| Page Range | 40931-42015 | |
| FR Document |
| Page and Subject | |
|---|---|
| 83 FR 41073 - Sunshine Act Meetings | |
| 83 FR 41113 - Sunshine Act Meetings | |
| 83 FR 41139 - E.O. 13224 Designation of Qassim Abdullah Ali Ahmed, aka Qassim al-Muamen, aka Qassim Al Muamen, aka Qassim Abdullah Ali, aka Qassim Abdullah as a Specially Designated Global Terrorist | |
| 83 FR 41140 - Review of the Designation as a Foreign Terrorist Organization of Boko Haram (and Other Aliases) | |
| 83 FR 41140 - Review of the Designation as a Foreign Terrorist Organization of Abu Sayyaf Group (and Other Aliases) | |
| 83 FR 41073 - Medicare and Medicaid Program; Application From DNV GL-Healthcare (DNV GL) for Continued Approval of Its Hospital Accreditation Program | |
| 83 FR 41096 - Technical Mapping Advisory Council | |
| 83 FR 41068 - Proposed Collection; Comment Request | |
| 83 FR 41065 - Procurement List; Deletions | |
| 83 FR 41064 - Procurement List; Proposed Addition and Deletions | |
| 83 FR 41035 - Approval and Promulgation of Air Quality Implementation Plans; State of Colorado; Motor Vehicle Inspection and Maintenance Program and Associated Revisions | |
| 83 FR 41069 - Proposed Collection; Comment Request | |
| 83 FR 41069 - Submission for OMB Review; Comment Request | |
| 83 FR 40985 - Drawbridge Operation Regulation; Columbia River, Portland, OR and Vancouver, WA | |
| 83 FR 40986 - Drawbridge Operation Regulation; Willamette River at Portland, OR | |
| 83 FR 41095 - Lifejacket Approval Harmonization | |
| 83 FR 41019 - Fisheries of the Exclusive Economic Zone Off Alaska; Sablefish in the West Yakutat District of the Gulf of Alaska | |
| 83 FR 41020 - Fisheries of the Exclusive Economic Zone Off Alaska; Pacific Ocean Perch in the West Yakutat District of the Gulf of Alaska | |
| 83 FR 41078 - Process To Request a Review of Food and Drug Administration's Decision Not To Issue Certain Export Certificates for Devices; Draft Guidance for Industry and Food and Drug Administration Staff; Availability | |
| 83 FR 41059 - Notice of Public Meeting of the Idaho Advisory Committee | |
| 83 FR 41026 - Proposed Removal of Temporary Regulations on a Partner's Share of a Partnership Liability for Disguised Sale Purposes; Hearing Cancellation | |
| 83 FR 41114 - New Postal Products | |
| 83 FR 41097 - 60-Day Notice of Proposed Information Collection: Home Equity Conversion Mortgage (HECM) Counseling Standardization and Roster | |
| 83 FR 41099 - 30-Day Notice of Proposed Information Collection: Single Family Mortgage Insurance on Hawaiian Homelands | |
| 83 FR 41098 - 30-Day Notice of Proposed Information Collection: Indian Community Development Block Grant | |
| 83 FR 41077 - Agency Information Collection Activities; Submission for Office of Management and Budget Review; Comment Request; Guidance for Industry: Controlled Correspondence Related to Generic Drug Development | |
| 83 FR 41093 - Center for Scientific Review; Notice of Closed Meetings | |
| 83 FR 41080 - Quality Metrics Site Visit Program for Center for Drug Evaluation and Research and Center for Biologics Evaluation and Research Staff; Information Available to Industry; Extension of the Proposal Period | |
| 83 FR 41093 - Draft Report on Carcinogens Monograph on Night Shift Work and Light at Night; Availability of Document; Request for Comments; Notice of Peer-Review Meeting | |
| 83 FR 41059 - Carbazole Violet Pigment 23 From India: Rescission of Countervailing Duty Administrative Review; 2016 | |
| 83 FR 41081 - National Institute of Neurological Disorders and Stroke; Notice of Closed Meetings | |
| 83 FR 41140 - Notice of National Grain Car Council Meeting | |
| 83 FR 41067 - Submission for OMB Review; Comment Request | |
| 83 FR 41076 - Proposed Information Collection Activity; Comment Request | |
| 83 FR 41060 - Mid-Atlantic Fishery Management Council (MAFMC); Public Hearings | |
| 83 FR 41061 - Pacific Fishery Management Council; Public Meetings | |
| 83 FR 41063 - North Pacific Fishery Management Council; Public Meeting | |
| 83 FR 41063 - Fisheries of the Gulf of Mexico; Southeast Data, Assessment, and Review (SEDAR); Public Meeting | |
| 83 FR 41062 - Marine Mammals; File No. 22222 | |
| 83 FR 41068 - Submission for OMB Review; Comment Request | |
| 83 FR 40973 - Medical Devices and Device-Led Combination Products; Voluntary Malfunction Summary Reporting Program for Manufacturers | |
| 83 FR 41141 - Petition for Exemption; Summary of Petition Received; Headquarters Air Force Junior Reserve Officer Training Corps | |
| 83 FR 41075 - Proposed Information Collection Activity; Comment Request | |
| 83 FR 41021 - Proposed Amendment of VOR Federal Airways V-18, V-102, and V-278 in the Vicinity of Guthrie, TX | |
| 83 FR 40967 - Amendment of Multiple Restricted Area Boundary Descriptions; Florida | |
| 83 FR 41046 - Rural Development Cooperative Agreement Program | |
| 83 FR 41056 - Establishment of Maximum Interest Rate | |
| 83 FR 41032 - Special Local Regulation; Breton Bay, Leonardtown, MD | |
| 83 FR 41029 - Special Local Regulation; Choptank River, Talbot and Dorchester Counties, MD | |
| 83 FR 41072 - North Carolina Electric Membership Corporation v. Duke Energy Progress, LLC; Notice of Complaint | |
| 83 FR 41082 - National Institutes of Health (NIH) Office of Science Policy (OSP) Recombinant or Synthetic Nucleic Acid Research: Proposed Changes to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules (NIH Guidelines) | |
| 83 FR 41081 - Request for Information To Solicit Feedback on the Brain Research Through Advancing Innovative Neurotechnologies (BRAIN) Initiative | |
| 83 FR 41071 - Agency Information Collection Activities; Comment Request; Federal Family Educational Loan Program-Servicemembers Civil Relief Act (SCRA) | |
| 83 FR 41141 - Rescission of Notice of Intent (NOI) To Prepare an Environmental Impact Statement (EIS) | |
| 83 FR 41140 - Meeting of the Regional Energy Resource Council | |
| 83 FR 41100 - Endangered and Threatened Wildlife and Plants; Draft Recovery Plan for Neosho Mucket | |
| 83 FR 41108 - Notice of Availability of the Grand Staircase-Escalante National Monument-Grand Staircase, Kaiparowits, and Escalante Canyon Units and Federal Lands Previously Included in the Monument That Are Excluded From the Boundaries Draft Resource Management Plans and Associated Environmental Impact Statement | |
| 83 FR 41111 - Notice of Availability of the Draft Bears Ears National Monument Indian Creek and Shash Jáa Units Monument Management Plans and Associated Environmental Impact Statement, Utah | |
| 83 FR 41113 - Proposed Submission of Information Collection for OMB Review; Comment Request; Partitions of Eligible Multiemployer Plans | |
| 83 FR 41080 - Agency Information Collection Activities; Proposed Collection; Public Comment Request | |
| 83 FR 41072 - Environmental Impact Statements; Notice of Availability | |
| 83 FR 41070 - Proposed Collection; Comment Request | |
| 83 FR 41138 - Presidential Declaration Amendment of a Major Disaster for the State of Hawaii | |
| 83 FR 41071 - Agency Information Collection Activities; Comment Request; Servicemembers Civil Relief Act (SCRA): Interest Rate Limitation Request | |
| 83 FR 41117 - Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To Require Certain Member Organizations To Participate in Scheduled Market-Wide Circuit Breaker Testing | |
| 83 FR 41121 - Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section 7018(a) of the Exchange's Rules | |
| 83 FR 41118 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating To Amending the ICC Clearing Rules Regarding Mark-to-Market Margin | |
| 83 FR 41126 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to the Exchange Rule 514 Priority on the Exchange | |
| 83 FR 41058 - Notice of Public Meeting of the West Virginia Advisory Committee | |
| 83 FR 41124 - Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Schedule of Fees Relating to Crossing Orders and Responses to Crossing Orders in Index Options on the Nasdaq 100 Reduced Value Index | |
| 83 FR 41115 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delete and Replace the Current Rules on Arbitration | |
| 83 FR 41128 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Make Permanent Rule 11.24, Which Sets Forth the Exchange's Pilot Retail Price Improvement Program | |
| 83 FR 41057 - Notice of Public Meeting of the Virginia Advisory Committee | |
| 83 FR 41057 - Agenda and Notice of Public Meeting of the Delaware Advisory Committee | |
| 83 FR 41058 - Agenda and Notice of Public Meeting of the District of Columbia Advisory Committee | |
| 83 FR 41076 - Science and Regulation of Live Microbiome-Based Products Used To Prevent, Treat, or Cure Diseases in Humans; Public Workshop | |
| 83 FR 41023 - Medical Devices; Classification of Accessories Distinct From Other Devices; Proposed List of Accessories Suitable for Class I; Request for Comments | |
| 83 FR 41045 - Humboldt-Toiyabe National Forest; Clark Counties, Nevada; Lee Canyon Notice of Availability | |
| 83 FR 41101 - Indian Gaming; Approval of Tribal-State Class III Gaming Compact Amendments in the State of Oklahoma | |
| 83 FR 41102 - Indian Gaming; Approval of Tribal-State Class III Gaming Compact Amendments in the State of Oklahoma | |
| 83 FR 41139 - Changes to SBA Secondary Market Program | |
| 83 FR 41042 - United States Standards for Grades of Pork Carcasses | |
| 83 FR 41102 - Rate Adjustments for Indian Irrigation Projects | |
| 83 FR 40931 - Cotton Board Rules and Regulations: Adjusting Supplemental Assessment on Imports (2018 Amendments) | |
| 83 FR 41043 - Agency Information Collection Activities: Proposed Collection; Comment Request-Supplemental Nutrition Assistance Program (SNAP), Store Applications, Forms FNS-252, FNS-252-E, FNS-252-FE, FNS-252-R, FNS-252-2 and FNS-252-C | |
| 83 FR 41066 - Proposed Extension of Approval of Information Collection; Comment Request; Notification Requirements for Coal and Wood Burning Appliances | |
| 83 FR 41066 - Proposed Extension of Approval of Information Collection; Comment Request-Testing and Recordkeeping Requirements for Carpets and Rugs | |
| 83 FR 41018 - Snapper-Grouper Fishery of the South Atlantic; 2018 Commercial Accountability Measure and Closure for the Other Jacks Complex | |
| 83 FR 41112 - Proposed Collection, Comment Request | |
| 83 FR 41006 - Air Plan Approval; California; San Joaquin Valley Unified Air Pollution Control District; Reasonably Available Control Technology Demonstration | |
| 83 FR 41039 - World Trade Center Health Program; Petition 019-Irritable Bowel Syndrome; Finding of Insufficient Evidence | |
| 83 FR 40961 - Airworthiness Directives; Rolls-Royce Corporation Engines | |
| 83 FR 40963 - Airworthiness Directives; ATR-GIE Avions de Transport Régional Airplanes | |
| 83 FR 40959 - Airworthiness Directives; Fokker Services B.V. Airplanes | |
| 83 FR 40971 - Standard Instrument Approach Procedures, and Takeoff Minimums and Obstacle Departure Procedures; Miscellaneous Amendments | |
| 83 FR 40968 - Standard Instrument Approach Procedures, and Takeoff Minimums and Obstacle Departure Procedures; Miscellaneous Amendments | |
| 83 FR 41954 - Centralized Partnership Audit Regime | |
| 83 FR 40945 - Amendment to the Annual Privacy Notice Requirement Under the Gramm-Leach-Bliley Act (Regulation P) | |
| 83 FR 41026 - TRICARE; Extended Care Health Option (ECHO) Respite Care | |
| 83 FR 41039 - Significant New Use Rules on Certain Chemical Substances | |
| 83 FR 40986 - Significant New Use Rules on Certain Chemical Substances | |
| 83 FR 41009 - Civilian Board of Contract Appeals; Rules of Procedure for Contract Disputes Act Cases | |
| 83 FR 41786 - Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations-Pathways to Success | |
| 83 FR 41144 - 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 2019 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (Promoting Interoperability Programs) Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Medicare Cost Reporting Requirements; and Physician Certification and Recertification of Claims |
Agricultural Marketing Service
Food and Nutrition Service
Forest Service
Rural Business-Cooperative Service
Rural Housing Service
Rural Utilities Service
International Trade Administration
National Oceanic and Atmospheric Administration
Air Force Department
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Children and Families Administration
Food and Drug Administration
National Institutes of Health
Coast Guard
Fish and Wildlife Service
Indian Affairs Bureau
Land Management Bureau
Labor Statistics Bureau
Federal Aviation Administration
Federal Highway Administration
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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Agricultural Marketing Service, USDA.
Direct final rule.
The Agricultural Marketing Service (AMS) is amending the Cotton Board Rules and Regulations, increasing the value assigned to imported cotton for the purposes of calculating supplemental assessments collected for use by the Cotton Research and Promotion Program. This amendment is required each year to ensure that assessments collected on imported cotton and the cotton content of imported products will be the same as those paid on domestically produced cotton. In addition, AMS is updating the Harmonized Tariff Schedule (HTS) statistical reporting numbers that were amended since the last assessment adjustment in 2017.
This direct rule is effective October 16, 2018, without further action or notice, unless significant adverse comment is received by September 17, 2018. If significant adverse comment is received, AMS will publish a timely withdrawal of the amendment in the
Written comments may be submitted to the addresses specified below. All comments will be made available to the public. Please do not include personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publically disclosed. All comments may be posted on the internet and can be retrieved by most internet search engines. Comments may be submitted anonymously.
Comments, identified by AMS-CN-18-0013, may be submitted electronically through the
Shethir M. Riva, Director, Research and Promotion, Cotton and Tobacco Program, AMS, USDA, 100 Riverside Parkway, Suite 101, Fredericksburg, Virginia, 22406, telephone (540) 361-2726, facsimile (540) 361-1199, or email at
Amendments to the Cotton Research and Promotion Act (7 U.S.C. 2101-2118) (Act) were enacted by Congress under Subtitle G of Title XIX of the Food, Agriculture, Conservation, and Trade Act of 1990 (Pub. L. 101-624, 104 Stat. 3909, November 28, 1990). These amendments contained two provisions that authorize changes in the funding procedures for the Cotton Research and Promotion Program. These provisions provide for: (1) The assessment of imported cotton and cotton products; and (2) termination of refunds to cotton producers. (Prior to the 1990 amendments to the Act, producers could request assessment refunds.)
As amended, the Cotton Research and Promotion Order (7 CFR part 1205) (Order) was approved by producers and importers voting in a referendum held July 17-26, 1991, and the amended Order was published in the
This direct final rule would amend the value assigned to imported cotton in the Cotton Board Rules and Regulations (7 CFR 1205.510(b)(2)) that is used to determine the Cotton Research and Promotion assessment on imported cotton and cotton products. The total value of assessment levied on cotton imports is the sum of two parts. The first part of the assessment is based on the weight of cotton imported—levied at a rate of $1 per bale of cotton, which is equivalent to 500 pounds, or $1 per 226.8 kilograms of cotton. The second part of the import assessment (referred to as the supplemental assessment) is based on the value of imported cotton lint or the cotton contained in imported cotton products—levied at a rate of five-tenths of one percent of the value of domestically produced cotton.
Section 1205.510(b)(2) of the Cotton Research and Promotion Rules and Regulations provides for assigning the calendar year weighted average price received by U.S. farmers for Upland cotton to represent the value of imported cotton. This is so that the assessment on domestically produced cotton and the assessment on imported cotton and the cotton content of imported products is the same. The source for the average price statistic is
The current value of imported cotton as published in 2017 in the
An example of the complete assessment formula and how the figures are obtained is as follows:
The total assessment per kilogram of raw cotton is obtained by adding the $1 per bale equivalent assessment of $0.004409 per kg. and the supplemental assessment $0.007496 per kg., which equals $0.011905 per kg.
The current assessment on imported cotton is $0.011510 per kilogram of imported cotton. The revised assessment in this direct final rule is $0.011905, an increase of $0.000395 per kilogram. This increase reflects the increase in the average weighted price of Upland cotton received by U.S. farmers during the period January through December 2017.
Import Assessment Table in section 1205.510(b)(3) indicates the total assessment rate ($ per kilogram) due for each Harmonized Tariff Schedule (HTS) number that is subject to assessment. This table must be revised each year to reflect changes in supplemental assessment rates and any changes to the HTS numbers. In this direct final rule, AMS is amending the Import Assessment Table.
AMS believes that these amendments are necessary to ensure that assessments collected on imported cotton and the cotton content of imported products are the same as those paid on domestically produced cotton. Accordingly, changes reflected in this rule should be adopted and implemented as soon as possible since it is required by regulation.
As described in this
Also, this direct-final rulemaking furthers the objectives of Executive Order 13563, which requires that the regulatory process “promote predictability and reduce uncertainty” and “identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.”
AMS has used the direct rule rulemaking process since 2013 and has not received any adverse comments; however, if AMS does receives significant adverse comment during the comment period, it will publish, in a timely manner, a document in the
This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation would not have substantial and direct effects on Tribal governments and would not have significant Tribal implications.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review. Additionally, because this rule does not meet the definition of a significant regulatory action it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017 titled `Reducing Regulation and Controlling Regulatory Costs' ” (February 2, 2017).
This rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have retroactive effect.
The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 12 of the Act, any person subject to an order may file with the Secretary of Agriculture (Secretary) a petition stating that the order, any provision of the plan, or any obligation imposed in connection with the order is not in accordance with law and requesting a modification of the order or to be exempted therefrom. Such person is afforded the opportunity for a hearing on the petition. After the hearing, the Secretary would rule on the petition. The Act provides that the District Court of the United States in any district in which the person is an inhabitant, or has his principal place of business, has jurisdiction to review the Secretary's ruling, provided a complaint is filed within 20 days from the date of the entry of the Secretary's ruling.
In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has examined the economic impact of this rule on small entities. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such action so that small businesses will not be unduly or disproportionately burdened. The Small Business Administration defines, in 13 CFR part 121, small agricultural producers as those having annual receipts of no more than $750,000 and small agricultural service firms (importers) as having receipts of no more than $7,500,000. In 2017, an estimated 20,000 importers are subject to the rules and regulations issued pursuant to the Cotton Research and Promotion Order. Most are considered small entities as defined by the Small Business Administration.
This rule would only affect importers of cotton and cotton-containing products and would increase the assessments paid by the importers under the Cotton Research and Promotion Order. The current assessment on imported cotton is $0.011510 per kilogram of imported cotton. The amended assessment would be $0.011905, which was calculated based on the 12-month weighted average of price received by U.S. cotton farmers. Section 1205.510, “Levy of assessments”, provides “The rate of the supplemental assessment on imported cotton will be the same as that levied on cotton produced within the United States.” In addition, section 1205.510 provides that the 12-month weighted average of prices received by U.S.
Under the Cotton Research and Promotion Program, assessments are used by the Cotton Board to finance research and promotion programs designed to increase consumer demand for Upland cotton in the United States and international markets. In 2016 (the last audited year), producer assessments totaled $36.5 million and importer assessments totaled $36.51 million. According to the Cotton Board, should the volume of cotton products imported into the U.S. remain at the same level in 2018, one could expect an increase of assessments by approximately $1,278,951.
Imported organic cotton and products may be exempt from assessment if eligible under section 1205.519 of the Order.
There are no Federal rules that duplicate, overlap, or conflict with this rule.
In compliance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) which implement the Paperwork Reduction Act (PRA) (44 U.S.C. Chapter 35) the information collection requirements contained in the regulation to be amended have been previously approved by OMB and were assigned control number 0581-0093, National Research, Promotion, and Consumer Information Programs. This rule does not result in a change to the information collection and recordkeeping requirements previously approved.
A 30-day comment period is provided to comment on the changes to the Cotton Board Rules and Regulations proposed herein. This period is deemed appropriate because an amendment is required to adjust the assessments collected on imported cotton and the cotton content of imported products to be the same as those paid on domestically produced cotton. Accordingly, the change in this rule, if adopted, should be implemented as soon as possible.
Advertising, Agricultural research, Cotton, Marketing agreements, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, AMS amends 7 CFR part 1205 as follows:
7 U.S.C. 2101-2118; 7 U.S.C 7401.
(b) * * *
(2) The 12-month average of monthly weighted average prices received by U.S. farmers will be calculated annually. Such weighted average will be used as the value of imported cotton for the purpose of levying the supplemental assessment on imported cotton and will be expressed in kilograms. The value of imported cotton for the purpose of levying this supplemental assessment is $1.1905 cents per kilogram.
(3) * * *
Bureau of Consumer Financial Protection.
Final rule.
The Bureau of Consumer Financial Protection (Bureau) is amending Regulation P, which requires, among other things, that financial institutions provide an annual notice describing their privacy policies and practices to their customers. The amendment implements a December 2015 statutory amendment to the Gramm-Leach-Bliley Act providing an exception to this annual notice requirement for financial institutions that meet certain conditions.
The amendments to Regulation P in this final rule will become effective on September 17, 2018.
Monique Chenault, Paralegal Specialist; Joseph Devlin, Senior Counsel; Office of Regulations, at (202) 435-7700.
Title V, Subtitle A of the Gramm-Leach-Bliley Act (GLBA)
On December 4, 2015, Congress amended the GLBA as part of the Fixing America's Surface Transportation Act (FAST Act). This amendment, titled Eliminate Privacy Notice Confusion,
Section 503(f) took effect upon enactment in December 2015. In July 2016 the Bureau proposed to update Regulation P to reflect the change in the underlying law. As part of its implementation, the Bureau is also amending Regulation P to provide timing requirements for delivery of annual privacy notices in the event that a financial institution that qualified for this annual notice exception later changes its policies or practices in such a way that it no longer qualifies for the exception. The Bureau is further
The GLBA was enacted into law in 1999 and governs the privacy practices of a broad range of financial institutions.
In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
The Bureau has the authority to promulgate GLBA privacy rules for depository institutions and many non-depository institutions. However, rulewriting authority with regard to securities and futures-related companies is vested in the SEC and CFTC, respectively, and rulewriting authority with respect to certain motor vehicle dealers is vested in the FTC.
The GLBA and Regulation P require that financial institutions provide consumers with certain notices describing their privacy policies.
GLBA Section 502 and Regulation P also require that initial, annual, and revised notices provide information about the right to opt out of certain financial institution sharing of nonpublic personal information with some types of nonaffiliated third parties. For example, a mortgage customer has the right to opt out of a financial institution disclosing his or her name and address to an unaffiliated home insurance company. On the other hand, a financial institution is not required to allow a consumer to opt out of the institution's disclosure of his or her nonpublic personal information to third party service providers and pursuant to joint marketing arrangements subject to certain requirements; disclosures relating to maintaining and servicing accounts, securitization, law enforcement and compliance, and consumer reporting; and certain other disclosures described in the GLBA and Regulation P as exceptions to the opt-out requirement.
In addition to opt-out rights under the GLBA, annual privacy notices also may include information about certain consumer opt-out rights under the Fair Credit Reporting Act (FCRA). The privacy notices under the GLBA/Regulation P and affiliate disclosures under the FCRA/Regulation V interact in two ways. First, section 603(d)(2)(A)(iii) of the FCRA excludes from that statute's definition of a consumer report
Second, section 624 of the FCRA and Regulation V's Affiliate Marketing Rule provide that an affiliate of a financial institution that receives certain information (
In pursuit of the Bureau's goal of reducing unnecessary or unduly burdensome regulations, the Bureau in December 2011 issued a Request for Information (RFI) seeking specific suggestions from the public for streamlining regulations the Bureau had inherited from other Federal agencies. In that RFI, the Bureau specifically identified the annual privacy notice as a potential opportunity for streamlining and solicited comment on possible alternatives to delivering the annual privacy notice.
Financial institutions historically have provided annual notices generally by U.S. postal mail.
In addition, to assist customers with limited or no access to the internet, an institution using the alternative delivery method was required to mail annual notices to customers who requested them by telephone. To make customers aware that its annual privacy notice was available through the website or by phone, the institution was required to include a clear and conspicuous statement of availability at least once per year on an account statement, coupon book, or a notice or disclosure the institution issued under any provision of law.
On December 4, 2015, Congress amended the GLBA as part of the FAST Act. This amendment, titled Eliminate Privacy Notice Confusion,
On July 15, 2016, the Bureau published a proposed rule to implement the FAST Act statutory amendment to the GLBA. The Bureau has considered the comments received on that proposed rule, and now issues this final rule based on it.
As discussed above, the statutory exception to the annual notice requirement is already effective. The amendments to Regulation P in this final rule will be effective 30 days from the date of publication in the
In developing this final rule, the Bureau considered its potential impact on consumer privacy. The rule will not affect the collection or use of consumers' nonpublic personal information by financial institutions. The rule implements a new statutory exception to limit the circumstances under which financial institutions subject to Regulation P will be required to deliver annual privacy notices to their customers. Delivery of annual privacy notices is required under the rule if financial institutions make certain types of changes to their privacy policies or if the statute and Regulation P afford customers the right to opt out of financial institutions' sharing of customers' nonpublic personal information with nonaffiliated third parties. The statutory exception and this final rule do not affect the requirement to deliver an initial privacy notice, and all consumers will continue to receive such notices describing the privacy policies of any financial institutions with which they do business to the extent currently required.
The Bureau is issuing this final rule pursuant to its authority under section 504 of the GLBA, as amended by section 1093 of the Dodd-Frank Act.
Regulation P's substantive requirements, including the requirement to deliver privacy notices, are generally
The Bureau received no comments on this technical amendment, and adopts it now as proposed.
As explained above, Regulation P's substantive requirements, including the requirement to deliver privacy notices, are generally imposed upon entities that meet the definition of “You” in § 1016.3(s)(1). The Bureau has rulemaking authority over entities other than financial institutions pursuant to GLBA section 504(a)(1)(A).
The Bureau proposed to amend the general requirement in § 1016.5(a)(1) that financial institutions provide annual notices, to clarify that the Bureau has added an exception to this requirement in § 1016.5(e) to incorporate the amendment to GLBA section 503.
No commenters specifically discussed the conforming change to the general rule in § 1016.5(a). One commenter suggested that the Bureau remove any GLBA privacy notice requirement and instead require financial institutions to post their privacy notices online, allow all consumers to choose whether to receive any privacy notices, make electronic notices the default for any consumers who opt to receive any privacy notices, and allow financial institutions to charge fees for any paper privacy notices they provide.
The Bureau now adopts the conforming amendment to the general requirement in § 1016.5(a)(1) that financial institutions provide annual notices, to clarify that the Bureau has added an exception to this requirement in § 1016.5(e) to incorporate the amendment to GLBA section 503. The Bureau does not believe that the comment is relevant to the proposal and it does not provide a basis to change the approach proposed by the Bureau. Congress did not include revisions along the lines the commenter suggested in the statutory provision that the Bureau is implementing in this rulemaking.
New GLBA § 503(f) provides that a financial institution is excepted from providing an annual notice if it meets the two conditions described below. The Bureau proposed to add new § 1016.5(e) to incorporate into Regulation P the exception created by new § 503(f). Under proposed § 1016.5(e), as in section 503(f), a financial institution would be excepted from providing an annual notice if it meets the two conditions discussed below.
The commenters overwhelmingly supported proposed § 1016.5(e). Although some commenters asked that the exception be broadened, no commenters who discussed the proposed exception objected to it. The commenters stated that the exception would reduce burden and would not harm consumers, and was less complicated and burdensome than the previous alternative delivery method. Some suggested that the provision would benefit consumers. The comments that specifically discussed either of the two requirements for the exception, in § 1016.5(e)(1)(i) and (ii), are discussed below in relation to those provisions.
A trade association representing credit unions requested that to eliminate confusion and protect institutions from citations, the rule should be effective retroactive to December 4, 2015, the date the statutory GLBA amendments took effect. In addition, an attorney suggested that the Bureau preempt State privacy statutes that might require institutions to continue providing annual privacy notices in spite of the Federal exception. The attorney recommended the Bureau modify § 1016.17 to expressly preempt contrary State law, and instead require that an institution make its privacy notice continually available online.
After considering the comments and for the reasons discussed below, the Bureau now adopts the exception to the annual notice requirement largely as proposed, with certain changes to the timing provisions in § 1016.5(e)(2), as discussed below.
In regard to the comment recommending that § 1016.17 be modified, § 1016.17 implements GLBA § 507,
In regard to the comment on retroactivity, the Bureau has made clear in the proposed rule and this final rule that new GLBA § 503(f) became effective upon enactment in December 2015.
New GLBA section 503(f)(1) states the first condition for the annual privacy notice exception: that a financial institution provide nonpublic personal information only in accordance with the provisions of subsection (b)(2) or (e) of section 502 of the GLBA. The Bureau proposed § 1016.5(e)(1)(i) to incorporate this condition by requiring that to qualify for the annual notice exception, any nonpublic personal information that financial institutions provide to nonaffiliated third parties must be provided only in accordance with § 1016.13, § 1016.14 or § 1016.15 of Regulation P.
Almost no commenters specifically discussed the first of the two requirements of the new statutory exception. One credit union explained that it does not share nonpublic personal information beyond the exceptions provided in § 1016.13,
The Bureau now adopts § 1016.5(e)(1)(i) as proposed. Section 1016.5(e)(1)(i) will incorporate the first requirement of GLBA § 503(f) by requiring that to qualify for the annual notice exception, any nonpublic personal information that financial institutions provide to nonaffiliated third parties must be provided only in accordance with § 1016.13, § 1016.14 or § 1016.15 of Regulation P; these regulatory sections implement subsections (b)(2) and (e) of section 502.
The Bureau notes that § 1016.6(a)(7) requires that annual privacy notices incorporate any disclosures made under FCRA section 603(d)(2)(A)(iii) regarding the consumer's ability to opt out of sharing of information among affiliates. Further, the notices may incorporate any opt-out disclosures provided under FCRA section 624.
Given the structure of the statute, the Bureau does not interpret GLBA section 503(f)(1) to preclude financial institutions that provide nonpublic personal information in accordance with FCRA sections 603(d)(2)(A)(iii) or 624 from qualifying for the exception. Thus, as the Bureau stated in its proposal, the presence or absence of these FCRA disclosures on a financial institution's privacy notice will not affect whether the institution satisfies GLBA section 503(f)(1) and § 1016.5(e)(1)(i). As the Bureau noted, however, financial institutions that choose to take advantage of the annual notice exception must still provide any opt-out disclosures required under FCRA sections 603(d)(2)(A)(iii) and 624, if applicable. Under the FCRA, neither of these opt-outs is required to be provided annually.
New GLBA section 503(f)(2) states the second condition for the annual notice exception: that a financial institution not have changed its “policies and practices with regard to disclosing nonpublic personal information” from the policies and practices that were disclosed in the most recent notice sent to consumers in accordance with GLBA section 503. Because the Bureau determined that the statutory language was ambiguous as to the exact types of sharing intended, the Bureau proposed § 1016.5(e)(1)(ii) to resolve this ambiguity by requiring that, to qualify for the annual notice exception, a financial institution must not have changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice the financial institution provided.
As with the first requirement for the annual notice exception at § 1016.5(e)(1)(i), few commenters specifically discussed the second requirement at § 1016.5(e)(1)(ii). However, the commenters overwhelmingly signaled their support for these provisions by supporting the Bureau's implementation of the statutory exception. Two trade associations representing credit unions did specifically express support for the proposed interpretation of the statutory language as referring only to a change to a disclosure under § 1016.6(a)(2) through (5) and (9).
The Bureau now adopts § 1016.5(e)(1)(ii) as proposed, providing that, to qualify for the annual notice exception, a financial institution must not have changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice the financial institution provided.
Paragraphs (1) through (9) of § 1016.6(a) list the specific information that must be included in privacy notices. Section 1016.6(a)(2) through (5) and (9) require a financial institution to include information related to its policies and practices with regard to disclosing nonpublic personal information, but § 1016.6(a)(1) (information collection) and § 1016.6(a)(8) (confidentiality and security) do not.
Section 1016.6(a)(7) requires that any disclosure an institution makes under FCRA section 603(d)(2)(A)(iii), which describes a consumer's ability to opt out of disclosures of information among affiliates, be included on the privacy notice. The Bureau believes that the statute is ambiguous as to whether a financial institution that changes the disclosure required under § 1016.6(a)(7) from the most recent notice sent to consumers would satisfy GLBA section 503(f)(2). In the proposed rule, the Bureau sought comment on whether proposed § 1016.5(e)(1)(ii) should include changes to disclosures required by § 1016.6(a)(7) and on how frequently institutions change that disclosure. The Bureau further sought comment on whether institutions would prefer to inform customers of these changes
All the commenters who addressed these issues stated that changes to the disclosures required by FCRA section 603(d)(2)(A)(iii) should not affect the availability of the annual notice exception. A State-wide trade association representing credit unions indicated that the presence or absence of FCRA disclosures on a credit union's privacy notice, and subsequent changes to those FCRA sharing practices, should not impact whether an institution qualifies for the annual notice exception. This trade association stated, without providing data, that it believed that changes by credit unions in its State to FCRA section 603(d)(2)(A)(iii) information disclosures are infrequent, and that few such credit unions share data in a way that trigger a FCRA opt-out in the first place. Other commenters who discussed the 603(d)(2)(A)(iii) information disclosures stated that allowing changes to disqualify financial institutions from the annual notice exception would interfere with the burden reduction intended, and that FCRA has its own disclosure requirements.
Given the structure of the statute, the Bureau does not interpret GLBA section 503(f)(2) to preclude financial institutions that make changes to disclosures required by § 1016.6(a)(7) from qualifying for the exception. The Bureau also notes that a change in the 603(d)(2)(A)(iii) information disclosures only requires a one-time notice and opt out. The Bureau does not believe that consumers would be materially benefited by requiring this one-time notice to be included in a privacy notice under Regulation P, especially where it is required in a separate notice required by the FCRA.
In addition to the discussion of 603(d)(2)(A)(iii) information disclosures, the Bureau noted in the proposed rule that a financial institution would satisfy § 1016.5(e)(1)(ii) if it changes its disclosures describing policies and practices with regard to disclosing nonpublic personal information that are included in the institution's privacy notice without being required by the GLBA or § 1016.6 (
The Bureau received few comments on this issue. A trade association representing credit unions stated that later changes to initial voluntary disclosures should not trigger the need to send annual privacy notices. The commenter suggested that imposing such a requirement would dissuade institutions from making voluntary disclosures. A banking and insurance trade association stated that affiliate marketing policy changes should not impact the availability of the exception. A trade association representing banks stated that changes to disclosures that are not required to be included in privacy notices should not trigger non-compliance. The trade association believed it would be costly and burdensome to add additional disclosures.
As indicated in the preamble to the proposed rule, the Bureau has determined that disclosures describing sharing with affiliates under FCRA section 624 or voluntary disclosures and opt-outs will not affect a financial institution's eligibility for the annual privacy notice exception under GLBA § 503(f). The Bureau believes that the alternative interpretation could discourage the use of voluntary disclosures while adding unnecessary burden.
New GLBA section 503(f) states that a financial institution that meets the requirements for the annual notice exception will not be required to provide annual notices “until such time” as the financial institution fails to comply with the criteria described in section 503(f)(1) and 503(f)(2), which are now implemented in § 1016.5(e)(1)(i) and (ii). A financial institution will no longer meet the requirements for the exception either by beginning to share nonpublic personal information in ways that trigger rights to opt-out notices under the GLBA and Regulation P, or by otherwise changing its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice the financial institution provided.
Financial institutions that no longer meet the conditions for the exception must provide customers with annual privacy notices. However, the GLBA, including new GLBA section 503(f), does not clearly specify when institutions must provide these notices. Thus, the statute is ambiguous on the point. It could be read to require the financial institution to provide an annual privacy notice by the time it changes its policies or practices in such a way that it no longer qualifies for the exception. Alternatively, it could be read to subject the financial institution, at the time it changes its policies or practices in such a way that it no longer qualifies for the exception, to the requirement to provide an annual privacy notice while being silent as to the timing for providing that notice.
Pursuant to its authority in GLBA section 504 to issue rules to implement the GLBA, the Bureau proposed to resolve this ambiguity by adopting this second reading and issuing standards for when institutions must provide these notices. Specifically, in proposed § 1016.5(e)(2)(i) and (ii), the Bureau proposed to use its rulemaking authority under GLBA section 504(a) to establish timing requirements for providing an annual notice in these circumstances. The Bureau proposed to establish these requirements to ensure that delivery of the annual privacy notice in these circumstances is consistent with the existing timing requirements for privacy notices in the regulation, where applicable, and to provide clarity to financial institutions regarding these requirements.
In developing the proposed framework, the Bureau looked to existing requirements under the statute and regulation because they already address circumstances in which a financial institution might change its policies and procedures in a way that affects the content of the notices. Specifically, § 1016.8 requires that the financial institution provide a revised notice to consumers
Accordingly, the timing requirements in proposed § 1016.5(e)(2)(i) and (ii) would differ depending on whether the change that causes the financial institution to no longer satisfy the conditions for the annual notice
Three-fifths of all industry commenters on the proposed rule specifically addressed the proposed timing requirements. The comments on the timing requirements viewed the requirement in § 1016.5(e)(2)(i) and that in § 1016.5(e)(2)(ii) very differently, as will be discussed below in regard to those sections. In regard to the overall timing requirements, one trade association representing credit unions expressed appreciation for the Bureau's proposal, stating that such clarification will eliminate confusion surrounding delivery requirements after a financial institution no longer meets the requirements for the exception. A trade association representing banks supported the proposed timing requirements, asserting that institutions will not find it difficult to comply with the suggested conditions. This commenter also requested clarification that once notices are sent and there are no further privacy changes, an institution will be able to again qualify for the exception, thus excepting them from having to send further annual notices.
The Bureau is adopting the timing provisions largely as proposed, with a change to the duration of the timing requirement in § 1016.5(e)(2)(ii), as discussed below. The Bureau is also adding another example to § 1016.5(e)(2)(iii) to clarify whether a financial institution again qualifies for the annual notice exception after delivering an annual notice under § 1016.5(e)(2).
For changes to a financial institution's policies or practices that cause it to no longer satisfy the conditions for the exception and also trigger an obligation to send a revised notice prior to the change, the Bureau proposed in § 1016.5(e)(2)(i) that financial institutions would be required to resume delivery of their subsequent regular annual notices pursuant to the existing timing requirements that govern delivery of annual notices generally. Because the revised notice would inform the customer of the institution's changed policies and practices before any new sharing occurs, the Bureau believed that there is no clear urgency regarding delivery of the first annual notice subsequent to implementation of the new policies and procedures.
Specifically, § 1016.4(a)(1) generally requires a financial institution to provide an initial notice to an individual who becomes the institution's customer no later than when it establishes a customer relationship. Section 1016.5(a) requires a financial institution to provide a privacy notice to its customers “not less than annually” during the continuation of any customer relationship. Section 1016.5(a)(1) defines annually to mean “at least once in any period of 12 consecutive months.” It further provides that a financial institution “may define the 12-consecutive-month period, but [] must apply it to the customer on a consistent basis.” Section 1016.5(a)(2) provides an example of the meaning of “annually” in relation to the delivery of the first annual notice after the initial notice:
You provide a notice annually if you define the 12-consecutive-month period as a calendar year and provide the annual notice to the customer once in each calendar year following the calendar year in which you provided the initial notice. For example, if a customer opens an account on any day of year 1, you must provide an annual notice to that customer by December 31 of year 2.
The example in § 1016.5(a)(2) provides financial institutions with the flexibility to select a specific date during the year to provide annual notices to all customers, regardless of when a particular customer relationship began. This flexibility avoids burdening institutions with either having to provide annual notices on the anniversary of initial notices, or alternatively providing two notices in the first year of the customer relationship to get all accounts originated in a given calendar year on the same cycle for delivering subsequent annual notices.
The Bureau proposed that the approach to timing of the annual notice in § 1016.5(a)(2) be applied if a financial institution makes a change that causes it to lose the exception and triggers the requirement to deliver a revised notice prior to the change. Under the proposed approach, if a financial institution provides a revised notice on any day of year 1 in advance of changing its policies or practices such that it loses the exception, that revised notice would be treated as analogous to an initial notice in § 1016.5(a)(2). Assuming that the financial institution defines the 12-month period as the calendar year, the financial institution would have to provide the first annual notice after losing the exception by December 31 of year 2.
The Bureau invited comment on the timing conditions proposed in § 1016.5(e)(2)(i). Few commenters separately discussed § 1016.5(e)(2)(i). All commenters who explicitly addressed the proposed timing requirements under § 1016.5(e)(2)(i) agreed with the Bureau's proposed approach. No industry commenters suggested alternative timing conditions. One credit union asserted that the proposed timing condition would incentivize credit unions to plan and notify their members in advance of making changes to privacy policies. Two trade associations representing banks and credit unions supported the timing requirement because it would prevent institutions from having to send out multiple notices within the same year. The trade association representing credit unions asserted that redundant notices provide no benefit to consumers and pose a burden and expense on credit unions.
The Bureau now adopts § 1016.5(e)(2)(i) as proposed. The Bureau believes that using the same approach in § 1016.5(e)(2)(i) as in existing § 1016.5(a)(2) is appropriate for two reasons. First, customers will receive a revised notice informing them of the change in the financial institution's policies or practices before the change occurs, and thus customers will not be harmed by the financial institution taking a longer period of time in which to deliver the first annual notice after the annual notice exception has been lost. Second, this approach will preserve flexibility for financial institutions and avoid requiring them to deliver a revised notice and an annual notice in the same year, and allowing them to use a convenient delivery date for annual notices for all customers. The Bureau believes this flexibility is justified because a financial institution that is required to deliver a revised privacy notice pursuant to § 1016.8 may have continuing annual notice obligations after the exception is lost. Such an institution could be sharing other than as described in the Regulation P exceptions and thus fail to satisfy § 1016.5(e)(1)(i), making the annual notice exception unavailable in future years.
For financial institutions that change their policies and practices in such a way as to lose the § 503(f) exception, but do not share information in a way that triggers the requirement under § 1016.8 to deliver a revised notice prior to the change, the Bureau proposed that a financial institution must deliver the annual notice within 60 days after the change that caused the institution to lose the exception. The Bureau proposed this 60-day period for providing the annual notice in this situation because customers would not receive a revised notice from the financial institution prior to the institution's change in policies or practices.
The Bureau requested comment on whether 60 days is an appropriate period for delivering annual notices in these circumstances or if another period would be more appropriate. Approximately half of all commenters specifically addressed the timing conditions proposed under § 1016.5(e)(2)(ii). These commenters generally opposed the 60-day requirement, advocating instead for an increased amount of time for institutions to deliver the revised notice. The majority of these commenters requested at least 90 days to deliver the notice.
Trade associations representing credit unions cited cost concerns with the 60-day requirement, asserting that because they send quarterly statements to many consumers, the timing requirement would require institutions to send out an additional notice. Some of these commenters suggested that 90 days was a more appropriate timeframe, as it would allow institutions to minimize costs by sending the revised notice with the next quarterly statement. One of these trade associations representing credit unions also asserted that 60 days was too brief, particularly for small credit unions addressing inadvertent changes. This commenter suggested 90 to 120 days to allow credit unions the opportunity to include the notice with the quarterly periodic statement, and noted that while all members may not receive monthly statements, most receive account statements quarterly.
Other industry commenters suggested 120 days as an appropriate time to deliver the annual notice. A few of these commenters cited the same above-mentioned cost concerns that are associated with separate mailers. These commenters asserted that 120 days would allow the notice to be included with regularly scheduled member statements, therefore eliminating the need for an additional mailer. One industry commenter representing credit unions noted that a separate mailer would be especially costly for smaller credit unions with fewer resources.
Industry commenters who suggested 120 days also stated, without specific explanation, that the proposed 60-day requirement did not provide institutions enough time to perform. A few of these industry commenters asserted that smaller credit unions, particularly those with fewer resources, would find the 60-day time frame too short. Some of those same commenters thought that larger credit unions with numerous departments working to consolidate information would also struggle to meet the 60-day requirement. Several trade associations representing credit unions stated that a longer time frame would allow credit unions time to organize logistics, educate staff, and command the resources necessary to draft and send the required notice. One industry commenter stated that an extension would not negatively impact consumers because prior notice is still required when changes allow sharing with third parties of non-public personal information and the option to opt out in advance.
One trade association commenter representing credit unions suggested at least 180 days, citing the fact that § 1016.8 does not require a revised privacy notice under the circumstances described in § 1016.5(e)(2)(ii). This commenter also suggested that to combat costs, financial institutions should have the option to include a message on periodic statements or mailers that there has been a change to the privacy notice, and direct the recipient to the financial institution's website to view and download an electronic copy of the revised notice.
The Bureau now adopts the timing provision in § 1016.5(e)(2)(ii) with a 100 calendar day period during which the financial institution must provide the annual privacy notice. The unanimous industry objection to the 60-day period suggests that the proposal likely would have imposed costs that the Bureau had not anticipated. The 100-day period will accommodate the inclusion of the notice with quarterly statements. The Bureau believes that providing 10 days in addition to the 90 days many commenters requested is appropriate because most calendar quarters are slightly longer than 90 days, and a short additional period should be allowed for administrative activities and to provide flexibility if the end date falls on a weekend or holiday. The Bureau does not believe that consumers will be harmed by this extension of the time period from the proposal.
However, the Bureau notes that the commenters requesting 120 or 180 days provided no specific reason why allowing such additional time would contribute to cost savings beyond allowing the notice to be included in quarterly statements. The Bureau is not aware of any other reason, and therefore declines to adopt a longer period.
The Bureau believes that the 100-day deadline will not impose undue or unreasonable costs on financial institutions, particularly since the delivery requirement is effectively a one-time burden absent additional changes to a financial institution's policies and practices. Specifically, after providing the one annual notice, the financial institution will likely once again meet both of the conditions for the exception—it will not be sharing nonpublic personal information with nonaffiliates other than as described in a Regulation P exception to the opt-out requirements and its policies and practices will not have changed since it provided the annual notice. Because the financial institution likely will once again meet the conditions for the exception, it likely will not be required to provide future annual notices. In other words, these financial institutions will likely lose the exception for only a single year. The Bureau is including an additional example in § 1016.5(e)(2)(iii)(B) for clarity. Given that financial institutions delivering notices pursuant to § 1016.5(e)(2)(ii) will likely have no continuing obligation to send annual notices, they likely will not need flexibility in choosing a convenient delivery date for future annual notices, beyond the 100 days of flexibility being provided for a single privacy notice.
In regard to the comment that the regulation should allow financial institutions to include a message on periodic statements or mailers directing customers to an electronic copy of the annual notice, the Bureau believes that any reduction in costs would be minimal because the financial institution is likely not required to provide more than one notice. In addition, the Bureau did not propose or request comment on such an option.
The Bureau also notes that financial institutions have substantial flexibility in managing the burden involved in sending the one annual notice because institutions can generally choose when
In order to facilitate compliance with proposed § 1016.5(e)(2), the Bureau proposed § 1016.5(e)(2)(iii) to provide an example for when an institution must provide an annual notice after changing its policies or practices such that it no longer meets the requirements for the annual notice exception set forth in proposed § 1016.5(e)(1).
The Bureau did not receive any comments specifically discussing the example provided in § 1016.5(e)(2)(iii). Because the Bureau believes that the example will provide clarity and facilitate compliance, it is now being made final in § 1016.5(e)(2)(iii)(A), with a minor change due to the alteration of the time frame in § 1016.5(e)(2)(ii). In addition, the Bureau is providing a second example, in § 1016.5(e)(2)(iii)(B), to facilitate compliance when a financial institution must only provide one annual notice before it again qualifies for the § 1016.5(e)(1) exception.
Section 1016.5(e)(2)(iii)(A) provides an example for when an institution must provide an annual notice after changing its policies or practices such that it no longer meets the requirements for the annual notice exception in § 1016.5(e)(1). The Bureau believes this example will facilitate compliance with § 1016.5(e)(2). The example assumes that an institution changes its policies or practices effective April 1 of year 1 and defines the 12-consecutive-month period pursuant to § 1016.5(a)(1) as a calendar year. Section 1016.5(e)(2)(iii)(A) states that the institution must provide an annual notice by December 31 of year 2 if the institution was required to provide a revised notice prior to the change and provided that revised notice on March 1 of year 1 in advance of the change. Section 1016.5(e)(2)(iii)(A) further states that the institution must provide an annual notice by July 9 of year 1 if the institution was not required to provide a revised notice prior to the change.
The Bureau is also providing a second example, in § 1016.5(e)(2)(iii)(B), to facilitate compliance when a financial institution must provide only one annual notice before it again qualifies for the § 1016.5(e)(1) exception, as discussed above in relation to § 1016.5(e)(2)(ii). The example assumes that a financial institution changes its policies and practices in such a way that it no longer meets the requirements of § 1016.5(e)(1), and so provides an annual notice to its customers. The example further assumes that after providing the annual notice to its customers, the financial institution once again meets the requirements of § 1016.5(e)(1) for an exception to the annual notice requirement. The example explains that the financial institution does not need to provide additional annual notices to its customers until such time as it no longer meets the requirements of § 1016.5(e)(1).
As discussed in Part II, the Bureau amended Regulation P in October 2014 to allow financial institutions that met certain criteria to deliver annual notices pursuant to the “alternative delivery method.” Because financial institutions that met the conditions in Regulation P to use the alternative delivery method will also meet the conditions for the statutory exception in section 503(f), the Bureau proposed to remove the alternative delivery method from Regulation P by removing § 1016.9(c)(2) and renumbering existing § 1016.9(c)(1) as § 1016.9(c).
Commenters generally expressed support for the proposed removal of the alternative delivery method. Ten commenters addressed the issue, with eight supporting the proposal and two opposing it.
Some commenters welcomed elimination of the alternative delivery method, asserting that the conditions associated with the 2014 provision deterred institutions from taking advantage of the intended relief. A debt collector organization stated that the alternative delivery method did not provide a solution for many debt collectors and consumers. This commenter asserted that the alternative delivery required model form created a significant risk of class action litigation because of claims that the language conflicts with the Fair Debt Collection Practices Act's prohibitions on third-party disclosure. A commenter representing several trade associations stated that the alternative delivery method requirement to post the notice online eliminated any benefits from the 2014 rule.
Two trade associations agreed that the alternative delivery method would no longer be useful in light of the statutory exception to the annual notice requirement, and one of these trade associations stated that it was unlikely that financial institutions would continue to use a complex means of compliance when a simpler one was available.
Several commenters discussed benefits associated with eliminating the alternative delivery method. One trade association stated that removing the alternative delivery method would eliminate confusion between the rule and the statute. Another trade association representing banks expressed appreciation of the elimination of the alternative delivery method, arguing that it would remove the confusion of having both an exception from the annual privacy notice and an alternative to the delivery requirement. One trade association stated that consumers will benefit from the elimination of the method, as they will experience decreasing information overload.
One trade association representing banks requested clarification that institutions that qualify for the exception but still keep a copy of the privacy policy on their websites will not be criticized or penalized.
Two trade association commenters representing the consumer credit industry and credit unions did not support removal of the alternative delivery method. These commenters stated that their customers or members prefer to receive communications electronically. Both commenters cited cost burdens associated with mailing privacy notices.
The trade association representing the consumer credit industry stated that several of their member financial institutions, particularly those that provide indirect auto loans, do not qualify for the statutory exception to the annual notice requirement because the institutions share consumer information with nonaffiliated third parties other than as described in §§ 1016.13, 14 and 15. These institutions are required under § 1016.10 of Regulation P to inform consumers through the institution's annual privacy notice that the consumer has a right to opt out of that information sharing. The trade association representing the consumer credit industry encouraged expansion of the alternative delivery method, highlighting the cost effectiveness of electronic delivery and stating that many institutions upgraded systems to implement the alternative delivery method under the 2014 rule. This commenter also urged the Bureau to consider allowing institutions that share with nonaffiliated third parties to deliver their privacy notices electronically, such as via website
After considering the comments, the Bureau now adopts the proposed change, removing the alternative delivery method from Regulation P by removing § 1016.9(c)(2) and renumbering former § 1016.9(c)(1) as § 1016.9(c).
Any financial institution that met the conditions to use the alternative delivery method will also meet the conditions to be excepted from delivering an annual privacy notice pursuant to new GLBA section 503(f). First, new GLBA section 503(f)(1) is substantively identical to the first requirement for using the alternative delivery method:
The Bureau believes that a financial institution that has both options available to it would choose not to send the annual privacy notice at all, rather than to deliver it pursuant to the alternative delivery method, so that it can eliminate rather than merely reduce the cost of providing annual notices. Given that any financial institution that qualifies to use the alternative delivery method for its annual notices also meets the qualifications for the new annual notice exception, the Bureau believes that including the alternative delivery method in Regulation P is no longer useful.
The Bureau notes that financial institutions that delivered annual notices using the alternative delivery method while it was in effect delivered those notices using a method that was in compliance with Regulation P, notwithstanding that the alternative delivery method provision is now being removed from the regulation. The Bureau further notes that financial institutions that qualify for the new annual notice exception may still choose to post privacy notices on their websites, deliver privacy notices to consumers who request them, and notify consumers of the notices' availability. Such activities will not affect a financial institution's eligibility for the new 503(f) exception.
The Bureau has considered the comments suggesting that it retain and expand the alternative delivery method for providing annual privacy notices. In this rulemaking, the Bureau is implementing the FAST Act amendments to the GLBA, which eliminate the requirement that financial institutions provide an annual privacy notice if certain conditions are met. In making these amendments to the GLBA, Congress did not address the delivery method financial institutions must or may use if they continue to be required to provide an annual privacy notice, including where financial institutions have not changed their privacy policies since their last privacy notice and they share information with nonaffiliated third parties other than as described in §§ 1016.13, .14, and .15. Because Congress did not address these issues in the FAST Act amendments to the GLBA, the Bureau declines to address them in this rulemaking to implement those amendments.
In developing the final rule, the Bureau has considered the potential benefits, costs, and impacts as required by section 1022(b)(2) of the Dodd-Frank Act.
This final rule implements the December 2015 amendment to the GLBA by amending § 1016.5 of Regulation P to provide that a financial institution is not required to deliver an annual privacy notice if it:
(1) Provides nonpublic personal information to nonaffiliated third parties only in accordance with the provisions of § 1016.13, § 1016.14, or § 1016.15; and
(2) Has not changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice provided.
In considering the potential benefits, costs, and impacts of the rule, the Bureau takes as the baseline for the analysis the legal regime that existed prior to the FAST Act's amendment of the GLBA.
The impact on consumers of § 1016.5(e) depends on whether the particular consumer prefers or would otherwise benefit from receiving an annual privacy notice that does not offer the consumer an opt-out under the GLBA and is largely unchanged
For other consumers who would prefer or otherwise benefit from receiving the annual notices, there will be some cost because many institutions that previously delivered notices—whether through the standard delivery methods or through the alternative delivery method that includes posting on the institution's website—will no longer deliver annual notices. Consumers may be less informed about opportunities to limit a financial institution's information sharing practices if the financial institution meets the requirements for the annual notice exception and chooses not to provide annual notices. For example, some consumers will receive fewer notices in which a financial institution offers
If financial institutions choose not to provide notices pursuant to the annual notice exception, consumers may also be less informed of their opt-out rights under the FCRA. Section 503(c)(4) of the GLBA and Regulation P require financial institutions providing initial and annual privacy notices to incorporate into them any notification and opt-out disclosures provided pursuant to section 603(d)(2)(A)(iii) of the FCRA.
Regarding benefits and costs to covered persons, the primary effect of the rule will be burden reduction achieved by lowering the costs to industry of providing annual privacy notices. Section 1016.5(e) imposes no new compliance requirements on any financial institution. Any institution that could use the alternative delivery method will meet the requirements for the annual notice exception pursuant to § 1016.5(e).
The expected cost savings to financial institutions from the revisions to § 1016.5(e) depend on whether the financial institution uses the alternative delivery method under the baseline. Financial institutions that currently use the alternative delivery method will likely cease complying with the requirements in current § 1016.9(c)(2) since they necessarily meet the requirements of the exception to the annual notice requirement and thus will no longer be required to deliver an annual notice.
For the 2014 Annual Privacy Notice Rule, the Bureau collected a sample of privacy policies from banks and credit unions and estimated both the number of financial institutions that would adopt the alternative delivery method and the aggregate cost savings that would result.
The Bureau also previously examined the privacy policies of the four credit unions with assets over $10 billion as well as the privacy policies of 50 additional credit unions selected through random sampling. The Bureau previously concluded that 46% of credit unions could use the alternative delivery method. The information evaluated in the re-analysis shows that none of the credit unions that could not use the alternative delivery method will be able to use the exception to the annual notice requirement. Credit unions that clearly could not use the alternative delivery method generally shared information with nonaffiliated third parties other than as specified in the exceptions in §§ 1016.13, 1016.14, and 1016.15. However, there are a number of cases in which the Bureau could not readily evaluate the information sharing practices of the sampled credit union because it did not have a website, did not post the privacy notice on its website, or did not use the model form.
Regarding the number of non-depository financial institutions that will benefit from the exception to the annual notice requirement, the Bureau uses the same basic methodology as in its prior analysis. Specifically, the Bureau assumes that the fraction of non-depository financial institutions that cannot use the alternative delivery method but can use the new annual notice exception is the same for non-depository institutions as for banks (9.5%).
Having identified the financial institutions that will benefit from the exception to the annual notice requirement, the Bureau estimates the benefit using the same basic methodology as in its prior analysis.
The Bureau requested comment on the preliminary presentation of this analysis as well as the submission of additional data that could inform the Bureau's consideration of the cost savings to financial institutions. No comments addressed this request.
The Regulation P exception to the annual notice requirement implements a December 2015 statutory amendment to the GLBA. The Bureau considered alternatives to the timeline for delivery of annual notices when a financial institution that qualified for the annual exception changes its policies or practices such that it no longer qualifies. Because the estimates of costs and benefits to consumers and covered persons take institutions' sharing policies and practices as given, the alternatives with respect to the timeline for delivery of annual notices do not impact those estimates. Further, even if the estimates allowed for changes in sharing policies and practices that can cause institutions to meet or fail to meet the requirements for the annual notice exception, the aggregate annual benefits and costs of delivery will not likely be significantly impacted by the timeline for delivery of annual notices. The Bureau does note, however, that changing from 60 to 100 days for delivery of the annual privacy notice under § 1016.5(e)(2)(ii) should result in a small burden reduction from the proposal, as financial institutions will be able to send the notice with quarterly statements as they requested.
The Bureau currently estimates that approximately 600 banks with $10 billion or less in assets cannot use the alternative delivery method but can use the annual notice exception. This constitutes 47% of banks with $10 billion or less in assets that do not use the alternative delivery method and 8.8% of all banks with $10 billion or less in assets. As reported above, 70% of banks with more than $10 billion in assets that do not use the alternative delivery method can use the proposed exception to the annual notice requirement. This is 55% of all banks with more than $10 billion in assets. Thus, the rule may have different impacts on federally insured depository institutions with $10 billion or less in assets as described in section 1026 of the Dodd-Frank Act. The Bureau currently believes that no credit unions of any size that could not use the alternative delivery method will be able to use the exception to the annual notice requirement.
The Bureau does not believe that the rule will reduce consumers' access to consumer financial products or services or have a unique impact on rural consumers.
The Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires each agency to consider the potential impact of its regulations on small entities, including small businesses, small governmental units, and small not-for-profit organizations. The RFA defines a “small business” as a business that meets the size standard developed by the Small Business Administration pursuant to the Small Business Act. The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.
At the proposed rule stage, the Bureau determined that an IRFA was not required because the proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. For this final rule, the Bureau continues to believe that that determination is accurate. The Bureau does not expect the rule to impose costs on small entities. All methods of compliance under current law will remain available to small entities when this rule is adopted. Thus, a small entity that is in compliance with current law need not take any different or additional action under the new rule. In addition, based on the data analysis described previously, the Bureau believes that the annual notice exception will allow some small institutions to stop sending the annual notice and to thereby reduce costs.
Accordingly, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities.
Under the Paperwork Reduction Act of 1995 (PRA),
As explained below, the Bureau has determined that this rule does not contain any new or substantively revised information collection requirements other than those previously approved by OMB. The rule will implement the December 2015 amendment to the GLBA and amend § 1016.5 of Regulation P to provide that a financial institution is not required to deliver an annual privacy notice if it:
(1) Provides nonpublic personal information to nonaffiliated third parties only in accordance with the provisions of § 1016.13, § 1016.14, or § 1016.15 and;
(2) Has not changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice provided.
Under Regulation P, the Bureau generally accounts for the paperwork burden for the following respondents pursuant to its enforcement/supervisory authority: Federally insured depository institutions with more than $10 billion in total assets, their depository institution affiliates, and certain non-depository institutions. The Bureau and the FTC generally both have enforcement authority over non-depository institutions subject to Regulation P. Accordingly, the Bureau has allocated to itself half of the final rule's estimated reduction in burden on non-depository financial institutions subject to Regulation P. Other Federal agencies, including the FTC, are responsible for estimating and reporting to OMB the paperwork burden for the institutions for which they have enforcement and/or supervision authority. They may use the Bureau's burden estimation methodology, but need not do so.
The Bureau does not believe that this final rule will impose any new or substantively revised collections of information as defined by the PRA, and instead believes that it will have the overall effect of reducing the previously approved estimated burden on industry for the information collections
The Bureau believes that the one-time cost of adopting the annual notice exception for financial institutions that adopt it will be
The Bureau takes all of the reduction in ongoing burden from banks and credit unions with assets $10 billion and above and half the reduction in ongoing burden from the non-depository institutions subject to the FTC enforcement authority that are subject to the Bureau's Regulation P. The total reduction in ongoing burden taken by the Bureau is 53,216 hours or $3.058 million annually.
The Bureau has determined that the final rule does not contain any new or substantively revised information collection requirements as defined by the PRA and that the burden estimate for the previously approved information collections should be revised as explained above. The Bureau requested comments on these determinations or any other aspect of the proposal for purposes of the PRA, but received none.
Pursuant to the Congressional Review Act (5 U.S.C. 801
Banks, Banking, Consumer protection, Credit, Credit unions, Foreign banking, Holding companies, National banks, Privacy, Reporting and recordkeeping requirements, Savings associations, Trade practices.
For the reasons set forth in the preamble, the Bureau amends Regulation P, 12 CFR part 1016, as set forth below:
12 U.S.C. 5512, 5581; 15 U.S.C. 6804.
(s)(1)
(a)(1) * * * Except as provided by paragraph (e) of this section, you must provide a clear and conspicuous notice to customers that accurately reflects your privacy policies and practices not less than annually during the continuation of the customer relationship. * * *
(e)
(i) Provide nonpublic personal information to nonaffiliated third parties only in accordance with the provisions of § 1016.13, § 1016.14, or § 1016.15; and
(ii) Have not changed your policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed to the customer under § 1016.6(a)(2) through (5) and (9) in the most recent privacy notice provided pursuant to this part.
(2)
(i)
(ii)
(iii)
(B) You change your policies and practices in such a way that you no longer meet the requirements of paragraph (e)(1) of this section, and so provide an annual notice to your customers. After providing the annual notice to your customers, you once again meet the requirements of paragraph (e)(1) of this section for an exception to the annual notice requirement. You do not need to provide additional annual notices to your customers until such time as you no longer meet the requirements of paragraph (e)(1) of this section.
(c)
(1) The customer uses your website to access financial products and services electronically and agrees to receive notices at the website, and you post your current privacy notice continuously in a clear and conspicuous manner on the website; or
(2) The customer has requested that you refrain from sending any information regarding the customer relationship, and your current privacy notice remains available to the customer upon request.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule.
We are adopting a new airworthiness directive (AD) for certain Fokker Services B.V. Model F28 Mark 0070 and 0100 airplanes. This AD was prompted by a report that the retraction actuator eye-end of a Goodrich main landing gear (MLG) failed. This AD requires a one-time general visual inspection of the left-hand (LH) and right-hand (RH) MLG retraction actuators and replacement if necessary. We are issuing this AD to address the unsafe condition on these products.
This AD is effective September 21, 2018.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of September 21, 2018.
For service information identified in this final rule, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone +31 (0)88-6280-350; fax +31 (0)88-6280-111; email
You may examine the AD docket on the internet at
Tom Rodriguez, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-231-3226.
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Fokker Services B.V. Model F28 Mark 0070 and 0100 airplanes. The NPRM published in the
We are issuing this AD to address failure of the retraction actuator eye-end of a Goodrich MLG, which could prevent retraction of the MLG and/or its complete extension, possibly resulting in damage to the airplane during landing, and consequent injury to occupants.
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2018-0001, dated January 4, 2018 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Fokker Services B.V. Model F28 Mark 0070 and 0100 airplanes. The MCAI states:
An occurrence was reported where, following take-off after gear up selection, the retraction actuator eye-end (P/N [part number] 41518-3) of a Goodrich MLG failed. After the LG UNSAFE indication, the flight crew successfully selected gear down and locked by applying the alternate extension
This condition, if not detected and corrected, could prevent retraction of the MLG and/or its complete extension, possibly resulting in damage to the aeroplane during landing, and consequent injury to occupants.
To address this potential unsafe condition, Fokker Services published SBF100-32-168 to provide inspection and replacement instructions.
For the reasons described above, this AD requires a one-time [general visual] inspection [for deficiencies] (check the eye-end for presence of interference/damage and for orientation of the greasing nipple) of the MLG retraction actuators, left-hand (LH) and right-hand (RH) sides, and, depending on findings, replacement.
You may examine the MCAI in the AD docket on the internet at
We gave the public the opportunity to participate in developing this final rule. We received no comments on the NPRM or on the determination of the cost to the public.
We reviewed the relevant data and determined that air safety and the public interest require adopting this final rule as proposed, except for minor editorial changes. We have determined that these minor changes:
• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and
• Do not add any additional burden upon the public than was already proposed in the NPRM.
Fokker Services B.V. has issued Fokker Service Bulletin SBF100-32-168, dated May 22, 2017. This service information describes procedures for a one-time general visual inspection for deficiencies of the Goodrich MLG retraction actuators and replacement of the actuator if necessary (
We estimate that this AD affects 5 airplanes of U.S. registry.
We estimate the following costs to comply with this AD:
We estimate the following costs to do any necessary replacements that would be required based on the results of the inspection. We have no way of determining the number of aircraft that might need these replacements:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective September 21, 2018.
None.
This AD applies to Fokker Services B.V. Model F28 Mark 0070 and 0100 airplanes, certificated in any category, all serial numbers, if equipped with Goodrich main landing gear (MLG), part number (P/N) 41050-x (all dashes) or P/N 41060-x (all dashes).
Air Transport Association (ATA) of America Code 32, Landing gear.
This AD was prompted by a report that the retraction actuator eye-end of a Goodrich MLG failed. We are issuing this AD to address failure of the retraction actuator eye-end of a Goodrich MLG, which could prevent retraction of the MLG and/or its complete extension, possibly resulting in damage to the airplane during landing, and consequent injury to occupants.
Comply with this AD within the compliance times specified, unless already done.
For the purposes of this AD, a “serviceable part” is a serviceable retraction actuator with an eye-end that does not have any indication of interference or damage, as specified in the Accomplishment Instructions of Fokker Service Bulletin SBF100-32-168, dated May 22, 2017.
Within 12 months after the effective date of this AD, perform a general visual inspection of the left-hand (LH) and right-hand (RH) MLG retraction actuators for deficiencies (
The following provisions also apply to this AD:
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2018-0001, dated January 4, 2018, for related information. This MCAI may be found in the AD docket on the internet at
(2) For more information about this AD, contact Tom Rodriguez, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-231-3226.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Fokker Service Bulletin SBF100-32-168, dated May 22, 2017.
(ii) Reserved.
(3) For service information identified in this AD, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone +31 (0)88-6280-350; fax +31 (0)88-6280-111; email
(4) You may view this service information at the FAA, Transport Standards Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), DOT.
Final rule.
We are adopting a new airworthiness directive (AD) for certain Rolls-Royce Corporation (RRC) AE 2100D2A and AE 2100D3 model turboprop engines and AE 3007A2 model turbofan engines. This AD was prompted by the possibility of a low-cycle fatigue failure on certain turbine wheels. This AD requires removing the affected turbine wheels at the next engine shop visit or before reaching the new reduced life limit, whichever occurs first, and replacing them with parts eligible for installation. We are issuing this AD to address the unsafe condition on these products.
This AD is effective September 21, 2018.
The Director of the Federal Register approved the incorporation by reference
For service information identified in this final rule, contact Rolls-Royce Corporation, 450 South Meridian Street, Indianapolis, IN 46225; phone: 317-230-3774. You may view this service information at the FAA, Engine and Propeller Standards Branch, 1200 District Avenue, Burlington, MA 01803. For information on the availability of this material at the FAA, call 781-238-7759. It is also available on the internet at
You may examine the AD docket on the internet at
Kyri Zaroyiannis, Aerospace Engineer, Chicago ACO Branch, FAA, 2300 E. Devon Ave., Des Plaines, IL 60018; phone: 847-294-7836; fax: 847-294-7834; email:
We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain RRC AE 2100D2A and AE 2100D3 model turboprop engines and AE 3007A2 model turbofan engines. The NPRM published in the
We gave the public the opportunity to participate in developing this final rule. We have considered the comment received. RRC supported the NPRM.
We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this final rule as proposed.
We reviewed RRC Alert Service Bulletin (ASB) AE 2100D2-A-72-090, Revision 1, dated July 11, 2014, and RRC ASB AE 2100D3-A-72-286, Revision 1, dated July 11, 2014 (one document, referred to herein as “RRC ASB AE 2100D2-A-72-090/AE 2100D3-A-72-286”), and RRC ASB AE 3007A-A-72-419, Revision 2, dated December 4, 2017. RRC ASB AE 2100D2-A-72-090/AE 2100D3-A-72-286 provides removal and replacement instructions and a new life limit for the affected 1st-stage gas generator turbine wheels installed on RRC AE 2100D2A and AE 2100D3 model turboprop engines. ASB AE 3007A-A-72-419 provides removal and replacement instructions and a new life limit for 1st-stage HPT wheels installed on RRC AE 3007A2 model turbofan engines. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We estimate that this AD affects nine engines installed on airplanes of U.S. registry.
We estimate the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to engines, propellers, and associated appliances to the Manager, Engine and Propeller Standards Branch, Policy and Innovation Division.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective September 21, 2018.
None.
This AD applies to:
(1) Rolls-Royce Corporation (RRC) AE 2100D2A turboprop engines with 1st-stage gas generator turbine wheels, part number (P/N) 23089692, with serial numbers (S/Ns) MW65898 or MW68310, installed.
(2) RRC AE 2100D3 turboprop engines with 1st-stage gas generator turbine wheels, P/N 23088906, with S/Ns MW65895, MW65896, MW65900, MW65901, MW65903, MW68305, MW68306, MW68307, MW68312, MW68314, MW68316, MW68318, or MW68319, installed.
(3) RRC AE 3007A2 turbofan engines with 1st-stage high-pressure turbine (HPT) wheels, P/N 23088906, with S/Ns MW65894, MW68303, or MW68315, installed.
Joint Aircraft System Component (JASC) Code 7250, Turbine section.
This AD was prompted by the possibility of steel inclusions in the turbine wheel forging. We are proposing this AD to prevent a low-cycle fatigue failure of a 1st-stage gas generator turbine wheel or 1st-stage HPT wheel. The unsafe condition, if not addressed, could result in uncontained turbine wheel release, damage to the engine, and damage to the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) Remove the affected 1st-stage gas generator turbine wheel and replace with a part eligible for installation at the next engine shop visit or before exceeding the life limit of 4,800 engine cycles, whichever occurs first, in accordance with the Accomplishment Instructions, Paragraph 2, of RRC Alert Service Bulletin (ASB) AE 2100D2-A-72-090, Revision 1, dated July 11, 2014, and RRC ASB AE 2100D3-A-72-286, Revision 1, dated July 11, 2014 (co-published as one document).
(2) Remove the affected 1st-stage HPT wheel and replace with a part eligible for installation at the next engine shop visit or before exceeding the life limit of 5,600 engine cycles, whichever occurs first, in accordance with the Accomplishment Instructions, Paragraph 2, of RRC ASB AE 3007A-A-72-419, Revision 2, dated December 4, 2017.
For the purpose of this AD, an “engine shop visit” is the induction of an engine into the shop for maintenance involving the separation of pairs of major mating engine flanges, except that the separation of engine flanges solely for the purposes of transportation without subsequent engine maintenance is not an engine shop visit.
(1) The Manager, Chicago ACO Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (j) of this AD.
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
For more information about this AD, contact Kyri Zaroyiannis, Aerospace Engineer, Chicago ACO Branch, FAA, 2300 E. Devon Ave., Des Plaines, IL, 60018; phone: 847-294-7836; fax: 847-294-7834; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Rolls-Royce Corporation (RRC) Alert Service Bulletin (ASB) AE 2100D2-A-72-090, Revision 1, dated July 11, 2014, and RRC ASB AE 2100D3-A-72-286, Revision 1, dated July 11, 2014 (co-published as one document).
(ii) RRC ASB AE 3007A-A-72-419, Revision 2, dated December 4, 2017.
(3) For RRC service information identified in this AD, contact Rolls-Royce Corporation, 450 South Meridian Street, Indianapolis, IN, 46225; phone: 317-230-3774.
(4) You may view this service information at FAA, Engine and Propeller Standards Branch, 1200 District Avenue, Burlington, MA, 01803. For information on the availability of this material at the FAA, call 781-238-7759.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule; request for comments.
We are superseding Airworthiness Directive (AD) 2017-24-01, which applied to certain ATR—GIE Avions de Transport Régional Model ATR42-500 airplanes and Model ATR72-212A airplanes. AD 2017-24-01 required an inspection for routing attachments of electrical harness bundles and for wire damage, and corrective actions if necessary. This new AD adds additional airplanes to the applicability. This AD was prompted by a determination that additional airplanes are affected by the unsafe condition. We are issuing this AD to address the unsafe condition on these products.
This AD is effective September 4, 2018.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of September 4, 2018 .
We must receive comments on this AD by October 1, 2018.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this final rule, contact ATR—GIE Avions de Transport Régional, 1 Allée Pierre Nadot, 31712 Blagnac Cedex, France; telephone +33 (0) 5 62 21 62 21; fax +33 (0) 5 62 21 67 18; email
You may examine the AD docket on the internet at
Shahram Daneshmandi, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-321-3220.
We issued AD 2017-24-01, Amendment 39-19105 (82 FR 55755, November 24, 2017) (“AD 2017-24-01”), which applied to certain Model ATR42-500 airplanes and Model ATR72-212A airplanes. AD 2017-24-01 was prompted by reports of electrical harness bundle chafing with a window blinding panel in the fuselage due to missing routing attachments. AD 2017-24-01 required an inspection for routing attachments (
Since we issued AD 2017-24-01, we have determined that additional airplanes are affected by the unsafe condition.
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2018-0105, dated May 08, 2018 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Model ATR42-500 airplanes and Model ATR72-212A airplanes. The MCAI states:
An event was reported of several spurious alarms on a recently delivered ATR 72 aeroplane. During subsequent trouble-shooting, damage was found on the electrical harness wire bundle (Route 1M), due to chafing with a window blinding panel located on the left-hand (LH) side of the fuselage, zone 231. A bracket, necessary to maintain the harness wire bundle close to the structure of the fuselage and avoid chafing, was missing. The same bracket was also found missing on the right-hand (RH) side of the fuselage, zone 232, Route 2M, although without damage on the harness wire bundle. A quality investigation revealed another aeroplane on the production line where same brackets were not installed.
This condition, if not detected and corrected, may lead to wire failure (cut or shorted) and, in case of several failures in combination, to loss of systems, possibly resulting in reduced control of the aeroplane.
To address this potential unsafe condition, ATR published the applicable SB [service bulletin] to provide inspection instructions. Consequently, EASA issued AD 2017-0118 [which corresponds to FAA AD 2017-24-01] to require verification of the installation of the brackets, a one-time inspection of the wire bundles, and depending on findings, accomplishment of applicable corrective action(s).
Since that [EASA] AD was issued, an occurrence was reported of engine intermittent auto-feather, caused by damage on the electrical harness bundle Route 1M. The affected aeroplane MSN [manufacturer serial number] was not identified in the Applicability of EASA AD 2017-0118.
For the reason described above, this [EASA] AD retains the requirements of EASA AD 2017-0118, which is superseded, and expands the Applicability to include additional aeroplanes, identified by MSN in Group 2 as specified in section `Definitions' of this [EASA] AD.
The MCAI includes MSNs 1071, 1141, 1341, 1367, and 1377 in its applicability, but those MSNs are not identified in the definitions for the affected groups. Those MSNs are not affected by the identified unsafe condition. Therefore, we have not included those MSNs in our applicability. You may examine the MCAI on the internet at
ATR has issued Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018; and Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018. This service information describes procedures for an inspection of routing attachments (
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are issuing this AD because we evaluated all pertinent information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.
There are currently no domestic operators of this product. Therefore, we good cause find that notice and opportunity for prior public comment are unnecessary and that, for the same reason, good cause exists for making this amendment effective in less than 30 days.
This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
Currently, there are no affected U.S.-registered airplanes. If an affected airplane is imported and placed on the U.S. Register in the future, we provide the following cost estimates to comply with this AD:
We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes to the Director of the System Oversight Division.
We determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD is effective September 4, 2018.
This AD replaces AD 2017-24-01, Amendment 39-19105 (82 FR 55755, November 24, 2017) (“AD 2017-24-01”).
This AD applies to the ATR—GIE Avions de Transport Régional airplanes identified in paragraphs (c)(1) and (c)(2) of this AD, certificated in any category.
(1) Model ATR42-500 airplanes, manufacturer serial numbers (MSNs) 1001 through 1014 inclusive, 1016 through 1019 inclusive, and 1201 through 1212 inclusive.
(2) Model ATR72-212A airplanes, MSNs 1048 through 1070 inclusive, 1072 through 1140 inclusive, 1142 through 1200 inclusive, 1220 through 1340 inclusive, 1342 through 1353 inclusive, 1355 through 1366 inclusive, 1368 through 1376 inclusive, 1378 through 1380 inclusive, 1382, 1385, and 1388.
Air Transport Association (ATA) of America Code 92, Electric.
This AD was prompted by reports of electrical harness bundle chafing with a window blinding panel in the fuselage due to missing routing attachments and by a determination that additional airplanes that were not identified in AD 2017-24-01 are affected by the unsafe condition. We are issuing this AD to detect and correct missing
Comply with this AD within the compliance times specified, unless already done.
(1) For the purposes of this AD, Group 1 airplanes are identified as the following: MSNs 1014, 1016 through 1019 inclusive, 1165 through 1212 inclusive, 1220 through 1340 inclusive, 1342 through 1353 inclusive, 1355 through 1366 inclusive, 1368 through 1376 inclusive, 1378 through 1380 inclusive, 1382, 1385 and 1388.
(2) For the purposes of this AD, Group 2 airplanes are identified as the following: MSNs 1001 through 1013 inclusive, 1048 through 1070 inclusive, 1072 to 1140 inclusive 1142 through 1164 inclusive.
This paragraph restates the requirements of paragraph (g) of AD 2017-24-01, with new service information and revised compliance language. For Group 1 airplanes: Within 6 months or 500 flight hours after December 11, 2017 (the effective date of AD 2017-24-01), whichever occurs first, do a detailed inspection for missing brackets and damage (including but not limited to chafing and electrical shorting) to wire bundles of the Route 1M and Route 2M electrical harness, in accordance with the flowchart in paragraph 1.C., “Description,” and the Accomplishment Instructions of ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018 (for Model ATR42-500 airplanes); or ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018 (for Model ATR72-212A airplanes); as applicable. Although ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018; and ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018; specify reporting, this AD does not include that requirement.
For Group 2 airplanes: Within 6 months or 500 flight hours after the effective date of this AD, whichever occurs first, do a detailed inspection for missing brackets and damage (including but not limited to chafing and electrical shorting) to wire bundles of the Route 1M and Route 2M electrical harness, in accordance with the flowchart in paragraph 1.C., “Description,” and the Accomplishment Instructions of ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018 (for Model ATR42-500 airplanes); or ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018 (for Model ATR72-212A airplanes); as applicable. Although ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018; and ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018; specify reporting, this AD does not include that requirement.
If the inspection required by paragraph (h) or (i) of this AD reveals that any bracket is missing or any wire is damaged, before further flight, do applicable corrective actions, in accordance with the flowchart in paragraph 1.C., “Description,” and the Accomplishment Instructions of ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018 (for Model ATR42-500 airplanes); or ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018 (for Model ATR72-212A airplanes); as applicable. Where ATR Service Bulletin ATR42-92-0033, Revision 02, dated April 12, 2018; and ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018; specify to contact ATR-GIE Avions de Transport Régional for appropriate action, before further flight, accomplish corrective actions in accordance with the procedures specified in paragraph (l)(2) of this AD.
This paragraph provides credit for actions required by paragraphs (h), (i), and (j) of this AD, if those actions were performed before the effective date of this AD using ATR Service Bulletin ATR42-92-0033, dated May 3, 2017, or Revision 01, dated July 20, 2017; or ATR Service Bulletin ATR72-92-1044, dated May 3, 2017, or Revision 01, dated July 20, 2017, as applicable. ATR Service Bulletin ATR42-92-0033, dated May 3, 2017; and ATR72-92-1044, dated May 3, 2017, were previously incorporated by reference in AD 2017-24-01. ATR Service Bulletin ATR42-92-0033 Revision 01, dated July 20, 2017; and ATR72-92-1044, Revision 01, dated July 20, 2017, were not previously incorporated by reference.
The following provisions also apply to this AD:
(1) Alternative Methods of Compliance (AMOCs): The Manager, International Section, Transport Standards Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the International Section, send it to the attention of the person identified in paragraph (m)(2) of this AD. Information may be emailed to:
(2) Contacting the Manufacturer: As of the effective date of this AD, for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Section, Transport Standards Branch, FAA; or, the European Aviation Safety Agency (EASA); or, ATR—GIE Avions de Transport Régional's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2018-0105, dated May 08, 2018, for related information. This MCAI may be found in the AD docket on the internet at
(2) For more information about this AD, contact Shahram Daneshmandi, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-321-3220.
(3) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (n)(3) and (n)(4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) ATR Service Bulletin ATR42- 92-0033, Revision 02, dated April 12, 2018.
(ii) ATR Service Bulletin ATR72-92-1044, Revision 02, dated April 12, 2018.
(3) For service information identified in this AD, contact ATR—GIE Avions de Transport Régional, 1 Allée Pierre Nadot, 31712 Blagnac Cedex, France; telephone +33 (0) 5 62 21 62 21; fax +33 (0) 5 62 21 67 18; email
(4) You may view this service information at the FAA, Transport Standards Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
Federal Aviation Administration (FAA), DOT.
Final rule; technical amendment.
This action makes minor adjustments to the boundary descriptions of restricted areas R-2905A and R-2905B, Tyndall AFB, FL; R-2914B, and R-2919B, Valparaiso, FL; R-2915A and R-2915C, Eglin AFB, FL. The changes are needed because the FAA has adopted updated digital data that more precisely define maritime limits and other geophysical features used in the boundary descriptions. This requires minor changes to certain latitude/longitude points in the boundary descriptions of the above restricted areas in order to match the updated data and ensure accurate boundary depiction on aeronautical charts.
Paul Gallant, Airspace Policy Group, AJV-11, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.
This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it supports updating certain boundary coordinates for restricted areas Tyndall AFB, FL, Valparaiso, FL, and, Eglin AFB, FL.
Some restricted area boundary descriptions use maritime limits, such as references to the shoreline of the U.S., to identify the shape of the area (
For a variety of reasons, maritime limits change over time. The FAA has received updated digital data for maritime limits from the National Oceanic and Atmospheric Administration (NOAA). Digital data are more precise than measurements used in the past. The FAA, through the implementation of its data-driven charting process, was able to utilize this new data to accurately update the U.S. maritime limit boundaries used for aeronautical charting. Prior to the update, the maritime limit boundary data used for charting were over 25 years old. In applying the updated data, FAA found that some restricted area boundary descriptions that were based on the maritime limits, did not correspond to the updated shoreline data. Consequently, there are minor mismatches between some restricted area latitude/longitude coordinates and the actual shoreline position. Similarly, more accurate digital data is available for railroads and highways and the FAA is applying that information as well.
This rulemaking action updates the affected boundary coordinates of restricted areas R-2905A, R-2905B, R-2914B, R-2915C, and R-2919B, in Florida to ensure that the published boundaries match the actual relation to the U.S. shoreline, and maintain aeronautical chart accuracy. R-2915A is amended to reflect digital positional data for the L and N Railroad and the Navarre-Milton Highway, which form part of that restricted area's boundary.
This action amends Title 14 Code of Federal Regulations (14 CFR) part 73 by making minor updates to certain latitude/longitude coordinates in the descriptions of restricted areas R-2905A, R-2905B, R-2914B, R-2915A, R-2915C, and R-2919B, in Florida. The changes are needed because the FAA has adopted the use of digital data for aeronautical charting. This more precise digital plotting of points revealed minor mismatches between some current restricted area boundary coordinates and the updated digital data for those points. The specific restricted area boundary updates are shown below:
These minor editorial changes update existing restricted area boundaries with more precise digital information. It does not affect the location, designated altitudes, or activities conducted within the restricted areas; therefore, notice and public procedure under 5 U.S.C. 553(b) are unnecessary.
The FAA has determined that this action only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under
The FAA has determined that this action of making minor adjustments to the boundary descriptions of restricted areas R-2905A and R-2905B, Tyndall AFB, FL; R-2914B, Valparaiso, FL; R-2915A and R-2915C, Eglin AFB, FL; and R-2919B, Valparaiso, FL qualifies for categorical exclusion under the National Environmental Policy Act and its implementing regulations at 40 CFR part 1500, and in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5-6.5.d, Modification of the technical description of special use airspace (SUA) that does not alter the dimension, altitudes, or times of designation of the airspace. This airspace action makes minor updates to certain boundary coordinates of restricted areas R-2905A and R-2905B, Tyndall AFB, FL; R-2914B, Valparaiso, FL; R-2915C, Eglin AFB, FL; and R-2919B, Valparaiso, FL, to match the more precise digital shoreline data received from the National Oceanic and Atmospheric Administration (NOAA). This ensures that the affected boundaries continue to match the NOAA-defined position of the U.S. shoreline, and more accurate digital data for geophysical references. It does not alter the location, altitudes, or activities conducted within the airspace; therefore, it is not expected to cause any potentially significant environmental impacts. In accordance with FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, the FAA has reviewed this action for factors and circumstances in which a normally categorically excluded action may have a significant environmental impact requiring further analysis. The FAA has determined that no extraordinary circumstances exist that warrant preparation of an environmental assessment or environmental impact study.
Airspace, Prohibited areas, Restricted areas.
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 73, as follows:
49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
By removing the current boundaries and adding in its place the following:
By removing the current boundaries and adding in its place the following:
By removing the current boundaries and adding in its place the following:
By removing the current boundaries and adding in its place the following:
By removing the current boundaries and adding in its place the following:
By removing the current boundaries and adding in its place the following:
Federal Aviation Administration (FAA), DOT.
Final rule.
This rule amends, suspends, or removes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide for the safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports.
This rule is effective August 17, 2018. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of August 17, 2018.
Availability of matter incorporated by reference in the amendment is as follows:
1. U.S. Department of Transportation, Docket Ops-M30, 1200 New Jersey
2. The FAA Air Traffic Organization Service Area in which the affected airport is located;
3. The office of Aeronautical Navigation Products, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or,
4. The National Archives and Records Administration (NARA).
For information on the availability of this material at NARA, call 202-741-6030, or go to:
All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit the National Flight Data Center online at
Thomas J. Nichols, Flight Procedure Standards Branch (AFS-420) Flight Technologies and Procedures Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK. 73125) telephone: (405) 954-4164.
This rule amends Title 14, Code of Federal Regulations, part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (NFDC)/Permanent Notice to Airmen (P-NOTAM), and is incorporated by reference under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR 97.20. The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the
This amendment provides the affected CFR sections, and specifies the SIAPs and Takeoff Minimums and ODPs with their applicable effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number.
The material incorporated by reference is publicly available as listed in the
The material incorporated by reference describes SIAPs, Takeoff Minimums and ODPs as identified in the amendatory language for part 97 of this final rule.
This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP and Takeoff Minimums and ODP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP and Takeoff Minimums and ODP as modified by FDC permanent NOTAMs.
The SIAPs and Takeoff Minimums and ODPs, as modified by FDC permanent NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs and Takeoff Minimums and ODPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts.
The circumstances that created the need for these SIAP and Takeoff Minimums and ODP amendments require making them effective in less than 30 days.
Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedure under 5 U.S.C. 553(b) are impracticable and contrary to the public interest and, where applicable, under 5 U.S.C. 553(d), good cause exists for making these SIAPs effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air Traffic Control, Airports, Incorporation by reference, Navigation (air).
Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal regulations, part 97, (14 CFR part 97), is amended by amending Standard Instrument Approach Procedures and Takeoff Minimums and ODPs, effective at 0901 UTC on the dates specified, as follows:
49 U.S.C. 106(f), 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721-44722.
By amending: § 97.23 VOR, VOR/DME, VOR or TACAN, and VOR/DME or TACAN; § 97.25 LOC, LOC/DME, LDA, LDA/DME, SDF, SDF/DME; § 97.27 NDB, NDB/DME; § 97.29 ILS, ILS/DME, MLS, MLS/DME, MLS/RNAV; § 97.31 RADAR SIAPs; § 97.33 RNAV SIAPs; and § 97.35 COPTER SIAPs, Identified as follows:
Federal Aviation Administration (FAA), DOT.
Final rule.
This rule establishes, amends, suspends, or removes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures (ODPs) for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports.
This rule is effective August 17, 2018. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions.
The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of August 17, 2018.
Availability of matters incorporated by reference in the amendment is as follows:
1. U.S. Department of Transportation, Docket Ops-M30, 1200 New Jersey Avenue SE, West Bldg., Ground Floor, Washington, DC 20590-0001.
2. The FAA Air Traffic Organization Service Area in which the affected airport is located;
3. The office of Aeronautical Navigation Products, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or,
4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to:
All SIAPs and Takeoff Minimums and ODPs are available online free of charge. Visit the National Flight Data Center at
Thomas J. Nichols, Flight Procedure Standards Branch (AFS-420), Flight Technologies and Programs Divisions, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082, Oklahoma City, OK 73125) Telephone: (405) 954-4164.
This rule amends Title 14 of the Code of Federal Regulations, part 97 (14 CFR part 97), by establishing, amending, suspending, or removes SIAPS, Takeoff Minimums and/or ODPS. The complete regulatory description of each SIAP and its associated Takeoff Minimums or ODP for an identified airport is listed on FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA forms are FAA Forms 8260-3, 8260-4,
The large number of SIAPs, Takeoff Minimums and ODPs, their complex nature, and the need for a special format make publication in the
The material incorporated by reference is publicly available as listed in the
The material incorporated by reference describes SIAPS, Takeoff Minimums and/or ODPS as identified in the amendatory language for part 97 of this final rule.
This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP, Takeoff Minimums and ODP as Amended in the transmittal. Some SIAP and Takeoff Minimums and textual ODP amendments may have been issued previously by the FAA in a Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts.
The circumstances that created the need for some SIAP and Takeoff Minimums and ODP amendments may require making them effective in less than 30 days. For the remaining SIAPs and Takeoff Minimums and ODPs, an effective date at least 30 days after publication is provided.
Further, the SIAPs and Takeoff Minimums and ODPs contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPs and Takeoff Minimums and ODPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedure under 5 U.S.C. 553(b) are impracticable and contrary to the public interest and, where applicable, under 5 U.S.C. 553(d), good cause exists for making some SIAPs effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air traffic control, Airports, Incorporation by reference, Navigation (air).
Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) is amended by establishing, amending, suspending, or removing Standard Instrument Approach Procedures and/or Takeoff Minimums and Obstacle Departure Procedures effective at 0901 UTC on the dates specified, as follows:
49 U.S.C. 106(f), 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44701, 44719, 44721-44722.
Food and Drug Administration, HHS.
Notification; order granting alternative.
The Food and Drug Administration's (FDA, Agency, or we) Center for Devices and Radiological Health and Center for Biologics Evaluation and Research are announcing that the Agency is granting an alternative that permits manufacturer reporting of certain device malfunction medical device reports (MDRs) in summary form on a quarterly basis. We refer to this alternative as the “Voluntary Malfunction Summary Reporting Program.” This voluntary program reflects goals for streamlining malfunction reporting outlined in the commitment letter agreed to by FDA and industry and submitted to Congress, as referenced in the Medical Device User Fee Amendments of 2017 (MDUFA IV Commitment Letter).
This voluntary program applies only to reportable malfunction events that manufacturers become aware of on or after August 17, 2018. See further discussion in section IV.F. “Submission Schedule and Logistics.”
Michelle Rios, Center for Devices and Radiological Health (CDRH), Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 3222, Silver Spring, MD 20993, 301-796-6107,
Every year, FDA receives hundreds of thousands of MDRs of suspected device-associated deaths, serious injuries, and malfunctions. The Agency's MDR program is one of the postmarket surveillance tools FDA uses to monitor device performance, detect potential device-related safety issues, and contribute to benefit-risk assessments. Malfunction reports represent a substantial fraction of the MDRs FDA receives on an annual basis.
Medical device reporting requirements for manufacturers are set forth in section 519 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 360i) and the regulations contained in part 803 (21 CFR part 803). Among other things, part 803 requires the submission of an individual MDR when a manufacturer becomes aware of information, from any source, which reasonably suggests that one of its marketed devices malfunctioned and the malfunction of the device or a similar device marketed by the manufacturer would be likely to cause or contribute to a death or serious injury if the malfunction were to recur (§§ 803.10(c)(1) and 803.50(a)(2). Throughout this document, we refer to such malfunctions as “reportable malfunctions” or “reportable malfunction events.”
The Food and Drug Administration Amendments Act of 2007 (FDAAA)
In the
In response to the 2017 Proposal, FDA received 24 comments from industry, professional societies, trade organizations, and individual consumers by the close of the comment period, each containing one or more comments on one or more issues. A summary of the comments to the docket and our responses follow. To make it easier to identify comments and our responses, the word “Comment” appears in parentheses before the comment's description, and the word “Response” in parentheses precedes the response. The comments are grouped based on common themes and numbered sequentially.
(Comment 1) Three comments suggested that the proposal was inconsistent with amendments made by section 227 of FDAAA to section 519(a) of the FD&C Act regarding malfunction reporting requirements. Two of these comments specifically recommended that FDA immediately implement summary, quarterly malfunction reporting under section 519(a)(1)(B)(ii) of the FD&C Act for all class I devices and those class II devices that are not permanently implantable, life supporting, or life sustaining.
(Response 1) FDA disagrees with these comments. As discussed in the 2017 Proposal, currently, there are still reportable malfunctions for which submission of individual malfunction reports on a prompter basis than quarterly is necessary to protect the public health—for example, when remedial action is needed to prevent an unreasonable risk of substantial harm to the public health. Those situations may involve class I devices and class II devices that are not permanently implantable, life supporting, or life sustaining, and it is not feasible for FDA to provide notice in the
(Comment 2) Several comments raised concerns that the proposed program would be unable to provide FDA with critical information on adverse event reporting. Many of the comments from individual consumers also raised concerns that the proposed program would limit transparency of malfunction event data that is publicly available to patients and physicians, including transparency regarding the number of reported malfunctions. However, another comment indicated that the proposed program would minimize burden while maintaining patient safety. That same comment further indicated that the proposed malfunction summary reporting format would enhance public visibility into the events and associated investigation compared to a format previously used for the Alternative Summary Reporting (ASR) program.
(Response 2) FDA disagrees with the comments suggesting that the Voluntary Malfunction Summary Reporting Program will negatively affect patient safety and the transparency of malfunction reports. Summary, quarterly reporting in accordance with this program will result in some malfunction reports being submitted to FDA and added to the publicly available Manufacturer and User Facility Device Experience (MAUDE) database later
While summary malfunction reports submitted under this program will change the format in which information is presented to FDA, we do not believe there will be an adverse impact on the content of information provided to FDA. The format for summary reporting described in section IV.D includes a narrative section for describing malfunctions, similar to the narrative section required for individual reporting. In addition, each narrative section is required to include a sentence specifying the number of malfunction events summarized in the report, providing transparency for the public regarding the number of events that a summary report available in MAUDE represents. Therefore, we agree with the comment that the summary reporting format will improve transparency for the public when compared to some past summary reports submitted to FDA, such as reports submitted under the ASR program (Ref. 2).
(Comment 3) One comment requested clarification as to whether a manufacturer would need to apply or obtain permission to participate in the program and asked FDA to clarify how the proposed program would work with other alternative summary reporting situations. Another comment asked FDA to clarify whether manufacturers can still apply for an exemption or variance to be granted under § 803.19 for their devices that do not fall under an eligible product code.
(Response 3) FDA is clarifying in the description of the alternative that manufacturers do not need to submit a request or application to FDA before participating in the Voluntary Malfunction Summary Reporting Program. For devices that fall within eligible product codes, the alternative that FDA is granting under § 803.19 provides that manufacturers may choose or “self-elect” to participate, subject to the program conditions identified in section IV. If a manufacturer wishes to request a different exemption, variance, or alternative under § 803.19 (including for devices in product codes that are eligible for the Voluntary Malfunction Summary Reporting Program) the manufacturer may submit a request to FDA. For more information regarding the recommended content of such requests, see section 2.27 of the Agency's guidance entitled “Medical Device Reporting for Manufacturers: Guidance for Industry and Food and Drug Administration Staff” (MDR Guidance) (Ref. 3).
Whether participation in the Voluntary Malfunction Summary Reporting Program will have an impact on a manufacturer being granted a different exemption, variance, or alternative under § 803.19 will depend on the scope of the other exemption, variance, or alternative. FDA will make a case-by-case determination on requests for an exemption, variance, or alternative submitted under § 803.19(b).
(Comment 4) Several comments also discussed the scope of product codes that should be eligible for the proposed program. One comment expressed concern about including class III devices and class II devices that are permanently implantable, life-supporting, or life-sustaining in the program and urged FDA to issue another
(Response 4) FDA disagrees that it should publish another
(Comment 5) Three comments recommended that importers be included within the scope of the proposed program and indicated that FDA should provide a rationale for not including them. One of those comments suggested that without more information, it appeared arbitrary that FDA did not include importers and user facilities in the summary reporting program.
(Response 5) FDA disagrees with these comments. Unlike manufacturers, device user facilities are not required to submit malfunction reports under part 803. User facilities, such as hospitals or nursing homes, are required to submit MDRs to FDA and/or the manufacturer
Importers are also subject to different requirements for reporting device malfunctions than those for manufacturers under part 803. Under § 803.40, importers are required to submit a report to the device manufacturer, not to FDA, within 30 days after becoming aware of a reportable malfunction event. Manufacturers then determine the reportability of the information received from the importer and accordingly submit those reports to FDA. This program specifically addresses malfunction summary reporting to FDA. In addition, we believe it is important for importers to continue to submit individual malfunction MDRs to device manufacturers in accordance with § 803.40 so that manufacturers receive detailed information necessary to conduct adequate investigations and follow up related to malfunction events.
(Comment 6) One comment suggested that when requesting that a manufacturer submit a 5-day report, FDA should have an objective and documented basis for making such a request, as well as an opportunity for manufacturers to appeal. Other comments asked FDA to define the term “substantially similar” as used in describing the program condition regarding 5-day reports and to clarify
(Response 6) The circumstances in which a 5-day report is required are defined under § 803.53, and those circumstances remain unchanged for manufacturers participating in the Voluntary Malfunction Summary Reporting Program. As stated in the 2017 Proposal, the reporting requirements at § 803.53 will continue to apply to manufacturers of devices in eligible product codes who participate in this program. We have added a separate heading to the description of the alternative to clarify this point further. For more information regarding the handling of a 5-day report, please see section 2.20 of the Agency's MDR Guidance (Ref. 3).
The first individual reporting condition requires that if a manufacturer submits a 5-day report for an event or events that require remedial action to prevent an unreasonable risk of substantial harm to public health, all subsequent reportable malfunctions of the same nature that involve substantially similar devices must be submitted as individual MDRs in accordance with §§ 803.50 and 803.52 until the date that the remedial action has been resolved to FDA's satisfaction. For purposes of this individual reporting condition, a “substantially similar” device could be, for example, a device that is the same except for certain performance characteristics or a device that is the same except for certain cosmetic differences in color or shape.
Regarding the term “imminent hazard,” FDA notes that the term is used to describe one of the general overarching principles for summary reporting, but is not included in the descriptions of any of the individual reporting conditions. For purposes of these overarching principles, we intend “imminent hazard” to capture situations in which a device poses a significant risk to health and creates a public health situation that should be addressed immediately to prevent injury. Use of that term in one of the overarching principles was not intended to indicate any change in the standard for a 5-day report under § 803.53.
(Comment 7) One comment indicated that there should be objective and documented criteria for when FDA would provide written notice that manufacturers must submit an individual, 30-day malfunction report in accordance with the proposed program conditions, along with an opportunity for appeal. The comment further asserted that due process considerations need to be made regarding these reporting requirements, including notice, a written justification for the request, and a process to appeal.
(Response 7) FDA disagrees that there should be fixed criteria for notifying a manufacturer that it must submit an individual, 30-day malfunction report in accordance with the program conditions. Manufacturers who are notified to submit individual reports in accordance with the individual reporting conditions will need to comply with MDR requirements to which they would otherwise be subject if not granted this alternative under § 803.19. FDA has provided examples of when it would make these notifications, but public health issues that require submission of individual MDRs to monitor device safety are not uniform and may arise in various ways.
FDA will provide written notice to manufacturers when they need to submit individual MDRs pursuant to individual reporting conditions 3 and 4, as described in section IV.B. In addition, the Agency already has a process in place for stakeholders to request review of decisions made by CDRH employees. For more information, refer to the FDA Guidance entitled “Center for Devices and Radiological Health Appeals Processes” (Ref. 4).
(Comment 8) Some comments disagreed with the proposed program condition that would have required manufacturers to submit individual, 30-day MDRs for reportable malfunction events that are the subject of any ongoing device recall and suggested that the condition be modified or removed. The comments cited several different reasons for objecting to this condition, including that the condition is not mentioned in the MDUFA IV Commitment Letter, that the condition may discourage manufacturers from conducting voluntary or class III recalls, that the condition is duplicative of information that FDA receives during a recall, and that it may be difficult for manufacturers to manage the requirements (
(Response 8) FDA disagrees with the comments recommending removal of this individual reporting condition. Recall classification takes into account both the severity of harm and the likelihood of occurrence, and it is important for FDA to have access to more timely information on malfunctions related to certain recalls to ensure that the recall has been appropriately classified and that the recall strategy is effective.
FDA also provides the following responses to the additional specific issues raised in the comments: (a) For the reasons discussed above, FDA continues to believe that it is important for malfunctions related to certain recalls to be reported as individual MDRs. However, after considering the comments, FDA has determined that this individual reporting condition should only apply to reportable malfunctions that are the subject of a recall involving a correction or removal that must be reported to FDA under part 806 (21 CFR part 806). Under part 806, manufacturers and importers are required to make a written report to FDA of any correction or removal of a device if the correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act caused by the device that may present a risk to health, unless the information has already been submitted to FDA in accordance with other reporting requirements. (See § 806.10(a) and (f).) Because the definition of “risk to health” under part 806 tracks the definitions of class I and class II recalls in § 7.3(m) (21 CFR 7.3(m)), reports of corrections and removals are required for actions that meet the definition of class I and class II recalls. However, under part 806, manufacturers and importers need not report events that are categorized as class III recalls under § 7.3(m) (see 62 FR 27183, May 19, 1997). Therefore, an action that meets the definition of a class III recall would not, on its own, trigger the requirement to submit individual reports under the Voluntary Malfunction Summary Reporting Program.
(b) FDA agrees that it is important to provide clarity regarding when the requirement to submit individual MDRs is triggered under this individual reporting condition and the events to which that requirement applies. Therefore, FDA is revising the alternative to clarify that, as of the date a manufacturer submits a required report of a correction or removal under part 806 (or the date that the manufacturer submits a report of the correction or removal under 21 CFR part 803 or part 1004 instead, as permitted under § 806.10(f)), the manufacturer must submit reportable malfunction events related to that correction or removal as individual MDRs in accordance with §§ 803.50 and 803.52. We believe these revisions will help provide manufacturers with a clear date on which this individual reporting obligation is triggered.
With respect to malfunction events that were identified for inclusion in a summary report but are subsequently identified as the subject of a reportable correction or removal prior to the end of the relevant summary reporting period, FDA is revising the alternative to state that a summary MDR must be submitted for those reportable malfunctions within 30 calendar days of when the manufacturer submits the required report of correction or removal. In the summary report, the manufacturer must include a check on the box for “Recall” in SECTION H.7 of the electronic Form FDA 3500A. We have similarly revised the description of individual reporting conditions 3 and 4 to clarify the requirements for handling malfunction events identified for inclusion in a summary report (but not yet submitted) prior to the date that individual reporting is triggered.
(c) As part of its recall termination process, FDA considers MDR information, including reported malfunctions to help evaluate the effectiveness of the recall. Therefore, FDA disagrees with the suggestion to limit the duration of individual reporting under this condition to 90 days past the date of a recall. However, after considering the comments, we do not believe it is necessary to receive individual MDRs for reportable malfunction events that are the subject of a recall after FDA has terminated the recall. We have revised the alternative accordingly (see Section IV.B.2.). For similar reasons, we have revised the first individual reporting condition to state that individual MDRs associated with a 5-day report are only required until the remedial action at issue is resolved to FDA's satisfaction.
(d) By “malfunction events of the same nature,” FDA means additional reportable malfunction events involving the same malfunction that prompted the recall.
(Comment 9) One comment, regarding proposed individual reporting condition 3, suggested that FDA provide information on the timing for when the Agency will provide written notice to a manufacturer that the manufacturer can resume participation in the Voluntary Malfunction Summary Reporting Program.
(Response 9) FDA cannot provide a uniform timeframe for when the Agency would notify manufacturers submitting individual reports due to an identified public health issue that they can resume submission of summary, quarterly malfunction reports for those devices because the timing and resolution of public health issues is specific to each situation.
(Comment 10) Three comments recommended that FDA clarify what constitutes a “new type of reportable malfunction” that is exempt from summary reporting. One of these comments indicated that FDA should provide additional information regarding when a manufacturer can begin submitting summary reports for these new types of device malfunctions.
(Response 10) FDA disagrees that the meaning of the phrase “new type of reportable malfunction” was unclear in the proposal. Manufacturers are required under § 820.198 (21 CFR 820.198) to evaluate complaints to determine if they represent events that must be reported to FDA under part 803 or if an investigation is required. Through this process, if a manufacturer identifies a new type of reportable malfunction that has not previously been reported to FDA over the life of that device, this information must be submitted to FDA as an individual MDR in accordance with §§ 803.50 and 803.52 and may not be reported to FDA in a summary malfunction report. This will allow FDA and manufacturers to better understand and address emergent issues with medical devices. We have revised this individual reporting condition to clarify that after manufacturers submit an individual MDR for the initial occurrence of a previously unreported type of reportable malfunction for a device, subsequent reports for that same type of malfunction for that device may be in summary form, unless they are subject to individual reporting for another reason.
(Comment 11) Some comments suggested that FDA allow manufacturers to “bundle together” reportable malfunction events in a summary report by product code or product family and allow the use of International Medical Device Regulators Forum's (IMDRF) Level 1,2 codes to bundle like events in a summary report.
(Response 11) FDA disagrees with the suggestion that manufacturers be permitted to bundle reportable malfunction events by product code or product family for purposes of submitting a summary report. Each unique combination of device brand name (corresponding to SECTION D1 of the Form FDA 3500A), device model, and device problem code(s) (corresponding to SECTION F10/H6 of the Form FDA 3500A) can be summarized together in reports submitted under this program. (Comments regarding the number of brand names that should be included in each summary report are further addressed in the response to Comment 16 below, and we have made corrections to the summary reporting instructions for SECTION D.4 to be clear that each summary malfunction report should summarize events for a single device model.) Bundling together malfunction reports by product codes or device families would make summarizing and interpreting the information in a summary report difficult for manufacturers, FDA, and the public because a product code or product family could contain several devices with different functions, components, and modes of operation that are important for purposes of understanding malfunction events and the causes of those events. The intent of the Voluntary Malfunction Summary Reporting Program is to streamline reporting of events that are the same or similar, yet not to over bundle reports such that important details regarding device performance are obscured.
The IMDRF (Ref. 5) is working towards harmonization of all medical device coding, including device problem codes. To harmonize medical device coding globally, device problem codes have been organized in a hierarchical arrangement, such that higher level codes (
(Comment 12) One comment noted that it was unclear whether a summary malfunction report will be available in MAUDE or another database. Another comment recommended that FDA allow Excel spreadsheets with malfunction report data to be uploaded to MAUDE.
(Response 12) FDA plans to make summary reports submitted under the Voluntary Malfunction Summary Reporting Program publicly available in MAUDE. However, FDA will not upload Excel spreadsheets to MAUDE because they are incompatible with the MAUDE interface.
(Comment 13) One comment indicated that FDA should consider amending the requirement that an individual process the complaints twice—once for reporting assessment and then quarterly.
(Response 13) FDA disagrees with this comment. FDA is granting an alternative to the individual reporting requirements under part 803 for certain reportable malfunction events. The Quality System (QS) regulation requires manufacturers to evaluate all complaints to determine if they represent events that must be reported to FDA under part 803 (§ 820.198(a)). If a complaint represents an MDR reportable event, then the manufacturer must, among other things, investigate it and submit an MDR to FDA. (See §§ 803.10(c), 803.50, and 820.198(d)) The difference for manufacturers that have been granted the alternative described in this document is that they could choose to report certain malfunction events to FDA as a summary report instead of as an individual report.
(Comment 14) One comment requested that FDA provide more detail concerning the terms “similar device” and “similar complaint,” as used in the discussion of the rationale for the proposed summary reporting format.
(Response 14) The term “similar device” is used in FDA's MDR regulations to describe malfunction events for which manufacturers must submit a report to FDA. (see
FDA does not believe it is necessary to provide a formal definition of the term “similar complaint” for purposes of this alternative because that term is not used in describing any of the conditions of the Voluntary Malfunction Summary Reporting Program, including the required reporting format. Whether a complaint constitutes a “similar complaint” for purposes of conducting an investigation under FDA's QS regulation is outside the scope of this alternative.
(Comment 15) One comment asked FDA to provide further information on how a manufacturer is to provide supplemental information, including whether FDA expects such information to be shared with the Agency. Some comments also noted that FDA should explain how a previously submitted summary malfunction report should be updated with new information, including how to handle new information regarding a previously reported event that would change the categorization of the event (
(Response 15) FDA understands the need for clarification of how to handle additional information and supplemental reporting under this program and has revised the alternative to address this issue. A manufacturer participating in the Voluntary Malfunction Summary Reporting Program must submit an initial summary report within the Summary Malfunction Reporting Schedule timeframe described in table 1. Supplemental reports to a summary malfunction report must also be submitted within that timeframe. For example, if a manufacturer submits a summary report for certain malfunction events of which it became aware in January to March and in May of that same year becomes aware of additional information that would have been required in the initial summary report if it had been known to the manufacturer, then the manufacturer must submit a supplemental report with that additional information by July 31. Manufacturers do not need to submit a supplemental report for new information if they would not have been required to report that information had it been known or available at the time of filing the initial summary malfunction report.
However, this timing for supplemental reports would not apply when additional information is learned about an event or events included in a previously submitted summary report that triggers individual reporting requirements. For example, if the manufacturer becomes aware of additional information reasonably suggesting that a previously reported malfunction meets the criteria for a reportable serious injury or death event, then the manufacturer must submit an initial, individual MDR for the identified serious injury or death within 30 calendar days of becoming aware of the additional information. The manufacturer must simultaneously submit a supplement to the initial MDR summary report reducing the number of events summarized by 1, so that the total number of events remains the same. The alternative has been revised to reflect that these are requirements for participating in the Voluntary Malfunction Summary Reporting Program.
(Comment 16) One comment stated that Form FDA 3500A is not an optimal format because it is only used for single event reporting. Other comments made specific recommendations and/or raised issues regarding the proposed summary reporting format using Form FDA 3500A, including the following: (a) In Form FDA 3500A, SECTIONS B.5 and H.10, FDA should request that information be entered in a summary, high-level form, rather than requiring detailed descriptions or itemized investigation findings; (b) clarify the most “up to date” information that is expected to be received in the report; (c) clarify that only one brand name per product code should be entered in the field with additional brand names being provided in a separate attachment (SECTION D.1); (d) inclusion of patient age, weight, and breakdown of gender and race is inappropriate for summary malfunction reporting, and it is not clear if such information is required in a summary malfunction report; (e) clarify that manufacturers can submit summary malfunction reports for devices manufactured at multiple manufacturing sites (SECTION D.3); (f) the summary format should permit a serial number to be used instead of a lot number to identify the devices that are the subject of a summary report (SECTION D.4); and (g) address how a manufacturer should link a device problem code with a method code, result code, and evaluation conclusion code (if different) for a single summary report that includes more than one device problem.
(Response 16) FDA does not believe the summary reporting format should be changed to use a new form. The
(Comment 17) Some comments raised issues regarding the application of the malfunction summary reporting for combination products that contain a device constituent part but that are marketed under drug or biological product marketing authorization pathways (referred to in this document as drug and biologic-led combination products), as opposed to those under device marketing authorization pathways (device-led combination products). Issues raised in these comments include: Concerns about a device product code-based eligibility approach for drug and biologic-led combination products because such products may not have a device product code; the quarterly schedule proposed because it would create redundancies for drug and biologic-led combination products, which are subject to periodic reporting; the format proposed because it might not be compatible with the reporting systems for drugs or biological products that are utilized for drug and biologic-led combination products; and development of a single report that includes malfunction summary reporting and satisfies other combination product reporting requirements.
(Response 17) Among other things, the final rule on postmarketing safety reporting (PMSR) for combination products (81 FR 92603, December 20, 2016), codified in part 4, subpart B (21 CFR part 4, subpart B), clarified that all combination product applicants must comply with malfunction reporting requirements as described in part 803 if their combination product contains a device constituent part. Accordingly, in the 2017 Proposal, FDA requested comment on how the Voluntary Malfunction Summary Reporting Program might be implemented for combination products, including drug and biologic-led combination products. Shortly after the issuance of the proposal for this program, FDA also published a draft guidance entitled, “Postmarketing Safety Reporting for Combination Products; Guidance for Industry and FDA Staff” (PMSR draft guidance) (Ref. 7) regarding compliance with the final rule on PMSR for combination products, and an Immediately in Effect guidance announcing FDA's compliance policy for that rule (Ref. 8). The PMSR draft guidance noted that the Agency was proposing the Voluntary Malfunction Summary Reporting Program and stated that the Agency intends to update the PMSR draft guidance if combination products are included in the program. The compliance policy guidance announced the Agency's intent to delay enforcement of certain provisions of the rule, including malfunction reporting requirements for drug and biologic-led combination products, to provide applicants with additional time to consider Agency recommendations and technical specifications as they update their systems and procedures to comply with those provisions.
Applicants of device-led combination products must submit MDRs in accordance with part 803 (see § 4.104 (21 CFR 4.104)), and therefore, they report malfunctions using the same system as device manufacturers. Thus, FDA believes the eMDR data system and instructions support use of the Voluntary Malfunction Summary Reporting Program for such products. Accordingly, we are including device-led combination products in the Voluntary Malfunction Summary Reporting Program. However, combination product applicants for drug
(Comment 18) One comment recommended that FDA permit manufacturers to submit individual reports for each adverse event within 90 calendar days from the date they become aware of the reportable event, while using the summary format. The comment also suggested that FDA provide an additional 30 days for the submission of summary reports because the manufacturer may need more than a month between the end of the reporting period and the due date to aggregate reports.
(Response 18) FDA disagrees with this comment. Permitting manufacturers to submit individual reports using the summary format within 90 calendar days would delay the submission of malfunction information to FDA without providing the anticipated benefits of summary reporting that FDA identified in the 2017 Proposal, such as increased efficiency in processing malfunction reports and more readily apparent malfunction trends. While we recognize that a manufacturer may become aware of some reportable malfunction events toward the end of a quarter, manufacturers will have at least 30 days from that time to prepare and submit summary malfunction reports. FDA does not believe that manufacturers will need an additional 30 days beyond the reporting schedule outlined in the 2017 Proposal to aggregate malfunction reports into a summary report. Therefore, we have retained the Summary Malfunction Reporting Schedule that was included in the 2017 Proposal (see table 1).
(Comment 19) One comment suggested that FDA use a more generic reporting number format or a completely different reporting number format.
(Response 19) FDA disagrees with this comment. The required reporting number format for this program uses the existing common format that manufacturers must use to submit individual reports through their electronic reporting systems under part 803. Therefore, we believe there is no need for a separate MDR reporting number format to identify summary reports.
(Comment 20) One comment suggested that FDA clarify what the manufacturer should do if an investigation is not completed within the reported timeframe.
(Response 20) As discussed in response to Comment 15, FDA has revised the alternative to include instructions regarding supplemental reporting for summary reports submitted under this voluntary program. In situations where a manufacturer is not able to complete its investigation regarding a reportable malfunction by the deadline for submitting a summary report, the manufacturer is still required to report the event within the timeframes specified in the Summary Malfunction Reporting Schedule (see table 1). If additional information becomes known or available to the manufacturer after submission of a summary report, including additional information that becomes known through an investigation, the manufacturer is required to submit supplemental reports amending its initial submission as needed.
(Comment 21) Some comments suggested that FDA should explain more clearly how industry would make a request under § 803.19(b) and provide a mechanism for industry to request an exemption, when appropriate, for product codes that may be newly assigned within the first 2 years.
(Response 21) FDA is not making any changes to the alternative in response to this comment. As discussed in section VI, FDA intends to periodically assess the eligibility of product codes after they have been in existence for 2 years and will update the FDA's Product Classification database accordingly. Manufacturers can also send a request for a product code to be added to the list of eligible product codes and for manufacturers of devices within that product code to be granted the same alternative for malfunction events associated with those devices. Information about where to send such requests is provided in section VI.
(Comment 22) One comment stated that the average Paperwork Reduction Act (PRA) burden on manufacturers of 6 minutes per response appears to be a very low estimate.
(Response 22) FDA disagrees with this comment. The estimation of time is the amount of time needed to submit a summary malfunction report. It is essentially the same amount of time needed to submit an individual report because the event narrative should be similar, with the exception of one additional line that is entered that indicates the number of adverse events represented by the report. It does not include the time needed to evaluate and investigate complaints that may represent reportable malfunction events.
(Comment 23) Two comments suggested that FDA should provide clarity on how the program will apply with national competent authorities via the National Competent Authority Report (NCAR) exchange program.
(Response 23) FDA disagrees with this comment. The NCAR exchange program is separate from FDA's MDR reporting requirements. Malfunction summary reporting under this program does not change the information shared through the NCAR exchange program, and the NCAR program is currently outside the scope of the Voluntary Malfunction Summary Reporting Program.
(Comment 24) One comment suggests that FDA should use IBM's Watson Platform for Health GxP (Watson) to conduct an analysis to identify the product codes that represent the largest opportunity described in the business case for patients, industry, and FDA instead of other database systems.
(Response 24) FDA disagrees with this comment. Among other reasons, the IBM Watson Platform is not an FDA-owned resource; therefore, it is not logistically feasible for FDA to use this platform to identify product codes eligible for the Voluntary Malfunction Summary Reporting Program at this time.
Informed by the findings from the Pilot Program for Medical Device Reporting on Malfunctions, FDA identified the following overarching principles for summary reporting of malfunctions:
• The collection of information in summary format should allow FDA to
• To increase efficiency, summary malfunction reporting should occur in a common format for the electronic reporting system used.
• Information about reportable malfunctions should be transparent to FDA and to the public, regardless of whether the information is reported as an individual MDR or a summary report. Information contained in a summary malfunction report that is protected from public disclosure under applicable disclosure laws would be redacted prior to release of the report.
• Manufacturers should communicate information regarding an imminent hazard at the earliest time possible.
• Summary reporting is meant to streamline the process of reporting malfunctions. It does not change regulatory requirements for MDR-related investigations or recordkeeping by manufacturers. (For example, manufacturers participating in the Voluntary Malfunction Summary Reporting Program remain subject to requirements for establishing and maintaining MDR event files under § 803.18. In addition, under the QS regulation, manufacturers must evaluate, review, and investigate any complaint that represents an MDR reportable event (see § 820.198).
• Summary reporting information should not be duplicative of information received through other MDR reporting processes.
For the reasons discussed in the 2017 Proposal and in section II, the Agency has determined that, at this time, pursuant to section 519(a)(1)(B)(i)(III) of the FD&C Act, all devices should remain subject to the reporting requirements of part 803, to protect the public health. However, based on the findings from the 2015 Pilot Program, the Agency's experience with summary reporting programs, its experience with MDR reporting generally, and the comments received on 2017 Proposal, FDA has determined that for many devices, it is appropriate to permit manufacturers to submit malfunction summary reports on a quarterly basis, for certain malfunctions, instead of individual, 30-day malfunction reports.
Therefore, under § 803.19, FDA is granting the manufacturers of devices within eligible product codes, as identified in FDA's Product Classification Database (
The alternative permits manufacturers of devices within eligible product codes to submit malfunction reports in summary format on a quarterly basis for those devices, subject to the conditions of the alternative described in the remainder of this section. Such manufacturers “self-elect” to participate by submitting summary malfunction reports in accordance with the conditions of the alternative. They do not need to submit a separate application to FDA to participate.
The remainder of this section describes the following conditions that manufacturers must follow if they choose to submit summary malfunction reports for devices within eligible product codes under the alternative: (1) The conditions under which individual malfunction reports are required; (2) submission of supplemental reports; (3) the format for summary malfunction reports; (4) considerations for combination products; and (5) the schedule and other logistics for submission of summary reports. Because this is an alternative, if a manufacturer does not submit summary reports for reportable malfunction events in accordance with the conditions described in this section, including the reporting schedule and format, then the manufacturer must submit individual malfunction reports in compliance with all requirements under part 803 (unless the manufacturer has been granted a different exemption, variance, or alternative that applies).
The Voluntary Malfunction Summary Reporting Program does not apply to reportable death or serious injury events, which are still required to be reported to FDA within the mandatory 30-calendar-day timeframe, under §§ 803.50 and 803.52, or within the 5-work day timeframe under § 803.53. Thus, if a manufacturer participating in the program becomes aware of information reasonably suggesting that a device that it markets may have caused or contributed to a death or serious injury, then the manufacturer must submit an individual MDR for that event because it involves a reportable death or serious injury.
The reporting requirements at § 803.53 also continue to apply to manufacturers participating in the program. Under § 803.53(a), a 5-day report must be filed if a manufacturer becomes aware of an MDR reportable event that necessitates remedial action to prevent an unreasonable risk of substantial harm to the public health. Further, under § 803.53(b), if FDA has made a written request for the submission of a 5-day report, the manufacturer must submit, without further requests, a 5-day report for all subsequent reportable malfunctions of the same nature that involve substantially similar devices for the time period specified in the written request. FDA may extend the time period stated in the original written request if the Agency determines it is in the interest of the public health (see § 803.53(b)).
Manufacturers of devices in eligible product codes may continue submitting individual, 30-day malfunction reports in compliance with §§ 803.50 and 803.52 if they choose to do so. However, those manufacturers may submit all reportable malfunction events for devices in eligible product codes in the summary format and according to the schedule described below in section IV.D and F, unless one of the following individual reporting conditions applies:
After submitting a 5-day report required under § 803.53(a), all subsequent reportable malfunctions of the same nature that involve substantially similar devices must be submitted as individual MDRs in
When a device is the subject of a recall involving the correction or removal of the device to address a malfunction and that correction or removal is required to be reported to FDA under part 806,
If a manufacturer becomes aware of reportable malfunction events before the date that the requirement to submit individual reports is triggered and a summary report for those events has not yet been submitted to FDA, then the manufacturer must submit any of those malfunction events related to the recall in a summary MDR format within 30 calendar days of submitting the required report of correction or removal. In the summary MDR, the manufacturer must include a check box of recall in section H.7 of the electronic Form FDA 3500A.
If FDA has determined that individual malfunction reports are necessary to provide additional information and more rapid reporting for an identified public health issue involving certain devices, manufacturers must submit reportable malfunction events for those devices as individual MDRs in compliance with §§ 803.50 and 803.52. Under these circumstances, FDA will provide written notification to manufacturers of relevant devices that individual MDR submissions are necessary. FDA will provide further written notice when manufacturers of those devices may resume participation in summary malfunction reporting.
The requirement to submit individual reports under this condition is triggered on the date the manufacturer receives the written notification from FDA. If a manufacturer became aware of reportable malfunction events before the date that the requirement to submit individual reports is triggered and a summary report for those events has not yet been submitted to FDA, then the manufacturer must submit any of those malfunction events for the identified devices to FDA within 30 calendar days of receiving notification from FDA.
FDA may determine that a specific manufacturer is no longer allowed to participate in the Voluntary Malfunction Summary Reporting Program for reasons including, but not limited to, failure to comply with applicable MDR requirements under part 803, failure to follow the conditions of the program, or the need to monitor a public health issue. In that case, FDA will provide written notification to the device manufacturer to submit individual malfunction reports in compliance with §§ 803.50 and 803.52. The requirement to submit individual reports under this condition is triggered on the date the manufacturer receives the written notification from FDA. If a manufacturer became aware of reportable malfunction events before the date that the requirement to submit individual reports is triggered under this condition and a summary report for those events has not yet been submitted to FDA, then the manufacturer must submit those malfunction events within 30 calendar days of receiving notification from FDA.
If a manufacturer becomes aware of information reasonably suggesting a reportable malfunction event has occurred for a device that the manufacturer markets and the reportable malfunction is a new type of malfunction that the manufacturer has not previously reported to FDA for that device, then the manufacturer must submit an individual report for that reportable malfunction in compliance with §§ 803.50 and 803.52. After the manufacturer submits this initial individual report, subsequent malfunctions of this type may be submitted in summary form according to the reporting schedule in table 1, unless another individual reporting condition applies.
In general, if a manufacturer obtains information required in a malfunction summary report (see section IV.D. describing the required content of a summary report), that the manufacturer did not provide because it was not known or was not available when the manufacturer submitted the initial summary malfunction report, the manufacturer must submit the supplemental information to FDA in an electronic format in accordance with § 803.12(a). The supplemental information must be submitted to FDA by the submission deadline described in the Summary Malfunction Reporting Schedule (table 1), according to the date on which the manufacturer becomes aware of the supplemental information. Manufacturers must continue to follow the requirements for the content of supplemental reports set forth at § 803.56(a) thorough (c), meaning that on a supplemental or follow up report, the manufacturer must: (a) Indicate that the report being submitted is a supplemental or follow up report; (b) submit the appropriate identification numbers of the report that you are updating with the supplemental information (
However, if a manufacturer submits a summary malfunction report and subsequently becomes aware of information reasonably suggesting that
Manufacturers of devices in eligible product codes who elect to participate in the Voluntary Malfunction Summary Reporting Program must submit summary malfunction reports in the format described below. As detailed in the 2017 Proposal and Appendix, the format largely adopts the format that was tested in FDA's Pilot Program for Medical Device Reporting on Malfunctions and is compatible with the Form FDA 3500A (Ref. 9), which allows manufacturers to submit MDRs using the same electronic submission form that they use to submit individual MDRs, in accordance with the eMDR Final Rule (79 FR 8832, February 14, 2014). Because summary malfunction reports represent a grouping of malfunction events for a specific model of a device, the summary reporting format would require an additional element in the summary text narrative to identify the number of reportable malfunctions that each report represents. As described below, the XML tags “<NOE>” and “<NOE/>” are placed on both sides of the number of events (NOE) to make the number extractable from the report. FDA believes that submission of summary reports in the format described below will provide the most compact and efficient reporting mechanism for streamlining malfunction reporting that still provides sufficient detail for FDA to monitor devices effectively.
• SECTION B.5: Describe Event or Problem—To distinguish this report as a summary malfunction report, the first sentence of the device event narrative must read: “This report summarizes <NOE> XXX </NOE> malfunction events,” where XXX is replaced by the number of malfunction events being summarized.
The device event narrative must then include a detailed description of the nature of the events and, if relevant and available, we recommend including a range of patient age and weight and a breakdown of patient gender, race, and ethnicity.
• SECTION D.1: Brand Name.
• SECTION D.2 and D.2.b: Common Device Name and Product Code. Include the common name of the device and Product Classification Code (Procode).
• SECTION D.3: Manufacturer Name, City, and State.
• SECTION D.4: Device Identification—Enter the model and/or catalog number and lot number(s) and/or serial number(s) for the devices that are the subject of the MDR. Include any device identifier (DI) portion of the unique device identifier (UDI) for the device version or model that is the subject of the MDR.
• SECTION G.1: Contact Office (and Manufacturing Site(s) for Devices)—Enter the name, address, and email of the manufacturer reporting site (contact office), including the contact name for the summary report being submitted. Enter the name and address of the manufacturing site(s) for the device, if different from the contact office.
• SECTION G.2: Phone Number of Contact Office.
• SECTION G.5: Combination Products—If applicable, indicate that the report involves a combination product (see section IV.E.).
• SECTION H.1: Type of Reportable Event—Check “Malfunction” in this box.
• SECTION H.6: Event Problem and Evaluation Codes—
○ Enter the device problem code(s). (See Appendix A for case examples of how to report (Ref. 6).)
○ Enter the evaluation code(s) for the following categories: Method, Results, Conclusion.
○ Enter a Conclusion Code, even if the device was not evaluated.
• SECTION H.10: Additional Manufacturer Narrative—Provide a summary of the results of the investigation for the reported malfunctions, including any follow up actions taken, and any additional information that would be helpful in understanding how the manufacturer addressed the malfunction events summarized in the report. Enter a breakdown of the malfunction events summarized in the report, including the number of devices that were returned, the number of devices that were labeled “for single use” (if any), and the number of devices that were reprocessed and reused (if any).
As noted in the response to comment 17 above, device-led combination products are included in this alternative that we are granting under § 803.19 to permit voluntary malfunction summary reporting. The eMDR data system and instructions support use of the Voluntary Malfunction Summary Reporting Program for device-led combination products. However, as discussed in response to comment 17 above, additional considerations need to be addressed before drug and biologic-led combination products could be included in the Voluntary Malfunction Summary Reporting Program. As noted in Response 17, the Agency intends to delay enforcement of the malfunction reporting requirements for drug and biologic-led combination products under the PMSR final rule. FDA will consider the relevant comments received on the 2017 Proposal, as well as any additional, relevant comments relating to malfunction reporting for drug and biologic-led combination products submitted in relation to the PMSR draft guidance in developing an approach for voluntary malfunction summary reporting for such combination products.
Manufacturers submitting malfunction summary reports or supplemental reports to a malfunction summary report must use electronic reporting (Ref. 10) to submit those reports on a quarterly basis according to the schedule in table 1. The summary malfunction report must include the MDR Number, which consists of the registration number of the manufacturer, the year in which the event is being reported, and a 5-digit sequence number. Information included in a malfunction summary report must be current as of the last date of the quarterly timeframe identified in the first column of table 1.
The Voluntary Malfunction Summary Reporting Program applies only to reportable malfunction events that manufacturers become aware of on or after August 17, 2018. The deadline for FDA accepting the first round of quarterly reports for this program is October 31, 2018.
Under §§ 803.17 and 803.18, manufacturers are required to develop, maintain, and implement written MDR procedures and establish and maintain MDR event files, and those requirements remain applicable for manufacturers that elect to participate in this program. Among other things, a manufacturer must develop, maintain, and implement MDR procedures that provide for timely transmission of complete MDRs to FDA. (See § 803.17(a)(3)). Manufacturers participating in the Voluntary Malfunction Summary Reporting Program will need to update their internal MDR processes and procedures to provide for submitting summary malfunction reports within the Summary Malfunction Reporting Schedule.
The goal of the Voluntary Malfunction Summary Reporting Program is to permit manufacturers of devices under certain product codes to report malfunctions on a quarterly basis and in a summary format, as outlined in the MDUFA IV Commitment Letter (Ref. 1), in a manner that provides for effective monitoring of devices and is beneficial for FDA, industry, and the public. An important part of this voluntary program is providing clarification to manufacturers regarding the product codes eligible for the program.
Consistent with the MDUFA IV Commitment Letter (Ref. 1), FDA has identified eligible product codes for the Voluntary Malfunction Summary Reporting Program in FDA's Product Classification Database, available on FDA's website, as part of granting the alternative (see
If FDA determines that individual malfunction reports are necessary from a specific manufacturer or for specific devices, FDA will notify relevant manufacturers that they must submit individual reports and provide an explanation for that decision and, as appropriate, the steps necessary to return to summary, quarterly reporting. The Agency also notes that, under § 803.19(d), it may revoke or modify in writing an exemption, variance, or alternative reporting requirement if it determines that revocation or modification is necessary to protect the public health.
FDA recognizes that new product codes will be created after the date of granting the Voluntary Malfunction Summary Reporting Program alternative under § 803.19. In general, FDA does not intend to consider devices under product codes in existence for less than 2 years to be eligible for the program, unless the new product code was issued solely for administrative reasons. Any product code in existence after the publication date will be initially ineligible to participate in the program. However, FDA will periodically evaluate new product codes after they have been in existence for 2 years to determine whether they should be added to the list of product codes eligible for the Voluntary Malfunction Summary Reporting Program. If FDA determines that a new product code should be added, then it will grant manufacturers of devices within that product code the same alternative under § 803.19 for malfunction events associated with those devices and update FDA's Product Classification database accordingly to reflect the changes.
Manufacturers can send a request for a product code to be added to the list of eligible product codes and for manufacturers of devices within that product code to be granted the same alternative for malfunction events associated with those devices to the
In accordance with section 519(a)(1)(B)(i) of the FD&C Act and § 803.19, FDA is granting the alternative described in section IV to manufacturers of devices in eligible product codes, as identified in the FDA Product Classification Database (
The Agency has determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
The Voluntary Malfunction Summary Reporting Program described in this Notice contains information collection provisions that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). These provisions have been approved under OMB control number 0910-0437.
This document also refers to previously approved collections of information. These collections of information are subject to review by the OMB under the PRA (44 U.S.C. 3501-3520). The collections of information in part 4, subpart B, regarding postmarketing safety reporting for combination products have been approved under OMB control number 0910-0834; the collections of information in part 803, regarding medical device reporting, have been approved under OMB control number 0910-0437; the collections of information in 806, regarding corrections and removals, have been approved under OMB control number 0910-0359; the collections of information in 21 CFR part 807, subpart E, regarding premarket notification, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in 21 CFR part 810, regarding medical device recall authority, have been approved under OMB control number 0910-0432; the collections of information in part 820, regarding quality system regulations, have been approved under OMB control number 0910-0073; the collections of information in 21 CFR parts 1002 through 1050, regarding radiological health, have been approved under OMB control number 0910-0025; the collections of information regarding the MedWatch: The Food and Drug Administration Medical Products Reporting Program have been approved under OMB control number 0910-0291; and the collections of information regarding the Adverse Event Program for Medical Devices (Medical Product Safety Network (MedSun)) have been approved under OMB control number 0910-0471.
The following references are on display in the Dockets Management Staff, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852 and are available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they are also available electronically at
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Interstate 5 (I-5) Bridges across the Columbia River, mile 106.5, between Portland, Oregon, and Vancouver, Washington. The deviation is necessary to facilitate the presence of participants in the Hands Across the Bridge Project. This deviation allows the bridges to remain in the closed-to-navigation position during the event.
This deviation is effective from 11 a.m. to 2 p.m. on September 3, 2018.
The docket for this deviation, USCG-2018-0775 is available at
If you have questions on this temporary deviation, call or email Mr. Steven Fischer, Bridge Administrator, Thirteenth Coast Guard District; telephone 206-220-7282, email
Oregon Department of Transportation (bridge owner) requested a temporary deviation from the operating schedule for the I-5 Bridges, mile 106.5, across the Columbia River between Vancouver, WA, and Portland, OR, to facilitate safe passage of participants in the Hands Across the Bridge Project. The I-5 Bridges provides three designated navigation channels with vertical clearances ranging from 39 to 72 feet above Columbia River Datum 0.0 while the lift spans are in the closed-to-navigation position. The normal operating schedule for the I-5 Bridges is 33 CFR 117.869. The subject bridges need not open to marine vessels during
Vessels able to pass under the bridges in the closed-to-navigation positions may do so at any time. Both bridges will be able to open for emergencies, and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridges must return to their regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation; modification.
The Coast Guard has modified a temporary deviation from the operating schedule that governs the Hawthorne Bridge crosses the Willamette River, mile 13.1, at Portland, OR. The deviation is necessary to accommodate a filming event for a movie. This modified deviation changes the period the bridge is authorized to remain in the closed-to-navigation position.
This modified deviation is effective from 6 p.m. on September 8, 2018, to 12:01 a.m. on September 9, 2018.
The docket for this deviation, USCG-2018-0676 is available at
If you have questions on this modification, call or email Mr. Steven Fischer, Bridge Administrator, Thirteenth Coast Guard District; telephone 206-220-7282, email
On July 19, 2018, we published a temporary deviation entitled “Drawbridge Operation Regulation; Willamette River at Portland, OR” in the
The Hawthorne Bridge provides a vertical clearance of 49 feet in the closed-to-navigation position referenced to the vertical clearance above Columbia River Datum 0.0. The subject bridge operates per 33 CFR 117.897(c)(3)(v). Waterway usage on this part of the Willamette River includes vessels ranging from commercial tug and barge to small pleasure craft. The Coast Guard requested objections to this modification from local mariners via email. No objections were submitted to us. Waterway usage on this part of the Willamette River includes vessels ranging from commercial tug and barge to small pleasure craft.
Vessels able to pass through the bridge in the closed-to-navigation position may do so at any time. The bridge will be able to open for emergencies, and there is no immediate alternate route for vessels to pass. The Coast Guard will inform the users of the waterway, through our Local and Broadcast Notices to Mariners, of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Environmental Protection Agency (EPA).
Direct final rule.
EPA is promulgating significant new use rules (SNURs) under the Toxic Substances Control Act (TSCA) for 27 chemical substances which were the subject of premanufacture notices (PMNs). The chemical substances are subject to Orders issued by EPA pursuant to section 5(e) of TSCA. This action requires persons who intend to manufacture (defined by statute to include import) or process any of these 27 chemical substances for an activity that is designated as a significant new use by this rule to notify EPA at least 90 days before commencing that activity. The required notification initiates EPA's evaluation of the intended use within the applicable review period. Persons may not commence manufacture or processing for the significant new use until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required with that determination.
This rule is effective on October 16, 2018. For purposes of judicial review, this rule shall be promulgated at 1 p.m. (e.s.t.) on August 31, 2018.
Written adverse comments on one or more of these SNURs must be received on or before September 17, 2018 (see Unit VI. of the
For additional information on related reporting requirement dates, see Units I.A., VI., and VII. of the
Submit your comments, identified by docket identification (ID)
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
You may be potentially affected by this action if you manufacture, process, or use the chemical substances contained in this rule. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Manufacturers or processors of one or more subject chemical substances (NAICS codes 325 and 324110),
This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements promulgated at 19 CFR 12.118 through 12.127 and 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA. Importers of chemicals subject to these SNURs must certify their compliance with the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this rule on or after September 17, 2018 are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) (see § 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.
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Section 5(a)(2) of TSCA (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four bulleted TSCA section 5(a)(2) factors listed in Unit III. Once EPA determines that a use of a chemical substance is a significant new use, TSCA section 5(a)(1)(B) requires persons to submit a significant new use notice (SNUN) to EPA at least 90 days before they manufacture or process the chemical substance for that use (15 U.S.C. 2604(a)(1)(B)(i)). TSCA furthermore prohibits such manufacturing or processing from commencing until EPA has conducted a review of the notice, made an appropriate determination on the notice, and taken such actions as are required in association with that determination (15 U.S.C. 2604(a)(1)(B)(ii)). As described in Unit V., the general SNUR provisions are found at 40 CFR part 721, subpart A.
General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the rule. Provisions relating to user fees appear at 40 CFR part 700. According to § 721.1(c), persons subject to these SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). In particular, these requirements include the information submission requirements of TSCA section 5(b) and 5(d)(1), the exemptions authorized by TSCA section 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once
Section 5(a)(2) of TSCA states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:
• The projected volume of manufacturing and processing of a chemical substance.
• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.
• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.
• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.
In addition to these factors enumerated in TSCA section 5(a)(2), the statute authorizes EPA to consider any other relevant factors.
To determine what would constitute a significant new use for the chemical substances that are the subject of these SNURs, EPA considered relevant information about the toxicity of the chemical substances, likely human exposures and environmental releases associated with possible uses, and the four bulleted TSCA section 5(a)(2) factors listed in this unit.
EPA is establishing significant new use and recordkeeping requirements for 27 chemical substances in 40 CFR part 721, subpart E. In this unit, EPA provides the following information for each chemical substance:
• PMN number.
• Chemical name (generic name, if the specific name is claimed as CBI).
• Chemical Abstracts Service (CAS) Registry number (if assigned for non-confidential chemical identities).
• Basis for the TSCA section 5(e) Order.
• Information identified by EPA that would help characterize the potential health and/or environmental effects of the chemical substance in support of a request by the PMN submitter to modify the Order, or if a manufacturer or processor is considering submitting a SNUN for a significant new use designated by the SNUR.
This information may include testing required in a TSCA section 5(e) Order to be conducted by the PMN submitter, as well as testing not required to be conducted but which would also help characterize the potential health and/or environmental effects of the PMN substance. Any recommendation for information identified by EPA was made based on EPA's consideration of available screening-level data, if any, as well as other available information on appropriate testing for the chemical substance. Further, any such testing identified by EPA that includes testing on vertebrates was made after consideration of available toxicity information, computational toxicology and bioinformatics, and high-throughput screening methods and their prediction models. EPA also recognizes that whether testing/further information is needed will depend on the specific exposure and use scenario in the SNUN. EPA encourages all SNUN submitters to contact EPA to discuss any potential future testing. See Unit VIII. for more information.
• CFR citation assigned in the regulatory text section of this rule.
The regulatory text section of each rule specifies the activities designated as significant new uses. Certain new uses, including exceedance of production volume limits (
These rules include 27 PMN substances that are subject to Orders issued under TSCA section 5(e)(1)(A)(ii)(I) where EPA determined that it has insufficient information to conduct a reasoned evaluation and the activities associated with the PMN substances may present unreasonable risk to human health or the environment. Those Orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The SNURs identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).
Where EPA determined that the PMN substance may present an unreasonable risk of injury to human health via inhalation exposure, the underlying TSCA section 5(e) Order usually requires, among other things, that potentially exposed employees wear specified respirators unless actual measurements of the workplace air show that air-borne concentrations of the PMN substance are below a New Chemical Exposure Limit (NCEL) that is established by EPA to provide adequate protection to human health. In addition to the actual NCEL concentration, the comprehensive NCELs provisions in TSCA section 5(e) Orders, which are modeled after Occupational Safety and Health Administration (OSHA) Permissible Exposure Limits (PELs) provisions, include requirements addressing performance criteria for sampling and analytical methods, periodic monitoring, respiratory protection, and recordkeeping. However, no comparable NCEL provisions currently exist in 40 CFR part 721, subpart B, for SNURs. Therefore, for these cases, the individual SNURs in 40 CFR part 721, subpart E, will state that persons subject to the SNUR who wish to pursue NCELs as an alternative to the § 721.63 respirator requirements may request to do so under § 721.30. EPA expects that persons whose § 721.30 requests to use the NCELs approach for SNURs that are approved by EPA will be required to comply with NCELs provisions that are comparable to those contained in the corresponding TSCA section 5(e) Order for the same chemical substance.
1. Submission of certain toxicity testing on the representative congener groups prior to exceeding a certain time period specified in the Order.
2. Use of the PMN substances only for the uses specified in the Order: Flame retardants and plasticizers in PVC, polymers, and rubber; flame retardants, plasticizers, and lubricants in adhesives, caulk, sealants, and coatings; additives in lubricants including metalworking fluids; and flame retardants and waterproofers in textiles.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the representative congener groups prior to exceeding a certain time period specified in the Order.
2. Use of the PMN substances only for the uses specified in the Order: Flame retardants and plasticizers in PVC, polymers, and rubber; flame retardants, plasticizers, and lubricants in adhesives, caulk, sealants, and coatings; additives in lubricants including metalworking fluids; and flame retardants and waterproofers in textiles.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the representative congener groups prior to exceeding a certain time period specified in the Order.
2. Use of the PMN substances only for the uses specified in the Order: Flame retardants and plasticizers in PVC, polymers, and rubber; flame retardants, plasticizers, and lubricants in adhesives, caulk, sealants, and coatings; additives in lubricants including metalworking fluids; and flame retardants and waterproofers in textiles.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to exceeding the production limits specified in the Order.
2. Use of personal protective equipment to prevent dermal exposure (where there is a potential for dermal exposure).
3. Use of a National Institute of Occupational Safety and Health (NIOSH)-certified respirator with an assigned protection factor (APF) of at least 1000 (where there is a potential for inhalation exposure) in conjunction with a minimum set of engineering controls described in the PMN, or compliance with a new chemical exposure limit (NCEL) of 170 parts per billion (ppb) as an 8-hour time-weighted average to prevent inhalation exposure.
4. Use of engineering controls to limit worker exposure and air release of the PMN substance to the environment.
5. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the Safety Data Sheet (SDS).
6. Manufacture, processing, and use in an enclosed process.
7. Use only as a chemical intermediate.
8. No release of the substance resulting in surface water concentrations that exceed 240 ppb.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment including impervious gloves and clothing which covers any other exposed areas of the arms, legs and torso (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No domestic manufacture of the substance.
5. Use of the substance only for the confidential uses specified in the Order.
6. No use involving application methods that generate a dust, mist, vapor, or aerosol.
7. Disposal of the substance only by water or landfill.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. No domestic manufacture of the substance.
2. Use of the substance in formulations containing no greater than 0.2% of the chemical substance and for the confidential uses specified in the Order.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of monitoring data on the substance.
2. Use of personal protective equipment including impervious gloves and protective clothing (where there is a potential for dermal exposures) and a NIOSH-certified powered air purifying particulate respirator with an Assigned Protection Factor (APF) of at least 1000 (where there is a potential for inhalation exposures).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. Manufacture, process, and use of the substance in a closed system as specified in the PMN.
5. Use of the substance only as a chemical intermediate.
6. No release of the substance into the surface waters of the United States.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of monitoring data as specified in the Order.
2. Use of personal protective equipment as specified in the Order (where there is a potential for dermal exposure).
3. Use of a NIOSH-certified respirator with an APF of at least 1000 (where there is a potential for inhalation exposure).
4. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
5. No domestic manufacture of the substance.
6. Use of the substance only in an enclosed process.
7. Use of the substance only for the confidential uses specified in the Order.
8. Manufacture, process, or use of the substance without the engineering controls required by the Order to control dermal and inhalation exposure.
9. Disposal of the substance by hazardous waste incineration except when in wastewater.
10. No release of the substance resulting in surface water concentrations that exceed 3 ppb.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of test data on the substance prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment including impervious gloves (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No domestic manufacture of the substance.
5. Use of the substance only as a site-limited intermediate for the production of UV curable coating resin.
6. No release of the substance to surface waters of the United States.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Use of personal protective equipment including impervious gloves to prevent dermal exposure (where there is a potential for dermal exposure).
2. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
3. No domestic manufacture of the substance.
4. No manufacture, process, or use of the substance that results in generation of a vapor, mist, or aerosol.
5. No manufacture of the substance where there is more than 0.1% residual isocyanate by weight.
6. Use of the substance only as a UV curable coating resin.
7. Only import the substance in totes.
8. Manufacture of the substance to have an average molecular weight of greater than 2,000 daltons.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment including impervious gloves to prevent dermal exposure (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No domestic manufacture of the substance.
5. No use of the substance other than other than for the confidential uses identified in the Order.
6. No release of the substance resulting in surface water concentrations that exceed 3 ppb.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment including impervious gloves to prevent dermal exposure (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No use other than for the confidential uses identified in the Order.
5. No use involving an application method that generates a vapor, mist, or aerosol.
6. No domestic manufacture of the substance.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substances prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment to prevent dermal exposure (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health and environmental precautionary statements on each label and in the SDS.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to
2. Use of personal protective equipment including impervious gloves to prevent dermal exposure (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No manufacture, processing, or use involving an application method that generates a vapor, mist, aerosol, or dust.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Use of personal protective equipment to prevent dermal exposure (where there is a potential for dermal exposure).
2. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
3. No use other than the confidential use allowed in the Order.
4. No domestic manufacture of the substance.
5. No processing without appropriate engineering controls to prevent inhalation exposure, including dust removal with 99.9% efficiency when loading or unloading the substance in powder form.
6. No release of the substance resulting in surface water concentrations that exceed 240 ppb.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Use of personal protective equipment including impervious gloves to prevent dermal exposure (where there is a potential for dermal exposure).
2. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
3. No manufacture beyond the confidential annual production volume limit specified in the Order.
4. No processing or use of the substances in an application method that generates a dust, mist, or aerosol.
The SNUR would designate as a “significant new use” the absence of these protective measures.
1. Submission of certain toxicity testing on the substance prior to exceeding the confidential production volume limit specified in the Order.
2. Use of personal protective equipment including impervious gloves (where there is a potential for dermal exposure).
3. Establishment and use of a hazard communication program, including human health precautionary statements on each label and in the SDS.
4. No domestic manufacture of the substance.
The SNUR would designate as a “significant new use” the absence of these protective measures.
During review of the PMNs submitted for the chemical substances that are subject to these SNURs, EPA concluded that for all 27 chemical substances regulation was warranted under TSCA section 5(e), pending the development of information sufficient to make reasoned evaluations of the health or environmental effects of the chemical substances. The basis for such findings is outlined in Unit IV. Based on these findings, TSCA section 5(e) Orders requiring the use of appropriate exposure controls were negotiated with the PMN submitters.
The SNURs identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).
EPA is issuing these SNURs for specific chemical substances which have undergone premanufacture review because the Agency wants to achieve the following objectives with regard to the significant new uses designated in this rule:
• EPA will receive notice of any person's intent to manufacture or process a listed chemical substance for the described significant new use before that activity begins.
• EPA will have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing a listed chemical substance for the described significant new use.
• EPA will be able to either determine that the prospective manufacture or processing is not likely to present an unreasonable risk, or to take necessary regulatory action associated with any other determination, before the described significant new use of the chemical substance occurs.
• EPA will identify as significant new uses any manufacturing, processing, use, distribution in commerce, or disposal that does not conform to the restrictions imposed by the underlying Orders, consistent with TSCA section 5(f)(4).
Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Chemical Substance Inventory (TSCA Inventory). Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the internet at
EPA is issuing these SNURs as direct final rules. The effective date of these rules is September 17, 2018 without further notice, unless EPA receives written adverse comments before September 17, 2018.
If EPA receives written adverse comments on one or more of these SNURs before September 17, 2018, EPA will withdraw the relevant sections of this direct final rule before its effective date.
This rule establishes SNURs for a number of chemical substances. Any person who submits adverse comments must identify the chemical substance and the new use to which it applies. EPA will not withdraw a SNUR for a chemical substance not identified in the comment.
To establish a significant new use, EPA must determine that the use is not ongoing. The chemical substances subject to this rule have undergone premanufacture review. In cases where EPA has not received a notice of commencement (NOC) and the chemical substance has not been added to the TSCA Inventory, no person may commence such activities without first submitting a PMN. Therefore, for chemical substances for which an NOC has not been submitted EPA concludes that the designated significant new uses are not ongoing.
When chemical substances identified in this rule are added to the TSCA Inventory, EPA recognizes that, before the rule is effective, other persons might engage in a use that has been identified as a significant new use. However, TSCA section 5(e) Orders have been issued for all of the chemical substances, and the PMN submitters are prohibited by the TSCA section 5(e) Orders from undertaking activities which will be designated as significant new uses. The identities of 13 of the 27 chemical substances subject to this rule have been claimed as confidential and EPA has received no post-PMN
Therefore, EPA designates
Persons who begin commercial manufacture or processing of the chemical substances for a significant new use identified as of that date will have to cease any such activity upon the effective date of the final rule. To resume their activities, these persons will have to first comply with all applicable SNUR notification requirements and wait until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required with that determination.
EPA recognizes that TSCA section 5 does not require developing any particular new information (
In the absence of a TSCA section 4 test rule covering the chemical substance, persons are required only to submit information in their possession or control and to describe any other information known to or reasonably ascertainable by them (see 40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing. Unit IV. lists potentially useful information for all of the listed SNURs. Descriptions of this information are provided for informational purposes. EPA strongly encourages persons, before performing any testing, to consult with the Agency pertaining to protocol selection. Furthermore, pursuant to TSCA section 4(h), which pertains to reduction of testing in vertebrate animals, EPA encourages consultation with the Agency on the use of alternative test methods and strategies (also called New Approach Methodologies, or NAMs), if available, to generate the recommended test data. EPA encourages dialog with Agency representatives to help determine how best the submitter can meet both the data needs and the objective of TSCA section 4(h). To access the OCSPP test guidelines referenced in this document electronically, please go to
In certain of the TSCA section 5(e) Orders for the chemical substances regulated under this rule, EPA has established production volume limits in view of the lack of data on the potential health and environmental risks that may be posed by the significant new uses or increased exposure to the chemical substances. These limits cannot be exceeded unless the PMN submitter first submits the results of specified tests that would permit a reasoned evaluation of the potential risks posed by these chemical substances. Under recent TSCA section 5(e) Orders, each PMN submitter is required to submit each study at least 14 weeks (earlier TSCA section 5(e) Orders required submissions at least 12 weeks) before reaching the specified production limit. The SNURs contain the same production volume limits as the TSCA section 5(e) Orders. Exceeding these production limits is defined as a significant new use. Persons who intend to exceed the production limit must notify the Agency by submitting a SNUN at least 90 days in advance of commencement of non-exempt commercial manufacture or processing.
Any request by EPA for the triggered and pended testing described in the Orders was made based on EPA's consideration of available screening-level data, if any, as well as other available information on appropriate testing for the PMN substances. Further, any such testing request on the part of EPA that includes testing on vertebrates was made after consideration of available toxicity information, computational toxicology and bioinformatics, and high-throughput screening methods and their prediction models.
Potentially useful information identified in Unit IV. may not be the only means of addressing the potential risks of the chemical substance. However, submitting a SNUN without any test data or other information may increase the likelihood that EPA will take action under TSCA section 5(e), particularly if satisfactory test results have not been obtained from a prior PMN or SNUN submitter. EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to generate useful information.
SNUN submitters should be aware that EPA will be better able to evaluate SNUNs which provide detailed information on the following:
• Human exposure and environmental release that may result from the significant new use of the chemical substances.
• Information on risks posed by the chemical substances compared to risks posed by potential substitutes.
By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a procedure to deal with the situation where a specific significant new use is CBI, at § 721.1725(b)(1).
Under these procedures a manufacturer or processor may request EPA to determine whether a proposed use would be a significant new use under the rule. The manufacturer or processor must show that it has a
If EPA determines that the use identified in the
According to § 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 720.40 and 721.25. E-PMN software is available electronically at
EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2017-0414.
This action establishes SNURs for several new chemical substances that were the subject of PMNs and TSCA section 5(e) Orders. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993).
According to PRA (44 U.S.C. 3501
The information collection requirements related to this action have already been approved by OMB pursuant to PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.
Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques, to the Director, Collection Strategies Division, Office of Environmental Information (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.
On February 18, 2012, EPA certified pursuant to RFA section 605(b) (5 U.S.C. 601
1. A significant number of SNUNs would not be submitted by small entities in response to the SNUR.
2. The SNUR submitted by any small entity would not cost significantly more than $8,300.
A copy of that certification is available in the docket for this action.
This action is within the scope of the February 18, 2012 certification. Based on the Economic Analysis discussed in Unit XI. and EPA's experience promulgating SNURs (discussed in the certification), EPA believes that the following are true:
• A significant number of SNUNs would not be submitted by small entities in response to the SNUR.
• Submission of the SNUN would not cost any small entity significantly more than $8,300.
Therefore, the promulgation of the SNUR would not have a significant economic impact on a substantial number of small entities.
Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this action. As such, EPA has determined that this action does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501
This action will not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999).
This action does not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This action does not significantly nor uniquely affect the communities of Indian Tribal governments, nor does it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this action.
This action is not subject to Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.
This action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this
In addition, since this action does not involve any technical standards, NTTAA section 12(d) (15 U.S.C. 272 note), does not apply to this action.
This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Reporting and recordkeeping requirements.
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Therefore, 40 CFR parts 9 and 721 are amended as follows:
7 U.S.C. 135
15 U.S.C. 2604, 2607, and 2625(c).
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respirator requirements in paragraph (a)(2)(i) of this section, a manufacturer or processor may choose to follow the new chemical exposure limit (NCEL) provision listed in the TSCA section 5(e) Order for this substance. The NCEL is 170 ppb as an 8-hour time weighted average. Persons who wish to pursue NCELs as an alternative to § 721.63 respirator requirements may request to do so under § 721.30. Persons whose § 721.30 requests to use the NCELs approach are approved by EPA will be required to follow NCELs provisions comparable to those contained in the corresponding TSCA section 5(e) Order.
(B) [Reserved]
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(v)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(iv)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve revisions to the San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD or “District”) portion of the California State Implementation Plan (SIP). These revisions concern the District's 2014 demonstration regarding Reasonably Available Control Technology (RACT) requirements for the 2008 8-hour ozone National Ambient Air Quality Standard (NAAQS). We are also taking final action to approve into the California SIP the following documents that help support the District's RACT demonstration: SJVUAPCD's supplement to its 2014 RACT SIP demonstration, which contains SJVUAPCD's negative declarations where the District concludes it has no sources subject to certain Control Techniques Guidelines (CTG) documents and relevant permit conditions to implement RACT level requirements for J.R. Simplot's Nitric Acid plant in Helm, California (CA); and SJVUAPCD's 2016 Ozone Plan for the 2008 8-Hour Ozone Standard—Chapter 3.4 and Appendix C only. We are approving local SIP revisions to demonstrate that RACT is implemented as required under the Clean Air Act (CAA or the “the Act”).
This rule will be effective on September 17, 2018.
The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2018-0272. All documents in the docket are listed on the
Stanley Tong, EPA Region IX, (415) 947-4122,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On May 17, 2018 (83 FR 22908), the EPA proposed to approve SJVUACPD's “2014 Reasonably Available Control Technology (RACT) Demonstration for the 8-Hour Ozone State Implementation Plan (SIP)” (
In addition to the
We are also approving portions of SJVUAPCD's “2016 Ozone Plan for the 2008 8-Hour Ozone Standard” (
As discussed in our proposed rule, the District's
The EPA's proposed action provided a 30-day public comment period. During this period, we received one anonymous comment that was outside the scope of this rulemaking. The comment was not germane to our evaluation of the submitted SJVUAPCD documents to demonstrate that the District's stationary sources are subject to RACT requirements.
No comments were submitted that change our assessment of the submitted documents as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is fully approving the following documents into the California SIP: SJVUAPCD's
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of certain permit conditions for the J.R. Simplot Nitric Acid Plan in Helm, CA and described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 16, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
(449) * * *
(ii) * * *
(D) San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD).
(
(496) * * *
(ii) * * *
(B) San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD).
(
(507) New regulations for the following APCD were submitted on June 29, 2018 by the Governor's designee.
(i)
(
(ii)
(
(a) * * *
(8) * * *
(iii) The following negative declarations for the 2008 NAAQS were adopted by the San Joaquin Valley Unified Air Pollution Control District on June 21, 2018, and submitted to the EPA on June 29, 2018.
Civilian Board of Contract Appeals; General Services Administration (GSA).
Final rule.
The Civilian Board of Contract Appeals (Board) amends its rules of procedure for cases arising under the Contract Disputes Act, and for disputes between insurance companies and the Department of Agriculture's Risk Management Agency in which decisions of the Federal Crop Insurance Corporation are brought before the Board under the Federal Crop Insurance Act. The Board's current rules were issued in 2008 and were last amended in 2011. After considering the one responsive comment received, the Board now promulgates its final rules of procedure.
September 17, 2018.
Mr. J. Gregory Parks, Chief Counsel, Civilian Board of Contract Appeals, 1800 M Street NW, Suite 600, Washington, DC 20036; at 202-606-8787; or email at
The Board was established within GSA by section 847 of the National Defense Authorization Act for Fiscal Year 2006, Public Law 109-163. Board members are administrative judges appointed by the Administrator of General Services under 41 U.S.C. 7105(b)(2). Among its other functions, the Board hears and decides contract disputes between Government contractors and most civilian Executive agencies under the Contract Disputes Act, 41 U.S.C. 7101-7109, and its implementing regulations, and disputes pursuant to the Federal Crop Insurance Act, 7 U.S.C. 1501
The Board's rules of procedure for Contract Disputes Act cases and Federal Crop Insurance Act cases were adopted in May 2008 (73 FR 26947) and were last amended in August 2011 (76 FR 50926). The Board published in the
The period for comments closed on May 29, 2018. The Board has considered all comments received, revising the proposed rules, in part, as explained in part B below, and now promulgates its final rules of procedure. These rules simplify and modernize access to the Board by establishing a preference for electronic filing, increase conformity between the Board's rules and the Federal Rules of Civil Procedure, streamline the wording of the Board's rules, and clarify current rules and practices. In addition, the time for filing is amended from 4:30 p.m. to midnight Eastern Time, and the stated monetary limitations for electing the accelerated and small claims procedures are deleted and replaced with references to the requirements stated in the Contract Disputes Act.
The Board received comments from two commenters. Commenters included one attorney from a Federal agency and one anonymous source. Comments from the anonymous source concerned matters wholly unrelated to the proposed rule, and the concerns noted by the attorney were already addressed in the proposed rule. The Board carefully considered the comments but has not revised its proposed rule based on issues the commenters raised. The final rule incorporates minor, non-substantive corrections to the proposed rule. The corrections are addressed below.
Sections 6101.1, 6101.3, 6101.4, 6101.12, and 6101.23 are amended to correct spelling, grammatical, or spacing errors; include a cross-reference; and clarify a phrase.
GSA certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 602
The Paperwork Reduction Act, 44 U.S.C. 3501
The final rule is exempt from Congressional review under Public Law 104-121 because it relates solely to agency organization, procedure, and practice and does not substantially affect the rights or obligations of non-agency parties.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of
This final rule is not an E.O. 13771 regulatory action because this rule is not significant under E.O. 12866.
Administrative practice and procedure; Government procurement; Agriculture.
Therefore, GSA revises 48 CFR parts 6101 and 6102 to read as follows:
41 U.S.C. 7101-7109.
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(1) The name, telephone number, and mailing and email addresses of the appellant and/or its attorney or authorized representative;
(2) The contract number;
(3) The name of the contracting officer who received or issued the claim, with that person's telephone number, mailing address, and email address;
(4) A copy of the claim with any certification; and
(5) A copy of the contracting officer's decision on the claim or a statement that the appeal is from a failure to issue a decision (“a deemed denial”).
(b)
(1) The name, telephone number, and mailing and email addresses of the petitioner and/or its attorney or authorized representative;
(2) The contract number;
(3) The name of the contracting officer who received the claim, with that person's telephone number, mailing address, and email address; and
(4) A copy of the claim with any certification.
(c)
(d)
(2) Alternatively, under the CDA, a contractor may appeal when a contracting officer has not issued a decision on a claim within the time allowed by the CDA or the time set by a tribunal acting on a petition.
(3) Under the CDA, a petition may be filed in the period between—
(i) Receipt of notice from a contracting officer, within 60 days after the submission of a claim, that the contracting officer intends to issue a decision on the claim more than 60 days after its submission, and
(ii) The due date stated by the contracting officer.
(4) Under EAJA, an application must be filed within 30 days after the date that the decision in the underlying appeal becomes no longer subject to appeal.
(e)
(f)
(a)
(b)
(a)
(1) The contracting officer's decision on the claim;
(2) The contract, including all pertinent specifications, amendments, plans, drawings, and incorporated proposals or parts thereof;
(3) All correspondence between the parties relevant to the appeal;
(4) The claim with any certification;
(5) Relevant affidavits, witness statements, or transcripts of testimony taken before the appeal;
(6) All documents relied on by the contracting officer to decide the claim; and
(7) Relevant internal memoranda, reports, and notes.
(b)
(2) A party may efile an appeal file or a supplement thereto by permission of the Board.
(3) Appeal file exhibits shall be in .pdf format or will be rejected. The appeal file index and each exhibit shall be separate documents, without embedded documents.
(4) Appeal file exhibits shall be complete, legible, arranged in chronological order, numbered, and indexed. Parties shall avoid filing duplicative exhibits and shall number exhibits continuously and consecutively from one filing to the next, so that a complete appeal file consists of one set of consecutively numbered exhibits.
(5) Parties shall number the pages of each exhibit consecutively, unless an exhibit is already paginated in another logical manner.
(6) The appeal file index shall describe each exhibit by date and content.
(7) Parties may file documents
(c)
(2) Appeal file exhibits shall be complete, legible, arranged in chronological order, tabbed, and indexed. Parties shall avoid filing duplicative exhibits and shall number exhibits continuously and consecutively from one filing to the next, so a complete appeal file consists of one set of consecutively tabbed exhibits.
(3) Parties shall number the pages of each paper exhibit consecutively, unless an exhibit is already paginated in another logical manner.
(4) Parties shall file exhibits in 3-ring binders with spines no wider than 3 inches, labeled on the cover and spine with the name of the appeal, CBCA number, and tab numbers in each binder. Include in each binder the index of the entire filing.
(5) The appeal file index shall describe each exhibit by date and content.
(6) Parties shall separately file and index documents submitted
(d)
(e)
(f)
(g)
(h)
(a)
(2)
(3)
(b)
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(d)
A party filing any document not submitted
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(f)
(1)
(2)
(g)
(h)
(a)
(1)
(i) Rule 4 (48 CFR 6101.4) appeal file exhibits other than those to which an objection is sustained;
(ii) Other documents or parts thereof admitted as evidence;
(iii) Tangible things admitted as evidence;
(iv) Transcripts or recordings of testimony before the Board; and
(v) Factual stipulations and factual admissions.
(2)
(i) The notice of appeal, petition, or application;
(ii) The complaint, answer, and amendments thereto;
(iii) Motions and briefs on motions;
(iv) Other briefs;
(v) Demonstrative hearing exhibits; and
(vi) Anything else the Board may expressly admit or take notice of.
(b)
(c)
(d)
(1)
(2)
(i) The party submits the document to explain a discovery dispute;
(ii) The Board denies a motion for protective order, and the movant asks that the record include a document that the party would have used in the case with a protective order, for possible later review of the Board's denial; or
(iii) Good cause exists to find that
(3)
(e)
The Board may in its discretion receive any evidence to which no party objects. In ruling on evidentiary objections, the Board is guided but not bound by the Federal Rules of Evidence, except that the Board generally admits hearsay unless the Board finds it unreliable.
The Board may order a conference of the parties for any purpose. Conferences are usually telephonic and are rarely recorded or transcribed. No one may record a conference by any means without Board approval. If the Board issues a memorandum or order memorializing a conference, a party has 5 days from receipt of the memorandum or order to object in writing to the memorialization.
(a)
(b)
(2)
(3)
(4)
(c)
(d)
(a)
(b)
(c)
(d)
(e)
(2)
(3)
(f)
(a)
(b)
(c)
(d)
(2)
(3)
(e)
(f)
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(b)
(c)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
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(b)
(c)
(d)
(a)
(b)
(a)
(b)
(c)
(a)
(b)
(c)
(a)
(b)
(c)
(d)
The Board arranges transcription of hearings, other than hearings under the small claims procedure of Rule 52 (48 CFR 6101.52). The Board may, but generally does not, arrange transcription of conferences or other proceedings. No one may record or transcribe a Board proceeding without the Board's permission. The Board may order or acknowledge corrections to an official transcript. Each party is responsible for obtaining its own copy of a transcript.
(a)
(b)
(a)
(b)
(a)
(b)
(1) The Board is satisfied that it has jurisdiction; and
(2) The stipulation states that no party will seek reconsideration of, seek relief from, or appeal the Board's decision.
(a)
(b)
(c)
(a)
(b)
(c)
(a)
(b)
(c)
(d)
(a)
(b)
(a)
(b)
(c)
(1) Specify the applicant, appeal, and amount sought;
(2) Explain why the applicant is legally eligible for an award;
(3) Provide a schedule of fees and expenses with supporting documentation;
(4) Be signed by the applicant or a person appearing for the applicant, with a declaration under penalty of perjury that the information in the application is correct;
(5) Provide evidence of the applicant's small business status or net worth; and
(6) Justify any request for attorney fees exceeding the statutory rate.
(d)
(2) The Board may order further proceedings if necessary for a full and fair resolution of issues arising from an application.
(e)
When permitted by law, Board awards under contracts may be paid from the permanent indefinite judgment fund under 31 U.S.C. 1304 and 31 CFR part 256. An EAJA award is paid from funds of the respondent.
(a)
(b)
(c)
(d)
If a Court remands a case to the Board for further proceedings, each party shall, within 30 days of receipt of the appellate mandate, recommend procedures to comply with the remand order. The Board will then issue an order on further proceedings.
No member of the Board or of the Board's staff will communicate with a party about any material issue in a case outside of the presence of the other party, and no one shall attempt such communications on behalf of a party. This rule does not bar such communications about the Board's administrative functions or procedures.
(a)
(b)
(1) Taking the facts pertaining to the matter in dispute to be established for the purpose of the case in accordance with the contention of the party who is not at fault;
(2) Forbidding the challenge of the accuracy of any evidence;
(3) Refusing to allow the party to support or oppose designated claims or defenses;
(4) Prohibiting the party from introducing into evidence designated claims or defenses;
(5) Striking pleadings or parts thereof, or staying further proceedings until the order is obeyed;
(6) Dismissing the case or any part thereof;
(7) Enforcing the protective order and disciplining individuals subject to such order for violation thereof, including disqualifying a party's representative, attorney, expert, or consultant from further participation in the case;
(8) Drawing evidentiary inferences adverse to the party; or
(9) Imposing such other sanctions as the Board deems appropriate.
(c)
(d)
(2)
The seal of the Board is a circular logo with “Civilian Board of Contract Appeals” on the outer margin. The seal is a means of authenticating records, notices, orders, dismissals, opinions, subpoenas, and certificates issued by the Board.
An appellant in an eligible case may elect the small claims procedure under Rule 52 (48 CFR 6101.52) or the accelerated procedure under Rule 53 (48 CFR 6101.53). Parties may jointly elect alternative dispute resolution under Rule 54 (48 CFR 6101.54).
(a)
(b)
(c)
(a)
(b)
(c)
(a)
(b)
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(d)
(e)
7 U.S.C. 1501
These procedures govern the Board's resolution of disputes between insurance companies and the Department of Agriculture's Risk Management Agency (RMA) involving actions of the Federal Crop Insurance Corporation (FCIC). Prior to the creation of this Board, the Department of Agriculture Board of Contract Appeals resolved this variety of dispute pursuant
The rules of procedure for these cases are the same as the rules of procedure for Contract Disputes Act appeals, with these exceptions:
(a)
(2) A notice of appeal is filed upon its receipt by the Office of the Clerk of the Board, not when it is mailed.
(3) The terms “petition” and “petitioner” do not apply to FCIC cases.
(b)
(2) In Rule 2(a) (48 CFR 6101.2(a)), the references to “contracting officer” are references to “Deputy Administrator.”
(3) Rule 2(b) (48 CFR 6101.2(b)) does not apply to FCIC cases.
(4) In Rule 2(d)(1) (48 CFR 6101.2(d)(1)), an appeal from a determination of a Deputy Administrator shall be filed no later than 90 calendar days after the date the appellant receives that determination. The Board is authorized to resolve only those appeals that are timely filed.
(5) In Rule 2(d)(2) (48 CFR 6101.2(d)(2)), an appeal may be filed with the Board if the Deputy Administrator fails or refuses to issue a determination within 90 days after the appellant submits a request for a determination.
(c)
(2) In Rule 4(a), paragraphs (1) through (7) (48 CFR 6101.4(a)(1) through (7)), describing materials included in the appeal file, are replaced by the following:
(i) The determination of the Deputy Administrator that is the subject of the dispute;
(ii) The reinsurance agreement (with amendments or modifications) at issue in the dispute;
(iii) Pertinent correspondence between the parties that is relevant to the dispute, including prior administrative determinations and related submissions;
(iv) Documents and other tangible materials on which the Deputy Administrator relied in making the underlying determination; and
(v) Any additional material pertinent to the authority of the Board or the resolution of the dispute.
(3) The following subsection is added to Rule 4 (48 CFR 6101.4): Media on which appeal file is to be submitted. All appeal file submissions, including the index, shall be submitted in two forms: Paper and in a text or .pdf format submitted on a compact disk. Each compact disk shall be labeled with the name and docket number of the case. The judge may delay the submission of the compact disk copy of the appeal file until the close of the evidentiary record.
(d)
(e)
(f)
(g)
(h)
(1)
(2)
(i)
(j)
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS implements an accountability measure (AM) for the Other Jacks Complex commercial sector in the exclusive economic zone (EEZ) of the South Atlantic for the 2018 fishing year through this temporary rule. The Other Jacks Complex is composed of the lesser amberjack, almaco jack, and banded rudderfish. NMFS projects that commercial landings of the Other Jacks Complex will reach the combined commercial annual catch limit (ACL) by August 22, 2018. Therefore, NMFS closes the commercial sector for this complex in the South Atlantic EEZ, on August 22, 2018, and it will remain closed until the start of the next fishing year on January 1, 2019. This closure is
This temporary rule is effective at 12:01 a.m., local time, on August 22, 2018, until 12:01 a.m., local time, on January 1, 2019.
Mary Vara, NMFS Southeast Regional Office, telephone: 727-824-5305, email:
The snapper-grouper fishery of the South Atlantic includes lesser amberjack, almaco jack, and banded rudderfish, which combined are the Other Jacks Complex. The Other Jacks Complex is managed under the Fishery Management Plan for the Snapper-Grouper Fishery of the South Atlantic Region (FMP). The FMP was prepared by the South Atlantic Fishery Management Council and is implemented by NMFS under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) by regulations at 50 CFR part 622.
The combined commercial ACL for the Other Jacks Complex is 189,422 lb (85,920 kg), round weight. Under 50 CFR 622.193(l)(1)(i), NMFS is required to close the commercial sector for the Other Jacks Complex when the commercial ACL has been reached, or is projected to be reached, by filing a notification to that effect with the Office of the Federal Register. NMFS has determined that the commercial sector for this complex is projected to reach its ACL by August 22, 2018. Therefore, this temporary rule implements an AM to close the commercial sector for the Other Jacks Complex in the South Atlantic, effective at 12:01 a.m., local time, on August 22, 2018.
The operator of a vessel with a valid commercial permit for South Atlantic snapper-grouper having lesser amberjack, almaco jack, or banded rudderfish on board must have landed and bartered, traded, or sold such species prior to 12:01 a.m., local time, on August 22, 2018. During the commercial closure, the recreational bag limit specified in 50 CFR 622.187(b)(8) and the possession limits specified in 50 CFR 622.187(c) apply to all harvest or possession of lesser amberjack, almaco jack, or banded rudderfish in or from the South Atlantic EEZ, while the recreational sector is open. These recreational bag and possession limits apply in the South Atlantic on board a vessel for which a valid Federal commercial or charter vessel/headboat permit for South Atlantic snapper-grouper has been issued, regardless of whether such species were harvested in state or Federal waters. During the commercial closure, the sale or purchase of lesser amberjack, almaco jack, or banded rudderfish taken from the South Atlantic EEZ is prohibited.
The Regional Administrator for the NMFS Southeast Region has determined this temporary rule is necessary for the conservation and management of the fish in the Other Jacks Complex, a component of the South Atlantic snapper-grouper fishery, and is consistent with the Magnuson-Stevens Act and other applicable laws.
This action is taken under 50 CFR 622.193(l)(1)(i) and is exempt from review under Executive Order 12866.
These measures are exempt from the procedures of the Regulatory Flexibility Act because the temporary rule is issued without opportunity for prior notice and public comment.
This action responds to the best scientific information available. The Assistant Administrator for NOAA Fisheries (AA) finds that the need to immediately implement this action to close the commercial sector for the Other Jacks Complex constitutes good cause to waive the requirements to provide prior notice and opportunity for public comment pursuant to the authority set forth in 5 U.S.C. 553(b)(B), as such procedures are unnecessary and contrary to the public interest. Such procedures are unnecessary because the rule implementing the AM itself has been subject to notice and comment, and all that remains is to notify the public of the closure. Such procedures are contrary to the public interest because of the need to immediately implement this action to protect the species in the Other Jacks Complex, since the capacity of the fishing fleet allows for rapid harvest of the commercial ACL. Prior notice and opportunity for public comment would require time and would potentially result in a harvest well in excess of the established commercial ACL.
For the aforementioned reasons, the AA also finds good cause to waive the 30-day delay in the effectiveness of this action under 5 U.S.C. 553(d)(3).
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting retention of sablefish by vessels using trawl gear in the West Yakutat District of the Gulf of Alaska (GOA). This action is necessary because the 2018 total allowable catch of sablefish allocated to vessels using trawl gear in the West Yakutat District of the GOA will be reached.
Effective 1200 hours, Alaska local time (A.l.t.), August 14, 2018, through 2400 hours, A.l.t., December 31, 2018.
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2018 total allowable catch (TAC) of sablefish allocated to vessels using trawl gear in the West Yakutat District of the GOA is 240 metric tons (mt) as established by the final 2018 and 2019 harvest specifications for groundfish of the GOA (83 FR 8768, March 1, 2018).
In accordance with § 679.20(d)(2), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2018 TAC of sablefish allocated to vessels using trawl gear in the West Yakutat District of the GOA will be reached. Therefore, NMFS is requiring that sablefish caught by vessels using trawl gear in the West Yakutat District of the GOA be treated as prohibited species in accordance with § 679.21(b).
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay prohibiting the retention of sablefish by vessels using trawl gear in the West Yakutat District of the GOA. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 13, 2018.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by §§ 679.20 and 679.21 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting directed fishing for Pacific ocean perch in the West Yakutat District of the Gulf of Alaska (GOA). This action is necessary to prevent exceeding the 2018 total allowable catch of Pacific ocean perch in the West Yakutat District of the GOA.
Effective 1200 hours, Alaska local time (A.l.t.), August 14, 2018, through 2400 hours, A.l.t., December 31, 2018.
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2018 total allowable catch (TAC) of Pacific ocean perch in the West Yakutat District of the GOA is 3,371 metric tons (mt) as established by the final 2018 and 2019 harvest specifications for groundfish of the GOA (83 FR 8768, March 1, 2018).
In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2018 TAC of Pacific ocean perch in the West Yakutat District of the GOA will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 3,271 mt, and is setting aside the remaining 100 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for Pacific ocean perch in the West Yakutat District of the GOA. While this closure remains effective the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of directed fishing for Pacific ocean perch in the West Yakutat District of the GOA. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of August 13, 2018.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to amend VHF Omnidirectional Range (VOR) Federal airways V-18, V-102, and V-278 in the vicinity of Guthrie, TX. The modifications are necessary due to the planned decommissioning of the Guthrie, TX, VOR/Tactical Air Navigation (VORTAC) navigation aid (NAVAID), which provides navigation guidance for portions of the affected air traffic service (ATS) routes. The Guthrie VORTAC is being decommissioned as part of the FAA's VOR Minimum Operational Network (MON) program.
Comments must be received on or before October 1, 2018.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2018-0769; Airspace Docket No. 18-ASW-10 at the beginning of your comments. You may also submit comments through the internet at
FAA Order 7400.11B, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
Colby Abbott, Airspace Policy Group, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2018-0769; Airspace Docket No. 18-ASW-10) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2018-0769; Airspace Docket No. 18-ASW-10.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order 7400.11B, Airspace Designations and Reporting Points, dated August 3, 2017, and effective September 15, 2017. FAA Order
The FAA is planning decommissioning activities for the Guthrie, TX, VORTAC in 2019 as one of the candidate VORs identified for discontinuance by the FAA's VOR MON program and listed in the final policy statement notice, “Provision of Navigation Services for the Next Generation Air Transportation System (NextGen) Transition to Performance-Based Navigation (PBN) (Plan for Establishing a VOR Minimum Operational Network),” published in the
With the planned decommissioning of the Guthrie VORTAC, the remaining ground-based NAVAID coverage in the area is insufficient to enable the continuity of the affected airways. As such, proposed modifications to V-18, V-102, and V-278 would result in gaps in the route structures. To overcome the gaps, instrument flight rules (IFR) traffic could use adjacent VOR Federal airways V-14 and V-114 between the Lubbock, TX, VORTAC and Wichita Falls, TX, VORTAC; Federal airways V-14, V-114, and V-355 between the Lubbock, TX, VORTAC and Bowie, TX, VORTAC; or Federal airways V-62 and V-66 between the Lubbock, TX, VORTAC and Millsap, TX, VORTAC to circumnavigate the affected area. Additionally, IFR traffic could file point to point through the affected area using fixes that will remain in place, or receive air traffic control (ATC) radar vectors through the area. Visual flight rules pilots who elect to navigate via the airways through the affected area could also take advantage of the adjacent VOR Federal airways or ATC services listed previously.
The FAA is proposing an amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 by modifying VOR Federal airways V-18, V-102, and V-278. The planned decommissioning of the Guthrie, TX, VORTAC has made these actions necessary. The proposed VOR Federal airway changes are outlined below.
VOR Federal airways are published in paragraph 6010(a) of FAA Order 7400.11B dated August 3, 2017, and effective September 15, 2017, which is incorporated by reference in 14 CFR 71.1. The VOR Federal airways listed in this document would be subsequently published in the Order.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
From Millsap, TX; Glen Rose, TX; Cedar Creek, TX; Quitman, TX; Belcher, LA; Monroe, LA; Magnolia, MS; Meridian, MS; Crimson, AL; Vulcan, AL; Talladega, AL; Atlanta, GA; Colliers, SC; to Charleston, SC.
From Salt Flat, TX; Carlsbad, NM; Hobbs, NM; to Lubbock, TX.
From Texico, NM; to Plainview, TX. From Bowie, TX; Bonham, TX; Paris, TX; Texarkana, AR; Monticello, AR; Greenville, MS; Sidon, MS; Bigbee, MS; to Vulcan, AL.
Food and Drug Administration, HHS.
Notification; request for comments.
As required by the FDA Reauthorization Act of 2017 (FDARA), the Food and Drug Administration (FDA or Agency) has identified a list of accessories for which the Agency believes general controls alone are sufficient to provide reasonable assurance of safety and effectiveness, so the accessories could be in class I. FDA is publishing this document proposing to classify these accessories into class I and distinct from other devices, as well as seek public comment in accordance with procedures established by FDARA. This document does not represent FDA's final determination with respect to the proposed accessories listed in this document.
Submit either electronic or written comments on the document by October 16, 2018.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before October 16, 2018 The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
•
Ian Ostermiller, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 5454, Silver Spring, MD 20993-0002, 301-796-5678.
On August 18, 2017, FDARA was signed into law (Pub. L. 115-52). Section 707 of FDARA amended section 513(f) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and, among other amendments, created a process for FDA to propose a list of accessories suitable for distinct classification into class I (see section 513(f)(6)(D)(i) of the FD&C Act (21 U.S.C. 360c(f)(6)(D)(i))). Section 707 of FDARA mandated that FDA make the first such proposal within a year of enactment of FDARA, and FDA is publishing this document in accordance with this statutory mandate.
Section 201(h) of the FD&C Act defines “device” to include, among other articles, an “accessory” (see 21 U.S.C. 321(h)). As such, all articles that meet the definition of “device”, including accessories, are regulated under the FD&C Act. Based on sections 201(h) and 513(f)(6) of the FD&C Act, we have described our current thinking on which devices we would generally consider to be accessories in the guidance document, “Medical Device Accessories—Describing Accessories and Classification Pathways,” available at
Section 513 of the FD&C Act defines three classes of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three classes of devices are class I (general controls), class II (special controls), and class III (premarket approval). Some accessories may be granted marketing authorization as part of a submission for another device with which they are intended to be used and in class II or III that, if considered distinctly from another device (such as the parent device), may be suitable for classification into class I if general controls alone are sufficient to provide a reasonable assurance of safety and effectiveness of the accessory.
Section 513(h)(1) defines general controls as the controls authorized by or under sections 501, 502, 510, 516, 518, 519, and 520 of the FD&C Act. These controls include, but are not limited to, provisions related to adulteration and misbranding, registration and listing, records and reports on devices, and good manufacturing practices. The regulations for good manufacturing practices are under 21 CFR part 820, the Quality System regulation. Subject to the exceptions identified in § 820.30(a)(2) (21 CFR 820.30(a)(2)) for specific devices and those automated with computer software, design controls under § 820.30 do not generally apply to a class I device.
This document represents FDA's compliance with FDARA's requirement to identify the first list of accessories suitable for distinct classification into class I. As required by FDARA, we are providing you with the opportunity to provide comment. Once the comment period ends, we will consider the comments and publish in the
The classification of each accessory will be based on the risks of the accessory when used as intended and the level of regulatory controls necessary to provide a reasonable assurance of safety and effectiveness of the accessory, notwithstanding the classification of any other device with which such accessory is intended to be used (see section 513(f)(6)(A) of the FD&C Act).
In general, we considered an accessory to be eligible for classification into class I distinct from another device if the accessory: (1) Is not for use in supporting or sustaining human life, or of substantial importance in preventing impairment to human health; (2) does not represent a potential unreasonable risk of illness or injury; and (3) general controls alone would be sufficient to provide a reasonable assurance of safety and effectiveness of the accessory.
Note that by regulation, design controls apply to class I devices only if the devices are automated with computer software or are listed under § 820.30(a)(2)(ii). Thus, if an accessory is not automated with computer software but would require design controls to provide reasonable assurance of safety and effectiveness, we did not consider it eligible for classification through the final action based on this document.
You may wish to propose additional accessories as suitable for distinct classification into class I using the factors described above where the accessories are otherwise eligible for classification under section 513(f)(6)(D)(i) of the FD&C Act. Should you wish to propose additional accessories, your comment should briefly explain why you think general controls alone will provide reasonable assurance of safety and effectiveness. Conversely, should you disagree with any of the proposed accessories for class I, your comments should briefly explain why additional regulatory controls, such as premarket review through a 510(k) submission or premarket approval (PMA), are necessary to provide reasonable assurance of safety and effectiveness.
Certain manual orthopedic instruments that are for use with other devices in orthopedic surgery meet FDA's definition of an accessory described in the Accessories Guidance. Accordingly, we are clarifying our intended regulatory approach for certain accessories used in orthopedic surgery to distinguish which accessories may be candidates for classification per section 513(f)(6)(D)(i) of the FD&C Act.
Instruments for use in orthopedic surgery vary widely from general manual surgical instruments used to manipulate tissue to more complex accessories specifically designed for use with a parent device/system. Orthopedic manual surgical instruments are classified in § 888.4540 (21 CFR 888.4540), and many “general use” instruments fall within this classification. This regulation pertains to “nonpowered hand-held device[s] intended for medical purposes to manipulate tissue, or for use with other devices in orthopedic surgery.” These devices are class I, subject to general controls, and exempt from premarket notification procedures, subject to the limitations of exemptions in 21 CFR 888.9. This classification was based upon recommendations provided to FDA by the Orthopedic Device Classification Panel (the Panel) in October 1977 regarding classification of medical devices in commercial distribution before May 28, 1976. The Panel identified the following risks to health for this device type: “Tissue damage and adverse tissue reaction: Inadequate mechanical properties, such as lack of material strength of the device, may result in device fracture and possible tissue damage and, if fragments of the fractured device remain in the tissue, an adverse tissue reaction may result” (47 FR 29052).
FDA agreed that class I was appropriate because general controls alone were sufficient to mitigate the risk of tissue damage and adverse tissue reaction associated with inadequate mechanical properties and provide a reasonable assurance of the safety and effectiveness of these devices. Over time, manufacturers have developed and sought to market orthopedic instrumentation with designs unique to a device system, and these types of instruments may present new or different risks compared to inadequate mechanical properties. For example, certain device-specific instruments are accessories and require precise technical specifications or design characteristics to function as intended to support, supplement or augment the parent device, and if not designed appropriately, could cause implant malpositioning or migration. Accordingly, FDA considers design controls (see § 820.30) to be an important element in the regulation of device-specific accessories, among other regulatory controls, to ensure appropriate compatibility between the accessory and the parent device. In contrast, class I orthopedic manual surgical instruments do not require such controls.
Instruments that are “device-specific,” or designed for use with a specific parent device/system and thus are accessories, have historically been reviewed in the same premarket submission as the parent device. In an effort to ensure a common understanding as to which orthopedic accessories fall under the existing class I regulation (§ 888.4540), and which devices do not and, therefore, may be candidates for classification under section 513(f)(6)(D)(i) of the FD&C Act,
It is often necessary for orthopedic instruments to be described in a premarket submission (
We welcome comments to help identify accessories in other product areas where the classification of the accessory relative to the parent device may be unclear and would benefit from this type of policy clarification.
We are proposing the following accessories, which have been granted marketing authorization as part of a premarket submission (
We would place each of these accessories in 21 CFR part 876, 878, or 886, as appropriate. Each of these accessories would be class I, exempt from the premarket notification procedures in 21 CFR part 807, subject to the applicable limitations of exemption (
This document refers to previously approved collections of information. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in the following FDA
Internal Revenue Service (IRS), Treasury.
Cancellation of notice of public hearing on proposed rulemaking.
This document cancels a public hearing on proposed regulations concerning how partnership liabilities are allocated for disguised sale purposes.
The public hearing, originally scheduled for August 21, 2018 at 10:00 a.m. is cancelled.
Regina Johnson of the Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration) at (202) 317-6901 (not a toll-free number).
A notice of proposed rulemaking and notice of public hearing that appeared in the
The public comment period for these regulations expired on July 19, 2018. The notice of proposed rulemaking and notice of hearing instructed those interested in testifying at the public hearing to submit a request to speak and an outline of the topics to be discussed. The outline of topics to be discussed was due by August 3, 2018. As of August 3, 2018, no one has requested to speak. Therefore, the public hearing scheduled for August 21, 2018 at 10:00 a.m. is cancelled.
Office of the Secretary, Department of Defense (DoD).
Proposed rule.
This proposed rule requests public comment on a proposed revision to the TRICARE Extended Care Health Option (ECHO) respite care benefit. Under the current program, TRICARE beneficiaries enrolled in ECHO are eligible for 16 hours of respite care per month in any month during which the beneficiary receives another ECHO authorized benefit (other than the EHHC benefit). This proposed rule seeks to eliminate the concurrent ECHO benefit requirement and allow beneficiaries enrolled in ECHO to receive a maximum of 16 hours of respite care per month, regardless of whether another ECHO benefit is received in the same month.
Written comments received at the address indicated below by October 16, 2018 will be accepted.
You may submit comments, identified by docket number or Regulatory Information Number (RIN) and title, by either of the following methods:
•
•
Ms. Trish Reilly, Defense Health Agency, TRICARE Clinical Policy Division, telephone (619) 236-5332.
This proposed rule seeks to amend the TRICARE ECHO program regulation to expand beneficiary access to ECHO respite care services. This proposed rule, if implemented, would eliminate the concurrent ECHO benefit requirement and allow beneficiaries enrolled in ECHO to receive a maximum of 16 hours of respite care per month, regardless of whether another ECHO benefit is received in the same month.
This regulation is proposed under the authority of 5 U.S.C. 301 which allows
Per 32 CFR 199.5(c)(7), ECHO beneficiaries are eligible for a maximum of 16 hours of respite care per month in any month during which the beneficiary otherwise receives an ECHO benefit(s). This requirement for a concurrent ECHO benefit was originally implemented to ensure optimal medical management of the beneficiary's ECHO-qualifying condition. TRICARE proposes to eliminate the requirement for a beneficiary to receive a concurrent ECHO benefit in order to qualify for respite care. This change will expand access to respite care services (as recommended by the Military Compensation and Retirement Modernization Commission (MCRMC)), allowing families to access those hours without receiving another ECHO benefit during the same month the respite care is received.
The proposed rule is estimated to cost the Department of Defense $5.7 million annually (based on FY17 data). If the proposed rule is implemented, it is anticipated that 2,924 ECHO beneficiaries will participate in the respite care program at an average cost of $1,937 per beneficiary (this number does not include homebound beneficiaries who receive respite care under the ECHO Home Health Care (EHHC) program). These beneficiaries are already in ECHO and, therefore, have completed all registration requirements. This expansion of the benefit requires nothing additional from the beneficiaries and will not result in an increased burden to the public. Currently, beneficiaries may not access ECHO respite care services if they are not utilizing another ECHO benefit during the same month, and this rulemaking action will eliminate this barrier to care.
Military families face unique challenges in caring for family members with special medical or educational needs that are complicated by frequent moves and repeated deployments. Support for these families involves a multi-faceted system coordinated across numerous functional areas within the Department of Defense and Military Services to include: The Military Health System (MHS); military personnel support services; housing programs; dependents' education programs; child and youth services; morale, welfare, and recreation activities; and community support activities, among others.
The Exceptional Family Member Program (EFMP) is designed to identify active duty military family members with special medical and/or educational needs to ensure coordination of care and continuity of benefits throughout the military assignment and relocation process. EFMP provides additional support to these active duty military families to alleviate some of the challenges associated with frequent family relocations and deployments of their sponsoring service member as required by military duties. EFMP family support services have traditionally included respite care provided by certified day care providers in order to provide temporary relief to military family members who are responsible for the regular care of dependent family members with special needs. The Office of the Under Secretary of Defense for Personnel and Readiness published a proposed rule entitled “Exceptional Family Member Program (EFMP)” in the
Active Duty families enrolled in EFMP may be eligible, based on qualifying conditions, for TRICARE Extended Health Care Option (ECHO) expanded benefits. ECHO is a supplemental program to the TRICARE Basic Program that provides eligible Active Duty Family Members extended benefits to include comprehensive health care services (including services necessary to maintain, or minimize or prevent deterioration of function of the patient) and case management services with respect to the qualifying condition which include serious physical disabilities and extraordinary physical or psychological conditions as defined in 32 CFR 199.2. The purpose of ECHO is to provide an additional financial resource for an integrated set of services and supplies designed to assist in the reduction of the disabling effects of the beneficiary's qualifying condition. The ECHO program provides coverage for medical, habilitative, and rehabilitative services and supplies not covered under the TRICARE Basic Program; durable medical equipment, including adaptation and maintenance; assistive technologies devices and training to use the devices; comprehensive home health care services (
The final rule implementing the ECHO Program (which was previously called the Program for Persons with Disabilities (PFPWD) from 1997-2004, and before that the Program for the Handicapped (PFTH) from origination in 1966-1997), amended the TRICARE regulations governing the PFPWD and was published in the
ECHO-registered beneficiaries who are not receiving ECHO Home Health Care (EHHC) services currently are eligible to receive a maximum of 16 hours of respite care in any calendar month in which they also receive any other ECHO authorized benefit other than the EHHC benefit. Respite care consists of providing skilled and non-skilled health care services for the covered beneficiary such that in the absence of the primary caregiver, management of the beneficiary's ECHO qualifying condition and safety are provided. In order to assure the quality of care for beneficiaries enrolled in ECHO, all ECHO respite care services must be provided by Medicare or Medicaid certified Home Health Agencies (HHAs) who have in effect at the time of services a valid agreement to participate in the TRICARE program. The ECHO respite care program (which provides health care services by a home health agency) should not be considered a substitute for EFMP respite care (which provides day care services by a certified day care provider), because not all EFMP family members qualify for ECHO or require specific health care services in the absence of the primary caregiver. The goal is to ensure that these families have access to the appropriate services to meet their specific needs while still ensuring
In addition to EFMP respite care and ECHO respite care, there is a third type of respite care, EHHC respite care. The EHHC benefit provides coverage of home health care services and respite care services for ECHO eligible beneficiaries who require more than intermittent or part-time home health services covered under the TRICARE Basic Program. This would include ventilator-dependent beneficiaries and others with extraordinary physical conditions. EHHC beneficiaries whose plan of care includes frequent interventions by the primary caregiver(s) (
The Department of Defense remains committed to supporting Service members and their family members with special needs. Together, the Office of Community Support for Military Families with Special Needs, the Services, and the MHS, are working to enhance and improve support for these families, including everything from complex medical management to non-clinical case management and family support services. The Department is also committed to eliminating unnecessary requirements that act as barriers to care. Consistent with these principles, the Department is proposing this specific amendment to the existing regulations governing the ECHO program.
The requirement to receive a concurrent ECHO benefit in order to be entitled to ECHO respite care was originally imposed as a medical management tool. We now conclude that this specific requirement is no longer necessary and may serve as an inappropriate barrier to receipt of respite services for some families. Even in those months where no other ECHO services are provided (where all needed care may already be covered under the Basic Program or under demonstration authority), there may still be some health care services rendered to the beneficiary enrolled in ECHO by the primary caregiver for which respite care provided by a home health agency is warranted.
We note that the January 2015 Report of the MCRMC cited a need to improve support for military members with special needs dependents and made a number of recommendations. We have already implemented or are taking steps to implement several of their specific recommendations, including the recommendation to allow families to access ECHO respite care without receiving another ECHO benefit during the same month that respite care is received which is proposed in this rule. The Department is still studying some of the other recommendations that were made in order to identify and implement, as appropriate, ECHO enhancements that will be of greatest benefit to our beneficiaries. Finally, we believe some of the recommendations fall outside the purview of the ECHO program specifically, and the Military Health System in general, and are more appropriately directed to the Office of Community Support for Military Families with Special Needs, including the provision of respite care that does not involve health care services (
We propose that elimination of the requirement for a simultaneous ECHO benefit will provide maximum flexibility to families without sacrificing the goal of ensuring the safe and effective management of the beneficiary's ECHO qualifying condition. First, we note that TRICARE beneficiaries with complex medical needs may receive case management services including medical management, disease management and chronic care coordination, under the TRICARE Basic Program, regardless of whether the beneficiary is an ECHO eligible beneficiary. As the TRICARE program has evolved over time, continuing to require an ECHO eligible beneficiary to receive a concurrent ECHO benefit as a medical management tool is no longer necessary. Based on our current program structure, beneficiaries should already be receiving medical management services and the receipt of any ECHO benefit, including ECHO respite care, provides an additional opportunity to ensure the safe and effective management of the beneficiary's qualifying condition. Furthermore, in accordance with 32 CFR 199.5(h)(3), all ECHO benefits, including ECHO respite care, require authorization prior to receipt of such benefits. Paragraph (i) discusses required documentation as a prerequisite to authorizing ECHO benefits. As a practical matter, the home health agency providing the respite services must document the health care services needed by the ECHO beneficiary in the absence of the family caregiver and the schedule for the services during the provision of respite care in order to ensure an appropriately trained provider is sent and the beneficiary's needs are met. If this regulatory change is enacted, after public comment, additional details regarding required documentation to be provided to the Managed Care Support Contractor and home health agency for authorization of ECHO respite services will be published in the TRICARE Policy Manual available at
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. A regulatory impact analysis must be prepared for major rules with economically significant effects ($100 million or more in any one year). This rulemaking is neither “economically significant” as measured by the $100 million threshold, nor is it otherwise significant.
This proposed rule is not expected to be an E.O. 13771 regulatory action because it is not significant under E.O. 12866.
Under the Congressional Review Act, a major rule may not take effect until at least 60 days after submission to Congress of a report regarding the rule.
The Regulatory Flexibility Act requires that each Federal agency analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. This proposed rule is not an economically significant regulatory action, and it will not have a significant impact on a substantial number of small entities. Therefore, this rule is not subject to the requirements of the RFA.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any one year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $140 million. This final rule will not mandate any requirements for state, local, or tribal governments or the private sector.
This rule will not impose significant additional information collection requirements on the public under the Paperwork Reduction Act of 1995 (44 U.S.C. 3502-3511). Existing information collection requirements of the TRICARE and Medicare programs will be utilized. TRICARE ECHO respite care providers will be coding and filing claims in the same manner as they currently are with TRICARE.
This rule has been examined for its impact under E.O. 13132, and it does not contain policies that have federalism implications that would have substantial direct effects on the States, on the relationship between the national Government and the States, or on the distribution of powers and responsibilities among the various levels of Government. Therefore, consultation with State and local officials is not required.
Claims, Dental health, Health care, Health insurance, Individuals with disabilities, Military personnel.
Accordingly, 32 CFR part 199 is proposed to be amended as follows:
5 U.S.C. 301; 10 U.S.C. chapter 55.
(c) * * *
(7)
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard proposes to establish special local regulations for certain navigable waters of the Choptank River. This action is necessary to provide for the safety of life on these waters near Oxford, MD, from October 7, 2018, through October 15, 2018, during a sailboat regatta. This proposed rule would prohibit persons and vessels from being in the regulated area unless authorized by the Captain of the Port Maryland-National Capital Region or the Coast Guard Patrol Commander. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before September 17, 2018.
You may submit comments identified by docket number USCG-2018-0577 using the Federal eRulemaking Portal at
If you have questions about this proposed rulemaking, call or email Mr. Ronald Houck, U.S. Coast Guard Sector Maryland-National Capital Region; telephone 410-576-2674, email
On February 13, 2018, the Tred Avon Yacht Club of Oxford, MD, notified the Coast Guard through submission of a marine event application that it is planning to conduct a sailboat regatta from October 5, 2018, through October 15, 2018, the 2018 Star World Championship. Race activities on navigable waters are planned each afternoon of the regatta beginning on October 7th. The regatta consists of approximately 100 2-person, 23-foot long International Star Class sailboats. These vessels will operate along a designated and marked 2.5 nautical mile long course. The course is located on the Choptank River, in Talbot and Dorchester Counties, near Oxford, MD. Hazards from the sailboat regatta include participants operating within and adjacent to a designated navigation channel and interfering with vessels intending to operate within that channel, as well as injury to persons and damage to property that involve
The purpose of this rulemaking is to protect event participants, spectators, and transiting vessels on waters in and near the race area before, during, and after the scheduled event. The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1233, which authorizes the Coast Guard to establish special local regulations to promote the safety of life on navigable waters during regattas or marine parades.
The COTP Maryland-National Capital Region is proposing to establish special local regulations that would be enforced from 11:30 a.m. until 5:30 p.m., each day, from October 7, 2018, through October 15, 2018. The proposed regulated area is rectangular in shape, measuring approximately six nautical miles in length by four nautical miles in width. The area would cover all navigable waters of the Choptank River, within an area bounded by the following coordinates: commencing at latitude 38°41′39.02″ N, longitude 076°11′19.18″ W, thence south to latitude 38°37′28.68″ N, longitude 076°11′19.18″ W, thence west to latitude 38°37′28.68″ N, longitude 076°18′18.35″ W, thence north to latitude 38°41′39027″ N, longitude 076°18′18.35″ W, thence east to point of origin, located near Oxford, MD.
This proposed rule provides additional information about an area within the regulated area, the “Race Area”, and its definition.
The proposed duration of the special local regulations and size of the regulated area are intended to ensure the safety of life on these navigable waters before, during, and after races, scheduled from noon until 5 p.m. on October 7, 8, 9, 10, 11, 12, 13, 14, and 15, 2018. The COTP and PATCOM would have authority to forbid and control the movement of vessels and persons, including event participants, in the regulated area. When hailed or signaled by an official patrol, a vessel or person in the regulated area would be required to immediately comply with directions given by the COTP or PATCOM. If a person or vessel fails to follow such directions, the Coast Guard may expel them from the area, issue them a citation for failure to comply, or both.
Except for 2018 Star World Championship participants, a vessel or person would be required to get permission from the COTP or PATCOM before entering the regulated area. Vessel operators can request permission to enter and transit through the regulated area by contacting the PATCOM on VHF-FM channel 16. Vessel traffic would be able to safely transit the regulated area once the PATCOM deems it safe to do so. A person or vessel not registered with the event sponsor as a participant or assigned as official patrols would be considered a spectator. Official Patrols are any vessel assigned or approved by the Commander, Coast Guard Sector Maryland-National Capital Region with a commissioned, warrant, or petty officer on board and displaying a Coast Guard ensign.
If permission is granted permission by the COTP or PATCOM, a person or vessel would be allowed to enter the regulated area or pass directly through the regulated area as instructed. Vessels would be required to operate at a safe speed that minimizes wake while within the regulated area. Official patrol vessels will direct spectator vessels while within the regulated area. Vessels would be prohibited from loitering within the navigable channel.
The regulatory text we are proposing appears at the end of this document.
We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the size, duration and location of the regulated area. Vessel traffic would be able to safely transit around this regulated area, which would impact a small designated area of the Choptank River for 54 hours. The Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the status of the regulated area. Moreover, the rule would allow vessels to seek permission to enter the regulated area, and vessel traffic would be able to safely transit the regulated area once the PATCOM deems it safe to do so.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the regulated area may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This proposed rule would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this proposed rule under Department of Homeland Security Directive 023-01 and Commandant Instruction M16475.1D, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves implementation of regulations within 33 CFR part 100 applicable to organized marine events on the navigable waters of the United States. The temporary regulated area that would be enforced daily during a nine-day period during the sailboat regatta.. Normally such actions are categorically excluded from further review under paragraph L61 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 01. A preliminary Memorandum For Record for Categorically Excluded Actions supporting this determination is available in the docket where indicated under
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
Documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at
Marine safety, Navigation (water), Reporting and recordkeeping requirements, Waterways.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 100 as follows:
33 U.S.C. 1233; 33 CFR 1.05-1.
(a)
(b)
(1)
(2)
(c)
(2) Except for participants and vessels already at berth, a person or vessel within the regulated area at the start of enforcement of this section must immediately depart the regulated area.
(3) A spectator must contact the PATCOM to request permission to either enter or pass through the regulated area. The PATCOM, and official patrol vessels enforcing this regulated area, can be contacted on marine band radio VHF-FM channel 16 (156.8 MHz) and channel 22A (157.1 MHz). If permission is granted, the spectator may enter the regulated area or pass directly through the regulated area as instructed by PATCOM. A vessel within the regulated area must operate at a safe speed that minimizes wake. A spectator vessel must not loiter within the navigable channel while within the regulated area.
(4) Only participant vessels and official patrol vessels are allowed to enter the race area.
(5) A person or vessel that desires to transit, moor, or anchor within the regulated area must first obtain authorization from the COTP Maryland-National Capital Region or PATCOM. A person or vessel seeking such permission can contact the PATCOM on Marine Band Radio, VHF-FM channel 16 (156.8 MHz).
(6) The Coast Guard will publish a notice in the Fifth Coast Guard District Local Notice to Mariners and issue a marine information broadcast on VHF-FM marine band radio announcing specific event date and times.
(d)
(1) From 11:30 a.m. until 5:30 p.m. on October 7, 2018.
(2) From 11:30 a.m. until 5:30 p.m. on October 8, 2018.
(3) From 11:30 a.m. until 5:30 p.m. on October 9, 2018.
(4) From 11:30 a.m. until 5:30 p.m. on October 10, 2018.
(5) From 11:30 a.m. until 5:30 p.m. on October 11, 2018.
(6) From 11:30 a.m. until 5:30 p.m. on October 12, 2018.
(7) From 11:30 a.m. until 5:30 p.m. on October 13, 2018.
(8) From 11:30 a.m. until 5:30 p.m. on October 14, 2018.
(9) From 11:30 a.m. until 5:30 p.m. on October 15, 2018.
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard proposes to establish special local regulations for certain waters of the Breton Bay. This action is necessary to provide for the safety of life on these navigable waters of Breton Bay, at Leonardtown, MD, on October 6, 2018 and October 7, 2018. This proposed rulemaking would prohibit persons and vessels from being in the regulated area unless authorized by the Captain of the Port Maryland-National Capital Region or a designated representative. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before September 17, 2018.
You may submit comments identified by docket number USCG-2018-0225 using the Federal eRulemaking Portal at
If you have questions about this proposed rulemaking, call or email MST2 Dane Grulkey, U.S. Coast Guard Sector Maryland-National Capital Region; telephone 410-576-2570, email
On January 22, 2018, the Southern Maryland Boat Club notified the Coast Guard that they will be conducting their fall regatta from 8 a.m. to 5 p.m. on October 6, 2018, and October 7, 2018. The regatta consists of approximately 40 boats, participating in an exhibition of vintage outboard racing V-hull boats; the regatta is not a competition but rather a demonstration of the vintage race craft. Hazards from the regatta include vessels reaching speeds of 90 mph and include risks of injury or death resulting from near or actual contact among participant vessels and spectator vessels or waterway users if normal vessel traffic were to interfere with the event. The COTP Maryland-National Capital Region has determined that potential hazards associated with the regatta would be a safety concern for anyone intending to operate within specified waters.
The purpose of this rulemaking is to protect marine event participants, spectators and transiting vessels on specified waters of Breton Bay before, during, and after the scheduled event. The Coast Guard proposes this rulemaking under authority in 33 U.S.C. 1233, which authorize the Coast Guard to establish and define special local regulations.
The COTP Maryland-National Capital Region proposes to establish special local regulations to be enforced from 7:30 a.m. to 5:30 p.m. on October 6, 2018, and from 7:30 a.m. to 5:30 p.m. on October 7, 2018. The regulated area would include all navigable waters within Breton Bay, from shoreline to shoreline, within an area bound by a line drawn along latitude 38°16′43″ N;
We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the size and duration of the regulated area, which would impact a small designated area of Breton Bay during October 6-7, 2018, for a total of 18 hours. The Coast Guard would issue a Broadcast Notice to Mariners via marine band radio VHF-FM channel 16 about the status of the regulated area. Moreover, the rule would allow vessel operators to request permission to enter the regulated area for the purpose of safely transiting the regulated area if deemed safe to do so by the Coast Guard Patrol Commander.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section IV-A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This proposed rule would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this proposed rule under Department of Homeland Security Directive 023-01 and Commandant Instruction M16475.1D, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves the creation of a special local regulation to be enforced a total of 18 hours over two days. This category of marine event water activities includes but is not limited to sail boat regattas, boat parades, power boat racing, swimming events, crew racing, canoe and sail board racing. Normally such actions are categorically excluded from further review under paragraph L61 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 01. A preliminary Memorandum For Record for Categorically Excluded Actions is available in the docket where indicated under
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
Documents mentioned in this NPRM as being available in the docket, and all public comments, will be in our online docket at
Marine safety, Navigation (water), Reporting and recordkeeping requirements, Waterways.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 100 as follows:
33 U.S.C. 1233.
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(2) The operator of any vessel in the regulated area shall:
(i) Stop the vessel immediately when directed to do so by any Official Patrol and then proceed only as directed.
(ii) All persons and vessels shall comply with the instructions of the Official Patrol.
(iii) When authorized to transit the regulated area, all vessels shall proceed at the minimum speed necessary to maintain a safe course that minimizes wake near the race course.
(3) The Coast Guard Patrol Commander may terminate the event, or the operation of any participant, at any time it is deemed necessary for the protection of life or property.
(4) The Race Area is an area described by a line bounded by coordinates provided in latitude and longitude that outlines the boundary of a Race Area within the regulated area defined in paragraph (b)(2) of this section. The actual placement of the race course will be determined by the marine event sponsor but must be located within the designated boundaries of the Race Area. Only participants and official patrol vessels are allowed to enter the Race Area.
(5) The Buffer Zone is an area that surrounds the perimeter of the Race Area within the regulated area defined in paragraph (b)(3) of this section. The purpose of a Buffer Zone is to minimize potential collision conflicts with participants and spectators or nearby transiting vessels. This area provides separation between the Race Area and Spectator Area or other vessels that are operating in the vicinity of the regulated area defined in paragraph (b)(1) of this section. Only participants and official patrol vessels are allowed to enter the Buffer Zone.
(6) The Spectator Area is an area described by a line bounded by coordinates provided in latitude and longitude that outlines the boundary of a spectator area within the regulated area defined in paragraph (b)(4) of this section. Spectators are only allowed inside the regulated area if they remain within the Spectator Area. All spectator vessels shall be anchored or operate at a no-wake speed while transiting within the Spectator Area. Spectators may contact the Coast Guard Patrol Commander to request permission to either enter the Spectator Area or pass through the regulated area. If permission is granted, spectators must enter the Spectator Area or pass directly through the regulated area as instructed at safe speed and without loitering.
(7) The Coast Guard Patrol Commander and official patrol vessels enforcing this regulated area can be contacted on marine band radio VHF-FM channel 16 (156.8 MHz) and channel 22A (157.1 MHz). Persons and vessels desiring to transit, moor, or anchor within the regulated area must obtain authorization from Captain of the Port Maryland-National Capital Region or Coast Guard Patrol Commander. The Captain of the Port Maryland-National Capital Region can be contacted at telephone number 410-576-2693 or on Marine Band Radio, VHF-FM channel 16 (156.8 MHz). The Coast Guard Patrol Commander can be contacted on Marine Band Radio, VHF-FM channel 16 (156.8 MHz).
(8) The Coast Guard will publish a notice in the Fifth Coast Guard District Local Notice to Mariners and issue a marine information broadcast on VHF-FM marine band radio.
(d)
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing approval of two State Implementation Plan (SIP) revisions submitted by the State of Colorado. The revisions involve amendments to Colorado's Regulation Number 11, “Motor Vehicle Emissions Inspection Program.” The revisions enhance the use of Regulation Number 11's Clean Screen Program, allow self-inspecting vehicle fleets to use the On-Board Diagnostics (OBD) testing procedure, provide corrections to the Low Emitter Index (LEI) component of the Clean Screen Program, clarify existing provisions, correct administrative errors, delete obsolete language, establish inspection procedures for when emission control equipment tampering is detected, and make several other minor associated revisions. These actions are being taken under section 110 of the Clean Air Act (CAA).
Written comments must be received on or before September 17, 2018.
Submit your comments, identified by Docket ID No. EPA-R08-OAR-2018-0530, to the Federal Rulemaking Portal:
Tim Russ, Air Program, EPA, Region 8, Mail-code 8P-AR, 1595 Wynkoop Street, Denver, Colorado 80202-1129, (303) 312-6479, or
Throughout this document wherever “we,” “us,” or “our” is used, we mean the EPA.
Colorado's Regulation Number 11 (hereafter “Reg. No. 11”) addresses the implementation of the State's motor vehicle inspection and maintenance (I/M) program. The I/M program consists of an “enhanced” component that
The Clean Screen program component of Colorado's Reg. No. 11 was originally approved, for implementation in the Metro-Denver area, with the Denver carbon monoxide redesignation to attainment and maintenance plan (see: 66 FR 64751, December 14, 2001). The Clean Screen criteria that was approved in 2001 by the EPA required two valid passing remote sensing readings on different days or from different sensors, that met the applicable emissions reading requirements in Part F of Reg. No. 11, within a 12-month period to clean-screen a vehicle (see 66 FR 44097, August 22, 2001).
Colorado revised Reg. No. 11 to expand the definition and requirements for a “clean-screened vehicle” to also include vehicles identified as low emitting vehicles in the state-determined LEI which have one passing remote sensing reading prior to the vehicle's registration renewal date. As part of the LEI process, the Colorado Department of Public Health and Environment, Air Pollution Control Division (APCD) develops an LEI on or before July 1 of each year. The LEI is based on a tabulation of the previous calendar year's IM240 inspection program results for specific make, model, and model year vehicles that passed IM240 vehicle inspections the previous year at a minimum rate of 98%.
Beginning in January 2015, Colorado also began implementing an OBD test for certain model year vehicles. An OBD I/M test essentially means the electronic retrieval, by connecting an OBD test analyzer to the computer port data link in the vehicle, of information from a vehicle's computer system. The electronic information retrieved includes stored readiness status, diagnostic trouble codes (DTC), malfunction indicator light (MIL) illumination and other data. If emission related DTCs are present or the MIL is commanded on, that would indicate an emissions related malfunction.
In addition, Colorado also extended the Reg. No. 11 exemption from I/M testing for new vehicles from 4 years to 7 years. This revision was based on Colorado's gathering of emissions testing information over a period of several years, which demonstrated that historically new and newer vehicles typically did not fail the IM240 or OBD emissions test within the first seven years of the vehicle's life.
As explained below, the EPA is proposing to approve various revisions to Colorado's Reg. No. 11 that the State submitted to the EPA on February 20, 2015, and on May 14, 2018. Most of the revisions involve minor updates to several sections of Reg. No. 11 and the deletion of obsolete language. More specifically, the substantive SIP revisions involve:
a. Addition of a definition of “Tampering” to Part A.II.
b. Revisions to Part B.IV.B to require span gases to be labelled in accordance with Attachment VI of Appendix A.
c. Revisions to Part A.II.16 and Part C.XII. (A.3 and C.2) to increase clean screening efficiency by removing the requirement that two qualifying clean screen observations must be made on different days or at different locations.
d. Revisions to Part C.II.B.4 to remove incomplete and obsolescent qualifying criteria for certain vehicles that are unable to be tested on the IM240 chassis dynamometer.
e. Revisions to Part C.II.C to allow self-inspecting gasoline vehicle fleets to utilize the more effective and more convenient OBD II testing procedure on all 1996 model year and newer vehicles.
f. Revisions to Part C.II.C.3 regarding acceptable readiness criteria for OBD sensors and monitors.
g. Revisions to Part C.II.C.9 and C.10 regarding I/M240 tests and tampering associated with OBD tests.
h. Revisions to Part C.VIII and IX to clarify and modernize provisions for issuance of emissions repair, diagnostic and economic hardship waivers.
i. Revisions to Part D.I.B. 5, 6, and 7 to remove obsolete language regarding dwell meters, timing lights, and idle adjustment.
j. Revisions to Part F.VI.B, the roadside remote sensing clean screen LEI, to allow for greater utilization of this component of the I/M program.
k. Revisions to Part F.VII with regard to OBD testing criteria.
l. Revisions to Appendix A, Attachment IV, Section 2.2, and the deletion of Appendix B in its entirety such as to remove obsolete specifications and procedures for vehicle inspection analyzer calibration gasses.
m. Corrections of typographical, grammatical, and formatting errors throughout Reg. No. 11.
We note that the specific basis for our proposed action and our analyses and findings are discussed in this proposed rulemaking. Technical information that we relied upon in this proposal is contained in the docket, available at
Section 110(a)(2) of the CAA requires that a state provide reasonable notice and public hearing before adopting a SIP revision and submitting it to us.
On October 16, 2014, the Colorado Air Quality Control Commission (AQCC) conducted a public hearing to consider the adoption of revisions and additions to the Colorado SIP. The revisions affecting the SIP involved the Reg. No. 11 revisions noted above and as discussed below in section IV. There were no public comments. After conducting a public hearing, the AQCC adopted the proposed revisions to Reg. No 11 on October 16, 2014. The SIP revisions became State effective on November 30, 2014.
We evaluated the State's February 20, 2015 SIP submittal for Reg. No. 11 and determined that the State met the requirements for reasonable notice and public hearing under section 110(a)(2)
On May 17, 2017, the AQCC conducted a public hearing to consider the adoption of revisions and additions to the Colorado SIP. The revisions affecting the SIP involved the Reg. No. 11 revisions noted above and as discussed below in section V. There were no public comments. After conducting a public hearing, the AQCC adopted the proposed revisions to Reg. No. 11 on May 17, 2017. The SIP revisions became State effective on September 30, 2017.
We evaluated the State's May 14, 2018 SIP submittal for Reg. No. 11 and determined that the State met the requirements for reasonable notice and public hearing under section 110(a)(2) of the CAA. In addition, our evaluation of the SIP revisions submittal also concluded that it met the minimum “completeness” criteria found in 40 CFR part 51, Appendix V.
The sections of Reg. No. 11 that were revised with the State's February 20, 2015 submittal were as follows:
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The sections of Reg. No. 11 that were revised with the State's May 14, 2018 submittal were as follows:
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Our review of the State's Reg. No. 11 revisions, as presented above in sections IV and V, involved numerous revisions to Reg. No. 11 Parts A, B, C, D, F, Appendix A, the deletion of Appendix B, and overall formatting, correction of typographic errors and other non-substantive changes. Based on our review and evaluation discussed above, we propose that the Reg. No. 11 SIP revisions, submitted by the State in letters dated February 20, 2015, and May 14, 2018, sufficiently address applicable provisions in 40 CFR part 51, subpart S, 40 CFR part 85, subpart W, and that our approval is warranted.
Section 110(1) of the CAA states that a SIP revision cannot be approved if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress towards attainment of a National Ambient Air Quality Standard or any other applicable requirement of the CAA. In view of the evaluations presented in sections IV and V above, the EPA proposes that the revisions to Colorado's Reg. No. 11 that are contained in the State's SIP submittals dated February 20, 2015, and May 14, 2018 will not interfere with attainment, reasonable further progress, or any other applicable requirement of the CAA.
The EPA is proposing approval of the February 20, 2015, submitted SIP revisions to Colorado's Regulation Number 11, Part A, Part B, Part C, Part F, Appendix A and the deletion of Appendix B. The EPA notes that revisions to Part F, sections VI.B.3 and VI.B.4 were also provided with the State's February 20, 2015 submittal. The EPA is not proposing action on these sections of Part F for the reasons noted above in section IV of this action.
In addition, the EPA is proposing approval of the May 14, 2018, submitted SIP revisions to Regulation Number 11, Part C, Part D, Part F and Appendix A.
In this rule, the EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by reference the amendments described in sections IV and V, above. The EPA has made, and will continue to make, these materials generally available through
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices provided that they meet the criteria of the CAA. Accordingly, this action merely proposes to approve state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the proposed rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, and Volatile organic compounds.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
EPA is proposing significant new use rules (SNURs) under the Toxic Substances Control Act (TSCA) for 27 chemical substances which were the subject of premanufacture notices (PMNs). The chemical substances are subject to Orders issued by EPA pursuant to section 5(e) of TSCA. This action would require persons who intend to manufacture (defined by statute to include import) or process any of these 27 chemical substances for an activity that is designated as a significant new use by these rules to notify EPA at least 90 days before commencing that activity. The required notification initiates EPA's evaluation of the intended use within the applicable review period. Persons may not commence manufacture or processing for the significant new use until EPA has conducted a review of the notice, made an appropriate determination on the notification, and has taken such actions as are required with that determination. In addition to this notice of proposed rulemaking, EPA is issuing the action as a direct final rule elsewhere in this issue of the
Comments must be received on or before September 17, 2018.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPPT-2017-0414, by one of the following methods:
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In addition to this Notice of Proposed Rulemaking, EPA is issuing the action as a direct final rule elsewhere in this issue of the
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Centers for Disease Control and Prevention, HHS.
Denial of petition for addition of a health condition.
On May 17, 2018, the Administrator of the World Trade Center (WTC) Health Program received a petition (Petition 019) to add irritable bowel syndrome (IBS) to the List of WTC-Related Health Conditions (List). Upon reviewing the scientific and medical literature, including information provided by the petitioner, the Administrator has determined that the available evidence does not have the potential to provide a basis for a decision on whether to add IBS to the List. The Administrator also finds that insufficient evidence exists to request a recommendation of the WTC Health Program Scientific/Technical Advisory Committee (STAC), to publish a proposed rule, or to publish a determination not to publish a proposed rule.
The Administrator of the WTC Health Program is denying this petition for the addition of a health condition as of August 17, 2018.
Visit the WTC Health Program website at
Rachel Weiss, Program Analyst, 1090 Tusculum Avenue, MS: C-48, Cincinnati, OH 45226; telephone (855) 818-1629 (this is a toll-free number); email
Title I of the James Zadroga 9/11 Health and Compensation Act of 2010 (Pub. L. 111-347, as amended by Pub. L. 114-113), added Title XXXIII to the Public Health Service (PHS) Act,
All references to the Administrator of the WTC Health Program (Administrator) in this document mean the Director of the National Institute for Occupational Safety and Health (NIOSH) or his designee.
Pursuant to section 3312(a)(6)(B) of the PHS Act, interested parties may petition the Administrator to add a health condition to the List in 42 CFR 88.15. Within 90 days after receipt of a valid petition to add a condition to the List, the Administrator must take one of the following four actions described in section 3312(a)(6)(B) of the PHS Act and § 88.16(a)(2) of the Program regulations: (1) Request a recommendation of the STAC; (2) publish a proposed rule in the
In addition to the regulatory provisions, the WTC Health Program has developed policies to guide the review of submissions and petitions,
A valid petition must include sufficient medical basis for the association between the September 11, 2001, terrorist attacks and the health condition to be added; in accordance with WTC Health Program policy, reference to a peer-reviewed, published, epidemiologic study about the health condition among 9/11-exposed populations or to clinical case reports of health conditions in WTC responders or survivors may demonstrate the required medical basis.
After the Program has determined that a petition is valid, the Administrator must direct the Program to conduct a review of the scientific literature to determine if the available scientific information has the potential to provide a basis for a decision on whether to add the health condition to the List.
On May 17, 2018, the Administrator received a petition (Petition 019) from a WTC survivor who was caught in the dust cloud near Ground Zero, requesting the addition of “irritable bowel syndrome (IBS)” to the List.
In response to Petition 019, and pursuant to the Program policy on the
The Administrator has determined that insufficient evidence is available to take further action at this time, including proposing the addition of IBS to the List (pursuant to PHS Act, sec. 3312(a)(6)(B)(ii) and 42 CFR 88.16(a)(2)(ii)) or publishing a determination not to publish a proposed rule in the
For the reasons discussed above, the Petition 019 request to add IBS to the List of WTC-Related Health Conditions is denied.
The Secretary, HHS, or his designee, the Director, Centers for Disease Control and Prevention (CDC) and Administrator, Agency for Toxic Substances and Disease Registry (ATSDR), authorized the undersigned, the Administrator of the WTC Health Program, to sign and submit the document to the Office of the Federal Register for publication as an official document of the WTC Health Program. Robert Redfield M.D., Director, CDC, and Administrator, ATSDR, approved this document for publication on August 10, 2018.
Agricultural Marketing Service, USDA.
Notice.
This Notice informs the public that the U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) will not proceed with revisions to the United States Standards for Grades of Pork Carcasses (pork standards) at this time.
August 17, 2018.
USDA, AMS, Livestock and Poultry Program (LP), Quality Assessment Division (QAD); 1400 Independence Ave. SW; Room 3932-S, STOP 0258; Washington, DC 20250-0258.
David Bowden, Chief, Standardization Branch; USDA, AMS, LP, QAD; 1400 Independence Avenue SW; Room 3932-S, STOP 0258; Washington, DC 20250-0258; phone (202) 690-3148; or via email at
Official USDA grade standards and associated voluntary, fee-for-service grading programs are authorized under the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621
AMS recognizes that the pork standards must be relevant to be of value to stakeholders and, therefore, recommendations for changes in the standards may be initiated by AMS or by interested parties at any time to achieve that goal. AMS originally posted this Notice seeking comment on the revised pork standards on October 23, 2017, with a closing date of December 22, 2017. Subsequently, AMS reopened the Notice for an additional 60-day comment period, ending March 19, 2018.
In all, 47 comments were received: There were 19 comments in favor of updating the pork standards, while 24 were opposed; 2 only requested extending the comment period; and 2 commenters did not clearly state a position. Responses received were representative of the pork industry and stakeholders, with the most comments coming from pork industry associations, packers, and producers.
The 19 commenters in support of revised pork standards said that changes were needed in the pork industry to revitalize domestic consumer demand and that the updated standards may be helpful in addressing the decline in purchases of fresh pork products, citing data that the average American consumer buys fresh pork only seven times a year. Some commenters expressed that a revised standard could lead to a USDA fee-for-service grading program, which would enhance uniformity of pork quality and build consumer confidence in pork purchasing decisions. Commenters also said that the revisions were scientifically sound and applicable to pork quality attributes that are consumer-recognized and tied to an improved eating experience. While some recognized the challenge of implementing the proposed standards revisions via a grading program in the modern processing environment, they expressed support for a standardized, objective carcass grading system focused more on quality than percent lean.
Most of the 24 comments against the proposed revisions were similar in nature and asserted the new grades would not add value for pork producers. Some commenters noted that the pork industry and individual companies have worked for many years to improve product quality attributes and promote their efforts through product branding and “niche” marketing, and the revised pork standards would endanger these efforts. Further, some commenters noted that proposed nomenclature of Prime, Choice, and Select, if implemented for pork, could result in devaluation of the established beef grading system. Pork packers and processors expressed concern that implementation of the revised pork standards would be impractical, in part because the technology available to accurately assess quality factors for pork is not yet effective while maintaining today's processing line speeds. Commenters opposed to the revisions also expressed concern that implementation at this time would cause disruption to existing producer-packer relationships and established logistics. Others were concerned that application of the standard specifically to the loin primal without positive correlation with the remaining carcass parts would be misleading, and that any premium generated by applying the standards would not offset the cost of implementing a USDA fee-for-service grading program in the plant.
A few commenters provided responses that were both for and against the revisions, outlining opportunities and challenges similar to those discussed above. All comments are available at the following website:
Based on the responses received from the Notices, AMS will not pursue any revisions to the pork standards at this time. AMS stands ready to assist agricultural industries in establishing voluntary standards and grading programs for commodities for which it has authority to do so; the pork industry retains this option should the need arise.
Food and Nutrition Service (FNS), USDA.
Notice.
In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on the proposed collection. This is a revision of a currently approved collection in the Supplemental Nutrition Assistance Program and concerns Retail Store Applications (Forms FNS-252; FNS-252-E; FNS-252-FE; FNS-252-R; FNS-252-2; and FNS-252-C).
Written comments must be received on or before October 16, 2018.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical or other technological collection techniques or other forms of information technology.
Comments may be sent to: Nicole Budzius, Chief, Retailer Administration Branch, Supplemental Nutrition Assistance Program, Retailer Policy and Management Division, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room 422, Alexandria, VA 22302. Comments may be faxed to the attention of Ms. Budzius at (703) 305-1863 or via email to:
All responses to this notice will be summarized and included in the request for Office of Management and Budget approval. All comments will be a matter of public record.
Requests for additional information or copies of this information collection should be directed to Nicole Budzius at
FNS is also responsible for requiring updates to application information and reviewing retail food store applications at least once every five years to ensure that each firm is under the same ownership and continues to meet eligibility requirements. The Act specifies that only those applicants whose participation will “effectuate the purposes of the program” should be authorized.
There are six forms associated with this approved Office of Management and Budget (OMB) information collection number 0584-0008—the Supplemental Nutrition Assistance Program Application for Stores, Forms FNS-252 (English and Spanish) and FNS-252-E (paper and online version respectively); Farmer's Market Application, Form FNS-252-FE; Meal Service Application, Form FNS-252-2; Reauthorization Application, Form FNS-252-R; and the Corporation Supplemental Application, Form FNS-252-C used for individual (chain) stores under a corporation. For new authorizations, the majority of applicants use form FNS-252 or FNS-252-E (paper or online, respectively). FNS is responsible for reviewing retail food store applications at least once every five years to ensure that each firm is under the same ownership and continues to meet eligibility guidelines. In order to accomplish this regulatory requirement, form FNS-252-R is used for reauthorization. In addition to these forms, during authorization or reauthorization, FNS may conduct an on-site store visit of the firm. The store visit of the firm helps FNS confirm that the information provided on the application is correct. An FNS representative or store visit contractor obtains permission to fill in the store visit checklist, photograph the store and asks the store owner or manager about the continued ownership of the store.
Applicants using form FNS-252-E or FNS-252-FE must also first self-register for a Level 1 access account through the USDA eAuthentication system in order to start an online application. USDA eAuthentication facilitates the electronic authentication of an individual.
The Agricultural Act of 2014 (2014 Farm Bill) amended the Food and Nutrition Act of 2008 (the Act) and the Supplemental Nutrition Assistance Program (SNAP) revised all retailer application forms (paper and electronic) in January, 2018, as a result of regulatory changes required by the Act and amended by the 2014 Farm Bill. Such changes to the Act amended the definition of “retail food store” to clarify when a retailer is a restaurant rather than a retail food store. Among the changes made to the SNAP retailer application form(s), the Food and Nutrition Service (FNS) added a new question, Question 18, concerning restaurant licensing, and revised Question 22, regarding total retail sales on Form FNS-252. Currently, respondents select a Yes or No response if they have or are applying for a restaurant license for their store in Question 18. Question 22 currently asks retailers to enter their total retail sales by category in dollars for a one year period. Sales categories include gasoline, lottery, tobacco, alcohol, other nonfood, and hot foods, cold prepared foods, accessory foods, and staple foods. Due to concern with the manner in which FNS is currently asking for retailer sales data, FNS is updating the retailer application question regarding sales. FNS is also removing the question concerning restaurant licensing and the requirement for businesses located in community property states to provide spousal information for each owner. Question 22 will revert back to asking
FNS intends to (1) rename Question 3, “Doing Business As (if different from Store Name)” to “Legal Business Name (if different from Store Name)”, (2) update Question 14 to remove the sentence requiring spousal information for businesses located in community property states, and in the Business Title section remove the word “spouse” in questions 14a-14d, (3) delete Question 18 regarding restaurant licensing, (4) revise Question 22 concerning total retail sales in the following manner: (a) Respondents will provide a response for either estimated or actual sales for a one year period. If actual sales are provided, the respondent will indicate the applicable tax year for this information. FNS also added back in the option to provide estimated retail sales per day, week, month, or year for total retail sales in Question 22b, and (b) provide a percentage of total retail sales for each category of product sold: Staple foods; accessory foods; hot foods, cold foods prepared on site; gasoline, and other non-food items, (5) add a new sentence to the Certification and Signature Statement to more clearly outline the risk for owners that are disqualified or fined for violation of Program rules; and (6) where appropriate, re-number the questions and update assistance material such as the General and Specific Instructions sections and on-line help screens. With the exception of the question identified in 4(b) above, no new questions or data information is being asked.
A draft of the proposed revision to Question 22 is provided in Attachment A. FNS also shared a draft of the proposed changes with our stakeholders. The proposed revision incorporates the feedback FNS received with the exception of any changes that would render FNS unable to make an eligibility decision or complete retailer monitoring activities. FNS would like to take this opportunity to clarify that while cold foods prepared on-site, such as at an in-store deli or salad bar, are eligible for purchase with SNAP benefits, collection of the percentage sales information is still necessary for FNS to make a restaurant determination. Additionally, all information provided on the application is information “provided by the retailer” and is protected under Section 9(c) of the Food and Nutrition Act of 2008, as amended, (the Act) (7 U.S.C. 2011
FNS estimates that the hourly burden time per response associated with this information collection for respondents remains unchanged from our previous submission. The revisions to the application(s) are due to program adjustments and the update to Question 3, the removal of a sentence in Question 14, the deletion of Question 18, the reformatting of information collected in Question 22; and the revision to the Certification and Signature Statement.
FNS used FY 2017 data in our calculation of burden estimates associated with this information collection as this was the most complete data available to us at this time. Table A below clarifies the burden of this information collection.
As currently approved by OMB, the hourly burden rate per response varies by the type of application used and the response time per respondent varies from 1 minute to 19 minutes. We estimate the new burden, on average, to be 9.13 minutes per respondent. There is no recordkeeping burden associated with these forms.
Attachment A: Draft FNS-252.
Forest Service, USDA.
Notice of Availability of the Draft Environmental Impact Statement for the Lee Canyon Ski Area Master Development Plan Phase I and Public Comment Period for the Associated Forest Plan Amendment.
The Humboldt-Toiyabe National Forest is issuing this notice to advise the public of the 45-day public comment period for the Draft Environmental Impact Statement (EIS) for the Lee Canyon Ski Area Master Development Plan Phase I (Lee Canyon Project) and the addition of a proposed project-specific amendment to the Toiyabe National Forest Land and Resource Management Plan (Forest Plan) for the Proposed Action and alternatives other than the No Action alternative. The Notice of Intent for the Lee Canyon Project was published in the
The comment period ends 45 days after today's Notice of Availability or 45 days after the Environmental Protection Agency's Notice of Availability is published in the
Comments may be submitted by any one of the following methods:
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Chris Linehan, Interdisciplinary Team Leader, at (702) 515-5401, or via email at
The purpose and need for the proposed Lee Canyon Project, as described in the Notice of Intent, is to address the length of time since the resort's facilities have been upgraded and emerging trends in winter recreation. Specific details of these needs are described in Draft EIS. The purpose and need for the proposed plan amendment is to ensure consistency between the Forest Plan and the proposed Lee Canyon Project. As described in the Draft EIS, the need was identified for exempting the Lee Canyon Project from the following Standards of the 1996 Spring Mountains National Recreation Area (SMNRA) General
The need for this Forest Plan amendment is that in the Lee Canyon Proposed Action new service roads, and ski area facilities would occur within the 100-yard buffer zone established around known Clokey's eggvetch and rough angelica populations or potential habitat. These areas have been thoroughly inventoried for these species and none were found within the project foot print. This project-specific Forest Plan amendment will allow development within the 100-yard buffer zones for these two-species established in the Standard GMP 0.31 (p. 18) to allow for construction of service roads and ski area facilities.
Under the Proposed Action and other action alternatives, Standard GMP 0.31 would be amended to allow new service roads and developed recreation sites to be placed within the 100-yard buffer zone around known Clokey's eggvetch and rough angelica populations or potential habitat, and within biodiversity hotspots in the Lee Canyon Special Use Permit Boundary.
1. Expansion occurs within the existing sub-basin.
2. Does not impact any threatened, endangered, or sensitive species or species of concern or its habitat.
3. Expansion is commensurate with development of additional parking in the lower Lee Canyon area and shuttle services.
4. Expansion incorporates defensible space design and fire safe facilities.
5. Where consistent with other standards and guidelines.
The need for this Forest Plan amendment is that the Proposed Action and other action alternatives include development of ski runs, mountain coasters, zip lines, mountain bike trails, parking areas, and access roads within the Lee Canyon Ski Area permitted boundary. As the Mount Charleston Blue Butterfly was listed as a endangered species in 2015 and the designated critical habitat for the butterfly includes portions of the Lee Canyon Ski Area, Constraint #2 from the standard cannot be met. The Proposed Action and other action alternatives also include the addition of a 500 vehicle parking lot at the ski area to accommodate increased visitor use without the development of additional parking in lower Lee Canyon or shuttle services. The project-specifc Forest Plan Amendment would exempt the project from the requirements under Constraint #2 and Constraint #3.
The substantive requirements of the 2012 Planning Rule (36 CFR part 219) likely to be directly related and, therefore, applicable to the Forest Plan amendment for the Lee Canyon Project are in 36 CFR 219.9(b) regarding threatened and endangered species and 36 CFR 219.10(a)(1), (3), and (7) regarding integrated resource management for multiple use. The scope and scale to which these substantive requirements would apply are the scope and scale of the Lee Canyon Project. The amendment would not apply to any other projects or activities.
The Responsible Official for the Lee Canyon Project and the Forest Plan amendment is William A. Dunkelberger, Forest Supervisor, Humboldt-Toiyabe National Forest Supervisor's Office, 1200 Franklin Way, Sparks, Nevada 89431, phone (775) 355-5310.
In consideration of the stated purpose and need and the analysis of environmental effects documented in this EIS, the Responsible Official will review the proposed action and alternatives in order to make the following decisions:
• Whether to authorize the proposed action or an alternative, including the required no-action alternative, all or in part;
• What design criteria and mitigation measures to require as a condition of the authorization;
• What evaluation methods and documentation to require for monitoring project implementation and mitigation effectiveness; and
• Whether to amend the Forest Plan to exempt the project from Standard GMP 0.31 and from Constraints #2 and #3 of Standard GMP Management Area 11.57.
The Lee Canyon Project and the Forest Plan amendment will be subject to objection under 36 CFR part 218.
Rural Development USDA.
Notice.
The Assistant to the Secretary for Rural Development (Agency) is seeking applications to support regional economic development planning efforts in rural communities under the Rural Economic Development Innovation (REDI) initiative. This funding opportunity will be administered by the Rural Development Innovation Center, in partnership with the Rural Business-Cooperative Service. The Agency is announcing up to $750,000 in competitive cooperative agreement funds in fiscal year (FY) 2018. Rural Development Agency may select one, multiple, or no award recipients. The Agency reserves the right to withhold the awarding of any funds if no application receives a score of at least 60 points.
This Notice lists the information needed to submit an application for these funds. This Notice announces that the Agency is accepting FY 2018 applications to support REDI.
The deadline for receipt of a complete application is midnight Eastern Standard Time on Wednesday, September 5, via
The deadline for receipt of an application is midnight Eastern Standard Time on Wednesday, September 5, 2018. Applications may be submitted electronically through the
Question about this announcement can be directed to Christine Sorensen, Regional Coordinator, via 202-568-9832 or
The Agency encourages applications that will support recommendations made in the Rural Prosperity Task Force report to help improve life in rural America (
• Achieving e-Connectivity for Rural America.
• Developing the Rural Economy.
• Harnessing Technological Innovation.
• Supporting a Rural Workforce.
• Improving Quality of Life.
It is anticipated that the anticipated number of respondents affected by this information collection is less than 10 entities and therefore, this Notice contains no reporting or recordkeeping provisions requiring Office of Management and Budget (OMB) approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
USDA Rural Development (RD) is authorized to administer cooperative agreement awards in accordance with 7 U.S.C. 2204b(b)(4). Rural Economic Development Innovation (REDI) aims to strengthen the capacity of rural communities (50,000 people or less in the United States plus Tribes and territories) in implementing strategic community and economic development plans as referenced in Section 379H of the Consolidated Farm and Rural Development Act (7 U.S.C. 2008v). The goal of this funding announcement is to solicit applications to provide cooperative agreement funding to eligible applicants to enable them to provide technical assistance and training and actionable planning of implementation of strategic community and economic development plans. Supporting regional economic development plans help rural communities overcome multi-jurisdictional challenges and better leverage Federal, state, local or private funding.
For purposes of this proposal, a quality regional economic plan will include but not be limited to the following:
• Evidence-based understanding of community assets, challenges and opportunities.
• Goals are focused, logical, targeted and timely with tasks identified and with a responsible party assigned.
• The plan was created through broad community participation, public input and buy-in.
• The format must be persuasive in a non-technical manner.
• The plan makes clear how each of its strategies is intended to help produce, either directly or indirectly, improvements in the local and regional economy.
• Regional economic development plans developed through REDI assistance should identify possible projects to be funded through RD programs and/or other Federal, state, local or private sector resources.
This funding opportunity expands rural communities' ability to access planning resources to convene, identify needs, create actionable economic development plans, and implement project priorities to improve quality of life in rural communities. Quality of life is a measure of human well-being that can be identified though economic and social indicators. Modern utilities, affordable housing, efficient transportation and reliable employment are economic indicators that must be integrated with social indicators like access to medical services, public safety, education and community resilience to empower rural communities to thrive. Economic development plans developed through this funding opportunity should focus on one or more of these economic and/or social indicators.
Applicants are encouraged to consider regional planning projects that provide measurable results in helping rural communities built robust and sustainable economies through strategic investments in infrastructure, partnerships, and innovation. Such projects should also support rural communities' ability to qualify for priority funding under Section 379H of the Consolidated Farm and Rural Development Act [7 U.S.C. 2008v].
This approach to comprehensive rural community development is unique in its attempt to improve rural communities in a way that is (1) rooted in emphasizing partnerships and collaboration among multiple public agencies and community partners and (2) focused on combining state resources to make wide-ranging quality-of-life impacts as opposed to separate, piecemeal, incremental improvements.
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i. Authority to suspend work if specification or work statements are not met;
ii. Review and approval of one stage of work before another may begin;
iii. Review and approval of substantive provisions of proposed sub-grants or contracts;
iv. Prior review and approval of key personnel; and
v. Agency collaboration and coordination with respect to deliverables and execution of the work plan. At a minimum, applicants should anticipate Agency participation in the selection of communities to receive regional planning assistance; the convening of community members, partners, and stakeholders; the delivery of training on RD programs and/or economic development principles; and the review/approval of regional economic development plans for purposes of priority funding under Section 379H of the Consolidated Farm and Rural Development Act (7 U.S.C. 2008v).
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Applicants must meet all of the following eligibility requirements by the application deadline. Applications which fail to meet any of these requirements by the application deadline will be deemed ineligible and will not be evaluated further and will not receive a Federal award.
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Additional details about cost sharing or matching funds/contributions is located at 2 CFR 200.306. Applicant matching funds must be included in the budget narrative. For matching funds offered by project partners, a separate commitment letter is required for each cash and/or in-kind match contribution. Commitment letters must be signed by the authorized organizational representative of the contributing organization and the applicant organization, which must include: (i) The name, address, and telephone number of the contributor; (ii) the name of the applicant organization; (iii) the title of the project for which the contribution is made, (iv) the dollar amount of the contribution; and (v) a statement that the contributor commits to furnish the contribution during the cooperative agreement period.
Applications without signed written commitments are deemed incomplete and will be ineligible. The value of applicant contributions to the project is established according to Federal cost principles. Applicants should refer to 2 CFR 200.306 for additional guidance on matching funds, in-kind contributions, and allowable costs.
4. Substantial Involvement: Proposed project must include a component that allows for active participation by the Agency in the majority of tasks. Examples of substantial involvement include but are not limited to the following: Joint-selection of communities to receive regional planning assistance; joint-convening of community members, partners, and stakeholders; joint-delivery of training on RD programs and/or economic development principles; and joint-review/approval of regional economic development plans for purposes of priority funding under Section 6025 Strategic Economic and Community Development. It is the intent of this project to engage Agency and state RD staff in the development of regional economic development plans and it is the responsibility of the applicant to identify tasks where RD staff can provide substantial involvement in the project. If you do not identify those tasks, your application is not eligible for funding.
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If you include funds in your budget that are unallowable, RD will consider the application for funding only if the unallowable costs total 10 percent or less of the total project budget, including Federal and matching funds. However, if the application is successful, those unallowable costs must be removed from the budget before RD will make an award. If RD cannot determine the percentage of unallowable costs or the amount of those costs exceeds 10 percent of the total project budget, the application will not be considered for funding.
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a. Demonstrate
b. Demonstrate
c. Demonstrate
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a. Project Background.
b. Project Objectives.
c. Project Approach/Methods.
d. Theory of Change.
e. Geographic Locations or Project Areas.
f. Project Management (Applicants are required to include a Work Plan Chart that lists each major Task by Key Personnel involved, Time Period of the task, Substantial Involvement of Rural Development staff, Deliverables, and Budget associated with each task).
g. Performance Metrics.
h. Graphics, References, Citations (Do not count against the 15-page maximum).
A Work Plan Chart template is available for applicants as part of this funding opportunity on
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a. AD-3030, “Representations Regarding Felony Conviction and Tax Delinquent Status for Corporate Applicants.” The AD-3030 must be submitted if entity is a corporate non-profit or for-profit corporation as indicated in the applicants SAM registration.
b. AD-3030, “Representations Regarding Felony Conviction and Tax Delinquent Status for Corporate Applicants.” The AD-3030 must be submitted if entity is a corporate non-profit or for-profit corporation as indicated in the applicants SAM registration.
c. SF-424B, “Assurances for Non-Construction Programs.” The SF-242B must be completed by all applicants.
d. SF-424B, “Assurances for Non-Construction Programs.” The SF-242B must be completed by all applicants.
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All required application documents must be submitted by midnight Eastern Standard Time on Wednesday,
Submitting an application through
Please allow sufficient time to register in
i. Go to
ii. Select the “Applicant” tab.
iii. Select the “Apply for Grants” heading.
iv. Click on “Get Application Package.” Follow all steps.
v. Provide the “Funding Opportunity Number” or return to the “Search Grants” section.
vi. All necessary forms are included within the
Applications not received through
The Agency is not responsible for any technical malfunctions or website problems related to
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i. Pre-award Costs. Pre-award costs are not authorized.
ii. Use of Funds. Award funds may be used to pay up to 50 percent of the project costs.
iii. Period of Performance. The maximum Period of Performance is 2 years. Applicants should anticipate a Period of Performance beginning September 30, 2018 and ending no later September 30, 2020.
iv. Indirect Cost Rate. The indirect cost rate is limited to 10 percent of direct charges for all nonprofit institutions, including institutions of higher education. All other organizations must use the rate identified in their Negotiated Indirect Cost Rate Approval (NICRA). If you do not have a NICRA, you may elect to charge only direct costs to the award. If you have never had a NICRA, you may also choose to use a de minimis rate of 10 percent of modified total direct costs in accordance with 2 CFR 200.414(f). Your indirect cost rate must be included on Form SF-424A.
v. Program Income. If you expect to earn Program Income during the Period of Performance, you must identify the amount and how you expect to use it (
vi. Prohibited Costs. In addition to costs identified as unallowable by 2 CFR part 200, the following costs are prohibited for this program. Neither award funds nor matching funds can be used to pay for the following types of expenses.
a. Duplicating services currently provided;
b. Funding a revolving loan fund;
c. Construction (in any form);
d. Salaries for positions involved in construction, renovations, rehabilitation, and any oversight of these types of activities;
e. Intermediary preparation of strategic plans for recipients;
f. Funding prostitution, gambling, or any illegal activities;
g. Grants to individuals;
h. Funding a grant where there may be a conflict of interest, or an appearance of a conflict of interest, involving any action by the Agency;
i. Providing assistance to only one individual, organization, or business;
j. Paying obligations incurred before the beginning date without prior Agency approval or after the ending date of the cooperative agreement;
k. Purchasing real estate;
l. Improvement or renovation of the recipient's office space or for the repair or maintenance of privately owned vehicles;
m. Any purpose prohibited in 2 CFR part 200 or 400;
n. Using cooperative agreement assistance or matching funds for Individual Development Accounts;
o. Purchasing vehicles.
Applications will first be reviewed to determine if they meet the eligibility requirements and comply with the funding restrictions in this Notice. If we determine that your application is ineligible, we will discontinue processing it, which means that we will not evaluate it further or provide any scoring information. We will notify you in writing regarding the reason(s) for ineligibility, and we will provide a description of your options if you believe that our determination is incorrect. Note that in the event that our determination is reversed, either due to the discovery of an Agency error or through a formal appeal, funding is restricted to available fiscal year 2018 funds.
If your application is determined to be eligible, we will further evaluate it based on the following criteria. All applications will be competitively ranked and the minimum score requirements for a cooperative agreement award under this Notice is 60 points.
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i. Soundness of Approach (0-20 points). The applicant can receive up to 20 points for soundness of approach. The maximum 20 points for this criterion will be based on the following:
a. The objectives must be clearly stated in the proposal and the applicant must define how this proposal will be implemented. The applicant must demonstrate how the proposal will strengthen the capacity of rural communities in developing and implementing regional plans for economic development. The applicant must demonstrate how the proposed technical assistance includes both the planning and implementation components referenced in Section C. The applicant must also demonstrate how the proposed technical assistance will expand rural communities' ability to access funding and planning resources to convene community members. The applicant must also demonstrate how the proposal will support implementation of regional economic development plans and should include descriptions on how proposed technical assistance will result in actionable steps to support implementation of these plans. (10 points)
b. The applicant clearly outlines their ability to provide the proposed technical assistance based on clearly stated and well-documented prior accomplishments. (5 points)
c. The proposal clearly outlines how it will implement activities to support alignment with one or more of the five key strategies (achieving e-connectivity, developing the rural economy, harnessing technological innovation, supporting a rural workforce, and improving quality of life in Rural America) the Agriculture and Rural Prosperity Task Force Report. (5 points)
ii. Partnerships (0-25 points). The applicant can receive up to 25 points for quality of the applicant's existing partnerships and proposed new partnerships for this effort. The applicant must recruit one or more private and/or public partners to meet match requirements and maximize leveraging of regional economic development plans developed through this project. The maximum 25 points for this criterion will be based on the following:
a. The applicant demonstrates how their proposal will focus on the quantity and quality of partnerships, including the ability to leverage new partners that have previously had limited engagement with RD projects or priorities to leverage resources, enhance technical assistance, and/or increase reach to underserved areas. The proposal must demonstrate that partners with shared missions and goals will be engaged to amplify reach in rural areas. (10 points)
b. The applicant demonstrates how their proposal will support the quantity and quality of match commitments to support this project, and percentage of match in cash form versus in-kind contributions. (5 points)
c. The applicant will demonstrate how their proposal will support the ability of applicant to leverage other community-driven plans or projects such as Comprehensive Economic Development Strategies (CEDS) or other Federally-recognized regional economic development plans. (5 points)
d. The applicant will demonstrate how their proposal will utilize partnerships outside of RD. The applicant will identify such partnerships and will demonstrate how they will provide access to such partnerships to support implementation of projects identified through development of regional economic development plans. (10 points)
iii. Innovation (0-10 points). The applicant can receive up to 10 points for innovative methods and practices to support development of regional economic development plans. The maximum 10 points for this criterion will be based on the following:
a. The applicant's proposal should demonstrate the ability of the applicant to propose methods and practices to utilize unique and innovative planning methods that are currently not being implemented at scale. (5 points)
b. The applicant's proposal should demonstrate the ability of the applicant to demonstrate that the proposed innovative methods and practices have been field-tested and ready to scale. (5 points) We are looking for unique and innovative ideas that are not currently being implemented at scale, so projects that propose innovative solutions that haven't been readily deployed before will receive higher points.
iv. Organizational Capacity & Qualifications (0-15 points). The applicant can receive up to 15 points based on organizational capacity and qualifications. The maximum 15 points for this criterion will be based on the following:
a. The applicant's proposal should demonstrate that the applicant has knowledge and prior experience in regional planning, particularly related to rural issues. The applicant should specify years of experience, types of communities served, and outcomes achieved. (10 points)
b. The applicant's proposal should demonstrate that the applicant has identified appropriate key personnel, both in terms of number of personnel and qualifications of personnel, to carry out the approach identified. Capacity of personnel to access data for needs assessments and access to planners and other technical experts will be evaluated. (5 points)
v. Work Plan (0-15 points). The applicant can receive up to 15 points based on the quality of the proposed work plan and approach. The maximum 15 points for this criterion will be based on the following:
a. Applicants should use the approved work plan template to include the following information: Description of objective, background approach, timeframe for key tasks along with substantial involvement, budget and deliverables that are necessary to implement project to support regional economic development planning in rural communities. Reasonableness and appropriateness of key tasks will be evaluated based on proposed project approach. (5 points)
b. The applicant's proposal should include a description of the types and general locations of rural communities to be served through this project, including the ability to support multiple rural planning activities across the nation and the reasonableness of effectively serving these communities based on key personnel, established timeframes, and budget. (5 points)
c. The applicant's proposal should include a description and appropriateness of the tasks to incorporate active participation from RD staff. (5 points)
vi. Performance Outcomes (0-15 points). The applicant can receive up to 15 points based on the quality of the proposed performance measures to evaluate progress and impacts of proposed project. The maximum 15 points for this criterion will be based on the following:
a. The applicant's proposal should include a description for how the results of the technical assistance will be measured, including the benchmarks to be used to measure effectiveness. Benchmarks should be specific and quantifiable. (10 points)
b. The applicant's proposal should include a description of benchmarks and outcomes achieved during previously deployed planning efforts. (5 points)
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i. Review Process. All eligible applications will be evaluated by an Application Review Panel using the criteria described in Section E.1 of this Notice. Panel members will be
ii. Selection Process. Applications will be ranked in descending order, according to the scores awarded by the Panel. Applications will be funded in rank order, until all available funds have been expended. Applications at or near the funding line may be funded in part, if the Agency believes an appropriate benefit can result from partial funding and if the applicant agrees to the amount of partial funding. In the event the Agency considers partial funding to be appropriate, we will contact the applicant and negotiate the final work plan and budget prior to approving an award.
iii. Anticipated Announcement and Award Dates. All awards must be obligated by September 30, 2018.
1. Federal Award Notices:
i. Successful applicants. Successful applicants will be notified in writing by
a. Complete Form RD 1942-46, “Letter of Intent to Meet Conditions.”
b. Complete Form RD 1940-1, “Request for Obligation of Funds.”
c. Complete FMMI Vendor Code Request Form.
d. Provide a copy of your organization's Negotiated Indirect Cost Rate Agreement.
e. Certify that all work completed for the award will benefit a rural area.
f. Certify that you will comply with the Federal Funding Accountability and Transparency Act of 2006 and report information about subawards and executive compensation.
g. Certify that the U.S. has not obtained an outstanding judgement against your organization in a Federal Court (other than in the United States Tax Court).
h. Execute Form SF-424B, “Assurances—Non-Construction Programs.”
i. Execute Form SF-LLL, “Disclosure Form to Report Lobbying,” if applicable or certify that your organization does not lobby.
j. Execute Form AD-1047, “Certification Regarding Debarment, Suspension, and Other Responsibility Matters-Primary Covered Transactions.”
k. Obtain a certification on Form AD-1048, “Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-Lower Tier Covered Transactions,” from anyone you do business with as a result of this award.
l. Execute Form AD-1049, “Certification Regarding a Drug-Free Workplace Requirements (Grants).”
m. Execute Form AD-3031, “Assurance Regarding Felony Conviction or Tax Delinquent Status for Corporate Applicants.”
n. Execute Form RD 400-4, “Assurance Agreement.”
Once the conditions described in the LOC have been met, the award will be approved through the execution of Form RD 4280-2 in conjunction with the RDCA Program Attachment. If an applicant is unable to meet the conditions of the award within 90 calendar days, the award will be withdrawn.
ii. Unsuccessful applicants. Unsuccessful applicants will be notified in writing no later than October 31, 2018.
2. Administrative and National Policy Requirements. The terms of the award are available at:
3. Reporting Requirements. The following reporting requirements apply to awards made through this program.
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If you have questions, you may contact Christine Sorensen at 202-568-9832 or
The Federal Government is not obligated to make any Federal award as a result of this announcement. Only authorized Federal officials can bind the Federal Government to the expenditure of funds.
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program. Political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at:
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USDA is an equal opportunity provider, employer, and lender.
Rural Housing Service, USDA.
Request for information.
The Rural Housing Service (RHS or Agency) seeks public comments on updating the provisions of the Single Family Housing Guaranteed Loan Program (SFHGLP), specifically regarding the maximum interest rate, its impact on loan making to potential SFHGLP borrowers, and possible changes to the interest rate cap. RHS is soliciting input regarding the maximum interest rate to help the Agency determine whether the interest rate cap should be modified in order to support the agency's mission to offer applicants, who are unable to secure the credit necessary for such housing from other sources under conventional credit terms, an opportunity to acquire new or existing housing for use as a primary residence; finance the repair and rehabilitation costs associated with the purchase of the home; and refinance an existing Section 502 loan to lower the interest rate.
These opportunities are provided to applicants under terms and conditions which the applicant can reasonably be expected to fulfill.
Written Comments: Interested parties must submit written comments on or before October 16, 2018.
Submit comments in either paper or electronic format by the following methods:
• Federal eRulemaking Portal at
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Kate Jensen, Finance and Loan Analyst, at
RHS delivers programs authorized by the Housing Act of 1949, as amended (42 U.S.C. 1472
Stakeholder input is vital to ensure that the maximum interest rate continues to support the agency's mission and not overly burden SFHGLP lenders and their customers. Currently, the maximum allowable interest rate is defined in Section 7.3.B of the program handbook (available at
The following questions and discussion items are posed to guide stakeholder comments. Where possible, RHS requests that comments include specific suggestions regarding ways to improve existing programs and delivery mechanisms and eliminate or minimize the duplication of RHS's regulation and policies with work performed by other entities, including federal, state, and local agencies. RHS welcomes pertinent comments that are beyond the scope of these questions.
1. Should the Agency continue with the requirement that the maximum allowable interest rate shall not exceed the current Federal National Mortgage Association posted yield for 90-day delivery (Actual/Actual) plus one percent for 30-year fixed rate conventional loans, rounded up to the nearest one quarter of one percent?
2. Should the Agency consider indexing the maximum allowable interest rate to a source other than the Federal National Mortgage Association?
3. Should a higher maximum allowable interest rate cap be established? If so, what maximum rate is recommended, and why?
4. Does the current maximum interest rate create any barriers to loan making in eligible rural areas? If so, how and under what circumstances?
5. What effect would increasing or eliminating the maximum interest rate have for loan originators and borrowers in underserved populations and rural communities?
6. If the maximum allowable interest rate cap were to be increased or
7. If the maximum allowable interest rate is raised or removed, what steps should the Agency take to monitor lenders to ensure that borrowers are not overcharged?
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027, found online at
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USDA is an equal opportunity provider, employer, and lender.
Commission on Civil Rights.
Announcement of monthly planning meetings.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA), that a planning meeting of the Delaware State Advisory Committee to the Commission will convene by conference call, on Monday, September 17, 2018 at 10:00 a.m. (EDT). The purpose of the meeting is to discuss preparation of the Committee's report on implicit bias and policing in communities of color in Delaware.
Monday, September 17, 2018, at 10:00 a.m. (EDT).
Ivy L. Davis, at
Interested members of the public may listen to the discussion by calling the following toll-free conference call number: 1-800-210-9006 and conference call ID: 4124362. Please be advised that before placing them into the conference call, the conference call operator may ask callers to provide their names, their organizational affiliations (if any), and email addresses (so that callers may be notified of future meetings). Callers can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number herein.
Persons with hearing impairments may also follow the discussion by first calling the Federal Relay Service at 1-800-877-8339 and providing the operator with the toll-free conference call number: 1-800-210-9006 and conference call ID: 4124362.
Members of the public are invited to submit written comments; the comments must be received in the regional office approximately 30 days after each scheduled meeting. Written comments may be mailed to the Eastern Regional Office, U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue, Suite 1150, Washington, DC 20425, or emailed to Evelyn Bohor at
Records and documents discussed during the meeting will be available for public viewing as they become available at
Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA) that a meeting of the Virginia Advisory Committee to the Commission will convene by conference call at 12:00 p.m. (EST) on Wednesday, September 19, 2018. The purpose of the meeting is for Committee members to continue discussing plans for the in-person briefing on hate crimes in VA—incidences and responses.
Wednesday, September 19, 2018, at 12:00 p.m. EST.
Ivy Davis at
Interested members of the public may listen to the discussion by calling the following toll-free conference call-in number: 1-800-474-8920 and conference call 8310490. Please be advised that before placing them into the conference call, the conference call operator will ask callers to provide their names, their organizational affiliations (if any), and email addresses (so that callers may be notified of future meetings). Callers can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free conference call-in number.
Persons with hearing impairments may also follow the discussion by first calling the Federal Relay Service at1-800-877-8339 and providing the operator with the toll-free conference call-in number: 1-800-474-8920 and conference call 8310490.
Members of the public are invited to make statements during the open comment period of the meeting or submit written comments. The comments must be received in the regional office approximately 30 days after each scheduled meeting. Written comments may be mailed to the Eastern Regional Office, U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue, Suite 1150, Washington, DC 20425, faxed to (202) 376-7548, or emailed to Corrine Sanders at
Records and documents discussed during the meeting will be available for public viewing as they become available at
Commission on Civil Rights.
Announcement of monthly planning meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA), that a planning meeting of the District of Columbia Advisory Committee to the Commission will convene at 12:00 p.m. (EDT) Thursday, September 6, 2018, at the offices of the U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue NW, Suite 1150, Washington, DC 20425. The purpose of the planning meeting is to continue project planning a briefing meeting on its civil rights project to examine the treatment of homeless persons that get swept up in the DC criminal justice system, including a review of the DC Mental Health Court.
Thursday, September 6, 2018 at 12:00 p.m. (EDT).
1331 Pennsylvania Avenue NW, Suite 1150, Washington, DC 20425.
Ivy L. Davis, at
Persons with accessibility needs should contact the Eastern Regional Office no later than 10 working days before the scheduled meeting by sending an email to the following email address at
Members of the public are entitled to submit written comments. The comments must be received in the regional office by Tuesday, October 9, 2018. Comments may be mailed to the Eastern Regional Office, U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue, Suite 1150, Washington, DC 20425 or emailed to Evelyn Bohor at
Records and documents discussed during the meeting will be available for public viewing as they become available at
Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA) that a meeting of the West Virginia Advisory Committee to the Commission will convene by conference call at 12:00 p.m. (EST) on Friday, September 7, 2018. The purpose of the meeting is to discuss plans for preparing the Committee report on the collateral consequences of a felony record on West Virginians' access to employment, housing, professional licenses and public benefits.
Friday, September 7, at 12:00 p.m. EST
Ivy Davis at
Interested members of the public may listen to the discussion by calling the following toll-free conference call-in number: 1-800-474-8920 and conference call 5788080. Please be advised that before placing
Persons with hearing impairments may also follow the discussion by first calling the Federal Relay Service at 1-888-364-3109 and providing the operator with the toll-free conference call-in number: 1-800-474-8920 and conference call 5788080.
Members of the public are invited to make statements during the open comment period of the meeting or submit written comments. The comments must be received in the regional office approximately 30 days after each scheduled meeting. Written comments may be mailed to the Eastern Regional Office, U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue, Suite 1150, Washington, DC 20425, faxed to (202) 376-7548, or emailed to Corrine Sanders at
Records and documents discussed during the meeting will be available for public viewing as they become available at
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act (FACA) that a meeting of the Idaho Advisory Committee (Committee) to the Commission will be held at 12:00 p.m. (Mountain Time) Tuesday, September 18, 2018, for the purpose of reviewing the project proposal on Native American voting rights.
The meeting will be held on Tuesday, September 18, 2018, at 12:00 p.m. MT.
Angelica Trevino at
This meeting is available to the public through the number listed above. Any interested member of the public may call this number and listen to the meeting. Callers can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are entitled to make comments during the open period at the end of the meeting. Members of the public may also submit written comments; the comments must be received in the Regional Programs Unit within 30 days following the meeting. Written comments may be mailed to the Western Regional Office, U.S. Commission on Civil Rights, 300 North Los Angeles Street, Suite 2010, Los Angeles, CA 90012. They may be faxed to the Commission at (213) 894-0508, or emailed Angelica Trevino at
Records and documents discussed during the meeting will be available for public viewing prior to and after the meeting at
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is rescinding the administrative review of the countervailing duty (CVD) order on carbazole violet pigment 23 (CVP-23) from India for the period January 1, 2016, through December 31, 2016.
Applicable August 17, 2018.
Gene H. Calvert, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3586.
On December 4, 2017, Commerce published a notice of opportunity to request an administrative review of the CVD order on CVP-23 from India for the period of review (POR) January 1, 2016, through December 31, 2016.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the party that requested the review withdraws its request for review within 90 days of the date of publication of the notice of initiation of the requested review. In this case, Pidilite timely withdrew its request for review within the 90-day deadline, and no other party requested an administrative review of the CVD order. Therefore, in accordance with 19 CFR 351.213(d)(1), Commerce is rescinding this administrative review in its entirety.
Commerce will instruct U.S. Customs and Border Protection (CBP) to assess countervailing duties on all appropriate entries. Because Commerce is rescinding this administrative review in its entirety, entries of CVP-23 from India during the period January 1, 2016, through December 31, 2016, shall be assessed countervailing duties at rates equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue appropriate assessment instructions to CBP 15 days after the publication of this notice in the
This notice serves as a final reminder to parties subject to administrative protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213(d)(4).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public hearings.
The Mid-Atlantic Fishery Management Council (Council), jointly with the Atlantic States Marine Fisheries Commission (Commission's) Summer Flounder, Scup, and Black Sea Bass Board (Board), will hold 10 public hearings, including one webinar hearing, to solicit public comments on the Draft Summer Flounder Commercial Issues and Goals and Objectives Amendment to the Summer Flounder, Scup, and Black Sea Bass Fishery Management Plan (FMP).
Written public comments must be received on or before 11:59 p.m. EST, October 12, 2018. The meetings will be held between September 10, 2018 and September 27, 2018. For specific dates and times, see
The hearing documents are accessible electronically via the internet at:
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Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, telephone: (302) 526-5255.
The Mid-Atlantic Fishery Management Council and the Atlantic States Marine Fisheries Commission have been preparing an amendment to the Summer Flounder, Scup, and Black Sea Bass FMP, known as the “Summer Flounder Commercial Issues and Goals and Objectives Amendment.” This amendment considers modifications to the qualification criteria for Federal commercial moratorium summer flounder permits, the current allocation of summer flounder commercial quota, and the current list of frameworkable items in the FMP (specifically, it considers adding a framework provision for commercial landings flexibility). An additional purpose of the action is to revise the FMP goals and objectives for summer flounder only. Additional information and amendment documents are available at:
The Council and Board will hold 10 public hearings on this amendment, during which Council or Commission staff will brief the public on the contents of the amendment documents and alternatives under consideration, prior to opening the hearing for public comments. The hearings schedule is as follows:
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These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to M. Jan Saunders at the Mid-Atlantic Council Office, (302) 526-5251, at least 5 days prior to the meeting date.
National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Commerce.
Notice of public meetings.
The Pacific Fishery Management Council (Pacific Council) and its advisory entities will hold public meetings.
The Pacific Council and its advisory entities will meet September 5-12, 2018. The Pacific Council meeting will begin on Friday, September 7, 2018 at 10 a.m. Pacific Daylight Time (PDT), reconvening at 8 a.m. each day through Wednesday, September 12, 2018. All meetings are open to the public, except a closed session will be held from 8 a.m. to 10 a.m., Friday, September 7 to address litigation and personnel matters. The Pacific Council will meet as late as necessary each day to complete its scheduled business.
Meetings of the Pacific Council and its advisory entities will be held at the Doubletree by Hilton Hotel Seattle Airport, 18740 International Blvd., Seattle, WA; telephone: (206) 246-8600.
Mr. Chuck Tracy, Executive Director; telephone: (503) 820-2280 or (866) 806-7204 toll-free; or access the Pacific Council website,
The September 7-12, 2018 meeting of the Pacific Council will be streamed live on the internet. The broadcasts begin initially at 10 a.m. PDT Friday, September 7, 2018 and continue at 8 a.m. daily through Wednesday, September 12, 2018. Broadcasts end daily at 5 p.m. PDT or when business for the day is complete. Only the audio portion and presentations displayed on the screen at the Pacific Council meeting will be broadcast. The audio portion is listen-only; you will be unable to speak to the Pacific Council via the broadcast. To access the meeting online, please use the following link:
The following items are on the Pacific Council agenda, but not necessarily in this order. Agenda items noted as “Final Action” refer to actions requiring the Council to transmit a proposed fishery management plan, proposed plan amendment, or proposed regulations to the U.S. Secretary of Commerce, under Sections 304 or 305 of the Magnuson-Stevens Fishery Conservation and Management Act. Additional detail on agenda items, Council action, advisory entity meeting times, and meeting rooms are described in Agenda Item A.5, Proposed Council Meeting Agenda, and will be in the advance September 2018 briefing materials and posted on the Pacific Council website at
Advisory body agendas will include discussions of relevant issues that are on the Pacific Council agenda for this meeting, and may also include issues that may be relevant to future Council meetings. Proposed advisory body agendas for this meeting will be available on the Pacific Council website
Although non-emergency issues not contained in this agenda may come before the Pacific Council for discussion, those issues may not be the subject of formal Council action during this meeting. Council action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Pacific Council's intent to take final action to address the emergency.
These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Mr. Kris Kleinschmidt at (503) 820-2280, ext. 411 at least ten business days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; receipt of application.
Notice is hereby given that Tamara McGuire, 310 W 123rd Ave., Anchorage, AK 99515, has applied in due form for a permit to conduct research on endangered Cook Inlet beluga whales.
Written, telefaxed, or email comments must be received on or before September 17, 2018.
The application and related documents are available for review by selecting “Records Open for Public Comment” from the “Features” box on the Applications and Permits for Protected Species (APPS) home page,
These documents are also available upon written request or by appointment in the Permits and Conservation Division, Office of Protected Resources,
Written comments on this application should be submitted to the Chief, Permits and Conservation Division, at the address listed above. Comments may also be submitted by facsimile to (301) 713-0376, or by email to
Those individuals requesting a public hearing should submit a written request to the Chief, Permits and Conservation Division at the address listed above. The request should set forth the specific reasons why a hearing on this application would be appropriate.
Amy Hapeman or Sara Young, (301) 427-8401.
The subject permit is requested under the authority of the Marine Mammal Protection Act of 1972, as amended (MMPA; 16 U.S.C. 1361
Ms. McGuire requests a 5-year permit to conduct research on endangered Cook Inlet beluga whales (
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Concurrent with the publication of this notice in the
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public meeting.
The North Pacific Fishery Management Council (Council) Science and Statistical Committee Subgroup (SSC Subgroup) will hold a public meeting.
The meeting will be held on Monday, September 10, 2018 from 9 a.m. to 4 p.m.
The meeting will be held in Room 2079, at the Alaska Fisheries Science Center (AFSC), 7700 Sand Point Way NE, Seattle, WA 98115.
Stephani Zador, AFSC staff; telephone: (206) 526-4693.
The agenda will include: (a) AFSC review of Alaska surveys and budget considerations; (b) discussion of alternatives for survey planning based on different budget scenarios; (c) develop recommendations for the SSC and Council; (d) other business. The Agenda is subject to change, and the latest version will be posted at
Public comment letters will be accepted until the start of the meeting, and should be submitted either electronically to Diana Evans, Council staff:
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Shannon Gleason at (907) 271-2809 at least 7 working days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR 61 in-person Data/Assessment Workshop for Gulf of Mexico Red Grouper.
The SEDAR 61 assessment of the Gulf of Mexico Red Grouper will consist of one in-person Data/Assessment Workshop and a series of webinars. See
The SEDAR 61 Data/Assessment Workshop will be held from 9 a.m. until 5 p.m. on September 11, 2018, from 8:30 a.m. until 5 p.m. on September 12, 2018, and from 8:30 a.m. until 1 p.m. on September 13, 2018.
Julie A. Neer, SEDAR Coordinator; (843) 571-4366. Email:
The Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils, in conjunction with NOAA Fisheries and the Atlantic and Gulf States Marine Fisheries Commissions have implemented the Southeast Data, Assessment and Review (SEDAR) process, a multi-step method for determining the status of fish stocks in the Southeast Region. SEDAR is a multi-step process including: (1) Data/Assessment Workshop, and (2) a series of webinars. The product of the Data/Assessment Workshop is a report which compiles and evaluates potential
The items of discussion in the Data/Assessment Workshop are as follows:
1. An assessment data set and associated documentation will be developed during the workshop.
2. Participants will evaluate proposed data and select appropriate sources for providing information on life history characteristics, catch statistics, discard estimates, length and age composition, and fishery dependent and fishery independent measures of stock abundance.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during these meetings. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to the Council office (see
16 U.S.C. 1801
Committee for Purchase From People Who Are Blind or Severely Disabled.
Proposed addition to and deletions from the Procurement List.
The Committee is proposing to add a product to the Procurement List that will be furnished by a nonprofit agency employing persons who are blind or have other severe disabilities, and deletes products and services previously furnished by such agencies.
Comments must be received on or before: September 16, 2018.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S Clark Street, Suite 715, Arlington, Virginia 22202-4149.
For further information or to submit comments contact: Michael R. Jurkowski, Telephone: (703) 603-2117, Fax: (703) 603-0655, or email
This notice is published pursuant to 41 U.S.C. 8503(a)(2) and 41 CFR 51-2.3. Its purpose is to provide interested persons an opportunity to submit comments on the proposed actions.
If the Committee approves the proposed addition, the entities of the Federal Government identified in this notice will be required to procure the product listed below from nonprofit agency employing persons who are blind or have other severe disabilities.
The following product is proposed for addition to the Procurement List for production by the nonprofit agency listed:
The following products and services are proposed for deletion from the Procurement List:
Committee for Purchase From People Who Are Blind or Severely Disabled.
Deletions from the Procurement List.
This action deletes products and services from the Procurement List previously furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S Clark Street, Suite 715, Arlington, Virginia, 22202-4149.
Michael R. Jurkowski, Telephone: (703) 603-2117, Fax: (703) 603-0655, or email
On 7/6/2018 (83 FR 130) and 7/13/2018 (83 FR 135), the Committee for Purchase From People Who Are Blind or Severely Disabled published notices of proposed deletions from the Procurement List.
After consideration of the relevant matter presented, the Committee has determined that the products and services listed below are no longer suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities. The major factors considered for this certification were:
1. The action will not result in additional reporting, recordkeeping or other compliance requirements for small entities.
2. The action may result in authorizing small entities to furnish the products and services to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the products and services deleted from the Procurement List.
Accordingly, the following products and services are deleted from the Procurement List:
Consumer Product Safety Commission.
Notice.
Pursuant to the Paperwork Reduction Act of 1995, the Consumer Product Safety Commission (CPSC) requests comments on a proposed extension of approval of information collection requirements for manufacturers and importers of carpets and rugs under the Standard for the Surface Flammability of Carpets and Rugs and the Standard for the Surface Flammability of Small Carpets and Rugs. The CPSC will consider all comments received in response to this notice before requesting an extension of this collection of information from the Office of Management and Budget (OMB).
Submit written or electronic comments on the collection of information by October 16, 2018.
You may submit comments, identified by Docket No. CPSC-2012-0030, by any of the following methods:
Bretford Griffin, Consumer Product Safety Commission, 4330 East-West Highway, Bethesda, MD 20814; (301) 504-7037, or by email to:
CPSC seeks to renew the following currently approved collection of information:
The CPSC solicits written comments from all interested persons about the proposed collection of information. The CPSC specifically solicits information relevant to the following topics:
Consumer Product Safety Commission.
Notice.
Pursuant to the Paperwork Reduction Act (PRA) of 1995, the
Submit written or electronic comments on the collection of information by October 16, 2018.
You may submit comments, identified by Docket No. CPSC-2012-0024, by any of the following methods:
Bretford Griffin, Consumer Product Safety Commission, 4330 East-West Highway, Bethesda, MD 20814; (301) 504-7037, or by email to:
CPSC seeks to renew the following currently approved collection of information:
The CPSC solicits written comments from all interested persons about the proposed collection of information. The CPSC specifically solicits information relevant to the following topics:
Department of the Air Force, DoD.
30-Day information collection notice.
The Department of Defense has submitted to OMB for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by September 17, 2018.
Comments and recommendations on the proposed information collection should be emailed to Ms. Jasmeet Seehra, DoD Desk Officer, at
Fred Licari, 571-372-0493, or
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
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Requests for copies of the information collection proposal should be sent to Mr. Licari at
Office of the Under Secretary of Defense for Personnel and Readiness, DoD.
30-Day information collection notice.
The Department of Defense has submitted to OMB for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by September 17, 2018.
Comments and recommendations on the proposed information collection should be emailed to Ms. Jasmeet Seehra, DoD Desk Officer, at
Fred Licari, 571-372-0493, or
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
•
Requests for copies of the information collection proposal should be sent to Mr. Licari at
Under Secretary of Defense for Research and Engineering, DoD.
Information collection notice.
In compliance with the
Consideration will be given to all comments received by October 16, 2018.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to Defense Technical Information Center, ATTN: Ms. Vakare Valaitis, 8725 John J. Kingman Road, Ft. Belvoir, VA 22060-6218, or call (703) 767-9159.
Under Secretary of Defense for Acquisition and Sustainment, DoD.
Information collection notice.
In compliance with the
Consideration will be given to all comments received by October 16, 2018.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to: The Defense Logistics Agency, Office of Small Business Programs, ATTN: Sherry Savage, 8725 John J. Kingman Road, Fort Belvoir, VA 22060 or write to
Office of the Under Secretary of Defense for Personnel and Readiness, DoD.
30-Day information collection notice.
The Department of Defense has submitted to OMB for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Consideration will be given to all comments received by September 17, 2018.
Comments and recommendations on the proposed information collection should be emailed to Ms. Jasmeet Seehra, DoD Desk Officer, at
Fred Licari, 571-372-0493, or
You may also submit comments and recommendations, identified by Docket ID number and title, by the following method:
•
Requests for copies of the information collection proposal should be sent to Mr. Licari at
Office of the Under Secretary of Defense for Personnel and Readiness, DoD.
Information collection notice.
In compliance with the
Consideration will be given to all comments received by October 16, 2018.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to Office of the Under Secretary of Defense (Personnel and Readiness) (FE&T), Office of Financial Readiness, ATTN: Mr. Andrew Cohen, 4000 Defense Pentagon, Washington, DC 20301-4000, or telephone Mr. Cohen at (703) 692-5286.
Respondents are creditors extending consumer credit as defined in the Final
The creditor shall provide the disclosures in writing in a form the covered borrower can keep. The creditor also shall provide the required disclosures orally. In mail and internet transactions, the creditor satisfies this requirement by providing a toll-free telephone number on or with the written disclosures that consumers may use to obtain oral disclosures. One disclosure for each transaction involving consumer credit; one covered-borrower check for each transaction involving consumer credit.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing a revision of an existing information collection.
Interested persons are invited to submit comments on or before October 16, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Ian Foss, 202-377-3681.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of an existing information collection.
Interested persons are invited to submit comments on or before October 16, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Take notice that on August 10, 2018, pursuant to section 206 of the Federal Power Act, 16 U.S.C. 824e, Rule 206 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.206 (2018), and section 16.1 of the Fifth Amended and Restated Power Supply and Coordination Agreement between Duke Energy Progress, LLC (DEP or Respondent) and the North Carolina Electric Membership Corporation (NCEMC or Complainant), FERC Rate Schedule No. 182, NCEMC filed a formal complaint against DEP alleging that the Respondent's Fixed Demand Rate, Variable Demand Rate, and the formula production rate that will go into effect January 1, 2020, are excessive, unjust and unreasonable, and not cost-based as required by the Respondent's Market-Based Rate Tariff, as more fully explained in the complaint.
The Complainant certifies that copies of the complaint were served on the contacts for the Respondent listed on the Commission's list of Corporate Officials and on the North Carolina Utilities Commission and the South Carolina Public Service Commission.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Section 309(a) of the Clean Air Act requires that EPA make public its comments on EISs issued by other Federal agencies. EPA's comment letters on EISs are available at:
Revision to the
Friday, August 24, 2018, 9:00 a.m. Eastern Time.
Jacqueline A. Berrien Training Center on the First Floor of the EEOC Office Building, 131 “M” Street NE, Washington, DC 20507.
The meeting will be closed to the public.
The Associate Legal Counsel has certified that, in her opinion, exemption 10 of the Sunshine Act, 5 U.S.C. 552b(c)(10) and 29 CFR 1612.4(j), permits consideration of the scheduled matters at the closed meeting.
Agency Adjudication and Determination on Federal Agency Discrimination Complaint Appeals:
The Commission will be considering four (4) cases.
Please telephone (202) 663-7100 (voice) and (202) 663-4074 (TTY) at any time for information on these meetings. The EEOC provides sign language interpretation and Communication Access Realtime Translation (CART) services at Commission meetings for the hearing impaired. Requests for other reasonable accommodations may be made by using the voice and TTY numbers listed above.
Bernadette B. Wilson, Executive Officer on (202) 663-4077.
Centers for Medicare & Medicaid Services (CMS), HHS.
Final notice.
This final notice announces our decision to approve the DNV GL— Healthcare for continued recognition as a national accrediting organization for hospitals that wish to participate in the Medicare or Medicaid programs.
This decision is effective August 17, 2018 through September 26, 2022.
Karena Meushaw (410) 786-6609, or Monda Shaver (410) 786-3410.
Under the Medicare program, eligible beneficiaries may receive covered services from a hospital, provided that certain requirements are met. Section 1861(e) of the Social Security Act (the Act), establishes distinct criteria for facilities seeking designation as a hospital. Regulations concerning provider agreements are at 42 CFR part 489 and those pertaining to activities relating to the survey and certification of facilities are at 42 CFR part 488. The regulations at 42 CFR part 482 specify the minimum conditions that a hospital must meet to participate in the Medicare program.
Generally, to enter into an agreement, a hospital must first be certified by a State survey agency as complying with the conditions or requirements set forth in part 482 of our regulations. Thereafter, the hospital is subject to regular surveys by a State survey agency to determine whether it continues to meet these requirements. There is an alternative, however, to surveys by State agencies.
Section 1865(a)(1) of the Act provides that, if a provider entity demonstrates through accreditation by an approved national accrediting organization that all applicable Medicare conditions are met or exceeded, we may deem those provider entities as having met the requirements. Accreditation by an accrediting organization is voluntary and is not required for Medicare participation.
If an accrediting organization is recognized by the Secretary of the Department of Health and Human Services as having standards for accreditation that meet or exceed Medicare requirements, any provider entity accredited by the national accrediting body's approved program may be deemed to meet the Medicare conditions. A national accrediting organization applying for approval of its accreditation program under part 488, subpart A, must provide the Centers for Medicare and Medicaid Services (CMS) with reasonable assurance that the accrediting organization requires the accredited provider entities to meet requirements that are at least as stringent as the Medicare conditions. Our regulations concerning the approval of accrediting organizations are set forth at § 488.5. The regulations at § 488.5(e)(2)(i) require accrediting organizations to reapply for continued approval of its accreditation program
Section 1865(a)(3)(A) of the Act provides a statutory timetable to ensure that our review of applications for CMS-approval of an accreditation program is conducted in a timely manner. The Act provides us 210 days after the date of receipt of a complete application, with any documentation necessary to make the determination, to complete our survey activities and application process. Within 60 days after receiving a complete application, we must publish a notice in the
In the April 17, 2018
• An onsite administrative review of DNV GL's: (1) Corporate policies; (2) financial and human resources available to accomplish the proposed surveys; (3) procedures for training, monitoring, and evaluation of its hospital surveyors; (4) ability to investigate and respond appropriately to complaints against accredited hospitals; and, (5) survey review and decision-making process for accreditation.
• The comparison of DNV GL's Medicare hospital accreditation program standards to our current Medicare hospitals Conditions of Participation (CoPs).
• A documentation review of hospital's survey process to:
++ Determine the composition of the survey team, surveyor qualifications, and DNV GL's ability to provide continuing surveyor training.
++ Compare DNV GL's processes to those we require of state survey agencies, including periodic resurvey and the ability to investigate and respond appropriately to complaints against accredited hospitals.
++ Evaluate DNV GL's procedures for monitoring hospitals it has found to be out of compliance with DNV GL's program requirements. (This pertains only to monitoring procedures when DNV GL identifies non-compliance. If noncompliance is identified by a state survey agency through a validation survey, the state survey agency monitors corrections as specified at § 488.9(c)).
++ Assess DNV GL's ability to report deficiencies to the surveyed hospital and respond to the hospital's plan of correction in a timely manner.
++ Establish DNV GL's ability to provide us with electronic data and reports necessary for effective validation and assessment of the organization's survey process.
++ Determine the adequacy of DNV GL's staff and other resources.
++ Confirm DNV GL's ability to provide adequate funding for performing required surveys.
++ Confirm DNV GL's policies with respect to surveys being unannounced.
++ Obtain DNV GL's agreement to provide us with a copy of the most current accreditation survey together with any other information related to the survey as we may require, including corrective action plans.
In accordance with section 1865(a)(3)(A) of the Act, the April 17, 2018 proposed notice also solicited public comments regarding whether DNV GL's requirements met or exceeded the Medicare CoPs for hospitals. We received two comments in response to our proposed notice. All of the comments received expressed unanimous support for DNV GL's hospital accreditation program.
We compared DNV GL's hospital accreditation program requirements and survey process with the Medicare CoPs at 42 CFR part 482, and the survey and certification process requirements of Parts 488 and 489. Our review and evaluation of DNV GL's hospital application, which were conducted as described in section III of this final notice, yielded the following areas where, as of the date of this notice, DNV GL has revised its standards and certification processes in order to meet the requirements at:
• Section 482.11 through 482.58, to ensure its standards replace the use of the word “shall” to “must” in all situations where CMS regulations use the word “must” or, clarify in DNV's glossary the intended definition of the word “shall” means “must.”
• State Operations Manual, Section 3012, to ensure that DNV GL's policies related to the timeframe(s) for follow-up activities, including follow-up surveys, for facilities that have previously demonstrated non-compliance at the condition level.
• Section 488.5(a)(4)(iv), to ensure that the hospital and provider-based locations (or a sample when allowed) are included in the hospital survey and deficiencies cited under the appropriate CoPs.
• Section 488.5(a)(11)(ii), to ensure that the data submitted in to CMS is timely, complete and accurate.
• Section 488.5(a)(12), to ensure a clearly defined complaint investigation process is in place that meets the requirements in the State Operations Manual Chapter 5 Section 5010 and Chapter 5 Section 5075.2 that includes the following:
++ Complete and accurate tracking of complaints as well as a process for maintaining a documented record of contacts made (for example, phone, email and United States mail) with the complainant, and others, if applicable;
++ Define the number of contact attempts required before closing out a complaint, if the complainant does not respond;
++ Educate DNV GL complaint intake staff that when complaint allegations could potentially result in condition-level non-compliance affecting the health and safety of patients, a survey is to be considered regardless if the allegation also involves payment related allegations; and,
++ The complaint must be investigated onsite within an appropriate timeframe.
• Section 488.26(b), to ensure that DNV GL survey documentation includes a detailed deficiency statement that clearly supports the manner and degree of non-compliance and that all observed non-compliance is cited at the appropriate level (condition verses standard level).
• Section 488.26(c)(4), to ensure that DNV GL surveyors review a sufficient number of inpatient and outpatient medical records during the survey process; the appropriate number of documents, logs, personnel and credentialing files are reviewed during the survey process; the document sources are clearly identified in the survey file; and that DNV GL surveyors have been appropriately trained and determined by DNV GL to be competent in identifying Immediate Jeopardy (IJ)
• Section 488.28(a), to ensure that the corrective action plan submitted by hospitals fully addresses the deficiencies cited and that the hospital's corrective actions are hospital wide and not focused solely on the area in which the deficiency was identified.
• Section 488.28(d), to ensure that all corrective action plans
• Section 488.18(a), to ensure all observations of non-compliance are adequately documented in the survey report and ensure corrective action is required by the hospital.
Based on our review and observations described in section III of this final notice, we approve DNV GL as a national accreditation organization for hospitals that request participation in the Medicare program, effective August 17, 2018 through September 26, 2022.
To verify DNV GL's continued compliance with the provisions of this final notice, CMS will conduct a follow-up corporate on-site visit and survey observation within 18 months of the publication date of this notice.
This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
States, the District of Columbia, and the Commonwealth of Puerto Rico are required to report statistics for the previous Federal fiscal year on:
• Assisted and applicant households, by type of LIHEAP assistance;
• Assisted and applicant households, by type of LIHEAP assistance and poverty level;
• Assisted households receiving nominal payments of $50 or less;
• Assisted households receiving only utility payment assistance; this information will automatically be transferred to the grantee's Performance Data Form.
• Assisted households, regardless of the type(s) of LIHEAP assistance, excluding households that only receive nominal payments of $50 or less;
• Assisted households, by type of LIHEAP assistance, having at least one vulnerable member who is at least 60 years or older, disabled, or five years old or younger;
• Assisted households, by type of LIHEAP assistance, with at least one member age 2 years or under;
• Assisted households, by type of LIHEAP assistance, with at least one member ages 3 years through 5 years; and
• Assisted households, regardless of the type(s) of LIHEAP assistance, having at least one member 60 years or older, disabled, or five years old or younger. Insular areas (other than the Commonwealth of Puerto Rico) and Indian Tribal Grantees are required to submit data only on the number of households receiving heating, cooling, energy crisis, and/or weatherization benefits.
The information is being collected for the Department's annual LIHEAP Report to Congress. The data also provides information about the need for LIHEAP funds. Finally, the data are used in the calculation of LIHEAP performance measures under the Government Performance and Results Act of 1993. The data elements will allow the accuracy of measuring LIHEAP targeting performance and LIHEAP cost efficiency.
In compliance with the requirements of the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. Chap. 35), the Administration for Children and Families is soliciting public comment on the specific aspects of the information collection described above. Copies of the proposed collection of information can be obtained and comments may be forwarded by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 330 C Street SW, Washington, DC 20201. Attn: ACF Reports Clearance Officer. Email address:
The Department specifically requests comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or
We are requesting no changes in the collection of data with the Carryover and Reallotment Report for FY 2018, a form for the collection of data, and the Simplified Instructions for Timely Obligations of FY 2019 LIHEAP Funds and Reporting Funds for Carryover and Reallotment. The form clarifies the information being requested and ensures the submission of all the required information. The form facilitates our response to numerous queries each year concerning the amounts of obligated funds. Use of the form is voluntary. Grantees have the option to use another format.
In compliance with the requirements of the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. Chap 35), the Administration for Children and Families is soliciting public comment on the specific aspects of the information collection described above. Copies of the proposed collection of information can be obtained and comments may be forwarded by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 330 C Street SW, Washington DC 20201. Attn: ACF Reports Clearance Officer. Email address:
The Department specifically requests comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.
Food and Drug Administration, HHS.
Notice of public workshop.
The Food and Drug Administration (FDA) Center for Biologics Evaluation and Research and the National Institutes of Health, National Institute of Allergy and Infectious Diseases (NIAID) are announcing a public workshop entitled “Science and Regulation of Live Microbiome-Based Products Used to Prevent, Treat, or Cure Diseases in Humans.” The purpose of the public workshop is to exchange information with the scientific community about the clinical, manufacturing, and regulatory considerations associated with live microbiome-based products, when administered to prevent, treat, or cure a disease or condition in humans. The public workshop will bring together government Agencies, academia, industry, and other stakeholders involved in research, development, and regulation of live microbiome-based products for such uses.
The public workshop will be held on September 17, 2018, from 9 a.m. to 5 p.m. See the
The public workshop will be held at the NIAID Conference Center, 5601 Fishers Lane, Rm. 1D13, Rockville, MD 20852. Entrance for public workshop participants is through the lobby, where routine security check procedures will be performed. For parking and security information, please refer to
Loni Warren Henderson or Sherri Revell, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 1118, Silver Spring, MD 20993, 240-402-8010, email:
Live microbiome-based products used to prevent, treat, or cure a disease or condition in humans are biological products. There is increasing interest in the use of such products for the treatment and/or prevention of conditions such as necrotizing enterocolitis and diarrhea. Historically, these products have presented with unique scientific and regulatory challenges.
The topics for discussion at the public workshop include the clinical, manufacturing, and regulatory considerations for live microbiome-based products to prevent, treat, or cure a disease or condition in humans, and the objective is to provide a forum for the exchange of information and perspectives on these topics.
Registration is free and based on space availability, with priority given to early registrants. Persons interested in attending this public workshop must register by August 28, 2018, midnight Eastern Time. Early registration is recommended because seating is limited; therefore, FDA may limit the number of participants from each organization. There will be no onsite registration.
If you need special accommodations due to a disability, please contact Loni Warren Henderson or Sherri Revell no later than September 10, 2018 (See
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA, Agency, or we) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Fax written comments on the collection of information by September 17, 2018.
To ensure that comments on the information collection are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs, OMB, Attn: FDA Desk Officer, Fax: 202-395-7285, or emailed to
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10a.m.-12 midnight, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
This information collection supports the above captioned Agency guidance. FDA has agreed to specific program enhancements and performance goals specified in the Generic Drug User Fee Reauthorization (GDUFA II) Commitment Letter. One of the performance goals applies to controlled correspondence related to generic drug development. The GDUFA II Commitment Letter includes details on FDA's commitment to respond to questions submitted as controlled correspondence within certain timeframes. To support these program goals, we have developed the guidance entitled “Controlled Correspondence Related to Generic Drug Development.” The guidance document is intended to facilitate FDA's prompt consideration of controlled correspondence and to assist in meeting the prescribed timeframes by providing procedural recommendations to include the following information in the inquiry: (1) Name, title, address, phone number, and entity of the person submitting the inquiry; (2) a letter of authorization, if applicable; (3) the FDA-assigned control number and submission date of any previous, related controlled correspondence that was accepted for substantial review and response, if any, as well as a copy of that previous controlled correspondence and FDA's response, if any; (4) the relevant reference listed drug(s), as applicable, including the application number, proprietary (brand) name, manufacturer, active ingredient, dosage form, and strength(s); (5) a statement that the controlled correspondence is related to a potential abbreviated new drug application (ANDA) submission to the Office of Generic Drugs and the ANDA number, if applicable; (6) a concise statement of the inquiry; (7) a recommendation of the appropriate FDA review discipline; and (8) relevant prior research and supporting materials.
The GDUFA II Commitment Letter also includes details on FDA's commitment to respond to requests to clarify ambiguities in FDA's controlled correspondence response within certain timeframes. To facilitate FDA's prompt consideration of the request and to assist in meeting the prescribed timeframes, the guidance document recommends including the following information in the inquiry: (1) Name, title, address, phone number, and entity of the person submitting the inquiry; (2) a letter of authorization, if applicable; (3) the FDA-assigned control number, submission date of the controlled correspondence on which the requestor is seeking clarification, a copy of that previous controlled correspondence, and FDA's response to the controlled correspondence; and (4) the clarifying questions and the corresponding section(s) of FDA's controlled correspondence response on which the requestor is seeking clarification.
In the
We estimate the burden of the information collection as follows:
This is the first extension of the information collection. We base our estimate on a review of Agency data of Fiscal Year submissions for 2014, 2015, and 2016, which reflects an increase in submissions that we attribute to an increase in generic drug development. Accordingly, we estimate 390 generic drug manufacturers and related industry (
Because the content of inquiries considered controlled correspondence is widely varied, we are providing an average burden hour for each inquiry. We estimate that it will take an average of 5 hours per inquiry for industry to gather necessary information, prepare the request, and submit the request to FDA. As a result, we estimate that it will take an average of 7,480 hours annually for industry to prepare and submit inquiries considered controlled correspondence.
Food and Drug Administration, HHS.
Notice of availability.
The Food and Drug Administration (FDA or Agency) is announcing the availability of the draft guidance entitled “Process to Request a Review of FDA's Decision Not to Issue Certain Export Certificates for Devices; Draft Guidance for Industry and Food and Drug Administration Staff.” FDA is issuing this draft guidance to comply with changes to the Federal Food, Drug, and Cosmetic Act (FD&C Act) as amended by the FDA Reauthorization Act of 2017 (FDARA), to specify the process afforded to persons denied a Certificate to Foreign Government (CFG) for a device. This draft guidance describes the information that the Center for Devices and Radiological Health (CDRH) and the Center for Biologics Evaluation and Research (CBER) will provide to a person whose request for a CFG for a device is denied, and the process for seeking review of such a denial. This draft guidance is not final nor is it in effect at this time.
Submit either electronic or written comments on the draft guidance by October 16, 2018 to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance.
You may submit comments on any guidance at any time as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
An electronic copy of the guidance document is available for download from the internet. See the
Joann Belt, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 3658, Silver Spring, MD 20993-0002,
FDA is issuing this draft guidance to comply with section 704 of FDARA (Pub. L. 115-52), which amended section 801 of the FD&C Act, to specify the process afforded to persons denied a CFG for a device. This draft guidance describes the information that CDRH and CBER will provide to a person whose request for a CFG for a device is denied, and the process for seeking review of such a denial. This draft guidance applies to the process for persons denied CFGs requested pursuant to section 801(e)(4)(A) of the FD&C Act (21 U.S.C. 381(e)(4)(A) for devices manufactured in an establishment registered under section 510 of the FD&C Act (21 U.S.C. 360) (
This draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent the current thinking of FDA on the process for persons denied a certificate to foreign government for a device. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations. This guidance is not subject to Executive Order 12866.
Persons interested in obtaining a copy of the draft guidance may do so by downloading an electronic copy from the internet. A search capability for all CDRH guidance documents is available at
This draft guidance refers to previously approved collections of information. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in sections 801(e) and 802 (21 U.S.C. 382) of the FD&C Act have been approved under OMB control number 0910-0498; the collections of information in 21 CFR part 807, subparts A through E, have been approved under OMB control number 0910-0625; the collections of information in 21 CFR part 820 have been approved under OMB control number 0910-0073; and the collections of information in the guidance “Center for Devices and Radiological Health Appeals Processes” have been approved under OMB control number 0910-0738.
Food and Drug Administration, HHS.
Notice; extension of the proposal period.
The Food and Drug Administration (FDA, Agency, or we) is extending the proposal period for the “Quality Metrics Site Visit Program for Center for Drug Evaluation and Research and Center for Biologics Evaluation and Research Staff,” published in the
FDA is extending the proposal period on the notice published June 29, 2018 (83 FR 30751). Submit either an electronic or written proposal by December 17, 2018 directly to Tara Gooen Bizjak or Stephen Ripley (see
Tara Gooen Bizjak, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 2109, Silver Spring, MD 20993-0002, 301-796-3257, email:
In the
Persons with access to the internet may obtain the information about the FDA Quality Metrics for Drug Manufacturing Program, including this Quality Metric Site Visit Program, at
Office of the Secretary, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995, the Office of the Secretary (OS), Department of Health and Human Services, is publishing the following summary of a proposed collection for public comment.
Comments on the ICR must be received on or before October 16, 2018.
Submit your comments to
When submitting comments or requesting information, please include the document identifier 0990-New-60D and project title for reference, to
Interested persons are invited to send comments regarding this burden estimate or any other aspect of this collection of information, including any of the following subjects: (1) The necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes for Health, HHS.
Notice.
The purpose of this Request for Information (RFI) is to solicit input on how best to accomplish the ambitious vision for the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative® set forth in BRAIN 2025: A Scientific Vision. NIH is soliciting input from all interested stakeholders, including members of the scientific community, trainees, academic institutions, the private sector, health professionals, professional societies, advocacy groups, and patient communities, as well as other interested members of the public.
The Request for Information is open for public comment. To assure consideration, your responded must be received by November 15, 2018, 11:59 p.m.
Responses to this RFI must be submitted electronically using the web-based form at
Please direct all inquiries to Samantha White, Ph.D., National Institute of Neurological Disorders and Stroke, 301-496-1675;
The BRAIN Initiative aims to develop new tools and technologies to understand and manipulate networks of cells in the brain. BRAIN 2025: A Scientific Vision serves as the strategic plan for the BRAIN Initiative at NIH and outlines an overarching vision, seven high level scientific priorities, and many specific goals. Designed to be achieved over at least a decade, the first five years of BRAIN 2025 emphasizes development of tools and technology, and the next five years shifts emphasis to using these tools to make fundamental discoveries about how brain circuits work and what goes wrong in disease.
The BRAIN Initiative is well underway (see
The ACD-WG will use the responses to this RFI, along with information gathered through a series of public workshops, to help inform their discussions of the BRAIN Initiative's progress and potential updates to the plan moving forward.
Anyone wishing to submit a response is asked to include:
• Ideas for new tools and technologies that have the potential to transform brain circuit research.
• Suggestions for fundamental questions about brain circuit function in
• Considerations for data sharing infrastructure and policies.
• Areas and topics for research on the ethical implications of BRAIN Initiative-supported emerging neurotechnologies and advancements and their applications.
• Approaches for disseminating new tools and technologies as well as training the broader neuroscience research community.
• Any other topic relevant to the strategic plan of the BRAIN Initiative.
National Institutes of Health, HHS.
Notice.
The National Institutes of Health (NIH) seeks public comment on its proposal to amend the
To ensure consideration, comments must be submitted in writing by October 16, 2018.
Comments may be submitted electronically by visiting:
If you have questions, or require additional background information about these proposed changes, please contact the NIH by email at
NIH is proposing a series of actions to the
At this time, there is duplication in submitting protocols, annual reports, amendments, and serious adverse events for HGT clinical protocols to both NIH and FDA that does not exist for other areas of clinical research. Historically, this duplication was conceived as harmonized reporting, enabling FDA to provide regulatory oversight while NIH provided a forum for open dialogue and transparency. However, since these complementary functions were first envisioned, we have now seen several converging systems emerge that provide some of these functions. For instance,
While the science and oversight system have evolved, HGT protocols continue to receive special oversight that is not afforded to other areas of clinical research. This observation was also noted in a 2014 Institute of Medicine of the National Academies report,
Briefly to summarize, NIH proposes amending the
1. Eliminate RAC review and reporting requirements to NIH for HGT protocols.
2. Modify roles and responsibilities of investigators, institutions, IBCs, the RAC, and NIH to be consistent with these goals including:
a. Modifying roles of IBCs in reviewing HGT to be consistent with review of other covered research, and
b. Eliminating references to the RAC, including its roles in HGT and biosafety.
NIH suggests that the series of changes proposed in this Notice is a rational next step in the process of considering appropriate oversight of HGT. Consistent with these proposed changes to the
With the proposed elimination of the requirements for safety reporting under Appendix M, IBC oversight should be completed immediately after the last participant is administered the final dose of product. Additionally, the role of IBC review is proposed to be amended to be consistent with FDA's current guidance regarding individual patient expanded access to investigational drugs. In this way, the role of the IBCs will be focused on providing local biosafety oversight of basic and clinical research involving recombinant or synthetic nucleic acids. In particular, NIH seeks comment on whether the expectations of IBCs, in light of these proposed changes, have been articulated clearly in the proposed revisions to the
Notably, the roles and responsibilities of the RAC are proposed to be removed from the
The proposed changes outlined above will require amendment of multiple portions of the
Section I-A currently states:
The purpose of the
Section I-A is proposed to be amended as follows:
The purpose of the
Section I-A-1 currently states:
Section I-A-1. Any nucleic acid molecule experiment, which according to the
Section I-A-1 is proposed to be amended as follows:
Section I-A-1. Any nucleic acid molecule experiment, which according to the
Section I-A-1-a currently states:
Section I-A-1-a. For experiments involving the deliberate transfer of recombinant or synthetic nucleic acid molecules, or DNA or RNA derived from recombinant or synthetic nucleic acid molecules, into human research participants (human gene transfer), no research participant shall be enrolled (see definition of enrollment in Section I-E-7) until the NIH protocol registration process has been completed (see Appendix M-I-B,
For a clinical trial site that is added after the completion of the NIH protocol registration process, no research participant shall be enrolled (see definition of enrollment in Section I-E-7) at the clinical trial site until IBC approval and IRB approval from that site have been obtained. Within 30 days of enrollment (see definition of enrollment in Section I-E-7) at a clinical trial site, the following documentation shall be submitted to NIH OSP: (1) Institutional Biosafety Committee approval (from the clinical trial site); (2) Institutional Review Board approval; (3) Institutional Review Board-approved informed consent document(s); and (4) NIH grant number(s) if applicable.
Section I-A-1-a is proposed to be amended as follows:
Section I-A-1-a. For experiments involving the deliberate transfer of recombinant or synthetic nucleic acid molecules, or DNA or RNA derived from recombinant or synthetic nucleic acid molecules, into human research participants (human gene transfer), no human gene transfer experiment shall be initiated (see definition of initiation in Section I-E-7) until Institutional Biosafety Committee (IBC) approval (from the clinical trial site) has been obtained; and all other applicable institutional and regulatory authorization(s) and approvals have been obtained.
Section I-E. General Definitions is proposed to be amended to delete the current definitions I-E-4, I-E-7 through I-E-12 and to include a new definition for “initiation.”
Section I-E-4 is proposed to be amended to define initiation as the following: “Initiation” of research is the introduction of recombinant or synthetic nucleic acid molecules into organisms, cells, or viruses.
Section III currently states:
This section describes six categories of experiments involving recombinant or synthetic nucleic acid molecules: (i) Those that require Institutional Biosafety Committee (IBC) approval, RAC review, and NIH Director approval before initiation (see Section III-A), (ii) those that require NIH OSP and Institutional Biosafety Committee approval before initiation (see Section III-B), (iii) those that require Institutional Biosafety Committee and Institutional Review Board approvals and RAC review before research participant enrollment (see Section III-C), (iv) those that require Institutional Biosafety Committee approval before initiation (see Section III-D), (v) those that require Institutional Biosafety Committee notification simultaneous with initiation (see Section III-E), and (vi) those that are exempt from the
If an experiment falls into Sections III-A, III-B, or III-C and one of the other sections, the rules pertaining to Sections III-A, III-B, or III-C shall be followed. If an experiment falls into Section III-F and into either Sections III-D or III-E as well, the experiment is considered exempt from the
Any change in containment level, which is different from those specified in the
Section III is proposed to be amended as follows:
This section describes six categories of experiments involving recombinant or synthetic nucleic acid molecules: (i) Those that require Institutional Biosafety Committee (IBC) approval and NIH Director approval before initiation (see Section III-A), (ii) those that require NIH OSP and Institutional Biosafety Committee approval before initiation (see Section III-B), (iii) those that require Institutional Biosafety Committee approval before initiation of human gene transfer (see Section III-C), (iv) those that require Institutional Biosafety Committee approval before initiation (see Section III-D), (v) those that require Institutional Biosafety Committee notification simultaneous with initiation (see Section III-E), and (vi) those that are exempt from the
If an experiment falls into Sections III-A, III-B, or III-C and one of the other sections, the rules pertaining to Sections III-A, III-B, or III-C shall be followed. If an experiment falls into Section III-F and into either Sections III-D or III-E as well, the experiment is considered exempt from the
Any change in containment level, which is different from those specified in the
Section III-A currently states:
Experiments considered as
Section III-A-1-a. The deliberate transfer of a drug resistance trait to microorganisms that are not known to acquire the trait naturally (see Section V-B,
Consideration should be given as to whether the drug resistance trait to be used in the experiment would render that microorganism resistant to the primary drug available to and/or indicated for certain populations, for example children or pregnant women.
At the request of an Institutional Biosafety Committee, NIH OSP will make a determination regarding whether a specific experiment involving the deliberate transfer of a drug resistance trait falls under Section III-A-1-a and therefore requires RAC review and NIH Director approval. An Institutional Biosafety Committee may also consult with NIH OSP regarding experiments that do not meet the requirements of Section III-A-1-a but nonetheless raise important public health issues. NIH OSP will consult, as needed, with one or more experts, which may include the RAC.
Section III-A is proposed to be amended as follows:
Experiments considered as
Section III-A-1-a. The deliberate transfer of a drug resistance trait to microorganisms that are not known to acquire the trait naturally (see Section V-B,
Consideration should be given as to whether the drug resistance trait to be used in the experiment would render that microorganism resistant to the primary drug available to and/or indicated for certain populations, for example children or pregnant women.
At the request of an Institutional Biosafety Committee, NIH OSP will
Section III-C currently states:
Section III-C. Experiments that Require Institutional Biosafety Committee and Institutional Review Board Approvals and RAC Review (if applicable) Before Research Participant Enrollment
Section III-C-1. Experiments Involving the Deliberate Transfer of Recombinant or Synthetic Nucleic Acid Molecules, or DNA or RNA Derived from Recombinant or Synthetic Nucleic Acid Molecules, into One or More Human Research Participants
Human gene transfer is the deliberate transfer into human research participants of either:
1. Recombinant nucleic acid molecules, or DNA or RNA derived from recombinant nucleic acid molecules, or
2. Synthetic nucleic acid molecules, or DNA or RNA derived from synthetic nucleic acid molecules that meet any one of the following criteria:
a. Contain more than 100 nucleotides; or
b. Possess biological properties that enable integration into the genome (
c. Have the potential to replicate in a cell; or
d. Can be translated or transcribed.
No research participant shall be enrolled (see definition of enrollment in Section I-E-7) until the NIH protocol registration process has been completed (see Appendix M-I-B,
In its evaluation of human gene transfer protocols, NIH will make a determination, following a request from one or more oversight bodies involved in the review at an initial site(s), whether a proposed human gene transfer experiment meets the requirements for selecting protocols for public RAC review and discussion (See Appendix M-I-B). The process of public RAC review and discussion is intended to foster the safe and ethical conduct of human gene transfer experiments. Public review and discussion of a human gene transfer experiment (and access to relevant information) also serves to inform the public about the technical aspects of the proposal, the meaning and significance of the research, and any significant safety, social, and ethical implications of the research.
Public RAC review and discussion of a human gene transfer experiment will be initiated in two exceptional circumstances: (1) Following a request for public RAC review from one or more oversight bodies involved in the review at an initial site(s), the NIH concurs that (a) the individual protocol would significantly benefit from RAC review and (b) that the submission meets one or more of the following NIH RAC review criteria: (i) The protocol uses a new vector, genetic material, or delivery methodology that represents a first-in-human experience, thus presenting an unknown risk; (ii) the protocol relies on preclinical safety data that were obtained using a new preclinical model system of unknown and unconfirmed value; or (iii) the proposed vector, gene construct, or method of delivery is associated with possible toxicities that are not widely known and that may render it difficult for oversight and federal regulatory bodies to evaluate the protocol rigorously. However, if one or more oversight bodies involved in the review at an initial site(s) requests public RAC review, but NIH does not concur that (a) the individual protocol would significantly benefit from RAC review and (b) that the submission meets one or more of the RAC review criteria (listed in i, ii, or iii), then the NIH OSP will inform, within 10 working days, the requesting and other oversight bodies involved in the review at an initial site(s) that public RAC review is not warranted. (2) The NIH Director, in consultation (if needed) with appropriate regulatory authorities, determines that the submission: (a) Meets one or more of the NIH RAC review criteria (listed in i, ii, or iii) and that public RAC review and discussion would provide a clear and obvious benefit to the scientific community or the public; or (b) raises significant scientific, societal, or ethical concerns.
For a clinical trial site that is added after the completion of the NIH protocol registration process, no research participant shall be enrolled (see definition of enrollment in Section I-E-7) at the clinical trial site until IBC approval and IRB approval from that site have been obtained. Within 30 days of enrollment (see definition of enrollment in Section I-E-7) at a clinical trial site, the following documentation shall be submitted to NIH OSP: (1) Institutional Biosafety Committee approval (from the clinical trial site); (2) Institutional Review Board approval; (3) Institutional Review Board-approved informed consent document(s); and (4) NIH grant number(s) if applicable.
In order to maintain public access to information regarding human gene transfer (including protocols that are not publicly reviewed by the RAC), the NIH OSP will maintain the documentation described in Appendices M-I through M-II. The information provided in response to Appendix M should not contain any confidential commercial or financial information or trade secrets, enabling all aspects of RAC review to be open to the public.
For specific directives concerning the use of retroviral vectors for gene delivery, consult Appendix B-V-1,
Section III-C is proposed to be amended as follows:
Human gene transfer is the deliberate transfer into human research participants of either:
1. Recombinant nucleic acid molecules, or DNA or RNA derived from recombinant nucleic acid molecules, or
2. Synthetic nucleic acid molecules, or DNA or RNA derived from synthetic nucleic acid molecules that meet any one of the following criteria:
a. Contain more than 100 nucleotides; or
b. Possess biological properties that enable integration into the genome (
c. Have the potential to replicate in a cell; or
d. Can be translated or transcribed.
Research cannot be initiated until Institutional Biosafety Committee and all other applicable institutional and regulatory authorization(s) and approvals have been obtained.
An individual patient expanded access IND is not research subject to the
Section III-D-7-b currently states:
Section III-D-7-b. Highly Pathogenic Avian Influenza H5N1 strains within the Goose/Guangdong/96-like H5 lineage (HPAI H5N1). Experiments involving influenza viruses containing a majority of genes and/or segments from a HPAI H5N1 influenza virus shall be conducted at BL3 enhanced containment, (see Appendix G-II-C-5, Biosafety Level 3 Enhanced for Research Involving Risk Group 3 Influenza Viruses). Experiments involving influenza viruses containing a minority of genes and/or segments from a HPAI H5N1 influenza virus shall be conducted at BL3 enhanced unless a risk assessment performed by the IBC determines that they can be conducted safely at biosafety level 2 and after they have been excluded pursuant to 9 CFR 121.3(e). NIH OSP is available to IBCs to provide consultation with the RAC and influenza virus experts when risk assessments are being made to determine the appropriate biocontainment for experiments with influenza viruses containing a minority of gene/segments from HPAI H5N1. Such experiments may be performed at BL3 enhanced containment or containment may be lowered to biosafety level 2, the level of containment for most research with other influenza viruses. (USDA/APHIS regulations and decisions on lowering containment also apply). In deciding to lower containment, the IBC should consider whether, in at least two animal models (
Section III-D-7-b is proposed to be amended as follows:
Section III-D-7-b. Highly Pathogenic Avian Influenza H5N1 strains within the Goose/Guangdong/96-like H5 lineage (HPAI H5N1). Experiments involving influenza viruses containing a majority of genes and/or segments from a HPAI H5N1 influenza virus shall be conducted at BL3 enhanced containment, (see Appendix G-II-C-5, Biosafety Level 3 Enhanced for Research Involving Risk Group 3 Influenza Viruses). Experiments involving influenza viruses containing a minority of genes and/or segments from a HPAI H5N1 influenza virus shall be conducted at BL3 enhanced unless a risk assessment performed by the IBC determines that they can be conducted safely at biosafety level 2 and after they have been excluded pursuant to 9 CFR 121.3(e). NIH OSP is available to IBCs to provide consultation with influenza virus experts when risk assessments are being made to determine the appropriate biocontainment for experiments with influenza viruses containing a minority of gene/segments from HPAI H5N1. Such experiments may be performed at BL3 enhanced containment or containment may be lowered to biosafety level 2, the level of containment for most research with other influenza viruses. (USDA/APHIS regulations and decisions on lowering containment also apply). In deciding to lower containment, the IBC should consider whether, in at least two animal models (
Section III-D-7-d currently states:
Section III-D-7-d. Antiviral Susceptibility and Containment. The availability of antiviral drugs as preventive and therapeutic measures is an important safeguard for experiments with 1918 H1N1, HPAI H5N1, and human H2N2 (1957-1968). If an influenza virus containing genes from one of these viruses is resistant to both classes of current antiviral agents, adamantanes and neuraminidase inhibitors, higher containment may be required based on the risk assessment considering transmissibility to humans, virulence, pandemic potential, alternative antiviral agents if available, etc.
Experiments with 1918 H1N1, human H2N2 (1957-1968) or HPAI H5N1 that are designed to create resistance to neuraminidase inhibitors or other effective antiviral agents (including investigational antiviral agents being developed for influenza) would be subject to Section III-A-1 (
Section III-D-7-d is proposed to be amended as follows:
Section III-D-7-d. Antiviral Susceptibility and Containment. The availability of antiviral drugs as preventive and therapeutic measures is an important safeguard for experiments with 1918 H1N1, HPAI H5N1, and human H2N2 (1957-1968). If an influenza virus containing genes from one of these viruses is resistant to both classes of current antiviral agents, adamantanes and neuraminidase inhibitors, higher containment may be required based on the risk assessment considering transmissibility to humans, virulence, pandemic potential, alternative antiviral agents if available, etc.
Experiments with 1918 H1N1, human H2N2 (1957-1968) or HPAI H5N1 that are designed to create resistance to neuraminidase inhibitors or other effective antiviral agents (including investigational antiviral agents being developed for influenza) would be subject to Section III-A-1 (
Section III-F-6 currently states:
Section III-F-6. Those that consist entirely of DNA segments from different species that exchange DNA by known physiological processes, though one or more of the segments may be a synthetic equivalent. A list of such exchangers will be prepared and periodically revised by the NIH Director with advice of the RAC after appropriate notice and opportunity for public comment (see Section IV-C-1-b-(1)-(c),
Section III-F-6 is proposed to be amended as follows:
Section III-F-6. Those that consist entirely of DNA segments from different species that exchange DNA by known physiological processes, though one or more of the segments may be a synthetic equivalent. A list of such exchangers will be prepared and periodically revised by the NIH Director after appropriate notice and opportunity for public comment (see Section IV-C-1-b-(1)-(c),
Section III-F-8 currently states:
Section III-F-8. Those that do not present a significant risk to health or the
Section III-F-8 is proposed to be amended as follows:
Section III-F-8. Those that do not present a significant risk to health or the environment (see Section IV-C-1-b-(1)-(c),
Section IV-B-1-f currently states:
Section IV-B-1-f. Ensure that when the institution participates in or sponsors recombinant or synthetic nucleic acid molecule research involving human subjects: (i) The Institutional Biosafety Committee has adequate expertise and training (using
Section IV-B-1-f is proposed to be amended as follows:
Section IV-B-1-f. Ensure that when the institution participates in or sponsors recombinant or synthetic nucleic acid molecule research involving human subjects: (i) The Institutional Biosafety Committee has adequate expertise and training (using
None of the other sub-sections under Section IV-B-1. General Information are proposed to be amended.
Section IV-B-2-a-(1) currently states:
Section IV-B-2-a-(1). The Institutional Biosafety Committee must be comprised of no fewer than five members so selected that they collectively have experience and expertise in recombinant or synthetic nucleic acid molecule technology and the capability to assess the safety of recombinant or synthetic nucleic acid molecule research and to identify any potential risk to public health or the environment. At least two members shall not be affiliated with the institution (apart from their membership on the Institutional Biosafety Committee) and who represent the interest of the surrounding community with respect to health and protection of the environment (
Section IV-B-2-a-(1) is proposed to be amended as follows:
Section IV-B-2-a-(1). The Institutional Biosafety Committee must be comprised of no fewer than five members so selected that they collectively have experience and expertise in recombinant or synthetic nucleic acid molecule technology and the capability to assess the safety of recombinant or synthetic nucleic acid molecule research and to identify any potential risk to public health or the environment. At least two members shall not be affiliated with the institution (apart from their membership on the Institutional Biosafety Committee) and who represent the interest of the surrounding community with respect to health and protection of the environment (
Section IV-B-2-b-(1) currently states:
Section IV-B-2-b-(1). Reviewing recombinant or synthetic nucleic acid molecule research conducted at or sponsored by the institution for compliance with the
Section IV-B-2-b-(1) is proposed to be amended as follows:
Section IV-B-2-b-(1). Reviewing recombinant or synthetic nucleic acid molecule research conducted at or sponsored by the institution for compliance with the
Section IV-B-2-b-(8) currently states:
Section IV-B-2-b-(8). The Institutional Biosafety Committee may not authorize initiation of experiments which are not explicitly covered by the
Section IV-B-2-b-(8) is proposed to be amended as follows:
Section IV-B-2-b-(8). The Institutional Biosafety Committee may not authorize initiation of experiments which are not explicitly covered by the
None of the other sub-sections under Section IV-B-2. Institutional Biosafety Committee (IBC) are proposed to be amended.
Section IV-B-6 currently states:
When the institution participates in or sponsors recombinant or synthetic nucleic acid molecule research involving human subjects, the institution must ensure that: (i) The Institutional Biosafety Committee has adequate expertise and training (using
Section IV-B-6 is proposed to be amended as follows:
When the institution participates in or sponsors recombinant or synthetic nucleic acid molecule research involving human subjects, the institution must ensure that the Institutional Biosafety Committee has adequate expertise and training (using
Section IV-B-7 currently states:
On behalf of the institution, the Principal Investigator is responsible for full compliance with the
Section IV-B-7 is proposed to be amended as follows:
On behalf of the institution, the Principal Investigator is responsible for full compliance with the
Section IV-B-7-b-(6) is proposed to be deleted in its entirety
Section IV-B-7-e-(5) is proposed to be deleted in its entirety
None of the other sub-sections under Section IV-B-7. Principal Investigator are proposed to be amended.
Section IV-C currently states:
The NIH Director is responsible for: (i) Establishing the
The NIH Director is responsible for:
Section IV-C-1-a-(1). Promulgating requirements as necessary to implement the
Section IV-C-1-a-(2). Establishing and maintaining RAC to carry out the responsibilities set forth in Section IV-C-2,
Section IV-C-1-a-(3). Establishing and maintaining NIH OSP to carry out the responsibilities defined in Section IV-C-3,
Section IV-C-1-a-(4). Conducting and supporting training programs in laboratory safety for Institutional Biosafety Committee members, Biological Safety Officers and other institutional experts (if applicable), Principal Investigators, and laboratory staff.
Section IV-C-1-a-(5). Establishing and convening Gene Therapy Policy Conferences as described in Appendix L,
In carrying out the responsibilities set forth in this section, the NIH Director, or a designee shall weigh each proposed action through appropriate analysis and consultation to determine whether it complies with the
To execute
Section IV-C-1-b-(1)-(a). Changing containment levels for types of experiments that are specified in the
Section IV-C-1-b-(1)-(b). Assigning containment levels for types of experiments that are not explicitly considered in the
Section IV-C-1-b-(1)-(c). Promulgating and amending a list of classes of recombinant or synthetic nucleic acid molecules to be exempt from the
Section IV-C-1-b-(1)-(d). Permitting experiments specified by Section III-A,
Section IV-C-1-b-(1)-(e). Certifying new host-vector systems with the exception of minor modifications of already certified systems (the standards and procedures for certification are described in Appendix I-II,
Section IV-C-1-b-(1)-(f). Adopting other changes in the
NIH OSP shall carry out certain functions as delegated to it by the NIH Director (see Section IV-C-3,
Section IV-C-1-b-(2)-(a). Changing containment levels for experiments that are specified in Section III,
Section IV-C-1-b-(2)-(b). Assigning containment levels for experiments not explicitly considered in the
Section IV-C-1-b-(2)-(c). Revising the
Section IV-C-1-b-(2)-(d). Interpreting the
Section IV-C-1-b-(2)-(e). Setting containment under Sections III-D-1-d,
Section IV-C-1-b-(2)-(f). Approving minor modifications of already certified host-vector systems (the standards and procedures for such modifications are described in Appendix I-II,
Section IV-C-1-b-(2)-(g). Decertifying already certified host-vector systems;
Section IV-C-1-b-(2)-(h). Adding new entries to the list of molecules toxic for vertebrates (see Appendix F,
Section IV-C-1-b-(2)-(i). Determining appropriate containment conditions for experiments according to case precedents developed under Section IV-C-1-b-(2)-(c).
Section IV-C is proposed to be amended as follows:
The NIH Director is responsible for: (i) Establishing the
The NIH Director is responsible for:
Section IV-C-1-a-(1). Promulgating requirements as necessary to implement the
Section IV-C-1-a-(2). Establishing and maintaining NIH OSP to carry out the responsibilities defined in Section IV-C-3,
Section IV-C-1-a-(3). Conducting and supporting training programs in laboratory safety for Institutional Biosafety Committee members, Biological Safety Officers and other institutional experts (if applicable), Principal Investigators, and laboratory staff.
In carrying out the responsibilities set forth in this section, the NIH Director or a designee shall weigh each proposed action through appropriate analysis and consultation to determine whether it complies with the
To execute
Section IV-C-1-b-(1)-(a). Changing containment levels for types of experiments that are specified in the
Section IV-C-1-b-(1)-(b). Assigning containment levels for types of experiments that are not explicitly considered in the
Section IV-C-1-b-(1)-(c). Promulgating and amending a list of classes of recombinant or synthetic nucleic acid molecules to be exempt from the
Section IV-C-1-b-(1)-(d). Permitting experiments specified by Section III-A,
Section IV-C-1-b-(1)-(e). Certifying new host-vector systems with the exception of minor modifications (
Section IV-C-1-b-(1)-(f). Adopting other changes in the
NIH OSP shall carry out certain functions as delegated to it by the NIH Director (see Section IV-C-3,
Section IV-C-1-b-(2)-(a). Changing containment levels for experiments that are specified in Section III,
Section IV-C-1-b-(2)-(b). Assigning containment levels for experiments not explicitly considered in the
Section IV-C-1-b-(2)-(c). Revising the
Section IV-C-1-b-(2)-(d). Interpreting the
Section IV-C-1-b-(2)-(e). Setting containment under Sections III-D-1-d,
Section IV-C-1-b-(2)-(f). Approving minor modifications of already certified host-vector systems (the standards and procedures for such modifications are described in Appendix I-II,
Section IV-C-1-b-(2)-(g). Decertifying already certified host-vector systems;
Section IV-C-1-b-(2)-(h). Adding new entries to the list of molecules toxic for vertebrates (see Appendix F,
Section IV-C-1-b-(2)-(i). Determining appropriate containment conditions for experiments according to case precedents developed under Section IV-C-1-b-(2)-(c).
Section IV-C-2. Recombinant DNA Advisory Committee (RAC) is proposed to be deleted in its entirety.
Section IV-C-3. Office of Science Policy (OSP) is proposed to be amended as follows:
Sections IV-C-3-a through IV-C-3-f are proposed to be deleted in their entirety. Section IV-C-3-h is proposed to be deleted in its entirety. Section IV-C-3-g will be renumbered to Section IV-C-3-a. Section IV-C-i will be renumbered to Section IV-C-3-b; Section IV-C-3-i-(1), Section IV-C-3-i-(2) and Section IV-C-3-i-(3) are proposed to be deleted in their entirety. Section IV-C-3-j will be renumbered to Section IV-C-3-c.
Section IV-C-3 is proposed to be amended as follows:
OSP shall serve as a focal point for information on recombinant or synthetic nucleic acid molecule activities and provide advice to all within and outside NIH including institutions, Biological Safety Officers, Principal Investigators, Federal agencies, state and local governments, and institutions in the private sector. OSP shall carry out such other functions as may be delegated to it by the NIH Director. OSP's responsibilities include (but are not limited to) the following:
Section IV-C-3-a. Reviewing and approving experiments involving the cloning of genes encoding for toxin molecules that are lethal for vertebrates at an LD
Section IV-C-3-b. Publishing in the
Section IV-C-3-c. Reviewing and approving the membership of an institution's Institutional Biosafety Committee, and where it finds the Institutional Biosafety Committee meets the requirements set forth in Section IV-B-2,
Section IV-D-5 currently states:
In general, the Freedom of Information Act requires federal agencies to make their records available to the public upon request. However, this requirement does not apply to, among other things, “trade secrets and commercial or financial information that is obtained from a person and that is privileged or confidential.” Under 18 U.S.C. 1905, it is a criminal offense for an officer or employee of the U.S. or any federal department or agency to publish, divulge, disclose, or make known “in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, (or) processes . . . of any person, firm, partnership, corporation, or association.” This provision applies to all employees of the federal government, including special Government
Section IV-D-5 is proposed to be amended as follows:
In general, the Freedom of Information Act requires federal agencies to make their records available to the public upon request. However, this requirement does not apply to, among other things, “trade secrets and commercial or financial information that is obtained from a person and that is privileged or confidential.” Under 18 U.S.C. 1905, it is a criminal offense for an officer or employee of the United States or any federal department or agency to publish, divulge, disclose, or make known “in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, (or) processes . . . of any person, firm, partnership, corporation, or association.” This provision applies to all employees of the federal government, including special Government employees.
None of the other sub-sections under Section IV are proposed to be amended.
Section V currently states:
Section V-A. The NIH Director, with advice of the RAC, may revise the classification for the purposes of the
Section V-B. Section III,
Section V is proposed to be amended as follows:
Section V-A. The NIH Director may revise the classification for the purposes of the
Section V-B. Section III,
Appendix A currently states:
Certain specified recombinant or synthetic nucleic acid molecules that consist entirely of DNA segments from different species that exchange DNA by known physiological processes, though one or more of the segments may be a synthetic equivalent are exempt from these
Appendix A is proposed to be amended as follows:
Certain specified recombinant or synthetic nucleic acid molecules that consist entirely of DNA segments from different species that exchange DNA by known physiological processes, though one or more of the segments may be a synthetic equivalent are exempt from these
Appendix C-IX-A currently states:
The NIH Director, with advice of the RAC, may revise the classification for the purposes of these
Appendix C-IX-A is proposed to be amended as follows:
The NIH Director may revise the classification for the purposes of these
None of the other sub-sections under Appendix C-IX. Footnotes and References of Appendix C are proposed to be amended.
Appendix D currently states in part:
As noted in the subsections of Section IV-C-1-b-(1), the Director, NIH, may take certain actions with regard to the
Appendix D is proposed to be amended as follows:
As noted in the subsections of Section IV-C-1-b-(1), the Director, NIH, may take certain actions with regard to the
Appendix I-II currently states:
Host-Vector 1 systems (other than
The following types of data shall be submitted, modified as appropriate for the particular system under consideration: (i) A description of the organism and vector; the strain's natural habitat and growth requirements; its physiological properties, particularly those related to its reproduction, survival, and the mechanisms by which it exchanges genetic information; the range of organisms with which this organism normally exchanges genetic information and the type of information is exchanged; and any relevant information about its pathogenicity or toxicity; (ii) a description of the history of the particular strains and vectors to be used, including data on any mutations which render this organism less able to survive or transmit genetic information; and (iii) a general description of the range of experiments contemplated with emphasis on the need for developing such an Host-Vector 1 system.
Investigators planning to request Host-Vector 2 systems certification may obtain instructions from NIH OSP concerning data to be submitted (see Appendices I-III-N and O,
Appendix I-II is proposed to be amended as follows:
Host-Vector 1 systems (other than
The following types of data shall be submitted, modified as appropriate for the particular system under consideration: (i) A description of the organism and vector; the strain's natural habitat and growth requirements; its physiological properties, particularly those related to its reproduction, survival, and the mechanisms by which it exchanges genetic information; the range of organisms with which this organism normally exchanges genetic information and the type of information is exchanged; and any relevant information about its pathogenicity or toxicity; (ii) a description of the history of the particular strains and vectors to be used, including data on any mutations which render this organism less able to survive or transmit genetic information; and (iii) a general description of the range of experiments contemplated with emphasis on the need for developing such an Host-Vector 1 system.
Investigators planning to request Host-Vector 2 systems certification may obtain instructions from NIH OSP concerning data to be submitted (see Appendices I-III-N and O,
Appendix L, GENE THERAPY POLICY CONFERENCES (GTPCS), is proposed to be deleted in its entirety.
Appendix M, Points to Consider in the Design and Submission of Protocols for the Transfer of Recombinant or Synthetic Nucleic Acid Molecules into One or More Human Research Participants (Points to Consider), is proposed to be deleted in its entirety.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes of Health, HHS.
Notice.
The National Toxicology Program (NTP) announces a meeting to peer review the Draft Report on Carcinogens Monograph on Night Shift Work and Light at Night. NTP has conducted a literature-based assessment to determine whether night shift work (
Kate Helmick, ICF, 2635 Meridian Parkway, Suite 200, Durham, NC, USA 27713. Phone: (919) 293-1673, Fax: (919) 293-1645, Email:
NTP has conducted a literature-based assessment and applied the
The monograph assesses the evidence from cancer studies in humans and experimental animals and mechanistic data and provides NTP's preliminary recommendation regarding whether night shift work and or light at night should be listed in the Report on Carcinogens, and if so, how the two exposure scenarios should be defined. The listing categories include
The deadline for submission of written comments is September 21, 2018. Written public comments should be submitted through the meeting website. Persons submitting written comments should include name, affiliation, mailing address, phone, email, and sponsoring organization (if any). Written comments received in response to this notice will be posted on the NTP website and the submitter will be identified by name, affiliation, and sponsoring organization (if any). Comments that address scientific/technical issues will be forwarded to the peer-review panel and NTP staff prior to the meeting.
The agenda allows for one oral public comment period (up to 12 commenters, up to 5 min per speaker). Registration to provide oral comments is September 21, 2018, at
If possible, oral public commenters should send a copy of their slides and/or statement or talking points to Kate Helmick by email:
Following the meeting, a report of the peer review will be prepared and made available on the NTP website.
Coast Guard, DHS.
Notice and request for comments.
The Coast Guard announces that it is harmonizing personal flotation device (PFD) standards between the United States and Canada by accepting a new standard for approval of PFDs. Specific elements of the new standard are contained in a policy letter and deregulatory savings analysis, on which we are requesting public comment, and are intended to promote the Coast Guard's maritime safety and stewardship missions.
Comments must be submitted to the online docket via
You may submit comments identified by docket number USCG-2018-0565 using the Federal eRulemaking Portal at
For information about this document call or email Jacqueline Yurkovich, Coast Guard; telephone 202-372-1389, email
We encourage you to submit comments on the lifejacket approval harmonization policy letter entitled, ADOPTION OF ANSI/CAN/UL 12402-5 AND -9, and the deregulatory savings analysis entitled, “Approval for Personal Floatation Devices/Adoption of ANSI/CAN/UL 12402-5 and 9,” which are available in the docket. The policy letter is also available on the USCG website,
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
The United States Coast Guard (USCG) has statutory authority under Title 46, U.S. Code, Sections 3306(a) and (b), 4102(a) and (b), 4302(a), and 4502(a) and (c)(2)(B) to prescribe regulations for the design, construction, performance, testing, carriage, use, and inspection of lifesaving equipment on commercial and recreational vessels. Since 2008, the USCG has been working closely with Transport Canada (TC) and a diverse group of U.S. and Canadian stakeholders to harmonize PFD standards with the current international standard (ISO 12402) to create a single North American standard for PFD approval. A single North American standard will allow manufacturers the opportunity to produce more innovative equipment that meets the approval requirements of both the United States and Canada.
In 2015, Underwriters Laboratories Inc. published bi-national standards
In April 2017, the USCG and TC signed a Memorandum of Understanding (MOU) outlining intended cooperation for approval of personal lifesaving appliances that comply with mutually acceptable standards, are tested by mutually accepted conformity assessment bodies or independent test laboratories, and are covered by a mutually acceptable follow-up program. In January 2018, TC published a policy stating it will accept UL 12402-5 as a substitute for its PFD standards in support of the MOU. The policy letter on which we are requesting comment builds on the efforts described above by establishing that the USCG will accept Level 70 PFDs complying
The adoption of this policy marks the culmination of over a decade of dedicated work across the lifejacket and recreational boating safety community and supports National Boating Safety Advisory Council Resolution 2009-83-01, which is available in the docket.
This policy letter allows manufacturers to have their products certified to the new bi-national standard, in lieu of the legacy standards codified in title 46 CFR. This allowance is intended to reduce the burden of maintaining approvals in U.S. and Canadian markets and to make additional types of PFDs available to U.S. and Canadian boaters.
This policy does not impact existing PFD approvals, and does not require any action on the part of boaters or mariners who have approved PFDs onboard. An existing approved PFD will continue to meet the same carriage requirements, as long as it remains in good and serviceable condition.
The Coast Guard has prepared a Deregulatory Savings Analysis for the policy letter that identifies and examines the potential costs and savings associated with implementing the new standards plan and is available in the docket. We request your comments on any concerns that you may have related to the policy changes.
This notice is issued under authority of 5 U.S.C. 552(a).
Federal Emergency Management Agency, DHS.
Committee Management; Notice of Federal Advisory Committee Meeting.
The Federal Emergency Management Agency (FEMA) Technical Mapping Advisory Council (TMAC) will meet in person on Tuesday, September 25, 2018, and Wednesday, September 26, 2018, in Reston, Virginia. The meeting will be open to the public.
The TMAC will meet on Tuesday, September 25, 2018, from 8:00 a.m.-5:30 p.m. Eastern Daylight Time (EDT), and Wednesday, September 26, 2018, from 8:00 a.m.-5:30 p.m. EDT. Please note that the meeting will close early if the TMAC has completed its business.
The meeting will be held at the United States Geological Survey (USGS) Headquarters at 12201 Sunrise Valley Drive, Reston, VA 20192. Members of the public who wish to attend the meeting must register in advance by sending an email to
For information on facilities or services for individuals with disabilities or to request special assistance at the meeting, contact the person listed below in the
To facilitate public participation, members of the public are invited to provide written comments on the issues to be considered by the TMAC, as listed in the
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A public comment period will be held on Tuesday, September 25, 2018, from 4:00 p.m. to 4:30 p.m. EDT and again on Wednesday, September 26, 2018, from 11:30 a.m. to 12:00 p.m. EDT. Speakers are requested to limit their comments to no more than three minutes. The public comment period will not exceed 30 minutes. Please note that the public comment period may end before the time indicated, following the last call for comments. Contact the individual listed below to register as a speaker by close of business on Friday, September 21, 2018.
Michael Nakagaki, Designated Federal Officer for the TMAC, FEMA, 400 C Street SW, Washington, DC 20024, telephone (202) 212-2148, and email
Notice of this meeting is given under the
In accordance with the
Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comment from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB Control Number and should be sent to: Colette Pollard, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 7th Street SW, Room 4176, Washington, DC 20410-5000; telephone 202-402-3400 (this is not a toll-free number) or email at
John Olmstead, Housing Program Specialist, Office of Housing Counseling, Office of Policy and Grant Administration, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email
Copies of available documents submitted to OMB may be obtained from Ms. Pollard.
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) The accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Ways to enhance the quality, utility, and clarity of the information to be collected; and (4) Ways to minimize the burden of the
HUD encourages interested parties to submit comment in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35.
Office of the Chief Information Officer, HUD.
Notice.
HUD submitted the proposed information collection requirement described below to the Office of Management and Budget (OMB) for review, in accordance with the Paperwork Reduction Act. The purpose of this notice is to allow for 30 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB Control Number and should be sent to: HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503; fax: 202-395-5806, Email:
Colette Pollard, Reports Management Officer, QMAC, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
The
The ICDBG program regulations are at 24 CFR part 1003. The ICDBG program requires eligible applicants to submit information to enable HUD to select the best projects for funding during annual competitions. Additionally, the information submitted is essential for HUD in monitoring grants to ensure that grantees are complying with applicable statutes and regulations and implementing activities as approved.
ICDBG applicants must submit a complete application package which includes an Application for Federal Assistance (SF-424), Applicant/Recipient Disclosure/Update Report (HUD-2880), Cost Summary (HUD-4123), and Implementation Schedule (HUD-4125). If the applicant has a waiver of the electronic submission requirement and is submitting a paper application, an Acknowledgement of Application Receipt (HUD-2993) must also be submitted. If the applicant is a tribal organization, a resolution from the tribe stating that the tribal organization is submitting an application on behalf of the tribe must also be included in the application package.
ICDBG recipients are required to submit a quarterly Federal Financial Report (SF-425) that describes the use of grant funds drawn from the recipient's line of credit. The reports are used to monitor cash transfers to the recipients and obtain expenditure data from the recipients. (2 CFR 200.327)
The regulations at 24 CFR part 200 require that grantees and sub-grantees take all necessary affirmative steps to assure that minority firms, women's business enterprises, and labor surplus area firms are used when possible. Consistent with these regulations, 24 CFR 1003.506(b) requires that ICDBG grantees report on these activities on an annual basis, with Contract and Subcontract Activity Report being due to HUD on October 10 of each year (HUD-2516).
The regulations at 24 CFR 1003.506 instruct recipients to submit to HUD an Annual Status and Evaluation Report (ASER) that describes the progress made in completing approved activities with a listing of work to be completed; a breakdown of funds expended; and when the project is completed, a program evaluation expressing the effectiveness of the project in meeting community development needs. The ASER is due by November 15 each year and at grant closeout.
The information collected will allow HUD to accurately audit the program.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond: Including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comment in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35.
Office of the Chief Information Officer, HUD.
Notice.
HUD submitted the proposed information collection requirement described below to the Office of Management and Budget (OMB) for review, in accordance with the Paperwork Reduction Act. The purpose of this notice is to allow for 30 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB Control Number and should be sent to: HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503; fax: 202-395-5806, Email:
Colette Pollard, Reports Management Officer, QMAC, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
The
In accordance with 24 CFR 203.439(c), lenders must report monthly to HUD and the DHHL on delinquent borrowers and provide documentation to HUD to support that the loss mitigation requirements of 24 CFR 203.602 have been met. To assist the DHHL in identifying delinquent loans, lenders report monthly. A delinquent mortgage that is reported timely would allow DHHL to intervene and prevent foreclosure.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond: Including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comment in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35.
Fish and Wildlife Service, Interior.
Notice of availability and request for public comment.
We, the U.S. Fish and Wildlife Service, announce the availability of the draft recovery plan for the endangered Neosho mucket. The draft recovery plan includes specific recovery objectives and criteria that must be met in order for us to delist this species under the Endangered Species Act. We request review and comment on this draft recovery plan from local, State, and Federal agencies; Tribes; and the public.
In order to be considered, comments on the draft recovery plan must be received on or before October 16, 2018.
For additional information about submitting comments, see
Melvin Tobin, by telephone at 501-513-4473, or via email at
We, the U.S. Fish and Wildlife Service (Service), announce the availability of the draft recovery plan for the endangered Neosho mucket (
The Neosho mucket is a freshwater mussel. The shell is up to 5 inches (18 cm) long. The species is sexually dimorphic, as is typical of
Neosho mucket glochidia (larvae) are obligate parasites on smallmouth bass (
The ESA specifies five factors for listing species as endangered or threatened. The Neosho mucket is threatened primarily by the destruction, modification, or curtailment of its habitat or range (Listing Factor A of the ESA). Specific threats include impoundment, sedimentation, chemical contaminants, mining, the inadequacy of existing regulatory mechanisms, population fragmentation and isolation, invasive nonindigenous species, and water temperature. Climate change (Listing Factor E) is also likely to have adverse effects on the species due to alteration of hydrologic cycles of rivers that support Neosho mucket, but the extent or magnitude of this threat has not been quantified at this time. We determined that other existing
As a result of these threats, the Neosho mucket was listed as endangered on the Federal List of Endangered and Threatened Wildlife in title 50 of the Code of Federal Regulations (50 CFR 17.11) on September 17, 2013 (78 FR 57076). A total of 483 river miles (777 river kilometers) in seven rivers and one creek (Elk, Fall, Illinois, Neosho, Spring, North Fork Spring, and Verdigris Rivers and Shoal Creek) has been designated as critical habitat for the Neosho mucket (80 FR 24692, April 30, 2015). Critical habitat as set forth in 50 CFR 17.95(f) is located in Benton and Washington Counties, Arkansas; Allen, Cherokee, Coffey, Elk, Greenwood, Labette, Montgomery, Neosho, Wilson, and Woodson Counties, Kansas; Jasper, Lawrence, McDonald, and Newton Counties, Missouri; and Adair, Cherokee, and Delaware Counties, Oklahoma.
Section 4(f) of the ESA requires the development of recovery plans for listed species, unless such a plan would not promote the conservation of a particular species. Recovery plans describe actions considered necessary for conservation of the species, establish recovery criteria, and estimate time and cost for implementing recovery measures. Section 4(f) of the ESA also requires us to provide public notice and an opportunity for public review and comment during recovery plan development. We will consider all information presented during a public comment period prior to approval of each new or revised recovery plan. We and other Federal agencies will take these comments into account in the course of implementing approved recovery plans.
The goal of this recovery plan is to ensure the long-term viability of the Neosho mucket in the wild to the point that it can be removed (“delisted”) from the Federal List of Endangered and Threatened Wildlife. To achieve this goal, it will be necessary to establish naturally self-sustaining populations with healthy long-term demographic traits and trends. We are defining the following reasonable delisting criteria based on the best available information on this species. These criteria will be reevaluated as new information becomes available:
The Neosho mucket will be considered for delisting when:
(1) Two of four targeted river basins (Illinois, Verdigris, Neosho, and Spring River basins) contain viable populations with positive or stable basin-wide population trend, as evidenced by a population number measured with sufficient precision to detect change of ±25 percent (Factors A, D, and E);
(2) Spatial distribution of natural or stocked aggregations distributed throughout the basin is sufficient to protect against local catastrophic or stochastic events (Factors A and E);
(3) All life stages are supported by sufficient habitat quantity and quality (see Primary Constituent Elements in the
(4) Threats and causes of decline have been reduced or eliminated (Factors A, D, and E).
A viable population is defined as a wild, naturally reproducing population that is able to persist and maintain sufficient genetic variation to evolve and respond to natural changes and stochastic events without further human intervention. Viable populations are expected to be large and genetically diverse, include at least five age classes with at least one cohort ≤7 years of age, and recruit at sufficient rates to maintain or increase population size.
We request written comments on the draft recovery plan. We will consider all comments we receive by the date specified in
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
The authority for this action is section 4(f) of the Endangered Species Act, 16 U.S.C. 1533 (f).
Bureau of Indian Affairs, Interior.
Notice.
The State of Oklahoma entered into compact amendments with the Absentee Shawnee Tribe, Cherokee Nation, Chickasaw Nation, Citizen Potawatomi Nation, Eastern Shawnee Tribe of Oklahoma, Iowa Tribe of Oklahoma, Kaw Nation, Muscogee (Creek) Nation, Seneca-Cayuga Nation, Wichita and Affiliated Tribes, and Wyandotte Nation of Oklahoma governing certain forms of class III gaming; this notice announces the approval of the State of Oklahoma Gaming Compact Non-house-Banked Table Games Supplement between the State of Oklahoma and the Absentee Shawnee Tribe, Cherokee Nation, Citizen Potawatomi Nation, Eastern Shawnee Tribe of Oklahoma, Iowa Tribe of Oklahoma, Kaw Nation, Muscogee (Creek) Nation, Seneca-Cayuga Nation, Wichita and Affiliated Tribes, and Wyandotte Nation.
The compact amendments take effect on August 17, 2018.
Ms. Paula L. Hart, Director, Office of Indian Gaming, Office of the Deputy Assistant Secretary—Policy and Economic Development, Washington, DC 20240, (202) 219-4066.
Under section 11 of the Indian Gaming Regulatory Act (IGRA) Public Law 100-497, 25 U.S.C. 2701
Bureau of Indian Affairs, Interior.
Notice.
The State of Oklahoma entered into compact amendments with the Choctaw Nation of Oklahoma and with the Fort Sill Apache Tribe of Oklahoma governing certain forms of class III gaming; this notice announces the approval of the State of Oklahoma Gaming Compact Non-house-Banked Table Games Supplement between the State of Oklahoma and the Choctaw Nation of Oklahoma and the Fort Sill Apache Tribe of Oklahoma.
The compact amendments take effect on August 17, 2018.
Ms. Paula L. Hart, Director, Office of Indian Gaming, Office of the Deputy Assistant Secretary—Policy and Economic Development, Washington, DC 20240, (202) 219-4066.
Under section 11 of the Indian Gaming Regulatory Act (IGRA) Public Law 100-497, 25 U.S.C. 2701
Bureau of Indian Affairs, Interior.
Notice.
The Bureau of Indian Affairs (BIA) owns or has an interest in irrigation projects located on or associated with various Indian reservations throughout the United States. We are required to establish irrigation assessment rates to recover the costs to administer, operate, maintain, and rehabilitate these projects. We are notifying you that we have adjusted the irrigation assessment rates at several of our irrigation projects and facilities to reflect current costs of administration, operation, maintenance, and rehabilitation.
The irrigation assessment rates are current as of January 1, 2018.
For details about a particular BIA irrigation project or facility, please use the tables in the
A Notice of Proposed Rate Adjustment was published in the
Yes. The 2019 Operation and Maintenance (O&M) rate for the Wind River Irrigation Project, Units 2, 3, and 4, was proposed in the
Yes. BIA received twelve (12) written comments related to the proposed irrigation rate adjustment for the Flathead Indian Irrigation Project and Wind River Irrigation Project.
Commenters raised concerns on the proposed rates about the following issues:
Written comments relating to the proposed rate adjustment were received by letter. BIA's summary of the issues and BIA's responses are provided below.
Regarding the timing of this
Regarding concerns with how FIIP management expends funds, each Project Manager has discretion to assess priorities and address those priorities, subject to available funding. As discussed in more detail below, BIA chose not to implement the full, recommended $7.50 increase in 2017, choosing instead to impose a $3.00 increase. As a result, the FIIP Project Manager had less funding available to address key priorities. It is anticipated that the proposed $4.50 increase will provide the FIIP Project Manager with opportunities to address additional priorities.
The BIA's Operations and Management Guidelines require only an annual meeting with the FJBC. This meeting took place on April 11, 2017. These Guidelines also allow FIIP management to meet with individual irrigation districts on an ad hoc basis; to that end, the FIIP Project Manager met with the chairmen of the three individual irrigation districts on June 15, 2017 to discuss the $4.50 rate increase. The FIIP Project Manager also met with the FJBC on September 12, 2017 and October 10, 2017, but the FJBC did not discuss the rate increase at those meetings.
In 2017, BIA proposed to increase the 2018 rate by $7.50 and explained in the
Written comments relating to the proposed rate adjustment were received by letter. The BIA's summary of the issues and BIA's responses are provided below.
BIA's irrigation program has been the subject of serval Office of Inspector General (OIG) and U.S. Government Accountability Office (GAO) audits. In the most recent OIG audit, No. 96-I-641, March 1996, the OIG concluded:
Operation and maintenance revenues were insufficient to maintain the projects, and some projects had deteriorated to the extent that their continued capability to deliver water was in doubt. This occurred because operation and maintenance rates were not based on the full cost of delivering irrigation water, including the costs of systematically rehabilitating and replacing project facilities and equipment, and because project personnel did not seek regular rate increases to cover the full cost of project operation.
A previous OIG audit performed on one of BIA's largest irrigation projects, the Wapato Irrigation Project, No. 95-I-1402, September 1995, reached the same conclusion.
To address the issues noted in these audits, BIA must systematically review and evaluate irrigation assessment rates and adjust them, when necessary, to reflect the full cost to operate and perform all appropriate maintenance on the irrigation project or facility infrastructure to ensure safe and reliable operation. If this review and adjustment is not accomplished, a rate deficiency can accumulate over time. Rate deficiencies force BIA to raise irrigation assessment rates in larger increments over shorter periods than would have been otherwise necessary.
BIA has projected this proposed rate increase for several years, and anticipated increasing the assessment rates in both 2018 and 2019. The Wind River Irrigation Project (WRIP) Operations and Maintenance (O&M) budget was prepared in accordance with BIA financial guidelines. The intent of the increases is for maintenance of a
Based on increased costs associated with administering, operating, maintaining, and rehabilitating WRIP, the need for the proposed rate increase is clear and justified for both 2018 and 2019. For those farm units where BIA determines that our irrigation facilities are not capable of delivering adequate irrigation water, an Annual Assessment Waiver can be granted to waive the O&M assessment.
Of the six WRIP rates, BIA does not set the rates for LeClair District or Riverton Valley Irrigation District. Of the remaining four WRIP rates, BIA is raising each Unit's 2017 rate by $1.00 over the course of two years. Rates for three Units (Unit 6, Crow Heart Unit, and A Canal Unit) are increasing by $1.00 in 2018; these three Units' rates will not increase in 2019. The remaining rate for Units 2, 3, and 4 will be raised by $1 over the course of two years: $0.50 increase in 2018 and $.50 increase in 2019. The rate increases will replenish WRIP's reserve fund; as explained below, the reserve fund is for contingencies or emergencies.
Regarding Unit 6 specifically, RCWUA bases its annual budget on the 85% collection rate minus the BIA direct service cost. The BIA direct service cost is $3.50 per acre and based on a cost per acre of direct services BIA provides to Unit 6 (Ray Canal water users), which includes: (1) Administrative functions for two full-time Accounting Technicians; (2) general office per acre cost; (3) 7.5% of the Project Manager's per acre cost; and (4) 8% of the Equipment Operator's per acre cost. With respect to the last item, BIA's Equipment Operators operate and maintain Washakie Dam, which provides water to the Ray Canal Diversion structure. The Equipment Operators also clean trash racks and maintain the diversion structure for Ray Canal. Operation and maintenance of Washakie Dam and the Ray Canal Diversion structure is captured in BIA's direct service cost of $3.50 per acre.
Although RCWUA may be functioning within its budget to provide O&M within Unit 6, BIA must assess rates based on the entire WRIP. BIA must increase the rate to (1) reflect the full cost of operating and performing all maintenance on the irrigation project or facility infrastructure and (2) maintain a reserve fund to cover emergencies, including critical repairs to avoid potential system failures that occurred in 2017. The reserve fund is used as needed for any Unit within WRIP, including Unit 6. Although BIA receives some non-water user funding for irrigation rehabilitation, each irrigation project needs to maintain a reserve fund for emergencies and equipment purchases. The BIA National Irrigation Handbook's Emergency Reserve Fund Guidelines recommends a reserve of 40% of the annual O&M costs, which is calculated by averaging five years of costs. For WRIP, the recommended reserve amount is $310,000. In addition, irrigation projects should maintain a sinking fund to meet future expenditures for replacement of equipment and vehicles. Currently, the reserve fund and sinking fund combined total is $280,000. The WRIP rate increases will bring in just over $28,000 in 2018 and over $36,000 in the following years for replenishment of WRIP's reserve and sinking funds. Thus, BIA views the modest rate increase here to be necessary and reasonable.
This notice affects you if you own or lease land within the assessable acreage of one of our irrigation projects or if you have a carriage agreement with one of our irrigation projects.
You can contact the appropriate office(s) stated in the tables for the irrigation project that serves you, or you can use the internet site for the Government Printing Office at
Our authority to issue this notice is vested in the Secretary of the Interior (Secretary) by 5 U.S.C. 301 and the Act of August 14, 1914 (38 Stat. 583; 25 U.S.C. 385). The Secretary has in turn delegated this authority to the Assistant Secretary—Indian Affairs under Part 209, Chapter 8.1A, of the Department of the Interior's Departmental Manual.
The following tables are the regional and project/agency contacts for our irrigation facilities.
The rate table below contains the final rates for the 2018 and 2019 calendar years for all irrigation projects where we recover costs of administering, operating, maintaining, and rehabilitating them. An asterisk immediately following the rate category notes the irrigation projects where 2018 rates are different from the 2019 rates.
The Department of the Interior strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and Tribal sovereignty. We have evaluated this notice under the Department's consultation policy and under the criteria of Executive Order 13175 and have determined there to be substantial direct effects on federally recognized Tribes because the irrigation projects are located on or associated with Indian reservations. To fulfill its consultation responsibility to Tribes and Tribal organizations, BIA communicates, coordinates, and consults on a continuing basis with these entities on issues of water delivery, water availability, and costs of administration, operation, maintenance, and rehabilitation of projects that concern them. This is accomplished at the individual irrigation project by project, agency, and regional representatives, as appropriate, in accordance with local protocol and procedures. This notice is one component of our overall coordination and consultation process to provide notice to, and request comments from, these entities when we adjust irrigation assessment rates.
The rate adjustments are not a significant energy action under the definition in Executive Order 13211. A Statement of Energy Effects is not required.
These rate adjustments are not a significant regulatory action and do not need to be reviewed by the Office of Management and Budget under Executive Order 12866.
These rate adjustments are not a rule for the purposes of the Regulatory Flexibility Act because they establish “a rule of particular applicability relating to rates.” 5 U.S.C. 601(2).
These rate adjustments do not impose an unfunded mandate on state, local, or Tribal governments in the aggregate, or on the private sector, of more than $130 million per year. They do not have a significant or unique effect on state, local, or Tribal governments or the private sector. Therefore, the Department is not required to prepare a statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531
These rate adjustments do not effect a taking of private property or otherwise have “takings” implications under Executive Order 12630. The rate adjustments do not deprive the public, state, or local governments of rights or property.
Under the criteria in section 1 of Executive Order 13132, these rate adjustments do not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement because they will not affect the States, the relationship
This notice complies with the requirements of Executive Order 12988. Specifically, in issuing this notice, the Department has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct as required by section 3 of Executive Order 12988.
These rate adjustments do not affect the collections of information which have been approved by the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), under the Paperwork Reduction Act of 1995. The OMB Control Number is 1076-0141 and expires June 30, 2019.
The Department has determined that these rate adjustments do not constitute a major Federal action significantly affecting the quality of the human environment and that no detailed statement is required under the National Environmental Policy Act of 1969, 42 U.S.C. 4321-4370(d), pursuant to 43 CFR 46.210(i). In addition, the rate adjustments do not present any of the 12 extraordinary circumstances listed at 43 CFR 46.215.
In developing this notice, we did not conduct or use a study, experiment, or survey requiring peer review under the Data Quality Act (Pub. L. 106-554).
Bureau of Land Management, Interior.
Notice of availability.
In accordance with the National Environmental Policy Act of 1969, as amended, and the Federal Land Policy and Management Act of 1976, as amended, the Bureau of Land Management (BLM) Grand Staircase-Escalante National Monument (GSENM) and Kanab Field Office (KFO) have prepared Draft Resource Management Plans (RMPs) and a Draft Environmental Impact Statement (EIS) for the GSENM Grand Staircase, Kaiparowits, and Escalante Canyons Units and Federal lands excluded from the Monument by Proclamation 9682 and by this notice are announcing the opening of the public comment period.
To ensure that comments will be considered, the BLM must receive written comments on the Draft RMPs/Draft EIS within 90 days of the date the Environmental Protection Agency publishes its Notice of Availability of the Draft RMPs/Draft EIS in the
You may submit comments on the Draft RMPs/Draft EIS by either of the following methods:
Copies of the Draft RMPs/Draft EIS are available at the following locations:
Matt Betenson, Associate Monument Manager, telephone (435) 644-1200; address 669 S Hwy. 89A, Kanab, UT 84741; email
On December 4, 2017, President Donald Trump signed Presidential Proclamation 9682 modifying the boundaries of the GSENM as established by Proclamation 6920 to exclude from designation and reservation approximately 861,974 acres of land. Lands that remain part of the GSENM are included in three units, known as the Grand Staircase, Kaiparowits, and Escalante Canyons Units and are reserved for the care and management of the objects of historic and scientific interest described in Proclamation 6920, as modified by Proclamation 9682. Lands that are excluded from the Monument boundaries are now referred to as the Kanab-Escalante Planning Area (KEPA) and are managed in accordance with the BLM's multiple-use mandate.
The planning area is located in Kane and Garfield Counties, Utah, and encompasses approximately 1.86 million acres of public land. For the GSENM Grand Staircase, Kaiparowits, and Escalante Canyons Units, this planning effort, is needed to identify goals, objectives, and management actions necessary for the conservation, protection, restoration, or enhancement of the resources, objects, and values identified in Proclamation 6920, as modified by Proclamation 9682. For lands excluded from the monument, this planning effort is needed to determine to identify goals, objectives, and management actions necessary to ensure that public lands and their various resource values are utilized in the combination that will best meet the present and future needs of the American people.
The entire planning area is currently managed by the BLM and under the Grand Staircase-Escalante National Monument Management Plan (BLM 1999), as amended. This planning effort would replace the existing Monument Management Plan with four new RMPs.
Within the Draft EIS, the BLM is also considering alternatives related to livestock Grazing on 318,000 acres of land within the Glen Canyon National Recreation Area, 65,500 acres in the Kanab Field Office and 2,300 acres in the Arizona Strip Field Office. The EIS includes information regarding the environmental consequences of implementing various livestock grazing management actions on resources in these areas. At the completion of this planning process, the National Park Service, who is cooperating with the BLM on preparation of the NEPA analysis, may adopt the EIS and prepare a separate decision related to livestock grazing for lands under NPS authority.
The BLM reviewed public scoping comments to identify planning issues that directed the formulation of alternatives and framed the scope of analysis in the Draft RMPs/Draft EIS. Issues identified include management of recreation and access; paleontological and cultural resources; livestock grazing; mineral resources; and wildlife, water, vegetation, and soil resources. This planning effort also considers management of lands with wilderness characteristics and designation of Areas of Critical Environmental Concern (ACECs).
The Draft RMPs/Draft EIS evaluate four alternatives in detail. Alternative A is the No Action alternative, which is a continuation of existing decisions in the Monument Management Plan. Alternative B generally focuses on protection of resources (
Pursuant to 43 CFR 1610.7-2(b), the BLM is required to publish a notice in the
The application of the Federal coal unsuitability criteria to portions of the Southern Kaiparowits in the lands excluded from the monument is included in the Draft RMP/Draft EIS. As required by 43 CFR 3461.2-1(a)(2), the public is invited to comment on the results of the application of the criteria and the process used to derive these results.
BLM Utah is soliciting comments on the entire Draft RMPs/Draft EIS. Please note that public comments and information submitted including names, street addresses, and email addresses of persons who submit comments will be available for public review and disclosure at addresses provided in the
Before including your address, phone number, email address or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may request to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
40 CFR 1506.6, 40 CFR 1506.10 and 43 CFR 1610.2.
Bureau of Land Management, Interior.
Notice of availability.
In accordance with the National Environmental Policy Act of 1969, as amended, and the Federal Land Policy and Management Act of 1976, as amended, the Bureau of Land Management (BLM) Canyon Country District Office, in coordination with the United States Forest Service (USFS), Manti-La Sal National Forest, has prepared Draft Monument Management Plans (MMPs) and an Environmental Impact Statement (EIS) for the Bears Ears National Monument (BENM) Indian Creek and Shash Jáa Units. By this Notice, the BLM is announcing the opening of the public comment period.
To ensure that comments will be considered, the BLM must receive written comments on the BENM Draft MMPs/Draft EIS within 90 days of the date the Environmental Protection Agency publishes its Notice of Availability of the BENM Draft MMPs/Draft EIS in the
You may submit comments on the BENM Draft MMPs/EIS by either of these methods:
Copies of the BENM Draft MMPs/Draft EIS are available at the following locations:
Lance Porter, District Manager, BLM Canyon Country District Office, 82 East Dogwood, Moab, UT 84532, telephone 435-259-2100 or email
On December 4, 2017, President Donald Trump signed Proclamation 9681 modifying the Bears Ears National Monument designated by Proclamation 9558 to exclude from its designation and reservation approximately 1,150,860 acres of land. The revised BENM boundary includes two units—Shash Jáa and Indian Creek Units—that are reserved for the care and management of the objects of historic and scientific interest within their boundaries. The planning area is located entirely in San Juan County, Utah and encompasses 169,289 acres of BLM-managed lands and 32,587 acres of National Forest System Lands. All of the National Forest System Lands are within the Shash Jáa Unit.
The BLM is the lead agency for the preparation of the EIS, and the Forest Service is participating as a cooperating agency.
This planning effort is needed to identify goals, objectives, and management actions necessary for the conservation, protection, restoration, or enhancement of the resources, objects, and values identified in Proclamation 9558, as modified by Proclamation 9681. The BENM is jointly managed by the BLM and USFS under the Monticello Resource Management Plan (BLM 2008), as amended, and the Manti La-Sal Land and Resource Management Plan (LRMP), as amended (USFS 1986). The MMPs would replace the existing Monticello RMP for the BLM-administered lands within the BENM, and would amend the existing Manti La-Sal LRMP for USFS-administered lands within the BENM.
Each agency will continue to manage their lands within the monument pursuant to their respective applicable legal authorities. The responsible official for the BLM is the Utah State Director; the responsible official for the USFS is the Manti-La Sal Forest Supervisor. The USFS intends to use the BLM's EIS to make its decision for the part of the Shash Jáa Unit MMP it administers. The USFS will use the BLM's administrative review procedures, as provided by the USFS 2012 Planning Rule, at 36 CFR 219.59(b).
The BLM and USFS have reviewed public scoping comments to identify planning issues that directed the formulation of alternatives and framed the scope of analysis in the Draft MMPs/Draft EIS. Issues identified include management of cultural resources, including protection of American Indian sacred sites, traditional cultural properties, and access by members of Indian tribes for traditional cultural and customary uses; recreation and access; livestock grazing; and wildlife, water, vegetation, and soil resources. This planning effort also considers management of lands with wilderness characteristics.
The Draft MMPs/Draft EIS evaluate four alternatives in detail. Alternative A is the No Action alternative, which is a continuation of existing decisions in the Monticello RMP and in the Manti-La Sal Forest Plan, to the extent that those decisions are compatible with the proclamations. Alternative B emphasizes resource protection and conservation. It is the alternative which imposes the greatest restrictions on recreation and other uses. The BLM and USFS would take a more active management approach to ensure that objects and values are conserved, protected and restored. Alternative C represents a balance among levels of restriction on recreation and other uses and emphasizes adaptive management to protect the long-term sustainability of Monument objects and values while providing for other multiple uses. Alternative D is the alternative with the least restrictive management prescriptions and utilizes a more passive management strategy, with the aim of minimizing the number of changes in the BENM. The agencies would focus on management actions that preserve objects and values but do not alter the existing character of the landscape or limit future agency discretion.
The BLM and USFS have identified Alternative D as the preferred
BLM Utah and the USFS are soliciting comments on the entire Draft MMPs/Draft EIS. Please note that public comments and information submitted including names, street addresses, and email addresses of persons who submit comments will be available for public review and disclosure at addresses provided in the
Before including your address, phone number, email address or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may request to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
40 CFR 1506.6, 40 CFR 1506.10, 43 CFR 1610.2, and 36 CFR 219.59.
Notice.
The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA95). This program helps to ensure that requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements on respondents can be properly assessed. The Bureau of Labor Statistics (BLS) is soliciting comments concerning the proposed extension for the collection of the “BLS Data Sharing Program.” A copy of the proposed information collection request (ICR) can be obtained by contacting the individual listed below in the
Written comments must be submitted to the office listed in the
Send comments to Erin Good, BLS Clearance Officer, Division of Management Systems, Bureau of Labor Statistics, Room 4080, 2 Massachusetts Avenue NE, Washington, DC 20212. Written comments may be transmitted by fax to 202-691-5111. (This is not a toll free number.)
Erin Good, BLS Clearance Officer, 202-691-7763. (See
An important aspect of the mission of the BLS is to disseminate to the public the maximum amount of information possible. Not all data are publicly available because of the importance of maintaining the confidentiality of BLS data. However, the BLS has opportunities available on a limited basis for eligible researchers to access confidential data for purposes of conducting valid statistical analyses that further the mission of the BLS as permitted in the Confidential Information Protection and Statistical Efficiency Act of 2002 (CIPSEA). The BLS makes confidential data available to eligible researchers through three major programs:
1. The Census of Fatal Occupational Injuries (CFOI), as part of the BLS occupational safety and health statistics program, compiles a count of all fatal work injuries occurring in the U.S. in each calendar year. Multiple sources are used in order to provide as complete and accurate information concerning workplace fatalities as possible. A research file containing CFOI data is made available offsite to eligible researchers.
2. The National Longitudinal Surveys of Youth (NLSY) is designed to document the transition from school to work and into adulthood. The NLSY collects extensive information about youths' labor market behavior and educational experiences over time. The NLSY includes three different cohorts: The National Longitudinal Survey of Youth 1979 (NLSY79), the NLSY79 Young Adult Survey, and the National Longitudinal Survey of Youth 1997 (NLSY97). NLSY data beyond the public use data are made available in greater detail through an offsite program to eligible researchers.
3. Additionally, the BLS makes available data from several employment, compensation, prices, and working conditions surveys to eligible researchers for onsite use. Eligible visiting researchers can access these data in researcher rooms at the BLS national office in Washington, DC or at a Federal Statistical Research Data Center (FSRDC).
Office of Management and Budget clearance is being sought for the BLS Data Sharing Program. In order to provide access to confidential data, the BLS must determine that the researcher's project will be exclusively statistical in nature and that the researcher is eligible based on guidelines set out in CIPSEA, the Office of Management and Budget (OMB) implementation guidance on CIPSEA, and BLS policy. This information collection provides the vehicle through which the BLS will obtain the necessary details to ensure all researchers and projects comply with appropriate laws and policies.
The Bureau of Labor Statistics is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility.
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they also will become a matter of public record.
Weeks of August 20, 27, September 3, 10, 17, 24, 2018.
Commissioners' Conference Room, 11555 Rockville Pike, Rockville, Maryland.
Public and Closed.
There are no meetings scheduled for the week of August 20, 2018.
There are no meetings scheduled for the week of August 27, 2018.
There are no meetings scheduled for the week of September 3, 2018.
There are no meetings scheduled for the week of September 17, 2018.
For more information or to verify the status of meetings, contact Denise McGovern at 301-415-0681 or via email at
The NRC Commission Meeting Schedule can be found on the internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (
Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555 (301-415-1969), or you may email
Pension Benefit Guaranty Corporation.
Notice of intent to request extension of OMB approval of information collection.
The Pension Benefit Guaranty Corporation (PBGC) intends to request that the Office of Management and Budget (OMB) extend approval, under the Paperwork Reduction Act, of a collection of information contained in its regulation on Partitions of Eligible Multiemployer Plans. This notice informs the public of PBGC's intent and solicits public comment on the collection of information.
Comments must be submitted on or before October 16, 2018.
Comments may be submitted by any of the following methods:
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All submissions received must include the agency's name (Pension Benefit Guaranty Corporation, or PBGC) and refer to OMB control number 1212-0068. All comments received will be posted without change to PBGC's website,
Copies of the collections of information may also be obtained by writing to Disclosure Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC 20005-4026, or calling 202-326-4040 during normal business hours. TTY users may call the Federal relay service toll-free at 800- 877-8339 and ask to be connected to 202-326-4040. PBGC's regulations on
Melissa Rifkin (
The Pension Benefit Guaranty Corporation (PBGC) intends to request that the Office of Management and Budget (OMB) extend approval, under the Paperwork Reduction Act, of a collection of information contained in its regulation on Partitions of Eligible Multiemployer Plans (29 CFR part 4233) (OMB control number 1212-0068; expires December 31, 2018). This notice informs the public of PBGC's intent and solicits public comment on the collection of information.
Sections 4233(a) and (b) of the Employee Retirement Income Security Act of 1974 (ERISA) allow a plan sponsor of a multiemployer plan to apply to PBGC for a partition of the plan and state the criteria that PBGC uses to determine a plan's eligibility for a partition.
PBGC's regulation on Partitions of Eligible Multiemployer Plans (29 CFR part 4233) sets forth the procedures for applying for a partition, the information required to be included in a partition application, and notices to interested parties of the application.
PBGC needs the information to determine whether a plan is eligible for partition and whether a proposed partition would comply with the statutory conditions required before PGBC may order a partition.
The collection of information under the regulation has been approved by OMB control number 1212-0068 (expires December 31, 2018). PBGC intends to request that OMB extend its approval for another three years. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
PBGC estimates that there will be six applications for partition each year for which plan sponsors submit applications under this regulation. The total estimated annual burden of the collection of information is 78 hours and $239,400.
PBGC is soliciting public comments to—
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodologies and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Issued in Washington, DC.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
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This Notice will be published in the
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to delete the current rules on arbitration (“Current Arbitration Rules”), currently under the 10000 Series (Rules 10001 through 10102), and adopt the Nasdaq ISE, LLC (“ISE”) rules on arbitration in Chapter 18 of the ISE's rulebook (“Proposed Arbitration Rules”) into General 6 in the Exchange's rulebook's (“Rulebook”) shell structure.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to delete the rules on arbitration, currently under the 10000 Series (Rules 10001 through 10102), and adopt the ISE rules on arbitration in Chapter 18 of the ISE's rulebook into General 6 in the Exchange's Rulebook.
The Exchange adopted the Current Arbitration Rules to ensure a fair and efficient manner in which to handle any dispute, claim or controversy arising out of, or in connection with, the business of any Member of the Exchange. To help administer the process of dispute resolution, the Exchange and FINRA are parties to a Regulatory Contract, pursuant to which FINRA has agreed to perform certain functions and provide access to certain services, including: member regulation and registration; non-real time market surveillance; examinations and investigations; and dispute resolution. FINRA currently operates the largest securities dispute resolution forum in the United States,
Because the Affiliated Exchanges are also parties to similar Regulatory Contracts with FINRA that make their members and associated persons of such members subject to the FINRA Code of Arbitration Procedure, the Exchange believes it is pertinent that a common set of rules on arbitration be included in the General section of the Rulebook's shell. These rules will, pursuant to subsequent filings, then replace the existing arbitration rules for each of the Affiliated Exchanges.
As part of the process of harmonizing these rules, staff evaluated the corresponding rules on arbitration at each of the Affiliated Exchanges. Staff have determined that the Proposed Arbitration Rules are the easiest to read and the most accessible, and do not
Therefore, the Exchange will adopt the Proposed Arbitration Rules and place them under the “General 6 Arbitration” of the shell's “General Equity and Options Rules” section. As mentioned, these rules are already in place on ISE, and also apply to Nasdaq GEMX, LLC and Nasdaq MRX, LLC, which incorporate Chapter 18 of the ISE Rules by reference. Subsequently, the other Affiliated Exchanges plan to adopt these rules also.
The relocation and harmonization of the arbitration rules is part of the Exchange's continued effort to promote efficiency and conformity of its processes with those of its Affiliated Exchanges.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed changes do not impose a burden on competition because, as previously stated, they are (i) of a non-substantive nature, (ii) intended to harmonize the Exchange's rules with those of its Affiliated Exchanges, and (iii) intended to organize the Rulebook in a way that it will ease the Members' navigation and reading of the rules across the Affiliated Exchanges.
No written comments were either solicited or received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On June 26, 2018, New York Stock Exchange LLC (“Exchange” or “NYSE”) filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to amend NYSE Rule 49 to require certain member organizations to participate in scheduled Market-Wide Circuit Breaker (“MWCB”) testing.
The Securities Information Processors (“SIPs”) for the U.S. equity markets have established a quarterly MWCB testing schedule.
The Exchange states that quarterly MWCB testing is critical to ensure that securities markets halt trading and subsequently re-open in a manner consistent with the MWCB rules.
The Exchange also proposes new Rule 49(c)(1), which would provide that each member organization notified of its obligation to participate in mandatory testing pursuant to standards established under paragraphs (b)(1) and (3) of Rule 49
Finally, proposed Rule 49(c)(2) would provide that member organizations not required to participate in a scheduled MWCB test pursuant to standards established in paragraphs (b)(1) and (3) of Rule 49 would be permitted to participate in a scheduled MWCB test.
The Exchange proposes to implement the proposed rule change at the same time that the Exchange notifies member organizations of required participation in the 2019 Regulation SCI industry test.
After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission believes that amending NYSE Rule 49 to require certain member organizations to participate in scheduled MWCB testing would enable the Exchange, participating member organizations, and others to assess the readiness of participating member organizations to respond in the event of unanticipated market volatility. Member organizations required to participate in MWCB testing pursuant to the proposal would be designated as such using the same standards used by the Exchange in determining which member organizations are subject to mandatory Regulation SCI testing. Because these member organizations have been designated by the Exchange as essential to the maintenance of a fair and orderly market, their demonstrated ability to halt and subsequently re-open trading in a manner consistent with the MWCB rules should contribute to the fairness and orderliness of the market for the benefit of all market participants. The Commission therefore believes that the proposal, as modified by Amendment No. 1, is designed to remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and to protect investors and the public interest.
Accordingly, for the reasons discussed above, the Commission believes that the Exchange's proposal, as modified by Amendment No. 1, is consistent with the Act.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On June 13, 2018, ICE Clear Credit LLC (“ICC”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The proposed rule change would revise Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-to-Market Margin payments as settlement payments (“settled-to-market”) rather than collateral (“collateralized-to-market”).
The proposed rule change would revise Rule 401 to reference Mark-to-Market Margin Balance, a new term that is defined in Rule 404 to mean the aggregate amount of Mark-to-Market Margin paid or received.
As stated above, the proposed rule change would not modify the current calculation of Mark-to-Market Margin, or other operational practices, but, instead, would replace certain specifics relating to ICC's Mark-to-Market Margin calculation with the new defined term Mark-to-Market Margin Balance.
Further, the proposed rule change would revise Rule 401(g) to specify that amounts ICC currently pays to CPs as interest on any Mark-to-Market Margin would no longer be considered interest but instead would be treated as a new payment obligation between ICC and CPs and referred to as the “price alignment amount.”
The proposed rule change would also clarify in proposed revisions to Rule 401(g) that the rate ICC may pay or charge a CP for a price alignment amount on any Mark-to-Market Margin or interest on any Initial Margin in the form of cash may be negative. This proposed revision is intended by ICC to more clearly address the effect negative market rate environments could have on how such amounts might be paid or charged by ICC to CPs.
The proposed rule change would add and clarify references to amounts that ICC will continue to treat as collateral to avoid confusion over the proper characterization of Mark-to-Market Margin under the ICC Rules. Specifically, the proposed rule change would update Rule 401(h) to provide that CPs may substitute, in accordance with the ICC Procedures and applicable law, Eligible Margin only for an amount of Initial Margin.
The proposed rule change would similarly add and clarify references to amounts that ICC would treat as settled to avoid confusion over the proper characterization of Mark-to-Market Margin under the ICC Rules. The proposed rule change would add language to Rule 402(e) to describe ICC's rights with respect to Mark-to-Market Margin and more clearly state that Mark-to-Market Margin payments constitute a settlement. The proposed rule change would also update Rule 401(l) to refer to settlement finality in relation to Mark-to-Market Margin.
Finally, the proposed rule change would make clarifications and conforming changes to Chapters 8 and 20 of the ICC Rules. The proposed rule change would revise Rule 801(a)(i), which describes how ICC calculates a CP's Required Contribution to the General Guaranty Fund, to refer to the transfer of Mark-to-Market Margin.
The proposed rule change would also replace, in the defined term MTM in Rule 808, the phrase “amount of MTM held by any Participant or ICE Clear Credit” with a conforming reference to the new defined term Mark-to-Market Margin Balance.
The proposed rule change would replace terminology in Rule 810(e) that is commonly used in conjunction with collateral by changing the words “posted” to “transferred” and removing the phrase “and be offset against”. This change would avoid confusion over the proper characterization of Mark-to-Market Margin as settlement payments.
Finally, the proposed rule change would clarify in Rule 20-605(c)(i)(B), which specifies the resources to be used to cover losses with respect to Client-Related Positions, that ICC would use the defaulting CP's Client-Related Mark-to-Market Margin, to the extent not previously applied to pay Mark-to-Market Margin to other CPs.
Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.
Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICC be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, as well as to assure the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible, and, in general, to protect investors and the public interest.
As described above, the proposed rule change would revise Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-to-Market Margin payments as settlement payments rather than collateral. To facilitate this characterization, the proposed rule change would introduce a new definition, Mark-to-Market Margin Balance, and a new concept, price alignment amount. Moreover, the proposed rule change would update the terminology used in certain rules, and the application of certain rules to Mark-to-Market Margin, in light of the characterization of Mark-to-Market Margin payments as settlement payments rather than collateral. The proposed rule change would not change the manner in which Mark-to-Market Margin is calculated, or other current ICC operational practices.
The Commission believes that by clarifying the treatment of Mark-to-Market Margin payments, the proposed rule change would help ensure that Mark-to-Market margin is treated as settled payments rather than collateral, consistent with ICC's intention. In doing so, the Commission further believes the proposed rule change would clarify that ICC has all rights and outright title to such Mark-to-Market Margin. The Commission believes the proposed rule change would clarify ICC's interest in and rights to Mark-to-Market Margin, thereby supporting ICC's ability to use Mark-to-Market Margin to cover credit and market losses.
The Commission further believes that in this regard the proposed rule change would remove potential confusion regarding the treatment of Mark-to-Market Margin, thereby helping to improve the operation and effectiveness of ICC's margin system. Given that an effective margin system is necessary to manage ICC's credit exposures to its CPs and the risks associated with clearing security based swap-related portfolios, the Commission believes that the proposed rule change would help improve ICC's ability to avoid the losses that could result from the mismanagement of credit exposures and the risks associated with clearing security based swap-related portfolios. Because such losses could disrupt ICC's ability to promptly and accurately clear security based swap transactions, the Commission believes that the proposed rule change, by improving the operation and effectiveness of ICC's margin system, would thereby help promote the prompt and accurate clearance and settlement of securities transactions.
Similarly, given that mismanagement of ICC's credit exposures to its CPs and the risks associated with clearing security based swap-related portfolios could cause ICC to realize losses on such portfolios and threaten ICC's ability to operate, thereby threatening access to securities and funds in ICC's control, the Commission believes that the proposed rule change would help assure the safeguarding of securities and funds which are in the custody or control of the ICC or for which it is responsible. Finally, for both of these reasons, the Commission believes the Framework would, in general, protect investors and the public interest.
Therefore, the Commission finds that the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, assure the safeguarding of securities and funds in ICC's custody and control, and, in general, protect investors and the public interest, consistent with the Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(b)(2) requires that ICC establish, implement, maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk-based models and parameters to set margin requirements and review such margin requirements and the related risk-based models and parameters at least monthly.
As described above, the proposed rule change would revise Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-to-Market Margin payments as settlement payments rather than collateral. Specifically, the Proposed Rule Change would revise Rule 401 to reference Mark-to-Market Margin Balance, a new term that is defined in Rule 404 to mean the aggregate amount of Mark-to-Market Margin paid or received. The new definition would be used in Rule 401(a), regarding House Margin, which would be revised to state that ICC calculates a net amount of Mark-to-Market Margin by subtracting a CP's Mark-to-Market Margin Balance from a CP's Mark-to-Market Margin Requirement. Moreover, under the proposed revised Rule 401(g), ICC would pay or charge a CP price alignment, which would be economically equivalent to interest, on any Mark-to-Market Margin and interest on any cash Initial Margin at a rate that may be negative. The proposed rule change would not modify the current calculation of Mark-to-Market Margin, or other operational practices, but, instead, would replace certain specifics relating to ICC's Mark-to-Market Margin calculation with the new defined term Mark-to-Market Margin Balance.
The Commission believes that by clarifying the treatment of Mark-to-Market Margin payments, the proposed rule change would help ensure that Mark-to-Market margin is treated as settled payments rather than collateral. The Commission believes that in this regard the proposed rule change would help ensure that the margin system is operating consistently for all CPs and in a manner that is consistent with ICC's view on the treatment of Mark-to-Market Margin by confirming that all Mark-to-Market Margin would be treated as settlement payments. In doing so, the Commission further believes the proposed rule change would clarify that ICC has all rights and outright title to such Mark-to-Market Margin. The Commission believes the proposed rule change would thereby clarify ICC's interest in and rights to Mark-to-Market Margin, thereby supporting ICC's ability to use Mark-to-Market to cover credit and market losses. The Commission therefore believes the proposed rule change would help ICC maintain and
Moreover, as noted above, the proposed rule change resulted from a request by CPs for ICC to confirm it treats Mark-to-Market Margin as settlement payments. CPs therefore may hesitate to post Mark-to-Market Margin if ICC does not consistently treat such margin as settlement payments. Thus, the Commission believes the proposed rule change would help ICC enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions.
Therefore, for the above reasons the Commission finds that the proposed rule change is consistent with Rule 17Ad-22(b)(2).
Rule 17Ad-22(d)(1) requires that ICC establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for a well-founded, transparent, and enforceable legal framework for each aspect of its activities in all relevant jurisdictions.
As discussed above, the proposed rule change would revise Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-to-Market Margin payments as settlement payments rather than collateral. The proposed rule change would also revise terminology to further clarify the legal characterization that payments of Mark-to-Market Margin represent settlement rather than collateral payments. These clarifying changes are the result of ICC's analysis of the legal characterization of Mark-to-Market Margin payments, at the request of its CPs.
Thus, ICC intends to treat Mark-to-Market Margin payments as settled rather than collateral, and the Commission believes that the proposed rule change's clarifications and additions would help ensure that ICC's margin system operates consistently with this intention. The Commission further believes that the proposed rule change would help ensure that the margin system is operating consistently for all CPs by confirming that all Mark-to-Market Margin would be treated as settlement payments. In ensuring the consistent treatment of Mark-to-Market Margin, the Commission believes that the proposed rule change would help ensure that the policies and procedures underlying ICC's margin system provide a well-founded, transparent, and enforceable legal framework.
Therefore, for the above reasons the Commission finds that the proposed rule change is consistent with Rule 17Ad-22(d)(1).
On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Exchange's transaction fees at Rule 7018(a), as described further below.
While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on August 1, 2018.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to amend the Exchange's transaction fees at Rule 7018 to (i) adjust the volume threshold for a credit associated with orders that access liquidity that are entered by members that access liquidity equal to or in excess of a certain percentage of their [sic] total Consolidated Volume
The Exchange operates on the “taker-maker” model, whereby it pays credits to members that take liquidity and charges fees to members that provide liquidity. Currently, the Exchange offers several different credits for orders that access liquidity on the Exchange. Among these credits, the Exchange pays a credit of $0.0015 per share executed for an order that accesses liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) entered by a member that accesses liquidity equal to or exceeding 0.075% of total Consolidated Volume during a month. The Exchange proposes to decrease the Consolidated Volume threshold applicable to this credit to 0.065% of total Consolidated Volume during a month. The Exchange recently had increased this threshold to 0.075%,
The Exchange presently offers several credits for members whose orders remove liquidity from the Exchange. Among these credits, the Exchange offers a $0.0018 per share executed credit for orders that access liquidity in securities in Tapes A and C (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) that are entered by a member that: (i) Accesses liquidity equal to or exceeding 0.20% of total Consolidated Volume during a month; and (ii) accesses 20% more liquidity as a percentage of Consolidated Volume than the member accessed in May 2018. The Exchange also offers a $0.0019 per share executed credit for orders that access liquidity in securities in Tape B (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) that are entered by a member that: (i) Accesses liquidity equal to or exceeding 0.20% of total Consolidated Volume during a month; and (ii) accesses 20% more liquidity as a percentage of Consolidated Volume than the member accessed in May 2018.
The Exchange now plans to add two new tiers that will also entitle members to receive credits of $0.0018 and $0.0019 per share executed. The first of these new tiers will offer a member a $0.0018 per share executed credit for its orders that access liquidity in securities in Tapes A and C (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) to the extent that the member, during a given month: (i) Has a total volume (including both providing and accessing liquidity) that is equal to or exceeds 0.20% [sic] of total Consolidated Volume during that month; (ii) has a total volume that is at least 20% greater (as a percentage of Consolidated Volume) than its total volume in July 2018; and (iii) of the 20% or more increase in total volume described above, at least 30% is attributable to adding liquidity. The second tier will offer a member a $0.0019 per share executed credit for orders that access liquidity in securities in Tape B (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price) to members that satisfy these same three conditions.
An example of how these two new credits will work is as follows. Firm X adds and removes 0.60% of total Consolidated Volume in securities in Tape A in July 2018. In August 2018, Firm X adds and removes 0.72% of total Consolidated Volume in securities in the same Tape. The increase in total volume as a percentage of total Consolidated Volume from July to August is 0.12%—which is an increase of approximately [sic] 20%. If at least 30% of that 0.12% increase (0.036%) is attributable to Firm X adding liquidity, then Firm X will qualify for a $0.0018 per share executed credit for its orders that access liquidity in securities in Tape A (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with a Non-displayed price).
The Exchange proposes to add these credits to provide new and stronger incentive for members to increase their total volume of activity on the Exchange, provided that at least a certain percentage of that increase in total volume arises from adding liquidity. The Exchange also proposes a higher credit for increasing volume in Tape B than it does in Tapes A or C to specifically target Tape B securities, where the Exchange has seen less activity than it has in Tape A and C securities.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Likewise, in
Further, “[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .”
The Exchange believes that it is reasonable to decrease the Consolidated Volume threshold on its credit for orders that access liquidity (excluding orders with Midpoint pegging and excluding orders that receive price improvement and execute against an order with Midpoint pegging [sic]) entered by members that access liquidity equal to or exceeding 0.075% of total Consolidated Volume during a month. The Exchange must, from time to time, assess the effectiveness of its credits in achieving their intended objectives and adjust the levels of such credits based on the Exchange's observations of market participant behavior. In this instance, the Exchange recently had increased the Consolidated Volume threshold to provide a stronger incentive to market participants to improve the market, but the Exchange has since determined that this increase was too high and that the threshold needs to be recalibrated downward to 0.065% to ensure that firms can continue to qualify for the credit. The Exchange believes that the proposed decrease is equitable and is not unfairly discriminatory because it will apply to all similarly situated member firms.
Likewise, the Exchange believes that its proposal is reasonable to add new credits for orders that access liquidity (excluding orders with Midpoint pegging and those that receive price improvement and execute against an order with a non-displayed price) that are entered by members that, in a given month, remove and access [sic] liquidity equal to or in excess of 0.50% of Consolidated Volume during the month, have a total volume (as a percentage of Consolidated Volume) that is 20% greater than it was in July 2018, and where at least 30% of the 20% increase in total volume (as a percentage of Consolidated Volume) arises from adding liquidity. This proposal is reasonable because it will provide new and stronger incentive for members to improve the market by both adding and removing liquidity from the Exchange. It will also incent them to increase the extent of this activity on the Exchange relative to their activity levels as of July 2018. The Exchange believes it is reasonable, equitable, and not unfairly discriminatory to propose a higher credit to members that increase volume in securities in Tape B than those that do so in securities in Tapes A and C because the Exchange has experienced less activity in Tape B securities relative to Tapes A and C securities and it wishes to specifically target increased activity with respect to Tape B securities. The Exchange also believes that these proposals are equitable and not unfairly discriminatory because they will apply to all similarly situated member firms.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and credits to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee or credit changes in this market may impose any burden on competition is extremely limited.
In this instance, the Exchange's proposals to add to or modify its credits do not impose a burden on competition because these proposals are reflective of the Exchange's overall efforts to provide greater incentives to market participants that it believes will improve the market, to the benefit of all participants. The Exchange does not believe that any of the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Moreover, because there are numerous competitive alternatives to the use of the Exchange, it is likely that BX will lose market share as a result of the changes if they are unattractive to market participants.
Likewise, the Exchange's proposed credits and credit amendments do not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from other exchanges and from off-exchange venues. Again, if the proposed credits are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposal will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Exchange's Schedule of Fees to provide further explanation on how the Exchange charges Crossing Orders and Responses to Crossing Orders in index options on the Nasdaq 100 Reduced Value Index (“NQX”).
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange recently adopted transaction fees and rebates for adding or removing liquidity from ISE (
In SR-ISE-2018-61, the Exchange stated that the above pricing would apply to all executions in NQX, including Non-Priority Customer
The Exchange does not seek to amend the manner in which Crossing Orders in NQX and responses thereto are currently charged, rather the Exchange
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed language relating to the application of taker fees to Crossing Orders and Responses to Crossing Orders in NQX is reasonable because the proposed rule text will bring greater transparency to the manner in which the Exchange charges NQX orders submitted in ISE's various crossing mechanisms. As discussed above, the Exchange charges members the applicable taker fee to both the originating and contra side of Crossing Orders in NQX as well charging the NQX taker pricing for Responses to Crossing Orders. The Exchange believes it is reasonable and appropriate to charge taker and not maker pricing for these orders because the Exchange seeks to encourage market making activity in NQX by providing the $0.25 per contract maker rebate to Market Maker orders that post liquidity in the Exchange's new proprietary product during the initial months of trading. Furthermore, the manner in which the Exchange applies the NQX taker fees in Section III.B is not changing with this proposal, and the proposed changes are intended to bring greater clarity to ISE's Schedule of Fees, to the benefit of all market participants.
The Exchange's proposal to add the clarifying language is also equitable and not unfairly discriminatory because the Exchange will continue to apply the taker fees for Crossing Orders and Responses to Crossing Orders in NQX in a uniform manner for all similarly situated participants. The Exchange also believes that it is equitable and not unfairly discriminatory to assess no taker fees to Market Maker Crossing Orders and Responses to Crossing Orders in NQX as compared to other Non-Priority Customers, who are currently assessed the $0.25 per contract taker fee for such orders. Market Makers, unlike other market participants, take on a number of obligations, including quoting obligations, that other market participants do not have. Further, the Exchange believes that it is equitable and not unfairly discriminatory to assess no transaction fees to Priority Customer
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. As discussed above, the proposal is intended to eliminate ambiguity from the Schedule of Fees by further explaining how ISE charges the originating and contra side of Crossing Orders in NQX as well as Responses to Crossing Orders in NQX. The proposal does not amend the current manner in which the Exchange assesses fees for Crossing Orders and Responses to Crossing Orders in NQX, and the Exchange will continue to assess the applicable taker fees in Section III.B for such NQX orders in a uniform manner to all market participants. For the foregoing reasons, the Exchange believes that the proposed changes do not impose an undue burden on competition.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend Exchange Rule 514, Priority on the Exchange.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Exchange Rule 514, Priority on the Exchange. Specifically, the Exchange proposes to amend subsection (c), Self-Trade Protection, to broaden the protection afforded under the current rule by giving Members
Currently, the rule prevents orders entered by a Market Maker
Members of the Exchange may either be Market Makers or Electronic Exchange Members.
The Exchange now proposes to allow members to choose to have this protection applied at either the MPID level, as currently implemented, or at the member firm level. If members choose to have this protection applied at the member firm level, the System will prohibit orders entered from different MPIDs within the Member's firm from trading against one another. The Exchange believes that the proposed enhancement will provide Members with more tailored self-trade functionality that will allow Members to manage their trading as appropriate based on the Member's business needs. While the Exchange believes that some firms will want to restrict trading interest from the same MPID, (as currently implemented), the Exchange believes that other firms will find it helpful to apply self-trade protection across all MPIDs of the same firm.
The Exchange note that similar functionality also exists on the Nasdaq Stock Market (“NASDAQ”) which prevents self-trades by MPID, or alternatively, if selected by the member, self-trade protection for all MPIDs of the firm.
The Exchange will announce the implementation date of this functionality via a Regulatory Circular prior to the functionality being available on the Exchange.
MIAX PEARL believes that its proposed rule changes are consistent with Section 6(b) of the Act
The Exchange believes the proposed changes promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system by providing Market Makers with additional flexibility to configure self-trade protections offered by the Exchange. Currently, all Market Makers are provided functionality that prevents orders entered by a Market Maker via the MEO Interface or the FIX Interface using the same MPID from executing against orders entered on the opposite side of the market by the same Market Maker using the same MPID via the MEO Interface or the FIX Interface. While this functionality is helpful, some members would prefer not to trade with orders entered under different MPIDs of the same firm. Therefore, the Exchange is proposing to provide Exchange Members flexibility with respect to how self-trade protections are implemented. Members may continue to use the current functionality, while members who prefer to prevent self-trades across different MPIDs within the same firm will now be provided with functionality that allows them to do so.
Similar functionality exists on the Nasdaq Stock Market and CboeBZX
MIAX PEARL does not believe that the proposed rule change will impose any burden on intermarket or intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to enhance the Exchange's current self-trade protection, and will benefit members that wish to protect their orders from trading with orders from other Market Makers within the same firm, rather than the more limited MPID standard currently in use. The new functionality, which is similar to functionality already provided on CboeBZX, is also completely voluntary, and members that wish to use the current functionality may continue to do so. The Exchange does not believe that providing more flexibility to members will have any significant impact on competition. Conversely, the Exchange believes that the proposed rule change will foster competition as Market Makers may send more orders to the Exchange knowing that there is no chance that they will trade with their own orders on the other side of the market. This could result in more order flow and more liquidity on the Exchange.
The Exchange does not believe that the proposed rule change will impose any burden on intra-market competition as self-trade protection is available to all Market Makers on the Exchange. Further, the Exchange does not believe that the proposed rule change will impose any burden on inter-market competition, and rather could potentially promote inter-market competition and result in more competitive order flow to the Exchange by more widely preventing Market Makers from trading with their own orders.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to make permanent Rule 11.24, which sets forth the Exchange's pilot Retail Price Improvement Program.
The text of the proposed rule change is available at the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The purpose of the proposed rule change is to amend Rule 11.24 to make permanent the Retail Price Improvement Program (the “Program”), which is currently offered on a pilot basis. The Exchange has operated the pilot for a six year period and believes that it has been successful in its stated goal of providing price improvement opportunities to retail investors. The analysis conducted by the Exchange shows that retail investors have been provided a total of $4.5 million of price improvement during the 2.5 year period reviewed from January 2016 through June 2018. In addition, the Exchange's analysis shows that the Program has provided these benefits to retail investors without having an adverse impact on the broader market. The proposal provides an analysis of the economic benefits to retail investors and the marketplace flowing from operation of the Program, which the Exchange believes supports making the Program permanent.
In November 2012, the Commission approved the Program on a pilot basis.
The SEC approved the Program on a pilot basis, in part, because it concluded, “the Program is reasonably designed to benefit retail investors by providing price improvement to retail order flow.”
The Exchange adopted the following definitions under Rule 11.24(a):
First, the term “Retail Member Organization” is defined as a Member (or a division thereof) that has been approved by the Exchange to submit Retail Orders.
Second, the term “Retail Order” is defined as an agency order or riskless principal that meets the criteria of FINRA Rule 5320.03
Finally, the term “Retail Price Improvement Order” or “RPI Order” consists of non-displayed interest on the Exchange that is priced better than the Protected NBB or Protected NBO by at least $0.001 and that is identified as such (“RPI interest”).
The price of an RPI Order is determined by a User's entry of the following into the Exchange: (1) RPI buy or sell interest; (2) an offset, if any; and (3) a ceiling or floor price. RPI Orders submitted with an offset are similar to other peg orders available to Users in that the order is tied or “pegged” to a certain price, and would have its price automatically set and adjusted upon changes in the Protected NBBO, both upon entry and any time thereafter. RPI buy or sell interest is typically entered to track the Protected NBBO, that is, RPI Orders are typically submitted with an offset. The offset is a predetermined amount by which the User is willing to improve the Protected NBBO, subject to a ceiling or floor price. The ceiling or floor price is the amount above or below which the User does not wish to trade. RPI Orders in their entirety (the buy or sell interest, the offset, and the ceiling or floor) will remain non-displayed. The Exchange also allows Users to enter RPI Orders that establish the exact limit price, which is similar to a non-displayed limit order currently accepted by the Exchange except the Exchange accepts sub-penny limit prices on RPI Orders in increments of $0.001. The Exchange monitors whether RPI buy or sell interest, adjusted by any offset and subject to the ceiling or floor price, is eligible to interact with incoming Retail Orders.
Users and RMOs may enter odd lots, round lots or mixed lots as RPI Orders and as Retail Orders respectively. As discussed below, RPI Orders are ranked and allocated according to price and time of entry into the System consistent with Rule 11.12 and therefore without regard to whether the size entered is an odd lot, round lot or mixed lot amount. Similarly, Retail Orders interact with RPI Orders according to the Priority and Allocation rules of the Program and without regard to whether they are odd lots, round lots or mixed lots. Finally, Retail Orders are designated as Type 1 or Type 2 without regard to the size of the order.
RPI Orders interact with Retail Orders as follows. Assume a User enters RPI sell interest with an offset of $0.001 and a floor of $10.10 while the Protected NBO is $10.11. The RPI Order could interact with an incoming buy Retail Order at $10.109. If, however, the Protected NBO was $10.10, the RPI Order could not interact with the Retail Order because the price required to deliver the minimum $0.001 price improvement ($10.099) would violate the User's floor of $10.10. If a User otherwise enters an offset greater than the minimum required price improvement and the offset would produce a price that would violate the User's floor, the offset would be applied only to the extent that it respects the User's floor. By way of illustration, assume RPI buy interest is entered with an offset of $0.005 and a ceiling of $10.112 while the Protected NBB is at $10.11. The RPI Order could interact with an incoming sell Retail Order at $10.112, because it would produce the required price improvement without violating the User's ceiling, but it could not interact above the $10.112 ceiling. Finally, if a User enters an RPI Order
Under Rule 11.24(b), any Member may qualify as an RMO if it conducts a retail business or routes retail orders on behalf of another broker-dealer. For purposes of Rule 11.24(b), conducting a retail business shall include carrying retail customer accounts on a fully disclosed basis. Any Member that wishes to obtain RMO status is required to submit: (1) An application form; (2) supporting documentation sufficient to demonstrate the retail nature and characteristics of the applicant's order flow; and (3) an attestation, in a form prescribed by the Exchange, that substantially all orders submitted as Retail Orders will qualify as such under Rule 11.24.
An RMO is required to have written policies and procedures reasonably designed to assure that it will only designate orders as Retail Orders if all requirements of a Retail Order are met. Such written policies and procedures must require the Member to (i) exercise due diligence before entering a Retail Order to assure that entry as a Retail Order is in compliance with the requirements of this rule, and (ii) monitor whether orders entered as Retail Orders meet the applicable requirements. If the RMO represents Retail Orders from another broker-dealer customer, the RMO's supervisory procedures must be reasonably designed to assure that the orders it receives from such broker-dealer customer that it designates as Retail Orders meet the definition of a Retail Order. The RMO must (i) obtain an annual written representation, in a form acceptable to the Exchange, from each broker-dealer customer that sends it orders to be designated as Retail Orders that entry of such orders as Retail Orders will be in compliance with the requirements of this rule, and (ii) monitor whether its broker-dealer customers' Retail Order flow continues to meet the applicable requirements.
If the Exchange disapproves the application, the Exchange provides a written notice to the Member. The disapproved applicant could appeal the disapproval by the Exchange as provided in Rule 11.24(d), and/or reapply for RMO status 90 days after the disapproval notice is issued by the Exchange. An RMO also could voluntarily withdraw from such status at any time by giving written notice to the Exchange.
Rule 11.24(c) addresses an RMO's failure to abide by Retail Order requirements. If an RMO designates orders submitted to the Exchange as Retail Orders and the Exchange determines, in its sole discretion, that those orders fail to meet any of the requirements of Retail Orders, the Exchange may disqualify a Member from its status as an RMO. When disqualification determinations are made, the Exchange provides a written disqualification notice to the Member. A disqualified RMO may appeal the disqualification as provided in Rule 11.24(d) and/or reapply for RMO status 90 days after the disqualification notice is issued by the Exchange.
Rule 11.24(d) provides appeal rights to Members. If a Member disputes the Exchange's decision to disapprove it as an RMO under Rule 11.24(b) or disqualify it under Rule 11.24(c), such Member (“appellant”) may request, within five business days after notice of the decision is issued by the Exchange, that the Retail Price Improvement Program Panel (“RPI Panel”) review the decision to determine if it was correct.
The RPI Panel consists of the Exchange's Chief Regulatory Officer (“CRO”), or a designee of the CRO, and two officers of the Exchange designated by the Chief Operating Officer (“COO”). The RPI Panel reviews the facts and render [sic] a decision within the time frame prescribed by the Exchange. The RPI Panel may overturn or modify an action taken by the Exchange and all determinations by the RPI Panel constitute final action by the Exchange on the matter at issue.
Under Rule 11.24(e), the Exchange disseminates an identifier when RPI interest priced at least $0.001 better than the Exchange's Protected Bid or Protected Offer for a particular security is available in the System (“Retail Liquidity Identifier”). The Retail Liquidity Identifier is disseminated through consolidated data streams (
Under Rule 11.24(f), an RMO can designate how a Retail Order would interact with available contra-side interest as follows:
A Type 1-designated Retail Order will interact with available contra-side RPI Orders and other price improving contra-side interest but will not interact with other available contra-side interest in the System that is not offering price improvement or route to other markets. The portion of a Type 1-designated Retail Order that does not execute against contra-side RPI Orders or other price improving liquidity will be immediately and automatically cancelled.
A Type 2-designated Retail Order will interact first with available contra-side RPI Orders and other price improving liquidity and then any remaining
Under Rule 11.24(g), competing RPI Orders in the same security are ranked and allocated according to price then time of entry into the System. Executions occur in price/time priority in accordance with Rule 11.12. Any remaining unexecuted RPI interest remains available to interact with other incoming Retail Orders if such interest is at an eligible price. Any remaining unexecuted portion of the Retail Order will cancel or execute in accordance with Rule 11.24(f). The following example illustrates this method:
An incoming Retail Order to sell ABC for 1,000 executes first against User 3's bid for 500 at $10.035, because it is the best priced bid, then against User 2's bid for 500 at $10.02, because it is the next best priced bid. User 1 is not filled because the entire size of the Retail Order to sell 1,000 is depleted. The Retail Order executes against RPI Orders in price/time priority.
However, assume the same facts above, except that User 2's RPI Order to buy ABC at $10.02 is for 100. The incoming Retail Order to sell 1,000 executes first against User 3's bid for 500 at $10.035, because it is the best priced bid, then against User 2's bid for 100 at $10.02, because it is the next best priced bid. User 1 then receives an execution for 400 of its bid for 500 at $10.015, at which point the entire size of the Retail Order to sell 1,000 is depleted.
As a final example, assume the same facts as above, except that User 3's order was not an RPI Order to buy ABC at $10.035, but rather, a non-displayed order to buy ABC at $10.03. The result would be similar to the result immediately above, in that the incoming Retail Order to sell 1,000 executes first against User 3's bid for 500 at $10.03, because it is the best priced bid, then against User 2's bid for 100 at $10.02, because it is the next best priced bid. User 1 then receives an execution for 400 of its bid for 500 at $10.015, at which point the entire size of the Retail Order to sell 1,000 is depleted.
All Regulation NMS securities traded on the Exchange are eligible for inclusion in the RPI Program. The Exchange limits the Program to trades occurring at prices equal to or greater than $1.00 per share. Toward that end, Exchange trade validation systems prevent the interaction of RPI buy or sell interest (adjusted by any offset) and Retail Orders at a price below $1.00 per share.
The Exchange established the Program in an attempt to attract retail order flow to the Exchange by providing an opportunity for price improvement to such order flow. The Exchange believes that the Program promotes transparent competition for retail order flow by allowing Exchange members to submit RPI Orders to interact with Retail Orders. Such competition promotes efficiency by facilitating the price discovery process and generating additional investor interest in trading securities, thereby promoting capital formation and retail investment opportunities. The Program will continue to be limited to trades occurring at prices equal to or greater than $1.00 per share.
In accordance with its filing establishing the pilot, the Exchange did “produce data throughout the pilot, which will include statistics about participation, the frequency and level of price improvement provided by the Program, and any effects on the broader market structure.”
The SEC stated in the RPI Approval Order that the Program could promote competition for retail order flow among execution venues, and that this could benefit retail investors by creating additional well-regulated and transparent price improvement opportunities for marketable retail order flow, most of which is currently executed in the Over-the-Counter (“OTC”) markets without ever reaching a public exchange.
Brokers route retail orders to a wide range of different trading systems. The Program offers a transparent and well-regulated option, providing meaningful competition and price improvement. As explained above, the purpose of the Program is to attract retail order flow to the Exchange by providing an opportunity for retail investors to receive price improvement. The Exchange believes that the Program has satisfied this goal, having provided a total of $4.5 million of price improvement, or approximately $153,000 per month, in the last 2.5 years. Furthermore, while the amount of price improvement provided in the Program varies month to month, the amount of price improvement provided in recent months has generally increased relative to prior months due to additional participation in the Program by market participants with retail order flow. The Exchange believes that this supports permanent approval of the pilot as retail investors continue to reap the benefits afforded by the Program. The amount of monthly and cumulative price improvement provided in the Program is illustrated in Chart 1 below.
Furthermore, Retail Order volume executed in the Program accounted for between 0.86% and 2.32% of total BYX volume from January 2017 to June 2018, as shown in Chart 2 below, and between 0.05% and 0.11% of total consolidated volume, as shown in Chart 3 below. Despite its size relative to total volume executed on the Exchange or the broader market, the Program has continued to provide considerable price improvement each month to retail investors that participated in the Program. In addition, the Exchange believes that the relatively modest volume executed in the Program relative to total BYX volume and total consolidated volume limits the potential impact of the Program on broader market quality on the Exchange.
Retail Orders are routed by sophisticated brokers using systems that seek the highest fill rates and amounts of price improvement. These brokers have many choices of execution venues for this order flow. When they choose to route to the Program, they have determined that it is the best opportunity for fill rate and price improvement at that time. As shown in Table 1 below, Retail Order average daily volume (“ADV”) executed in the Program averaged between 2 and 7 million shares from January 2016 to June 2018. Increased volatility in February 2018 likely contributed to the increased Retail Order shares executed in the Program that month. Fill rates for the majority of the period studied ranged from 11%-19% with fill rates declining below 10% starting in December 2017, likely due to additional participation in the Program that resulted in a significant increase in the Retail Order volume entered on the Exchange. Retail Orders also continue to receive more than the minimum $0.001 price improvement required of a liquidity providing RPI Order, with the monthly average price improvement provided to Retail Orders ranging from $0.0011-$0.0014 per share, and the monthly effective/quoted spread ratio ranging from 0.77-0.90. The Exchange believes that this data supports permanent approval of the Program as this would allow retail investors to continue to execute their orders with price improvement in the Program.
Tables 2, 3, and 4 show the distribution of Retail Orders entered and executed in the Program for the period from January 2017 to June 2018. As shown in Table 2, a majority of all Retail Orders entered to participate in the Program from January 2016 to June 2018 were for a round lot or fewer shares. Specifically, Retail Orders of one round lot or fewer shares accounted for an average of approximately 56% of the total number of Retail Orders entered. More than 73% of Retail Orders entered were for 300 shares or less. Very large orders of more than 7,500 shares accounted for only 1.9% of Retail Orders submitted to the Program but accounted for a significant portion (approximately 40%) of the shares entered, as shown in Table 3. In addition, despite lower fill rates, large orders account for a reasonable portion (approximately 9%) of the shares executed in the Program, as shown in Table 4. The Program also receives a significantly large number of odd lot and single lot sized shares, which could be representative of retail marketable orders from retail customers. By providing price improvement to these orders, retail customers would continue to benefit from the Program.
The Exchange also analyzed fill rates across the different order size buckets and found that while fill rates are higher for smaller orders as expected, large size orders are still able to access liquidity and therefore receive price improvement in the Program. Moreover, overall fill rates indicate that market participants that provide liquidity are responding with quote depth when the contra side order is looking for a fill. While fill rates decreased starting in November 2017, the Exchange believes that this is due to new Retail Order flow being routed to the Program, rather than a decrease in the available liquidity. Monthly volume executed in the Program, as shown in Table 1, has therefore remained constant or increased since November 2017 despite the lower overall fill rates for those months. The Exchange therefore believes that the Program is an attractive option for market participants looking to fill Retail Orders with price improvement.
As shown in Charts 2 and 3 above, Retail Order volume executed in the Program is a small percentage of both total volume executed on the Exchange and total consolidated volume. While the Program has better depth available for Retail Orders, it does not significantly affect the market volume of BYX. The average volume within the 95th percentile is between 1.3% and 1.7%. With the Program volume mostly below 2.5% of BYX volume, the Exchange does not believe that it is able to significantly impact BYX market quality. Nevertheless, to test the impact of the Program on broader market quality, the Exchange reviewed the correlation between metrics that are tied to overall market quality with relevant Program metrics over both 2017 and 2018. Based on this analysis, which is provided in Table 6 below, the Exchange does not believe that the Program has had any significant impact on broader market quality.
Specifically, the Exchange's analysis shows that: (1) Inside size in the broader market is not correlated with either RPI effective spreads or the percentage of volume executed in the Program, which suggests that market participants are not moving volume from the regular market to the Program as effective spreads narrow or volume executed in the Program increases; (2) effective spreads in the broader market are not correlated with the percentage of volume executed in the Program, which suggests that spreads are not widening as a result of more Retail Order flow being executed in the Program, (3) midpoint volume executed is not correlated with effective spreads in the Program, which suggests that market participants are not moving midpoint liquidity from the regular market to instead receive price improvement in the Program, and (4) displayed volume executed is not correlated with quoted spreads in the Program, which suggest that market participants are not entering non-displayed retail price improving interest in the Program as an alternative to displaying interest on an order book. The Exchange therefore believes that the Program can continue on a permanent basis—and thereby provide increased price improvement opportunities to retail investors on a transparent well-regulated exchange—without degrading market quality outside of the Program.
Based
The Exchange believes the proposed rule change is consistent with the requirements of Section 6(b) of the Act,
The Exchange believes that making the pilot permanent is consistent with these principles because the Program is reasonably designed to attract retail order flow to the exchange environment, while helping to ensure that retail investors benefit from the better price that liquidity providers are willing to give their orders. During the pilot period, the Exchange has provided data and analysis to the Commission. The Exchange believes that this data and analysis, as well as the further analysis provided in this filing, show that the Program has provided the intended benefits to the market, and retail investors in particular, and is therefore consistent with the Act.
Additionally, the Exchange believes the proposed rule change is designed to facilitate transactions in securities and to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system because making the Program permanent would allow the Exchange to continue to attract retail order flow to a public exchange and allow such order flow to receive potential price improvement. The data provided by the Exchange to the Commission staff demonstrates that the Program provided tangible price improvement to retail investors through a competitive pricing process
Finally, the Exchange also believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition. For all of these reasons, the Exchange believes that the proposed rule change is consistent with the Act.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that making the Program permanent would continue to promote competition for retail order flow among execution venues and contribute to the public price discovery process. The Exchange believes that the data supplied to the Commission, and experience gained over the life of the pilot, have demonstrated that the Program creates price improvement opportunities for retail orders that are equal to what would be provided under OTC internalization arrangements, thereby benefiting retail investors and increasing competition between execution venues. The Exchange also believes that making the Program permanent will promote competition between execution venues operating their own retail liquidity programs. Such competition will lead to innovation within the market, thereby increasing the quality of the national market system. Finally, the Exchange notes that it operates in a highly competitive market in which market participants can easily direct their orders to competing venues, including off-exchange venues. In such an environment, the Exchange must continually review, and consider adjusting the services it offers and the requirements it imposes to remain competitive with other U.S. equity exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Amendment 1.
This is an amendment of the Presidential declaration of a major disaster for the State of Hawaii (FEMA-4366-DR), dated 06/14/2018.
Issued on 06/14/2018.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
The notice of the President's major disaster declaration for the State of Hawaii, dated 06/14/2018, is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 09/12/2018.
All other information in the original declaration remains unchanged.
U.S. Small Business Administration.
Notice of changes to Secondary Market Program.
The purpose of this Notice is to provide the public with notification of program changes to SBA's Secondary Market Loan Pooling Program. Specifically, SBA is increasing the minimum maturity ratio for both SBA Standard Pools and Weighted-Average Coupon (WAC) Pools by 1.0%, to 95.0%. The changes described in this Notice are being made to ensure that there are sufficient funds to cover the estimated cost of the timely payment guaranty for newly formed SBA 7(a) loan pools. The changes in this Notice will be incorporated, as needed, into the SBA Secondary Market Program Guide and all other appropriate SBA Secondary Market documents.
The changes will apply to SBA 7(a) loan pools with an issue date on or after October 1, 2018.
Address comments concerning this Notice to John M. Wade, Chief Secondary Market Division, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416, or
John M. Wade, Chief, Secondary Market Division, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416, 202-205-3647, or
The Secondary Market Improvements Act of 1984 authorized SBA to guarantee the timely payment of principal and interest on Pool Certificates. A Pool Certificate represents a fractional undivided interest in a “Pool,” which is an aggregation of SBA guaranteed portions of loans made by SBA Lenders under section 7(a) of the Small Business Act, 15 U.S.C. 636(a). In order to support the timely payment guaranty requirement, SBA established the Master Reserve Fund (“MRF”), which serves as a mechanism to cover the cost of SBA's timely payment guaranty. Borrower payments on the guaranteed portions of pooled loans, as well as SBA guaranty payments on defaulted pooled loans, are deposited into the MRF. Funds are held in the MRF until distributions are made to investors (“Registered Holders”) of Pool Certificates. The interest earned on the borrower payments and the SBA guaranty payments deposited into the MRF supports the timely payments made to Registered Holders.
From time to time, SBA provides guidance to SBA Pool Assemblers on the required loan and pool characteristics necessary to form a Pool. These characteristics include, among other things, the minimum number of guaranteed portions of loans required to form a Pool, the allowable difference between the highest and lowest gross and net note rates of the guaranteed portions of loans in a Pool, and the minimum maturity ratio of the guaranteed portions of loans in a Pool. The minimum maturity ratio is equal to the ratio of the shortest and the longest remaining term to maturity of the guaranteed portions of loans in a Pool.
On October 1, 2017, SBA increased the minimum maturity ratio for both SBA Standard Pools and Weighted-Average Coupon (WAC) Pools to 94.0%. Based on SBA's expectations as to the performance of future Pools, SBA has determined that, in order to support the costs associated with SBA's Secondary Market Loan Pooling Program, it is necessary to further increase the minimum maturity ratio—in other words, to reduce the difference between the shortest and the longest remaining term of the guaranteed portions of loans in a Pool. SBA does not expect a 1 percentage point increase in the minimum maturity ratio to have an adverse impact on either the program or the participants in the program. SBA has monitored Pools formed over the last 18 months and has observed that many existing Pools have a minimum maturity ratio of at least 95.0%.
A higher minimum maturity ratio will decrease the difference between the amortization rates of the guaranteed portions of loans in a Pool. This will cause the cash flows from the guaranteed portions of loans in the Pool to be more homogenous, and will more closely match the amortization rate of the Pool Certificate. This is the primary driver in reducing the cost of SBA's timely payment guaranty on Pool Certificates. Therefore, effective October 1, 2018, all guaranteed portions of loans in a Pool presented for settlement with SBA's Fiscal Transfer Agent will be required to have a minimum maturity ratio of at least 95% for Standard Pools and WAC Pools. SBA is making this change pursuant to Section 5(g)(2) of the Small Business Act, 15 U.S.C. 634(g)(2).
SBA will continue to monitor loan and pool characteristics and will provide notification of additional changes as necessary. It is important to note that there is no change to SBA's obligation to honor its guaranty of the amounts owed to Registered Holders of Pool Certificates and that such guaranty continues to be backed by the full faith and credit of the United States.
This program change will be incorporated as necessary into SBA's Secondary Market Guide and all other appropriate SBA Secondary Market documents. As indicated above, this change will be effective for Pools with an issue date on or after October 1, 2018, and will modify any previous guidance regarding the minimum maturity ratio for Standard Pools or WAC Pools.
Acting under the authority of and in accordance with section 1(b) of Executive Order 13224 of September 23, 2001, as amended by Executive Order 13268 of July 2, 2002, and Executive Order 13284 of January 23, 2003, I hereby determine that the person known as Qassim Abdullah Ali Ahmed, aka Qassim al-Muamen, aka Qassim Al Muamen, aka Qassim Abdullah Ali, aka Qassim Abdullah, committed, or poses a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States. Consistent with the determination in section 10 of Executive Order 13224 that prior notice to persons determined to be subject to the Order
This notice shall be published in the
Based upon a review of the Administrative Record assembled pursuant to Section 219(a)(4)(C) of the Immigration and Nationality Act, as amended (8 U.S.C. 1189(a)(4)(C)) (“INA”), and in consultation with the Attorney General and the Secretary of the Treasury, I conclude that the circumstances that were the basis for the designation of the aforementioned organization as a Foreign Terrorist Organization have not changed in such a manner as to warrant revocation of the designation and that the national security of the United States does not warrant a revocation of the designation.
Therefore, I hereby determine that the designation of the aforementioned organization as a Foreign Terrorist Organization, pursuant to Section 219 of the INA (8 U.S.C. 1189), shall be maintained.
This determination shall be published in the
Based upon a review of the Administrative Record assembled pursuant to Section 219(a)(4)(C) of the Immigration and Nationality Act, as amended (8 U.S.C. 1189(a)(4)(C)) (“INA”), and in consultation with the Attorney General and the Secretary of the Treasury, I conclude that the circumstances that were the basis for the designation of the aforementioned organization as a Foreign Terrorist Organization have not changed in such a manner as to warrant revocation of the designation and that the national security of the United States does not warrant a revocation of the designation.
Therefore, I hereby determine that the designation of the aforementioned organization as a Foreign Terrorist Organization, pursuant to Section 219 of the INA (8 U.S.C. 1189), shall be maintained.
This determination shall be published in the
Surface Transportation Board (Board).
Notice of National Grain Car Council meeting.
Notice is hereby given of a meeting of the National Grain Car Council (NGCC), pursuant to the Federal Advisory Committee Act.
The meeting will be held on Thursday, September 13, 2018, beginning at 1:00 p.m. (CDT), and is expected to conclude at 5:00 p.m. (CDT).
The meeting will be held at the Kansas City Marriott Downtown, 200 West 12th Street, Kansas City, MO 64105 (Phone (816) 421-6800).
Fred Forstall at (202) 245-0241 or
The NGCC was established by the Interstate Commerce Commission (ICC) as a working group to facilitate private-sector solutions and recommendations to the ICC (and now the Board) on matters affecting rail grain car availability and transportation.
The general purpose of this meeting is to discuss rail carrier preparedness to transport the 2018 grain harvest. Agenda items include the following: Remarks by NGCC Chair Sharon G. Clark, Board Chair Ann D. Begeman, Board Vice Chairman and NGCC Co-Chair Deb Miller; reports by member groups on expectations for the upcoming harvest, domestic and foreign markets, the supply of rail cars, and rail service; and presentations by industry analysts. The full agenda, along with other information regarding the NGCC, is posted on the Board's website at
The meeting is open to the public and will be conducted pursuant to the Federal Advisory Committee Act, 5 U.S.C. app. 2; Federal Advisory Committee Management, 41 CFR pt. 102-3; the NGCC charter; and Board procedures.
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Tennessee Valley Authority (TVA).
Notice of meeting.
The TVA Regional Energy Resource Council (RERC) will hold a meeting on Wednesday, September 5, 2018, to discuss the scenarios and strategies that TVA has identified for the 2019 Integrated Resource Plan.
The RERC was established to advise TVA on its energy resource activities and the priority to be placed among competing objectives and values. Notice of this meeting is given under the Federal Advisory Committee Act (FACA).
The public meeting will be held on Wednesday, September 5, 2018, from 10:00 a.m. to 4:00 p.m., EDT.
The meeting will be held at the Hilton Knoxville, 501 West Church Avenue, Knoxville, Tennessee 37902, and will be open to the public. Anyone needing special access or accommodations should let the contact below know at least a week in advance.
Barbie Perdue, 865-632-6113,
The meeting agenda includes the following:
The RERC will hear opinions and views of citizens by providing a public comment session starting at 12:45 p.m., EDT, lasting up to one hour, on Wednesday, September 5, 2018. Persons wishing to speak are requested to register at the door between 11:00 a.m. and 12:00 p.m., EDT, on Wednesday, September 5, 2018, and will be called on during the public comment period. TVA will set time limits for providing oral comments, once registered. Handout materials should be limited to one printed page. Written comments are also invited and may be mailed to the Regional Energy Resource Council, Tennessee Valley Authority, 400 West Summit Hill Drive, WT-9-D, Knoxville, Tennessee 37902.
Federal Aviation Administration (FAA), DOT.
Notice.
This notice contains a summary of a petition seeking relief from 14 CFR part 61.103(a),
Comments on this petition must identify the petition docket number and must be received on or before September 6, 2018.
Send comments identified by docket number FAA-2018-0175 using any of the following methods:
•
•
•
•
Brent Hart (202) 267-4034, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591.
This notice is published pursuant to 14 CFR 11.85.
Federal Highway Administration (FHWA), Department of Transportation (DOT).
Notice.
The FHWA is issuing this notice to advise the public that we are rescinding the September 26, 2013, NOI to prepare an EIS for a proposed project, the I-90 Tolling Project, to manage congestion and traffic flow on I-90 between I-5 and I-405, and contribute revenue to the sustainable, long-term funding for timely completion of the SR 520 Bridge Replacement and HOV Program and maintenance and future transportation improvements on I-90.
Lindsey Handel, Urban Transportation Engineer, Federal Highway Administration, Washington Division, 711 S. Capitol Way, Suite 501, Olympia, WA 98501; telephone: 360-753-9550; and email:
On September 26, 2013, FHWA published a Notice of Intent to prepare an EIS for the I-90 Tolling Project to manage congestion and traffic flow on I-90 between I-5 and I-405, and contribute revenue to the sustainable, long-term funding for timely completion of the SR 520 Bridge Replacement and HOV Program and maintenance and future transportation improvements on I-90. The passage of the Connecting Washington state funding package in 2015 provided sufficient funding to complete the SR 520 Bridge Replacement, eliminating part of the purpose for this project. Any futureI-90 tolling projects will progress under a separate environmental review process in accordance with all applicable laws and regulations.
Centers for Medicare & Medicaid Services (CMS), HHS.
Final rule.
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 2019. Some of these changes implement certain statutory provisions contained in the 21st Century Cures Act and the Bipartisan Budget Act of 2018, and other legislation. We also are making changes relating to Medicare graduate medical education (GME) affiliation agreements for new urban teaching hospitals. 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 2019. 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 2019.
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, and LTCHs). 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 (now referred to as the Promoting Interoperability Programs). In addition, we are finalizing modifications to the requirements that apply to States operating Medicaid Promoting Interoperability Programs. We are updating policies for 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 the required supporting documentation for an acceptable Medicare cost report submission and the supporting information for physician certification and recertification of claims.
This final rule is effective on October 1, 2018.
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.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital Demonstration Program Issues.
Jeris Smith, (410) 786-0110, Frontier Community Health Integration Project Demonstration Issues.
Cindy Tourison, (410) 786-1093, 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 Snyder, (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 Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing Efficiency Measures Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing—Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues.
Joel Andress, (410) 786-5237 and Caitlin Cromer, (410) 786-3106, PPS-Exempt Cancer Hospital Quality Reporting Issues.
Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data Reporting Issues.
Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs Clinical Quality Measure Related Issues.
Kathleen Johnson, (410) 786-3295 and Steven Johnson (410) 786-3332, Promoting Interoperability Programs Nonclinical Quality Measure Related Issues.
Kellie Shannon, (410) 786-0416, Acceptable Medicare Cost Report Submissions Issues.
Thomas Kessler, (410) 786-1991, Physician Certification and Recertification of Claims.
This
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
Readers who experience any problems accessing any of the tables that are posted on the CMS websites identified above should contact Michael Treitel at (410) 786-4552.
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. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This final rule also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.
We are establishing new requirements and revising existing requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare. We also are establishing new requirements and revising existing requirements for eligible professionals (EPs), eligible hospitals, and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs. We are updating policies for the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program.
We are making changes relating to the supporting documentation required for an acceptable Medicare cost report submission and the supporting information for physician certification and recertification of claims.
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 2019 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, 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.
• 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
• 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 and 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(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS, with implementation beginning in FY 2016, and provides for a 4-year transitional blended payment rate for discharges occurring in LTCH cost reporting periods beginning in FYs 2016 through 2019. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2026.
• Section 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 in 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 (IMPACT Act, Pub. L. 113-185), which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.
Regulatory reform and reducing regulatory burden are high priorities for CMS. To reduce the regulatory burden on the healthcare industry, lower health care costs, and enhance patient care, in October 2017, we launched the Meaningful Measures Initiative.
The Meaningful Measures framework has the following objectives:
• Address high-impact measure areas that safeguard public health;
• Patient-centered and meaningful to patients;
• Outcome-based where possible;
• Fulfill each program's statutory requirements;
• Minimize the level of burden for health care providers (for example, through a preference for EHR-based measures, where possible, such as electronic clinical quality measures;
• Significant opportunity for improvement;
• Address measure needs for population based payment through alternative payment models; and
• Align across programs and/or with other payers.
In order to achieve these objectives, we have identified 19 Meaningful Measures areas and mapped them to six overarching quality priorities, as shown in the following table:
By including Meaningful Measures in our programs, we believe that we can also address the following cross-cutting measure criteria:
• Eliminating disparities;
• Tracking measurable outcomes and impact;
• Safeguarding public health;
• Achieving cost savings;
• Improving access for rural communities; and
• Reducing burden.
We believe that the Meaningful Measures Initiative will improve outcomes for patients, their families, and health care providers, while reducing burden and costs for clinicians and providers, as well as promoting operational efficiencies.
We received numerous comments from stakeholders regarding the Meaningful Measures Initiative and the impact of its implementation in CMS' quality programs. Many of these comments pertained to specific program proposals, and are discussed in the appropriate program-specific sections of this final rule. However, commenters also provided insights and recommendations for the ongoing development of the Meaningful Measures Initiative generally, including: ensuring transparency in public reporting and usability of publicly reported data; evaluating the benefit of individual measures to patients via use in quality programs weighed against the burden to providers of collecting and reporting that measure data; and identifying additional opportunities for alignment across CMS quality programs. We look forward to continuing to work with stakeholders to refine and further implement the Meaningful Measures Initiative, and will take commenters' insights and recommendations into account moving forward.
Below we provide a summary of the major provisions in this final rule. In general, these major provisions are as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the proposed changes that we included in the proposed rule issued prior to this final rule is presented in section I.D. of the preamble of this final rule.
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.) Therefore, for FY 2019, we are making an adjustment of +0.5 percent to the standardized amount.
Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. Accordingly, we are making conforming amendments to § 412.4(c) of the regulation, effective for discharges on or after October 1, 2018, to specify that if a discharge is assigned to one of the MS-DRGs subject to the postacute care transfer policy and the individual is transferred to hospice care by a hospice program, the discharge is subject to payment as a transfer case.
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 FY 2019 IPPS/LTCH PPS final rule, we are updating our estimates of the three factors used to determine uncompensated care payments for FY 2019. We are continuing to use uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA) in the calculation of Factor 2. We also are continuing to incorporate data from Worksheet S-10 in the calculation of hospitals' share of the aggregate amount
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 2019. In addition, we are eliminating the 25-percent threshold policy, and under this policy, we are applying a one-time adjustment of approximately 0.9 percent to the LTCH PPS standard Federal payment rate in FY 2019 to ensure this elimination of the 25-percent threshold policy is budget neutral.
We are making changes to policies for the Hospital Readmissions Reduction Program, which was 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 and further amended by section 15002 of the 21st Century Cures 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 applicable periods for FY 2019, FY 2020, and FY 2021. We also are codifying the definitions of dual-eligible patients, the proportion of dual-eligibles, and the applicable period for dual-eligibility.
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. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients, clinicians, and providers in our quality programs and the Patients Over Paperwork Initiative to reduce costs and burden and program complexity, as discussed in section I.A.2. of the preamble of this final rule, we are removing a total of 4 measures from the Hospital VBP Program, all of which will continue to be used in the Hospital IQR Program, in order to reduce the costs and complexity of tracking these measures in multiple programs. Specifically, we are removing one measure, beginning with the FY 2021 program year: (1) Elective Delivery (NQF #0469) (PC-01). We also are removing three measures from the Hospital VBP Program, effective with the effective date of this FY 2019 IPPS/LTCH PPS final rule: (1) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) (AMI Payment); (2) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); and (3) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Pneumonia (PN Payment) (NQF #2579). In addition, we are renaming the Clinical Care domain as the Clinical Outcomes domain, beginning with the FY 2020 program year. We also are adopting measure removal factors for the Hospital VBP Program.
We are not finalizing our proposals to remove of the following six patient safety measures: (1) National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138); (2) National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139); (3) American College of Surgeons-Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753); (4) National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
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 in the worst-performing 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. As part of our agency-wide Patients over Paperwork and Meaningful Measures Initiatives, discussed in section I.A.2. of the preamble of this final rule, we are retaining the measures currently included in the HAC Reduction Program because the measures address a performance gap in patient safety and reduce harm caused in the delivery of care. In this final rule, we are: (1) Establishing administrative policies to collect, validate, and publicly report NHSN healthcare-associated infection (HAI) quality measure data that facilitate a seamless transition, independent of the Hospital IQR Program, beginning with January 1, 2020 infectious events; (2) changing the scoring methodology by removing domains and assigning equal weighting to each measure for which a hospital has a measure; and (3) establishing the
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 this final rule, we are making several changes. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients and clinicians in our quality programs and the Patients Over Paperwork initiative to reduce burden, cost, and program complexity, as discussed in section I.A.2. of the preamble of this final rule, we are adding a new measure removal factor and removing a total of 39 measures from the Hospital IQR Program. We are finalizing a modified version of our proposal to remove 5 of those measures such that removal is delayed by 1 year. For a full list of measures being removed, we refer readers to section VIII.A.5.c. of the preamble of this final rule. Beginning with the CY 2018 reporting period/FY 2020 payment determination and subsequent years, we are removing 17 claims-based measures and two structural measures. Beginning with the CY 2019 reporting period/FY 2021 payment determination and subsequent years, we are removing three chart-abstracted measures and two claims-based measures. Beginning with the CY 2020 reporting period/FY 2022 payment determination and subsequent years, we are removing six chart-abstracted measures, one claims-based measure, and seven eCQMs from the Hospital IQR Program measure set. Beginning with the CY 2021 reporting period/FY 2023 payment determination, we are removing one claims-based measure.
In addition, for the CY 2019 reporting period/FY 2021 payment determination, we are: (1) Requiring the same eCQM reporting requirements that were adopted for the CY 2018 reporting period/FY 2020 payment determination (82 FR 38355 through 38361), such that hospitals submit one, self-selected calendar quarter of 2019 data for 4 eCQMs in the Hospital IQR Program measure set; and (2) requiring that hospitals use the 2015 Edition certification criteria for CEHRT. These changes are in alignment with changes or current established policies under the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs). In addition, we are summarizing public comments we received on two measures we are considering for potential future inclusion in the Hospital IQR Program, as well as on the potential future development and adoption of electronic clinical quality measures generally.
The LTCH QRP is authorized by section 1886(m)(5) of the Act and applies to all hospitals certified by Medicare as long-term care hospitals (LTCHs). Under the LTCH QRP, the Secretary reduces by 2 percentage points the annual update to the LTCH PPS standard Federal rate for discharges for an LTCH during a fiscal year if the LTCH fails to submit data in accordance with the LTCH QRP requirements specified for that fiscal year. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients and clinicians in our quality programs and the Patients Over Paperwork Initiative to reduce cost and burden and program complexity, as discussed in section I.A.2. of the preamble of this final rule, we are removing three measures from the LTCH QRP. We also are adopting a new measure removal factor and are codifying the measure removal factors in our regulations. In addition, we are updating our regulations to expand the methods by which an LTCH is notified of noncompliance with the requirements of the LTCH QRP for a program year and how CMS will notify an LTCH of a reconsideration decision.
In this final rule, we are finalizing several changes to reduce burden, increase interoperability and improve patient electronic access to their health information under the Medicare and Medicaid Promoting Interoperability Programs (previously referred to as Medicare and Medicaid EHR Incentive Programs). Specifically, we are finalizing: (1) An EHR reporting period of a minimum of any continuous 90 days in CYs 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency; (2) modifications to our proposed performance-based scoring methodology, which consists of a smaller set of objectives as well as a smaller set of new and modified measures; (3) the removal of certain CQMs beginning with the reporting period in CY 2020 as well as the CY 2019 reporting requirements we proposed to align the CQM reporting requirements for the Promoting Interoperability Programs with the Hospital IQR Program; (4) the codification of policies for subsection (d) Puerto Rico hospitals; (5) amendments to the prior approval policy applicable in the Medicaid Promoting Interoperability Program to align with the prior approval policy for MMIS and ADP systems and to minimize burden on States; and (6) deadlines for funding availability for States to conclude the Medicaid Promoting Interoperability Program.
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For FY 2019, we are updating our estimates of the three factors used to determine uncompensated care payments. We are continuing to use uninsured estimates produced by OACT as part of the development of the NHEA in the calculation of Factor 2. We also are continuing to incorporate data from Worksheet S-10 in the calculation of hospitals' share of the aggregate amount of uncompensated care by combining data on uncompensated care costs from Worksheet S-10 for FY 2014 and FY 2015 with proxy data regarding a hospital's share of low-income insured days for FY 2013 to determine Factor 3 for FY 2019. To determine the amount of uncompensated care for Puerto Rico hospitals, Indian Health Service and Tribal hospitals, and all-inclusive rate providers, we are using only the data regarding low-income insured days for FY 2013. In addition, in this final rule, we are establishing the following policies: (1) For providers with multiple cost reports beginning in the same fiscal year, to use the longest cost report and annualize Medicaid data and uncompensated care data if a hospital's cost report does not equal 12 months of data; (2) in the rare case where a provider has multiple cost reports beginning in the same fiscal year, but one report also spans the entirety of the following fiscal year such that the hospital has no cost report for that fiscal year, the cost report that spans both fiscal years will be used for the latter fiscal year; and (3) to apply statistical trim methodologies to potentially aberrant CCRs and potentially aberrant uncompensated care costs.
We project that the amount available to distribute as payments for uncompensated care for FY 2019 will increase by approximately $1.5 billion, as compared to the estimate of overall payments, including Medicare DSH payments and uncompensated care payments, that will be distributed in FY 2018. The 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.
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The removal of NHSN HAI measures from the Hospital IQR Program and the subsequent cessation of its validation processes for NHSN HAI measures and the creation of a validation process for the HAC Reduction program represent no net change in reporting burden across CMS hospital quality programs. However, with the finalization of our proposal to remove HAI chart-abstracted measures from the Hospital IQR Program, we anticipate a total burden shift of 43,200 hours and approximately $1.6 million, as a result of no longer needing to validate those HAI measures under the Hospital IQR Program and beginning the validation process under the HAC Reduction Program.
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Further, we anticipate that the removal of 39 measures will result in a reduction in costs unrelated to information collection. For example, it may be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. Also, when measures are in multiple programs, maintaining the specifications for those measures, as well as the tools we need to collect, validate, analyze, and publicly report the measure data may result in costs to CMS. In addition, beneficiaries may find it confusing to see public reporting on the same measure in different programs. We anticipate that our finalized policies will reduce the above-described costs.
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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 an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.
Under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through FY 2022. 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, 2022, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years).
Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M.
Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are included along with the IPPS annual update in this document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs continue to be paid solely under a reasonable cost-based system, subject to a rate-of-increase ceiling on inpatient operating costs. Similarly, extended neoplastic disease care hospitals are paid on a reasonable cost basis, subject to a rate-of-increase ceiling on inpatient operating costs.
The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413.
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 through September 30, 2015 all LTCHs were 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 generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS (73 FR 26797 through 26798).
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.
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.
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, 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.
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 Hospital 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 post-acute care providers, to report standardized patient assessment data, data on quality measures, and data on resource use and other measures.
Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. These adjustments follow the 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 2017 to fully offset $11 billion, in accordance with section 631 of the ATRA. The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.
The 21st Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016, contained the following provision affecting payments under the Hospital Readmissions Reduction 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 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 continuing to implement 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.
The Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 2018, contains provisions affecting payments under the IPPS and the LTCH PPS, which we are implementing or continuing to implement in this final rule:
• Section 50204 amended section 1886(d)(12) of the Act to provide for certain temporary changes to the low-volume hospital payment adjustment policy for FYs 2018 through 2022. For FY 2018, this provision extends the qualifying criteria and payment adjustment formula that applied for FYs 2011 through 2017. For FYs 2019 through 2022, this provision modifies the discharge criterion and payment adjustment formula. In FY 2023 and subsequent fiscal years, the qualifying criteria and payment adjustment revert to the requirements that were in effect for FYs 2005 through 2010.
• Section 50205 extends the MDH program through FY 2022. It also provides for an eligible hospital that is located in a State with no rural area to qualify for MDH status under an expanded definition if the hospital satisfies any of the statutory criteria at section 1886(d)(8)(E)(ii)(I), (II) (as of January 1, 2018), or (III) of the Act to be reclassified as rural.
• Section 51005(a) modified section 1886(m)(6) of the Act by extending the blended payment rate for site neutral payment rate LTCH discharges for cost reporting periods beginning in FY 2016 by an additional 2 years (FYs 2018 and 2019). In addition, section 51005(b) reduces the LTCH IPPS comparable per diem amount used in the site neutral payment rate for FYs 2018 through 2026 by 4.6 percent. In this final rule, we are making conforming changes to the existing regulations.
• Section 53109 modified section 1886(d)(5)(J) of the Act to require that, beginning in FY 2019, discharges to hospice care also qualify as a postacute care transfer and are subject to payment adjustments.
In the proposed rule that appeared in the
Below is a general summary of the major changes that we proposed to make in the proposed rule.
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 2019.
• Proposed adjustment to the standardized amounts under section 1886(d) of the Act for FY 2019 in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 414 of the MACRA.
• Proposed recalibration of the MS-DRG relative weights.
• A discussion of the proposed FY 2019 status of new technologies approved for add-on payments for FY 2018 and a presentation of our evaluation and analysis of the FY 2019 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).
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 2019 wage index update using wage data from cost reporting periods beginning in FY 2015.
• Proposal regarding other wage-related costs in the wage index.
• Calculation of the proposed occupational mix adjustment for FY 2019 based on the 2016 Occupational Mix Survey.
• Analysis and implementation of the proposed FY 2019 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.
• Proposals to codify policies regarding multicampus hospitals.
• 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.
• The proposed adjustment to the wage index for acute care hospitals for FY 2019 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 2019 wage index.
• Public comment solicitation on wage index disparities.
In section IV. 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 and special payment policy and implementation of the statutory changes to the postacute care transfer policy.
• Proposed changes to the inpatient hospital update for FY 2019.
• Proposed changes related to the statutory changes to the low-volume hospital payment adjustment policy.
• Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status.
• The statutorily required IME adjustment factor for FY 2019.
• Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care.
• Proposed changes to the effective date of SCH and MDH classification status determinations.
• Proposed changes related to the extension of the MDH program.
• Proposed changes to the rules for payment adjustments under the
• 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 2019.
• Proposed changes to Medicare GME affiliation agreements for new urban teaching hospitals.
• Discussion of and proposals relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2019.
• Proposed revisions of the hospital inpatient admission orders documentation requirements.
In section V. 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 2019.
In section VI. of the preamble of the proposed rule, we discussed—
• Proposed changes to payments to certain excluded hospitals for FY 2019.
• Proposed changes to the regulations governing satellite facilities.
• Proposed changes to the regulations governing excluded units of hospitals.
• Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration.
In section VII. 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 2019.
• Proposed changes to the blended payment rate for site neutral payment rate cases.
• Proposed elimination of the 25-percent threshold policy.
In section VIII. of the preamble of the proposed rule, we address—
• 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 requirements pertaining to the clinical quality measurement for eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs.
In section IX. of the preamble of the proposed rule, we set forth proposed revisions to the supporting documentation required for an acceptable Medicare cost report submission.
In section X. of the preamble of the proposed rule, we discussed our efforts to further improve the public accessibility of hospital standard charge information, effective January 1, 2019, in accordance with section 2718(e) of the Public Health Service Act.
In section XI. of the preamble of the proposed rule, we set forth proposed revisions to the requirements for supporting information used for physician certification and recertification of claims.
In section XII. of the preamble of the proposed rule, we included a request for information on the possible establishment of CMS patient health and safety requirements for hospitals and other Medicare- and Medicaid-participating providers and suppliers for interoperable electronic health records and systems for electronic health care information exchange.
In sections II. and III. of the Addendum to the proposed rule, we set forth the proposed changes to the amounts and factors for determining the proposed FY 2019 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We proposed to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum to the proposed rule, we addressed the update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2019 for certain hospitals excluded from the IPPS.
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 2019 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 2019. 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.
In Appendix A of the proposed rule, we set forth an analysis of the impact the proposed changes would have on affected acute care hospitals, CAHs, LTCHs, and PCHs.
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 2019 for the following:
• A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs).
• Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.
• The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges.
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 2018 recommendations concerning hospital inpatient payment
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.
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 2018 IPPS/LTCH PPS final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 56872; and 82 FR 38010 through 38085, respectively).
For information on the adoption of the MS-DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189).
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 (Pub. L. 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 rulemakings, 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 under Public Law 110-90.
In addition, as discussed in prior rulemakings and most recently in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009), 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 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. 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
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20176 and 20177), consistent with the requirements of section 414 of the MACRA, we proposed to implement a positive 0.5 percentage point adjustment to the standardized amount for FY 2019. We indicated that this would be a permanent adjustment to payment rates. We stated in the proposed rule that we plan to propose future adjustments required under section 414 of the MACRA for FYs 2020 through 2023 in future rulemaking.
After consideration of the public comments we received, we are finalizing the +0.5 percentage point adjustment to the standardized amount for FY 2019, as required under section 414 of the MACRA.
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 have calculated the IPPS MS-DRG relative weights using 19 CCRs, which now include distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization.
Consistent with our established policy, we calculated the final MS-DRG relative weights for FY 2019 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 2019 is included in section II.G. of the preamble to this FY 2019 IPPS/LTCH PPS final rule. As we did with the FY 2018 IPPS/LTCH PPS final rule, for this FY 2019 final rule, we are providing the version of the HCRIS from which we calculated these 19 CCRs on the CMS website at:
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.
As of October 1, 2015, providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system instead of the ICD-9-CM coding system, which was used through September 30, 2015. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting. For a detailed discussion of the conversion of the MS-DRGs to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56789).
CMS has previously encouraged input from our stakeholders concerning the annual IPPS updates when that input was made available to us by December 7 of the year prior to the next annual proposed rule update. As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38010), as we work 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, which will require additional time for us to review requests from the public to make specific updates, analyze claims data, and consider any proposed updates. Given the need for more time to carefully evaluate requests and propose updates, we changed the deadline to request updates to the MS-DRGs to November 1 of each year. This will provide an additional 5 weeks for the data analysis and review process. Interested parties had to submit any comments and suggestions for FY 2019 by November 1, 2017, and are encouraged to submit any comments and suggestions for FY 2020 by November 1, 2018 via the CMS MS-DRG Classification Change Request Mailbox located at:
Following are the changes that we proposed to the MS-DRGs for FY 2019 in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20177 through 20257). We invited public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in the proposed rule. In some cases, we proposed changes to the MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. In other cases, we proposed to maintain the existing MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. For the FY 2019 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2017 update of the FY 2017 MedPAR file, which contains hospital bills received through September 30, 2017, for discharges occurring through September 30, 2017. In our discussion of the proposed MS-DRG reclassification changes, we referred to our analysis of claims data from the “September 2017 update of the FY 2017 MedPAR file.”
In this FY 2019 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 2019 final rule, we did not perform any further MS-DRG analysis of claims data. Therefore, all of the data analysis is based on claims data from the September 2017 update of the FY 2017 MedPAR file, which contains bills received through September 30, 2017, for discharges occurring through September 30, 2017.
As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on 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; and
• 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.
We are making the FY 2019 ICD-10 MS-DRG GROUPER and Medicare Code Editor (MCE) Software Version 36, the ICD-10 MS-DRG Definitions Manual files Version 36 and the Definitions of Medicare Code Edits Manual Version 36 available to the public on our CMS website at:
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), we stated our intent to review the ICD-10 logic for Pre-MDC MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively), as well as 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 heart assist devices are currently assigned. We also encouraged 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:
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20178 through 20179), the logic for Pre-MDC MS-DRGs 001 and 002 is comprised of two lists. The first list includes procedure codes identifying a heart transplant procedure, and the second list includes procedure codes identifying the implantation of a heart assist system. The list of procedure codes identifying the implantation of a heart assist system includes the following three codes.
In addition to these three procedure codes, there are also 33 pairs of code combinations or procedure code “clusters” that, when reported together, satisfy the logic for assignment to MS-DRGs 001 and 002. The code combinations are represented by two procedure codes and include either one code for the insertion of the device with one code for removal of the device or one code for the revision of the device with one code for the removal of the device. The 33 pairs of code combinations are listed below.
In response to our solicitation for public comments on restructuring the MS-DRGs for heart assist system procedures, commenters recommended that CMS maintain the current logic under the Pre-MDC MS-DRGs 001 and 002. Similar to the discussion in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38011 through 38012) involving MS-DRG 215 (Other Heart Assist System Implant), the commenters provided examples of common clinical scenarios involving a left ventricular assist device (LVAD) and included the procedure codes that were reported under the ICD-9 based MS-DRGs in comparison to the procedure codes reported under the ICD-10 MS-DRGs, which are reflected in the following table.
The commenters noted that, for Pre-MDC MS-DRGs 001 and 002, the procedures involving the insertion of an implantable heart assist system, such as the insertion of a LVAD, and the procedures involving exchange of an LVAD (where an existing LVAD is removed and replaced with either a new LVAD or a new LVAD pump) demonstrate clinical similarities and utilize similar resources. Although the commenters recommended that CMS maintain the current logic under the Pre-MDC MS-DRGs 001 and 002, they also recommended that CMS continue to monitor the data in these MS-DRGs for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of patients undergoing procedures utilizing heart assist devices. The commenters also requested that coding guidance be issued for assignment of the correct ICD-10-PCS procedure codes describing LVAD exchanges to encourage accurate reporting of these procedures.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20180), we stated that we agree with the commenters that we should continue to monitor the data in Pre-MDC MS-DRGs 001 and 002 for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of patients undergoing procedures utilizing heart assist devices. In response to the request that coding guidance be issued for assignment of the correct ICD-10-PCS procedure codes describing LVAD exchanges to encourage accurate reporting of these procedures, as we noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), coding advice is issued independently from payment policy. We also noted that, historically, we have not provided coding advice in rulemaking with respect to policy (82 FR 38045). We collaborate with the American Hospital Association (AHA) through the Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We recommended that the requestor and other interested parties submit any questions pertaining to correct coding for these technologies to the AHA.
In response to the public comments we received on this topic, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20180), we provided the results of our claims analysis from the September 2017 update of the FY 2017 MedPAR file for cases in Pre-MDC MS-DRGs 001 and 002. Our findings are shown in the following table.
As shown in this table, for MS-DRG 001, there were a total of 1,993 cases with an average length of stay of 35.6 days and average costs of $185,660. For MS-DRG 002, there were a total of 179 cases with an average length of stay of 18.3 days and average costs of $99,635.
We then examined claims data in Pre-MDC MS-DRGs 001 and 002 for cases that reported one of the three procedure codes identifying the implantation of a heart assist system such as the LVAD. Our findings are shown in the following table.
As shown in this table, for MS-DRG 001, there were a total of 1,260 cases reporting procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach) with an average length of stay of 35.5 days and average costs of $206,663. There was one case that reported procedure code 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach) with an average length of stay of 8 days and average costs of $33,889. There were no cases reporting procedure code 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach). For MS-DRG 002, there were a total of 82 cases reporting procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach) with an average length of stay of 19.9 days and average costs of $131,957. There were no cases reporting procedure codes 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach) or 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach).
We also examined the cases in MS-DRGs 001 and 002 that reported one of the possible 33 pairs of code combinations or clusters. Our findings are shown in the following 8 tables. The first table provides the total number of cases reporting a procedure code combination (or cluster) compared to all of the cases in the respective MS-DRG, followed by additional detailed tables showing the number of cases, average length of stay, and average costs for each specific code combination that was reported in the claims data.
We did not find any cases reporting the following procedure code combinations (clusters) in the claims data.
The data show that there are differences in the average length of stay and average costs for cases in Pre-MDC MS-DRGs 001 and 002 according to the type of procedure (insertion, revision, or removal), the type of device (biventricular short-term external heart assist system, short-term external heart assist system or implantable heart assist system), and the approaches that were utilized (open, percutaneous, or percutaneous endoscopic). In the FY 2019 IPPS/LTCH PPS proposed rule, we agreed with the commenters' recommendation to maintain the structure of Pre-MDC MS-DRGs 001 and 002 for FY 2019 and stated that we would continue to analyze the claims data.
After consideration of the public comments we received, we are maintaining the current structure of Pre-MDC MS-DRGs 001 and 002 for FY 2019.
Commenters also suggested that CMS maintain the current logic for MS-DRG 215 (Other Heart Assist System Implant), but they recommended that CMS continue to monitor the data in MS-DRG 215 for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of procedures utilizing heart assist devices. As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20184), we also received a request to review claims data for procedures involving extracorporeal membrane oxygenation (ECMO) in combination with the insertion of a percutaneous short-term external heart assist device to determine if the current MS-DRG assignment is appropriate.
The logic for MS-DRG 215 is comprised of the procedure codes shown in the following table, for which we examined claims data in the September 2017 update of the FY 2017 MedPAR file in response to the commenters' requests. Our findings are shown in the following table.
As shown in this table, for MS-DRG 215, we found a total of 3,428 cases with an average length of stay of 8.7 days and average costs of $68,965. For procedure codes describing the insertion of a biventricular short-term external heart assist system with open, percutaneous or percutaneous endoscopic approaches, we found a total of 127 cases with an average length of stay ranging from 2 to 10 days and average costs ranging from $43,988 to $118,361. For procedure codes describing the insertion of a short-term external heart assist system with open, percutaneous or percutaneous endoscopic approaches, we found a total of 3,233 cases with an average length of stay ranging from 5.3 days to 11.5 days and average costs ranging from $57,042 to $99,107. For procedure codes describing the revision of a short-term external heart assist system with open or percutaneous approaches, we found a total of 88 cases with an average length of stay ranging from 10 to 13.5 days and average costs ranging from $71,077 to $99,378. We found 1 case
As the data show, there is a wide range in the average length of stay and the average costs for cases reporting procedures that involve a biventricular short-term external heart assist system versus a short-term external heart assist system. There is an even greater range in the average length of stay and the average costs when comparing the revision of a short-term external heart assist system to the revision of a synthetic substitute in the heart or to the revision of an implantable heart assist system.
In the proposed rule, we stated that we agreed with the commenters that continued monitoring of the data and further analysis is necessary prior to proposing any modifications to MS-DRG 215. As stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), we are aware that the AHA published Coding Clinic advice that clarified coding and reporting for certain external heart assist devices due to the technology being approved for new indications. The current claims data do not yet reflect that updated guidance. We also noted that there have been recent updates to the descriptions of the codes for heart assist devices in the past year. For example, the qualifier “intraoperative” was added effective October 1, 2017 (FY 2018) to the procedure codes describing the insertion of short-term external heart assist system procedures to distinguish between procedures where the device was only used intraoperatively and was removed at the conclusion of the procedure versus procedures where the device was not removed at the conclusion of the procedure and for which that qualifier would not be reported. The current claims data do not yet reflect these new procedure codes, which are displayed in the following table and are assigned to MS-DRG 215.
In the proposed rule, we indicated that our clinical advisors also agreed that additional claims data are needed for analysis prior to proposing any changes to MS-DRG 215. Therefore, we did not propose to make any modifications to MS-DRG 215 for FY 2019.
After consideration of the public comments we received, we are finalizing our proposal to maintain the current structure of MS-DRG 215 for FY 2019.
As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20185) and earlier in this section, we also received a request to review cases reporting the use of ECMO in combination with the insertion of a percutaneous short-term external heart assist device. Under ICD-10-PCS, ECMO is identified with procedure code 5A15223 (Extracorporeal membrane oxygenation, continuous) and the insertion of a percutaneous short-term external heart assist device is identified with procedure code 02HA3RZ (Insertion of short-term external heart assist system into heart, percutaneous approach). According to the commenter, when ECMO procedures are performed percutaneously, they are less invasive and less expensive than traditional ECMO. The commenter also noted that, currently under ICD-10-PCS, there is not a specific procedure code to identify percutaneous ECMO, and providers are only able to report ICD-10-PCS procedure code 5A15223, which may be inappropriately resulting in a higher paying MS-DRG. Therefore, the commenter submitted a separate request to create a new ICD-10-PCS procedure code specifically for percutaneous ECMO which was discussed at the March 6-7, 2018 ICD-10 Coordination and Maintenance Committee Meeting. We refer readers to section II.F.18. of the preamble of this final rule for further information regarding this meeting and the discussion for a new procedure code.
The requestor suggested that cases reporting a procedure code for ECMO in combination with the insertion of a percutaneous short-term external heart assist device could be reassigned from Pre-MDC MS-DRG 003 (ECMO or Tracheostomy with Mechanical Ventilation >96 Hours or Principal Diagnosis Except Face, Mouth and Neck with Major O.R. Procedure) to MS-DRG 215. Our analysis involved examining cases in Pre-MDC MS-DRG 003 in the September 2017 update of the FY 2017 MedPAR file for cases reporting ECMO with and without the insertion of a percutaneous short-term external heart assist device. Our findings are shown in the following table.
As shown in this table, we found a total of 14,383 cases with an average length of stay of 29.5 days and average costs of $118,218 in Pre-MDC MS-DRG 003. We found 1,786 cases reporting procedure code 5A15223 (Extracorporeal membrane oxygenation, continuous) with an average length of stay of 19 days and average costs of $119,340. We found 94 cases reporting procedure code 5A15223 and 02HA3RZ (Insertion of short-term external heart assist system into heart, percutaneous approach) with an average length of stay of 11.4 days and average costs of $110,874. Lastly, we found 1 case reporting procedure code 5A15223 and 02HA4RZ (Insertion of short-term external heart assist system into heart, percutaneous endoscopic approach) with an average length of stay of 1 day and average costs of $64,319.
We also reviewed the cases in MS-DRG 215 for procedure codes 02HA3RZ and 02HA4RZ. Our findings are shown in the following table.
As shown in this table, we found a total of 3,428 cases with an average length of stay of 8.7 days and average costs of $68,965. We found a total of 3,136 cases reporting procedure code 02HA3RZ with an average length of stay of 8.4 days and average costs of $67,670. We found a total of 31 cases reporting procedure code 02HA4RZ with an average length of stay of 5.3 days and average costs of $57,042.
We stated in the proposed rule that, for Pre-MDC MS-DRG 003, while the average length of stay and average costs for cases where procedure code 5A15223 was reported with procedure code 02HA3RZ or procedure code 02HA4RZ are lower than the average length of stay and average costs for cases where procedure code 5A15223 was reported alone, we are unable to determine from the data if those ECMO procedures were performed percutaneously in the absence of a unique code. In addition, the one case reporting procedure code 5A15223 with 02HA4RZ only had a 1 day length of stay and it is unclear from the data what the circumstances of that case may have involved. For example, the patient may have been transferred or may have expired. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20186), we proposed to not reassign cases reporting procedure code 5A15223 when reported with procedure code 02HA3RZ or procedure code 02HA4RZ for FY 2019. We stated in the proposed rule that our clinical advisors agreed that until there is a way to specifically identify percutaneous ECMO in the claims data to enable further analysis, a proposal at this time is not warranted.
Another commenter suggested that CMS should assign cases representing patients receiving treatment involving the peripheral VA ECMO procedure to MS-DRG 215 or another MS-DRG within MDC 5. The commenter stated that cases representing patients currently assigned to MS-DRG 215 are clinically coherent to the characteristics of the patients who undergo a peripheral VA ECMO procedure. Another commenter recommended that the new procedure code describing a percutaneous veno-venous (VV) ECMO procedure be considered for assignment to MS-DRG 004 or another MS-DRG within MDC 4 because the indication is to provide respiratory support.
In response to the commenters' suggestions to assign the new procedure codes for percutaneous ECMO procedures to MS-DRG 215, we note that the new procedure codes created to describe percutaneous ECMO procedures were not finalized at the time of the proposed rule. In addition, the deletion of the current procedure code for ECMO (ICD-10-PCS code 5A15223) and the creation of the new procedure code for central ECMO were not finalized at the time of the proposed rule. As these codes were not finalized at the time of the proposed rule, they were not reflected in Table 6B.—New Procedure Codes (which is available via the internet on the CMS website at:
Consistent with our annual process of assigning new procedure codes to MDCs and MS-DRGs, and designating a procedure as an O.R. or non-O.R. procedure, we reviewed the predecessor procedure code assignments. The predecessor procedure code (ICD-10-PCS code 5A15223) for the new percutaneous ECMO procedure codes describes an open approach which requires an incision along the sternum (sternotomy) and is performed for open heart surgery. It is considered extremely invasive and carries significant risks for complications, including bleeding, infection, and vessel injury. For central ECMO, arterial cannulation typically occurs directly into the ascending aorta and venous cannulation occurs directly into the right atrium. Conversely, percutaneous (peripheral) ECMO does not require a sternotomy and can be performed in the intensive care unit or at the bedside. The cannulae are placed percutaneously and can utilize a variety of configurations, according to the indication (VA or VV) and patient age (adult vs. pediatric). While percutaneous ECMO also carries risks, they differ from those of central ECMO. For example, our clinical advisor note that patients receiving percutaneous ECMO are at a greater risk of suffering vascular complications.
Upon review, our clinical advisors do not support assigning the new procedure codes for peripheral ECMO procedures to the same MS-DRG as the predecessor code for open (central) ECMO in Pre-MDC MS-DRG 003. Our clinical advisors also do not agree with designating percutaneous ECMO procedures as O.R. procedures because they are less resource intensive compared to open ECMO procedures. As shown in Table 6B.—New Procedure Codes associated with this final rule (which is available via the internet on the CMS website at:
Our clinical advisors support the designation of the peripheral ECMO procedures as a non-O.R. procedure affecting the MS-DRG assignment of MS-DRG 207 because they consider the procedure to be similar to providing mechanical ventilation greater than 96 hours in terms of both clinical severity and resource use. Because any respiratory diagnosis classified under MDC 4 with mechanical ventilation greater than 96 hours is assigned to MS-DRG 207, it is reasonable to expect that any patient with a respiratory diagnosis who requires treatment involving a peripheral ECMO procedure should also be assigned to MS-DRG 207. The same rationale was applied for MS-DRG 870, which also includes mechanical ventilation greater than 96 hours. In addition, based on the common clinical indications for which a percutaneous ECMO procedure is utilized, such as cardiogenic shock and cardiac arrest, our clinical advisors determined that MS-DRGs 291 (Heart Failure and Shock with MCC) and 296 (Cardiac Arrest, Unexplained with MCC) also are appropriate for a percutaneous ECMO procedure to affect the MS-DRG assignment. The MS-DRG assignment for a central ECMO procedure will remain in Pre-MDC MS-DRG 003.
In cases where a percutaneous external heart assist device is utilized, in combination with a percutaneous ECMO procedure, effective October 1, 2018, the ICD-10 MS-DRG Version 36 GROUPER logic results in a case assignment to MS-DRG 215 because the percutaneous external heart assist device procedure is designated as an O.R. procedure and assigned to MS-DRG 215.
Because the procedure codes describing percutaneous ECMO procedures are new, becoming effective October 1, 2018, we do not yet have any claims data to analyze. Once claims data becomes available, we can examine the
After consideration of the public comments we received, we are finalizing our proposal to not reassign cases reporting ICD-10-PCS procedure code 5A15223 when reported with ICD-10-PCS procedure code 02HA3RZ or ICD-10-PCS procedure code 02HA4RZ for FY 2019. Consistent with our policy for determining MS-DRG assignment for new codes and for the reasons discussed, the two new procedure codes describing percutaneous ECMO procedures discussed and displayed in the table above, under the ICD-10 MS-DRGs Version 36 GROUPER logic, effective October 1, 2018, are designated as non-O.R. procedures impacting the MS-DRG assignment of MS-DRGs 207, 291, 296, and 870. The MS-DRG assignment for the central ECMO procedure remains in Pre-MDC MS-DRG 003.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20186), we also discussed that a commenter also suggested that CMS maintain the current logic for MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon with and without MCC, respectively), but recommended that CMS continue to monitor the data in these MS-DRGs for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of procedures involving heart assist devices.
The logic for heart assist system devices in MS-DRGs 268 and 269 is comprised of the procedure codes shown in the following table, for which we examined claims data in the September 2017 update of the FY 2017 MedPAR file in response to the commenter's request. Our findings are shown in the following table.
As shown in this table, for MS-DRG 268, there were a total of 3,798 cases, with an average length of stay of 9.6 days and average costs of $49,122. There were 16 cases reporting procedure code 02PA0QZ (Removal of implantable heart assist system from heart, open approach), with an average length of stay of 23.4 days and average costs of $79,850. There were no cases that reported procedure codes 02PA0RS (Removal of biventricular short-term external heart assist system from heart, open approach), 02PA0RZ (Removal of short-term external heart assist system from heart, open approach), 02PA3RS (Removal of biventricular short-term external heart assist system from heart, percutaneous approach), 02PA4RS (Removal of biventricular short-term external heart assist system from heart, percutaneous endoscopic approach) or 02PA4RZ (Removal of short-term external heart assist system from heart, percutaneous endoscopic approach). There were 28 cases reporting procedure code 02PA3QZ (Removal of implantable
The data show that there are differences in the average length of stay and average costs for cases in MS-DRGs 268 and 269 according to the type of device (short-term external heart assist system or implantable heart assist system), and the approaches that were utilized (open, percutaneous, or percutaneous endoscopic). In the proposed rule, we stated that we agreed with the recommendation to maintain the structure of MS-DRGs 268 and 269 for FY 2019 and will continue to analyze the claims data for possible future updates. As such, we proposed to not make any changes to the structure of MS-DRGs 268 and 269 for FY 2019.
After consideration of the public comments we received, we are finalizing our proposal to maintain the structure of MS-DRGs 268 and 269 for FY 2019.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20188), we received a request to create a new Pre-MDC MS-DRG for all procedures involving the CivaSheet® technology, an implantable, planar brachytherapy source designed to enable delivery of radiation to the site of the cancer tumor excision or debulking, while protecting neighboring tissue. The requestor stated that physicians have used the CivaSheet® technology for a number of indications, such as colorectal, gynecological, head and neck, soft tissue sarcomas and pancreatic cancer. The requestor noted that potential uses also include nonsmall-cell lung cancer, ocular melanoma, and atypical meningioma. Currently, procedures involving the CivaSheet® technology are reported using ICD-10-PCS Section D—Radiation Therapy codes, with the root operation “Brachytherapy.” These codes are non-O.R. codes and group to the MS-DRG to which the principal diagnosis is assigned.
In response to this request, we analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for cases representing patients who received treatment that reported low dose rate (LDR) brachytherapy procedure codes across all MS-DRGs. We referred readers to Table 6P.—ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG Changes associated with the proposed rule, which is available via the internet on the CMS website at:
As shown in the immediately preceding table, we identified 4 cases reporting one of these LDR brachytherapy procedure codes across all MS-DRGs, with an average length of stay of 6.3 days and average costs of $39,853. In the proposed rule, we stated that we believe that creating a new Pre-MDC MS-DRG based on such a small number of cases could lead to distortion in the relative payment weights for the Pre-MDC MS-DRG. Having a larger number of clinically cohesive cases within the Pre-MDC MS-DRG provides greater stability for annual updates to the relative payment weights. Therefore, we did not propose to create a new Pre-MDC MS-DRG for procedures involving the CivaSheet® technology for FY 2019.
We agree with the commenter that there were some inadvertent errors in the table included in the proposed rule in reference to certain procedure codes and MS-DRGs; the table in this final rule above now correctly reflects the procedure codes and MS-DRGs reflected in the FY 2017 MedPAR file (as of the September 2017 update). We note that because our proposal was based on the small number of cases, and not the nature of those cases, these errors had no bearing on our proposal or our decision to finalize this proposal. We acknowledge the commenters' concerns about the adequacy of payment for these low volume services. Therefore, as part of our ongoing, comprehensive analysis of the MS-DRGs under ICD-10, we will continue to explore mechanisms through which to address rare diseases and low volume DRGs.
After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG structure for procedures involving the CivaSheet® technology for FY 2019.
The logic for case assignment to Pre-MDC MS-DRGs 11, 12, and 13 (Tracheostomy for Face, Mouth and Neck Diagnoses with MCC, with CC, and without CC/MCC, respectively) as displayed in the ICD-10 MS-DRG Version 35 Definitions Manual, which is available via the internet on the CMS website at:
To improve the manner in which the logic for assignment is displayed in the ICD-10 MS-DRG Definitions Manual and to clarify how it is applied for grouping purposes, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20188), we proposed to reorder the lists of the diagnosis and procedure codes. The list of principal diagnosis codes for face, mouth, and neck would be sequenced first, followed by the list of the tracheostomy procedure codes and, lastly, the list of laryngectomy procedure codes.
We also proposed to revise the titles of Pre-MDC MS-DRGs 11, 12, and 13 from “Tracheostomy for Face, Mouth and Neck Diagnoses with MCC, with CC and without CC/MCC, respectively” to “Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy with MCC”, “Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy with CC”, and “Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy without CC/MCC”, respectively, to reflect that laryngectomy procedures may also be assigned to these MS-DRGs.
After consideration of the public comments we received, we are finalizing our proposal to reorder the lists of diagnoses and procedure codes for Pre-MDC MS-DRGs 11, 12, and 13 in the ICD-10 MS-DRG Definitions Manual Version 36. We also are finalizing our proposal to revise the titles for Pre-MDC MS-DRGs 11, 12, and 13 as follows for the ICD-10 MS-DRGs Version 36, effective October 1, 2018:
• MS-DRG 11 (Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy with MCC);
• MS-DRG 12 (Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy with CC); and
• MS-DRG 13 (Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy without CC/MCC).
Chimeric Antigen Receptor (CAR) T-cell therapy is a cell-based gene therapy in which T-cells are genetically engineered to express a chimeric antigen receptor that will bind to a certain protein on a patient's cancerous cells. The CAR T-cells are then administered to the patient to attack certain cancerous cells and the individual is observed for potential serious side effects that would require medical intervention.
Two CAR T-cell therapies received FDA approval in 2017. KYMRIAH® (manufactured by Novartis Pharmaceuticals Corporation) was approved for the use in the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (ALL) that is refractory or in second or later relapse. In May 2018, KYMRIAH received FDA approval for a second indication, treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL), high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. YESCARTA® (manufactured by Kite Pharma, Inc.) was approved for use in the treatment of adult patients with relapsed or refractory large B-cell lymphoma and who have not responded to or who have relapsed after at least two other kinds of treatment.
Procedures involving the CAR T-cell therapies are currently identified with ICD-10-PCS procedure codes XW033C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into peripheral vein, percutaneous approach, new technology group 3) and XW043C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into central vein, percutaneous approach, new technology group 3), which both became effective October 1, 2017. Procedures described by these two ICD-10-PCS procedure codes are designated as non-O.R. procedures that have no impact on MS-DRG assignment.
As we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20189), we have received many inquiries from the public regarding payment of CAR T-cell therapy under the IPPS. Suggestions for the MS-DRG assignment for FY 2019 ranged from assigning ICD-10-PCS procedure codes XW033C3 and XW043C3 to an existing MS-DRG to the creation of a new MS-DRG for CAR T-cell therapy. In the context of the recommendation to create a new MS-DRG for FY 2019, we also received suggestions that payment should be established in a way that promotes comparability between the inpatient setting and outpatient setting.
As part of our review of these suggestions, we examined the existing MS-DRGs to identify the MS-DRGs that represent cases most clinically similar to those cases in which the CAR T-cell therapy procedures would be reported. The CAR T-cell procedures involve a type of autologous immunotherapy in which the patient's cells are genetically transformed and then returned to that patient after the patient undergoes cell depleting chemotherapy. Our clinical advisors believe that patients receiving treatment utilizing CAR T-cell therapy procedures would have similar clinical characteristics and comorbidities to those seen in cases representing patients receiving treatment for other hematologic cancers who are treated with autologous bone marrow transplant therapy that are currently assigned to MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC). Therefore, after consideration of the inquiries received as to how the IPPS can appropriately group cases reporting the use of CAR T-cell therapy, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20189), we proposed to assign ICD-10-PCS procedure codes XW033C3 and XW043C3 to Pre-MDC MS-DRG 016 for FY 2019. In addition, we proposed to revise the title of MS-DRG 016 from “Autologous Bone Marrow Transplant with CC/MCC” to “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy.”
However, we noted in the proposed rule that, as discussed in greater detail in section II.H.5.a. of the preamble of the proposed rule and this final rule, the manufacturer of KYMRIAH and the manufacturer of YESCARTA submitted applications for new technology add-on payments for FY 2019. We stated that we also recognize that many members of the public have noted that the combination of the new technology add-on payment applications, the extremely high-cost of these CAR T-cell therapies, and the potential for volume increases over time present unique challenges with respect to the MS-DRG assignment for procedures involving the utilization of CAR T-cell therapies and cases representing patients receiving treatment involving CAR T-cell therapies. We stated in the proposed rule that we believed that, in the context of these pending new technology add-on payment applications, there may also be merit in the alternative suggestion we received to create a new MS-DRG for procedures involving the utilization of CAR T-cell therapies and cases representing patients receiving treatment involving CAR T-cell therapy to which we could assign ICD-10-PCS procedure codes XW033C3 and XW043C3, effective for discharges occurring in FY 2019. We stated that, as noted in section II.H.5.a. of the preamble of the proposed rule, if a new MS-DRG were to be created then consistent with section 1886(d)(5)(K)(ix) of the Act there may no longer be a need for a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of the Act.
We invited public comments on our proposed approach of assigning ICD-10-PCS procedure codes XW033C3 and XW043C3 to Pre-MDC MS-DRG 016 for FY 2019. We also invited public comments on alternative approaches, including in the context of the pending KYMRIAH and YESCARTA new technology add-on payment applications, and the most appropriate way to establish payment for FY 2019 under any alternative approaches. We indicated that such payment alternatives may include using a CCR of 1.0 for charges associated with ICD-10-PCS procedure codes XW033C3 and XW043C3, given that many public inquirers believed that hospitals would be unlikely to set charges different from the costs for KYMRIAH and YESCARTA CAR T-cell therapies, as discussed further in section II.A.4.g.2. of the Addendum of the proposed rule and this final rule. We further stated that these payment alternatives, including payment under any potential new MS-DRG, also could take into account an appropriate portion of the average sales price (ASP) for these drugs, including in the context of the pending new technology add-on payment applications.
We invited comments on how these payment alternatives would affect access to care, as well as how they affect incentives to encourage lower drug prices, which is a high priority for this Administration. In addition, we stated that we are considering approaches and authorities to encourage value-based care and lower drug prices. We solicited comments on how the payment methodology alternatives may intersect and affect future participation in any such alternative approaches.
We noted that, as stated in section II.F.1.b. of the preamble of the proposed rule, we described the criteria used to establish new MS-DRGs. In particular,
Some commenters recommended that, until a more permanent solution is developed, CMS finalize the proposed assignment of CAR T-cell therapy to MS-DRG 016, approve the NTAP application for CAR T-cell therapy, and/or allow for a CCR of 1.0 for CAR T-cell therapy. However, some commenters disagreed with CMS' proposed assignment of CAR T-cell therapy to MS-DRG 016 and requested a new separate MS-DRG. These commenters disagreed that patients receiving CAR T-cell therapy are sufficiently clinically similar to patients receiving autologous bone marrow transplants. Reasons cited by these commenters included differences in lengths of stay, the level and predictability of associated toxicity, and the overall disease burden. Some of these commenters suggested creating a new separate MS-DRG for CAR T-cell therapy and developing the FY 2019 weight for this MS-DRG not based only on historical claims data but also including alternative data on the cost of CAR T-cell therapy drugs, such as average sales price (ASP) data. Some commenters pointed to the establishment of a separate DRG for drug eluting stents under the IPPS as a possible payment model for CAR T-cell therapy.
Other commenters did not support the creation of a new separate MS-DRG for CAR T-cell therapy. Reasons cited by these commenters included the relative newness of the therapy, the limited number of providers delivering these treatments, the low volume of patients, redistributive effects, and the lack of long term data surrounding length of stay, treatment complexities, and costs. These commenters urged CMS to collect more comprehensive clinical and cost data before considering assignment of a new MS-DRG to these therapies.
Some commenters requested that CMS carve out the cost of CAR T-cell therapy from the IPPS and pay for it on a pass-through basis reflecting the cost of the therapy to the hospital and indicated that this was the approach taken by some state Medicaid programs. These commenters believed that payment on a pass-through basis, for inpatient and/or outpatient care, provides the most accurate payment while minimizing inappropriate payment incentives across the inpatient and outpatient setting.
Commenters also made technical and operational suggestions to CMS if we were to adopt changes to our existing payment mechanisms in the final rule as they apply to CAR T-cell therapy, including how a CCR of 1.0 would be operationalized, or how CMS would collect data on the cost of CAR T-cell therapy for pass-through and other purposes.
Given the relative newness of CAR T-cell therapy, the potential model, including the reasons underlying our consideration of a potential model described in greater detail in the CY 2019 OPPS/ASC proposed rule, and our request for feedback on this model approach, we believe it would be premature to adopt changes to our existing payment mechanisms, either under the IPPS or for IPPS-excluded cancer hospitals, specifically for CAR T-cell therapy. Therefore, we disagree with commenters who have requested such changes under the IPPS for FY
We agree with commenters who recommended that we finalize the proposed assignment of CAR-T therapy to MS-DRG 016 rather than consider the creation of a new MS-DRG for these therapies, given the relative newness of the therapy, the limited number of providers delivering these treatments, the low volume of patients, redistributive effects, and the lack of long-term data surrounding length of stay, treatment complexities, and costs. In addition to the potential model, we agree we should collect more comprehensive clinical and cost data before considering assignment of a new MS-DRG to these therapies.
In response to the commenters who indicated that MS-DRG 016 is a poor clinical match for CAR T-cell therapy patients and would prefer that we create a new MS-DRG for CAR-T cell therapy, we acknowledge that there are differences between the treatment approaches, but we continue to believe that MS-DRG 016 is the most appropriate match of the existing MS-DRGs, given similarities between CAR-T cell therapy and autologous bone marrow transplant in harvesting and infusion of patient cells as well as post-infusion monitoring for and management of potentially severe adverse effects. We reiterate that, in light of the potential model and our request for feedback on this approach, it would be premature to create a new MS-DRG specifically for CAR T-cell therapy. We will consider requests for alternative MS-DRG assignments and/or the creation of a new MS-DRG for CAR T-cell therapy after we review the public feedback on a potential model and as we gain further experience with CAR T-cell therapy and can better evaluate the commenters' concerns.
As described in more detail in section II.H. of the preamble of this final rule, we are approving new technology add-on payments for CAR T-cell therapy for FY 2019.
In response to commenters who made technical and operational suggestions if CMS were to adopt changes to its existing payment mechanisms in the final rule as they apply to CAR T-cell therapy, because we are not adopting such changes, we are not addressing those technical and operational comments at the current time but will consider them for future rulemaking as appropriate.
After consideration of the public comments we received, we are finalizing our proposed approach of assigning ICD-10-PCS procedure codes XW033C3 and XW043C3 to Pre-MDC MS-DRG 016 for FY 2019 and to revise the title of MS-DRG 016 from “Autologous Bone Marrow Transplant with CC/MCC” to “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy.”
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019), based on a request we received and our review of the claims data, the advice of our clinical advisors, and consideration of public comments, we finalized our proposal to reassign all cases reporting a principal diagnosis of epilepsy and one of the following ICD-10-PCS code combinations, which capture cases involving neurostimulator generators inserted into the skull (including cases involving the use of the RNS
• 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).
The finalized listing of epilepsy diagnosis codes (82 FR 38018 through 38019) contained codes provided by the requestor (82 FR 38016), in addition to diagnosis codes organized in subcategories G40.A- and G40.B- as recommended by a commenter in response to the proposed rule (82 FR 38018) because the diagnosis codes organized in these subcategories also are representative of diagnoses of epilepsy.
For FY 2019, we received a request to include two additional diagnosis codes organized in subcategory G40.1- in the listing of epilepsy diagnosis codes for cases assigned to MS-DRG 023 because these diagnosis codes also represent diagnoses of epilepsy. The two additional codes identified by the requestor are:
• G40.109 (Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with simple partial seizures, not intractable, without status epilepticus); and
• G40.111 (Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with simple partial seizures, intractable, with status epilepticus).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20190), we stated that we agreed with the requestor that diagnosis codes G40.109 and G40.111 also are representative of epilepsy diagnoses and should be added to the listing of epilepsy diagnosis codes for cases assigned to MS-DRG 023 because they also capture a type of epilepsy. Our clinical advisors reviewed this issue and agreed that adding the two additional epilepsy diagnosis codes is appropriate. Therefore, we proposed to add ICD-10-CM diagnosis codes G40.109 and G40.111 to the listing of epilepsy diagnosis codes for cases assigned to MS-DRG 023, effective October 1, 2018.
After consideration of the public comments we received, we are finalizing our proposal to add ICD-10-CM diagnosis codes G40.109 and G40.111 to the list of epilepsy diagnosis codes for assignment to MS-DRG 023 in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20190), we received two separate, but related requests to create new MS-DRGs for cases that identify patients who have been diagnosed with neurological conditions classified under MDC 1 (Diseases and Disorders of the Nervous
The requestors stated that patients with a principal diagnosis of respiratory failure requiring mechanical ventilation are currently assigned to MS-DRG 207 (Respiratory System Diagnoses with Ventilator Support >96 Hours), which has a relative weight of 5.4845, and to MS-DRG 208 (Respiratory System Diagnoses with Ventilator Support <=96 Hours), which has a relative weight of 2.3678. The requestors also stated that patients with a principal diagnosis of ischemic cerebral infarction who received a thrombolytic agent during the hospital stay and did not undergo an O.R. procedure are assigned to MS-DRGs 061, 062, and 063 (Ischemic Stroke, Precerebral Occlusion or Transient Ischemia with Thrombolytic Agent with MCC, with CC, and without CC/MCC, respectively) under MDC 1, while patients with a principal diagnosis of intracranial hemorrhage or ischemic cerebral infarction who did not receive a thrombolytic agent during the hospital stay and did not undergo an O.R. procedure are assigned to MS-DRGs 064, 065 and 66 (Intracranial Hemorrhage or Cerebral Infarction with MCC, with CC or TPA in 24 Hours, and without CC/MCC, respectively) under MDC 1.
The requestors provided the current FY 2018 relative weights for these MS-DRGs as shown in the following table.
The requestors stated that although the ICD-10-CM Official Guidelines for Coding and Reporting allow sequencing of acute respiratory failure as the principal diagnosis when it is jointly responsible (with an acute neurologic event) for admission, which would result in assignment to MS-DRGs 207 or 208 when the patient requires mechanical ventilation, it would not be appropriate to sequence acute respiratory failure as the principal diagnosis when it is secondary to intracranial hemorrhage or ischemic cerebral infarction.
The requestors also stated that reporting for other purposes, such as quality measures, clinical trials, and Joint Commission and State certification or survey cases, is based on the principal diagnosis, and it is important, from a quality of care perspective, that the intracranial hemorrhage or cerebral infarction codes continue to be sequenced as principal diagnosis. The requestors believed that cases of patients who present with cerebral infarction or cerebral hemorrhage and acute respiratory failure are currently in conflict for principal diagnosis sequencing because the cerebral infarction or cerebral hemorrhage code is needed as the principal diagnosis for quality reporting and other purposes. However, acute respiratory failure is needed as the principal diagnosis for purposes of appropriate payment under the MS-DRGs.
The requestors stated that by creating new MS-DRGs for neurological conditions with mechanical ventilation, those patients who require mechanical ventilation for airway protection on admission and those patients who develop acute respiratory failure requiring mechanical ventilation after admission can be grouped to MS-DRGs that provide appropriate payment for the mechanical ventilation resources. The requestors suggested two new MS-DRGs, citing as support that new MS-DRGs were created for patients with sepsis requiring mechanical ventilation greater than and less than 96 hours.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20191) and earlier in this section, the requests we received were separate, but related requests. The first request was to specifically identify patients presenting with intracranial hemorrhage or cerebral infarction with mechanical ventilation and create two new MS-DRGs as follows:
• Suggested new MS-DRG XXX (Intracranial Hemorrhage or Cerebral Infarction with Mechanical Ventilation >96 Hours); and
• Suggested new MS-DRG XXX (Intracranial Hemorrhage or Cerebral Infarction with Mechanical Ventilation <=96 Hours).
The second request was to consider
• Suggested New MS-DRG XXX (Neurological System Diagnosis with Mechanical Ventilation 96+ Hours); and
• Suggested New MS-DRG XXX (Neurological System Diagnosis with Mechanical Ventilation <96 Hours).
Both requesters suggested that CMS use the three ICD-10-PCS codes identifying mechanical ventilation to assign cases to the respective suggested new MS-DRGs. The three ICD-10-PCS codes are shown in the following table.
Below we discuss the different aspects of each request in more detail.
The first request involved two aspects: (1) Analyzing patients diagnosed with cerebral infarction and required mechanical ventilation who received a thrombolytic (for example, TPA) and did not undergo an O.R. procedure; and (2) analyzing patients diagnosed with intracranial hemorrhage or ischemic cerebral infarction and required mechanical ventilation who did not receive a thrombolytic (for example, TPA) during the current episode of care and did not undergo an O.R. procedure.
For the first subset of patients, we analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for MS-DRGs 061, 062, and 063 because cases that are assigned to these MS-DRGs specifically identify patients who were diagnosed with a cerebral infarction and received a thrombolytic. The 90 ICD-10-CM diagnosis codes that specify a cerebral infarction and were included in our analysis are listed in Table 6P.1a associated with the proposed rule (which is available via the internet on the CMS website at:
The ICD-10-PCS procedure codes displayed in the following table describe use of a thrombolytic agent.
We examined claims data in MS-DRGs 061, 062, and 063 and identified cases that reported mechanical ventilation of any duration with a principal diagnosis of cerebral infarction where a thrombolytic agent was administered and the patient did not undergo an O.R. procedure. Our findings are shown in the following table.
As shown in this table, there were a total of 5,192 cases in MS-DRG 061 with an average length of stay of 6.4 days and average costs of $20,097. There were a total of 758 cases reporting the use of mechanical ventilation in MS-DRG 061 with an average length of stay ranging from 4.9 days to 12.8 days and average costs ranging from $19,795 to $41,691. For MS-DRG 062, there were a total of 9,730 cases with an average length of stay of 3.9 days and average costs of $13,865. There were a total of 33 cases reporting the use of mechanical ventilation in MS-DRG 062 with an average length of stay ranging from 3.8 days to 5.3 days and average costs ranging from $14,026 to $19,817. For MS-DRG 063, there were a total of 1,984 cases with an average length of stay of 2.7 days and average costs of $11,771. There were a total of 8 cases reporting the use of mechanical ventilation in MS-DRG 063 with an average length of stay ranging from 2.0 days to 2.7 days and average costs ranging from $11,195 to $14,588.
We then compared the total number of cases in MS-DRGs 061, 062, and 063 specifically reporting mechanical
As shown in this table, the total number of cases reported in MS-DRG 061 was 5,192, with an average length of stay of 6.4 days and average costs of $20,097. There were 166 cases that reported mechanical ventilation >96 hours, with an average length of stay of 12.8 days and average costs of $41,691. There were 594 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 6.5 days and average costs of $23,780.
The total number of cases reported in MS-DRG 062 was 9,730, with an average length of stay of 3.9 days and average costs of $13,865. There were no cases identified in MS-DRG 062 where mechanical ventilation >96 hours was reported. However, there were 34 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 4.2 days and average costs of $15,558.
The total number of cases reported in MS-DRG 63 was 1,984 with an average length of stay of 2.7 days and average costs of $11,771. There were no cases identified in MS-DRG 063 where mechanical ventilation >96 hours was reported. However, there were 8 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 2.3 days and average costs of $12,467.
For the second subset of patients, we examined claims data for MS-DRGs 064, 065, and 066. We identified cases reporting mechanical ventilation of any duration with a principal diagnosis of cerebral infarction or intracranial hemorrhage where a thrombolytic agent was not administered during the current hospital stay and the patient did not undergo an O.R. procedure. The 33 ICD-10-CM diagnosis codes that specify an intracranial hemorrhage and were included in our analysis are listed in Table 6P.1b associated with the proposed rule (which is available via the internet on the CMS website at:
We also used the list of 90 ICD-10-CM diagnosis codes that specify a cerebral infarction listed in Table 6P.1a associated with the proposed rule for our analysis. We noted that the GROUPER logic for case assignment to MS-DRG 065 includes that a thrombolytic agent (for example, TPA) was administered within 24 hours of the current hospital stay. The ICD-10-CM diagnosis code that describes this scenario is Z92.82 (Status post administration of tPA (rtPA) in a different facility within the last 24 hours prior to admission to current facility). We did not review the cases reporting that diagnosis code for our analysis. Our findings are shown in the following table.
The total number of cases reported in MS-DRG 064 was 76,513, with an average length of stay of 6.0 days and average costs of $12,574. There were a total of 10,997 cases reporting the use of mechanical ventilation in MS-DRG 064 with an average length of stay ranging from 3.1 days to 13.4 days and average costs ranging from $8,675 to $38,262. For MS-DRG 065, there were a total of 106,554 cases with an average length of stay of 3.7 days and average costs of $7,236. There were a total of 450 cases reporting the use of mechanical ventilation in MS-DRG 065 with an average length of stay ranging from 2.1 days to 10.2 days and average costs ranging from $6,145 to $20,759. For MS-DRG 066, there were a total of 34,689 cases with an average length of stay of 2.5 days and average costs of $5,321. There were a total of 195 cases reporting the use of mechanical ventilation in MS-DRG 066 with an average length of stay ranging from 1.4 days to 4.0 days and average costs ranging from $3,426 to $10,364.
We then compared the total number of cases in MS-DRGs 064, 065, and 066 specifically reporting mechanical ventilation >96 hours with a principal diagnosis of cerebral infarction or intracranial hemorrhage where a thrombolytic agent was not administered and the patient did not undergo an O.R. procedure against the total number of cases reporting mechanical ventilation <=96 hours with a principal diagnosis of cerebral infarction or intracranial hemorrhage where a thrombolytic agent was not administered and the patient did not undergo an O.R. procedure. Our findings are shown in the following table.
The total number of cases reported in MS-DRG 064 was 76,513, with an average length of stay of 6.0 days and average costs of $12,574. There were 2,153 cases that reported mechanical ventilation >96 hours, with an average length of stay of 13.4 days and average costs of $38,262, and there were 8,794 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 4.9 days and average costs of $13,704.
The total number of cases reported in MS-DRG 65 was 106,554, with an average length of stay of 3.7 days and average costs of $7,236. There were 22 cases that reported mechanical ventilation >96 hours, with an average length of stay of 10.2 days and average costs of $20,759, and there were 428 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 2.7 days and average costs of $8,086.
The total number of cases reported in MS-DRG 66 was 34,689, with an average length of stay of 2.5 days and average costs of $5,321. There was one case that reported mechanical ventilation >96 hours, with an average length of stay of 4.0 days and average costs of $3,426, and there were 194 cases that reported mechanical ventilation <=96 hours, with an average length of stay of 1.8 days and average costs of $5,141.
We also analyzed claims data for MS-DRGs 207 and 208. As shown in the following table, there were a total of 19,471 cases found in MS-DRG 207 with an average length of stay of 13.8 days and average costs of $38,124. For MS-DRG 208, there were a total of 55,802 cases found with an average length of stay of 6.7 days and average costs of $17,439.
We stated in the proposed rule that our analysis of claims data relating to the first request for MS-DRGs 061, 062, 063, 064, 065, and 066 and consultation with our clinical advisors do not support creating new MS-DRGs for cases that identify patients diagnosed with cerebral infarction or intracranial hemorrhage who require mechanical ventilation with or without a thrombolytic and in the absence of an O.R. procedure.
For the first subset of patients (in MS-DRGs 061, 062 and 063), our data findings for MS-DRG 061 demonstrate the 166 cases that reported mechanical ventilation >96 hours had a longer average length of stay (12.8 days versus 6.4 days) and higher average costs ($41,691 versus $20,097) compared to all the cases in MS-DRG 061. However, there were no cases that reported mechanical ventilation >96 hours for MS-DRG 062 or MS-DRG 063. For the 594 cases that reported mechanical ventilation <=96 hours in MS-DRG 061, the data show that the average length of stay was consistent with the average length of stay of all of the cases in MS-DRG 061 (6.5 days versus 6.4 days) and the average costs were also consistent with the average costs of all of the cases in MS-DRG 061 ($23,780 versus $20,097). For the 34 cases that reported mechanical ventilation <=996 hours in MS-DRG 062, the data show that the average length of stay was consistent with the average length of stay of all of the cases in MS-DRG 062 (4.2 days versus 3.9 days) and the average costs were also consistent with the average costs of all of the cases in MS DRG 062 ($15,558 versus $13,865). Lastly, for the 8 cases that reported mechanical ventilation <=96 hours in MS-DRG 063, the data show that the average length of stay was consistent with the average length of stay of all of the cases in MS-DRG 063 (2.3 days versus 2.7 days) and the average costs were also consistent with the average costs of all of the cases in MS DRG 063 ($12,467 versus $11,771).
For the second subset of patients (in MS-DRGs 064, 065 and 066), the data findings for the 2,153 cases that reported mechanical ventilation >96 hours in MS-DRG 064 showed a longer average length of stay (13.4 days versus 6.0 days) and higher average costs ($38,262 versus $12,574) compared to all of the cases in MS-DRG 064. However, the 2,153 cases represent only 2.8 percent of all the cases in MS-DRG 064. For the 22 cases that reported mechanical ventilation >96 hours in MS-DRG 065, the data showed a longer average length of stay (10.2 days versus 3.7 days) and higher average costs ($20,759 versus $7,236) compared to all of the cases in MS-DRG 065. However, the 22 cases represent only 0.02 percent of all the cases in MS-DRG 065. For the one case that reported mechanical ventilation >96 hours in MS-DRG 066, the data showed a longer average length of stay (4.0 days versus 2.5 days) and lower average costs ($3,426 versus $5,321) compared to all of the cases in MS-DRG 066. For the 8,794 cases that reported mechanical ventilation <=96 hours in MS-DRG 064, the data showed that the average length of stay was shorter than the average length of stay for all of the cases in MS-DRG 064 (4.9 days versus 6.0 days) and the average costs were consistent with the average costs of all of the cases in MS-DRG 064 ($13,704 versus $12,574). For the 428 cases that reported mechanical ventilation <=96 hours in MS-DRG 065, the data showed that the average length of stay was shorter than the average length of stay for all of the cases in MS-DRG 065 (2.7 days versus 3.7 days) and the average costs were consistent with the average costs of all the cases in MS-DRG 065 ($8,086 versus $7,236). For the 194 cases that reported mechanical ventilation <=96 hours in MS-DRG 066, the data showed that the average length of stay was shorter than the average length of stay for all of the cases in MS-DRG 066 (1.8 days versus 2.5 days) and the average costs were less than the average costs of all of the cases in MS-DRG 066 ($5,141 versus $5,321).
We stated in the proposed rule that, based on the analysis described above, the current MS-DRG assignment for the cases in MS-DRGs 061, 062, 063, 064, 065 and 066 that identify patients diagnosed with cerebral infarction or intracranial hemorrhage who require mechanical ventilation with or without a thrombolytic and in the absence of an O.R. procedure appears appropriate.
Our clinical advisors also noted that patients requiring mechanical ventilation (in the absence of an O.R. procedure) are known to be more resource intensive and it would not be practical to create new MS-DRGs specifically for this subset of patients diagnosed with an acute neurologic event, given the various indications for which mechanical ventilation may be utilized. We stated in the proposed rule that, if we were to create new MS-DRGs for patients diagnosed with an intracranial hemorrhage or cerebral infarction who require mechanical ventilation, it would not address all of the other patients who also utilize mechanical ventilation resources. It would also necessitate further extensive analysis and evaluation for several other conditions that require mechanical ventilation across each of the 25 MDCs under the ICD-10 MS-DRGs.
To evaluate the frequency in which the use of mechanical ventilation is reported for different clinical scenarios, we examined claims data across each of the 25 MDCs to determine the number of cases reporting the use of mechanical ventilation >96 hours. Our findings are shown in the table below.
As shown in the table, the top 5 MDCs with the largest number of cases reporting mechanical ventilation >96 hours are MDC 18, with 48,176 cases; MDC 4, with 27,793 cases; MDC 5, with 16,923 cases; MDC 1, with 13,668 cases; and MDC 6, with 6,401 cases. We noted that the claims data demonstrate that the average length of stay is consistent with what we would expect for cases reporting the use of mechanical ventilation >96 hours across each of the 25 MDCs. The top 5 MDCs with the highest average costs for cases reporting mechanical ventilation >96 hours were MDC 22, with average costs of $188,704; MDC 17, with average costs of $99,968; MDC 12, with average costs of $95,204; MDC 5, with average costs of $84,565; and MDC 13, with average costs of $83,319. We noted that the data for MDC 8 demonstrated similar results compared to MDC 13 with average costs of $83,271 for cases reporting mechanical ventilation >96 hours. In summary, the claims data reflect a wide variance with regard to the frequency and average costs for cases reporting the use of mechanical ventilation >96 hours.
We also examined claims data across each of the 25 MDCs for the number of cases reporting the use of mechanical ventilation <=96 hours. Our findings are shown in the table below.
As shown in the table, the top 5 MDCs with the largest number of cases reporting mechanical ventilation <=96 hours are MDC 18, with 69,826 cases; MDC 4, with 64,861 cases; MDC 5, with 45,147 cases; MDC 1, with 29,896 cases; and MDC 6, with 15,629 cases. We noted that the claims data demonstrate that the average length of stay is consistent with what we would expect for cases reporting the use of mechanical ventilation <=96 hours across each of the 25 MDCs. The top 5 MDCs with the highest average costs for cases reporting mechanical ventilation <=96 hours are MDC 17, with average costs of $46,335; MDC 22, with average costs of $45,557; MDC 8, with average costs of $40,183; MDC 24, with average costs of $36,475; and MDC 5, with average costs of $35,818. Similar to the cases reporting mechanical ventilation >96 hours, the claims data for cases reporting the use of mechanical ventilation <=96 hours also reflect a wide variance with regard to the frequency and average costs. Depending on the number of cases in each MS-DRG, it may be difficult to detect patterns of complexity and resource intensity.
With respect to the requestor's statement that reporting for other purposes, such as quality measures, clinical trials, and Joint Commission and State certification or survey cases, is based on the principal diagnosis, and their belief that patients who present with cerebral infarction or cerebral hemorrhage and acute respiratory failure are currently in conflict for principal diagnosis sequencing because the cerebral infarction or cerebral hemorrhage code is needed as the principal diagnosis for quality reporting and other purposes (however, acute respiratory failure is needed as the principal diagnosis for purposes of appropriate payment under the MS-DRGs), we noted that providers are required to assign the principal diagnosis according to the ICD-10-CM Official Guidelines for Coding and Reporting and these assignments are not based on factors such as quality measures or clinical trials indications. Furthermore, we do not base MS-DRG reclassification decisions on those factors. If the cerebral hemorrhage or ischemic cerebral infarction is the reason for admission to the hospital, the cerebral hemorrhage or ischemic cerebral infarction diagnosis code should be assigned as the principal diagnosis.
We acknowledged in the proposed rule that new MS-DRGs were created for cases of patients with sepsis requiring mechanical ventilation greater than and less than 96 hours. However, those MS-DRGs (MS-DRG 575 (Septicemia with Mechanical Ventilation 96+ Hours Age >17) and MS-DRG 576 (Septicemia without Mechanical Ventilation 96+ Hours Age >17)) were created several years ago, in FY 2007 (71 FR 47938 through 47939) in response to public comments suggesting alternatives for the need to recognize the treatment for that subset of patients with severe sepsis who exhibit a greater degree of severity and resource consumption as septicemia is a systemic condition, and also as a
We stated in the proposed rule that we believe that additional analysis and efforts toward a broader approach to refining the MS-DRGs for cases of patients requiring mechanical ventilation across the MDCs involves carefully examining the potential for instability in the relative weights and disrupting the integrity of the MS-DRG system based on the creation of separate MS-DRGs involving small numbers of cases for various indications in which mechanical ventilation may be required.
The second request focused on patients diagnosed with
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, we did not propose to create new MS-DRGs for cases that identify patients diagnosed with neurological conditions classified under MDC 1 who require mechanical ventilation with or without a thrombolytic and in the absence of an O.R. procedure.
After consideration of the public comments we received, we are finalizing our proposal to not create new MS-DRGs, classified under MDC 1, for cases that identify patients requiring mechanical ventilation and are diagnosed with stroke or any other neurological condition with or without a thrombolytic, and in the absence of an O.R. procedure for FY 2019.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56804 through 56809), we discussed a request to examine the ICD-10-PCS procedure code combinations that describe procedures involving pacemaker insertions to determine if some procedure code combinations were excluded from the Version 33 ICD-10 MS-DRG assignments for MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC, respectively) under MDC 5. We finalized our proposal to modify the Version 34 ICD-10 MS-DRG GROUPER logic so the specified procedure code combinations were no longer required for assignment into those MS-DRGs. As a result, the logic for pacemaker insertion procedures was simplified by separating the procedure codes describing cardiac pacemaker device insertions into one list and separating the procedure codes describing cardiac pacemaker lead insertions into another list. Therefore, when any ICD-10-PCS procedure code describing the insertion of a pacemaker device is reported from that specific logic list with any ICD-10-PCS procedure code describing the insertion of a pacemaker lead from that specific logic list (81 FR 56804 through 56806), the case is assigned to MS-DRGs 242, 243, and 244 under MDC 5.
We then discussed our examination of the Version 33 GROUPER logic for MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with and without MCC, respectively) because assignment of cases to these MS-DRGs also included qualifying ICD-10-PCS procedure code combinations involving pacemaker insertions (81 FR 56806 through 56808). Specifically, the logic for Version 33 ICD-10 MS-DRGs 258 and 259 included ICD-10-PCS procedure code combinations describing the removal of pacemaker devices and the insertion of new pacemaker devices. We finalized our proposal to modify the Version 34 ICD-10 MS-DRG GROUPER logic for MS-DRGs 258 and 259 to establish that a case reporting any procedure code from the list of ICD-10-PCS procedure codes describing procedures involving pacemaker device insertions without any other procedure
Lastly, we discussed our examination of the Version 33 GROUPER logic for MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/MCC, respectively), and noted that cases assigned to these MS-DRGs also included lists of procedure code combinations describing procedures involving the removal of pacemaker leads and the insertion of new leads, in addition to lists of single procedure codes describing procedures involving the insertion of pacemaker leads, removal of cardiac devices, and revision of cardiac devices (81 FR 56808). We finalized our proposal to modify the ICD-10 MS-DRG GROUPER logic for MS-DRGs 260, 261, and 262 so that cases reporting any one of the listed ICD-10-PCS procedure codes describing procedures involving pacemakers and related procedures and associated devices are assigned to MS DRGs 260, 261, and 262 under MDC 5. Therefore, the GROUPER logic that required a combination of procedure codes be reported for assignment into MS-DRGs 260, 261 and 262 under Version 33 was no longer required effective with discharges occurring on or after October 1, 2016 (FY 2017) under Version 34 of the ICD-10 MS-DRGs.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20198), we noted that while the discussion in the FY 2017 IPPS/LTCH PPS final rule focused on the MS-DRGs involving pacemaker procedures under MDC 5, similar GROUPER logic exists in Version 33 of the ICD-10 MS-DRGs under MDC 1 (Diseases and Disorders of the Nervous System) in 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) and MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) in MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without MCC, respectively) where procedure code combinations involving cardiac pacemaker device insertions or removals and cardiac pacemaker lead insertions or removals are required to be reported together for assignment into those MS-DRGs. We also noted that, with the exception of when a principal diagnosis is reported from MDC 1, MDC 5, or MDC 21, the procedure codes describing the insertion, removal, replacement, or revision of pacemaker devices are assigned to a medical MS-DRG in the absence of another O.R. procedure according to the GROUPER logic. We referred the reader to the ICD-10 MS-DRG Definitions Manual Version 33, which is available via the internet on the CMS website at:
As discussed in the FY 2019 IPS/LTCH PPS proposed rule (83 FR 20198), for FY 2019, we received a request to assign all procedures involving the insertion of pacemaker devices to surgical MS-DRGs, regardless of the principal diagnosis. The requestor recommended that procedures involving pacemaker insertion be grouped to surgical MS-DRGs within the MDC to which the principal diagnosis is assigned, or that they group to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC, respectively). Currently, in Version 35 of the ICD-10 MS-DRGs, procedures involving pacemakers are assigned 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 (Diseases and Disorders of the Nervous System), to MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with MCC and without MCC, respectively), and MS-DRGs 260, 261 and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/MCC, respectively) under MDC 5 (Diseases and Disorders of the Circulatory System), and to MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively), under MDC 21 (Injuries, Poisoning and Toxic Effects of Drugs), with all other unrelated principal diagnoses resulting in a medical MS-DRG assignment. According to the requestor, the medical MS-DRGs do not provide adequate payment for the pacemaker device, specialized operating suites, time, skills, and other resources involved for pacemaker insertion procedures. Therefore, the requestor recommended that procedures involving pacemaker insertions be grouped to surgical MS-DRGs. We refer readers to the ICD-10 MS-DRG Definitions Manual Version 35, which is available via the internet on the CMS website at:
The following procedure codes describe procedures involving the insertion of a cardiac rhythm related device which are classified as a type of pacemaker insertion under the ICD-10 MS-DRGs. These four codes are assigned to MS-DRGs 040, 041, and 042, as well as MS-DRGs 907, 908, and 909, and are designated as O.R. procedures.
We examined cases from the September update of the FY 2017 MedPAR claims data for cases involving pacemaker insertion procedures reporting the above ICD-10-PCS codes in MS-DRGs 040, 041 and 042 under MDC 1. Our findings are shown in the following table.
The following table is a summary of the findings shown above from our review of MS-DRGs 040, 041 and 042 and the total number of cases reporting a pacemaker insertion procedure.
We found a total of 12,264 cases in MS-DRGs 040, 041, and 042 with an average length of stay of 6.7 days and average costs of $19,986. We found a total of 36 cases in MS-DRGs 040, 041, and 042 reporting procedure codes describing the insertion of a pacemaker device with an average length of stay of 9.1 days and average costs of $32,906.
We then examined cases involving pacemaker insertion procedures reporting those same four ICD-10-PCS procedure codes 0JH60PZ, 0JH63PZ, 0JH80PZ and 0JH83PZ in MS-DRGs 907, 908, and 909 under MDC 21. Our findings are shown in the following table.
We note that there were no cases found where procedure codes 0JH63PZ, 0JH80PZ or 0JH83PZ were reported in MS-DRGs 907, 908 and 909 under MDC 21 and, therefore, they are not displayed in the table.
The following table is a summary of the findings shown above from our review of MS-DRGs 907, 908, and 909 and the total number of cases reporting a pacemaker insertion procedure.
We found a total of 19,148 cases in MS-DRGs 907, 908, and 909 with an average length of stay of 6.7 days and average costs of $19,199. We found a total of 13 cases in MS-DRGs 907, 908, and 909 reporting pacemaker insertion procedures with an average length of stay of 7.5 days and average costs of $49,929.
We also examined cases involving pacemaker insertion procedures reporting the following procedure codes that are assigned to MS-DRGs 242, 243, and 244 under MDC 5.
Our data findings are shown in the following table. We note that procedure codes displayed with an asterisk (*) in the table are designated as non-O.R. procedures affecting the MS-DRG.
The following table is a summary of the findings shown above from our review of MS-DRGs 242, 243, and 244 and the total number of cases reporting a pacemaker insertion procedure.
We found a total of 58,765 cases in MS-DRGs 242, 243, and 244 with an average length of stay of 4.6 days and average costs of $20,253. We found a total of 58,822 cases reporting pacemaker insertion procedures in MS-DRGs 242, 243, and 244 with an average length of stay of 4.6 days and average costs of $20,270. We note that the analysis performed is by procedure code, and because multiple pacemaker insertion procedures may be reported on a single claim, the total number of these pacemaker insertion procedure cases exceeds the total number of all cases found across MS-DRGs 242, 243, and 244 (58,822 procedures versus 58,765 cases).
We then analyzed claims for cases reporting a procedure code describing (1) the insertion of a pacemaker device only, (2) the insertion of a pacemaker lead only, and (3) both the insertion of a pacemaker device and a pacemaker lead across all the MDCs except MDC 5 to determine the number of cases currently grouping to medical MS-DRGs and the potential impact of these cases moving into the surgical unrelated MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC, respectively). Our findings are shown in the following table.
We found a total of 2,747 cases reporting the insertion of a pacemaker device in 177 medical MS-DRGs with an average length of stay of 9.5 days and average costs of $29,389 across all the MDCs except MDC 5. We found a total of 2,831 cases reporting the insertion of a pacemaker lead in 175 medical MS-DRGs with an average length of stay of 9.4 days and average costs of $29,240 across all the MDCs except MDC 5. We found a total of 2,709 cases reporting both the insertion of a pacemaker device and the insertion of a pacemaker lead in 170 medical MS-DRGs with an average length of stay of 9.4 days and average costs of $29,297 across all the MDCs except MDC 5.
We also analyzed claims for cases reporting a procedure code describing the insertion of a pacemaker device with a procedure code describing the insertion of a pacemaker lead in all the surgical MS-DRGs across all the MDCs except MDC 5. Our findings are shown in the following table.
We found a total of 3,667 cases reporting the insertion of a pacemaker device and the insertion of a pacemaker lead in 194 surgical MS-DRGs with an average length of stay of 12.8 days and average costs of $48,856 across all the MDCs except MDC 5.
For cases where the insertion of a pacemaker device, the insertion of a pacemaker lead or the insertion of both a pacemaker device and lead were reported on a claim grouping to a medical MS-DRG, the average length of stay and average costs were generally higher for these cases when compared to the average length of stay and average costs for all the cases in their assigned MS-DRGs. For example, we found 113 cases reporting both the insertion of a pacemaker device and lead in MS-DRG 378 (G.I. Hemorrhage with CC), with an average length of stay of 7.1 days and average costs of $23,711. The average length of stay for all cases in MS-DRG 378 was 3.6 days and the average cost for all cases in MS-DRG 378 was $7,190. The average length of stay for cases reporting both the insertion of a pacemaker device and lead were twice as long as the average length of stay for all the cases in MS-DRG 378 (7.1 days versus 3.6 days). In addition, the average costs for the cases reporting both the insertion of a pacemaker device and lead were approximately $16,500 higher than the average costs of all the cases in MS-DRG 378 ($23,711 versus $7,190). We refer readers to Table 6P.1c associated with the proposed rule (which is available via the internet on the CMS website) for the detailed report of our findings across the other medical MS-DRGs. We note that the average costs and average length of stay for cases reporting the insertion of a pacemaker device, the insertion of a pacemaker lead or the insertion of both a pacemaker device and lead are reflected in Columns D and E, while the average costs and average length of stay for all cases in the respective MS-DRG are reflected in Columns I and J.
The claims data results from our analysis of this request showed that if we were to support restructuring the GROUPER logic so that pacemaker insertion procedures that include a combination of the insertion of the pacemaker device with the insertion of the pacemaker lead are designated as an O.R. procedure across all the MDCs, we would expect approximately 2,709 cases to move or “shift” from the medical MS-DRGs where they are currently grouping into the surgical unrelated MS-DRGs 981, 982, and 983.
Our clinical advisors reviewed the data results and recommended that pacemaker insertion procedures involving a complete pacemaker system (insertion of pacemaker device combined with insertion of pacemaker lead) warrant classification into surgical MS-DRGs because the patients receiving these devices demonstrate greater treatment difficulty and utilization of resources when compared to procedures that involve the insertion of only the pacemaker device or the insertion of only the pacemaker lead. We note that the request we addressed in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 24981 through 24984) was to determine if some procedure code combinations were excluded from the ICD-10 MS-DRG assignments for MS-DRGs 242, 243, and 244. We proposed and, upon considering public comments received, finalized an alternate approach that we believed to be less complicated. We also stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56806) that we would continue to monitor the MS-DRGs for pacemaker insertion procedures as we receive ICD-10 claims data. Upon further review, we stated that we believe that recreating the procedure code combinations for pacemaker insertion procedures would allow for the grouping of these procedures to the surgical MS-DRGs, which we believe is warranted to better recognize the resources and complexity of performing these procedures. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20203), we proposed to recreate pairs of procedure code combinations involving both the insertion of a pacemaker device with the insertion of a pacemaker lead to act as procedure code combination pairs or “clusters” in the GROUPER logic that are designated as O.R. procedures outside of MDC 5 when reported together.
After consideration of the public comments we received, we are finalizing our proposal to recreate pairs of procedure code combinations involving both the insertion of a pacemaker device with the insertion of a pacemaker lead to act as procedure code combination pairs or “clusters” in the GROUPER logic that are designated as O.R. procedures outside of MDC 5 when reported together under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
We also proposed to designate all the procedure codes describing the insertion of a pacemaker device or the insertion of a pacemaker lead as non-O.R. procedures when reported as a single, individual stand-alone code based on the recommendation of our clinical advisors as noted in the proposed rule and earlier in this section and consistent with how these procedures were classified under the Version 33 ICD-10 MS-DRG GROUPER logic.
After consideration of the public comments we received, we are finalizing our proposal to designate all the procedure codes describing the insertion of a pacemaker device or the insertion of a pacemaker lead as non-O.R. procedures when reported as a single, individual stand-alone code outside of MDC 5 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
In the proposed rule, we referred readers to Table 6P.1d, Table 6P.1e, and Table 6P.1f. associated with the proposed rule (which is available via the internet on the CMS website at:
In addition, we proposed to maintain the current GROUPER logic for MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with MCC and without MCC, respectively) where the listed procedure codes as shown in the ICD-10 MS-DRG Definitions Manual Version 35, which is available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing the lists of the procedure codes in Tables 6P.1d., Table 6P.1e., and Table 6P.1f associated with the proposed rule, with the addition of ICD-10-PCS procedure codes 02H63MZ and 02H73MZ to be included for the pacemaker insertion code pairs and as stand-alone codes for the insertion of a pacemaker lead, as reflected in Tables 6P.1.d. and 6P.1.f. associated with this final rule. We also are finalizing our proposal to maintain the current GROUPER logic for MS-DRGs 258 and 259 and for MS-DRGs 260, 261, and 262
We noted in the proposed rule that, while the requestor did not include the following procedure codes in its request, these codes are also currently designated as O.R. procedure codes and are assigned to MS-DRGs 260, 261, and 262 under MDC 5.
In the proposed rule, we solicited public comments on whether these procedure codes describing the removal or revision of a cardiac lead and removal or revision of a cardiac rhythm related (pacemaker) device should also be designated as non-O.R. procedure codes for FY 2019 when reported as a single, individual stand-alone code with a principal diagnosis outside of MDC 5 for consistency in the classification among these devices.
After consideration of the public comments we received, we are maintaining the O.R. designation of the procedure codes listed in the above table under the ICD-10 MS-DRGs Version 36, effective October 1, 2018. As additional claims data become available, we will continue to analyze these procedures.
We also note in the proposed rule that, while the requestor did not include the following procedure codes in its request, the codes in the following table became effective October 1, 2016 (FY 2017) and also describe procedures involving the insertion of a pacemaker. Specifically, the following list includes procedure codes that describe an intracardiac or “leadless” pacemaker. These procedure codes are designated as O.R. procedure codes and are currently assigned to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with MCC and without MCC, respectively) under MDC 5.
We examined claims data for procedures involving an intracardiac pacemaker reporting any of the above codes across all MS-DRGs. Our findings are shown in the following table.
We found 1,190 cases reporting a procedure involving an intracardiac pacemaker with an average length of stay of 8.6 days and average costs of $38,576. Of these 1,190 cases, we found 1,037 cases in MS-DRGs under MDC 5. We also found that the 153 cases that grouped to MS-DRGs outside of MDC 5 grouped to surgical MS-DRGs; therefore, another O.R. procedure was also reported on the claim. However, in the FY 2019 IPPS/LTCH PPS proposed rule, we solicited public comments on whether these procedure codes describing the insertion and revision of intracardiac pacemakers should also be considered for classification into all surgical unrelated MS-DRGs outside of MDC 5 for FY 2019.
After consideration of the public comments we received, we are maintaining the O.R. designation of the procedure codes listed in the above table under the ICD-10 MS-DRGs Version 36, effective October 1, 2018. As additional claims data become available, we will continue to analyze these procedures.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38111), we discontinued new technology add-on payments for the LUTONIX® and IN.PACT
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20205), there are currently 36 ICD-10-PCS procedure codes that describe the performance of endovascular procedures involving treatment of the superficial femoral arteries that utilize a drug-coated balloon, which are listed in the following table.
The requestor performed its own analysis of claims data and expressed concern that it found that the average costs of cases using a drug-coated balloon in the performance of percutaneous endovascular procedures involving treatment of patients who have been diagnosed with peripheral arterial disease are significantly higher than the average costs of all of the cases in the MS-DRGs where these procedures are currently assigned. The requestor also expressed concern that payments may no longer be adequate because the new technology add-on payments have been discontinued and may affect patient access to these procedures.
We first examined claims data from the September 2017 update of the FY 2017 MedPAR file for cases reporting any 1 of the 36 ICD-10-PCS procedure codes listed in the immediately preceding table that describe the use of a drug-coated balloon in the performance of endovascular procedures in MS-DRGs 252, 253, and 254. Our findings are shown in the following table.
As shown in this table, there were a total of 33,583 cases in MS-DRG 252, with an average length of stay of 7.6 days and average costs of $23,906. There were 870 cases in MS-DRG 252 reporting the use of a drug-coated balloon in the performance of an endovascular procedure, with an average length of stay of 8.8 days and average costs of $30,912. The total number of cases in MS-DRG 253 was 25,714, with an average length of stay of 5.4 days and average costs of $18,986. There were 1,532 cases in MS-DRG 253 reporting the use of a DCB in the performance of an endovascular procedure, with an average length of stay of 5.4 days and average costs of $23,051. The total number of cases in MS-DRG 254 was 12,344, with an average length of stay of 2.8 days and average costs of $13,287. There were 488 cases in MS-DRG 254 reporting the use of a DCB in the performance of an endovascular procedure, with an average length of stay of 2.4 days and average costs of $17,445.
The results of our data analysis show that there is not a very high volume of cases reporting the use of a drug-coated balloon in the performance of endovascular procedures compared to all of the cases in the assigned MS-DRGs. The data results also show that the average length of stay for cases reporting the use of a drug-coated balloon in the performance of endovascular procedures in MS-DRGs 253 and 254 is lower compared to the average length of stay for all of the cases in the assigned MS-DRGs, while the average length of stay for cases reporting the use of a drug-coated balloon in the performance of endovascular procedures in MS-DRG 252 is slightly higher compared to all of the cases in MS-DRG 252 (8.8 days versus 7.6 days). Lastly, the data results showed that the average costs for cases reporting the use of a drug-coated balloon in the performance of percutaneous endovascular procedures were higher compared to all of the cases in the assigned MS-DRGs. Specifically, for MS-DRG 252, the average costs for cases reporting the use of a DCB in the performance of endovascular procedures were $30,912 versus the average costs of $23,906 for all cases in MS-DRG 252, a difference of $7,006. For MS-DRG 253, the average costs for cases reporting the use of a drug-coated balloon in the performance of endovascular procedures were $23,051 versus the average costs of $18,986 for all cases in MS-DRG 253, a difference
The following table is a summary of the findings discussed above from our review of MS-DRGs 252, 253 and 254 and the total number of cases that used a drug-coated balloon in the performance of the procedure across MS-DRGs 252, 253, and 254.
As shown in this table, there were a total of 71,641 cases across MS-DRGs 252, 253, and 254, with an average length of stay of 6.0 days and average costs of $20,310. There were a total of 2,890 cases across MS-DRGs 252, 253, and 254 reporting the use of a drug-coated balloon in the performance of the procedure, with an average length of stay of 6.0 days and average costs of $24,569. The data analysis showed that cases reporting the use of a drug-coated balloon in the performance of the procedure across MS-DRGs 252, 253 and 254 have similar lengths of stay (6.0 days) compared to the average length of stay for all of the cases in MS-DRGs 252, 253, and 254. The data results also showed that the cases reporting the use of a drug-coated balloon in the performance of the procedure across these MS-DRGs have higher average costs ($24,569 versus $20,310) compared to the average costs for all of the cases across these MS-DRGs.
We stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20207) that the results of our claims data analysis and the advice from our clinical advisors did not support reassigning cases reporting the use of a drug-coated balloon in the performance of these procedures from the lower severity level MS-DRGs 253 and 254 to the highest severity level MS-DRG 252 at this time. We further stated that, if we were to reassign cases that utilize a drug-coated balloon in the performance of these types of procedures from MS-DRG 254 to MS-DRG 252, the cases would result in overpayment and also would have a shorter length of stay compared to all of the cases in MS-DRG 252. While the cases reporting the use of a drug-coated balloon in the performance of these procedures are higher compared to the average costs for all cases in their assigned MS-DRGs, it is not by a significant amount. We stated that we believe that as use of a drug-coated balloon becomes more common, the costs will be reflected in the data. Our clinical advisors also agreed that it would not be clinically appropriate to reassign cases for patients from the lowest severity level (without CC/MCC) MS-DRG to the highest severity level (with MCC) MS-DRG in the absence of additional data to better determine the resource utilization for this subset of patients. Therefore, for these reasons, we proposed to not reassign cases reporting the use of a drug-coated balloon in the performance of endovascular procedures from MS-DRGs 253 and 254 to MS-DRG 252.
After consideration of the public comments we received, we are finalizing our proposal to not reassign cases reporting the use of a drug-coated balloon in the performance of endovascular procedures from MS-DRGs 253 and 254 to MS-DRG 252 for FY 2019.
We noted in the proposed rule that because 24 of the 36 ICD-10-PCS procedure codes describing the use of a
As shown in this table, there were a total of 71,641 cases across MS-DRGs 252, 253, and 254, with an average length of stay of 6.0 days and average costs of $20,310. There were 522 cases across MS-DRGs 252, 253, and 254 reporting the use of an intraluminal device with use of a drug-coated balloon in the performance of the procedure, with an average length of stay of 6.0 days and average costs of $28,418. There were 447 cases across MS-DRGs 252, 253, and 254 reporting the use of a drug-eluting intraluminal device with use of a drug-coated balloon in the performance of the procedure, with an average length of stay of 6.0 days and average costs of $26,098. Lastly, there were 2,705 cases across MS-DRGs 252, 253, and 254 reporting the use of a drug-coated balloon alone in the performance of the procedure, with an average length of stay of 6.1 days and average costs of $24,553.
The data showed that the 2,705 cases in MS-DRGs 252, 253, and 254 reporting the use of a drug-coated balloon alone in the performance of the procedure have lower average costs compared to the 969 cases in MS-DRGs 252, 253, and 254 reporting the use of an intraluminal device (522 cases) or a drug-eluting intraluminal device (447 cases) with a drug-coated balloon in the performance of the procedure ($24,553 versus $28,418 and $26,098, respectively.) The data also showed that the cases reporting the use of a drug-coated balloon alone in the performance of the procedure have a comparable average length of stay compared to the cases reporting the use of an intraluminal device or a drug-eluting intraluminal device with a drug-coated balloon in the performance of the procedure (6.1 days versus 6.0 days).
In summary, as we stated in the proposed rule, we believe that further analysis of endovascular procedures involving the treatment of superficial femoral arteries for peripheral arterial disease that utilize a drug-coated balloon in the performance of the procedure would be advantageous. As additional claims data become available, we will be able to more fully evaluate the differences in cases where a procedure utilizes a drug-coated balloon alone in the performance of the procedure versus cases where a procedure utilizes an intraluminal device or a drug-eluting intraluminal device in addition to a drug-coated balloon in the performance of the procedure.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20207), we received a request to reassign ICD-10-CM diagnosis code D17.71 (Benign lipomatous neoplasm of kidney) from MDC 06 (Diseases and Disorders of the Digestive System) to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract). The requestor stated that this diagnosis code is used to describe a kidney neoplasm and believed that because the ICD-10-CM code is specific to the kidney, a more appropriate assignment would be under MDC 11. In FY 2015, under the ICD-9-CM classification, there was not a specific diagnosis code for a benign lipomatous neoplasm of the kidney. The only diagnosis code available was ICD-9-CM diagnosis code 214.3 (Lipoma of intra-abdominal organs), which was assigned to MS-DRGs 393, 394, and 395 (Other Digestive System Diagnoses with MCC, with CC, and without CC/MCC, respectively) under MDC 6. Therefore, when we converted from the ICD-9 based MS-DRGs to the ICD-10 MS-DRGs, there was not a specific code available that identified the kidney from which to replicate. As a result, ICD-10-CM diagnosis code D17.71 was assigned to those same MS-DRGs (MS-DRGs 393, 394, and 395) under MDC 6.
While reviewing the MS-DRG classification of ICD-10-CM diagnosis code D17.71, we also reviewed the MS-DRG classification of another diagnosis code organized in subcategory D17.7, ICD-10-CM diagnosis code D17.72 (Benign lipomatous neoplasm of other genitourinary organ). ICD-10-CM diagnosis code D17.72 is currently assigned under MDC 09 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast) to MS-DRGs 606 and 607 (Minor Skin Disorders with and without MCC, respectively). Similar to the replication issue with ICD-10-CM diagnosis code D17.71, with ICD-10-CM diagnosis code D17.72, under the ICD-9-CM classification, there was not a specific diagnosis code to identify a benign lipomatous neoplasm of genitourinary organ. The only diagnosis code available was ICD-9-CM diagnosis code 214.8 (Lipoma of other specified sites), which was assigned to MS-DRGs 606 and 607 under MDC 09. Therefore, when we converted from the ICD-9 based MS-DRGs to the ICD-10 MS-DRGs, there was not a specific code available that identified another genitourinary organ (other than the kidney) from which to replicate. As a result, ICD-10-CM diagnosis code D17.72 was assigned to those same MS-DRGs (MS-DRGs 606 and 607) under MDC 9.
In the proposed rule, we proposed to reassign ICD-10-CM diagnosis code D17.71 from MS-DRGs 393, 394, and 395 (Other Digestive System Diagnoses with MCC, with CC, and without CC/MCC, respectively) under MDC 06 to
After consideration of the public comments we received, we are finalizing our proposals to reassign ICD-10-CM diagnosis code D17.71 from MS-DRGs 393, 394, and 395 under MDC 6 to MS-DRGs 686, 687, and 688 under MDC 11, and to reassign ICD-10-CM diagnosis code D17.72 from MS-DRGs 606 and 607 under MDC 9 to MS-DRGs 686, 687, and 688 under MDC 11 in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20208), we received a request to reassign the following 8 ICD-10-PCS procedure codes that describe repositioning of the colon and takedown of end colostomy from MS-DRGs 344, 345, and 346 (Minor Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 329, 330, and 331 (Major Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively):
The requestor indicated that the resources required for procedures identifying repositioning of specified segments of the large bowel are more closely aligned with other procedures that group to MS-DRGs 329, 330, and 331, such as repositioning of the large intestine (unspecified segment).
We analyzed the claims data from the September 2017 update of the FY 2017 Med PAR file for MS-DRGs 344, 345 and 346 for all cases reporting the 8 ICD-10-PCS procedure codes listed in the table above. Our findings are shown in the following table:
The data showed that the average length of stay and average costs for cases that reported a specific large bowel reposition procedure were generally consistent with the average length of stay and average costs for all of the cases in their assigned MS-DRG.
We then examined the claims data in the September 2017 update of the FY 2017 MedPAR file for MS-DRGs 329, 330 and 331. Our findings are shown in the following table.
As shown in this table, across MS-DRGs 329, 330, and 331, we found a total of 112,388 cases, with an average length of stay of 8.4 days and average costs of $21,382. We stated in the FY 2019 IPPS/LTCH PPS proposed rule that the results of our analysis indicate that the resources required for cases reporting the specific large bowel repositioning procedures are more aligned with those resources required for all cases assigned to MS-DRGs 344, 345, and 346, with the average costs being lower than the average costs for all cases assigned to MS-DRGs 329, 330, and 331. Our clinical advisors also indicated that the 8 specific bowel repositioning procedures are best aligned with those in MS-DRGs 344, 345, and 346. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20209), we proposed to maintain the current assignment of the 8 specific bowel repositioning procedures in MS-DRGs 344, 345, and 346 for FY 2019.
After consideration of the public comments we received, we are finalizing our proposal to maintain the current assignment of the 8 specific bowel repositioning procedures in MS DRGs 344, 345, and 346 for FY 2019.
In conducting our analysis of MS-DRGs 329, 330, and 331, we also examined the subset of cases reporting one of the bowel procedures listed in the following table as the only O.R. procedure.
This approach can be useful in determining whether resource use is truly associated with a particular procedure or whether the procedure frequently occurs in cases with other procedures with higher than average resource use. As shown in the following table, we identified 398 cases reporting a bowel procedure as the only O.R. procedure, with an average length of stay of 6.3 days and average costs of $13,595 across MS-DRGs 329, 330, and 331, compared to the overall average length of stay of 8.4 days and average costs of $21,382 for all cases in MS-DRGs 329, 330, and 331.
We stated in the FY 2019 IPPS/LTCH PPS proposed rule that the resources required for these cases are more aligned with the resources required for cases assigned to MS-DRGs 344, 345, and 346 than with the resources required for cases assigned to MS-DRGs 329, 330, and 331. Our clinical advisors also agreed that these cases are more clinically aligned with cases in MS-DRGs 344, 345, and 346, as they are minor procedures relative to the major bowel procedures assigned to MS-DRGs 329, 330, and 331. Therefore, in the proposed rule, we proposed to reassign the 12 ICD-10-PCS procedure codes listed above from MS-DRGs 329, 330, and 331 to MS-DRGs 344, 345, and 346.
Commenters also noted that several questions and answers regarding these ICD-10-PCS procedure codes were published in
After consideration of the public comments we received, we are not finalizing our proposal to reassign the 12 ICD-10-PCS procedure codes listed above from MS-DRGs 329, 330, and 331 to MS-DRGs 344, 345, and 346 for FY 2019.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38036), we announced our plans to review the ICD-10 logic for the MS-DRGs where procedures involving spinal fusion are currently assigned for FY 2019. After publication of the FY 2018 IPPS/LTCH PPS final rule, we received a comment suggesting that CMS publish findings from this review and discuss possible future actions. The commenter agreed that it is important to be able to fully evaluate the MS-DRGs to which all spinal fusion procedures are currently assigned with additional claims data, particularly considering the 33 clinically invalid codes that were identified through the rulemaking process (82 FR 38034 through 38035) and the 87 codes identified from the upper and lower joint fusion tables in the ICD-10-PCS classification and discussed at the September 12, 2017 ICD-10 Coordination and Maintenance Committee that were proposed to be deleted effective October 1, 2018 (FY 2019). The agenda and handouts from that meeting can be obtained from the CMS website at:
According to the commenter, deleting the 33 procedure codes describing clinically invalid spinal fusion procedures for FY 2018 partially resolves the issue for data used in setting the FY 2020 payment rates. However, the commenter also noted that the problem will not be fully resolved until the FY 2019 claims are available for FY 2021 ratesetting (due to the 87 codes identified at the ICD-10 Coordination and Maintenance Committee meeting for deletion effective October 1, 2018 (FY 2019)).
The commenter noted that it analyzed claims data from the FY 2016 MedPAR data set and was surprised to discover a significant number of discharges reporting 1 of the 87 clinically invalid codes that were identified and discussed by the ICD-10 Coordination and Maintenance Committee among the following spinal fusion MS-DRGs.
In addition, the commenter noted that it also identified a number of discharges for the 33 clinically invalid codes we identified in the FY 2018 IPPS/LTCH PPS final rule in the same MS-DRGs listed above. According to the commenter, its findings of these invalid spinal fusion procedure codes in the FY 2016 claims data comprise approximately 30 percent of all discharges for spinal fusion procedures.
The commenter expressed its appreciation that CMS is making efforts to address coding inaccuracies within the classification and suggested that CMS publish findings from its own review of spinal fusion coding issues in those MS-DRGs where cases reporting spinal fusion procedures are currently assigned and include a discussion of possible future actions in the FY 2019 IPPS/LTCH PPS proposed rule. The commenter believed that such an approach would allow time for stakeholder input on any possible proposals along with time for the invalid codes to be worked out of the datasets. The commenter also noted that publishing CMS' findings will put the agency, as well as the public, in a better position to address any potential payment issues for these services beginning in FY 2021.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20210), we thanked the commenter for acknowledging the steps we have taken in our efforts to address coding inaccuracies within the classification as we continue to refine the ICD-10 MS-DRGs. We did not propose any changes to the MS-DRGs involving spinal fusion procedures for FY 2019. However, in response to the commenter's suggestion and findings, we provided the following results from our analysis of the September 2017 update of the FY 2017 MedPAR claims data for the MS-DRGs involving spinal fusion procedures.
We noted that while the commenter stated that 87 codes were identified from the upper and lower joint fusion tables in the ICD-10-PCS classification and discussed at the September 12, 2017 ICD-10 Coordination and Maintenance Committee meeting to be deleted effective October 1, 2018 (FY 2019), there were 99 spinal fusion codes identified in the meeting materials, as shown in Table 6P.1g associated with the proposed rule (which is available via the internet on the CMS website at:
As shown in Table 6P.1g associated with the proposed rule, the 99 procedure codes describe spinal fusion procedures that have device value “Z” representing No Device for the 6th character in the code. Because a spinal fusion procedure always requires some type of device (for example, instrumentation with bone graft or bone
We examined claims data from the September 2017 update of the FY 2017 MedPAR file for cases reporting any of the clinically invalid spinal fusion procedures with device value “Z” No Device in MS-DRGs 028 (Spinal Procedures with MCC), 029 (Spinal Procedures with CC or Spinal Neurostimulators), and 030 (Spinal Procedures without CC/MCC) under MDC 1 and MS-DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473 under MDC 8 (that are listed and shown earlier in this section). Our findings are shown in the following tables.
As shown in this summary table, we found a total of 142,752 cases in MS-DRGs 028, 029, 030, 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473 with an average length of stay of 3.9 days and average costs of $31,788. We found a total of 16,472 cases reporting a procedure code for an invalid spinal fusion procedure with device value “Z” No Device across MS-DRGs 028, 029, and 030 under MDC 1 and MS-DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473 under MDC 8, with an average length of stay of 5.1 days and average costs of $42,929. The results of the data analysis demonstrate that these invalid spinal fusion procedures represent approximately 12 percent of all discharges across the spinal fusion MS-DRGs. Because these procedure codes describe clinically invalid procedures, we would not expect these codes to be reported on any claims data. We stated in the proposed rule that it is unclear why providers assigned procedure codes for spinal fusion procedures with the device value “Z” No Device. Our analysis did not examine whether these claims were isolated to a specific provider or whether this inaccurate reporting was widespread among a number of providers.
With regard to possible future action, we indicated in the proposed rule that we will continue to monitor the claims data for resolution of the coding issues previously identified. Because the procedure codes that we analyzed and presented findings for in the FY 2019 IPPS/LTCH PPS proposed rule will no longer be in the classification system, effective October 1, 2018 (FY 2019), the claims data that we examine for FY 2020 may still contain claims with the invalid codes. As such, we will continue to collaborate with the AHA as one of the four Cooperating Parties through the AHA's
For the reasons described and as stated in the proposed rule and earlier in our discussion, we proposed not to make any changes to the spinal fusion MS-DRGs for FY 2019.
After consideration of the public comments we received, we are finalizing our proposal to not make any changes to the spinal fusion MS-DRGs for FY 2019.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20212), we received a request to reassign ICD-10-CM diagnosis codes reported with a principal diagnosis of cellulitis and a secondary diagnosis code of B95.62 (Methicillin resistant Staphylococcus aureus infection as the cause of diseases classified elsewhere) or A49.02 (Methicillin resistant Staphylococcus aureus infection, unspecified site). Currently, these cases are assigned to MS-DRG 602 (Cellulitis with MCC) and MS-DRG 603 (Cellulitis without MCC) in MDC 9. The requestor believed that cases of cellulitis with MSRA infection should be reassigned to MS-DRG 867 (Other Infectious and Parasitic Diseases Diagnoses with MCC) because MS-DRGs 602 and 603 include cases that do not accurately reflect the severity of illness or risk of mortality for patients diagnosed with cellulitis and MRSA. The requestor acknowledged that the organism is not to be coded before the localized infection, but stated in its request that patients diagnosed with cellulitis and MRSA are entirely different from patients diagnosed only with cellulitis. The requestor stated that there is a genuine threat to life or limb in these cases. The requestor further stated that, with the opioid crisis and the frequency of MRSA infection among this population, cases of cellulitis with MRSA should be identified with a specific combination code and assigned to MS-DRG 867.
For the FY 2019 IPPS/LTCH PPS proposed rule, we analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for all cases assigned to MS-DRGs 602 and 603 and subsets of these cases reporting a principal ICD-10-CM diagnosis of cellulitis and a secondary diagnosis code of B95.62 or A49.02. Our findings are shown in the following table.
As shown in this table, we examined the subsets of cases in MS-DRGs 602 and 603 reported with a principal diagnosis of cellulitis and a secondary diagnosis code B95.62 or A49.02. Both of these subsets of cases had an average length of stay that was comparable to the average length of stay for all cases in MS-DRG 602 and greater than the average length of stay for all cases in MS-DRG 603, and average costs that were lower than the average costs of all cases in MS-DRG 602 and higher than the average costs of all cases in MS-DRG 603. As we have discussed in prior rulemaking (77 FR 53309), it is a fundamental principle of an averaged payment system that half of the procedures in a group will have above average costs. It is expected that there will be higher cost and lower cost subsets, especially when a subset has low numbers.
To examine the request to reassign ICD-10-CM diagnosis codes reported with a principal diagnosis of cellulitis and a secondary diagnosis code of B95.62 or A49.02 from MS-DRGs 602 and 603 to MS-DRG 867 (which would typically involve also reassigning those cases to the two other severity level MS-DRGs 868 and 869 (Other Infectious
We compared the average length of stay and average costs for MS-DRGs 867, 868, and 869 to the average length of stay and average costs for the subsets of cases in MS-DRGs 602 and 603 reported with a principal diagnosis of cellulitis and a secondary diagnosis code of B95.62 or A49.02. We found that the average length of stay for these subsets of cases was shorter and the average costs were lower than those for all cases in MS-DRG 867, but that the average length of stay and average costs were higher than those for all cases in MS-DRG 868 and MS-DRG 869. We stated in the proposed rule that our findings from the analysis of claims data do not support reassigning cellulitis cases reported with ICD-10-CM diagnosis code B95.62 or A49.02 from MS-DRGs 602 and 603 to MS-DRGs 867, 868 and 869. Our clinical advisors noted that when a principal diagnosis of cellulitis is accompanied by a secondary diagnosis of B95.62 or A49.02 in MS-DRGs 602 or 603, the combination of these primary and secondary diagnoses is the reason for the hospitalization, and the level of acuity of these subsets of patients is similar to other patients in MS-DRGs 602 and 603. Therefore, in the proposed rule, we stated that these cases are more clinically aligned with all cases in MS-DRGs 602 and 603. For these reasons, we did not propose to reassign cellulitis cases reported with ICD-10-CM diagnosis code of B95.62 or A49.02 to MS-DRG 867, 868, or 869 for FY 2019. We invited public comments on our proposal to maintain the current MS-DRG assignment for ICD-10-CM codes B95.62 and A49.02 when reported as secondary diagnoses with a principal diagnosis of cellulitis.
After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG classification for cases reported with ICD-10-CM diagnosis codes B95.62 and A49.02 when reported as secondary diagnoses with a principal diagnosis of cellulitis.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20212), we received a request to revise the MS-DRG classification for cases of patients diagnosed with porphyria and reported with ICD-10-CM diagnosis code E80.21 (Acute intermittent (hepatic) porphyria) to recognize the resource requirements in caring for these patients, to ensure appropriate payment for these cases, and to preserve patient access to necessary treatments. Porphyria is defined as a group of rare disorders (“porphyrias”) that interfere with the production of hemoglobin that is needed for red blood cells. While some of these disorders are genetic (inborn) and others are acquired, they all result in the abnormal accumulation of hemoglobin building blocks, called porphyrins, which can be deposited in the tissues where they particularly interfere with the functioning of the nervous system and the skin. Treatment for patients suffering from disorders of porphyrin metabolism consists of an intravenous injection of Panhematin® (hemin for injection). ICD-10-CM diagnosis code E80.21 is currently assigned to MS-DRG 642 (Inborn and Other Disorders of Metabolism). (We note that this issue has been discussed previously in the FY 2013 IPPS/LTCH PPS proposed and final rules (77 FR 27904 through 27905 and 77 FR 53311 through 53313, respectively) and the FY 2015 IPPS/LTCH PPS proposed and final rules (79 FR 28016 and 79 FR 49901, respectively)).
We analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for cases assigned to MS-DRG 642. Our findings are shown in the following table.
As shown in this table, cases reporting diagnosis code E80.21 as the principal diagnosis in MS-DRG 642 had higher average costs and longer average lengths of stay compared to the average costs and lengths of stay for all other cases in MS-DRG 642.
To examine the request to reassign cases with ICD-10-CM diagnosis code E80.21 as the principal diagnosis, we analyzed claims data for all cases in MS-DRGs for endocrine disorders, including MS-DRG 643 (Endocrine Disorders with MCC), MS-DRG 644 (Endocrine Disorders with CC), and MS-DRG 645 (Endocrine Disorders without CC/MCC). The results of our analysis are shown in the following table.
The data results showed that the average length of stay for the subset of cases reporting ICD-10-CM diagnosis code E80.21 as the principal diagnosis in MS-DRG 642 is lower than the average length of stay for all cases in MS-DRG 643, but higher than the average length of stay for all cases in MS-DRGs 644 and 645. The average costs for the subset of cases reporting ICD-10-CM diagnosis code E80.21 as the principal diagnosis in MS-DRG 642 are much higher than the average costs for all cases in MS-DRGs 643, 644, and 645. However, after considering these findings in the context of the current MS-DRG structure, we stated in the FY 2019 IPPS/LTCH PPS proposed rule that we were unable to identify an MS-DRG that would more closely parallel these cases with respect to average costs and length of stay that would also be clinically aligned. We further stated that our clinical advisors believe that, in the current MS-DRG structure, the clinical characteristics of patients in these cases are most closely aligned with the clinical characteristics of patients in all cases in MS-DRG 642. Moreover, given the small number of porphyria cases, we do not believe there is justification for creating a new MS-DRG. Basing a new MS-DRG on such a small number of cases could lead to distortions 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. In summary, we did not propose to revise the MS-DRG classification for porphyria cases.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20212 through 20213), we recognize the average costs of the small number of porphyria cases are greater than the average costs of the cases in MS-DRG 642 overall. An averaged payment system depends on aggregation of similar cases with a range of costs, and it is therefore usually possible to define subsets with higher values and subsets with lower values. We seek to identify sufficiently large sets of claims data with a resource/cost similarity and clinical similarity in developing diagnostic-related groups rather than smaller subsets of diagnoses. In response to the commenters' assertion that these cases are not clinically similar to other cases within the MS-DRG, our clinical advisors continue to believe that MS-DRG 642 represents the most clinically appropriate placement within the current MS-DRG structure at this time because the clinical characteristics of patients in these cases are most closely aligned with the clinical characteristics of patients in all cases in MS-DRG 642.
We are sensitive to the commenters' concerns about access to treatment for beneficiaries who have been diagnosed with this condition. Therefore, as part of our ongoing, comprehensive analysis of the MS-DRGs under ICD-10, we will continue to explore mechanisms through which to address rare diseases and low volume DRGs. However, at this time, for the reasons summarized earlier, we are finalizing our proposal for FY 2019 to maintain the MS-DRG classification for porphyria cases.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20213 through 20214),we received a request to review the codes assigned to MS-DRG 685 (Admit for Renal Dialysis) to determine if the MS-DRG should be deleted, or if it should remain as a valid MS-DRG. Currently, the ICD-10-CM diagnosis codes shown in the table below are assigned to MS-DRG 685:
The requestor stated that, under ICD-9-CM, diagnosis code V56.0 (Encounter for extracorporeal dialysis) was reported as the principal diagnosis to identify patients who were admitted for an encounter for dialysis. However, under ICD-10-CM, there is no comparable code in which to replicate such a diagnosis. The requestor noted that, while patients continued to be admitted under inpatient status (under certain circumstances) for dialysis services, there is no existing ICD-10-CM diagnosis code within the classification that specifically identifies a patient being admitted for an encounter for dialysis services.
The requestor also noted that three of the four ICD-10-CM diagnosis codes currently assigned to MS-DRG 685 are on the “Unacceptable Principal Diagnosis” edit code list in the Medicare Code Editor (MCE). Therefore, these codes are not allowed to be reported as a principal diagnosis for an inpatient admission.
We examined claims data from the September 2017 update of the FY 2017 MedPAR file for cases reporting ICD-10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32. Our findings are shown in the following table.
As shown in the table above, for MS-DRG 685, there were a total of 78 cases reporting ICD-10-CM diagnosis code Z49.01, with an average length of stay of 4 days and average costs of $8,871. There were no cases reporting ICD-10-CM diagnosis code Z49.02, Z49.31, or Z49.32.
Our clinical advisors reviewed the clinical issues, as well as the claims data for MS-DRG 685. Based on their review of the data analysis, our clinical advisors recommended that MS-DRG 685 be deleted and ICD-10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32 be reassigned. Historically, patients were admitted as inpatients to receive hemodialysis services. However, over time, that practice has shifted to outpatient and ambulatory settings. Because of this change in medical practice, we stated in the FY 2019 IPPS/LTCH PPS proposed rule that we did not believe that it was appropriate to maintain a vestigial MS-DRG, particularly due to the fact that the transition to ICD-10 had resulted in three out of four codes that mapped to the MS-DRG being precluded from being used as principal diagnosis codes on the claim. In addition, our clinical advisors believed that reassigning the ICD-10-CM diagnosis codes from MS-DRG 685 to MS-DRGs 698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC\MCC, respectively) was clinically appropriate because the reassignment would result in an accurate MS-DRG assignment of a specific case or inpatient service and encounter based on acceptable principal diagnosis codes under these MS-DRGs.
Therefore, for FY 2019, because there is no existing ICD-10-CM diagnosis code within the classification system that specifically identifies a patient being admitted for an encounter for dialysis services; and three of the four ICD-10-CM diagnosis codes, Z49.02, Z49.31, and Z49.32, currently assigned to MS-DRG 685 are on the Unacceptable Principal Diagnosis edit code list in the MCE, we proposed to reassign ICD-10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32 from MS-DRG 685 to MS-DRGs 698, 699, and 700, and to delete MS-DRG 685.
After consideration of the public comments we received, we are finalizing our proposal to delete MS-DRG 685 and reassign ICD-10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32 from MS-DRG 685 to MS-DRGs 698, 699, and 700 for FY 2019, without modification.
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19834) and final rule (82 FR 38036 through 38037), we noted that 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 a result, we solicited 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, we sought public comments on further refinements to the conditions defined as a complicating diagnosis in MS-DRG 774 and MS-DRG 781 (Other Antepartum Diagnoses with Medical Complications). We indicated that we would review public comments received in response to the solicitation as we continued to evaluate these MS-DRGs under MDC 14 and, if warranted, we would propose refinements for FY 2019. Commenters were instructed to direct comments for consideration to the CMS MS-DRG Classification Change Request Mailbox located at
In response to our solicitation for public comments on the MS-DRGs related to vaginal delivery, one commenter recommended that CMS convene a workgroup that would include hospital staff and physicians to systematically review the MDC 14 MS-DRGs and to identify which conditions should appropriately be considered complicating diagnoses. As an interim step, this commenter recommended that CMS consider the following suggestions as a result of its own evaluation of MS-DRGs 767, 774 and 775.
For MS-DRG 767, the commenter recommended that the following ICD-10-CM diagnosis codes and ICD-10-PCS procedure code be removed from the GROUPER logic and provided the rationale for why the commenter suggested removing each code.
For MS-DRG 774, the commenter recommended that the following ICD-10-CM diagnosis codes be removed from the GROUPER logic and provided the rationale for why the commenter suggested removing each code.
For MS-DRG 775, the commenter recommended that the following ICD-10-CM diagnosis codes and ICD-10-PCS procedure code be removed from the GROUPER logic and provided the rationale for why the commenter suggested removing each code.
Another commenter agreed that the MS-DRG logic for a vaginal delivery under MDC 14 is technically complex and provided examples to illustrate these facts. For instance, the commenter noted that the GROUPER logic code lists appear redundant with several of the same codes listed for different MS-DRGs and that the GROUPER logic code list for a vaginal delivery in MS-DRG 774 is comprised of diagnosis codes while the GROUPER logic code list for a vaginal delivery in MS-DRG 775 is comprised of procedure codes. The commenter also noted that several of the ICD-10-CM diagnosis codes shown in the table below that became effective with discharges on and after October 1, 2016 (FY 2017) or October 1, 2017 (FY 2018) appear to be missing from the GROUPER logic code lists for MS-DRGs 781 and 774.
Lastly, the commenter stated that the list of ICD-10-PCS procedure codes appears comprehensive, but indicated that inpatient coding is not their expertise. We note that it was not clear which list of procedure codes the commenter was specifically referencing. The commenter did not provide a list of any procedure codes for CMS to review or reference a specific MS-DRG in its comment.
Another commenter expressed concern that ICD-10-PCS procedure codes 10D17Z9 (Manual extraction of products of conception, retained, via natural or artificial opening) and 10D18Z9 (Manual extraction of products of conception, retained, via natural or artificial opening endoscopic) are not assigned to the appropriate MS-DRG. ICD-10-PCS procedure codes 10D17Z9 and 10D18Z9 describe the manual removal of a retained placenta and are currently assigned to MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C). According to the commenter, a patient that has a vaginal delivery with manual removal of a retained placenta is not having a sterilization or D&C procedure. The commenter noted that, under ICD-9-CM, a vaginal delivery with manual removal of retained placenta grouped to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis) or MS-DRG 775 (Vaginal Delivery without Complicating Diagnosis). The commenter suggested CMS review these procedure codes for appropriate MS-DRG assignment under the ICD-10 MS-DRGs.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20217), we thanked the commenters and stated that we appreciated the recommendations and suggestions provided in response to our solicitation for comments on the GROUPER logic for the MS-DRGs involving a vaginal delivery or complicating diagnosis under MDC 14. With regard to the commenter who recommended that we convene a workgroup that would include hospital staff and physicians to systematically review the MDC 14 MS-DRGs and to identify which conditions should appropriately be considered complicating diagnoses, we noted that we formed an internal workgroup comprised of clinical advisors that included physicians, coding specialists, and other IPPS policy staff that assisted in our review of the GROUPER logic for a vaginal delivery and complicating diagnoses. We indicated that we also received clinical input from 3M/Health Information Systems (HIS) staff, which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. We note that our analysis involved other MS-DRGs under MDC 14, in addition to those for which we specifically solicited public comments. As one of the other commenters correctly pointed out, there is redundancy, with several of the same codes listed for different MS-DRGs. Below we provide a summary of our internal analysis with responses to the commenters' recommendations and suggestions incorporated into the applicable sections. We referred readers to the ICD-10 MS-DRG Version 35 Definitions Manual located via the internet on the CMS website at:
We started our evaluation of the GROUPER logic for the MS-DRGs under MDC 14 by first reviewing the current concepts that exist. For example, there are “groups” for cesarean section procedures, vaginal delivery procedures, and abortions. There also are groups where no delivery occurs, and lastly, there are groups for after the delivery occurs, or the “postpartum” period. These groups are then further subdivided based on the presence or absence of complicating conditions or the presence of another procedure. We examined how we could simplify some of the older, complex GROUPER logic and remain consistent with the structure of other ICD-10 MS-DRGs. We identified the following MS-DRGs for closer review, in addition to MS-DRG 767, MS-DRG 768, MS-DRG 774, MS-DRG 775 and MS-DRG 781.
The first issue we reviewed was the GROUPER logic for complicating conditions (MS-DRGs 774 and 781). Because one of the main objectives in our transition to the MS-DRGs was to better recognize the severity of illness of a patient, we believed we could structure the vaginal delivery and other MDC 14 MS-DRGs in a similar way. Therefore, we began working with the concept of vaginal delivery “with MCC, with CC and without CC/MCC” to replace the older, “complicating conditions” logic.
Next, we compared the additional GROUPER logic that exists between the vaginal delivery and the cesarean section MS-DRGs (MS-DRGs 765, 766, 767, 774, and 775). Currently, the vaginal delivery MS-DRGs take into account a sterilization procedure; however, the cesarean section MS-DRGs do not. Because a patient can have a sterilization procedure performed along with a cesarean section procedure, we adopted a working concept of “cesarean section with and without sterilization with MCC, with CC and without CC/MCC”, as well as “vaginal delivery with and without sterilization with MCC, with CC and without CC/MCC”.
We then reviewed the GROUPER logic for the MS-DRGs involving abortion and where no delivery occurs (MS-DRGs 770, 777, 778, 779, 780, and 782). We believed that we could consolidate the groups in which no delivery occurs.
Finally, we considered the GROUPER logic for the MS-DRGs related to the postpartum period (MS-DRGs 769 and 776) and determined that the structure of these MS-DRGs did not appear to require modification.
After we established those initial working concepts for the MS-DRGs discussed above, we examined the list of the ICD-10-PCS procedure codes that comprise the sterilization procedure GROUPER logic for the vaginal delivery MS-DRG 767. We identified the two manual extraction of placenta codes that the commenter had brought to our attention (ICD-10-PCS codes 10D17Z9 and 10D18Z9). We also identified two additional procedure codes, ICD-10-PCS codes 10D17ZZ (Extraction of products of conception, retained, via natural or artificial opening) and 10D18ZZ (Extraction of products of conception, retained, via natural or artificial opening endoscopic) in the list that are not sterilization procedures. Two of the four procedure codes describe manual extraction (removal) of retained placenta and the other two procedure codes describe dilation and curettage procedures. We then identified four more procedure codes in the list that do not describe sterilization procedures. ICD-10-PCS procedure codes 0UDB7ZX (Extraction of endometrium, via natural or artificial opening, diagnostic), 0UDB7ZZ (Extraction of endometrium, via natural or artificial opening), 0UDB8ZX (Extraction of endometrium, via natural or artificial opening endoscopic, diagnostic), and 0UDB8ZZ (Extraction of endometrium, via natural or artificial opening endoscopic) describe dilation and curettage procedures that can be performed for diagnostic or therapeutic purposes. We stated in the proposed rule that we believe that these ICD-10-PCS procedure codes would be more appropriately assigned to MDC 13 (Diseases and Disorders of the Female Reproductive System) in MS-DRGs 744 and 745 (D&C, Conization, Laparaoscopy and Tubal Interruption with and without CC/MCC, respectively) and, therefore, removed them from our working list of sterilization and/or D&C procedures. Because the GROUPER logic for MS-DRG 767 includes both sterilization and/or D&C, we agreed that all the other procedure codes currently included under that logic list of sterilization procedures should remain, with the exception of the two identified by the commenter. Therefore, in the proposed rule, we stated we agreed with the commenter that the manual extraction of retained placenta procedure codes should be reassigned to a more clinically appropriate vaginal delivery MS-DRG because they are not describing sterilization procedures.
Our attention then turned to other MDC 14 GROUPER logic code lists starting with the “CC for C-section” list under MS-DRGs 765 and 766 (Cesarean Section with and without CC/MCC, respectively). As noted in the proposed rule and earlier in this section, in conducting our review, we considered how we could utilize the severity level concept (with MCC, with CC, and without CC/MCC) where applicable. Consistent with this approach, we removed the “CC for C-section” logic from these MS-DRGs as part of our working concept and efforts to refine MDC 14. We determined it would be less complicated to simply allow the existing ICD-10 MS-DRG CC and MCC
Next, we reviewed the “Delivery Procedure” and “Delivery Outcome” GROUPER logic code lists for the vaginal delivery MS-DRGs 767, 768, 774, and 775. We identified ICD-10-PCS procedure code 10A0726 (Abortion of products of conception, vacuum, via natural or artificial opening) and ICD-10-PCS procedure code 10S07ZZ (Reposition products of conception, via natural or artificial opening) under the “Delivery Procedure” code list as procedure codes that should not be included because ICD-10-PCS procedure code 10A07Z6 describes an abortion procedure and ICD-10-PCS procedure code 10S07ZZ describes repositioning of the fetus and does not indicate a delivery took place. We also noted that, as described in the proposed rule and earlier in this discussion, a commenter recommended that ICD-10-PCS procedure code 10A07Z6 be removed from the GROUPER logic specifically for MS-DRGs 767 and 775. Therefore, we removed these two procedure codes from the logic code list for “Delivery Procedure” in MS-DRGs 767, 768, 774, and 775. We stated in the proposed rule that we agreed with the commenter that ICD-10-PCS procedure code 10A07Z6 would be more appropriately assigned to one of the Abortion MS-DRGs. For the remaining procedures currently included in the “Delivery Procedure” code list we considered which procedures would be expected to be performed during the course of a standard, uncomplicated delivery episode versus those that would reasonably be expected to require additional resources outside of the delivery room. The list of procedure codes we reviewed is shown in the following table.
While we acknowledged that these procedures may be performed to treat obstetrical lacerations as discussed in prior rulemaking (81 FR 56853), we stated that we also believe that these procedures would reasonably be expected to require a separate operative episode and would not be performed immediately at the time of the delivery. Therefore, we removed those procedure codes describing repair of the rectum, anus, and anal sphincter shown in the table above from our working concept list of procedures to consider for a vaginal delivery. Our review of the list of diagnosis codes for the “Delivery Outcome” as a secondary diagnosis did not prompt any changes. We stated in the proposed rule we agreed that the current list of diagnosis codes continues to appear appropriate for describing the outcome of a delivery.
As the purpose of our analysis and this review was to clarify what constitutes a vaginal delivery to satisfy the ICD-10 MS-DRG logic for the vaginal delivery MS-DRGs, we believed it was appropriate to expect that a procedure code describing the vaginal delivery or extraction of “products of conception” procedure and a diagnosis code describing the delivery outcome should be reported on every claim in which a vaginal delivery occurs. This is also consistent with Section I.C.15.b.5 of the ICD-10-CM Official Guidelines for Coding and Reporting, which states “A code from category Z37, Outcome of delivery, should be included on every maternal record when a delivery has occurred. These codes are not to be used on subsequent records or on the newborn record.” Therefore, we adopted the working concept that, regardless of the principal diagnosis, if there is a procedure code describing the vaginal delivery or extraction of “products of conception” procedure and a diagnosis code describing the delivery outcome, this logic would result in assignment to a vaginal delivery MS-DRG. In the proposed rule, we noted that, as a result of this working concept, there would no longer be a need to maintain the “third condition” list under MS-DRG 774. In addition, as noted in the proposed rule and earlier in this discussion, because we were working with the concept of vaginal delivery “with MCC, with CC, and without CC/MCC” to replace the older, “complicating conditions” logic, there would no longer be a need to maintain the “second condition” list of complicating diagnosis under MS-DRG 774.
We then reviewed the GROUPER logic code list of “Or Other O.R. procedures” (MS-DRG 768) to determine if any changes to these lists were warranted. Similar to our analysis of the procedures listed under the “Delivery Procedure” logic code list, our examination of the procedures currently described in the “Or Other O.R. procedures” procedure code list also considered which procedures would be expected to be
The next set of MS-DRGs we examined more closely included MS-DRGs 777, 778, 780, 781, and 782. We believed that, because the conditions in these MS-DRGs are all describing antepartum related conditions, we could group the conditions together clinically. Diagnoses described as occurring during pregnancy and diagnoses specifying a trimester or maternal care in the absence of a delivery procedure reported were considered antepartum conditions. We also believed we could better classify these groups of patients based on the presence or absence of a procedure. Therefore, we worked with the concept of “antepartum diagnoses with and without O.R. procedure”.
As noted in the proposed rule and earlier in the discussion, we adopted a working concept of “cesarean section with and without sterilization with MCC, with CC, and without CC/MCC.” This concept is illustrated in the following table and includes our suggested modifications.
As shown in the table, we suggested deleting MS-DRGs 765 and 766. We also suggested creating 6 new MS-DRGs that are subdivided by a 3-way severity level split that includes “with Sterilization” and “without Sterilization”.
We also adopted a working concept of “vaginal delivery with and without sterilization with MCC, with CC, and without CC/MCC”. This concept is illustrated in the following table and includes our suggested modifications.
As shown in the table, we suggested deleting MS-DRGs 767, 774, and 775. We also suggested creating 6 new MS-DRGs that are subdivided by a 3-way severity level split that includes “with Sterilization/D&C” and “without Sterilization/D&C”.
In addition, as indicated above, we believed that we could consolidate the groups in which no delivery occurs. In the proposed rule, we stated we believe that consolidating MS-DRGs where clinically coherent conditions exist is consistent with our approach to MS-DRG reclassification and our continued refinement efforts. This concept is illustrated in the following table and includes our suggested modifications.
As shown in the table, we suggested deleting MS-DRGs 777, 778, 780, 781, and 782. We also suggested creating 6 new MS-DRGs that are subdivided by a 3-way severity level split that includes “with O.R. Procedure” and “without O.R. Procedure”.
Once we established each of these fundamental concepts from a clinical perspective, we were able to analyze the data to determine if our initial suggested modifications were supported.
To analyze our suggested modifications for the cesarean section and vaginal delivery MS-DRGs, we examined the claims data from the September 2017 update of the FY 2017 MedPAR file for MS-DRGs 765, 766, 767, 768, 774, and 775.
As shown in the table, there were a total of 3,494 cases in MS-DRG 765, with an average length of stay of 4.6 days and average costs of $8,929. For MS-DRG 766, there were a total of 1,974 cases, with an average length of stay of 3.1 days and average costs of $6,488. For MS-DRG 767, there were a total of 351 cases, with an average length of stay of 3.2 days and average costs of $ 7,886. For MS-DRG 768, there were a total of 17 cases, with an average length of stay of 6.2 days and average costs of $26,164. For MS-DRG 774, there were a total of 1,650 cases, with an average length of stay of 3.3 days and average costs of $6,046. Lastly, for MS-DRG 775, there were a total of 4,676 cases, with an average length of stay of 2.4 days and average costs of $4,769.
To compare and analyze the impact of our suggested modifications, we ran a simulation using the Version 35 ICD-10 MS-DRG GROUPER. The following table reflects our findings for the suggested Cesarean Section MS-DRGs with a 3-way severity level split.
As shown in the table, there were a total of 178 cases for the cesarean section with sterilization with MCC group, with an average length of stay of 6.4 days and average costs of $12,977. There were a total of 511 cases for the cesarean section with sterilization with CC group, with an average length of stay of 4.1 days and average costs of $8,042. There were a total of 475 cases for the cesarean section with sterilization without CC/MCC group, with an average length of stay of 3.0 days and average costs of $6,259. For the cesarean section without sterilization with MCC group there were a total of 707 cases, with an average length of stay of 5.9 days and average costs of $11,515. There were a total of 1,887 cases for the cesarean section without sterilization with CC group, with an average length of stay of 4.2 days and average costs of $7,990. Lastly, there were a total of 1,710 cases for the cesarean section without sterilization without CC/MCC group, with an average length of stay of 3.3 days and average costs of $6,663.
The following table reflects our findings for the suggested Vaginal Delivery MS-DRGs with a 3-way severity level split.
As shown in the table, there were a total of 25 cases for the vaginal delivery with sterilization/D&C with MCC group, with an average length of stay of 6.7 days and average costs of $11,421. There were a total of 63 cases for the vaginal delivery with sterilization/D&C with CC group, with an average length of stay of 2.4 days and average costs of $6,065. There were a total of 126 cases for vaginal delivery with sterilization/D&C without CC/MCC group, with an average length of stay of 2.3 days and average costs of $6,697. There were a total of 406 cases for the vaginal delivery without sterilization/D&C with MCC group, with an average length of stay of 5.0 days and average costs of $9,605. There were a total of 1,952 cases for the vaginal delivery without sterilization/D&C with CC group, with an average length of stay of 2.9 days and average costs of $5,506. There were a total of 4,105 cases for the vaginal delivery without sterilization/D&C without CC/MCC group, with an average length of stay of 2.3 days and average costs of $4,601.
We then reviewed the claims data from the September 2017 update of the FY 2017 MedPAR file for MS-DRGs 777, 778, 780, 781, and 782. Our findings are shown in the following table.
As shown in the table, there were a total of 72 cases in MS-DRG 777, with an average length of stay of 1.9 days and average costs of $7,149. For MS-DRG 778, there were a total of 205 cases, with an average length of stay of 2.7 days and average costs of $4,001. For MS-DRG 780, there were a total of 41 cases, with an average length of stay of 2.1 days and average costs of $3,045. For MS-DRG 781, there were a total of 2,333 cases, with an average length of stay of 3.7 days and average costs of $5,817. Lastly, for MS-DRG 782, there were a total of 70 cases, with an average length of stay of 2.1 days and average costs of $3,381.
To compare and analyze the impact of deleting those 5 MS-DRGs and creating 6 new MS-DRGs, we ran a simulation using the Version 35 ICD-10 MS-DRG GROUPER. Our findings below represent what we found and would expect under the suggested modifications. The following table reflects the MS-DRGs for the suggested Other Antepartum Diagnoses MS-DRGs with a 3-way severity level split.
Our analysis of claims data from the September 2017 update of the FY 2017 MedPAR file recognized that when the criteria to create subgroups were applied for the 3-way severity level splits for the suggested MS-DRGs, those criteria were not met in all instances. For example, the criteria that there are at least 500 cases in the MCC or CC group was not met for the suggested Vaginal Delivery with Sterilization/D&C 3-way severity level split or the suggested Other Antepartum Diagnoses with O.R. Procedure 3-way severity level split.
However, as we have noted in prior rulemaking (72 FR 47152), we cannot adopt the same approach to refine the maternity and newborn MS-DRGs because of the extremely low volume of Medicare patients there are in these DRGs. While there is not a high volume of these cases represented in the Medicare data, and while we generally advise that other payers should develop MS-DRGs to address the needs of their patients, we believe that our suggested 3-way severity level splits would address the complexity of the current MDC 14 GROUPER logic for a vaginal delivery and takes into account the new and different clinical concepts that exist under ICD-10 for this subset of patients while also maintaining the existing MS-DRG structure for identifying severity of illness, utilization of resources and complexity of service.
However, as an alternative option, we also performed analysis for a 2-way severity level split for the suggested MS-DRGs. Our findings are shown in the following tables.
Similar to the analysis performed for the 3-way severity level split, we acknowledged that when the criteria to create subgroups was applied for the alternative 2-way severity level splits for the suggested MS-DRGs, those criteria were not met in all instances. For example, the suggested Vaginal Delivery with Sterilization/D&C and the Other Antepartum Diagnoses with O.R. Procedure alternative option 2-way severity level splits did not meet the criteria for 500 or more cases in the MCC or CC group.
Based on our review, which included support from our clinical advisors, and the analysis of claims data described above, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed the deletion of 10 MS-DRGs and the creation of 18 new MS-DRGs (as shown below). This proposal was based on the approach described above, which involves consolidating specific conditions and concepts into the structure of existing logic and making additional modifications, such as adding severity levels, as part of our refinement efforts for the ICD-10 MS-DRGs. We indicated in the proposed rule that our proposals are intended to address the vaginal delivery “complicating diagnosis” logic and antepartum diagnoses with “medical complications” logic with the proposed addition of the existing and familiar severity level concept (with MCC, with CC, and without CC/MCC) to the MDC 14 MS-DRGs to provide the ability to distinguish the varying resource requirements for this subset of patients and allow the opportunity to make more meaningful comparisons with regard to severity across the MS-DRGs. We stated that our proposals, as set forth below, would also simplify the vaginal delivery procedure logic that we identified and commenters acknowledged as technically complex by eliminating the extensive diagnosis and procedure code lists for several conditions that must be met for assignment to the vaginal delivery MS-DRGs. We stated that our proposals also are intended to respond to issues identified and brought to our attention through public comments for consideration in updating the GROUPER logic code lists in MDC 14.
Specifically, we proposed to delete the following 10 MS-DRGs under MDC 14:
• MS-DRG 765 (Cesarean Section with CC/MCC);
• MS-DRG 766 (Cesarean Section without CC/MCC);
• MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C);
• MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis);
• MS-DRG 775 (Vaginal Delivery without Complicating Diagnosis);
• MS-DRG 777 (Ectopic Pregnancy);
• MS-DRG 778 (Threatened Abortion);
• MS-DRG 780 (False Labor);
• MS-DRG 781 (Other Antepartum Diagnoses with Medical Complications); and
• MS-DRG 782 (Other Antepartum Diagnoses without Medical Complications).
We proposed to create the following new 18 MS-DRGs under MDC 14:
• Proposed new MS-DRG 783 (Cesarean Section with Sterilization with MCC);
• Proposed new MS-DRG 784 (Cesarean Section with Sterilization with CC);
• Proposed new MS-DRG 785 (Cesarean Section with Sterilization without CC/MCC);
• Proposed new MS-DRG 786 (Cesarean Section without Sterilization with MCC);
• Proposed new MS-DRG 787 (Cesarean Section without Sterilization with CC);
• Proposed new MS-DRG 788 Cesarean Section without Sterilization without CC/MCC);
• Proposed new MS-DRG 796 (Vaginal Delivery with Sterilization/D&C with MCC);
• Proposed new MS-DRG 797 (Vaginal Delivery with Sterilization/D&C with CC);
• Proposed new MS-DRG 798 (Vaginal Delivery with Sterilization/D&C without CC/MCC);
• Proposed new MS-DRG 805 (Vaginal Delivery without Sterilization/D&C with MCC);
• Proposed new MS-DRG 806 (Vaginal Delivery without Sterilization/D&C with CC);
• Proposed new MS-DRG 807 (Vaginal Delivery without Sterilization/D&C without CC/MCC);
• Proposed new MS-DRG 817 (Other Antepartum Diagnoses with O.R. Procedure with MCC);
• Proposed new MS-DRG 818 (Other Antepartum Diagnoses with O.R. Procedure with CC);
• Proposed new MS-DRG 819 (Other Antepartum Diagnoses with O.R. Procedure without CC/MCC);
• Proposed new MS-DRG 831 (Other Antepartum Diagnoses without O.R. Procedure with MCC);
• Proposed new MS-DRG 832 (Other Antepartum Diagnoses without O.R. Procedure with CC); and
• Proposed new MS-DRG 833 (Other Antepartum Diagnoses without O.R. Procedure without CC/MCC).
The diagrams below illustrate how the proposed MS-DRG logic for MDC 14 would function. The first diagram (Diagram 1.) begins by asking if there is a principal diagnosis from MDC 14. If no, the GROUPER logic directs the case to the appropriate MDC based on the principal diagnosis reported. Next, the logic asks if there is a cesarean section procedure reported on the claim. If yes, the logic asks if there was a sterilization procedure reported on the claim. If yes, the logic assigns the case to one of the proposed new MS-DRGs 783, 784, or 785. If no, the logic assigns the case to one of the proposed new MS-DRGs 786, 787, or 788. If there was not a cesarean section procedure reported on the claim, the logic asks if there was a vaginal delivery procedure reported on the claim. If yes, the logic asks if there was another O.R. procedure other than sterilization, D&C, delivery procedure or a delivery inclusive O.R. procedure. If yes, the logic assigns the case to existing MS-DRG 768. If no, the logic asks if there was a sterilization and/or D&C reported on the claim. If yes, the logic assigns the case to one of the proposed new MS-DRGs 796, 797, or 798. If no, the logic assigns the case to one of the proposed new MS-DRGs 805, 806, or 807. If there was not a vaginal delivery procedure reported on the claim, the GROUPER logic directs you to the other
The logic for Diagram 2. begins by asking if there is a principal diagnosis of abortion reported on the claim. If yes, the logic then asks if there was a D&C, aspiration curettage or hysterotomy procedure reported on the claim. If yes, the logic assigns the case to existing MS-DRG 770. If no, the logic assigns the case to existing MS-DRG 779. If there was not a principal diagnosis of abortion reported on the claim, the logic asks if there was a principal diagnosis of an antepartum condition reported on the claim. If yes, the logic then asks if there was an O.R. procedure reported on the claim. If yes, the logic assigns the case to one of the proposed new MS-DRGs 817, 818, or 819. If no, the logic assigns the case to one of the proposed new MS-DRGs 831, 832, or 833. If there was not a principal diagnosis of an antepartum condition reported on the claim, the logic asks if there was a principal diagnosis of a postpartum condition reported on the claim. If yes, the logic then asks if there was an O.R. procedure reported on the claim. If yes, the logic assigns the case to existing MS-DRG 769. If no, the logic assigns the case to existing MS-DRG 776. If there was not a principal diagnosis of a postpartum condition reported on the claim, the logic identifies that there was a principal diagnosis describing childbirth, delivery or an intrapartum condition reported on the claim without
To assist in detecting coding and MS-DRG assignment errors for MS-DRG 998 that could result when a provider does not report the procedure code for either a cesarean section or a vaginal delivery along with an outcome of delivery diagnosis code, as discussed in section II.F.13.d., we proposed to add a new Questionable Obstetric Admission edit under the MCE. We invited public comments on this proposed MCE edit and we also invited public comments on the need for any additional MCE considerations with regard to the proposed changes for the MDC 14 MS-DRGs.
We referred readers to Tables 6P.1h. through 6P.1k. associated with the proposed rule for the lists of the diagnosis and procedure codes that we proposed to assign to the GROUPER logic for the proposed new MS-DRGs and the existing MS-DRGs under MDC 14. We invited public comments on our proposed list of diagnosis codes, which also addresses the list of diagnosis codes that a commenter identified as missing from the GROUPER logic. We noted that, as a result of our proposed GROUPER logic changes to the vaginal delivery MS-DRGs, which would only take into account the procedure codes for a vaginal delivery and the outcome of delivery secondary diagnosis codes, there is no longer a need to maintain a specific principal diagnosis logic list for those MS-DRGs. Therefore, while we
With regard to the commenter's concern that the diagnosis codes listed above appear to be missing from the GROUPER logic, we note that, currently, all of the diagnoses codes are included in the MDC 14 Assignment of Diagnosis Codes List. The diagnosis codes that include the terminology “complicating the puerperium” are listed under the “Second Condition—Principal or Secondary Diagnosis” code list in the diagnosis code logic for MS-DRG 774, and the diagnosis codes that include the terminology “complicating childbirth” are listed under the “Principal Diagnosis” code list for the diagnosis code logic for MS-DRG 781 (Other Antepartum Diagnoses with Medical Complications). We acknowledge that the diagnosis codes that include the
As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20220), in our proposal for restructuring the MDC 14 MS-DRGs under the ICD-10 MS-DRGs Version 36, diagnoses described as occurring during pregnancy and diagnoses specifying a trimester or maternal care in the absence of a delivery procedure reported are considered antepartum conditions. Also, as shown in Table 6P.1j. associated with the proposed rule (available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing our proposals, without modification, including the list of diagnosis codes assigned to the MS-DRGs under the restructuring of the vaginal delivery MS-DRGs under MDC 14, which we note also addresses the list of diagnosis codes that a commenter identified and were noted in the proposed rule as appearing to be missing from the GROUPER logic.
We also invited public comments on our proposal to reassign ICD-10-PCS procedure codes 0UDB7ZX, 0UDB7ZZ, 0UDB8ZX, and 0UDB8ZZ that describe dilation and curettage procedures from MS-DRG 767 under MDC 14 to MS-DRGs 744 and 745 under MDC 13.
After consideration of the public comments we received, we are finalizing our proposal to reassign ICD-10-PCS procedure codes 0UDB7ZX, 0UDB7ZZ, 0UDB8ZX, and 0UDB8ZZ that describe dilation and curettage procedures from MS-DRG 767 under MDC 14 to MS-DRGs 744 and 745 under MDC 13 in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
After consideration of the public comments we received, we are finalizing our proposed list of diagnosis and procedure codes for assignment to the revised MDC 14 MS-DRGs including the deletion of 10 MS-DRGs and the creation of 18 new MS-DRGs in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
ICD-10-CM diagnosis codes R65.10 (Systemic Inflammatory Response Syndrome (SIRS) of non-infectious origin without acute organ dysfunction) and R65.11 (Systemic Inflammatory Response Syndrome (SIRS) of non-infectious origin with acute organ dysfunction) are currently assigned to MS-DRGs 870 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours), 871 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours with MCC), and 872 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours without MCC) under MDC 18 (Infectious and Parasitic Diseases, Systemic or Unspecified Sites). As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20226), our clinical advisors noted that these diagnosis codes are specifically describing conditions of a non-infectious origin, and recommended that they be reassigned to a more clinically appropriate MS-DRG.
We examined claims data from the September 2017 update of the FY 2017 MedPAR file for cases in MS-DRGs 870, 871, and 872. Our findings are shown in the following table.
As shown in this table, we found a total of 31,658 cases in MS-DRG 870, with an average length of stay of 14.3 days and average costs of $42,981. We found a total of 566,531 cases in MS-DRG 871, with an average length of stay
We then examined claims data in MS-DRGs 870, 871, or 872 for cases reporting an ICD-10-CM diagnosis code of R65.10 or R65.11. Our findings are shown in the following table.
As shown in this table, we found a total of 1,254 cases reporting a principal diagnosis code of R65.10 in MS-DRGs 870, 871, and 872, with an average length of stay of 3.8 days and average costs of $6,615. We found a total of 138 cases reporting a principal diagnosis code of R65.11 in MS-DRGs 870, 871, and 872, with an average length of stay of 4.8 days and average costs of $9,655. We found a total of 1,232 cases reporting a secondary diagnosis code of R65.10 in MS-DRGs 870, 871, and 872, with an average length of stay of 5.5 days and average costs of $10,670. Lastly, we found a total of 117 cases reporting a secondary diagnosis code of R65.11 in MS-DRGs 870, 871, and 872, with an average length of stay of 6.2 days and average costs of $12,525.
The claims data included a total of 1,392 cases in MS-DRGs 870, 871, and 872 that reported a principal diagnosis code of R65.10 or R65.11. We noted in the FY 2019 IPPS/LTCH PPS proposed rule that these 1,392 cases appear to have been coded inaccurately according to the ICD-10-CM Official Guidelines for Coding and Reporting at Section I.C.18.g., which specifically state: “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 non-infectious 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, according to the Coding Guidelines, ICD-10-CM diagnosis codes R65.10 and R65.11 should not be reported as the principal diagnosis on an inpatient claim.
We have acknowledged in past rulemaking the challenges with coding for SIRS (and sepsis) (71 FR 24037). In addition, we note that there has been confusion with regard to how these codes are displayed in the ICD-10 MS-DRG Definitions Manual under MS-DRGs 870, 871, and 872, which may also impact the reporting of these conditions. For example, in Version 35 of the ICD-10 MS-DRG Definitions Manual (which is available via the internet on the CMS website at:
To address the issue of determining a more appropriate MS-DRG assignment for ICD-10-CM diagnosis codes R65.10 and R65.11, we reviewed alternative options under MDC 18. Our clinical advisors determined the most appropriate option is MS-DRG 864 (Fever) because the conditions that are assigned here describe conditions of a non-infectious origin.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20227), we proposed to reassign ICD-10-CM diagnosis codes R65.10 and R65.11 to MS-DRG 864 and to revise the title of MS-DRG 864 to “Fever and Inflammatory Conditions” to better reflect the diagnoses assigned there.
As noted in the ICD-10 MS-DRG Definitions Manual Version 35, Appendix B—Diagnosis Code/MDC/MS-DRG Index, each diagnosis code is listed with the MDC and the MS-DRGs to which the diagnosis is used to define the logic of the DRG either as a principal diagnosis or a secondary diagnosis. For diagnosis codes R65.10 and R65.11, the ICD-10 MS DRG Definitions Manual displays MDC 18 and MS-DRGs 870-872, as described previously. As discussed in the proposed rule, because the diagnosis are codes listed under the heading of “Principal Diagnosis” in the ICD-10 MS DRG Definitions Manual, it may appear to indicate that these codes are to be reported as a principal diagnosis for assignment to these MS-DRGs. However, the Definitions Manual display of the GROUPER logic assignment for each diagnosis code is for grouping purposes only and does not correspond to coding guidelines for reporting the principal diagnosis. In other words, cases will group according to the GROUPER logic, regardless of any coding guidelines or coverage policies. It is the MCE and other payer specific edits that identify inconsistencies in the coding guidelines or coverage policies. Under our proposed change to the ICD-10 MS-DRGs Version 36, cases reporting diagnosis code R65.10 or R65.11 as a secondary diagnosis would result in assignment to MS-DRG 864 when one of the other listed diagnosis codes in the MS-DRG 864 logic is reported as the principal diagnosis.
After consideration of the public comments we received, we are finalizing our proposal to reassign ICD-10-CM diagnosis codes R65.10 and R65.11 to MS-DRG 864 and to revise the title of MS-DRG 864 to “Fever and Inflammatory Conditions”.
ICD-10-CM Coding Guidelines include “Code first” sequencing instructions for cases reporting a principal diagnosis of toxic effect (ICD-10-CM codes T51 through T65) and a secondary diagnosis of corrosive burn (ICD-10-CM codes T21.40 through T21.79). As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20227), we received a request to reassign these cases from MS-DRGs 901 (Wound Debridements for Injuries with MCC), 902 (Wound Debridements for Injuries with CC), 903 (Wound Debridements for Injuries without CC/MCC), 904 (Skin Grafts for Injuries with CC/MCC), 905 (Skin Grafts for Injuries without CC/MCC), 917 (Poisoning and Toxic Effects of Drugs with MCC), and 918 (Poisoning and Toxic Effects of Drugs without MCC) to MS-DRGs 927 (Extensive Burns or Full Thickness Burns with Mechanical Ventilation >96 Hours with Skin Graft), 928 (Full Thickness Burn with Skin Graft or Inhalation Injury with CC/MCC), 929 (Full Thickness Burn with Skin Graft or Inhalation Injury without CC/MCC), 933 (Extensive Burns or Full Thickness Burns with Mechanical Ventilation >96 Hours without Skin Graft), 934 (Full Thickness Burn without Skin Graft or Inhalation Injury), and 935 (Nonextensive Burns).
The requestor noted that, for corrosion burns codes T21.40 through T21.79, ICD-10-CM Coding Guidelines instruct to “Code first (T51 through T65) to identify chemical and intent.” Because code first notes provide sequencing directive, when patients are admitted with corrosive burns (which can be full thickness and extensive), toxic effect codes T51 through T65 must be sequenced first followed by codes for the corrosive burns. This causes full-thickness and extensive burns to group to MS-DRGs 901 through 905 when excisional debridement and split thickness skin grafts are performed, and to MS-DRGs 917 and 918 when procedures are not performed. This is in contrast to cases reporting a principal diagnosis of corrosive burn, which group to MS-DRGs 927 through 935.
The requestor stated that MS-DRGs 456 (Spinal Fusion except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions with MCC), 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions with CC), and 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions without CC/MCC) are grouped based on the procedure performed in combination with the principal diagnosis or secondary diagnosis (secondary scoliosis). The requestor stated that when codes for corrosive burns are reported as secondary diagnoses in conjunction with principal diagnoses codes T5l through T65, particularly when skin grafts are performed, they would be more appropriately assigned to MS-DRGs 927 through 935.
We analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for all cases assigned to MS-DRGs 901, 902, 903, 904, 905, 917, and 918, and subsets of these cases with principal diagnosis of toxic effect with secondary diagnosis of corrosive burn. We noted in the proposed rule that we found no cases from this subset in MS-DRGs 903, 907, 908, and 909 and, therefore, did not include the results for these MS-DRGs in the table below. We also analyzed all cases assigned to MS-DRGs 927, 928, 929, 933, 934, and 935 and those cases that reported a principal diagnosis of corrosive burn. Our findings are shown in the following two tables.
As shown in this table, there were a total of 55 cases with a principal diagnosis of toxic effect and a secondary diagnosis of corrosive burn across MS-DRGs 901, 902, 903, 904, 905, 917, and 918. When comparing this subset of codes relative to those of each MS-DRG as a whole, we noted that, in most of these MS-DRGs, the average costs and average length of stay for this subset of cases were roughly equivalent to or lower than the average costs and average length of stay for cases in the MS-DRG as a whole, while in one case, they were higher. As we have noted in prior rulemaking (77 FR 53309) and elsewhere in the proposed rule and this final rule, it is a fundamental principle of an averaged payment system that half of the procedures in a group will have above average costs. It is expected that there will be higher cost and lower cost subsets, especially when a subset has low numbers. We stated in the proposed rule that the results of this analysis indicate that these cases are appropriately placed within their current MDC.
Our clinical advisors reviewed this request and indicated that patients with a principal diagnosis of toxic effect and a secondary diagnosis of corrosive burn have been exposed to an irritant or corrosive substance and, therefore, are clinically similar to those patients in MDC 21. Furthermore, our clinical advisors did not believe that the size of this subset of cases justifies the significant changes to the GROUPER logic that would be required to address the commenter's request, which would involve rerouting cases when the primary and secondary diagnoses are in different MDCs.
To address the request of reassigning cases with a principal diagnosis of toxic effect and secondary diagnosis of corrosive burn, we reviewed the data for all cases in MS-DRGs 927, 928, 929, 933, 934, and 935 and those cases reporting a principal diagnosis of corrosive burn. We found a total of 60 cases reporting a principal diagnosis of corrosive burn, with an average length of stay of 8.5 days and average costs of $19,456. We stated in the proposed rule that our clinical advisors believe that these cases reporting a principal diagnosis of corrosive burn are appropriately placed in MDC 22 as they are clinically aligned with other patients in this MDC. We further stated that, in
After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG structure for cases reporting a principal diagnosis of toxic effect (ICD-10-CM codes T51 through T65) and a secondary diagnosis of corrosive burn (ICD-10-CM codes T21.40 through T21.79).
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 2018 IPPS/LTCH PPS final rule (82 FR 38045), we 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 website at
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20229), we addressed the MCE requests we received by the November 1, 2017 deadline. We also discussed the proposals we were making based on our internal review and analysis. In this FY 2019 IPPS/LTCH PPS final rule, we present a summation of the comments we received in response to the MCE requests and proposals presented based on internal reviews and analyses in the proposed rule, our responses to those comments, and our finalized policies.
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 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 are making available the FY 2019 ICD-10 MCE Version 36 Manual file, along with the link to the mainframe and computer software for the MCE Version 36 (and ICD-10 MS DRGs), on the CMS website at:
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 0-17 years inclusive (for example, Reye's syndrome, routine child health exam).
• Maternity—Age range is 12-55 years inclusive (for example, diabetes in pregnancy, antepartum pulmonary complication).
• Adult—Age range is 15-124 years inclusive (for example, senile delirium, mature cataract).
Under the ICD-10 MCE, the Perinatal/Newborn Diagnoses 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
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20229), we indicated that, in the ICD-10-CM classification, there are 14 diagnosis codes that describe specific suspected conditions that have been evaluated and ruled out during the newborn period and are currently not on the Perinatal/Newborn Diagnoses 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 the following diagnosis codes are appropriate to add to the edit code list for the Perinatal/Newborn Diagnoses Category.
Therefore, we proposed to add the ICD-10-CM diagnosis codes listed in the table above to the Age Conflict edit under the Perinatal/Newborn Diagnoses Category edit code list. We also proposed to continue to include the existing diagnosis codes currently listed under the Perinatal/Newborn Diagnoses Category edit code list.
After consideration of the public comments we received, we are finalizing our proposal to add the ICD-10-CM diagnosis codes listed in the table above to the Age Conflict edit under the Perinatal/Newborn Diagnoses Category edit code list. We also are finalizing our proposal to continue to include the existing list of codes on the Perinatal/Newborn Diagnoses Category edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
Under the ICD-10 MCE, the Pediatric Diagnoses Category for 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.
As discussed in section II.F.15. of the preamble of the proposed rule, Table 6C.—Invalid Diagnosis Codes associated with the proposed rule and this final (which is available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing our proposal to remove ICD-10-CM diagnosis code Z13.4 from the Pediatric Diagnoses Category edit code list. We also are finalizing our proposal to maintain the other existing codes on the Pediatric Diagnoses Category edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
Under the ICD-10 MCE, the Maternity Diagnoses Category for the Age Conflict edit considers the age range of 12 to 55 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.
As discussed in section II.F.15. of the preamble of the proposed rule, Table 6A.—New Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
In addition, as discussed in section II.F.15. of the preamble of the proposed rule, Table 6C.—Invalid Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing our proposal to add the diagnosis codes listed in the table above to the Maternity Diagnoses Category edit code list and our proposal to remove ICD-10-CM diagnosis codes F53 and O86.0 from the Maternity Diagnoses Category edit code list. We also are finalizing our proposal to maintain the other existing codes on the Maternity Diagnoses Category edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
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.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20231), we indicated that we received a request to consider the addition of the following ICD-10-CM diagnosis codes to the list for the Diagnoses for Females Only edit.
The requestor noted that, currently, ICD-10-CM diagnosis code Z30.44 (Encounter for surveillance of vaginal ring hormonal contraceptive device) is on the Diagnoses for Females Only edit code list and suggested that ICD-10-CM diagnosis code Z30.015, which also describes an encounter involving a vaginal ring hormonal contraceptive, be added to the Diagnoses for Females Only edit code list as well. In addition, the requestor suggested that ICD-10-CM diagnosis codes Z31.7 and Z98.891 be added to the Diagnoses for Females Only edit code list.
We reviewed ICD-10-CM diagnosis codes Z30.015, Z31.7, and Z98.891, and we agreed with the requestor that it is clinically appropriate to add these three ICD-10-CM diagnosis codes to the Diagnoses for Females Only edit code list because the conditions described by these codes are specific to and consistent with the female sex.
In addition, as discussed in section II.F.15. of the preamble of the proposed rule, Table 6A.—New Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing our proposals to add ICD-10-CM diagnosis codes Z30.015, Z31.7 and Z98.891 and the ICD-10-CM diagnosis codes listed in the table above to the Diagnoses for Females Only edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
In addition, as discussed in section II.F.15. of the preamble of the proposed rule, Table 6C.—Invalid Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
Because these three ICD-10-CM diagnosis codes will no longer be effective as of October 1, 2018, we proposed to remove them from the Diagnoses for Females Only edit code list under the Sex Conflict edit.
After consideration of the public comments we received, we are finalizing our proposal to remove ICD-10-CM diagnosis codes F53, O86.0, and Q51.2, from the Diagnoses for Females Only edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
As discussed in section II.F.15. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule, Table 6B.—New Procedure Codes associated with the proposed rule (which is available via the internet on the CMS website at:
We also proposed to continue to include the existing procedure codes currently listed under the Procedures for Females Only edit code list.
After consideration of the public comments we received, we are finalizing our proposal to add ICD-10-PCS procedure codes 0UY90Z0, 0UY90Z1 and 0UY90Z2 to the Procedures for Females Only edit code list. We also are finalizing our proposal to maintain the existing list of codes on the Procedures for Females Only edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
As discussed in section II.F.15. of the preamble of the proposed rule, Table 6A.—New Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
We also proposed to continue to include the existing diagnosis codes currently listed under the Diagnoses for Males Only edit code list.
After consideration of the public comments we received, we are finalizing our proposal to add the ICD-10-CM diagnosis codes listed in the table above to the Diagnoses for Males Only edit code list. We also are finalizing our proposal to maintain the existing list of codes on the Diagnoses for Males Only edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
In the ICD-10-CM classification system, manifestation codes describe the manifestation of an underlying disease, not the disease itself and, therefore, should not be used as a principal diagnosis.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20232), we noted that, as discussed in section II.F.15. of the preamble of the proposed rule, Table 6A.—New Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
After consideration of the public comments we received, we are finalizing our proposal to add ICD-10-CM diagnosis codes K82.A1 and K82.A2 to the Manifestation Code as Principal Diagnosis edit code list and to continue to include the existing diagnosis codes currently listed under the Manifestation Code as Principal Diagnosis edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
In the MCE, some diagnoses are not usually sufficient justification for admission to an acute care hospital. For example, if a patient is assigned ICD-10-CM diagnosis code R03.0 (Elevated blood pressure reading, without diagnosis of hypertension), the patient would have a questionable admission because an elevated blood pressure reading is not normally sufficient justification for admission to a hospital.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20233), we noted that, as discussed in section II.F.10. of the preamble of the proposed rule, we were proposing several modifications to the MS-DRGs under MDC 14 (Pregnancy, Childbirth and the Puerperium). We stated in the proposed rule that one aspect of these proposed modifications involves the GROUPER logic for the cesarean section and vaginal delivery MS-DRGs. We referred readers to section II.F.10. of the preamble of the proposed rule for a detailed discussion of the proposals regarding these MS-DRG modifications under MDC 14 and the relation to the MCE.
If a patient presents to the hospital and either a cesarean section or a vaginal delivery occurs, it is expected that, in addition to the specific type of delivery code, an outcome of delivery code is also assigned and reported on the claim. The outcome of delivery codes are ICD-10-CM diagnosis codes that are to be reported as secondary diagnoses as instructed in Section I.C.15.b.5 of the ICD-10-CM Official Guidelines for Coding and Reporting which states: “A code from category Z37, Outcome of delivery, should be included on every maternal record when a delivery has occurred. These codes are not to be used on subsequent records or on the newborn record.” Therefore, to encourage accurate coding and appropriate MS-DRG assignment in alignment with the proposed modifications to the delivery MS-DRGs, we proposed to create a new “Questionable Obstetric Admission Edit” under the Questionable Admission edit to read as follows:
We proposed that the three ICD-10-PCS procedure codes listed in the following table would be used to establish the list of codes for the proposed Questionable Obstetric Admission edit logic for cesarean section.
We proposed that the nine ICD-10-PCS procedure codes listed in the following table would be used to establish the list of codes for the proposed new Questionable Obstetric
We proposed that the 19 ICD-10-CM diagnosis codes listed in the following table would be used to establish the list of secondary diagnosis codes for the proposed new Questionable Obstetric Admission edit logic for outcome of delivery.
After consideration of the public comments we received, we are finalizing our proposal to create the new Questionable Obstetric Admission edit. We also are finalizing our proposal to include ICD-10-PCS procedure codes 10D00Z0, 10D00Z1, and 10D00Z2 listed above for the “Procedure code list for cesarean section” portion of the edit. We are finalizing our proposal to include the procedure codes listed above for vaginal delivery with modifications. Specifically, we are not including ICD-10-PCS procedure codes 10D07Z6, 10D07Z87, 10D17Z9 and 10D18Z9 in the “Procedure code list for vaginal delivery” portion of the edit and finalizing the inclusion of the remaining
In the MCE, there are select codes that describe a circumstance which 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.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20234), we noted that, as discussed in section II.F.9. of the preamble of the proposed rule, ICD-10-CM diagnosis codes Z49.02 (Encounter for fitting and adjustment of peritoneal dialysis catheter), Z49.31 (Encounter for adequacy testing for hemodialysis), and Z49.32 (Encounter for adequacy testing for peritoneal dialysis) are currently on the Unacceptable Principal Diagnosis edit code list. We proposed to add diagnosis code Z49.01 (Encounter for fitting and adjustment of extracorporeal dialysis catheter) to the Unacceptable Principal Diagnosis edit code list because this is an encounter code that would more likely be performed in an outpatient setting.
We also noted in the proposed rule that, as discussed in section II.F.15. of the preamble of the proposed rule, Table 6C.—Invalid Diagnosis Codes associated with the proposed rule (which is available via the internet on the CMS website at:
We also proposed to continue to include the other existing diagnosis codes currently listed under the Unacceptable Principal Diagnosis edit code list.
After consideration of the public comments we received, we are finalizing our proposal to add ICD-10-CM diagnosis code Z49.01 to the Unacceptable Principal Diagnosis edit code list. We also are finalizing our proposal to remove ICD-10-CM diagnosis code Z13.4 from the Unacceptable Principal Diagnosis edit code list. In addition, we are finalizing our proposal to maintain the other existing codes on the Unacceptable Principal Diagnosis edit code list under the ICD-10 MCE Version 36, effective October 1, 2018.
The procedures shown below are identified as non-covered procedures only when any code from the diagnoses list shown below is present as either a principal or secondary diagnosis.
This update will also be reflected in the ICD-10 MCE software Version 36 effective October 1, 2018.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 38054), we noted the importance of ensuring accuracy of the coded data from the reporting, collection, processing, coverage, payment, and analysis aspects. We have engaged a contractor to assist in the review of the limited coverage and noncovered procedure edits in the MCE that may also be present in other claims processing systems that are utilized by our MACs. The MACs must adhere to criteria specified within the National Coverage Determinations (NCDs) and may implement their own edits in addition to what are already incorporated into the MCE, resulting in duplicate edits. The objective of this review is to identify where duplicate edits may exist and to determine what the impact might be if these edits were to be removed from the MCE.
We have noted that the purpose of the MCE is to ensure that errors and inconsistencies in the coded data are recognized during Medicare claims processing. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20235), we indicated that we are considering whether the inclusion of coverage edits in the MCE necessarily aligns with that specific goal because the focus of coverage edits is on whether or not a particular service is covered for payment purposes and not whether it was coded correctly.
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 2018 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:
Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS-DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS-DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS-DRG associated with the most resource-intensive surgical class.
A surgical class can be composed of one or more MS-DRGs. For example, in MDC 11, the surgical class “kidney transplant” consists of a single MS-DRG (MS-DRG 652) and the class “major bladder procedures” consists of three MS-DRGs (MS-DRGs 653, 654, and 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS-DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS-DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS-DRGs 001 and 002 and surgical class B includes MS-DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 001 are higher than that of MS-DRG 003, but the average costs of MS-DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS-DRG in the class by frequency (that is, by the number of cases in the MS-DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of “other O.R. procedures” as discussed in this final rule.
This methodology may occasionally result in assignment of a case involving multiple procedures to the lower-weighted MS-DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in
We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the “other O.R. procedures” surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS-DRG or MS-DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The “other O.R. procedures” class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higher-ordered surgical class has lower average costs than the class ordered below it.
Based on the changes that we proposed to make in the FY 2019 IPPS/LTCH PPS proposed rule, as discussed in section II.F.10. of the preamble of this final rule, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20235), we proposed to revise the surgical hierarchy for MDC 14 (Pregnancy, Childbirth & the Puerperium) as follows: In MDC 14, we proposed to delete MS-DRGs 765 and 766 (Cesarean Section with and without CC/MCC, respectively) and MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C) from the surgical hierarchy. We proposed to sequence proposed new MS-DRGs 783, 784, and 785 (Cesarean Section with Sterilization with MCC, with CC and without CC/MCC, respectively) above proposed new MS-DRGs 786, 787, and 788 (Cesarean Section without Sterilization with MCC, with CC and without CC/MCC, respectively). We proposed to sequence proposed new MS-DRGs 786, 787, and 788 (Cesarean Section without Sterilization with MCC, with CC and without CC/MCC, respectively) above MS-DRG 768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C). We also proposed to sequence proposed new MS-DRGs 796, 797, and 798 (Vaginal Delivery with Sterilization/D&C with MCC, with CC and without CC/MCC, respectively) below MS-DRG 768 and above MS-DRG 770 (Abortion with D&C, Aspiration Curettage or Hysterotomy). Finally, we proposed to sequence proposed new MS-DRGs 817, 818, and 819 (Other Antepartum Diagnoses with O.R. procedure with MCC, with CC and without CC/MCC, respectively) below MS-DRG 770 and above MS-DRG 769 (Postpartum and Post Abortion Diagnoses with O.R. Procedure). Our proposals for Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 36 are illustrated in the following table.
After consideration of the public comments we received, we are finalizing our proposed changes to Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 36 as illustrated in the table above effective October 1, 2018.
As with other MS-DRG related issues, we encourage commenters to submit requests to examine ICD-10 claims pertaining to the surgical hierarchy via the CMS MS-DRG Classification Change Request Mailbox located at:
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).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20236), we indicated 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 2019 were available via the internet on the CMS website at:
Table 6I.1—Proposed Additions to the MCC List—FY 2019;
Table 6I.2—Proposed Deletions to the MCC List—FY 2019;
Table 6J.1—Proposed Additions to the CC List—FY 2019; and
Table 6J.2—Proposed Deletions to the CC List—FY 2019.
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 are a result of code expansions, with the exception of diagnosis codes B20 and J80, which are the result of proposed severity level designation changes. Therefore, the diagnosis codes on these lists will no longer be valid codes, effective FY 2019.
We referred readers to the Tables 6I.1, 6I.2, 6J.1, and 6J.2 associated with the proposed rule, which are available via the internet on the CMS website at:
As shown in the table below and in Table 6J.1. associated with the proposed rule, a total of six new diagnosis codes were proposed to be designated at the CC severity level based on review of the predecessor code (T81.4XXA), clinical coherence, and resource considerations.
Therefore, for the reasons discussed above, our clinical advisors continue to support the proposed CC severity level designation for diagnosis code T81.44XA for FY 2019.
In addition, because these diagnosis codes identified by the commenter are new, we do not have any claims data for further analysis. Once we have additional claims data to allow us to conduct further review, we can continue to examine these conditions to determine if their impact on resource use is equal to or above the expected value of a CC severity level designation.
After consideration of the public comments we received, we are finalizing our proposal to designate diagnosis codes K35.20 and T81.44XA as CC severity levels. We also are finalizing our other proposed additions and deletions with their corresponding severity level designations for FY 2019. We refer readers to Tables 6I.1., 6I.2, 6J.1, and 6J.2. associated with this final rule, which are available via the internet on the CMS website at:
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38060), we provided the public with notice of our plans to conduct a comprehensive review of the CC and MCC lists for FY 2019. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38056 through 38057), we also finalized our proposal to maintain the existing lists of principal diagnosis codes in Table 6L.—Principal Diagnosis Is Its Own MCC List and Table 6M.—Principal Diagnosis Is Its Own CC List for FY 2018, without any changes to the existing lists, noting our plans to conduct a comprehensive review of the CC and MCC lists for FY 2019 (82 FR 38060). We stated that 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.
We also stated that 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. The Principal Diagnosis Is Its Own CC or MCC Lists were developed for the FY 2016 implementation of the ICD-10 version of the MS-DRGs to facilitate replication of the ICD-9-CM MS-DRGs. As part of our efforts to replicate the ICD-9-CM MS-DRGs, we implemented logic that may have increased the complexity of the MS-DRG assignment hierarchy and altered the format of the ICD-10 MS-DRG Definitions Manual. Two examples of workarounds used to facilitate replication are the proliferation of procedure clusters in the surgical MS-DRGs and the creation of the Principal Diagnosis Is Its Own CC or MCC Lists special logic.
The following paragraph was added to the Version 33 ICD-10 MS-DRG Definitions Manual to explain the use of the Principal Diagnosis Is Its Own CC or MCC Lists: “A few ICD-10-CM diagnosis codes express conditions that are normally coded in ICD-9-CM using two or more ICD-9-CM diagnosis codes. In the interest of ensuring that the ICD-10 MS-DRGs Version 33 places a patient in the same DRG regardless whether the patient record were to be coded in ICD-9-CM or ICD-10-CM/PCS, whenever one of these ICD-10-CM combination codes is used as principal diagnosis, the cluster of ICD-9-CM codes that would be coded on an ICD-9-CM record is considered. If one of the ICD-9-CM codes in the cluster is a CC or MCC, then the single ICD-10-CM combination code used as a principal diagnosis must also imply the CC or MCC that the ICD-9-CM cluster would have presented. The ICD-10-CM diagnoses for which this implication must be made are listed here.” Versions 34 and 35 of the ICD-10 MS-DRG Definitions Manual also include this special logic for the MS-DRGs.
The Principal Diagnosis Is Its Own CC or MCC Lists were developed in the absence of ICD-10 coded data by mapping the ICD-9-CM diagnosis codes to the new ICD-10-CM combination codes. CMS has historically used clinical judgment combined with data analysis to assign a principal diagnosis describing a complex or severe condition to the appropriate DRG or MS-DRG. The initial ICD-10 version of the MS-DRGs replicated from the ICD-9 version can now be evaluated using clinical judgment combined with ICD-10 coded data because it is no longer necessary to replicate MS-DRG assignment across the ICD-9 and ICD-10 versions of the MS-DRGs for purposes of calculating relative weights. Now that ICD-10 coded data are available, in addition to using the data for calculating relative weights, ICD-10 data can be used to evaluate the effectiveness of the special logic for assigning a severity level to a principal diagnosis, as an indicator of resource utilization. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20237), to evaluate the effectiveness of the special logic, we conducted analysis of the ICD-10 coded data combined with clinical review to determine whether to propose to keep the special logic for assigning a severity level to a principal diagnosis, or to propose to remove the special logic and use other available means of assigning a complex principal diagnosis to the appropriate MS-DRG.
In the proposed rule, using claims data from the September 2017 update of the FY 2017 MedPAR file, we employed the following method to determine the impact of removing the special logic used in the current Version 35 GROUPER to process claims containing a code on the Principal Diagnosis Is Its Own CC or MCC Lists. Edits and cost estimations used for relative weight calculations were applied, resulting in 9,070,073 IPPS claims analyzed for this special logic impact evaluation. We refer readers to section II.G. of the preamble of this final rule for further information regarding the methodology for calculation of the relative weights.
First, we identified the number of cases potentially impacted by the special logic. We identified 310,184 cases reporting a principal diagnosis on the Principal Diagnosis Is Its Own CC or MCC lists. Of the 310,184 total cases that reported a principal diagnosis code on the Principal Diagnosis Is Its Own CC or MCC Lists, 204,749 cases also reported a secondary diagnosis code at the same severity level or higher severity level, and therefore the special logic had no impact on MS-DRG assignment. However, of the 310,184 total cases, there were 105,435 cases that did not report a secondary diagnosis code at the same severity level or higher severity level, and therefore the special logic could potentially impact MS-DRG assignment, depending on the specific severity leveling structure of the base DRG.
Next, we removed the special logic in the GROUPER that is used for processing claims reporting a principal diagnosis on the Principal Diagnosis Is Its Own CC or MCC Lists, thereby creating a Modified Version 35 GROUPER. Using this Modified Version 35 GROUPER, we reprocessed the 105,435 claims for which the principal diagnosis code was the sole source of a MCC or CC on the case, to obtain data for comparison showing the effect of removing the special logic.
After removing the special logic in the Version 35 GROUPER for processing claims containing diagnosis codes on the Principal Diagnosis Is Its Own CC or MCC Lists, and reprocessing the claims using the Modified Version 35 GROUPER software, we found that 18,596 (6 percent) of the 310,184 cases reporting a principal diagnosis on the Principal Diagnosis Is Its Own CC or MCC Lists resulted in a different MS-
Below we provide a summary of the steps that we followed for the analysis performed.
To estimate the overall financial impact of removing the special logic from the GROUPER, we calculated the aggregate change in estimated payment for the MS-DRGs by comparing average costs for each MS-DRG affected by the change, before and after removing the special logic. Before removing the special logic in the Version 35 GROUPER, the cases impacted by the special logic had an estimated average payment of $58 million above the average costs for all the MS-DRGs to which the claim was originally assigned. After removing the special logic in the Version 35 GROUPER, the 18,596 cases impacted by the special logic had an estimated average payment of $39 million below the average costs for the newly assigned MS-DRGs.
We performed regression analysis to compare the proportion of variance in the MS-DRGs with and without the special logic. The results of the regression analysis showed a slight decrease in variance when the logic was removed. While the decrease itself was not statistically significant (an R-squared of 36.2603 percent after the special logic was removed, compared with an R-squared of 36.2501 percent in the current version 35 GROUPER), we note that the proportion of variance across the MS-DRGs essentially stayed the same, and certainly did not increase, when the special logic was removed.
We further examined the 18,596 claims that were impacted by the special logic in the GROUPER for processing claims containing a code on the Principal Diagnosis Is Its Own CC or MCC Lists. The 18,596 claims were analyzed by the principal diagnosis code and the MS-DRG assigned, resulting in 588 principal diagnosis and MS-DRG combinations or subsets. Of the 588 subsets of cases that utilized the special logic, 556 of the 588 subsets (95 percent) had fewer than 100 cases, 529 of the 588 subsets (90 percent) had fewer than 50 cases, and 489 of the 588 subsets (83 percent) had fewer than 25 cases.
We examined the 32 subsets of cases (5 percent of the 588 subsets) that utilized the special logic and had 100 or more cases. Of the 32 subsets of cases, 18 (56 percent) are similar in terms of average costs and length of stay to the MS-DRG assignment that results when the special logic is removed, and 14 of the 32 subsets of cases (44 percent) are similar in terms of average costs and length of stay to the MS-DRG assignment that results when the special logic is utilized.
The table below contains examples of four subsets of cases that utilize the special logic, comparing average length of stay and average costs between two MS-DRGs within a base DRG, corresponding to the MS-DRG assigned when the special logic is removed and the MS-DRG assigned when the special logic is utilized. All four subsets of cases involve the principal diagnosis code E11.52 (Type 2 diabetes mellitus with diabetic peripheral angiopathy with gangrene). There are four subsets of cases in this example because the records involving the principal diagnosis code E11.52 are assigned to four different base DRGs, one medical MS-DRG and three surgical MS-DRGs, depending on the procedure code(s) reported on the claim. All subsets of cases contain more than 100 claims. In three of the four subsets, the cases are similar in terms of average length of stay and average costs to the MS-DRG assignment that results when the special logic is removed, and in one of the four subsets, the cases are similar in terms of average length of stay and average costs to the MS-DRG assignment that results when the special logic is utilized.
As shown in the following table, using ICD-10-CM diagnosis code E11.52 (Type 2 diabetes mellitus with diabetic peripheral angiopathy with gangrene) as our example, the data findings show four different MS-DRG pairs for which code E11.52 was the principal diagnosis on the claim and where the special logic impacted MS-DRG assignment. For the first MS-DRG pair, we examined MS-DRGs 240 and 241 (Amputation for Circulatory System Disorders Except Upper Limb and Toe with CC and without CC/MCC, respectively). We found 436 cases reporting diagnosis code E11.52 as the principal diagnosis, with an average length of stay of 5.5 days and average costs of $11,769. These 436 cases are assigned to MS-DRG 240 with the special logic utilized, and assigned to MS-DRG 241 with the special logic removed. The total number of cases reported in MS-DRG 240 was 7,675, with an average length of stay of 8.3 days and average costs of $17,876. The total number of cases reported in MS-DRG 241 was 778, with an average length of stay of 5.0 days and average costs of $10,882. The 436 cases are more similar to MS-DRG 241 in terms of length of stay and average cost and less similar to MS-DRG 240.
For the second MS-DRG pair, we examined MS-DRGs 256 and 257 (Upper Limb and Toe Amputation for Circulatory System Disorders with CC and without CC/MCC, respectively). We found 193 cases reporting ICD-10-CM
For the third MS-DRG pair, we examined MS-DRGs 300 and 301 (Peripheral Vascular Disorders with CC and without CC/MCC, respectively). We found 185 cases reporting ICD-10-CM diagnosis code E11.52 as the principal diagnosis, with an average length of stay of 3.6 days and average costs of $5,981. These 185 cases are assigned to MS-DRG 300 with the special logic utilized, and assigned to MS-DRG 301 with the special logic removed. The total number of cases reported in MS-DRG 300 was 29,327, with an average length of stay of 4.1 days and average costs of $7,272. The total number of cases reported in MS-DRG 301 was 9,611, with an average length of stay of 2.8 days and average costs of $5,263. These 185 cases are more similar to MS-DRG 301 in terms of average length of stay and average costs and less similar to MS-DRG 300.
For the fourth MS-DRG pair, we examined MS-DRGs 253 and 254 (Other Vascular Procedures with CC and without CC/MCC, respectively). We found 225 cases reporting diagnosis code E11.52 as the principal diagnosis, with an average length of stay of 5.2 days and average costs of $17,901. These 225 cases are assigned to MS-DRG 253 with the special logic utilized, and assigned to MS-DRG 254 with the special logic removed. The total number of cases reported in MS-DRG 253 was 25,714, with an average length of stay of 5.4 days and average costs of $18,986. The total number of cases reported in MS-DRG 254 was 12,344, with an average length of stay of 2.8 days and average costs of $13,287. Unlike the previous three MS-DRG pairs, these 225 cases are more similar to MS-DRG 253 in terms of average length of stay and average costs and less similar to MS-DRG 254.
Based on our analysis of the data, we stated that we believe that there may be more effective indicators of resource utilization than the Principal Diagnosis Is Its Own CC or MCC Lists and the special logic used to assign clinical severity to a principal diagnosis. As stated in the proposed rule and earlier in this discussion, it is no longer necessary to replicate MS-DRG assignment across the ICD-9 and ICD-10 versions of the MS-DRGs. The available ICD-10 data can now be used to evaluate other indicators of resource utilization.
Therefore, as an initial recommendation from the first phase in our comprehensive review of the CC and MCC lists, we proposed to remove the special logic in the GROUPER for processing claims containing a diagnosis code from the Principal Diagnosis Is Its Own CC or MCC Lists, and we proposed to delete the tables containing the lists of principal diagnosis codes, Table 6L.—Principal Diagnosis Is Its Own MCC List and Table 6M.—Principal Diagnosis Is Its Own CC List, from the ICD-10 MS-DRG Definitions Manual for FY 2019. We invited public comments on our proposals.
After consideration of the public comments we received, we are finalizing our proposal to remove the special logic in the GROUPER for processing claims containing a code on the Principal Diagnosis Is Its Own CC or MCC Lists as an initial step in our first phase of the comprehensive review of the CC and MCC lists. We also are finalizing our proposal to delete the tables containing the lists of principal diagnosis codes, Table 6L.—Principal Diagnosis Is Its Own MCC List and Table 6M.—Principal Diagnosis Is Its Own CC List, from the ICD-10 MS-DRG Definitions Manual Version 36, effective October 1, 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.
In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles:
• Chronic and acute manifestations of the same condition should not be considered CCs for one another;
• Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another;
• Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another;
• Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and
• Closely related conditions should not be considered CCs for one another.
The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50544) for detailed information regarding revisions that were made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
The ICD-10 MS-DRGs Version 35 CC Exclusion List is included as Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available via the internet on the CMS website at:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20239), for FY 2019, we proposed changes to the ICD-10 MS-DRGs Version 36 CC Exclusion List. Therefore, we developed Table 6G.1.—Proposed Secondary Diagnosis Order Additions to the CC Exclusions List—FY 2019; Table 6G.2.—Proposed Principal Diagnosis Order Additions to the CC Exclusions List—FY 2019; Table 6H.1.—Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List—FY 2019; and Table 6H.2.—Proposed Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2019. For Table 6G.1, each secondary diagnosis code proposed for addition to the CC Exclusion List is shown with an asterisk and the principal diagnoses proposed to exclude the secondary diagnosis code are provided in the indented column immediately following it. For Table 6G.2, each of the principal diagnosis codes for which there is a CC exclusion is shown with an asterisk and the conditions proposed for addition to the CC Exclusion List that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. For Table 6H.1, each secondary diagnosis code proposed for deletion from the CC Exclusion List is shown with an asterisk followed by the principal diagnosis codes that currently exclude it. For Table 6H.2, each of the principal diagnosis codes is shown with an asterisk and the proposed deletions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. associated with the proposed rule are available via the internet on the CMS website at:
To identify new, revised and deleted diagnosis and procedure codes, for FY 2019, 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 website at:
In the FY 2019 IPPS/LTCH PPS proposed rule, 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.
The commenter stated that the proposed MS-DRG assignment for diagnosis code K35.20 is inappropriate and urged CMS to assign additional MS-DRGs and revise Table 6A. Specifically, the commenter expressed concern that MS-DRGs 371, 372, and 373 (Major Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, and without CC/MCC, respectively) were the only MS-DRGs assigned to diagnosis code K35.20 and requested that MS-DRGs 338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) also be assigned. The commenter questioned why CMS only assigned MS-DRGs 371, 372, and 373 for diagnosis code K35.20 when diagnosis code K35.32 was assigned to MS-DRGs 338, 339, and 340 in addition to MS-DRGs 371, 372, and 373. The commenter stated that the FY 2019 ICD-10-CM Tabular List of Diseases and Injuries indicates that codes at the new subcategory K35.2 include a ruptured or perforated appendix, which is a complicating diagnosis and requires additional resources. The commenter expressed concern that the proposed MS-DRG assignment for diagnosis code K35.20 does not appropriately reflect the complications of the underlying disease or resources associated with acute appendicitis with generalized peritonitis. The commenter also noted that studies of patients admitted with appendicitis define complicated appendicitis as the presence of either generalized peritonitis due to perforated appendicitis or appendicular abscess. The commenter further noted that an appendix may perforate and cause generalized peritonitis without abscess if the perforation is walled off from the remainder of the peritoneal cavity because of its retroperitoneal location or by loops of small intestine or omentum.
We also consulted with the staff at the Centers for Disease Control's (CDC's) National Center for Health Statistics (NCHS) because NCHS has the lead responsibility for maintaining the ICD-10-CM diagnosis codes. The NCHS' staff acknowledged the clinical concerns of the commenter based on the manner in which diagnosis codes K35.2 and K35.3 were expanded and confirmed that they will consider further review of these newly expanded codes with respect to the clinical concepts.
Therefore, we maintain that the proposed MS-DRG assignment for diagnosis code K35.20 as shown in Table 6A is appropriate. Because the diagnosis codes that the commenter submitted in its comments are new, effective October 1, 2018, we do not yet have any claims data. We will continue to monitor these codes as data become available.
After consideration of the public comments we received, we are finalizing our proposal to assign diagnosis code K35.20 to MS-DRGs 371, 372, and 373 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
According to the commenter, abscesses, postoperative infections, and gangrene of gallbladder warrant the CC designation because they are acute conditions and require antibiotics or surgical treatment and impact the length of stay. The commenter noted that, currently, diagnosis codes K61.3 (Ischiorectal abscess) and K61.4 (Intrasphincteric abscess) are designated as CCs. The commenter also noted that gangrene of gallbladder classifies to acute cholecystitis, which is a CC, and recommended that the codes listed in the above table all be designated as CCs.
With regard to the commenter's statement that gangrene of gallbladder classifies to acute cholecystitis which is a CC, we acknowledge that, currently, diagnosis code K81.0 (Acute cholecystitis) is a CC and has an inclusion term for gangrene of gallbladder. However, the new code description does not include the term “acute”. Upon review of code K82.A1, our clinical advisors continue to support maintaining the proposed non-CC designation because they do not agree from a clinical perspective that this condition warrants a CC designation or significantly impacts resource utilization as a secondary diagnosis as the primary diagnosis likely is a more significant contributor to resource utilization. With regard to the codes describing infection of obstetrical wound of varying degrees and depths, the predecessor code O86.0 (Infection of obstetric wound) is currently classified as a non-CC and our clinical advisors agreed that, in the absence of data for the new codes, they are appropriately designated as non-CCs.
After consideration of the public comments we received, we are finalizing our proposed severity level assignments for the above listed diagnosis codes under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
We also are making available on the CMS website at
• Table 6A.—New Diagnosis Codes—FY 2019;
• Table 6B.—New Procedure Codes—FY 2019;
• Table 6C.—Invalid Diagnosis Codes—FY 2019;
• Table 6D.—Invalid Procedure Codes—FY 2019;
• Table 6E.—Revised Diagnosis Code Titles—FY 2019;
• Table 6F.—Revised Procedure Code Titles—FY 2019;
• Table 6G.1.—Secondary Diagnosis Order Additions to the CC Exclusions List—FY 2019;
• Table 6G.2.—Principal Diagnosis Order Additions to the CC Exclusions List—FY 2019;
• Table 6H.1.—Secondary Diagnosis Order Deletions to the CC Exclusions List—FY 2019;
• Table 6H.2.—Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2019;
• Table 6I.1.—Additions to the MCC List—FY 2019;
• Table 6I.2.-Deletions to the MCC List—FY 2019;
• Table 6J.1.—Additions to the CC List—FY 2019; and
• Table 6J.2.—Deletions to the CC List—FY 2019.
We note that, as discussed in section II.F.15.c. of the preamble of this final rule, we proposed, and in this final rule are finalizing, to delete Table 6L. and Table 6M. from the ICD-10 MS-DRG Definitions Manual for FY 2019.
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described our process for establishing three different levels of CC severity into which we would subdivide the diagnosis codes. The categorization of diagnoses as an MCC, a CC, or a non-CC was accomplished using an iterative approach in which each diagnosis was evaluated to determine the extent to which its presence as a secondary diagnosis resulted in increased hospital resource use. We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our approach. Since this comprehensive analysis was completed for FY 2008, we have evaluated diagnosis codes individually when receiving requests to change the severity level of specific diagnosis codes. However, given the transition to ICD-10-CM and the significant changes that have occurred to diagnosis codes since this review, we believe it is necessary to conduct a comprehensive analysis once again. We have begun this analysis and will discuss our findings in future rulemaking. We are currently using the same methodology utilized in FY 2008 and described below to conduct this analysis.
For each secondary diagnosis, we measured the impact in resource use for the following three subsets of patients:
(1) Patients with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs.
(2) Patients with at least one other secondary diagnosis that is a CC but none that is an MCC.
(3) Patients with at least one other secondary diagnosis that is an MCC.
Numerical resource impact values were assigned for each diagnosis as follows:
Each diagnosis for which Medicare data were available was 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 cost for each subset of cases was compared to the expected cost for cases in that subset. The following format was used to evaluate each diagnosis:
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 cost 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 a major CC. The C3 value reflects a patient with at least one other secondary diagnosis that is a major CC. 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).
These mathematical constructs are used as guides in conjunction with the judgment of our clinical advisors to classify each secondary diagnosis reviewed as an MCC, CC or non-CC. Our clinical panel reviews the resource use impact reports and suggests modifications to the initial CC subclass assignments when clinically appropriate.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20241), we received a request that we consider changing the severity level of ICD-10-CM diagnosis code B20 (Human immunodeficiency virus [HIV] disease) from an MCC to a CC. We used the approach outlined above to evaluate this request. The table below contains the data that were evaluated for this request.
We stated in the proposed rule that while the data did not strongly suggest that the categorization of HIV as an MCC was inaccurate, our clinical advisors indicated that, for many patients with HIV disease, symptoms are well controlled by medications. Our clinical advisors stated that if these patients have an HIV-related complicating disease, that complicating disease would serve as a CC or an MCC. Therefore, they advised us that ICD-10-CM diagnosis code B20 is more similar to a CC than an MCC. Based on the data results and the advice of our clinical advisors, we proposed to change the severity level of ICD-10-CM diagnosis code B20 from an MCC to a CC.
As discussed in section II.F.18. of the preamble of this final rule, requests for new ICD-10-CM diagnosis codes are discussed at the ICD-10 Coordination and Maintenance Committee meetings. We refer the commenter to the National Center for Health Statistics (NCHS) website at
After consideration of the public comments we received, we are finalizing our proposal to change the severity level of diagnosis code of B20 from an MCC to a CC.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20241), we also received a request to change the severity level for ICD-10-CM diagnosis code J80 (Acute respiratory distress syndrome) from a CC to a MCC. We used the approach outlined above to evaluate this request. The following table contains the data that were evaluated for this request.
We stated in the proposed rule that the data suggest that the resources involved in caring for a patient with this condition are 77 percent greater than expected when the patient has either no other secondary diagnosis present or all the other secondary diagnoses present are non-CCs. The resources are 56 percent greater than expected when reported in conjunction with another secondary diagnosis that is a CC, and 34 percent greater than expected when reported in conjunction with another secondary diagnosis code that is an MCC. Our clinical advisors agreed that the resources required to care for a patient with this secondary diagnosis are consistent with those of an MCC. Therefore, we proposed to change the severity level of ICD-10-CM diagnosis code J80 from a CC to an MCC.
After consideration of the public comments we received, we are finalizing our proposal to change the severity level of ICD-10-CM diagnosis code J80 from a CC to an MCC.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20241), we also received a request to change the severity level for ICD-10-CM diagnosis code G93.40 (Encephalopathy, unspecified) from an MCC to a non-CC. The requestor pointed out that the nature of the encephalopathy or its underlying cause should be coded. The requestor also noted that unspecified heart failure is a non-CC. We used the approach outlined earlier to evaluate this request. The following table contains the data that were evaluated for this request.
We stated in the proposed rule that the data suggest that the resources involved in caring for a patient with this condition are 84 percent greater than expected when the patient has either no other secondary diagnosis present or all the other secondary diagnoses present are non-CCs. We stated in the proposed rule that the resources are 15 percent lower than expected when reported in conjunction with another secondary diagnosis that is a CC, and 49 percent lower than expected when reported in conjunction with another secondary diagnosis code that is an MCC. The sentence should have read as follows: The resources are 15 percent lower than expected when reported in conjunction with another secondary diagnosis that is a CC, and 51 percent lower than expected when reported in conjunction with another secondary diagnosis code that is an MCC. We noted that the pattern observed in resource use for the condition of unspecified heart failure (ICD-10-CM diagnosis code I50.9) differs from that of unspecified encephalopathy. Our clinical advisors reviewed this request and agreed that, from a clinical standpoint, the resources involved in caring for a patient with this condition are aligned with those of an MCC. Therefore, we did not propose a change to the severity level for ICD-10-CM diagnosis code G93.40.
After consideration of the public comments we received, we are changing the severity level for ICD-10-CM diagnosis code G93.40 from an MCC to a CC.
After consideration of the public comment received, we are not changing the severity level of ICD-10-CM code I50.84 or the ICD-10-CM codes describing hepatic encephalopathy for FY 2019.
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) 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 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 are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group.
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. Based on the results of our review of the claims data from the September 2017 update of the FY 2017 MedPAR file, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20242), we did not propose to move 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.
After consideration of the public comments we received, we are not
We also review the list of ICD-10-PCS procedures that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether any of those procedures should be reassigned from one of those two groups of MS-DRGs to the other group of MS-DRGs based on average costs and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS-DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS-DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data.
Based on the results of our review of the September 2017 update of the FY 2017 MedPAR file, we also proposed to maintain the current structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989.
After consideration of the public comments we received, we are finalizing our proposal to maintain the current structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
We received a request recommending that CMS reassign cases for congenital pectus excavatum (congenital depression of the sternum or concave chest) when reported with a procedure describing repositioning of the sternum (the Nuss procedure) from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) 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). ICD-10-CM diagnosis code Q67.6 (Pectus excavatum) is reported for this congenital condition and is currently assigned to MDC 4 (Diseases and Disorders of the Respiratory System). ICD-10-PCS procedure code 0PS044Z (Reposition sternum with internal fixation device, percutaneous endoscopic approach) may be reported to identify the Nuss procedure and is currently assigned to MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) in MS-DRGs 515, 516, and 517. The requester noted that
Our analysis of this grouping issue confirmed that, when pectus excavatum (ICD-10-CM diagnosis code Q67.6) is reported as a principal diagnosis with a procedure such as the Nuss procedure (ICD-10-PCS procedure code 0PS044Z), these cases group to MS-DRGs 981, 982, and 983. The reason for this grouping is because whenever there is a surgical procedure reported on a claim, which is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures.” In the example provided, because the ICD-10-CM diagnosis code Q67.6 describing pectus excavatum is classified to MDC 4 and the ICD-10-PCS procedure code 0PS044Z is classified to MDC 8, the GROUPER logic assigns this case to the “unrelated operating room procedures” set of MS-DRGs.
During our review of ICD-10-CM diagnosis code Q67.6, we also reviewed additional ICD-10-CM diagnosis codes in the Q65 through Q79 code range to determine if there might be other conditions classified to MDC 4 that describe congenital malformations and deformities of the musculoskeletal system. We identified the following six ICD-10-CM diagnosis codes:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20243), we proposed to reassign ICD-10-CM diagnosis code Q67.6, as well as the additional six ICD-10-CM diagnosis codes above describing congenital musculoskeletal conditions, from MDC 4 to MDC 8 where other related congenital conditions that correspond to the musculoskeletal system are classified, as discussed further below.
We identified other related ICD-10-CM diagnosis codes that are currently assigned to MDC 8 in categories Q67 (Congenital musculoskeletal deformities of head, face, spine and chest), Q76 (Congenital malformations of spine and bony thorax), and Q77 (Osteochondrodysplasia with defects of growth of tubular bones and spine) that are listed in the following table.
Next, we analyzed the MS-DRG assignments for the related codes listed above and found that cases with the following conditions are assigned to MS-DRGs 551 and 552 (Medical Back Problems with and without MCC, respectively) under MDC 8.
The remaining conditions shown below are assigned to MS-DRGs 564, 565, and 566 (Other Musculoskeletal System and Connective Tissue Diagnoses with MCC, with CC, and without CC/MCC, respectively) under MDC 8.
As a result of our review, we proposed to reassign ICD-10-CM diagnosis code Q67.6, as well as the additional six ICD-10-CM diagnosis codes above describing congenital musculoskeletal conditions, from MDC 4 to MDC 8 in MS-DRGs 564, 565, and 566. Our clinical advisors agreed with this proposed reassignment because it is clinically appropriate and consistent with the other related ICD-10-CM diagnosis codes grouped in the Q65 through Q79 range that describe congenital malformations and deformities of the musculoskeletal system that are classified under MDC 8 in MS-DRGs 564, 565, and 566. We stated in the propsed rule that by reassigning ICD-10-CM diagnosis code Q67.6 and the additional six ICD-10-CM diagnosis codes listed in the table above from MDC 4 to MDC 8, cases reporting these ICD-10-CM diagnosis codes in combination with the respective ICD-10-PCS procedure code will reflect a more appropriate grouping from a clinical perspective because they will now be classified under a surgical musculoskeletal system related MS-DRG and will no longer result in an MS-DRG assignment to the “unrelated operating room procedures” surgical class.
In summary, we proposed to reassign ICD-10-CM diagnosis codes Q67.6, Q67.7, Q76.6, Q76.7, Q76.8, Q76.9, and Q77.2 from MDC 4 to MDC 8 in MS-DRGs 564, 565, and 566 (Other Musculoskeletal System and Connective Tissue Diagnoses with MCC, with CC, and without CC/MCC, respectively).
After consideration of the public comments we received, we are finalizing the proposal to reassign ICD-10-CM diagnosis codes Q67.6, Q67.7, Q76.6, Q76.7, Q76.8, Q76.9, and Q77.2 from MDC 4 to MDC 8 in MS-DRGs 564, 565, and 566 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
We also received a request recommending that CMS reassign cases for sternal fracture repair procedures from MS-DRGs 981, 982, and 983 and from MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures with MCC, with CC and without CC/MCC, respectively) under MDC 4 to MS-DRGs 515, 516, and 517 under MDC 8. The requester noted that clavicle fracture repair procedures with an internal fixation device group to MS-DRGs 515, 516, and 517 when reported with an ICD-10-CM diagnosis code describing a fractured clavicle. However, sternal fracture repair procedures with an internal fixation device group to MS-DRGs 981, 982, and 983 or MS-DRGs 166, 167 and 168 when reported with an ICD-10-CM diagnosis code describing a fracture of the sternum. According to the requestor, because the clavicle and sternum are in the same anatomical region of the body, it would appear that assignment to MS-DRGs 515, 516, and 517 would be more appropriate for sternal fracture repair procedures.
The requestor provided the following list of ICD-10-PCS procedure codes in its request for consideration to reassign to MS-DRGs 515, 516 and 517 when reported with an ICD-10-CM diagnosis code for sternal fracture.
We noted that the above five ICD-10-PCS procedure codes that may be reported to describe a sternal fracture repair are already assigned to MS-DRGs 515, 516, and 517 under MDC 8. In addition, ICD-10-PCS procedure codes 0PS000Z and 0PS030Z are assigned to MS-DRGs 166, 167 and 168 under MDC 4.
As noted in the previous discussion, whenever there is a surgical procedure reported on a claim, which is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures.” In the examples provided by the requestor, when the ICD-10-CM diagnosis code describing a sternal fracture is classified under MDC 4 and the ICD-10-PCS procedure code describing a sternal fracture repair procedure is classified under MDC 8, the GROUPER logic assigns these cases to the “unrelated operating room procedures” group of MS-DRGs (981, 982, and 983) and when the ICD-10-CM diagnosis code describing a sternal fracture is classified under MDC 4 and the ICD-10-PCS procedure code
For our review of this grouping issue and the request to have procedures for sternal fracture repairs assigned to MDC 8, we analyzed the ICD-10-CM diagnosis codes describing a sternal fracture currently classified under MDC 4. We identified 10 ICD-10-CM diagnosis codes describing a sternal fracture with an “initial encounter” classified under MDC 4 that are listed in the following table.
Our analysis of this grouping issue confirmed that when 1 of the 10 ICD-10-CM diagnosis codes describing a sternal fracture listed in the table above from MDC 4 is reported as a principal diagnosis with an ICD-10-PCS procedure code for a sternal repair procedure from MDC 8, these cases group to MS-DRG 981, 982, or 983. We also confirmed that when 1 of the 10 ICD-10-CM diagnosis codes describing a sternal fracture listed in the table above from MDC 4 is reported as a principal diagnosis with an ICD-10-PCS procedure code for a sternal repair procedure from MDC 4, these cases group to MS-DRG 166, 167 or 168.
Our clinical advisors agreed with the requested reclassification of ICD-10-CM diagnosis codes S22.20XA, S22.20XB, S22.21XA, S22.21XB, S22.22XA, S22.22XB, S22.23XA, S22.23XB, S22.24XA, and S22.24XB describing a sternal fracture with an initial encounter from MDC 4 to MDC 8. They advised that this requested reclassification is clinically appropriate because it is consistent with the other related ICD-10-CM diagnosis codes that describe fractures of the sternum and which are classified under MDC 8. The ICD-10-CM diagnosis codes describing a sternal fracture currently classified under MDC 8 to MS-DRGs 564, 565, and 566 are listed in the following table.
We stated in the proposed rule that by reclassifying the 10 ICD-10-CM diagnosis codes listed in the table earlier in this section describing sternal fracture codes with an “initial encounter” from MDC 4 to MDC 8, the cases reporting these ICD-10-CM diagnosis codes in combination with the respective ICD-10-PCS procedure codes will reflect a more appropriate grouping from a clinical perspective and will no longer result in an MS-DRG assignment to the “unrelated operating room procedures” surgical class when reported with a surgical procedure classified under MDC 8.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20245), we proposed to reassign ICD-10-CM diagnosis codes S22.20XA, S22.20XB, S22.21XA, S22.21XB, S22.22XA, S22.22XB, S22.23XA, S22.23XB, S22.24XA, and S22.24XB from under MDC 4 to MDC 8 to MS-DRGs 564, 565, and 566. We invited public comments on our proposals.
After consideration of the public comments we received, we are finalizing the proposal to reassign ICD-10-CM diagnosis codes S22.20XA, S22.20XB, S22.21XA, S22.21XB, S22.22XA, S22.22XB, S22.23XA, S22.23XB, S22.24XA, and S22.24XB from MDC 4 to MDC 8 to MS-DRGs 564, 565, and 566 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
In addition, we received a request recommending that CMS reassign cases for rib fracture repair procedures from MS-DRGs 981, 982, and 983, and from MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) under MDC 4 to MS-DRGs 515, 516, and 517 under MDC 8. The requestor noted that clavicle fracture repair procedures with an internal fixation device group to MS-DRGs 515, 516, and 517 when reported with an ICD-10-CM diagnosis code describing a fractured clavicle. However, rib fracture repair procedures with an internal fixation device group to MS-DRGs 981, 982, and 983 or to MS-DRGs 166, 167 and 168 when reported with an ICD-10-CM diagnosis code describing a rib fracture. According to the requestor, because the clavicle and ribs are in the same anatomical region of the body, it would appear that assignment to MS-DRGs 515, 516, and 517 would be more appropriate for rib fracture repair procedures.
The requestor provided the following list of 10 ICD-10-PCS procedure codes in its request for consideration for reassignment to MS-DRGs 515, 516 and 517 when reported with an ICD-10-CM diagnosis code for rib fracture.
We note that the above 10 ICD-10-PCS procedure codes that may be reported to describe a rib fracture repair are already assigned to MS-DRGs 515, 516, and 517 under MDC 8. In addition, 6 of the 10 ICD-10-PCS procedure codes listed above (0PH104Z, 0PH134Z, 0PH144Z, 0PH204Z, 0PH234Z and 0PH244Z) are also assigned to MS-DRGs 166, 167, and 168 under MDC 4.
As noted in the previous discussions above, whenever there is a surgical procedure reported on a claim, which is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in an MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures.” In the examples provided by the requestor, when the ICD-10-CM diagnosis code describing a rib fracture is classified under MDC 4 and the ICD-10-PCS procedure code describing a rib fracture repair procedure is classified under MDC 8, the GROUPER logic assigns these cases to the “unrelated operating room procedures” group of MS-DRGs (981, 982, and 983) and when the ICD-10-CM diagnosis code describing a rib fracture is classified under MDC 4 and the ICD-10-PCS procedure code describing a rib repair procedure is also classified under MDC 4, the GROUPER logic assigns these cases to MS-DRG 166, 167, or 168.
For our review of this grouping issue and the request to have procedures for rib fracture repairs assigned to MDC 8, we analyzed the ICD-10-CM diagnosis codes describing a rib fracture and found that, while some rib fracture ICD-10-CM diagnosis codes are classified under MDC 8 (which would result in those cases grouping appropriately to MS-DRGs 515, 516, and 517), there are other ICD-10-CM diagnosis codes that are currently classified under MDC 4. We identified the following ICD-10-CM diagnosis codes describing a rib fracture with an initial encounter classified under MDC 4, as listed in the following table.
Our analysis of this grouping issue confirmed that, when one of the following four ICD-10-PCS procedure codes identified by the requestor (and listed in the table earlier in this section) from MDC 8 (0PS104Z, 0PS134Z, 0PS204Z, or 0PS234Z) is reported to describe a rib fracture repair procedure with a principal diagnosis code for a rib fracture with an initial encounter listed in the table above from MDC 4, these cases group to MS-DRG 981, 982, or 983.
During our review of those four repositioning of the rib procedure codes, we also identified the following four ICD-10-PCS procedure codes classified to MDC 8 that describe repositioning of the ribs.
We confirmed that when one of the above four procedure codes is reported with a principal diagnosis code for a rib fracture listed in the table above from MDC 4, these cases also group to MS-DRG 981, 982, or 983.
Lastly, we confirmed that when one of the six ICD-10-PCS procedure codes describing a rib fracture repair listed in the previous table above from MDC 4 is reported with a principal diagnosis code for a rib fracture with an initial encounter from MDC 4, these cases group to MS-DRG 166, 167, or 168.
In response to the request to reassign the procedure codes that describe a rib fracture repair procedure from MS-DRGs 981, 982, and 983 and from MS-DRGs 166, 167, and 168 under MDC 4 to MS-DRGs 515, 516, and 517 under MDC 8, as discussed above, the 10 ICD-10-PCS procedure codes submitted by the requestor that may be reported to describe a rib fracture repair are already assigned to MS-DRGs 515, 516, and 517 under MDC 8 and 6 of those 10 procedure codes (0PH104Z, 0PH134Z, 0PH144Z, 0PH204Z, 0PH234Z, and 0PH244Z) are also assigned to MS-DRGs 166, 167, and 168 under MDC 4.
We analyzed claims data from the September 2017 update of the FY 2017 MedPAR file for cases reporting a principal diagnosis of a rib fracture (initial encounter) from the list of diagnosis codes shown in the table above with one of the six ICD-10-PCS procedure codes describing the insertion of an internal fixation device into the rib (0PH104Z, 0PH134Z, 0PH144Z, 0PH204Z, 0PH234Z, and 0PH244Z) in MS-DRGs 166, 167, and 168 under MDC 4. Our findings are shown in the table below.
As shown in this table, there were a total of 22,938 cases in MS-DRG 166, with an average length of stay of 10.2 days and average costs of $24,299. In MS-DRG 166, we found 40 cases reporting a principal diagnosis of a rib fracture(s) with insertion of an internal fixation device for the rib(s), with an average length of stay of 11.4 days and average costs of $43,094. There were a total of 10,815 cases in MS-DRG 167, with an average length of stay of 5.7 days and average costs of $13,252. In MS-DRG 167, we found 10 cases reporting a principal diagnosis of a rib fracture(s) with insertion of an internal fixation device for the rib(s), with an average length of stay of 6.7 days and average costs of $30,617. There were a total of 3,242 cases in MS-DRG 168, with an average length of stay of 3.1 days and average costs of $9,708. In MS-DRG 168, we found 4 cases reporting a principal diagnosis of a rib fracture(s) with insertion of an internal fixation device for the rib(s), with an average length of stay of 2 days and average costs of $21,501. Overall, for MS-DRGs 166, 167, and 168, there were a total of 54 cases reporting a principal diagnosis of a rib fracture(s) with insertion of an internal fixation device for the rib(s), demonstrating that while rib fractures may require treatment, they are not typically corrected surgically. Our clinical advisors agreed with the current assignment of procedure codes to MS-DRGs 166, 167, and 168 that may be reported to describe repair of a rib fracture under MDC 4, as well as the current assignment of procedure codes to MS-DRGs 515, 516, and 517 that may be reported to describe repair of a rib fracture under MDC 8. Our clinical advisors noted that initial, acute rib fractures can cause numerous respiratory related issues requiring various treatments and problems with the healing of a rib fracture are considered musculoskeletal issues.
We also noted that the procedure codes submitted by the requestor may be reported for other indications and they are not restricted to reporting for repair of a rib fracture. Therefore, assignment of these codes to the MDC 4 MS-DRGs and the MDC 8 MS-DRGs is clinically appropriate.
To address the cases reporting procedure codes describing the
Our clinical advisors agreed with this proposed addition to the classification structure because it is clinically appropriate and consistent with the other related ICD-10-PCS procedure codes that may be reported to describe rib fracture repair procedures with the insertion of an internal fixation device and are classified under MDC 4.
We stated in the proposed rule that by adding the eight ICD-10-PCS procedure codes describing repositioning of the rib(s) that may be reported to describe a rib fracture repair procedure under the classification structure for MDC 4, these cases will no longer result in an MS-DRG assignment to the “unrelated operating room procedures” surgical class when reported with a diagnosis code under MDC 4.
After consideration of the public comments we received, we are finalizing the proposal to add ICD-10-PCS procedure codes 0PS104Z, 0PS10ZZ, 0PS134Z, 0PS144Z, 0PS204Z, 0PS20ZZ, 0PS234Z and 0PS244Z currently assigned to MDC 8 into MDC 4 in MS-DRGs 166, 167 and 168 under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
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 website at:
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 2019 at a public meeting held on September 12-13, 2017, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 13, 2017.
The Committee held its 2018 meeting on March 6-7, 2018. The deadline for submitting comments on these code proposals was scheduled for April 6, 2018. 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 2018 would be included in the October 1, 2018 update to ICD-10-CM/ICD-10-PCS. As discussed in earlier sections of the preamble of this final rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes that are captured in Table 6A.—New Diagnosis Codes, Table 6B.—New Procedure Codes, Table 6C.—Invalid Diagnosis Codes, Table 6D.—Invalid Procedure Codes, Table 6E.—Revised Diagnosis Code Titles, and Table 6F.—Revised Procedure Code Titles for this final rule, which are available via the internet on the CMS website at:
Live Webcast recordings of the discussions of procedure codes at the Committee's September 12-13, 2017 meeting and March 6-7, 2018 meeting can be obtained from the CMS website at:
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:
Questions and comments concerning the procedure codes should be submitted via Email to:
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 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
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 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 not any requests approved for an expedited April 1, 2018 implementation of a code at the September 12-13, 2017 Committee meeting. Therefore, there were not any new codes for implementation on April 1, 2018.
ICD-9-CM addendum and code title information is published on the CMS website at:
Information on ICD-10-CM diagnosis codes, along with the Official ICD-10-CM Coding Guidelines, can also be found on the CDC website at:
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.
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, 2017 and March 6-7, 2018 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, 2018. We invited public comments on any code requests discussed at the September 12-13, 2017 and March 6-7, 2018 Committee meetings for implementation as part of the October 1, 2018 update. The deadline for commenting on code proposals discussed at the September 12-13, 2017 Committee meeting was November 13, 2017. The deadline for commenting on code proposals discussed at the March 6-7, 2018 Committee meeting was April 6, 2018.
In the FY 2008 IPPS final rule with comment period (72 FR 47246 through 47251), we discussed the topic of Medicare payment for devices that are replaced without cost or where credit for a replaced device is furnished to the hospital. We implemented a policy to reduce a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that subsequently failed or was recalled determined the base MS-DRG assignment. At that time, we specified that we will reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit for a replaced device equal to 50 percent or more of the cost of the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 51557), we clarified this policy to state that the policy applies if the hospital received a credit equal to 50 percent or more of the cost of the replacement device and issued instructions to hospitals accordingly.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20250 through 20251), for FY 2019, 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 the table below.
We did not receive any public comments on 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 in the table included in the proposed rule and above that will be subject to the replaced devices offered without cost or with a credit policy, effective October 1, 2018.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20251 through 20257), we addressed requests that we received regarding changing the designation of specific ICD-10-PCS procedure codes from non-O.R. to O.R. procedures, or changing the designation from O.R. procedure to non-O.R. procedure. In cases where we proposed to change the designation of procedure codes from non-O.R. to O.R. procedures, we also proposed one or more MS-DRGs with which these procedures are clinically aligned and to which the procedure code would be assigned. We generally examine the MS-DRG assignment for similar procedures, such as the other approaches for that procedure, to determine the most appropriate MS-DRG assignment for procedures newly designated as O.R. procedures. We invited public comments on these proposed MS-DRG assignments.
We also noted that many MS-DRGs require the presence of any O.R. procedure. As a result, cases with a principal diagnosis associated with a particular MS-DRG would, by default, be grouped to that MS-DRG. Therefore, we do not list these MS-DRGs in our discussion below. Instead, we only discussed MS-DRGs that require explicitly adding the relevant procedures codes to the GROUPER logic in order for those procedure codes to affect the MS-DRG assignment as intended. In addition, cases that contain O.R. procedures will map to MS-DRGs 981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) when they do not contain a principal diagnosis that corresponds to one of the MDCs to which that procedure is assigned. These procedures need not be assigned to MS-DRGs 981 through 989 in order for this to occur. Therefore, if requestors included some or all of MS-DRGs 981 through 989 in their request or included MS-DRGs that require the presence of any O.R. procedure, we did not specifically address that aspect in summarizing their request or our response to the request in the section below.
One requestor identified 22 ICD-10-PCS procedure codes that describe procedures involving transcranial brain and cerebral ventricle excision that the requestor stated would generally require the resources of an operating room. The 22 procedure codes are listed in the following table.
The requestor stated that, although percutaneous burr hole biopsies are performed through smaller openings in the skull than open burr hole biopsies, these procedures require drilling or cutting through the skull using sterile technique with anesthesia for pain control. The requestor also noted that similar procedures involving percutaneous drainage of the subdural space are currently classified as O.R. procedures in Version 35 of the ICD-10 MS-DRGs. However, these 22 ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor recommended that the 22 ICD-10-PCS codes be designated as O.R. procedures and assigned to MS-DRGs 25, 26, and 27 (Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively).
In the proposed rule, we stated that we agreed with the requestor that these procedures typically require the resources of an operating room. Therefore, we proposed to add these 22 ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 25, 26, and 27 in MDC 1 (Diseases and Disorders of the Nervous System).
After consideration of the public comment we received, we are finalizing our proposal to change the designation of the 22 ICD-10-PCS procedure codes shown in the table above from non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified 22 ICD-10-PCS procedure codes that describe procedures involving open extirpation of subcutaneous tissue and fascia that the requestor stated would generally require the resources of an operating room. The 22 procedure codes are listed in the following table.
The requestor stated that these procedures involve making an open incision deeper than the skin under general anesthesia, and that irrigation and/or excision of devitalized tissue or cavity are often required and are considered inherent to the procedure. The requestor also stated that open drainage of subcutaneous tissue and fascia, open excisional debridement of subcutaneous tissue and fascia, and open nonexcisional debridement/extraction of subcutaneous tissue and fascia are designated as O.R. procedures, and that these 22 procedures should be designated as O.R. procedures for the same reason. In the ICD-10 MS-DRGs Version 35, these 22 ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor recommended that the 22 ICD-10-PCS procedure codes listed in the table be assigned to MS-DRGs 579, 580, and 581 (Other Skin, Subcutaneous Tissue and Breast Procedures with MCC, CC, and without CC/MCC, respectively).
In the proposed rule, we stated that we disagreed with the requestor that these procedures typically require the resources of an operating room. Our clinical advisors indicated that these open extirpation procedures are minor procedures that can be performed outside of an operating room, such as in a radiology suite with CT or MRI guidance. We disagreed that these procedures are similar to open drainage procedures. Therefore, we proposed to maintain the status of these 22 ICD-10-PCS procedure codes as non-O.R. procedures.
After consideration of the public comments we received, we are finalizing our proposal to maintain the non-O.R. status of the 22 identified open extirpation procedures.
One requestor identified 13 ICD-10-PCS procedure codes that describe procedures involving open drainage, open extirpation, and open debridement/excision of the scrotum and breast. The requestor stated that the 13 procedures listed in the following table involve making an open incision deeper than the skin under general anesthesia, and that irrigation and/or excision of devitalized tissue or cavity are often required and are considered inherent to the procedure. The requestor also stated that open drainage of subcutaneous tissue and fascia, open excisional debridement of subcutaneous tissue and fascia, open non-excisional debridement/extraction of subcutaneous tissue and fascia, and open excision of breast are designated as O.R. procedures, and that these 13 procedures should be designated as O.R. procedures for the same reason. In the ICD-10 MS-DRGs Version 35, these 13 ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment.
The requestor recommended that the 3 ICD-10-PCS scrotal procedure codes be assigned to MS-DRGs 717 and 718 (Other Male Reproductive System O.R. Procedures Except Malignancy with CC/MCC and without CC/MCC, respectively) and the 10 breast procedure codes be assigned to MS-DRGs 584 and 585 (Breast Biopsy, Local Excision and Other Breast Procedures with CC/MCC and without CC/MCC, respectively).
In the proposed rule, we stated that we agreed with the requestor that these procedures typically require the resources of an operating room due to the nature of breast and scrotal tissue, as well as with the MS-DRG assignments recommended by the requestor. In addition, we stated that we believe that the scrotal codes should also be assigned to MS-DRGs 715 and 716 (Other Male Reproductive System O.R. Procedures for Malignancy with CC/MCC and without CC/MCC, respectively). Therefore, we proposed to add these 13 ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures, assigned to MS-DRGs 715, 716, 717, and 718 in MDC 12 (Diseases and Disorders of the Male Reproductive System) for the scrotal procedure codes and assigned to MS-DRGs 584 and 585 in MDC 9 (Diseases and Disorders of the Skin,
After consideration of the public comments we received, we are finalizing our proposal to change the designation of the 13 ICD-10-PCS procedure codes shown in the table above from non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified eight ICD-10-PCS procedure codes that describe procedures involving open drainage and open extirpation of the parotid or submaxillary glands, shown in the following table.
The requestor stated that these procedures involve making an open incision through subcutaneous tissue, fascia, and potentially muscle, to reach and incise the parotid or submaxillary gland under general anesthesia, and that irrigation and/or excision of devitalized tissue or cavity may be required and are considered inherent to the procedure. The requestor also stated that open drainage of subcutaneous tissue and fascia, open excisional debridement of subcutaneous tissue and fascia, and open non-excisional debridement/extraction of subcutaneous tissue and fascia are designated as O.R. procedures, and that these eight procedures should be designated as O.R. procedures for the same reason. In the ICD-10 MS-DRGs Version 35, these eight ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor requested that these procedures be assigned to MS-DRG 139 (Salivary Gland Procedures).
In the proposed rule, we stated that we agreed with the requestor that these eight procedures typically require the resources of an operating room. Therefore, we proposed to add these ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRG 139 in MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and Throat).
After consideration of the public comments we received, we are finalizing our proposal to change the designation of the 8 ICD-10-PCS procedure codes shown in the table above from non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified four sets of ICD-10-PCS procedure code combinations (eight ICD-10-PCS codes) that describe procedures involving open removal and insertion of spacers into the knee or hip joints, shown in the following table. The requestor stated that these are invasive procedures involving removal and reinsertion of devices into major joints and are performed in the operating room under general anesthesia. In the ICD-10 MS-DRGs Version 35, these four ICD-10-PCS procedure code combinations are not recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor recommended that CMS determine the most appropriate surgical DRGs for these procedures.
In the proposed rule, we stated that we agreed with the requestor that these procedures typically require the resources of an operating room. However, our clinical advisors indicated that these codes should be designated as O.R. procedures even when reported as stand-alone procedures. Therefore, for the knee procedures, we proposed to add these four ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 485, 486, and 487 (Knee Procedures with Principal Diagnosis of Infection with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 488 and 489 (Knee Procedures without Principal diagnosis of Infection with CC/MCC and without CC/MCC, respectively), both in MDC 8 (Diseases and Disorders of the Musculoskeletal
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 non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified the following three ICD-10-PCS procedure codes that describe procedures involving endoscopic dilation of ureter(s) with intraluminal device.
The requestor stated that these procedures involve the use of cystoureteroscopy to view the bladder and ureter and dilation under visualization, which are often followed by placement of a ureteral stent. The requestor also stated that endoscopic extirpation of matter from ureter, endoscopic biopsy of bladder, endoscopic dilation of bladder, endoscopic dilation of renal pelvis, and endoscopic dilation of the ureter without insertion of intraluminal device are all assigned to surgical DRGs, and that these three procedures should be designated as O.R. procedures for the same reason. In the ICD-10 MS-DRGs Version 35, these three ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. The requestor recommended that these procedures be assigned to MS-DRGs 656, 657, and 658 (Kidney and Ureter Procedures for Neoplasm with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 659, 660, and 661 (Kidney and Ureter Procedures for Non-Neoplasm with MCC, with CC, and without CC/MCC, respectively).
In the proposed rule, we stated that we agreed with the requestor that these procedures typically require the resources of an operating room. In addition to the MS-DRGs recommended by the requestor, we further stated that we believe that these procedure codes should also be assigned to other MS-DRGs, consistent with the assignment of other dilation of ureter procedures: MS-DRG 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple Significant Trauma with MCC, with CC, and without CC/MCC, respectively). Therefore, we proposed to add the three ICD-10-PCS procedure codes identified by the requestor to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 656, 657, and 658 in MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract), MS-DRGs 659, 660, and 661 in MDC 11, MS-DRGs 907, 908, and 909 in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs), and MS-DRGs 957, 958, and 959 in MDC 24 (Multiple Significant Trauma).
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 non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified seven ICD-10-PCS procedure codes that describe procedures involving thoracoscopic drainage of the pericardial cavity or pleural cavity, or extirpation of matter from the pleura, as shown in the following table.
The requestor stated that these procedures involve making an incision through the chest wall and inserting a thoracoscope for visualization of thoracic structures during the procedure. The requestor also stated that some thoracoscopic procedures are assigned to surgical MS-DRGs, while other procedures are assigned to medical MS-DRGs. In the ICD-10 MS-DRGs Version 35, these seven ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment.
In the proposed rule, we stated that we agreed with the requestor that these procedures typically require the resources of an operating room, as well as significant time and skill. During our review, we noted that the following two related procedures using the open approach also were not currently recognized as O.R. procedures:
Therefore, to be consistent with the MS-DRGs to which other approaches for procedures involving drainage or extirpation of matter from the pleura are assigned, we proposed to add these nine ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to one of the following MS-DRGs: MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 4 (Diseases and Disorders of the Respiratory System); MS-DRGs 270, 271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 5 (Diseases and Disorders of the Circulatory System); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, Poorly Differentiated Neoplasms); MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure with MCC, with CC, and without CC/MCC, respectively) in MDC 17; MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple Significant Trauma with MCC, with CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant Trauma). We invited public comments on our proposal.
After consideration of the public comments we received, we are finalizing our proposal to change the designation of the nine ICD-10-PCS procedure codes shown in the tables above from non-O.R. procedures to O.R. procedures, effective October 1, 2018.
One requestor identified 20 ICD-10-PCS procedure codes that describe procedures involving open insertion of totally implantable and tunneled vascular access devices. The codes are identified in the following table.
The requestor stated that open procedures to insert totally implantable vascular access devices (VAD) involve implantation of a port by open approach, cutting through subcutaneous tissue/fascia, placing the device, and then closing tissues so that none of the device is exposed. The requestor explained that open procedures to insert tunneled VADs involve insertion of the catheter into central vasculature, and then open incision of subcutaneous tissue and fascia through which the device is tunneled. The requestor also indicated that these procedures require two ICD-10-PCS codes: One for the insertion of the VAD or port within the subcutaneous tissue; and one for percutaneous insertion of the central venous catheter that is connected to the device. The requestor further noted that, in MDC 11, cases with these procedure codes are assigned to surgical MS-DRGs and that insertion of infusion pumps by open approach groups to surgical MS-DRGs. The requestor recommended that these procedures be assigned to surgical MS-DRGs in MDC 09 as well. We examined the O.R. designations for this group of procedures and determined that they currently are designated as non-O.R. procedures for MDC 09 and MDC 11.
In the proposed rule, we stated that we agreed with the requestor that procedures involving open insertion of totally implantable VAD procedures typically require the resources of an operating room. However, we stated that we disagreed that the tunneled VAD procedures typically require the resources of an operating room. Therefore, we proposed to update the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index to designate the 10 ICD-10-PCS procedure codes describing the totally implantable VAD procedures as O.R. procedures, which will continue to be assigned to MS-DRGs 579, 580, and 581 (Other Skin, Subcutaneous Tissue and Breast Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast) and MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures, with CC, with MCC, and without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract). We noted that these procedures already affect MS-DRG assignment to these MS-DRGs. However, we stated that if the procedure is unrelated to the principal diagnosis, it will be assigned to MS-DRGs 981, 982, and 983 instead of a medical MS-DRG.
After consideration of the public comments we received, we are finalizing our proposal to change the designation of the 10 ICD-10-PCS procedure codes describing open insertion of totally implantable VAD procedures shown in the table above from non-O.R. procedures to O.R. procedures, effective October 1, 2018.
After consideration of the public comments we received, we are finalizing our proposals to change the designation of the totally implantable VAD procedures to O.R. procedures and to maintain the non-O.R. designation of the tunneled VAD procedures.
One requestor identified 20 ICD-10-PCS procedure codes that describe procedures involving percutaneous joint reposition with internal fixation device, shown in the following table.
The requestor stated that reposition of the sacrum, femur, tibia, fibula, and other fractures of bone with internal fixation device by percutaneous approach are assigned to surgical DRGs, and that reposition of sacroiliac, hip, knee, and other joint locations with internal fixation should therefore also be assigned to surgical DRGs. In the ICD-10 MS-DRGs Version 35, these 20 ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment.
In the proposed rule, we stated that we disagreed with the requestor that these procedures typically require the resources of an operating room, as these procedures are not as invasive as the bone reposition procedures referenced by the requestor. Our clinical advisors advised that these procedures are typically performed in a radiology suite. Therefore, we proposed to maintain the status of these 20 ICD-10-PCS procedure codes as non-O.R. procedures.
After consideration of the public comments we received, we are finalizing our proposal to maintain the non-O.R. status of the 20 ICD-10-PCS procedure codes that describe procedures involving percutaneous joint reposition with internal fixation device listed in the table above.
One requestor identified four ICD-10-PCS procedure codes that describe procedures involving endoscopic destruction of the intestine, as shown in the following table.
The requestor stated that these procedures are rarely performed in the operating room. In the ICD-10 MS-DRGs Version 35, these four ICD-10-PCS procedure codes are currently recognized as O.R. procedures for purposes of MS-DRG assignment.
In the proposed rule, we stated that we agreed with the requestor that these procedures do not typically require the resources of an operating room. Therefore, we proposed to remove these four procedure codes from the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures.
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, 2018.
One requestor identified the following ICD-10-PCS procedure codes that describe procedures involving endoscopic drainage of the lung via natural or artificial opening for diagnostic purposes.
The requestor stated that these procedures are rarely performed in the operating room.
In the proposed rule, we stated that we agreed with the requestor that these procedures do not require the resources of an operating room. In addition, while we were reviewing this comment, we identified three additional related codes:
In the ICD-10 MS-DRGs Version 35, these ICD-10-PCS procedure codes are currently recognized as O.R. procedures for purposes of MS-DRG assignment.
We proposed to remove ICD-10-PCS procedure codes 0B9J8ZX, 0B9F8ZX, 0B9D8ZX, 0B9C8ZX, and 0B9G8ZX from the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E—Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures.
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 tables above from O.R. procedures to non-O.R. procedures, effective October 1, 2018.
One commenter responding to the FY 2019 IPPS/LTCH PPS proposed rule identified eight ICD-10-PCS procedure codes that describe endobronchial valve procedures that the commenter believed should be designated as O.R. procedures. The codes are identified in the following table.
The commenter stated that these procedures are most commonly performed in the O.R., given the need for better monitoring and support through the process of identifying and occluding a prolonged air leak using endobronchial valve technology. The commenter also noted that other endobronchial valve procedures have an O.R. designation. In the ICD-10 MS-DRGs Version 35, these eight ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. The commenter requested that these eight codes be assigned to MS-DRG 163 (Major Chest Procedures with MCC) due to similar cost and resource use.
Our clinical advisors disagree with the commenter that the eight identified procedures typically require the use of an operating room. Our clinical advisors believe that these procedures would typically be performed in an endoscopy suite. Therefore, we are not changing the non-O.R. designation of the eight identified ICD-10-PCS codes listed in the table above.
We received public comments regarding a number of MS-DRG and related issues that were outside the scope of the proposals included in the FY 2019 IPPS/LTCH PPS proposed rule. These comments were as follows:
• One commenter requested that CMS evaluate the MS-DRG assignment for Face Transplant procedures and its designation as an extensive versus nonextensive O.R. procedure.
• One commenter requested that a new ICD-10-CM diagnosis code be created for a Kennedy terminal ulcer.
• One commenter requested that CMS examine the MS-DRG assignment and/or payment of patients who are admitted to the hospital for initiation or titration of certain antiarrhythmic drugs.
• One commenter requested that diagnosis codes in category O9A.2- and
• One commenter requested that new MS-DRGs be created for endovascular cardiac valve replacements with and without a cardiac catheterization.
• One commenter recommended that CMS analyze claims data for cases reporting renal replacement therapy and issue guidance to facilities on the use of the ICD-10-PCS procedure codes.
• One commenter requested specific MS-DRG assignments for ICD-10-PCS codes that were not yet approved at the time of issuance of the proposed rule.
• One commenter recommended changes to the severity level designation for diagnosis codes that appear in Table 6E.—Revised Diagnosis Code Titles associated with the proposed rule.
Because we consider these public comments to be outside the scope of the proposed rule, we are not addressing them in this final rule. As stated in section II.F.1.b. of the preamble of this final rule, we encourage individuals with comments about MS-DRG classification to submit these comments no later than November 1 of each year so that they can be considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.
In developing the FY 2019 system of weights, 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 2017 MedPAR data used in this final rule include discharges occurring on October 1, 2016, through September 30, 2017, based on bills received by CMS through March 31, 2018, 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 2017 MedPAR file used in calculating the relative weights includes data for approximately 9,689,743 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, 2018 update of the FY 2017 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 2019 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 2019 relative weights are based on the ICD-10-CM diagnoses and ICD-10-PCS procedure codes from the FY 2017 MedPAR claims data, grouped through the ICD-10 version of the FY 2019 GROUPER (Version 36).
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 used cost report data from the March 31, 2018 update of the FY 2016 HCRIS for calculating the final FY 2019 cost-based relative weights.
As we explain in section II.E.2. of the preamble of this final rule, we calculated the FY 2019 relative weights based on 19 CCRs, as we did for FY 2018. The methodology we used to calculate the FY 2019 MS-DRG cost-based relative weights based on claims data in the FY 2017 MedPAR file and data from the FY 2016 Medicare cost reports is as follows:
• To the extent possible, all the claims were regrouped using the FY 2019 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 2017 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)
• Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS-DRG and before eliminating statistical outliers.
• 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 92.5 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 (77 FR 53341 through 53343). Specifically, because acute care hospitals participating in the BPCI Initiative still receive IPPS payments under section 1886(d) of the Act, we include all applicable data from these subsection (d) hospitals in our IPPS payment modeling and ratesetting calculations as if the hospitals were not participating in those models under the BPCI Initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in the BPCI Initiative in our ratesetting process.
The participation of hospitals in the BPCI initiative is set to conclude on September 30, 2018. The participation of hospitals in the Bundled Payments for Care Improvement (BPCI) Advanced model is set to start on October 1, 2018. The BPCI Advanced model, tested under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of a single payment and risk track, which bundles payments for multiple services beneficiaries receive during a Clinical Episode. Acute care hospitals may participate in BPCI Advanced in one of two capacities: As a model Participant or as a downstream Episode Initiator. Regardless of the capacity in which they participate in the BPCI Advanced model, participating acute care hospitals will continue to receive IPPS payments under section 1886(d) of the Act. Acute care hospitals that are Participants also assume financial and quality performance accountability for Clinical Episodes in the form of a reconciliation payment. For additional information on the BPCI Advanced model, we refer readers to the BPCI Advanced web page on the CMS Center for Medicare and Medicaid Innovation's website at:
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 2016 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 2019 IPPS/LTCH PPS proposed rule (83 FR 20259), 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.
In the FY 2019 IPPS/LTCH PPS proposed rule, we also invited public comments on our proposals related to recalibration of the proposed FY 2019 relative weights and the changes in the relative weights from FY 2018.
We developed the national average CCRs as follows:
Using the FY 2016 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 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. We calculated the transfer-adjusted discharges for use in the calculation of the Version 36 MS-DRG relative weights using the statutory expansion of the postacute care transfer policy to include discharges to hospice care by a hospice program discussed in section IV.A.2.b. of the preamble of this final rule. For the purposes of calculating the normalization factor, we used the transfer-adjusted discharges with the expanded postacute care transfer policy for Version 35 as well. (When we calculate the normalization factor, we calculate the transfer-adjusted case count for the prior GROUPER version (in this case Version 35) and multiply by the weights of that GROUPER. We then compare that pool to the transfer-adjusted case count using the new GROUPER version.) 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 2019 cost-based relative weights were then normalized by an adjustment factor of 1.761194774 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 2019 are as follows:
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
After consideration of the comments we received, we are finalizing our proposals, with the modification for recalibrating the relative weights for FY 2019 at the same level as the FY 2018 relative weights for MS-DRGs where the FY 2018 relative weight declined by 20 percent from the FY 2017 relative weight and the FY 2019 relative weight would have declined by 20 percent or more from the FY 2018 relative weight.
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 § 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, § 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 2018 IPPS/LTCH PPS final rule contains the final thresholds that we used to evaluate applications for new medical service or technology add-
As previously stated, Table 10 that is released with each proposed and final rule contains the thresholds that we use to evaluate applications for new medical service and technology add-on payments for the fiscal year that follows the fiscal year that is otherwise the subject of the rulemaking. For example, the thresholds in Table 10 released with the FY 2018 IPPS/LTCH PPS final rule are applicable to FY 2019 new technology applications. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20276), we proposed, beginning with the thresholds for FY 2020 and future years, to provide the thresholds that we previously included in Table 10 as one of our data files posted via the internet on the CMS website at:
We did not receive any public comments on this proposal. Therefore, we are finalizing the proposal, without modification, and presenting the MS-DRG threshold amounts (previously included in Table 10 of the annual IPPS/LTCH PPS proposed and final rules) that will be used in evaluating new technology add-on payment applications for FY 2020 in a data file that is available, along with the other data files associated with this FY 2019 IPPS/LTCH PPS final rule, on the CMS website at:
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 or 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, § 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 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 § 412.88, if the costs of the discharge (determined by applying cost-to-charge ratios (CCRs) as described in § 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 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 § 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 § 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 the 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
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 website, in a user friendly format. This guide was published in 2010 and is available on the CMS website at:
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
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20277), we noted that applicants for add-on payments for new medical services or technologies for FY 2020 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 website at:
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 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 2019 prior to publication of the FY 2019 IPPS/LTCH PPS proposed rule, we published a notice in the
As stated in the proposed rule, approximately 150 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:
In response to the published notice and the February 13, 2018 New Technology Town Hall meeting, we received written comments regarding the applications for FY 2019 new technology add-on payments. (We refer readers to the FY 2019 IPPS/LTCH PPS proposed rule for summaries of the comments received in response to the published notice and the New Technology Town Hall meeting and our responses (83 FR 20278 through 20280).) We also noted in the proposed rule that we do not summarize comments that are unrelated to the “substantial clinical improvement” criterion. As explained earlier and in the
Public commenters stated opinions and made suggestions relating to the mapping of new technologies to the appropriate MS-DRG, deeming a new technology a substantial clinical improvement if it receives HDE approval from the FDA, and the use of external data in determining the cost threshold that CMS considers to be outside of the scope of the proposed rule. Because we did not request public comments nor propose to make any changes to any of the issues above, we are not summarizing these public comments, nor responding to them in this final rule. As noted below in section II.H.5.a. of the preamble of this final rule, we refer readers to section II.F.2.d. of the preamble of this final rule for a summary of and our responses to the public comments we received in response to our solicitation regarding the most appropriate mechanism to provide payment to hospitals for new technologies, such as CAR T-cell therapy drugs, including through the use of new technology add-on payments (82 FR 20294), as well as a summary of the public comments we received in response to the solicitation for public comment on our concerns with the payment alternatives that we considered for CAR T-cell therapy drugs and therapies and our responses to those comments (83 FR 20190).
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 website at:
Jazz Pharmaceuticals submitted an application for new technology add-on payments for FY 2017 for Defitelio® (defibrotide), 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® improves the survival rate of patients diagnosed with VOD with multi-organ failure by 23 percent.
Defitelio® 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 2006. The applicant's New Drug Application (NDA) for Defitelio® received FDA approval on March 30, 2016. The applicant confirmed that Defitelio® 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® was finalized with FDA approval, and that commercial shipments of Defitelio® to hospitals and treatment centers began on April 4, 2016. Therefore, we agreed that, based on this information, the newness period for Defitelio® begins on April 4, 2016, the date of its first commercial availability.
The applicant received approval to use unique ICD-10-PCS procedure codes to describe the use of Defitelio®, with an effective date of October 1, 2016. The approved ICD-10PCS 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® and consideration of the public comments we received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved Defitelio® 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® technology would incur an average cost per case of $151,800 (70 kg adult × 25 mg/kg/day × 21 days = 36,750 mg per patient/200 mg vial = 184 vials per patient × $825 per vial = $151,800). Under § 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® is $75,900.
Our policy is that a medical service or technology may continue to be considered “new” for purposes of new technology add-on payments within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology. Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the fiscal year (70 FR 47362).
With regard to the newness criterion for Defitelio®, we considered the beginning of the newness period to commence on the first day Defitelio® was commercially available (April 4, 2016). Because the 3-year anniversary date of the entry of the Defitelio® onto the U.S. market (April 4, 2019) will
After consideration of the public comments we received, we are finalizing our proposal, with modification, to continue new technology add-on payments for Defitelio® for FY 2019. Based on the applicant's updated cost information, the maximum new technology add-on payment for a case involving the use of Defitelio® is $80,500 for FY 2019.
Two manufacturers, Edwards Lifesciences and LivaNova, submitted applications for new technology add-on payments for FY 2018 for the INTUITY Elite
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.
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 determined these two devices are substantially similar to each other and that it was 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. In accordance with our policy, we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38120) 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 is February 29, 2016, when the Perceval valve became commercially available. The ICD-10-PCS code approved to identify procedures involving the use of both devices when surgically implanted is ICD-10-PCS code X2RF032
After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the INTUITY and Perceval valves and consideration of the public comments we received in response to the FY 2018 IPPS/LTCH PPS proposed rule, we approved the INTUITY and Perceval valves for new technology add-on payments for FY 2018 (82 FR 38125). We stated that we believed 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 was 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 § 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.
With regard to the newness criterion for the INTUITY and Perceval valves, we considered the newness period for the INTUITY and Perceval valves to begin February 29, 2016. 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
In addition, 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 is no longer considered as “new” once it is more than 2 to 3 years old, irrespective of how frequently the medical service or technology has been used in the Medicare population (70 FR 47349). As such, in this case, because the Perceval and INTUITY valves have been available on the U.S. market for more than 2 to 3 years, we consider the costs to have been included in the MS-DRG relative weights regardless of whether the technologies' use in the Medicare population has been frequent or infrequent.
Based on all of the reasons stated above, the Perceval and INTUITY valves are no longer considered “new” for purposes of new technology add-on payments for FY 2019. Therefore, after consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for the Perceval and INTUITY valves for FY 2019.
W. L. Gore and Associates, Inc. submitted an application for new technology add-on payments for the GORE® EXCLUDER® 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® EXCLUDER® 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 FDA pre-market approval of the GORE IBE device on February 29, 2016. The following procedure codes 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); 04VC3EZ (Restriction of right common iliac artery with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach); 04VC4EZ (Restriction of right common iliac artery with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach); 04VD0EZ (Restriction of left common iliac artery with branched or fenestrated intraluminal device, one or two arteries, open approach); 04VD3EZ (Restriction of left common iliac artery with branched or fenestrated intraluminal device, one or two arteries, percutaneous approach); 04VD4EZ (Restriction of left common iliac artery
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 § 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. 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 GORE IBE device onto the U.S. market (February 28, 2019) will occur in the first half of FY 2019, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20282), we proposed to discontinue new technology add-on payments for this technology for FY 2019. We invited public comments on our proposal to discontinue new technology add-on payments for the GORE IBE device.
With regard to the GORE IBE device, the applicant noted that there was a deletion of ICD-10-PCS procedure codes in FY 2018 used for the coding of procedures identifying the GORE IBE implant, which created confusion for hospital billing departments that were reporting these codes. As a result, the applicant believed that the GORE IBE implant procedures may have been under-reported and the claims data has not captured the utilization and cost data for these implant procedures. Additionally, the applicant stated that MACs, as a general practice, do not include Category III CPT codes in their internal processes and, specifically, do not include 0254T for the identification of the GORE IBE procedure. The applicant believed that this lack of alignment between the new technology add-on payment policy and the MACs' treatment of Category III CPT codes for the identification of GORE IBE procedures likely contributed to the severe under-reporting of procedures involving the GORE IBE implant. Therefore, the applicant recommended that CMS maintain consistent ICD-10 coding practices, encourage the MACs to include procedures involving devices for which new technology add-on payments are effective in their internal processes, and extend new technology add-on payments for the GORE IBE technology through FY 2019 to allow assessment of sufficient claims data that reflect the costs of the GORE IBE device.
Based on the reasons stated above, the GORE IBE device is no longer considered “new” for purposes of new technology add-on payments for FY 2019. Therefore, after consideration of the public comments we received, we are finalizing our proposal to discontinue new technology add-on payments for the GORE IBE device for FY 2019.
Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2017 for idarucizumab (also known as PRAXBIND), a product developed as an antidote to reverse the effects of PRADAXA (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.
PRAXBIND was approved by the FDA on October 16, 2015. PRAXBIND is indicated for the use in the treatment of
The applicant was granted approval to use unique ICD-10-PCS procedure codes that became effective October 1, 2016, to describe the use of this technology. The approved ICD-10-PCS 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 § 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 PRAXBIND was approved by the FDA on October 16, 2015. 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 PRAXBIND onto the U.S. market will occur in the first half of FY 2019 (October 15, 2018), in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20282), we proposed to discontinue new technology add-on payments for this technology for FY 2019. We invited public comments on our proposal to discontinue new technology add-on payments for idarucizumab.
Janssen Biotech submitted an application for new technology add-on payments for the Stelara® induction therapy for FY 2018. Stelara® received FDA approval as an intravenous (IV) infusion treatment for adult patients with moderately to severe active Crohn's disease (CD) who have failed or were intolerant to treatment using immunomodulators or corticosteroids, but never failed a tumor necrosis factor (TNF) blocker, or failed or were intolerant to treatment using one or more TNF blockers. The FDA approved Stelara® on September 23, 2016. Stelara® IV is intended for induction—subcutaneous prefilled syringes are intended for maintenance dosing. Stelara® must be administered intravenously by a health care professional in either an inpatient hospital setting or an outpatient hospital setting.
Stelara® for IV infusion is packaged in single 130 mg vials. Induction therapy consists of a single IV infusion dose using the following weight-based dosing regimen: Patients weighing less than (<)55 kg are administered 260 mg of Stelara® (2 vials); patients weighing more than (>)55 kg, but less than (<)85 kg are administered 390 mg of Stelara® (3 vials); and patients weighing more than (>)85 kg are administered 520 mg of Stelara® (4 vials). An average dose of Stelara® administered through IV infusion is 390 mg (3 vials). Maintenance doses of Stelara® are administered at 90 mg, 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, immunomodulators, tumor necrosis alpha (TNFα) inhibitors, and anti-integrin agents. Surgery may be necessary for some patients diagnosed with CD in which conventional therapies have failed.
After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for Stelara® and consideration of the public comments we received in response to the FY 2018 IPPS/LTCH PPS proposed rule, we approved Stelara® for new technology add-on payments for FY 2018 (82 FR 38129). Cases involving Stelara® that are eligible for new technology add-on payments are identified by ICD-10-PCS procedure code XW033F3 (Introduction of other New Technology therapeutic substance into peripheral vein, percutaneous approach, new technology group 3). With the new technology add-on payment application, the applicant estimated that the average Medicare beneficiary would require a dosage of 390 mg (3 vials) at a hospital acquisition cost of $1,600 per vial (for a total of $4,800). Under § 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 Stelara® is $2,400.
With regard to the newness criterion for Stelara®, we considered the beginning of the newness period to commence when Stelara® received FDA approval as an IV infusion treatment of Crohn's disease (CD) on September 23, 2016. Because the 3-year anniversary date of the entry of Stelara® onto the U.S. market (September 23, 2019) will occur after FY 2019, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20282 through 20283) we proposed to continue new technology add-on payments for this technology for FY 2019. We proposed that the maximum payment for a case involving Stelara® would remain at $2,400 for FY 2019. We invited public comments on our proposal to continue new technology add-on payments for Stelara® for FY 2019.
BTG International Inc. submitted an application for new technology add-on payments for the Vistogard
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.
Vistogard
With regard to the newness criterion, Vistogard
After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for Vistogard
With regard to the newness criterion for the Vistogard
Merck & Co., Inc. submitted an application for new technology add-on payments for ZINPLAVA
ZINPLAVA
After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for ZINPLAVA
With regard to the newness criterion for ZINPLAVA
We received 15 applications for new technology add-on payments for FY 2019. In accordance with the regulations under § 412.87(c), applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year that the application is being considered. Since the issuance of the FY 2019 IPPS/LTCH PPS proposed rule, three applicants, Progenics Pharmaceuticals, Inc. (the applicant for AZEDRA®), Somahlution, Inc. (the applicant for DURAGRAFT®), and TherOx, Inc. (the applicant for Supersaturated Oxygen (SSO
Two manufacturers, Novartis Pharmaceuticals Corporation and Kite Pharma, Inc. submitted separate applications for new technology add-on payments for FY 2019 for KYMRIAH (tisagenlecleucel) and YESCARTA (axicabtagene ciloleucel), respectively. Both of these technologies are CD-19-directed T-cell immunotherapies used for the purposes of treating patients with aggressive variants of non-Hodgkin lymphoma (NHL). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20284), we noted that KYMRIAH was approved by the FDA on August 30, 2017, for use in the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (ALL) that is refractory or in second or later relapse, which is a different indication and patient population than the new indication and targeted patient population for which the applicant submitted a request for approval of new technology add-on payments for FY 2019. Specifically, and as summarized in a table presented in the proposed rule and updated in the following table presented in this final rule, the new indication for which Novartis Pharmaceuticals Corporation is requesting approval for new technology add-on payments for KYMRIAH is as an autologous T-cell immune therapy indicated for use in the treatment of patients with relapsed/refractory (r/r) diffuse large B-Cell lymphoma after two or more lines of systemic therapy including diffuse large B-cell lymphoma (DLBCL) not eligible for autologous stem cell transplant (ASCT). In addition, we indicated that as of the time of the development of the proposed rule, Novartis Pharmaceuticals Corporation had been granted Breakthrough Therapy designation by the FDA, and was awaiting FDA approval for the use of KYMRIAH under this new indication. The updated table that follows reflects that Novartis Pharmaceuticals Corporation received FDA approval for the use of KYMRIAH under this new indication on May 1, 2018. We also noted that Kite Pharma, Inc. previously submitted an application for approval for new technology add-on payments for FY 2018 for KTE-C19 for use as an autologous T-cell immune therapy in the treatment of adult patients with r/r aggressive B-cell NHL who are ineligible for ASCT. However, Kite Pharma, Inc. withdrew its application for KTE-C19 prior to publication of the FY 2018 IPPS/LTCH PPS final rule. Kite Pharma, Inc. resubmitted an application for approval for new technology add-on payments for FY 2019 for KTE-C19 under a new name, YESCARTA, for the same indication. Kite Pharma, Inc. received FDA approval for this original indication and treatment use of YESCARTA on October 18, 2017. (We refer readers to the following updated table for a comparison of the indications and FDA approvals for KYMRIAH and YESCARTA).
We note that procedures involving the KYMRIAH and YESCARTA therapies are both reported using the following ICD-10-PCS procedure codes: XW033C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into peripheral vein, percutaneous approach, new technology group 3); and XW043C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into central vein, percutaneous approach, new technology group 3). We further note that, in section II.F.2.d. of the preamble of this final rule, we are finalizing our proposal to assign cases reporting these ICD-10-PCS procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to revise the title of this MS-DRG to (Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy). We refer readers to section II.F.2.d. of the preamble of this final rule for a complete discussion of these final policies.
According to the applicants, patients with NHL represent a heterogeneous group of B-cell malignancies with varying patterns of behavior and response to treatment. B-cell NHL can be classified as either an aggressive, or indolent disease, with aggressive variants including DLBCL; primary mediastinal large B-cell lymphoma (PMBCL); and transformed follicular lymphoma (TFL). Within diagnoses of NHL, DLBCL is the most common subtype of NHL, accounting for approximately 30 percent of patients who have been diagnosed with NHL, and survival without treatment is measured in months.
According to Novartis Pharmaceuticals Corporation, the recent FDA approval (on May 1, 2018) for the additional indication allows KYMRIAH to be used for the treatment of patients with R/R DLBCL who are not eligible for ASCT. Novartis Pharmaceuticals Corporation describes KYMRIAH as a CD-19-directed genetically modified autologous T-cell immunotherapy which utilizes peripheral blood T-cells, which have been reprogrammed with a transgene encoding, a chimeric antigen receptor (CAR), to identify and eliminate CD-19-expressing malignant and normal cells. Upon binding to CD-19-expressing cells, the CAR transmits a signal to promote T-cell expansion, activation, target cell elimination, and persistence of KYMRIAH cells. The transduced T-cells expand in vivo to engage and eliminate CD-19-expressing cells and may exhibit immunological endurance to help support long-lasting remission.
According to Kite Pharma, Inc., YESCARTA is indicated for the use in the treatment of adult patients with r/r large B-cell lymphoma after two or more lines of systemic therapy, including DLBCL not otherwise specified, PMBCL, high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. YESCARTA is not indicated for the treatment of patients with primary central nervous system lymphoma. The applicant for YESCARTA described the technology as a CD-19-directed genetically modified autologous T-cell immunotherapy that binds to CD-19-expressing cancer cells and normal B-cells. These normal B-cells are considered to be non-essential tissue, as they are not required for patient survival. According to the applicant, studies demonstrated that following anti-CD-19 CAR T-cell engagement with CD-19-expressing target cells, the CD-28 and CD-3-zeta co-stimulatory domains activate downstream signaling cascades that lead to T-cell activation, proliferation, acquisition of effector functions and secretion of inflammatory cytokines and chemokines. This sequence of events leads to the elimination of CD-19-expressing tumor cells.
Both applicants expressed that their technology is the first treatment of its kind for the targeted adult population. In addition, both applicants asserted that their technology is new and does not use a substantially similar mechanism of action or involve the same treatment indication as any other currently FDA-approved technology. In the FY 2019 IPPS/LTCH PPS proposed rule, we noted that, at the time each applicant submitted its new technology add-on payment application, neither technology had received FDA approval for the indication for which the applicant requested approval for the new technology add-on payment. We indicated that KYMRIAH had been granted Breakthrough Therapy designation for the use in the treatment of patients for the additional indication that is the subject of its new technology add-on application and, as of the time of the development of the proposed rule, was awaiting FDA approval. As noted previously, the applicant for KYMRIAH received approval for this additional indication on May 1, 2018. We further noted in the proposed rule that, YESCARTA received FDA approval for use in the treatment of patients and the indication stated in its application on October 18, 2017, after each applicant submitted its new technology add-on payment application.
As noted, according to both applicants, KYMRIAH and YESCARTA are the first CAR T-cell immunotherapies of their kind. Because potential cases representing patients who may be eligible for treatment using KYMRIAH and YESCARTA would group to the same MS-DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS procedures codes are used to report treatment using either KYMRIAH or YESCARTA), and we believed that these technologies 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 disagreed with the applicants and believed these two technologies are substantially similar to each other and that it was appropriate to evaluate both technologies as one application for new technology add-on payments under the IPPS. For these reasons, and as discussed further below, we stated that we intended to make one determination regarding approval for new technology add-on payments that would apply to both applications, and in accordance with our policy, would use the earliest market availability date submitted as the beginning of the newness period for both KYMRIAH and YESCARTA. Several public commenters submitted comments regarding whether the technologies are substantially similar to each other in response to the proposed rule and we summarize and respond to the public comments below.
With respect to the newness criterion, as previously stated, YESCARTA received FDA approval on October 18, 2017. According to the applicant, prior to FDA approval, YESCARTA had been available in the U.S. only on an investigational basis under an investigational new drug (IND) application. For the same IND patient population, and until commercial availability, YESCARTA was available under an Expanded Access Program (EAP) which started on May 17, 2017. The applicant stated that it did not recover any costs associated with the EAP. According to the applicant, the first commercial shipment of YESCARTA was received by a certified treatment center on November 22, 2017. As discussed previously, KYMRIAH received FDA approval May 1, 2018, for use in the treatment of patients diagnosed with r/r DLBCL that are not eligible for ASCT. Additionally, as noted in the proposed rule, KYMRIAH was previously granted Breakthrough Therapy designation by the FDA. We stated in the proposed rule that we believe that, in accordance with our policy, if these technologies are substantially similar to each other, it is appropriate to use the earliest market
We stated in the proposed rule that, because we believe these two technologies are substantially similar to each other, we believe it is appropriate to evaluate 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 stated that we intended to make one determination regarding new technology add-on payments that would apply to both applications. We stated that 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 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).
We stated that, if substantially similar technologies are 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, we stated that, because the technologies have been submitted for review in the same year and we believe they are substantially similar to each other, 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. We received public comments regarding our proposal to evaluate KYMRIAH and YESCARTA as one application for new technology add-on payments under the IPPS and we summarize and respond to these public comments below.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20284), we stated that we believe that KYMRIAH and YESCARTA are substantially similar to each other for purposes of analyzing these two applications as one application. As discussed in the proposed rule, we stated that we also need to determine whether KYMRIAH and YESCARTA are substantially similar to existing technologies prior to their approval by the FDA and their release onto the U.S. 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 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 KYMRIAH asserted that its unique design, which utilizes features that were not previously included in traditional cytotoxic chemotherapeutic or immunotherapeutic agents, constitutes a new mechanism of action. The deployment mechanism allows for identification and elimination of CD-19-expressing malignant and non-malignant cells, as well as possible immunological endurance to help support long-lasting remission.
The applicant for YESCARTA stated that YESCARTA is the first engineered autologous cellular immunotherapy comprised of CAR T-cells that recognizes CD-19 express cancer cells and normal B-cells with efficacy in patients with r/r large B-cell lymphoma after two or more lines of systemic therapy, including DLBCL not otherwise specified, PMBCL, high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma as demonstrated in a multi-centered clinical trial. Therefore, the applicant believed that YESCARTA's mechanism of action is distinct and unique from any other cancer drug or biologic that is currently approved for use in the treatment of patients who have been diagnosed with aggressive B-cell NHL, namely single-agent or combination chemotherapy regimens. At the time of the development of the proposed rule, the applicant also pointed out that YESCARTA was the only available therapy that has been granted FDA approval for the treatment of adult patients with r/r large B-cell lymphoma after two or more lines of systemic therapy, including DLBCL not otherwise specified, PMBCL, high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma.
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
The applicant for YESCARTA also addressed the concern expressed by CMS in the FY 2018 IPPS/LTCH PPS proposed rule regarding Kite Pharma Inc.'s FY 2018 new technology add-on payment application for the KTE-C19 technology (82 FR 19888). At the time, CMS expressed concern that KTE-C19 may use the same or similar mechanism of action as the Bi-Specific T-Cell engagers (BiTE) technology. The applicant for YESCARTA explained that YESCARTA has a unique and distinct mechanism of action that is substantially different from BiTE's or any other drug or biologic currently assigned to any MS-DRG in the FY 2016 MedPAR Hospital Limited Data Set. In providing more detail regarding how YESCARTA is different from the BiTE technology, the applicant explained that the BiTE technology is not an engineered autologous T-cell immunotherapy derived from a patient's own T-cells. Instead, it is a bi-specific T-cell engager that recognizes CD-19 and CD-3 cancer cells. Unlike engineered T-cell therapy, BiTE does not have the ability to enhance the proliferative and cytolytic capacity of T-cells through ex-vivo engineering. Further, BiTE is approved for the treatment of patients who have been diagnosed with Philadelphia chromosome-negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia (ALL) and is not approved for patients with relapsed or refractory large B-cell lymphoma, whereas YESCARTA is indicated for use in the treatment of adult patients with r/r aggressive B-cell NHL who are ineligible for ASCT.
The applicant for YESCARTA also indicated that its mechanism of action is not the same or similar to the mechanism of action used by KYMRIAH's currently available FDA-approved CD-19-directed genetically modified autologous T-cell immunotherapy indicated for use in the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (ALL) that is refractory or in second or later relapse.
We stated in the proposed rule that while the applicant for YESCARTA stated how its technology is different from KYMRIAH, because both technologies are CD-19-directed T-cell immunotherapies used for the purpose of treating patients with aggressive variants of NHL, we believe that YESCARTA and KYMRIAH are substantially similar treatment options. Furthermore, in the FY 2019 IPPS/LTCH PPS proposed rule, we also stated that we were concerned there may be an age overlap (18 to 25) between the two different patient populations for the currently approved KYMRIAH technology and YESCARTA technology. We stated in the proposed rule, which was issued prior to the approval for a second indication (adult patients), that the indication for the KYMRIAH technology is for use in the treatment of patients who are up to 25 years of age and the YESCARTA technology is indicated for use in the treatment of adult patients.
We noted in the proposed rule that the applicant asserted that YESCARTA is not substantially similar to KYMRIAH. We stated that under this scenario, if both YESCARTA and KYMRIAH meet all of the new technology add-on payment criteria and are approved for new technology add-on payments for FY 2019, for purposes of making the new technology add-on payment, because procedures utilizing either YESCARTA or KYMRIAH CAR T-cell therapy drugs are reported using the same ICD-10-PCS procedure codes, in order to accurately pay the new technology add-on payment to hospitals that perform procedures utilizing either technology, it may be necessary to use alternative coding mechanisms to make the new technology add-on payments. In the FY 2019 IPPS/LTCH PPS proposed rule, CMS invited comments on alternative coding mechanisms to make the new technology add-on payments, if necessary.
We also invited public comments on whether KYMRIAH and YESCARTA are substantially similar to existing technologies and whether the technologies meet the newness criterion.
The applicant for YESCARTA stated that it continued to believe each technology consists of notable differences in the construction, as well as manufacturing processes and successes that may lead to differences in activity. The applicant encouraged CMS to evaluate YESCARTA as a separate new technology add-on payment application and approve separate new technology add-on payments for YESCARTA, effective October 1, 2018, and to not move forward with a single new technology add-on payment evaluation determination that covers both CAR T-cell therapies, YESCARTA and KYMRIAH. The applicant stated that the transmembrane domain of YESCARTA is comprised of a fragment of CD-28 co-stimulatory molecule, including an extracellular hinge domain, which provides structural flexibility for optimal binding of the target antigen by the scFV target binding region. The applicant further stated that, in contrast, KYMRIAH consists of a spacer and a transmembrane domain, which are derived from CD8-a. The applicant for YESCARTA believed that, the spacer provides a flexible link between the scFv and the transmembrane domain, which then accommodates different orientations of the antigen binding domain upon CD19 antigen recognition. The applicant stated that these differences in the origin of the transmembrane component between the YESCARTA and KYMRIAH may be one of the differences which lead to differentiation in CAR function and resulting activity between the two CAR constructs, which will be described later in this section.
The applicant for YESCARTA believed perhaps the most critical difference between the two technologies, YESCARTA and KYMRIAH, may be that of the co-stimulatory domains, which connect the extracellular scFv antigen binding domain to the cytoplasmic CD3-zeta downstream signaling domain. The applicant explained that, for YESCARTA, the technology is derived from the intracellular domains of co-stimulatory protein CD-28. However, for KYMRIAH, in contrast, the technology is derived from the co-stimulatory protein 4-1BB (CD137). The applicant believed that, although clear mechanisms are unknown, it is surmised that the difference in co-stimulatory region of the two CAR products may be responsible for differences in activity. The applicant stated that the ongoing hypothesis for these differences are based on differentially affecting CAR T-cell cytokine production, expansion, cytotoxicity and persistence after administration.
The applicant for YESCARTA also described an additional concept regarding the manufacturing process that it believed supported why the two technologies were different. The applicant explained that both, YESCARTA and KYMRIAH, are prepared from the patient's peripheral blood mononuclear cells, which are obtained via a standard leukapheresis procedure. However, the applicant stated that, with YESCARTA, the mononuclear cells are then enriched for T-cells and activated with anti-CD-3 antibody in the presence of IL-2 then transduced with the replication incompetent y-retroviral vector containing the anti-CD-19 CAR transgene. The applicant further explained that the transduced T-cells are expanded in cell culture, washed, formulated into a suspension, and cryopreserved. The applicant for YESCARTA believed that, in contrast, KYMRIAH uses anti CD-3/anti CD-28 coated magnetic beads for T-cell enrichment and activation, rather than anti-CD-3 antibody and IL-2, which are removed after CAR T-cell expansion and prior to harvest. The applicant explained that a further difference in the manufacturing of KYMRIAH is the use of lentiviral vector in the anti-CD-19 CAR gene transduction rather than a y-retroviral vector, as used for YESCARTA in manufacturing. The applicant stated that both y-retroviral or lentiviral vectors can permanently insert DNA into the genome. However, lentiviral vectors are capable of transducing quiescent cells, while y-retroviral vectors require cells in mitosis. According to the applicant, the manufacturing success in clinical trials is also different with results showing median turnaround time of 17 days for YESCARTA, with 99 percent success rate versus median turnaround time of 113 days, with 93 percent success rate for KYMRIAH.
The applicant for YESCARTA further stated that, if CMS decides to establish one new technology add-on payment determination and approval for both CAR T-cell therapies, the add-on payments should be structured to ensure that payment does not hinder access in any way for patients to receive the most appropriate cell therapy and use of YESCARTA and KYMRIAH can be uniquely and individually identified in the Medicare inpatient data.
Other commenters believed that the two CAR T-cell technologies should be considered as separate new technology add-on payment applications because the technologies' indications are approved for two different patient populations and diagnoses. The commenters stated that, while the approval for one of the diagnoses for adults is the same for KYMRIAH and YESCARTA, KYMRIAH has also been approved for treating children and, therefore, that should be reasoning to consider the application separately. Additionally, commenters stated that the pricing of both medications varies based on the patient population, and encouraged CMS to recognize this discrepancy when determining approval of new technology add-on payment and establishing adequate payments rates. Commenters agreed with CMS' conclusion that it is appropriate to consider both sets of cost and clinical data when determining whether the standard criteria for new technology add-on payments for KYMRIAH and YESCARTA were met, but also encouraged CMS to consider evaluation and determination of both technologies as separate applications.
Some commenters disagreed with CMS' views of the YESCARTA and KYMRIAH with respect to substantial similarity and expressed concerns with CMS' conclusion that the two CAR T-cell therapies are substantially similar to each other. The commenters believed that, because each therapy has received separate FDA Breakthrough designations, is approved based on separate Biological License Applications, and may likely be used in the treatment of different patient populations in different sites of care, consideration for approval of new technology add-on payments should be based on separate applications. Commenters further believed that, for purposes of meeting the newness criterion, each new technology add-on payment application must be treated as being unique. Despite these concerns, commenters supported CMS creating a new MS-DRG for procedures and cases representing patients receiving treatment involving CAR T-cell therapies, and recognized that each of the CAR T-cell therapies would be used in the treatment of cases representing patients that would be assigned to the same MS-DRG.
Several commenters disagreed with CMS' determination that the applications for KYMRIAH and YESCARTA are similar enough to warrant consideration as a single new technology add-on payment application, and recommended CMS consider the applications separately. Commenters believed that because KYMRIAH received FDA approval for the use in the treatment of patients diagnosed with
Other commenters further cautioned CMS that combining the new technology add-on payment applications' evaluation and determination for these two therapies would create precedent that may make it unlikely for future CAR T-cell therapies to be considered distinct from existing CAR T-cell therapies, or substantially similar. As a result, the commenters believed that, if CMS finalized its proposal to make a combined decision for KYMRIAH and YESCARTA, it is more likely that future CAR T-cell therapies will not qualify for new technology add-on payments. The commenters noted that, to mitigate any potential negative impact if CMS combines both the applications and makes its determination, it would be important for CMS to leave open the option for future CAR T-cell therapies to apply for and receive approval of new technology add-on payments, regardless of the decision made for the current applications under consideration.
Some commenters believed that section 1886(d)(5)(K) of the Act does not appear to clearly authorize CMS to jointly evaluate KYMRIAH and YESCARTA, which were submitted by separate manufacturers, as separate new technology add-on payment applications for two different products approved by FDA under two separate Biologics License Applications with distinct clinical and cost data submissions. The commenters believed that CMS' assessment appeared concentrated on a handful of perceived similarities in the mechanism of action and the patient and disease categories between the two newly approved CAR T-cell products. Commenters stated that this focused approach appeared to give little weight to the distinctions in the manufacturing process and co-stimulatory domains between the two CAR T-cell therapies, which obscures the important distinctions in how the different CAR T-cell technologies have been refined and optimized. The commenters further stated that CMS' evaluation also does not fully account for the difference in clinical profiles of these two agents.
Other commenters believed that failure to recognize the legitimate distinctions and technological innovations reflected by CAR T-cell therapy—and inherent across different CAR T-cell treatments, such as KYMRIAH and YESCARTA, could artificially restrict access to new technology add-on payments for these new and promising technologies. Commenters recommended CMS encourage development of medical innovation by applying the new technology add-on payment “newness” criterion in a way that recognizes the unique, novel, and distinct nature of the CAR T-cell technology.
In evaluating the new technology add-on payment applications for KYMRIAH and YESCARTA, some commenters believed that CMS may be overlooking the significant ways these two technologies represent a substantial medical advancement compared to existing therapies, most of which patients have already failed, before they go on to receive treatment involving CAR T-cell therapy. The commenters stated that CMS appeared to be unduly focusing on the perceived similarities between the two newly approved CAR T-cell therapies versus the advancement the technologies represent over existing therapies. The commenters encouraged CMS to recognize the ways in which KYMRIAH and YESCARTA significantly differ from existing technologies and to further apply the “newness” eligibility requirement for new technology add-on payments in a manner that does not unnecessarily discourage the availability of new technology add-on payments for these newly approved CAR T-cell therapies that represent significant clinical advantages over existing treatments.
The applicant for KYMRIAH stated that, at the time it submitted its new technology add-on payment application and as summarized in the FY 2019 IPPS/LTCH PPS proposed rule, similar to the applicant for YESCARTA, it believed the two technologies were not substantially similar to the other, or to other cancer drugs or biologics currently approved for use in the treatment of aggressive B-cell NHL and, therefore, met the newness criterion. However, the applicant acknowledged that, since the date it submitted its new technology add-on payment application both technologies, YESCARTA and KYMRIAH, have received FDA approval for the technologies' intended indications. The applicant for KYMRIAH further indicated that, based on FDA's recent approval, it agreed with CMS that KYMRIAH is substantially similar to YESCARTA, as defined by the new technology add-on payment application evaluation criteria.
The applicant for KYMRIAH detailed how it believed the technology is substantially similar to YESCARTA with respect to each criterion pertaining to substantial similarity.
With regard to the first criterion, whether YESCARTA and KYMRIAH use the same or a similar mechanism of action to achieve a therapeutic action, the applicant stated that, although KYMRIAH's and YESCARTA's mechanisms of actions are distinct and unique from any other cancer drug or biologic that is currently FDA-approved, namely single-agent or combination chemotherapy regimens, the applicant believed KYMRIAH and YESCARTA use the same or similar mechanisms of action to achieve the therapeutic outcome. To further support the assertion that the two technologies are substantially similar to one another, the applicant for KYMRIAH also provided the FDA-approved prescribing information (“12.1 Mechanism of Action”) issued for KYMRIAH and YESCARTA describing the mechanisms of actions as being the same or similar for both technologies in the following manner:
KYMRIAH:
YESCARTA:
In a summary of the FDA-approved prescribing information, the applicant further noted that, within the FDA-approved prescribing information, both KYMRIAH and YESCARTA are CD-19-directed genetically modified autologous T-cell immunotherapies that bind to CD-19-expressing cancer cells and normal B cells. Upon binding to CD-19-expressing cells, the respective CARs transmit a signal to promote T cell expansion, activation, and target cell elimination.
In response to the differences between KYMRIAH and YESCARTA related to spacer, transmembrane and co-stimulatory domains, which were stated by the applicant for YESCARTA, the applicant for KYMRIAH believed that, although there are structural differences that impact aspects of how the treatment effect is achieved, the overall mechanisms of actions of the two CAR T-cell therapy products are similar. The applicant explained that in defining drug classes, the FDA provided guidance that a class defined by mechanism of action would include drugs that have similar pharmacologic action at the receptor, membrane or tissue level. The applicant indicated that KYMRIAH is a cellular immunotherapy generated by gene modification of autologous donor T-cells. Further, the applicant for KYMRIAH stated that through the process of apheresis, leukocytes are harvested from the patient and undergo a process of ex-vivo gene transfer in which a CAR is introduced by lentiviral transduction. The applicant further explained that the CAR construct contains an antigen binding region designed to target CD-19, a co-stimulatory domain known as 4-1BB and a signaling domain called CD-3-zeta. The applicant stated that once transferred, the patient's T-cells will express the CAR construct anti-CD-19 4-1BB/CD-3-zeta, and undergo ex-vivo expansion. The applicant for KYMRIAH stated that both, KYMRIAH and YESCARTA, utilize a gene transfer process to modify autologous patient immune cells with a chimeric antigen receptor capable of directing immune mediated killing at a pre-specified target. The applicant further explained that both technologies accomplish their pharmacological effect through the use of three specialized domains, which are structurally different, but achieve similar environmental interactions. The applicant indicated that, in both agents, the antigen binding domain identifies CD-19 and, therefore, the interaction between the agent and its environment begins with the same receptor target interaction. Additionally, the applicant noted that both KYMRIAH and YESCARTA induce T-cell mediated cell death of the bound tumor cell by activating the T-cell expressing the CAR through the signaling domain, which is common to both agents and, therefore, at the tissue level, both generate a pharmacological impact by producing T-cell mediated apoptosis. The applicant for KYMRIAH stated that the pharmacological effect of these two agents is attained through tumor directed expansion of CAR T-cells and the development of memory T-cells that allow for potential long-term persistence and immunosurveillance. The applicant believed that, in both agents, this is achieved through the use of a co-stimulatory domain, which leads to the secretion of inflammatory substances such as cytokines, chemokines and growth factors, which induce T-cell proliferation and differentiation. The applicant for KYMRIAH stated that, although it agreed with the applicant for YESCARTA
With regard to the second criterion, whether YESCARTA and KYMRIAH will be assigned to the same or a different MS-DRG, the applicant stated that this criterion is met because cases representing patients eligible for treatment involving both, KYMRIAH and YESCARTA, will be reported using the same ICD-10-PCS procedure codes (XW033C3 and XW043C3) and will be assigned to the same MS-DRG—Pre-MDC MS-DRG 016 (as discussed in section II.F.2.d. of the preamble of this final rule).
With regard to the third criterion, whether YESCARTA® and KYMRIAH® will be used to treat the same or similar patient population, the applicant stated that both, KYMRIAH and YESCARTA, are FDA approved to treat adult patients diagnosed with r/r aggressive B-cell NHL in the same or similar patient population. The applicant, in summary, agreed with CMS' conclusion that KYMRIAH is “substantially similar” to YESCARTA, as defined by CMS, because both technologies are: (1) Intended to treat the same or similar disease in the same or similar patient population; (2) purposed to achieve the same therapeutic outcome using the same or similar mechanism of action; and (3) would be assigned to the same MS-DRGs. However, the applicant stated that, despite being “substantially similar” technologies, KYMRIAH and YESCARTA are not “substantially similar” to any other existing technology and, therefore, it believed KYMRIAH met the newness criterion.
Other commenters, generally, agreed that both, KYMRIAH and YESCARTA, are substantially similar technologies. One commenter stated that it agreed with CMS' approach on both clinical and policy grounds because given the promises and perils of both therapies, the surrounding coverage and payment issues present to be the same and that will also be the case for the successor drugs expected to soon achieve FDA approval and enter the U.S. market. The commenter explained that consideration of KYMRIAH and YESCARTA as one new technology add-on payment application simplifies the newness test because both technologies were assigned an ICD-10-PCS procedure code in 2017, and cases involving the utilization of the technologies and procedures reporting the ICD-10-PCS procedure codes will be assigned to the same MS-DRG, effective with the beginning of FY 2019 on October 1, 2018. The commenter also noted that, CMS indicated that November 22, 2017, would be the beginning date for the “newness” period because it marks the first delivery of YESCARTA to eligible treatment centers. The commenter believed this date was somewhat arbitrary, but did not provide an alternative date for consideration and, therefore, agreed that KYMRIAH and YESCARTA should be considered together as one new technology add-on payment application, both technologies met the criterion for newness, and the newness period appropriately begins on November 22, 2017. The commenter stated that, if approved for new
After consideration of the public comments we received, although we recognize the technologies are not completely the same in terms of their manufacturing process, co-stimulatory domains, and clinical profiles, we and also as the commenters expressed, are not convinced that these differences result in the use of a different mechanism of action and, therefore, infer that the two technologies' mechanisms of action are the same. Furthermore, we believe that KYMRIAH and YESCARTA are substantially similar to one another because potential cases representing patients who may be eligible for treatment using KYMRIAH and YESCARTA would group to the same MS-DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS procedures codes are used to report treatment using either KYMRIAH or YESCARTA). We also believe, as we and other commenters describe throughout this section, that these technologies are intended to treat the same or similar disease in the same or similar patient population—patients with r/r DLBCL who are ineligible for, or who have failed ASCT, and are purposed to achieve the same therapeutic outcome—ORR, CR, OS using the same or similar mechanism of action using genetically modified autologous T-cell immunotherapies. The respective CAR T-cells transmit a signal to promote T-cell expansion, activation, and ultimately cancer cell elimination to produce a targeted cellular therapy that may persist in the body even after the malignancy is eradicated.
We also believe that KYMRIAH and YESCARTA are not substantially similar to any other existing technologies because, as both applicants asserted in their FY 2019 new technology add-on payment applications and as stated by the other commenters, the technologies do not use the same or similar mechanism of action to achieve a therapeutic outcome as any other existing drug or therapy assigned to the same or different MS-DRG and represent the only FDA-approved technologies for this treatment population.
With regard to the commenter that indicated pricing of both products varies based on the patient population, and encouraged CMS to recognize this discrepancy when determining approval of new technology add-on payment and establishing adequate payments rates, we note that the applicants for both, KYMRIAH and YESCARTA, estimate that the average cost for an administered dose of KYMRIAH or YESCARTA is $373,000. We refer readers to the end of this discussion for complete details on the pricing of KYMRIAH and YESCARTA.
With respect to CMS' policy for evaluating substantially similar technologies, we believe our current policy is consistent with the authority and criteria in section 1886(d)(5)(K) of the Act. We note that CMS is authorized by the Act to develop criteria for the purposes of evaluating new technology add-on payment applications. For the purposes of new technology add-on payments, when technologies are substantially similar to each other, we believe it is appropriate to evaluate both technologies as one application for new technology add-on payments under the IPPS, for the reasons we discussed above and consistent with our evaluation of substantially similar technologies in prior rulemaking (82 FR 38120).
Finally, we note that for FY 2019, there is no payment impact regarding the determination that the two technologies are substantially similar to each other because the cost of the technologies is the same. However, we welcome additional comments in future rulemaking regarding whether KYMRIAH and YESCARTA are substantially similar and intend to revisit this issue in next year's proposed rule.
As we stated in the proposed rule and above, each applicant submitted separate analysis regarding the cost criterion for each of their products, and both applicants maintained that their product meets the cost criterion. We summarize each analysis below.
With regard to the cost criterion, the applicant for KYMRIAH searched the FY 2016 MedPAR claims data file to identify potential cases representing patients who may be eligible for treatment using KYMRIAH. The applicant identified claims that reported an ICD-10-CM diagnosis code of: C83.30 (DLBCL, unspecified site); C83.31 (DLBCL, lymph nodes of head, face and neck); C83.32 (DLBCL, intrathoracic lymph nodes); C83.33 (DLBCL, intra-abdominal lymph nodes); C83.34 (DLBCL, lymph nodes of axilla and upper limb); C83.35 (DLBCL, lymph nodes of inquinal region and lower limb); C83.36 (DLBCL, intrapelvic lymph nodes); C83.37 (DLBCL, spleen); C83.38 (DLBCL, lymph nodes of multiple sites); or C83.39 (DLBCL, extranodal and solid organ sites). The applicant also identified potential cases where patients received chemotherapy using two encounter codes, Z51.11 (Antineoplastic chemotherapy) and Z51.12 (Antineoplastic immunotherapy), in conjunction with DLBCL diagnosis codes.
Applying the parameters above, the applicant for KYMRIAH identified a total of 22,589 DLBCL potential cases that mapped to 437 MS-DRGs. The applicant chose the top 20 MS-DRGs which made up a total of 15,451 potential cases at 68 percent of total cases. Of the 22,589 total DLBCL potential cases, the applicant also provided a breakdown of DLBCL potential cases where chemotherapy was used, and DLBCL potential cases where chemotherapy was not used. Of the 6,501 DLBCL potential cases where chemotherapy was used, MS-DRGs 846 and 847 accounted for 6,181 (95 percent) of the 6,501 cases. Of the 16,088 DLBCL potential cases where chemotherapy was not used, the applicant chose the top 20 MS-DRGs which made up a total of 9,333 potential cases at 58 percent of total cases. The applicant believed the distribution of patients that may be eligible for treatment using KYMRIAH will include a wide variety of MS-DRGs. As such, the applicant conducted an analysis of three scenarios: potential DLBCL cases, potential DLBCL cases with chemotherapy, and potential DLBCL cases without chemotherapy.
The applicant removed reported historic charges that would be avoided through the use of KYMRIAH. Next, the applicant removed 50 percent of the chemotherapy pharmacy charges that would not be required for patients that may be eligible to receive treatment using KYMRIAH. The applicant standardized the charges and then applied an inflation factor of 1.09357, which is the 2-year inflation factor in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527), to update the charges from FY 2016 to FY 2018. The applicant did not add charges for KYMRIAH to its analysis. However, the applicant provided a cost analysis related to the three categories of claims data it previously researched (that is, potential DLBCL cases, potential DLBCL cases with chemotherapy, and potential DLBCL cases without chemotherapy). The applicant's analysis showed the inflated average case-weighted standardized charge per case for
We noted in the proposed rule that, as discussed in section II.F.2.d. of the preamble of the proposed rule, we proposed to assign the ICD-10-PCS procedure codes that describe procedures involving the utilization of these CAR T-cell therapy drugs and cases representing patients receiving treatment involving CAR T-cell therapy procedures to Pre-MDC MS-DRG 016 for FY 2019. Therefore, in addition to the analysis above, we compared the inflated average case-weighted standardized charge per case from all three cohorts above to the average case-weighted threshold amount for MS-DRG 016. The average case-weighted threshold amount for MS-DRG 016 from Table 10 in the FY 2018 IPPS/LTCH PPS final rule is $161,058. Although the inflated average case-weighted standardized charge per case for all three cohorts ($63,271, $39,723, and $72,781) is lower than the average case-weighted threshold amount for MS-DRG 016, we noted that similar to above, the applicant expected the cost of KYMRIAH to be higher than the new technology add-on payment threshold amount for MS-DRG 016. Therefore, it appeared that KYMRIAH would meet the cost criterion under this scenario as well.
We stated in the proposed rule that we appreciated the applicant's analysis. However, we noted that the applicant did not provide information regarding which specific historic charges were removed in conducting its cost analysis. Nonetheless, we stated that we believed that even if historic charges were identified and removed, the applicant would meet the cost criterion because, as indicated, the applicant expected the cost of KYMRIAH to be higher than the new technology add-on payment threshold amounts listed earlier.
We invited public comments on whether KYMRIAH meets the cost criterion.
After consideration of the public comments we received, we agree that KYMRIAH meets the cost criterion.
With regard to the cost criterion in reference to YESCARTA, the applicant conducted the following analysis. The applicant examined FY 2016 MedPAR claims data restricted to patients discharged in FY 2016. The applicant included potential cases reporting an ICD-10 diagnosis code of C83.38. Noting that only MS-DRGs 820 (Lymphoma and Leukemia with Major O.R. Procedure with MCC), 821 (Lymphoma and Leukemia with Major O.R. Procedure with CC), 823 and 824 (Lymphoma and Non-Acute Leukemia with Other O.R. Procedure with MCC, with CC, respectively), 825 (Lymphoma and Non Acute Leukemia with Other O.R Procedure without CC/MCC), and 840, 841 and 842 (Lymphoma and Non-Acute Leukemia with MCC, with CC and without CC/MCC, respectively) consisted of 10 or more cases, the applicant limited its analysis to these 8 MS-DRGs. The applicant identified 827 potential cases across these MS-DRGs. The average case-weighted unstandardized charge per case was $126,978. The applicant standardized charges using FY 2016 standardization factors and applied an inflation factor of 1.09357 from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527). The applicant for YESCARTA did not include the cost of its technology in its analysis.
Included in the average case-weighted standardized charge per case were charges for the current treatment components. Therefore, the applicant for YESCARTA removed 20 percent of radiology charges to account for chemotherapy, and calculated the adjusted average case-weighted standardized charge per case by subtracting these charges from the standardized charge per case. Based on the distribution of potential cases within the eight MS-DRGs, the applicant case-weighted the final inflated average case-weighted standardized charge per case. This resulted in an inflated average case-weighted standardized charge per case of $118,575. Using the FY 2018 IPPS Table 10 thresholds, the average case-weighted threshold amount was $72,858. Even without considering the cost of its technology, the applicant maintained that because the inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the technology met the cost criterion.
We noted in the proposed rule that, as discussed in section II.F.2.d. of the preamble of the proposed rule, we proposed to assign the ICD-10-PCS procedure codes that describe procedures involving the utilization of these CAR T-cell therapy drugs and cases representing patients receiving treatment involving CAR T-cell therapy procedures to Pre-MDC MS-DRG 016 for FY 2019. Therefore, in addition to the analysis above, we compared the inflated average case-weighted standardized charge per case ($118,575) to the average case-weighted threshold amount for MS-DRG 016. The average case-weighted threshold amount for MS-DRG 016 from Table 10 in the FY 2018 IPPS/LTCH PPS final rule is $161,058. Although the inflated average case-weighted standardized charge per case is lower than the average case-weighted threshold amount for MS-DRG 016, we noted that the applicant expected the cost of YESCARTA to be higher than the new technology add-on payment threshold amount for MS-DRG 016. Therefore, we stated that it appeared that YESCARTA would meet the cost criterion under this scenario as well.
We invited public comments on whether YESCARTA technology meets the cost criterion.
After consideration of the public comments we received, we agree that YESCARTA meets the cost criterion.
With regard to substantial clinical improvement for KYMRIAH, the applicant asserted that several aspects of the treatment represent a substantial clinical improvement over existing technologies. The applicant believed that KYMRIAH allows access for a treatment option for those patients who are unable to receive standard-of-care treatment. The applicant stated in its application that there are no currently FDA-approved treatment options for patients with r/r DLBCL who are ineligible for or who have failed ASCT. Additionally, the applicant maintained that KYMRIAH significantly improves clinical outcomes, including ORR, CR, OS, and durability of response, and allows for a manageable safety profile. The applicant asserted that, when compared to the historical control data (SCHOLAR-1) and the currently available treatment options, it is clear that KYMRIAH significantly improves clinical outcomes for patients with r/r DLBCL who are not eligible for ASCT. The applicant conveyed that, given that the patient population has no other available treatment options and an expected very short lifespan without therapy, there are no randomized controlled trials of the use of KYMRIAH in patients with r/r DLBCL and, therefore, efficacy assessments must be made in comparison to historical control data. The SCHOLAR-1 study is the most comprehensive evaluation of the outcome of patients with refractory DLBCL. SCHOLAR-1 includes patients from two large randomized controlled trials (Lymphoma Academic Research Organization-CORAL and Canadian Cancer Trials Group LY.12) and two clinical databases (MD Anderson Cancer Center and University of Iowa/Mayo Clinic Lymphoma Specialized Program of Research Excellence).
The applicant for KYMRIAH conveyed that the PARMA study established high-dose chemotherapy and ASCT as the standard treatment for patients with r/r DLBCL.
According to the applicant for KYMRIAH, the immunomodulatory agent Lenalidomide was only able to show an ORR of 30 percent, a CR rate of 8 percent, and a 4.6-month median duration of response.
According to the applicant, although controversial, allogeneic stem cell transplantation (allo-SCT) has been proposed for patients who have been diagnosed with r/r disease. It is hypothesized that the malignant cell will be less able to escape the immune targeting of allogenic T-cells—known as the graft-vs-lymphoma effect.
To express how KYMRIAH has improved clinical outcomes, including ORR, CR rate, OS, and durability of response, the applicant referenced clinical trials in which KYMRIAH was tested. Study 1 was a single-arm, open-label, multi-site, global Phase II study to determine the safety and efficacy of tisagenlecleucel in patients with R/R DLBCL (CCTL019C2201/CT02445248/‘JULIET' study).
The applicant for KYMRIAH reported that Study 2 was a supportive Phase IIa single institution study of adults who were diagnosed with advanced CD19+ NHL conducted at the University of Pennsylvania.
The applicant for KYMRIAH reported that Study 3 was a supportive, patient-level meta-analysis of historical outcomes in patients who were diagnosed with refractory DLBCL (SCHOLAR-1).
The applicant asserted that KYMRIAH provides a manageable safety profile when treatment is performed by trained medical personnel and, as opposed to ASCT, KYMRIAH mitigates the need for high-dose chemotherapy to induce response prior to infusion. Adverse events were most common in the 8 weeks following infusion and were manageable by a trained staff. Cytokine Relapse Syndrome (CRS) occurred in 58 percent of patients with 23 percent having Grade III or IV events as graded on the University of Pennsylvania grading system.
After reviewing the studies provided by the applicant, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20292), we stated that we were concerned the applicant included patients who were diagnosed with TFL and PMBCL in the SCHOLAR-1 data results for their comparison analysis, possibly skewing results. Furthermore, the discontinue rate of the JULIET trial was high. Of 147 patients enrolled for infusion involving KYMRIAH, 43 discontinued prior to infusion (9 discontinued due to inability to manufacture, and 34 discontinued due to patient-related issues). Finally, the rate of patients who experienced a diagnosis of CRS was high, 58 percent.
The applicant for YESCARTA stated that YESCARTA represents a substantial clinical improvement over existing technologies when used in the treatment of patients with aggressive B-cell NHL. The applicant asserted that YESCARTA can benefit the patient population with the highest unmet need, patients withr/r disease after failure of first-line or second-line therapy, and patients who have failed or who are ineligible for ASCT. These patients, otherwise, have adverse outcomes as demonstrated by historical control data.
Regarding clinical data for YESCARTA, the applicant stated that historical control data was the only ethical and feasible comparison information for these patients with chemorefractory, aggressive NHL who have no other available treatment options and who are expected to have a very short lifespan without therapy. According to the applicant, based on meta-analysis of outcomes in patients with chemorefractory DLBCL, there are no curative options for patients with aggressive B-cell NHL, regardless of refractory subgroup, line of therapy, and disease stage with their median OS being 6.6 months.
In the applicant's FY 2018 new technology add-on payment application for the KTE-C19 technology, which was discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19889), the applicant cited ongoing clinical trials. The applicant provided updated data related to these ongoing clinical trials as part of its FY 2019 application for YESCARTA.
According to the applicant, the 6-month and 12-month survival rates (95 percent CI) for patients enrolled in the SCHOLAR-1 study were 53 percent (49 percent, 57 percent) and 28 percent (25 percent, 32 percent).
The applicant also cited safety results from the pivotal Study 1, Phase II. According to the applicant, the clinical trial protocol stipulated that patients were infused with YESCARTA in the hospital inpatient setting and were monitored in the inpatient setting for at least 7 days for early identification and treatment involving YESCARTA-related toxicities, which primarily included CRS diagnoses and neurotoxicities. The applicant noted that the interim analysis showed the length of stay following infusion of YESCARTA was a median of 15 days. Ninety-three percent of patients experienced CRS diagnoses, 13 percent of whom experienced Grade III or higher (severe, life threatening or fatal) CRS diagnoses. The median time to onset of CRS diagnosis was 2 days (range 1 to 12 days) and the median time to resolution was 8 days. Ninety-eight percent of patients recovered from CRS diagnosis. Neurologic events occurred in 64 percent of patients, 28 percent of whom experienced Grade III or higher (severe or life threatening) events. The median time to onset of neurologic events was 5 days (range 1 to 17 days). The median time to resolution was 17 days. Nearly all patients recovered from neurologic events. The medications most often used to treat these complications included growth factors, blood products, anti-infectives, steroids, tocilizumab, and vasopressors. Two patients died from YESCARTA-related adverse events (hemophagocytic lymphohistiocytosis and cardiac arrest in the hospital setting as a result of CRS diagnoses). According to the applicant, there were no clinically important differences in adverse event rates across age groups (younger than 65 years old; 65 years old or older), including CRS diagnoses and neurotoxicity.
The applicant for YESCARTA provided information regarding a safety expansion cohort, Study 1 Phase II Safety Expansion Cohort 3 that was created and carried out in 2017. According to the applicant, this Safety Expansion Cohort investigated measures to mitigate the incidence and/or severity of anti-CD-19 CAR T therapy and evaluated an adverse event mitigation strategy by prophylactically using levetiracetam (Keppra), an anticonvulsant, and tocilizumab, an IL-6 receptor inhibitor. Of the 30 patients treated, 2 patients experienced Grade III CRS diagnoses; 1 of the 2 patients recovered. In late April 2017, the other patient also experienced multi-organ failure and a neurologic event that subsequently progressed to a fatal Grade V cerebral edema that was deemed related to YESCARTA treatment. This case of cerebral edema was observed in a 21 year-old male with refractory, rapidly progressive, symptomatic, stage IVB PMBCL. Analysis of the baseline serum and cerebrospinal fluid (CSF) obtained prior to any study treatment demonstrated high cytokine and
After reviewing the information submitted by the applicant as part of its FY 2019 new technology add-on payment application for YESCARTA, we stated in the FY 2019 IPPS/LTCH PPS proposed rule that we were concerned that it does not appear to include patient mortality data that was included as part of the applicant's FY2018 new technology add-on payment application for the KTE-C19 technology. In that application, as discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19890), the applicant provided that by an earlier cutoff date for the interim analysis of Study 1, among all KTE-C19 treated patients, 12 patients in Study 1, Phase II, including 10 from Cohort 1, and 2 from Cohort 2, died. Eight of these deaths were due to disease progression. One patient had disease progression after receiving KTE-C19 treatment and subsequently had ASCT. After ASCT, the patient died due to sepsis. Two patients (3 percent) died due to KTE-C19-related adverse events (Grade V hemophagocytic lymphohistiocytosis event and Grade V anoxic brain injury), and one died due to an adverse event deemed unrelated to treatment involving KTE-C19 (Grade V pulmonary embolism), without disease progression. We believed it would be relevant to include this information because it is related to the same treatment that is the subject of the applicant's FY 2019 new technology add-on payment application.
We also stated that we were concerned that there are few published results showing any survival benefits from the use of this treatment. In addition, we were concerned with the limited number of patients (n=108) that were studied after infusion involving YESCARTA T-cell immunotherapy. Finally, we indicated that we were concerned about the data related to the percentage of patients who experienced complications or toxicities related to YESCARTA treatment. According to the applicant, of the patients who participated in YESCARTA clinical trials, 93 percent developed CRS diagnoses and 64 percent experienced neurological adverse events.
We invited public comments on whether KYMRIAH and YESCARTA meet the substantial clinical improvement criterion.
The applicants for KYMRIAH and YESCARTA, as well as others submitted comments regarding whether KYMRIAH and YESCARTA met the substantial clinical improvement criterion.
In response to CMS' concerns that the use of the SCHOLAR-1 study as a baseline for comparison to the JULIET trial may have skewed results because the baseline population of the SCHOLAR-1 study included patient populations diagnosed with TFL and PMBCL, the applicant for KYMRIAH stated that the JULIET trial included patients diagnosed with TFL, making this patient population similar in nature to what was included in the SCHOLAR study. The applicant also indicated that, although it is true that patients diagnosed with PMBCL were excluded from the JULIET trial, these patients only make up 2 percent of the total population of the 636 patients evaluated in the SCHOLAR-1 study; limiting the impact that these patients could have had on the observed response rates. The applicant further explained that PMBCL is a form of large cell lymphoma, which differs from DLBCL in that the patient population is often younger and healthier and patients diagnosed with PMBCL are more likely to respond to first-line therapy, therefore, relapsed and refractory (r/r) patients are rare compared to those diagnosed with DLBCL. The applicant also stated that, due to the infrequency of patients diagnosed with r/r PMBCL, research isolating this pathology for treatment effect is limited. The applicant indicated that, although some studies estimate that chemorefractory PMBCL has a lower response rate than refractory DLBCL, those studies still report ORR equivalent to what was shown in SCHOLAR and each of these studies' results show r/r PMBCL patients having a CR rate that is equivalent or better than what was observed in the larger SCHOLAR study. The applicant believed that, given these outcomes and the small number of patients diagnosed with PMBCL in the SCHOLAR literature, it is unlikely that the results are skewed in such a way as to overestimate the comparative efficacy of KYMRIAH for patients diagnosed with r/r DLBCL.
In response to CMS' concerns regarding the drop-out rate within the JULIET trial, the applicant for KYMRIAH stated that the JULIET trial was designed to reflect a paradigm of patient management that the applicant believes reflects the real-world treatment decisions of health care providers. The applicant explained that in the JULIET trial, any patient who was identified as a candidate for treatment involving KYMRIAH and could undergo apheresis was enrolled in the trial at the time of apheresis collection, then patients were allowed to undergo bridging chemotherapy during the time that they awaited a manufacturing slot assignment and during the manufacturing process. The applicant indicated that this is in contrast with protocols of other trials in which patients are not enrolled until such time as a manufacturing slot is available because patients diagnosed with r/r DLBCL have rapidly progressive disease and they often have disease which is resistant or refractory to therapy and, therefore, patients may progress during this time. The applicant further stated that the design of the JULIET trial allowed these events to be captured, whereas other study designs that do not
The applicant also responded to CMS' concern regarding the percentage of patients who experienced CRS in the JULIET trial. The applicant for KYMRIAH stated that updated results show, using the conservative University of Pennsylvania Scale, CRS occurred in 78 percent of the patients enrolled in the JULIET clinical trial. However, only 23 percent of the patients had ≥Grade III CRS and no patient had Grade V CRS. The applicant further stated that patients with low grade CRS may reflect symptoms such as fever, myalgia, nausea or fatigue. The applicant noted that, in this context, the patients with ≥Grade III CRS represent those with a life-threatening condition that requires interventions to support respiratory or circulatory function. The applicant indicated that CRS was manageable by a trained staff according to a specific CRS treatment algorithm and current standard-of-care for these patients includes high-dose salvage chemotherapy regimens, as well as myeloablative therapy prior to autologous stem cell transplant, both of which have aggressive toxicity profiles. However, the applicant indicated that many of the toxicities of autologous stem cell transplant are managed without the benefit of treatment algorithms and directed therapies which aid in the management of CRS.
The applicant for YESCARTA responded to CMS' concern that its new technology add-on payment application did not appear to include patient mortality data that was included as part of the applicant's FY 2018 new technology add-on payment application for the KTE-C19 technology. The applicant acknowledged that the Study 1 interim analysis data included in the FY2018 new technology add-on payment application and depicted as CMS' concern was not explicitly detailed in the FY 2019 application, which focused on the primary analysis, nor in Supplement 2, which provided data from the updated analysis. The applicant confirmed that there were no new deaths from adverse events at the time of the Study 1 primary analysis (median follow-up of 6 months) or at the time of the updated analysis (median follow-up of 15.4 months).
The applicant also responded to CMS' concern that there are few published results describing survival benefits from the use of YESCARTA. The applicant indicated that information to address this issue was submitted to CMS in a new technology add-on payment supplemental file. The applicant indicated that this file provided data from the updated analysis (median follow-up of 15.4 months) and references for the published manuscripts. (We note that the information the applicant provided with its public comment was also previously provided to CMS in the supplemental file mentioned above). The applicant stated that, in December 2017, the long-term follow-up of Study 1 (ZUMA-1), Phase I (n=7), and Phase II (n=101) was published in the New England Journal of Medicine and presented at ASH 2017. The applicant explained that at median 15.4 months follow-up at the time of the updated analysis data cutoff (August 11, 2017), responses were ongoing in 42 percent of the patients where median duration of response for complete response has not been reached and median overall survival has not been reached. The applicant indicated that the authors concluded these high levels of durable response confirmed that YESCARTA is highly effective and provides substantial clinical benefit for patients diagnosed with large B-cell lymphoma who otherwise have no curative options. Additionally, the applicant stated that results show (best objective response, ongoing) ORR (82 percent, 42 percent) and CR (58 percent, 40 percent) at the time of the updated analysis (15.4 months) are significantly improved over results from SCHOLAR-1 historical control of 26 percent. The applicant stated that, based on the evidence of improved benefits provided to patients with no other treatment options, this study supports the finding that YESCARTA demonstrates that it represents a substantial clinical improvement over existing treatment options. The applicant further detailed that the results from the updated analysis show: The median time to response was rapid (1.0 month; range, 0.8 to 6.0) and that the median duration of complete response has not been reached. Additionally, the applicant explained that responses to treatment, including ongoing ones, were consistent across key covariates, including in individuals 65 years of age and younger and those individuals 65 years of age and older. The applicant also indicated that the median overall survival has not been reached. However, the applicant stated that the results of the updated analysis show the overall survival rate at 18 months was 52 percent and 56 percent of patients enrolled in the study were alive at the time of the updated analysis. The applicant also indicated that results show ongoing durable remissions have been observed in patients at 24 months.
The applicant for YESCARTA also responded to CMS' concern regarding the limited number of patients (n=108) that were studied after infusion involving YESCARTA T-cell immunotherapy. The applicant stated that the statistical plan for Study 1 was developed by Kite in close discussion with FDA. The applicant explained that the design of this statistical plan was developed so that the study size would be powered to show statistical significance for the primary end point: ORR. The applicant indicated that the primary analysis of Study 1, Phase II demonstrates that the primary endpoint has been met and that key secondary endpoints including Duration of Response and Overall Survival were also met. Therefore, the applicant believed that the results of the clinical data show YESCARTA has demonstrated substantial clinical improvement for patients who previously had no curative options, no standard therapy and a short expected survival. The applicant also explained that the sample size (the number of patients planned) for Study 1 was determined by the number of patients required to statistically demonstrate an improvement in the response rate with treatment involving YESCARTA and is
After consideration of the public comments we received, we agree that both, KYMRIAH and YESCARTA, represent a substantial clinical improvement over existing technologies because the technologies allow access for a treatment option for those patients who are unable to receive standard-of-care treatment. Additionally, there are no other currently FDA-approved treatment options for patients with r/r DLBCL who are ineligible for, or who have failed ASCT. Finally, both technologies appear to significantly improve clinical outcomes, including ORR, CR, OS, and durability of response, and allow for a manageable safety profile.
In summary, we have determined that KYMRIAH and YESCARTA meet all of the criteria for approval of new technology add-on payments. Therefore, we are approving new technology add-on payments for KYMRIAH and YESCARTA for FY 2019. We expect that KYMRIAH will be administered for the treatment of adult patients (18 years old and older) diagnosed with r/r DLBCL not eligible for ASCT, and YESCARTA will be administered for the treatment of adult patients diagnosed with r/r large B-cell lymphoma after two or more lines of systemic therapy, including DLBCL not otherwise specified, primary mediastinal large B-cell, high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. Cases involving KYMRIAH and YESCARTA that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure codes XW033C3 and XW043C3. The applicants for both, KYMRIAH and YESCARTA, estimate that the average cost for an administered dose of KYMRIAH or YESCARTA is $373,000. Under § 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 the use of KYMRIAH or YESCARTA is $186,500 for FY 2019.
We note that on May 16, 2018, CMS opened a national coverage determination (NCD) analysis on CAR T-cell therapy for Medicare beneficiaries with advanced cancer. The expected national coverage analysis completion date is May 17, 2019. For more information, we refer reader to the CMS website at:
Lastly, we note that in the FY 2019 IPPS/LTCH proposed rule (83 FR 20294), we discussed possible payment alternatives and invited public comments regarding the most appropriate mechanism to provide payment to hospitals for new technologies such as CAR T-cell therapy drugs, including through the use of new technology add-on payments. We also invited public comments on how they would affect incentives to encourage lower drug prices.
As discussed further in section II.F.2.d. of the preamble of this final rule, building on President Trump's
Jazz Pharmaceuticals, Inc. submitted an application for new technology add-on payments for the VYXEOS
AML is a type of cancer in which the bone marrow makes abnormal myeloblasts (immature bone marrow white blood cells), red blood cells, and platelets. If left untreated, AML progresses rapidly. Normally, the bone marrow makes blood stem cells that develop into mature blood cells over time. Stem cells have the potential to develop into many different cell types in the body. Stem cells can act as an internal repair system, dividing, essentially without limit, to replenish other cells. When a stem cell divides, each new cell has the potential to either remain a stem cell or become a specialized cell, such as a muscle cell, a red blood cell, or a brain cell, among others. A blood stem cell may become a myeloid stem cell or a lymphoid stem cell. Lymphoid stem cells become white blood cells. A myeloid stem cell becomes one of three types of mature blood cells: (1) Red blood cells that carry oxygen and other substances to body tissues; (2) white blood cells that fight infection; or (3) platelets that form blood clots and help to control bleeding. In patients diagnosed with AML, the myeloid stem cells usually become a type of myeloblast. The myeloblasts in patients diagnosed with AML are abnormal and do not become healthy white blood cells. Sometimes in patients diagnosed with AML, too many stem cells become abnormal red blood cells or platelets. These abnormal cells are called leukemia cells or blasts.
AML is defined by the World Health Organization (WHO) as greater than 20 percent blasts in the bone marrow or blood. AML can also be diagnosed if the blasts are found to have a chromosome change that occurs only in a specific type of AML diagnosis, even if the blast percentage does not reach 20 percent. Leukemia cells can build up in the bone
Treatment of AML diagnoses usually consists of two phases; remission induction and post-remission therapy. Phase one, remission induction, is aimed at eliminating as many myeloblasts as possible. The most common used remission induction regimens for AML diagnoses are the “7+3” regimens using an antineoplastic and an anthracycline. Cytarabine and daunorubicin are two commonly used drugs for “7+3” remission induction therapy. Cytarabine is continuously administered intravenously over the course of 7 days, while daunorubicin is intermittently administered intravenously for the first 3 days. The “7+3” regimen typically achieves a 70 to 80 percent complete remission (CR) rate in most patients under 60 years of age.
High rates of CR are not generally seen in older patients for a number of reasons, such as different leukemia biology, much higher incidence of adverse cytogenetic abnormalities, higher rate of multidrug resistant leukemic cells, and comparatively lower patient performance status (the standard criteria for measuring how the disease impacts a patient's daily living abilities). Intensive induction therapy has worse outcomes in this patient population.
According to the applicant, the combination of cytarabine and an anthracycline, either as “7+3” regimens or as part of a different regimen incorporating other cytotoxic agents, may be used as so-called “salvage” induction therapy in the treatment of adults diagnosed with AML who experience relapse in an attempt to achieve CR. According to the applicant, while CR rates of success vary widely depending on underlying disease biology and host factors, there is a lower success rate overall in achievement of CR with “7 +3” regimens compared to VYXEOS
VYXEOS
Cytarabine and daunorubicin are co-encapsulated inside the VYXEOS
With regard to the newness criterion, as discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant asserted that VYXEOS
The applicant provided the results of clinical studies to demonstrate that the CombiPlex technology and the ratiometric dosing of VYXEOS
The applicant maintained that, while VYXEOS
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, we stated that we believe that potential cases representing patients who may be eligible for treatment involving VYXEOS
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, the applicant asserted that VYXEOS
The following unique ICD-10-PCS codes were created to describe the administration of VYXEOS
In the FY 2019 IPPS/LTCH PPS proposed rule, we invited public comments on whether VYXEOS
With regard to the cost criterion, the applicant conducted the following analysis. The applicant used the FY 2016 MedPAR Hospital Limited Data Set (LDS) to assess the MS-DRGs to which cases representing potential patient hospitalizations that may be eligible for treatment involving VYXEOS
According to the applicant, the primary cohort of cases spans 131 unique MS-DRGs, 16 of which contained more than 10 cases. The most common MS-DRGs are MS-DRG 837, 834, 838, and 839. These 4 MS-DRGs account for 4,457 (81 percent) of the 5,483 potential cases in the cohort.
The case-weighted unstandardized charge per case is approximately $185,844. The applicant then removed charges related to other chemotherapy agents because VYXEOS
After removing the charges for the prior technology, the applicant standardized the charges. The applicant then applied an inflation factor of 1.09357, the value used in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527) to update the charges from FY 2016 to FY 2018. According to the applicant, for the primary new technology add-on payment cohort, the cost criterion was
The applicant provided additional analyses with the inclusion of VYXEOS
Finally, the applicant also provided the following sensitivity analyses (that did not include charges for VYXEOS
• Sensitivity Analysis 1—limited the cohort to patients who have been diagnosed with AML without remission (C92.00 or C92.50) who received chemotherapy and did not receive bone marrow transplant.
• Sensitivity Analysis 2—the modified cohort was limited to patients who have been diagnosed with relapsed AML who received chemotherapy and did not receive bone marrow transplant.
• Sensitivity Analysis 3—the modified cohort was limited to patients who have been diagnosed with AML and who did not receive bone marrow transplant.
• Sensitivity Analysis 4—the primary cohort was maintained, but 100 percent of the charges for revenue centers grouped into the “Pharmacy Charge Amount” were excluded.
• Sensitivity Analysis 5—identified patients who have been diagnosed with AML in remission.
The applicant noted that, in all of the sensitivity analysis scenarios, the average case-weighted standardized charge per case exceeded the average case-weighted Table 10 MS-DRG threshold amount. Based on all of the analyses above, the applicant maintained that VYXEOS
After consideration of the public comments we received, we believe that VYXEOS
With regard to substantial clinical improvement, according to the applicant, clinical data results have shown that the use of VYXEOS
• The applicant stated that clinical data results show that treatment with VYXEOS
• The applicant further asserted that high-risk, older patients (60 years old and older) previously untreated for diagnoses of AML will have a lower risk of early death when treated with VYXEOS
Based on data from the Phase III Study 301,
• The applicant asserted that high-risk, older patients (60 years old and older) previously untreated for a diagnosis of AML exhibited statistically significant improvements in response rates after treatment with VYXEOS
• The applicant asserted that VYXEOS
According to the applicant, patient outcome following transplant strongly favored patients in the VYXEOS
• The applicant asserted that VYXEOS
The applicant cited Gordon, et al., 2016,
• The applicant asserted that younger patients (18 to 65 years old) with poor risk first relapse AML have shown higher response rates with VYXEOS
• Mitoxantrone, etoposide, and cytarabine induced response in 23 percent of patients, with median overall survival of only 2 months.
• Modulation of deoxycitidine kinase by fludarabine led to the combination of fludarabine and cytarabine, resulting in a 36 percent CR rate with median remission duration of 39 weeks.
• First salvage gemtuzumab ozogamicin induced CR+CRp (or CR+CRi) response in 30 percent of patients with CD33+AML and, for patients with short first CR durations, appeared to be superior to cytarabine-based therapy.
The applicant noted that Study 205 results showed the use of VYXEOS
Based on all of the data presented above, the applicant concluded that VYXEOS
We invited public comments on whether VYXEOS
Based on evaluation of the new technology add-on payment application and consideration of the public comments we received, we have determined that VYXEOS
In its application, the applicant estimated that the average cost of a single vial for VYXEOS
Melinta Therapeutics, Inc., submitted an application for new technology add-on payments for VABOMERE
Complicated urinary tract infections (cUTIs) are defined as chills, rigors, or fever (temperature of greater than or equal to 38.0 °C); elevated white blood cell count (greater than 10,000/mm3), or left shift (greater than 15 percent immature PMNs); nausea or vomiting; dysuria, increased urinary frequency, or urinary urgency; lower abdominal pain or pelvic pain. Acute pyelonephritis is defined as chills, rigors, or fever (temperature of greater than or equal to 38.0 °C); elevated white blood cell count (greater than 10,000/mm3), or left shift (greater than 15 percent immature PMNs); nausea or vomiting; dysuria, increased urinary frequency, or urinary urgency; flank pain; costo-vertebral angle tenderness on physical examination. Risk factors for infection with drug-resistant organisms do not, on their own, indicate a cUTI.
The applicant reported that it has developed a beta-lactamase combination antibiotic, VABOMERE
The applicant stated that meropenem, a carbapenem, is a broad spectrum beta-lactam antibiotic that works by inhibiting cell wall synthesis of both gram-positive and gram-negative bacteria through binding of penicillin-binding proteins (PBP). Carbapenemase producing strains of bacteria have become more resistant to beta-lactam antibiotics, such as meropenem. However, meropenem in combination with vaborbactam, inhibits the carbapenemase activity, thereby allowing the meropenem to bind PBP and kill the bacteria.
According to the applicant, vaborbactam, a boronic acid inhibitor, is a first-in class beta-lactamase inhibitor. Vaborbactam blocks the breakdown of carbapenems, such as meropenem, by bacteria containing carbapenemases. Although vaborbactam has no antibacterial properties, it allows for the treatment of resistant infections by increasing bacterial sensitivity to meropenem. New carbapenemase producing strains of bacteria have become more resistant to beta-lactam antibiotics. However, meropenem in combination with vaborbactam, can inhibit the carbapenemase enzyme, thereby allowing the meropenem to bind PBP and kill the bacteria. The applicant stated that the vaborbactem component of VABOMERE
The applicant stated that VABOMERE
As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.
With 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, VABOMERE
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20300), we stated that we believed, although the molecular structure of the vaborbactam component of VABOMERE
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant asserted that patients who may be eligible to receive treatment involving VABOMERE
With respect to the third criterion, whether the use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant asserted that the use of VABOMERE
In the proposed rule, we stated that we were concerned VABOMERE
Several commenters believed that VABOMERE
Other commenters stated that, given the recognized shortage of new antibiotics, the unique benefits of VABOMERE
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 to which cases representing potential patients who may be eligible for treatment using VABOMERE
The applicant reported that the resulting 627 cases from the identified top 5 MS-DRGs have an average case-weighted unstandardized charge per case of $74,815. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20301), we noted that, instead of using actual charges from the Premier Research Database, the applicant computed this amount based on the average case-weighted threshold amounts in Table 10 from the FY 2018 IPPS/LTCH PPS final rule. For the rest of the analysis, the applicant adjusted the average case-weighted threshold amounts (referred to above as the average case-weighted unstandardized charge per case) rather than the actual average case-weighted unstandardized charge per case from the Premier Research Database. According to the applicant, based on the Premier data, $1,999 is the mean antibiotic costs of treating patients hospitalized with CRE infections with current therapies. The applicant explained that it identified 69 different regimens that ranged from 1 to 4 drugs from a study conducted to understand the current management of patients diagnosed with CRE infections. Accordingly, the applicant estimated the removal of charges for a prior technology of $1,999. The applicant then standardized the charges. The applicant applied an inflation factor of 9.357 percent from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527) to inflate the charges. At the time of the development of the proposed rule, the applicant noted that it did not yet have sufficient charge data from hospitals and would work to supplement its application with the information once it was available. However, for purposes of calculating charges, the applicant used the average charge as the wholesale acquisition cost (WAC) price for a treatment duration of 14 days and added this amount to the average charge per case. Using this estimate, the applicant calculated the final inflated case-weighted standardized charge per case as $91,304, which exceeded the average case-weighted threshold amount of $74,815. Therefore, the applicant asserted that VABOMERE
In the proposed rule, we indicated we were concerned that, as noted earlier, instead of using actual charges from the Premier Research Database, the applicant computed the average case-weighted unstandardized charge per case based on the average case-weighted threshold amounts in Table 10 from the FY 2018 IPPS/LTCH PPS final rule. Because the applicant did not demonstrate that the average case-weighted standardized charge per case for VABOMERE
For each subset, the applicant conducted a cost analysis for 100 percent of the identified cases, 75 percent of the identified cases, the top 20 MS-DRGs to which potential cases would map, and the top 10 MS-DRGs to which potential cases would map. For each subset, the applicant performed the following: (1) Calculated the case-weighted unstandardized charge per case; (2) removed 100 percent of the drug charges from the relevant cases in order to conservatively estimate for charges for drugs that potentially may be replaced by VABOMERE
The applicant stated that the cost of VABOMERE
The applicant stated that each subset demonstrated the average case-weighted standardized charge per case exceeded the average case-weighted threshold amount. Below are three tables, one for each subset, showing that the average case-weighted standardized charge per case exceeded the average case-weighted threshold amount.
With regard to the substantial clinical improvement criterion, the applicant believed that the results from the VABOMERE
TANGO I
Patient demographic and baseline characteristics were balanced between treatment groups in the m-MITT population.
• Approximately 93 percent of patients were Caucasian and 66 percent were females in both treatment groups.
• The mean age was 54 years old with 32 percent and 42 percent of the patients 65 years old and older in the VABOMERE
• Mean body mass index was approximately 26.5 kg/m2 in both treatment groups.
• Concomitant bacteremia was identified in 12 (6 percent) and 15 (8 percent) of the patients at baseline in the VABOMERE
• The proportion of patients who were diagnosed with diabetes mellitus at baseline was 17 percent and 19 percent in the VABOMERE
• The majority of the patients (approximately 90 percent) were enrolled from Europe, and approximately 2 percent of the patients were enrolled from North America. Overall, in both treatment groups, 59 percent of the patients had pyelonephritis and 40 percent had a cUTI, with 21 percent and 19 percent of the patients having a non-removable and removable source of infection, respectively.
Mean duration of IV treatment in both treatment groups was 8 days and mean total treatment duration (IV and oral) was 10 days; patients with baseline bacteremia could receive up to 14 days of therapy (IV and oral). Approximately 10 percent of the patients in each treatment group in the m-MITT population had a levofloxacin-resistant pathogen at baseline and received levofloxacin as the oral switch therapy. According to the applicant, this protocol violation may have impacted the assessment of the outcomes at the TOC visit. These patients were not excluded from the analysis of adverse reactions (headache, phlebitis, nausea, diarrhea, and others) occurring in 1 percent or more of the patients receiving VABOMERE
Regarding the FDA primary endpoint, the applicant stated the following:
• Overall success rate at the end of IV treatment (day 5 to 14) was 98.4 percent and 94 percent for the VABOMERE
• The TOC—7 days post IV therapy was 76.5 percent (124 of 162 patients) for the VABOMERE
• Despite being an NI trial, TANGO-I showed a statistically significant difference favoring VABOMERE
• VABOMERE
• Because the lower limit of the 95 percent CI is also greater than 0 percent, VABOMERE
• Because non-inferiority was demonstrated, then superiority was tested. Further, the applicant asserted that a non-inferiority design may have a “superiority” hypothesis imbedded within the study design that is appropriately tested using a non-inferiority design and statistical analysis. As such, according to the applicant, superiority trials concerning antibiotics are impractical and even unethical in many cases because one cannot randomize patients to receive inactive therapies. The applicant stated that it would be unethical to leave a patient with a severe infection without any treatment.
• The EMA endpoint of eradication rates at TOC were higher in the VABOMERE
In the proposed rule, we noted that the eradication rates of the EMA endpoint were not statistically significant. We invited public comments with respect to our concern as to whether the FDA endpoints demonstrating non-inferiority are statistically sufficient data to support that VABOMERE
In its application, the applicant offered data from the TANGO-I trial comparing VABOMERE
In the proposed rule we noted that the applicant asserted that the TANGO II study
A total of 72 patients were enrolled in the TANGO II trial. Of these, 50 of the patients (69.4 percent) had a gram-negative baseline organism (m-MITT population), and 43 of the patients (59.7 percent) had a baseline CRE (mCRE-MITT population). Within the mCRE-MITT population, 20 of the patients had bacteremia, 15 of the patients had a cUTI/AP, 5 of the patients had HABP/VABP, and 3 of the patients had a cIAI. The most common baseline CRE pathogens were K. pneumoniae (86 percent) and Escherichia coli (7 percent). Cure rates of the mCRE-MITT population at EOT for VABOMERE
According to the applicant, subgroup analyses of the TANGO II studies include an analysis of adverse events in which VABOMERE
• VABOMERE
• VABOMERE
• Efficacy results of the TANGO II trial cUTI/AP subgroup demonstrated VABOMERE
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20303), we noted that many of the TANGO II trial outcomes showing improvements in the use of VABOMERE
We invited public comments on whether the VABOMERE
The applicant further indicated that, with regard to the size of the study population for TANGO II, this study focused specifically on a patient population known to have or suspected of having CRE. The applicant further stated that, despite a concerted effort to search for patients with CRE infection and intensive pre-screening and screening activities across the globe, it took more than 2.5 years to enroll 77 patients. The applicant also noted that many other clinical studies in the context of new antibiotics development and other areas have involved similar or smaller cohorts of patients. According to the applicant, in the specific context of TANGO II, approximately 100 patients were pre-screened for each individual enrolled patient. The applicant stated that challenges are typical of the “ultra-orphan” world of antimicrobial development, where new treatments are needed, and pathogen-focused or resistance-focused clinical trials are crucial to accurately determine the efficacy of the treatment. The applicant further stated that unfortunately, study challenges (including difficulty consenting seriously-ill patients and their families, restricted entry criteria, exclusion for prior antibiotics, among others), along with a rare diagnosis, make larger trials with this life-threatening condition quite difficult to conduct. The applicant indicated that the patients enrolled in this study had a high incidence of underlying comorbidities and a high disease severity, with approximately 40 percent of the patients being immunocompromised and 75 percent with a Charlson Comorbidity Score >5. The applicant also noted appreciation that CMS recognized these challenges, particularly in the context of clinical trials for new antibiotic products that treat serious and life-threatening infections. The applicant believed that, for these reasons, the sample size used in the TANGO II trial does not undermine or diminish the significance of its results. The applicant indicated that the study focused specifically on
One commenter agreed with CMS' concern that improved outcomes in some trials may not be statistically significant and that the small number of patients, and the lack of a comparison to other antibiotic treatments of cUTIs known to be effective against uropathogens may not support that VABOMERE
In summary, we have determined that VABOMERE
As discussed above, according to the applicant, the cost of VABOMERE
Respicardia, Inc. submitted an application for new technology add-on payments for the remedē® System for FY 2019. According to the applicant, the remedē® System is indicated for use as a transvenous phrenic nerve stimulator in the treatment of adult patients who have been diagnosed with moderate to severe central sleep apnea. The remedē® System consists of an implantable pulse generator, and a stimulation and sensing lead. The pulse generator is placed under the skin, in either the right or left side of the chest, and it functions to monitor the patient's respiratory signals. A transvenous lead for unilateral stimulation of the phrenic nerve is placed either in the left pericardiophrenic vein or the right brachiocephalic vein, and a second lead to sense respiration is placed in the azygos vein. Both leads, in combination with the pulse generator, function to sense respiration and, when appropriate, generate an electrical stimulation to the left or right phrenic nerve to restore regular breathing patterns.
The applicant describes central sleep apnea (CSA) as a chronic respiratory disorder characterized by fluctuations in respiratory drive, resulting in the cessation of respiratory muscle activity and airflow during sleep.
According to the applicant, prior to the introduction of the remedē® System, typical treatments for CSA took the form of positive airway pressure devices. Positive airway pressure devices, such as continuous positive airway pressure (CPAP), have previously been used to treat patients diagnosed with obstructive sleep apnea. Positive airway devices deliver constant pressurized air via a mask worn over the mouth and nose, or nose alone. For this reason, positive airway devices may only function when the patient wears the necessary mask. Similar to CPAP, adaptive servo-ventilation (ASV) provides noninvasive respiratory assistance with expiratory positive airway pressure. However, ASV adds servo-controlled inspiratory pressure, as well, in an effort to maintain airway patency.
On October 6, 2017, the remedē® System was approved by the FDA as an implantable phrenic nerve stimulator indicated for the use in the treatment of adult patients who have been diagnosed with moderate to severe CSA. The device was available commercially upon FDA approval. Therefore, the newness period for the remedē® System is considered to begin on October 6, 2017. The applicant has indicated that the device also is designed to restore regular breathing patterns in the treatment of CSA in patients who also have been diagnosed with heart failure.
The applicant was approved for two unique ICD-10-PCS procedure codes for the placement of the leads: 05H33MZ (Insertion of neurostimulator lead into right innominate (brachiocephalic) vein) and 05H03MZ (Insertion of neurostimulator lead into azygos vein), effective October 1, 2016. The applicant indicated that implantation of the pulse generator is currently reported using ICD-10-PCS procedure code 0JH60DZ (Insertion of multiple array stimulator generator into chest subcutaneous tissue).
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 the purposes of new technology add-on payments.
As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20309), 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, the remedē® System provides stimulation to nerves to stimulate breathing. Typical treatments for hyperventilation CSA include supplemental oxygen and CPAP. Mechanical ventilation also has been used to maintain a patent airway. The applicant asserted that the remedē® System is a neurostimulation device resulting in negative airway pressure, whereas devices such as CPAP and ASV utilize positive airway pressure.
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that the remedē® System is assigned to MS-DRGs 040 (Peripheral, Cranial Nerve and Other Nervous System Procedures with MCC), 041 (Peripheral, Cranial Nerve and Other Nervous System Procedures with CC or Peripheral Neurostimulator), and 042 (Peripheral, Cranial Nerve and Other Nervous System Procedures without CC/MCC). The current procedures for the treatment options of CPAP and ASV are not assigned to these MS-DRGs.
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, the remedē® System is indicated for the use as a transvenous unilateral phrenic nerve stimulator in the treatment of adult patients who have been diagnosed with moderate to severe CSA. The applicant stated that the remedē® System reduces the negative symptoms associated with CSA, particularly among patients who have been diagnosed with heart failure. The applicant asserted that patients who have been diagnosed with heart failure are particularly negatively affected by CSA and currently available CSA treatment options of CPAP and ASV. According to the applicant, the currently available treatment options, CPAP and ASV, have been found to have worsened mortality and morbidity outcomes for patients who have been diagnosed with both CSA and heart failure. Specifically, ASV is currently contraindicated in the treatment of CSA in patients who have been diagnosed with heart failure.
The applicant also suggested that the remedē® System is particularly suited for the treatment of CSA in patients who also have been diagnosed with heart failure. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20310), we stated we were concerned that, while the remedē® System may be beneficial to patients who have been diagnosed with both CSA and heart failure, the FDA-approved indication is for use in the treatment of adult patients who have been diagnosed with moderate to severe CSA. We noted that the applicant's clinical analyses and data results related to patients who specifically were diagnosed with CSA and heart failure. We invited public comments on whether the remedē® System meets the newness criterion.
The applicant explained that currently, cases representing Medicare patients who have been admitted to the hospital with a diagnosis of CSA to receive treatment map to a wide array of MS-DRGs. However, the applicant believed that cases representing patients eligible for treatment involving the remedē® System would be assigned to a different MS-DRG than cases representing patients treated using standard treatment options, including CPAP or ASV. The applicant further explained that, based on an analysis of FY 2018 MedPAR data, claims including a diagnosis of CSA mapped to 458 MS-DRGs with no single MS-DRG representing more than 4.5 percent of the total claims. The applicant believed this variant assignment of cases representing patients who have been diagnosed with CSA and received treatment is likely due to the fact that
Several other commenters also supported approval of new technology add-on payments for the remedē® System, and asserted that the neurostimulation of the phrenic nerve is a different mechanism of action. The commenters indicated that they believed positive airway pressure (PAP) treatment is inferior to phrenic nerve stimulation because of patient intolerability, a lack of evidence in support of the success of PAP treatment in this population, or evidence showing that PAP such as ASV being contraindicated in the treatment of patients who have been diagnosed with CSA and heart failure. Another commenter agreed with the applicant, and stated that the remedē® System's mechanism of action to deliver treatment, the neurostimulation of the phrenic nerve, is a new treatment approach that has never previously been used.
After consideration of the public comments we received, for the reasons discussed, we believe that the remedē® System is not substantially similar to any existing technology and it meets the newness criterion.
With regard to the cost criterion, the applicant provided the following analysis to demonstrate that the technology meets the cost criterion. The applicant identified cases representing potential patients who may be eligible for treatment involving the remedē® System within MS-DRGs 040, 041, and 042. Using the Standard Analytical File (SAF) Limited Data Set (MedPAR) for FY 2015, the applicant included all claims for the previously stated MS-DRGs for its cost threshold calculation. The applicant stated that typically claims are selected based on specific ICD-10-PCS parameters, however this is a new technology for which no ICD-10-PCS procedure code and ICD-10-CM diagnosis code combination exists. Therefore, all claims for the selected MS-DRGs were included in the cost threshold analysis. This process resulted in 4,462 cases representing potential patients who may be eligible for treatment involving the remedē® System assigned to MS-DRG 040; 5,309 cases representing potential patients who may be eligible for treatment involving the remedē® System assigned to MS-DRG 041; and 2,178 cases representing potential patients who may be eligible for treatment involving the remedē® System assigned to MS-DRG 042, for a total of 11,949 cases.
Using the 11,949 identified cases, the applicant determined that the average unstandardized case-weighted charge per case was $85,357. Using the FY 2015 MedPAR dataset to identify the total mean charges for revenue code 0278, the applicant removed charges associated with the current treatment options for each MS-DRG as follows: $9,153.83 for MS-DRG 040; $12,762.31 for MS-DRG 041; and $21,547.73 for MS-DRG 042. The applicant anticipated that no other related charges would be eliminated or replaced. The applicant then standardized the charges and applied a 2-year inflation factor of 1.104055 obtained from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38524). The applicant then added charges for the new technology to the inflated average case-weighted standardized charges per case. No other related charges were added to the cases. The applicant calculated a final inflated average case-weighted standardized charge per case of $175,329 and a Table 10 average case-weighted threshold amount of $78,399. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant maintained that the technology met the cost criterion. With regard to the analysis above, in the proposed rule, we stated that we were concerned that all cases in MS-DRGs 040, 041, and 042 were used in the analysis. We further stated that we were unsure if all of these cases represent patients that may be truly eligible for treatment involving the remedē® System. We invited public comments on whether the remedē® System meets the cost criterion.
The applicant identified a total of 2,416 cases representing potential patients who may be eligible for treatment involving the remedē® System, with 1,762 cases (72.9 percent of all of the cases) mapping to MS-DRG 41 and 654 cases (27.1 percent of all of the cases) mapping to MS-DRG 42, resulting in an average case-weighted charge per case of $86,744. The applicant removed 100 percent of the charges associated with the services provided in connection with the prior technology. The applicant then standardized the charges and inflated the charges by an inflation factor of 9.36 percent, which resulted in an inflated average case-weighted standardized charge per case of $61,426. According to the applicant, the cost of the remedē® System is $34,500. The applicant converted the costs of the technology to charges by dividing the costs by the national CCR of 0.332 for “Implantable Devices” from the FY 2018 IPPS/LTCH PPS final rule. This resulted in $103,916 in estimated hospital charges for the new technology, which were added to the inflated standardized charges per case. The final inflated average case-weighted standardized charge per case is $165,342, which is $87,877 more than the Table 10 average case-weighted threshold amount of $77,465. Therefore, the applicant maintained that it meets the cost criterion.
After consideration of the additional information provided by the applicant, we agree that the remedē® System meets the cost criterion.
With respect to the substantial clinical improvement criterion, the applicant asserted that the remedē® System meets the substantial clinical improvement criterion. The applicant stated that the remedē® System offers a treatment option for a patient population unresponsive to, or ineligible for, treatment involving currently available options. According to the applicant, patients who have been diagnosed with CSA have no other available treatment options than the remedē® System. The applicant stated that published studies on both CPAP and ASV have proven that primary endpoints have not been met for treating patients who have been diagnosed with CSA. In addition, according to the ASV study, there was an increase in cardiovascular mortality.
According to the applicant, the remedē® System will prove to be a better treatment for the negative effects associated with CSA in patients who have been diagnosed with heart failure, such as cardiovascular insults resulting from sympathetic nervous system
The applicant shared the results from two studies concerning the effects of positive airway pressure ventilation treatment:
• The Canadian Continuous Positive Airway Pressure for Patients with Central Sleep Apnea and Heart Failure trial found that, while CPAP managed the negative symptoms of CSA, such as improved nocturnal oxygenation, increased ejection fraction, lower norepinephrine levels, and increased walking distance, it did not affect overall patient survival;
• In a randomized trial of 1,325 patients who had been diagnosed with heart failure who received treatment with ASV plus standard treatment or standard treatment alone, ASV was found to increase all-cause and cardiovascular mortality as compared to the control treatment.
The applicant also stated that published literature indicates that currently available treatment options do not meet primary endpoints with concern to the treatment of CSA; patients treated with ASV experienced an increased likelihood of mortality,
The applicant also stated that the remedē® System represents a substantial clinical improvement over existing technologies because of the reduction in the number of future hospitalizations, few device-related complications, and improvement in CSA symptoms and quality of life. Specifically, the applicant stated that the clinical data has shown a statistically significant reduction in Apnea-hypopnea index (AHI), improvement in quality of life, and significantly improved Minnesota Living with Heart Failure Questionnaire score. In addition, the applicant indicated that study results showed the remedē® System demonstrated an acceptable safety profile, and there was a trend toward fewer heart failure hospitalizations.
The applicant provided six published articles as evidence. All six articles were prospective studies. In three of the six studies, the majority of patients studied had been diagnosed with CSA with a heart failure comorbidity, while the remaining three studies only studied patients who had been diagnosed with CSA with a heart failure comorbidity. The first study
According to the applicant, some improvements of CSA symptoms were identified in statistical analyses. Sleep time and efficacy were not statistically significantly different for control night and therapy night, with median sleep times of 236 minutes and 245 minutes and sleep efficacy of 78 percent and 71 percent, respectively. There were no statistical differences across categorical time spent in each sleep stage (for example, N1, N2, N3, and REM) between control and therapy nights. The average respiratory rate and hypopnea index did not differ statistically across nights. Marginal positive statistical differences occurred between control and therapy nights for the baseline oxygen saturation median values (95 and 96 respectively) and obstructive apnea index (OAI) (1 and 4, respectively). Beneficial statistically significant differences occurred from control to therapy nights for the average heart rate (71 to 70, respectively), arousal index events per hour (32 to 12, respectively), apnea-hypopnea index (AHI) (45 to 23, respectively), central apnea index (CAI) (27 to 1, respectively), and oxygen desaturation index of 4 percent (ODI = 4 percent) (31 to 14, respectively). Two adverse events were noted: (1) Lead tip thrombus noted when lead was removed; the patient was anticoagulated without central nervous system sequelae; and (2) an episode of ventricular tachycardia upon lead placement and before stimulation was initiated. The episode was successfully treated by defibrillation of the patient's implanted ICD. Neither adverse event was directly related to the phrenic nerve stimulation therapy.
The second study
The third study
The fourth study
The fifth study
The final study data was from the pivotal study with limited information in the form of an abstract
The applicant asserted that the results from the pivotal trial
The applicant provided analyses from the above report focusing on the primary and secondary polysomnography endpoints, specifically, across patients who had been diagnosed with CSA with heart failure and non-heart failure. Eighty patients included in the study from the executive summary report had comorbid heart failure, while 51 patients did not. Of those patients with heart failure, 35 were treated while 45 patients were controls. Of those patients without heart failure, 23 were treated and 28 patients were controls. The applicant did not provide baseline descriptive statistical comparisons between treated and control groups controlling for heart failure status. Across all primary and secondary endpoints, the patient group who were diagnosed with CSA and comorbid heart failure experienced statistically significant improvements. Excepting percent of sleep in REM, the patient group who were diagnosed with CSA without comorbid heart failure experienced statistically significant improvements in all primary and secondary endpoints. In the FY 2019 IPPS/LTCH PPS proposed rule, we invited public comments on whether this current study design is sufficient to support substantial clinical improvement of the remedē® System with respect to all patient populations,
As previously noted, the applicant also contends that the technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatment options. Specifically, the applicant stated that the remedē® System is the only treatment option for patients who have been diagnosed with moderate to severe CSA; published studies on positive pressure treatments like CPAP and ASV have not met primary endpoints; and there was an increase in cardiovascular mortality according to the ASV study. According to the applicant, approximately 40 percent of patients who have been diagnosed with CSA have heart failure. The applicant asserted that the use of the remedē® System not only treats and improves the symptoms of CSA, but there is evidence of reverse remodeling in patients with reduced left ventricular ejection fraction (LVEF).
In the proposed rule we stated we were concerned that the remedē® System is not directly compared to the CPAP or ASV treatment options, which, to our understanding, are the current treatment options available for patients who have been diagnosed with CSA without heart failure. We noted that the FDA-approved indication for the implantation of the remedē® System is for use in the treatment of adult patients who have been diagnosed with moderate to severe CSA. We also noted that the applicant's supporting studies were directed primarily at patients who had been treated with the remedē® System who also had been diagnosed with heart failure. The applicant asserted that it would not be appropriate to use CPAP and ASV treatment options when comparing CPAP and ASV to the remedē® System in the patient population of heart failure diagnoses because these treatment options have been found to increase mortality outcomes in this population. In light of the limited length of time in which the remedē® System has been studied, we indicated we were concerned that any claims on mortality as they relate to treatment involving the use of the remedē® System may be limited. Therefore, we were concerned as to whether there is sufficient data to determine that the technology represents a substantial clinical improvement with respect to patients who have been diagnosed with CSA without heart failure.
We stated in the proposed rule that the applicant has shown that, among the subpopulation of patients who have been diagnosed with CSA and heart failure, the remedē® System decreases morbidity outcomes as compared to the CPAP and ASV treatment options. In the proposed rule, we noted that we understood that not all patients evaluated in the applicant's supporting clinical trials had been diagnosed with CSA with a comorbidity of heart failure. However, in all of the supporting studies for this application, the vast majority of study patients did have this specific comorbidity of CSA and heart failure. Of the three studies which enrolled both patients diagnosed with CSA with and without heart failure,
Therefore, in the proposed rule we stated we were concerned that differences in morbidity and mortality outcomes between CPAP, ASV, and the remedē® System in the general CSA patient population have not adequately been tested or compared. Specifically, the two patient populations, those who have been diagnosed with heart failure and CSA versus those who have been diagnosed with CSA alone, may experience different symptoms and outcomes associated with their disease processes. Patients who have been diagnosed with CSA alone present with excessive sleepiness, poor sleep quality, insomnia, poor concentration, and inattention.
We also noted that the clinical study had a small patient population (n=151), with follow-up for 6 months. We stated that we were interested in longer follow-up data that would further validate the points made by the applicant regarding the beneficial outcomes seen in patients who have been diagnosed with CSA who have been treated using the remedē® System. We also expressed interest in additional information regarding the possibility of electrical stimulation of unintended targets and devices combined with the possibility of interference from outside devices. Furthermore, we stated that we were unsure with regard to the longevity of the implanted device, batteries, and leads because it appears that the technology is meant to remain in use for the remainder of a patient's life. We invited public comments on whether the remedē® System represents a substantial clinical improvement over existing technologies.
• Other clinical trials, such as the CANPAP and SERVE-HF, which used PAP treatments in the course of treating patients who had been diagnosed with CSA were halted early due to the possibility of increased mortality;
• There exists little evidence showing that PAP treatments are effective for treatment of non-heart failure patients who have been diagnosed with CSA, according to the AASM; and
• Prior to the development of the remedē® System's pivotal trial, there was a lack of prospective, randomized data showing a relationship between PAP treatments and morbidity outcomes.
The applicant also believed that positive airway pressure devices were more likely to be considered for use in the treatment of patients who have been diagnosed with CSA, but without a diagnosis of heart failure. Another commenter stated that it agreed with the applicant's reasons and supported the rationale for not using PAP treatments as comparators in its clinical trials.
With regard to CMS' concern that claims related to mortality following treatment with the remedē® System are limited, the applicant agreed with CMS' assessment and stated that limited research on the system's impact on mortality for patients who have been diagnosed with CSA has been completed. The applicant further noted that mortality information was collected primarily for safety purposes during the pivotal trial. Another commenter also agreed with CMS' and the applicant's assessment and reiterated the applicant's statements.
The applicant addressed CMS' concern that the FDA-approved indication for the remedē® System is for all patients diagnosed with moderate to severe CSA and not specifically those diagnosed with a heart failure comorbidity. The applicant stated that the data from the pivotal trial provided evidence that the use of the remedē® System as a treatment option is safe and effective for patients who have been diagnosed with CSA, regardless of a heart failure comorbidity. Another commenter agreed with the applicant and stated that the data from the pivotal trial supported the applicant's response regarding the concern of the FDA-approved indication.
Regarding the concern that baseline statistical comparisons between treatment groups were not provided controlling for heart failure status, the applicant stated that there were no significant differences in baseline CSA disease burden between the treatment and control groups. The applicant further stated that, as expected, the heart failure and non-heart failure groups differed slightly by age and cardiac (for example, atrial fibrillation and hypertension) and other comorbidities (for example, hospitalizations within the last 12 months, diabetes, renal disease, depression).
In regard to the results at 6 and 12 months, the applicant stated that in all categories, except for quality of life, both the heart failure and non-heart failure groups showed statistically significant improvements from the baseline. The applicant asserted that for quality of life, which did not have a baseline, both groups had greater than 50 percent of respondents, which demonstrates marked or moderate improvement to their quality of life with a higher proportion in the non-heart failure group as compared to the heart failure group. Another commenter added that given the overall consistent balance achieved between the treatment and control groups across the many baseline variables examined, there is no evidence suggesting noteworthy imbalances to be expected in these subgroups.
The applicant addressed CMS' concerns related to the differences between heart failure and non-heart failure patients who received treatment with the remedē® System. The applicant asserted that it is well established that a significant proportion of patients who have been diagnosed with CSA have a heart failure comorbidity; 64 percent of patients enrolled in the pivotal trial had a diagnosis of heart failure. The applicant stated that it expected a higher proportion of heart failure patients enrolled in the study of CSA due to the correlated incidence of these diseases and the pivotal trial inclusion criteria being based on conventional sleep apnea metrics and not comorbidities. The applicant further stated that, regardless of the patients' comorbidity status, patients experienced consistent and durable improvements with the use of the remedē® System as a treatment option.
The applicant responded to CMS' concern regarding the small sample size used for the pivotal trial. The applicant stated that the sample size was chosen with an alpha error of 0.025, a power of 80 percent, an expected 50 percent response rate in the treatment group, and a 25 percent response rate in the control group. The applicant further stated that the study accounted for a 15 percent implantation failure and a 10 percent drop-out rate. The applicant indicated that, ultimately, the trial randomized 151 patients, with 147 successful implantations. Another commenter stated that the results showing highly statistical significance were derived from a sample size of patients across 31 different places around the world and, therefore, are generalizable.
The applicant responded to CMS' interest in longer term follow-up data. The applicant stated that 12-month follow-up data was recently published providing 12 months of treatment data for patients enrolled in the treated group and 6 months of treatment data for patients enrolled in the control group. Other commenters stated that 12-month follow-up data results are available and show continued durability of 6-month results.
The applicant addressed CMS' concern about the potential for electrical stimulation of unintended targets and interference from outside devices. The applicant stated that 42 percent of the patients involved in the pivotal trial had a concomitant cardiac device. The applicant stated that interactions between devices are not unique to the remedē® System and that only three serious device interactions were reported, all of which were resolved with reprogramming. The applicant further indicated that, all except 1 of the 21 extra-respiratory stimulation cases that occurred were resolved with routine reprogramming of the remedē® System, the other required repositioning of the lead. Ultimately, 96 percent of the patients enrolled in the pivotal trial would elect to have the medical procedure again.
Lastly, the applicant addressed CMS' concern about longevity of the implanted device, batteries, and leads. The applicant stated that the expected typical battery life is 41 months, which is consistent with other implanted neurostimulation devices. The applicant further stated that the leads were FDA pre-market approved and designed based on predicate, permanent cardiac pacing leads for which the standards are more rigorous than those for neurostimulation. The applicant indicated that, the leads, therefore, compare favorably to leads used for neurostimulation in categories such as lead breakage, connector failure, lead dislodgement, and infection.
Another commenter responded to CMS' concern about the possible failure in randomization when controlling for heart failure status. The commenter stated that it does not consider the reported baseline difference as a failure of randomization. The commenter further noted that, of the approximately 50 baseline factors examined and reported in the clinical study report from the pivotal trial, only MAI had a p-value equal to less than 0.05 associated with a study group difference.
Many commenters stated that the remedē® System represented a substantial clinical improvement and referenced clinical data, in general, and others specifically mentioned the pivotal trial results as demonstration of the improved benefit over existing treatment options. These commenters also noted that the use of the remedē® System and the mechanism of action of phrenic nerve stimulation showed sustained benefits for patients who have been diagnosed with CSA and received treatment using the system.
After consideration of the public comments we received, we have determined that the remedē® System meets all of the criteria for approval for new technology add-on payments. Therefore, we are approving new technology add-on payments for the remedē® System for FY 2019. Cases involving the use of the remedē® System that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedures codes 0JH60DZ and 05H33MZ in combination with procedure code 05H03MZ (Insertion of neurostimulator lead into right innominate vein, percutaneous approach) or 05H043MZ (Insertion of neurostimulator lead into left innominate vein, percutaneous approach).
In its application, the applicant estimated that the average Medicare beneficiary would require the surgical implantation of one remedē® System per patient. According to the application, the cost of the remedē® System is $34,500 per patient. Under § 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 the use of the remedē® System is $17,250 for FY 2019. In accordance with the current indication for the use of the remedē® System, CMS expects that the remedē® System will be used for the treatment of adult patients who have been diagnosed with moderate to severe CSA.
Titan Spine submitted an application for new technology add-on payments for the Titan Spine nanoLOCK® Interbody Device (the Titan Spine nanoLOCK®) for FY 2019. (We note that the applicant previously submitted an application for new technology add-on payments for this device for FY 2017.) The Titan Spine nanoLOCK® is a nanotechnology-based interbody medical device with a dual acid-etched titanium interbody system used to treat patients diagnosed with degenerative disc disease (DDD). One of the key distinguishing features of the device is the surface manufacturing technique and materials, which produce macro, micro, and nano-surface textures. According to the applicant, the combination of surface topographies enables initial implant fixation, mimics an osteoclastic pit for bone growth, and produces the nano-scale features that interface with the integrins on the outside of the cellular membrane. Further, the applicant noted that these features generate better osteogenic and angiogenic responses that enhance bone growth, fusion, and stability. The applicant asserted that the Titan Spine nanoLOCK®'s clinical features also reduce pain, improve recovery time, and produce lower rates of device complications such as debris and inflammation.
On October 27, 2014, the Titan Spine nanoLOCK® received FDA clearance for the use of five lumbar interbody devices and one cervical interbody device: The nanoLOCK® TA—Sterile Packaged Lumbar ALIF Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy; the nanoLOCK® TAS—Sterile Packaged Lumbar ALIF Stand Alone Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy; the nanoLOCK® TL—Sterile Packaged Lumbar Lateral Approach Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy; the nanoLOCK® TO—Sterile Packaged Lumbar Oblique/PLIF Approach Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy; the nanoLOCK® TT—Sterile Packaged Lumbar TLIF Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy; and the nanoLOCK® TC—Sterile Packaged Cervical Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy.
The applicant received FDA clearance on December 14, 2015, for the nanoLOCK® TCS—Sterile Package Cervical Stand Alone Interbody Fusion Device with nanoLOCK® surface, available in multiple sizes to accommodate anatomy. According to the applicant, July 8, 2016, was the first date that the nanotechnology production facility completed validations and clearances needed to manufacture the nanoLOCK® interbody fusion devices. Once validations and clearances were completed, the technology was available on the U.S. market on October 1, 2016. Therefore, the applicant believes that the newness period for nanoLOCK® would begin on October 1, 2016. Procedures involving the Titan Spine nanoLOCK® technology can be identified by the following ICD-10-PCS Section “X” New Technology codes:
• XRG0092 (Fusion of occipital-cervical joint using nanotextured surface interbody fusion device, open approach);
• XRG1092 (Fusion of cervical vertebral joint using nanotextured surface interbody fusion device, open approach);
• XRG2092 (Fusion of 2 or more cervical vertebral joints using nanotextured surface interbody fusion device, open approach);
• XRG4092 (Fusion of cervicothoracic vertebral joint using nanotextured surface interbody fusion device, open approach);
• XRG6092 (Fusion of thoracic vertebral joint using nanotextured surface interbody fusion device, open approach);
• XRG7092 (Fusion of 2 to 7 thoracic vertebral joints using nanotextured surface interbody fusion device, open approach);
• XRG8092 (Fusion of 8 or more thoracic vertebral joints using nanotextured surface interbody fusion device, open approach);
• XRGA092 (Fusion of thoracolumbar vertebral joint using nanotextured surface interbody fusion device, open approach);
• XRGB092 (Fusion of lumbar vertebral joint using nanotextured surface interbody fusion device, open approach);
• XRGC092 (Fusion of 2 or more lumbar vertebral joints using nanotextured surface interbody fusion device, open approach); and
• XRGD092 (Fusion of lumbosacral joint using nanotextured surface interbody fusion device, open approach).
We note that the applicant expressed concern that interbody fusion devices that have failed to gain or apply for FDA clearance with nanoscale features could confuse health care providers with marketing and advertising using terms related to nanotechnology and ultimately adversely affect patient outcomes.
As discussed previously, 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 the purposes of new technology add-on payments. In the proposed rule we noted that the substantial similarity discussion is applicable to both the lumbar and the cervical interbody devices because all of the devices use the Titan Spine nanoLOCK® technology.
With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant stated that, for both interbody devices (the lumbar and the cervical interbody device), the Titan Spine nanoLOCK®'s surface stimulates osteogenic cellular response to assist in bone formation during fusion. According to the applicant, the mechanism of action exhibited by the Titan Spine's nanoLOCK® surface technology involves the ability to create surface features that are meaningful to cellular regeneration at the nano-scale level. During the manufacturing process, the surface produces macro, micro, and nano-surface textures. The applicant believed that this unique combination and use of these surface topographies represents a new approach to stimulating osteogenic cellular response. The applicant further asserted that the macro-scale textured features are important for initial implant fixation; the micro-scale textured features mimic an osteoclastic pit for supporting bone growth; and the nano-scale textured features interface with the integrins on the outside of the cellular membrane, which generates the osteogenic and angiogenic (mRNA) responses necessary to promote healthy bone growth and fusion. The applicant stated that when correctly manufactured, an interbody fusion device includes a hierarchy of complex surface features, visible at different levels of magnification, that work collectively to impact cellular response through mechanical, cellular, and biochemical properties. The applicant stated that Titan Spine's proprietary and unique surface technology, the Titan Spine nanoLOCK® interbody devices, contain optimized nano surface characteristics, which generate the distinct cellular responses necessary for improved bone growth, fusion, and stability. The applicant further stated that the Titan Spine nanoLOCK®'s surface engages with the strongest portion of the vertebral endplate, which enables better resistance to subsidence because a unique dual acid-etched titanium surface promotes earlier bone in-growth. According to the applicant, the Titan Spine nanoLOCK®'s surface is created by using a reductive process of the titanium itself. The applicant asserted that use of the Titan Spine nanoLOCK® significantly reduces the potential for debris generated during impaction when compared to treatments using Polyetheretherketone (PEEK)-based implants coated with titanium. According to the results of an in vitro study (provided by the applicant), which examined factors produced by human mesenchymal stem cells on spine implant materials that compared angiogenic factor production using PEEK-based versus titanium alloy surfaces, osteogenic production levels were greater with the use of rough titanium alloy surfaces than the levels produced using smooth titanium alloy surfaces. Human mesenchymal stem cells were cultured on tissue culture polystyrene, PEEK, smooth TiAlV, or macro-/micro-/nanotextured rough TiAlV (mmnTiAlV) disks. Osteoblastic differentiation and secreted inflammatory interleukins were assessed after 7 days. The results of an additional study provided by the applicant examined whether inflammatory microenvironment generated by cells as a result of use of titanium aluminum-vanadium (Ti-alloy, TiAlV) surfaces is effected by surface micro texture, and whether it differs from the effects generated by PEEK-based substrates. This in vitro study compared angiogenic factor production and integrin gene expression of human osteoblast-like MG63 cells cultured on PEEK or titanium-aluminum vanadium (titanium alloy). Based on these study results, the applicant asserted that the use of micro textured surfaces has demonstrated greater promotion of osteoblast differentiation when compared to use of PEEK-based surfaces.
The applicant maintains that the nanoLOCK® was the first, and remains the only, device in spinal fusion, to apply for and successfully obtain a clearance for nanotechnology from the FDA. According to the applicant, in order for a medical device to receive a nanotechnology FDA clearance, the burden of proof includes each of the following to be present on the medical device in question: (1) Proof of specific nano scale features, (2) proof of capability to manufacture nano-scale features with repeatability and documented frequency across an entire device, and (3) proof that those nano-scale features provide a scientific benefit, not found on devices where the surface features are not present. The applicant further stated that many of the commercially available interbody fusion devices are created using additive manufacturing processes to mold or build surface from the ground up. Conversely, Titan Spine applied a subtractive surface manufacturing to remove pieces of a surface. The surface features that remain after this subtractive process generate features visible at magnifications that additive manufacturing has not been able to produce. According to the applicant, this subtractive process has been validated by the White House Office of Science and Technology, the National Nanotechnology Initiative, and the FDA that provide clearances to products that
With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, cases representing patients that may be eligible for treatment involving the Titan Spine nanoLOCK® technology would map to the same MS-DRGs as other (lumbar and cervical) interbody devices currently available to Medicare beneficiaries and also are used for the treatment of patients who have been diagnosed with DDD (lumbar or cervical).
With regard 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, the applicant stated that the Titan Spine nanoLOCK® can be used in the treatment of patients who have been diagnosed with similar types of diseases, such as DDD, and for a similar patient population receiving treatment involving both lumbar and cervical interbody devices.
In summary, the applicant maintained that the Titan Spine nanoLOCK® technology has a different mechanism of action when compared to other spinal fusion devices. Therefore, the applicant did not believe that the Titan Spine nanoLOCK® technology is substantially similar to existing technologies.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20316), we stated we were concerned that the Titan Spine nanoLOCK® interbody devices may be substantially similar to currently available titanium interbody devices because other roughened surface interbody devices also stimulate bone growth. While there is a uniqueness to the nanotechnology used by the applicant, other devices also stimulate bone growth such as PEEK-based surfaces and, therefore, we were concerned that the Titan Spine nanoLOCK® interbody devices use the same or similar mechanism of action as other devices.
We invited public comments on whether the Titan Spine nanoLOCK® interbody devices are substantially similar to existing technologies and whether these devices meet the newness criterion.
The applicant provided three analyses of claims data from the FY 2016 MedPAR file to demonstrate that the Titan Spine nanoLOCK® interbody devices meet the cost criterion. In the proposed rule, we noted that cases reporting procedures involving lumbar and cervical interbody devices would map to different MS-DRGs. As discussed in the Inpatient New Technology Add On Payment Final Rule (66 FR 46915), two separate reviews and evaluations of the technologies are necessary in this instance because cases representing patients receiving treatment for diagnoses associated with lumbar procedures that may be eligible for use of the technology under the first indication would not be expected to be assigned to the same MS DRGs as cases representing patients receiving treatment for diagnoses associated with cervical procedures that may be eligible for use of the technology under the second indication. Specifically, cases representing patients who have been diagnosed with lumbar DDD and who have received treatment that involved implanting a lumbar interbody device would map to MS DRG 028 (Spinal Procedures with MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal Neurostimulators), MS DRG 030 (Spinal Procedures without CC/MCC), MS-DRG 453 (Combined Anterior/Posterior Spinal Fusion with MCC), MS-DRG 454 (Combined Anterior/Posterior Spinal Fusion with CC), MS-DRG 455 (Combined Anterior/Posterior Spinal Fusion without CC/MCC), MS-DRG 456 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions with MCC), MS DRG 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusion without MCC), MS-DRG 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions without CC/MCC), MS-DRG 459 (Spinal Fusion Except Cervical with MCC), and MS-DRG 460 (Spinal Fusion Except Cervical without MCC). Cases representing patients who have been diagnosed with cervical DDD and who have received treatment that involved implanting a cervical interbody device would map to MS DRG 471 (Cervical Spinal Fusion with MCC), MS-DRG 472 (Cervical Spinal Fusion with CC), and MS-DRG 473 (Cervical Spinal Fusion without CC/MCC). Procedures involving the implantation of lumbar and cervical interbody devices are assigned to separate MS DRGs. Therefore, the devices categorized as lumbar interbody devices and the devices categorized as cervical interbody devices must distinctively (each category) meet the cost criterion and the substantial clinical improvement criterion in order to be eligible for new technology add on payments beginning in FY 2019.
The first analysis searched for any of the ICD-10-PCS procedure codes within the code series Lumbar-0SG [body parts 0 1 3] [open approach only 0] [device A only] [anterior column only 0, J], which typically are assigned to MS DRGs 028, 029, 030, and 453 through 460. The average case-weighted unstandardized charge per case was $153,005. The applicant then removed charges related to the predicate technology and then standardized the charges. The applicant then applied an inflation factor of 1.09357, the value used in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527) to update the charges from FY 2016 to FY 2018. The applicant added charges related to the Titan Spine nanoLOCK® lumbar interbody devices. This resulted in a final inflated average case-weighted standardized charge per case of $174,688, which exceeded the average
The second analysis searched for any of the ICD-10-PCS procedure codes within the code series Cervical-0RG [body parts 0-A] [open approach only 0] [device A only] [anterior column only 0, J], which typically are assigned to MS-DRGs 028, 029, 030, 453 through 455, and 471 through 473. The average case-weighted unstandardized charge per case was $88,034. The methodology used in the first analysis was used for the second analysis, which resulted in a final inflated average case-weighted standardized charge per case of $101,953, which exceeded the average case-weighted Table 10 MS-DRG threshold amount of $83,543.
The third analysis was a combination of the first and second analyses described earlier that searched for any of the ICD-10-PCS procedure codes within the Lumbar and Cervical code series listed above that are assigned to the MS-DRGs in the analyses above. The average case-weighted unstandardized charge per case was $127,736. The methodology used for the first and second analysis was used for the third analysis, which resulted in a final inflated average case-weighted standardized charge per case of $149,915, which exceeded the average case-weighted Table 10 MS-DRG threshold amount of $104,094.
Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in all of the applicant's analyses, the applicant maintained that the technology met the cost criterion.
We invited public comments on whether the Titan Spine nanoLOCK® meets the cost criterion.
We did not receive any public comments concerning whether the Titan Spine nanoLOCK® meets the cost criterion or the cost analysis presented in the proposed rule. We believe that the Titan Spine nanoLOCK® meets the cost criterion.
With regard to the substantial clinical improvement criterion for the Titan Spine nanoLOCK® Interbody Lumbar and Cervical Devices, the applicant submitted the results of two clinical evaluations. The first clinical evaluation was a case series and the second was a case control study. Regarding the case series, 4 physicians submitted clinical information on 146 patients. The 146 patients resulted from 2 surgery groups: A cervical group of 73 patients and a lumbar group of 73 patients. The division into cervical and lumbar groups was due to differences in surgical procedure and expected recovery time. Subsequently, the collection and analyses of data were presented for lumbar and cervical nanoLOCK® device implants. Data was collected using medical record review. Patient baseline characteristics, the reason for cervical and lumbar surgical intervention, inclusion and exclusion criteria, details on the types of pain medications and the pattern of usage preoperatively and postoperatively were not provided. In the proposed rule, we noted that the applicant did not provide an explanation of why the outcomes studied in the case series were chosen for review. However, the applicant noted that the case series data were restricted to patients treated with the Titan Spine nanoLOCK® device, with both retrospective and prospective data collection. These data appeared to be clinically related and included: (1) Pain medication usage; (2) extremity and back pain (assessed using the Numeric Pain Rating Scale (NPRS)); and (3) function (assessed using the Oswestry Disability Index (ODI)). Clinical data collection began with time points defined as “Baseline (pre-operation), Month 1 (0-4 weeks), Month 2 (5-8 weeks), Month 3 (9-12 weeks), Month 4 (13-16 weeks), Month 5 (17-20 weeks) and Month 6+ (>20 weeks)”. The n, mean, and standard deviation were presented for continuous variables (NPRS extremity pain, back pain, and ODI scores), and the n and percentage were presented for categorical variables (subjects taking pain medications). All analyses compared the time point (for example, Month 1) to the baseline.
Pain scores for extremities (leg and arm) were assessed using the NPRS, an 11 category ordinal scale where 0 is the lowest value and 10 is the highest value and, therefore, higher scores indicate more severe pain. Of the 73 patients in the lumbar group, the applicant presented data on 18 cases for leg or arm pain at baseline that had a mean score of 6.4, standard deviation (SD) 2.3. Between Month 1 and Month 6+ the number of lumbar patients for which data was submitted for leg or arm pain ranged from 3 patients (Month 5, mean score 3.7, SD 3.5) to 15 patients (Month 6+, mean score 2.5, SD 2.4), with varying numbers of patients for each of the other defined time points of Month 1 through Month 4. None of the defined time points of Month 1 through Month 4 had more than 14 patients or less than 3 patients that were assessed.
Of the 73 patients in the cervical group, 7 were assessed for leg or arm pain at baseline and had a mean score of 5.1, SD 3.5. Between Month 1 and Month 6+ the number of cervical patients assessed for leg or arm pain ranged from 0 patients (Month 5, no scores) to 5 patients (Month 1, mean score 4.2, SD 2.6), with varying numbers of patients for each of the other defined time points of Month 1 through Month 4. None of the defined time points of Month 1 through Month 4 had more than 5 patients or less than 2 patients that were assessed.
Back pain scores were also assessed using the NPRS, where 0 is the lowest value and 10 is the highest value and, therefore, higher scores indicate more severe pain. Of the 73 patients in the lumbar group, 66 were assessed for back pain at baseline and had a mean score of 7.9, SD 1.8. Between Month 1 and Month 6+ the number of lumbar patients assessed for back pain ranged from 4 patients (Month 5, mean score 4.0, SD 2.7) to 43 patients (Month 1, mean score 4.5, SD 2.7), with varying numbers of patients for each defined time point.
Of the 73 patients in the cervical group, 71 were assessed for back pain at baseline and had a mean score of 7.5, SD 2.3. Between Month 1 and Month 6+ the number of cervical patients assessed for back pain ranged from 2 patients (Month 5, mean score 7.0, SD 2.8) to 47 patients (Month 1, mean score 4.4, SD 2.9), with varying numbers of patients for each defined time point.
Function was assessed using the ODI, which ranges from 0 to 100, with higher scores indicating increased disability/impairment. Of the 73 patients in the lumbar group, 59 were assessed for ODI scores at baseline and had a mean score of 52.5, SD 18.7. Between Month 1 and Month 6+ the number of lumbar patients assessed for ODI scores ranged from 3 patients (Month 5, mean score 33.3, SD 19.8) to 38 patients (Month 1, mean score 48.1, SD 19.7), with varying numbers of patients for each defined time point. Of the 73 patients in the cervical group, 56 were assessed for ODI scores at baseline and had a mean score of 53.6, SD 18.2. Between Month 1 and Month 6+ the number of cervical patients assessed for ODI score ranged from 1 patient (Month 5, mean score 80, no SD noted) to 41 patients (Month 1, mean score 48.6, SD 20.5), with varying numbers of patients for each defined time point.
The percentages of patients not taking pain medicines per day for the lumbar and cervical groups over time were assessed. Of the 73 patients in the lumbar group, 69 were assessed at baseline and 27.5 percent of the 69 patients were not taking pain medication. Between Month 1 and Month 6+ the number of lumbar patients assessed for not taking pain medicines ranged from 5 patients
According to the applicant, both the lumbar and cervical groups showed a trend of improvement in all four clinical outcomes over time for which they collected data in their case series. However, the applicant also indicated that the trend was difficult to assess due to the relatively limited number of subjects with available assessments more than 4 months post-implant. The applicant shared that it had missing values for over 80 percent of the subjects in the study after the 4th post-operative month. According to the applicant and its results of the clinical evaluation, which was based on data from less than 20 percent of subjects, there was a statistically significant reduction in back pain for nanoLOCK® patients from “Baseline,” based on improvement at earlier than standard time points.
In the proposed rule, we stated we were concerned that the small sample size of patients assessed at each timed follow-up point for each of the clinical outcomes evaluated in the case series limited our ability to draw meaningful conclusions from these results. The applicant provided t-test results for the lumbar and cervical groups assessed for pain (back, leg, and arm). We indicated we were concerned that the t-test resulting from small sample sizes (for example, 2 of 73 patients in Month 5, and 5 of 73 patients in Month 6+) does not indicate a statistically meaningful improvement in pain scores.
Based on the results of the case series provided by the applicant, we stated that we were unable to determine whether the findings regarding extremity and back pain, ODI scores, and percentage of subjects not taking pain medication for patients who received treatment involving the Titan Spine nanoLOCK® devices represent a substantial clinical improvement due to the inconsistent sample size over time across both treatment arms in all evaluated outcome measures. The quantity of missing data in this case series, along with the lack of explanation for the missing data, raised concerns for the interpretation of these results. We also stated that we were unable to determine based on this case series whether there were improvements in extremity pain and back pain, ODI scores, and percentage of subjects not taking pain medicines for patients who received treatment involving the Titan Spine nanoLOCK® devices versus conventional and other intervertebral body fusion devices, as there were no comparisons to current therapies. As noted in the proposed rule and above, the applicant did not provide an explanation of why the outcomes studied in the case series were chosen for review. Therefore, we believed that we may have had insufficient information to determine if the outcomes studied in the case series are validated proxies for evidence that the nanoLOCK®'s surface promotes greater osteoblast differentiation when compared to use of PEEK-based surfaces. We invited public comments regarding our concerns, including with respect to why the outcomes studied in the case series were chosen for review.
We note that, we did not receive any public comments with respect to why the outcomes in the case series were selected for review.
The applicant's second clinical evaluation was a case-control study with a 1:5 case to control ratio. The applicant used deterministically linked, de-identified, individual level health care claims, electronic medical records (EMR), and other data sources to identify 70 cases and 350 controls for a total sample size of 420 patients. The applicant also identified OM1
The mean age for all patients in the study was 55 years old, and 47 percent were male. For the clinical length of stay outcome, the applicant noted that the mean length of stay was slightly longer among control patients, 3.9 days (SD=5.4) versus 3.2 days (SD=2.9) for cases, and a larger proportion of patients in the control group had lengths of stay equal to or longer than 5 days (21 percent versus 17 percent). Three control patients (0.8 percent) were readmitted within 30 days compared to zero readmissions among case patients. A slightly lower proportion of case patients were on opioids 3 months post-surgery compared to control patients (15 percent versus 16 percent).
In the proposed rule (83 FR 20318), we stated we were concerned that there may be significant outliers not identified in the case and control arms because for the mean length of stay outcome, the standard deviation for control patients (5.4 days) is larger than the point estimate (3.9 days). Based on the results of this clinical evaluation provided by the applicant, we stated that we were unable to determine whether the findings regarding lengths of stay and cumulative post-surgical opioid use for patients who received treatment involving the nanoLOCK® devices versus conventional intervertebral body fusion devices represent a substantial clinical improvement. We stated that without further information on selection of controls and whether there were adjustments in the statistical analyses controlling for confounding factors (for example, cause of back pain, level of experience of the surgeon, BMI and length of pain), we were concerned that the interpretation of the results may be limited. Finally, we stated we were concerned that the current data does not adequately support a strong association between the outcome measures of length of stay, readmission rates, and use of opioids and the use of nano-surface textures in the manufacturing of the Titan Spine nanoLOCK® device. For these reasons, we stated that we were concerned that the current data do not support a substantial clinical
In the proposed rule, we noted that the applicant indicated its intent to submit the results of additional ongoing studies to support the evidence of substantial clinical improvement over existing technologies for patients who received treatment involving the nanoLOCK® devices versus patients receiving treatment involving other interbody fusion devices. We invited public comments on whether the Titan Spine nanoLOCK® meets the substantial clinical improvement criterion.
After consideration of all the information from the applicant, as well as the public comments we received, we are unable to determine if the Titan Spine nanoLOCK® represents a substantial clinical improvement over the currently available devices used for lumbar and cervical DDD treatment due to a lack of significant and meaningful data. As stated above, we remain concerned that the current data does not adequately support a sufficient association between the outcome measures of length of stay, readmission rates, and use of opioids and the use of nano-surface textures in the manufacturing of the Titan Spine nanoLOCK® device to determine that the technology represents a substantial clinical improvement over existing available options. Therefore, after consideration of all of the new technology add-on payment criteria we are not approving new technology add-on payments for the Titan Spine nanoLock® devices for FY 2019.
Achaogen, Inc. submitted an application for new technology add-on payments for Plazomicin for FY 2019. We note that, since the publication of the proposed rule, the applicant has announced that the trade name for Plazomicin is ZEMDRI
The applicant stated that there is a strong need for antibiotics that can treat infections caused by MDR Enterobacteriaceae, specifically carbapenem resistant Enterobacteriaceae (CRE). Life-threatening infections caused by MDR bacteria have increased over the past decade, and the patient population diagnosed with infections caused by CRE is projected to double within the next 5 years, according to the Centers for Disease Control and Prevention (CDC). Infections caused by CRE are often associated with poor patient outcomes due to limited treatment options. Patients who have been diagnosed with BSIs due to CRE face mortality rates of up to 50 percent. Patients most at risk for CRE infections are those with CRE colonization, recent hospitalization or stay in a long-term care or skilled-nursing facility, an extensive history of antibacterial use, and whose care requires invasive devices like urinary catheters, intravenous (IV) catheters, or ventilators. The applicant estimated, using data from the Center for Disease Dynamics, Economics & Policy (CDDEP), that the Medicare population that has been diagnosed with antibiotic-resistant cUTI numbers approximately 207,000 and approximately 7,000 for BSIs/sepsis due to CRE.
The applicant noted that due to the public health concern of increasing antibiotic resistance and the need for new antibiotics to effectively treat MDR infections, Plazomicin has received the following FDA designations: Breakthrough Therapy; Qualified Infectious Disease Product, Priority Review; and Fast Track. The applicant noted that Breakthrough Therapy designation was granted on May 17, 2017, for the treatment of bloodstream infections (BSIs) caused by certain Enterobacteriaceae in patients who have been diagnosed with these types of infections who have limited or no alternative treatment options. The applicant noted that Plazomicin is the first antibacterial agent to receive this designation. The applicant noted that on December 18, 2014, the FDA designated Plazomicin as a Qualified Infectious Disease Product (QIDP) for the indications of hospital-acquired bacterial pneumonia (HAPB), ventilator-associated bacterial pneumonia (VABP), and complicated urinary tract infection (cUTI), including pyelonephritis and catheter-related blood stream infections (CRBSI). The applicant noted that Fast Track designation was granted by the FDA on August 12, 2012, for the Plazomicin development program for the treatment of serious and life-threatening infections due to CRE. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20320), we indicated that Plazomicin had not received approval from the FDA as of the time of the development of the proposed rule. However, as noted previously, the applicant received approval from the FDA on June 25, 2018, for Plazomicin with the trade name ZEMDRI
The applicant's request for approval for a unique ICD-10-PCS procedure code to identify the use of ZEMDRI
As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant asserted that Plazomicin does not use the same or similar mechanism of action to achieve a therapeutic outcome as any other drug assigned to the same or a different MS-DRG. The applicant stated that Plazomicin has a unique chemical structure designed to improve activity against aminoglycoside-resistant bacteria, which also are often resistant to other key classes of antibiotics, including beta-lactams and carbapenems. Bacterial resistance to aminoglycosides usually occurs through enzymatic modification by aminoglycoside modifying enzymes (AMEs) to compromise binding the target bacterial site. According to the applicant, AMEs were found in 98.6 percent of aminoglycoside nonsusceptible E. coli, Klebsiella spp, Enterobacter spp, and Proteus spp collected in 2016 U.S. surveillance
The applicant asserted that the mechanism of action is new due to the unique chemical structure. With regard to the general mechanism of action against bacteria, in the proposed rule, we stated we were concerned that the mechanism of action of Plazomicin appeared to be similar to other aminoglycoside antibiotics. As with other aminoglycosides, Plazomicin is bactericidal through inhibition of bacterial protein synthesis. The applicant maintained that the structural changes to the antibiotic constitute a new mechanism of action because it allows the antibiotic to remain active despite AMEs. Additionally, the applicant stated that Plazomicin would be the first, new aminoglycoside brought to market in over 40 years.
We invited public comments on whether Plazomicin's mechanism of action is new, including comments in response to our concern that its mechanism of action to eradicate bacteria (inhibition of bacterial protein synthesis) may be similar to that of other aminoglycosides, even if improvements to its structure may allow Plazomicin to be active even in the presence of common AMEs that inactivate currently marketed aminoglycosides.
Another commenter noted that CMS' concerns focused on commonalities between Plazomicin and other antibiotics in the same general antibiotic class, and stated that the unique benefits of this medicine should not be ignored due to the substantial similarities to other medicines, given the recognized shortage of new antibiotics.
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, we believe that potential cases representing patients who may be eligible for treatment involving Plazomicin would be assigned to the same MS-DRGs as cases representing patients who receive treatment for UTI or bacteremia.
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, we indicated in the proposed rule that the applicant asserted that Plazomicin is intended for use in the treatment of patients who have been diagnosed with cUTI, including pyelonephritis, and bloodstream infections, who have limited or no alternative treatment options. We stated that because the applicant anticipated that Plazomicin would be reserved for use in the treatment of patients who have limited or no alternative treatment options, the applicant believed that Plazomicin may be indicated to treat a new patient population for which no other technologies are available. However, we stated that it is possible that existing antimicrobials could also be used to treat those same bacteria Plazomicin is
Several other commenters supported the approval of new technology add-on payments for Plazomicin, and believed that Plazomicin treats a new patient population with very limited treatment options. The commenters specifically indicated that there is a need for new antibiotics to combat the crisis of multi-drug resistant bacteria, especially CRE infections. The commenters stated that there at least 70,000 cases of CRE annually in the United States, and the number is expected to double in 4 years. The commenters also noted that the CDC estimates that CRE infections are associated with mortality rates of up to 50 percent and occur in the most medically vulnerable patient populations. The commenters further recommended CMS acknowledge that as these organisms are becoming resistant to last-line antibiotic drugs, clinicians frequently face infections with no realistic treatment options for patients. The commenters also indicated that the CDC identified CRE as one of the three urgent drug-resistant threats to human health, and issued warning that without urgent action more patients will be “thrust back to a time before we had effective drugs.” Another commenter also noted that the World Health Organization identified CRE as one of the three pathogens with the highest priority for research and development of novel antimicrobials, and stated that Plazomicin is new because it has demonstrated superiority over historic regimens for the management of invasive CRE infections.
The applicant and other commenters also stated that, even with newly approved antibiotic products with activity against some CRE, development of resistance has already been reported resulting in patients having no other available treatment options. The applicant and other commenters further stated that there is a need for more than one effective antibiotic active against CRE for many reasons, including various patient characteristics such as drug allergies, source location of bacteria, and the need for two active antibiotics given at the same time—a common practice for multi-drug or pan-drug resistance. Therefore, the commenters believed that multiple antibiotic treatment options are necessary and the existence of other effective antibiotics does not preclude a new antibiotic such as ZEMDRI
Another commenter stated that it, generally, supported CMS' concerns regarding the substantial similarity criteria for Plazomicin.
After consideration of the public comments we received, we believe that the mechanism of action for ZEMDRI
With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The analyses submitted by the applicant and presented in the proposed rule and below were for the indications of cUTI and BSI because the applicant was seeking FDA approval for both indications. However, as noted earlier, the technology was only approved for use in the treatment of cUTI, including pyelonephrits. Therefore, while we summarize both analyses below, as presented in the proposed rule, we note that only the cost information related to cUTI is evaluated to demonstrate that the applicant meets the cost criterion. We stated in the proposed rule that in order to identify the range of MS-DRGs that potential cases representing patients who have been diagnosed with the specific types of infections for which the technology had been proposed to be indicated for use in the treatment of and who may be potentially eligible for treatment involving Plazomicin may map to, the applicant identified all MS-DRGs in claims that
For the cost analysis summarized in the proposed rule, the applicant calculated an average unstandardized case-weighted charge per case using 2,046,275 identified cases (100 percent of all cases) and using 1,533,449 identified cases (75 percent of all cases) of $69,414 and $63,126, respectively. The applicant removed 50 percent of the charges associated with other drugs (associated with revenue codes 025x, 026x, and 063x) from the MedPAR data because the applicant anticipated that the use of Plazomicin would reduce the charges associated with the use of some of the other drugs, noting that this was a conservative estimate because other drugs would still be required for these patients during their hospital stay. The applicant then standardized the charges and applied the 2-year inflation factor of 9.357 percent from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527) to inflate the charges from FY 2016 to FY 2018. No charges for Plazomicin were added in the analysis because the applicant explained that the anticipated price for Plazomicin had yet to be determined. Based on the FY 2018 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted threshold amount was $56,996 in the first scenario utilizing 100 percent of all cases, and $55,363 in the second scenario utilizing 75 percent of all cases. The inflated average case-weighted standardized charge per case was $62,511 in the first scenario and $57,054 in the second analysis. Because the inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount in both scenarios, the applicant maintained that the technology met the cost criterion. The applicant noted that the case-weighted threshold amount is met before including the average per patient cost of the technology in both analyses. As such, the applicant anticipated that the inclusion of the cost of Plazomicin, at any price point, would further increase charges above the average case-weighted threshold amount.
The applicant also supplied additional cost analyses that we summarized in the proposed rule, directing attention at each of the two proposed indications individually; the cost analyses considered potential cases representing patients who have been diagnosed with cUTI who may be eligible for treatment involving Plazomicin separately from potential cases representing patients who have been diagnosed with BSI/Bacteremia who may be eligible for treatment involving Plazomicin, with the cost analysis for each considering 100 percent and 75 percent of identified cases using the FY 2016 MedPAR data and the FY 2018 GROUPER Version 36. For the additional cost analyses summarized in the proposed rule, the applicant reported that, for potential cases representing patients who have been diagnosed with Bacteremia and who may be eligible for treatment involving Plazomicin, 100 percent of identified cases spanned 539 MS-DRGs, with 75 percent of the cases mapping to the following 4 MS-DRGs: 871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours with MCC), 872 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours without MCC), 853 (Infectious and Parasitic Diseases with O.R. Procedure with MCC), and 870 (Septicemia or Severe Sepsis with Mechanical Ventilation 96+ hours).
According to the applicant, for potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin, 100 percent of identified cases mapped to 702 MS-DRGs, with 75 percent of the cases mapping to 56 MS-DRGs. Potential cases representing patients who have been diagnosed with cUTIs and who may be eligible for treatment involving Plazomicin assigned to MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours with MCC) accounted for approximately 18 percent of all of the cases assigned to any of the identified 56 MS-DRGs (75 percent of cases sensitivity analysis), followed by MS-DRG 690 (Kidney and Urinary Tract Infections without MCC), which comprised almost 13 percent of all of the cases assigned to any of the identified 56 MS-DRGs. Two other common MS-DRGs containing potential cases representing potential patients who may be eligible for treatment involving Plazomicin who have been diagnosed with the specific type of indicated infections for which the technology is intended to be used, using the applicant's analysis approach for UTI based on mapping the ICD-10-CM diagnosis codes were: MS-DRG 872 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ hours without MCC) and MS-DRG 689 (Kidney and Urinary Tract Infections with MCC).
According to the applicant's analyses submitted prior to the FDA approval, as stated in the proposed rule, for potential cases representing patients who have been diagnosed with BSI and who may be eligible for treatment involving Plazomicin, the applicant calculated the average unstandardized case-weighted charge per case using 1,013,597 identified cases (100 percent of all cases) and using 760,332 identified cases (75 percent of all cases) of $87,144 and $67,648, respectively. The applicant applied the same methodology as the combined analysis above. Based on the FY 2018 IPPS/LTCH PPS final rule Table 10 thresholds, the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with BSI assigned to the MS-DRGs identified in the sensitivity analysis was $66,568 in the first scenario utilizing 100 percent of all cases, and $61,087 in the second scenario utilizing 75 percent of all cases. The inflated average case-weighted standardized charge per case was $77,004 in the first scenario and $60,758 in the second scenario; in the 100 percent of Bacteremia cases sensitivity analysis, the final inflated case-weighted standardized charge per case exceeded the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with BSI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the sensitivity analysis by $10,436 before including costs of Plazomicin. In the 75 percent of all cases sensitivity analysis scenario, the final inflated case-weighted standardized charge per case did not
For potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin, the applicant calculated the average unstandardized case-weighted charge per case using 100 percent of all cases and 75 percent of all cases of $59,908 and $48,907, respectively. The applicant applied the same methodology as the combined analysis above. Based on the FY 2018 IPPS/LTCH PPS final rule Table 10 thresholds, the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the first scenario utilizing 100 percent of all cases was $51,308, and $46,252 in the second scenario utilizing 75 percent of all cases. The inflated average case-weighted standardized charge per case was $53,868 in the first scenario and $45,185 in the second scenario. In the 100 percent of cUTI cases sensitivity analysis, the final inflated case-weighted standardized charge per case exceeded the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the 100 percent of all cases sensitivity analysis by $2,560 before including costs of Plazomicin. In the 75 percent of all cases scenario, the final inflated case-weighted standardized charge per case did not exceed the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the 75 percent sensitivity analysis, at $1,067 less than the average case-weighted threshold amount. In the proposed rule, we noted that because the applicant had not yet determined pricing for Plazomicin, however, it is possible that Plazomicin may also exceed the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with cUTI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the 75 percent of all cases sensitivity analysis if charges for Plazomicin are more than $1,067. We invited public comments on whether Plazomicin meets the cost criterion.
We note that the FDA approval for ZEMDRI
The applicant also updated the cost threshold analysis including hospital charges for ZEMDRI
Consistent with the analysis submitted for the proposed rule, the applicant calculated the average unstandardized case-weighted charge per case using 100 percent of all cases and 75 percent of all cases of $59,908 and $48,907, respectively. Consistent with the analysis submitted for the proposed rule, based on the FY 2018 IPPS/LTCH PPS final rule Table 10 thresholds, the average case-weighted threshold amount for potential cases representing patients who have been diagnosed with a cUTI and who may be eligible for treatment involving Plazomicin assigned to the MS-DRGs identified in the first scenario utilizing 100 percent of all cases was $51,308, and $46,252 in the second scenario utilizing 75 percent of all cases. The applicant utilized the same methodology described in the FY 2019 IPPS/LTCH PPS proposed rule with the exception of adding charges for Plazomicin. The applicant removed 50 percent of the charges associated with other drugs (associated with revenue
With respect to the substantial clinical improvement criterion, the applicant asserted that Plazomicin is a next generation aminoglycoside that offers a treatment option for a patient population who have limited or no alternative treatment options. Patients who have been diagnosed with BSI or cUTI caused by MDR Enterobacteria, particularly CRE, are difficult to treat because carbapenem resistance is often accompanied by resistance to additional antibiotic classes. For example, CRE may be extensively drug resistant (XDR) or even pandrug resistant (PDR). CRE are resistant to most antibiotics, and sometimes the only treatment option available to health care providers is a last-line antibiotic (such as colistin and tigecycline) with higher toxicity. According to the applicant, Plazomicin would give the clinician an alternative treatment option for patients who have been diagnosed with MDR bacteria like CRE because it has demonstrated activity against clinical isolates that possess a broad range of resistance mechanisms, including ESBLs, carbapenemases, and aminoglycoside modifying enzymes that limit the utility of different classes of antibiotics. Plazomicin also can be used to treat patients who have been diagnosed with BSI caused by resistant pathogens, such as ESBL-producing Enterobacteriaceae, CRE, and aminoglycoside-resistant Enterobacteriaceae. The applicant maintained that Plazomicin is a substantial clinical improvement because it offers a treatment option for patients who have been diagnosed with serious bacterial infections that are resistant to current antibiotics. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20322), we noted that Plazomicin is not indicated exclusively for resistant bacteria, but rather for certain susceptible organisms of gram-negative bacteria, including resistant and nonresistant strains for which existing antibiotics may be effective. We stated we were concerned that the applicant focused solely on Plazomicin's activity for resistant bacteria and did not supply information demonstrating substantial clinical improvement in treating nonresistant strains in the bacteria families for which Plazomicin is indicated. We note that because the FDA approval was for the cUTI indication only, and not the BSI proposed indication, we are only summarizing comments pertaining to the cUTI indication and evaluating whether ZEMDRI
The applicant stated that Plazomicin also meets the substantial clinical improvement criterion because it significantly improves clinical outcomes for a patient population compared to currently available treatment options. Specifically, the applicant asserted that Plazomicin has: (1) A mortality benefit and improved safety profile in treating patients who have been diagnosed with BSI due to CRE; and (2) statistically better outcomes at test-of-cure in patients who have been diagnosed with cUTI, including higher eradication rates for ESBL-producing pathogens, and lower rate of subsequent clinical relapses. The applicant conducted two Phase III studies, CARE and EPIC. The CARE trial compared Plazomicin to colistin, a last-line antibiotic that is a standard of care agent for patients who have been diagnosed with BSI when caused by CRE. The EPIC trial compared Plazomicin to meropenem for the treatment of patients who have been diagnosed with cUTI/acute pyelonephritis.
The CARE clinical trial was a randomized, open label, multi-center Phase III study comparing the efficacy of Plazomicin against colistin in the treatment of patients who have been diagnosed with BSIs or hospital-acquired bacterial pneumonia (HABP)/ventilator-acquired bacterial pneumonia
According to the applicant, the following results demonstrate a reduced mortality benefit in the patients who had been diagnosed with BSI subset. All-cause mortality at day 28 in the Plazomicin group was more than 5 times less than in the colistin group and all-cause mortality or significant complications at day 28 was reduced by 39 percent in the Plazomicin group compared to the colistin group. There was a large sustained 60-day survival benefit in the patients who had been diagnosed with BSI subset, with survival approximately 70 percent in the Plazomicin group compared to 40 percent in the colistin group. Additionally, according to the applicant, faster median time to clearance of CRE bacteremia of 1.5 versus 6 days for Plazomicin versus colistin and higher rate of documented clearance by day 5 (86 percent versus 46 percent) supported the reduced mortality benefit due to faster and more sustained clearance of bacteremia and also demonstrated clinical improvement in terms of more rapid beneficial resolution of the disease.
The applicant maintained that Plazomicin also represents a substantial clinical improvement in improved safety outcomes. Patients treated with Plazomicin had a lower incidence of renal events (10 percent versus 41.7 percent when compared to colistin), fewer Treatment Emergent Adverse Events (TEAEs), specifically blood creatinine increases and acute kidney injury, and approximately 30 percent fewer serious adverse events were in the Plazomicin group. According to the applicant, other substantial clinical improvements demonstrated by the CARE study for use of Plazomicin in patients who had been diagnosed with BSI included lower rate of superinfections or new infections, occurring in half as many patients treated with Plazomicin versus colistin (28.6 percent versus 66.7 percent).
According to the applicant, the CARE study demonstrates decreased all-cause mortality and significantly reduced disease complications at day 28 (EOS) and day 60 for patients who had been diagnosed with BSI, in addition to a superior safety profile to colistin. However, the applicant stated that, with the achieved enrollment, this study was not powered to support formal hypothesis testing and p-values and 90 percent confidence intervals are provided for descriptive purposes. The total number of patients who had been diagnosed with BSI was 29, with 14 receiving Plazomicin and 15 receiving colistin. While we understand the difficulty enrolling a large number of patients who have been diagnosed with BSI caused by CRE due to severity of the illness and the need for administering treatment promptly, we stated in the proposed rule we were concerned that results indicating reduced mortality and treatment advantages over existing standard of care for patients who have been diagnosed with BSI due to CRE are not statistically significant due to the small sample size. Therefore, we stated that we were concerned that the results from the CARE study cannot be used to support substantial clinical improvement.
The EPIC clinical trial was a randomized, multi-center, multi-national, double-blind study evaluating the efficacy and safety of Plazomicin compared with meropenem in the treatment of patients who have been diagnosed with cUTI based on composite cure endpoint (achieving both microbiological eradication and clinical cure) in the microbiological modified intent-to-treat (mMITT) population. Patients received between 4 to 7 days of IV therapy, followed by optional oral therapy like levofloxacin (or any other approved oral therapy) as step down therapy for a total of 7 to 10 days of therapy. Test-of-cure (TOC) was done 15 to 19 days and late follow-up (LFU) 24 to 32 days after the first dose of IV therapy. Six hundred nine patients fulfilled inclusion criteria, and were randomized to receive either Plazomicin or meropenem, with 306 patients receiving Plazomicin and 303 patients receiving meropenem. Safety analysis included 303 (99 percent) Plazomicin patients and 301 (99.3 percent) meropenem patients. mMITT analysis included 191 (62.4 percent) Plazomicin patients and 197 (65 percent) meropenem patients; exclusion from mMITT analysis was due to lack of study-qualifying uropathogen, which were pathogens susceptible to both Plazomicin and meropenem. In the mMITT population, both groups were comparable in terms of gender, age, percentage of patients who had been diagnosed with cUTI/acute pyelonephritis (AP)/urosepsis/bacteremia/moderate renal impairment at baseline.
According to the applicant, Plazomicin successfully achieved the primary efficacy endpoint of composite cure (combined microbiological eradication and clinical cure). At the TOC visit, 81.7 percent of Plazomicin patients versus 70.1 percent of meropenem patients achieved composite cure; this was statistically significant with a 95 percent confidence interval. Plazomicin also demonstrated higher eradication rates for key resistant pathogens than meropenem at both TOC (89.4 percent versus 75.5 percent) and LFU (77 percent versus 60.4 percent), suggesting that the Plazomicin treatment benefit observed at TOC was sustained. Specifically, Plazomicin demonstrated higher eradication rates, defined as baseline uropathogen reduced to less than 104, against the most common gram-negative uropathogens, including ESBL producing (82.4 percent Plazomicin versus 75.0 percent meropenem) and aminoglycoside resistant (78.8 percent Plazomicin versus 68.6 percent meropenem) pathogens. This was statistically significant, although of note, as total numbers of Enterobacteriaceae exceeded population of mMITT (191 Plazomicin, 197 meropenem) this presumably
According to the applicant, importantly, higher microbiological eradication rates at the TOC and LFU visits were associated with a lower rate of clinical relapse at LFU for Plazomicin treated patients (3 versus 14, or 1.8 percent Plazomicin versus 7.9 percent meropenem), with majority of the meropenem failures having had asymptomatic bacteriuria; that is, positive urine cultures without clinical symptoms, at TOC (21.1 percent), suggesting that the higher microbiological eradication rate at the TOC visit in Plazomicin-treated patients decreased the risk of subsequent clinical relapse. Plazomicin decreased recurrent infection by four-fold compared to meropenem, suggesting improved patient outcomes, such as reduced need for additional therapy and re-hospitalization for patients who have been diagnosed with cUTI. The safety profile of Plazomicin compared to meropenem was similar. The applicant noted that higher bacteria eradication results for Plazomicin were not due to meropenem resistance, as only patients with isolates susceptible to both drugs were included in the study. According to the applicant, the EPIC clinical trial results demonstrate clear differentiation of Plazomicin from meropenem, an agent considered by some as a gold-standard for treatment of patients who have been diagnosed with cUTI in cases due to resistant pathogens.
While the EPIC clinical trial was a non-inferiority study, the applicant contended that statistically significant improved outcomes and lower clinical relapse rates for patients treated with Plazomicin demonstrate that Plazomicin meets the substantial clinical improvement criterion for the cUTI indication. Specifically, according to the applicant, the efficacy results for Plazomicin combined with a generally favorable safety profile provide a compelling benefit-risk profile for patients who have been diagnosed with cUTI, and particularly those with infections due to resistant pathogens. Most patients enrolled in the EPIC clinical trial were from Eastern Europe. We expressed in the proposed rule that it is unclear how generalizable these results would be to patients in the United States as the susceptibilities of bacteria vary greatly by location. The applicant maintained that this is consistent with prior studies and is unlikely to have affected the results of the study because the pharmacokinetics of Plazomicin and meropenem are not expected to be affected by race or ethnicity. However, bacterial resistance can vary regionally and, in the proposed rule, we expressed that we are interested in how this data can be extrapolated to a majority of the U.S. population.
We also stated that it is also unknown how quickly resistance to Plazomicin might develop. Additionally, we stated that the microbiological breakdown of the bacteria is unknown without the full published results, and patients outside of the mMITT population were included when the applicant reported the statistically superior microbiological eradication rates of Enterobacteriaceae at TOC. In the FY 2019 IPPS/LTCH PPS proposed rule, we stated we were concerned whether there is still statistical superiority of Plazomicin in the intended bacterial targets in the mMITT.
The applicant also provided data presenting the breakdown of the uropathogens identified from baseline urine cultures in the mMITT population in the EPIC study, and clarified that statistically superior microbiological eradication rates observed with ZEMDRI
Finally, because both Plazomicin and meropenem were also utilized in conjunction with levofloxacin, we stated in the proposed rule that it is unclear to us whether combined antibiotic therapy will continue to be required in clinical practice, and how levofloxacin activity or resistance might affect the clinical outcome in both patient groups.
We invited public comments on whether Plazomicin meets the substantial clinical improvement criterion for patients who have been diagnosed with BSI and cUTI, including with respect to whether Plazomicin constitutes a substantial clinical improvement for the treatment of patients who have been diagnosed with BSI who have limited or no alternative treatment options, and whether statistically better outcomes at test-of-cure visit, including higher eradication rates for ESBL-producing pathogens, and lower rate of subsequent clinical relapses constitute a substantial clinical improvement for patients who have been diagnosed with cUTI.
In its application, the applicant estimated that the average Medicare beneficiary would require a dosage of 15 mg/kg administered as an IV infusion as a single dose. According to the applicant, the WAC for one dose is $330, and patients will typically require 3 vials for the course of treatment with ZEMDRI
The La Jolla Pharmaceutical Company submitted an application for new technology add-on payments for GIAPREZA
The applicant stated that shock is a life-threatening critical condition characterized by the inability to maintain blood flow to vital tissues due to dangerously low blood pressure (hypotension). Shock can result in organ failure and imminent death, such that mortality is measured in hours and days rather than months or years. Standard therapy for shock currently uses fluid and vasopressors to raise the mean arterial pressure (MAP). The two classes of standard of care (SOC) vasopressors are catecholamines and vasopressins. Patients do not always respond to existing standard of care therapies. Therefore, a diagnosis of shock can be a difficult and costly condition to treat. According to the applicant, 35 percent of patients who are diagnosed with shock fail to respond to standard of care treatment options using catecholamines and go on to second-line treatment, which is typically vasopressin. Eighty percent of patients on vasopressin fail to respond and have no other alternative treatment options. The applicant estimated that CMS covered charges to treat patients who are diagnosed with vasodilatory shock who fail to respond to standard of care therapy are approximately 2 to 3 times greater than the costs of other conditions, such as acute myocardial infarction, heart failure, and pneumonia. According to the applicant, one-third of patients in the intensive care unit are affected by vasodilatory shock, with 745,000 patients who have been diagnosed with shock being treated annually, of whom approximately 80 percent are septic.
With respect to the newness criterion, according to the applicant, the expanded access program (EAP), or FDA authorization for the “compassionate use” of an investigational drug outside of a clinical trial, was initiated August 8, 2017. GIAPREZA
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, GIAPREZA
The applicant explained that GIAPREZA
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, we stated in the proposed rule that we believe that potential cases representing patients who may be eligible for treatment involving GIAPREZA
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, once patients have failed treatment using catecholamines, treatment options for patients who have been diagnosed with severe septic or other distributive shock are limited. According to the applicant, agents that were previously available are each associated with their own adverse events (AEs). The applicant noted that primary options that have been investigated include vasopressin, corticosteroids, methylene blue, and blood purification techniques. Of these options, the applicant stated that only vasopressin has a recommendation as add on vasopressor therapy in current treatment guidelines, but the recommendations are listed as weak with moderate quality of evidence. According to the applicant, there is uncertainty regarding vasopressin's effect on mortality due to mixed clinical trial results, and higher doses of vasopressin have been associated with cardiac, digital, and splanchnic ischemia. Therefore, the applicant asserted that there is a significant unmet medical need for treatments for patients who have been diagnosed with septic or distributive shock who remain hypotensive, despite adequate fluid and vasopressor therapy and for medications that can provide catecholamine-sparing effects.
The applicant also noted that there is currently no standard of care for addressing the clinical state of septic or other distributive shock experienced by patients who fail to respond to fluid and available vasopressor therapy. Additionally, according to the applicant, no clinical evidence or consensus for treatments is available.
Based on the applicant's statements as summarized above, we stated in the proposed rule that it appears that the applicant is asserting that GIAPREZA
In the proposed rule, we invited public comments on whether GIAPREZA
One commenter pointed out that vasoconstriction is a very general and fundamental physiologic mechanism by which blood pressure is regulated, such that it would occur with any regimen for treating patients who have been diagnosed with shock.
Other commenters stated that current standard-of-care treatment options only target two of the three major biological systems regulating MAP, which makes GIAPREZA
With respect to the second criterion, the applicant indicated that there are inherent difficulties in capturing specific patient types for a condition such as a diagnosis of shock, and explained that the current structure of the MS-DRG payment system does not yet have the refined elements necessary to identify those patients likely to respond to treatment involving GIAPREZA
Regarding the third criterion, the applicant contended that although the FDA approval for GIAPREZA
Other commenters similarly stated that GIAPREZA
In addition to the public comments summarized above regarding mechanism of action, MS-DRG assignment of potential cases eligible for treatment involving use of GIAPREZA
With regard to the cost criterion, the applicant conducted an analysis for a narrower indication, patients who have been diagnosed with refractory shock who have failed to respond to standard of care vasopressors, and an analysis for a broader indication of all patients who have been diagnosed with septic or other distributive shock. In the FY 2019 IPPS/LTCH PPS proposed rule (82 FR 20325), we stated we believed that only this broader analysis, which reflects the patient population for which the applicant's technology is approved by the FDA, is relevant to demonstrate that the technology meets the cost criterion and, therefore, we only summarized this broader analysis in the proposed rule (and below). In order to identify the range of MS-DRGs that potential cases representing potential patients who may be eligible for treatment using GIAPREZA
The first analysis (Scenario 1) selected the MS-DRGs most representative of the potential patient cases where treatment involving GIAPREZA
Among only the top quartile of potential patient cases, the single MS-DRG representative of most potential patient cases was MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation >96 Hours with MCC) for both ICD-9-CM diagnosis code selection scenarios, and in both selections, it accounted for a potential patient case percentage surpassing 25 percent. Because GIAPREZA
Results of the analyses for each of the two code selection scenarios, each with three sensitivity analyses for a total of six analyses, are summarized in the tables below:
The applicant maintained that, based on the Table 10 thresholds, the inflated average case-weighted standardized charge per case in the analyses exceeded the average case-weighted threshold amount. The applicant noted that the inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount by at least $18,189, without the average per patient cost of the technology. As such, the applicant anticipated that the inclusion of the cost of GIAPREZA
The applicant noted, as noted in the proposed rule, that the inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount before including the average per patient cost of the technology. The applicant also added charges for the cost of the technology to its updated analysis. The applicant indicated that the WAC of GIAPREZA
To estimate the anticipated average charge submitted by hospitals for use of GIAPREZA
With respect to the substantial clinical improvement criterion, the applicant summarized that it believes that GIAPREZA
Expanding on the statements above, we stated in the proposed rule that the applicant believes that the use of GIAPREZA
The applicant maintained that GIAPREZA
Second, the applicant maintained that GIAPREZA
Third, the applicant asserted that GIAPREZA
In the proposed rule, we noted that the applicant stated that while the study was not powered to detect mortality effects, there was a nonsignificant trend toward longer survival in the GIAPREZA
The applicant concluded that GIAPREZA
We stated in the proposed rule that we understood that, in this heterogeneous and difficult to treat patient population, studies assessing mortality as a primary endpoint are difficult, and as such, surrogate endpoints (that is, achieving baseline MAP) have been explored to assess the efficacy of treatments. While the outcomes presented by the applicant, such as achieving target MAP, lower SOFA scores, and reduced catecholamine usage, could be surrogates for clinical outcomes in these patients, we stated that there is not a strong pool of evidence connecting these single data points directly with morbidity and mortality. Therefore, in the proposed rule, we stated that we were unsure whether achieving target MAP, lower SOFA scores, and reduced catecholamine usage represents a substantial clinical improvement or instead short-term, temporary improvements without a change in overall patient prognosis.
In response to this concern about MAP constituting a meaningful measure for substantial clinical improvement, the applicant supplied additional information from the current Surviving Sepsis guidelines, which recommend an initial target MAP of 65 mmHg. The applicant explained that as MAP falls below a critical threshold, inadequate tissue perfusion occurs, potentially resulting in multiple organ dysfunction and death. Therefore, early and adequate hemodynamic support and treatment of hypotension is critical to restore adequate organ perfusion and prevent worsening organ dysfunction and failure. In diagnoses of septic or distributive shock, the goal of treatment is to increase and maintain a threshold MAP in order to improve tissue perfusion. According to the applicant, tissue perfusion becomes linearly dependent on arterial pressure below a threshold MAP. In patients who have been diagnosed with septic shock requiring vasopressors, the current Surviving Sepsis guidelines are based on available evidence that demonstrates that adequate MAP is important to clinical outcomes and that prolonged decreases in MAP below 65 mmHg is associated with poor outcome. According to information supplied by the applicant, even short durations like less than 5 minutes of low MAP have been associated with severe outcomes, such as myocardial infarction, stroke, and acute kidney injury. The applicant stated that a retrospective study
Finally, we stated in the proposed rule that we were concerned that the study results may demonstrate substantial clinical improvement only for patients who are unresponsive to the administration of fluids and vasopressors because patients were only included in the ATHOS-3 study if they failed fluids and vasopressors, rather than for the broader patient population of adult patients who have been diagnosed with septic or other distributive shock for which GIAPREZA
The applicant also reiterated that clinical data showing GIAPREZA
In response to our concern that the mortality benefit was not statistically significant, the applicant stated that the p-values for the decrease in mortality rates with use of GIAPREZA
The applicant also disagreed with CMS regarding our statement in the proposed rule that there is not a strong pool of evidence directly connecting target MAP, lower SOFA scores, and reduced catecholamine usage with morbidity and mortality. The applicant submitted additional evidence from the Surviving Sepsis Campaign and international and European consensus guidelines to demonstrate that maintaining an adequate MAP is a clinically meaningful benefit affecting morbidity and mortality. The applicant reiterated that when MAP drops below 60 mmHg, the human body loses autoregulatory control of blood supply to key organs,
The applicant also stated that clinical data show reduced catecholamine use, a benefit of treatment involving GIAPREZA
Finally, in response to our concern that the results from the clinical trial may be too narrow to accurately represent the entire patient population that has been diagnosed with septic or other distributive shock and, therefore, may not adequately demonstrate that GIAPREZA
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Other commenters supported the clinical results and evidence of GIAPREZA
After consideration of the public comments we received, we have determined that GIAPREZA
In its application, the applicant estimated that the average Medicare beneficiary would require a dosage of 20ng/kg/min administered as an IV infusion over 48 hours, which would require 2 vials. The applicant explained that the WAC for one vial is $1,500, with each episode-of-care costing $3,000 per patient. Under § 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 the use of GIAPREZA
Claret Medical, Inc. submitted an application for new technology add-on payments for the Cerebral Protection System (Sentinel® Cerebral Protection System) for FY 2019. According to the applicant, the Sentinel Cerebral Protection System is indicated for the use as an embolic protection (EP) device to capture and remove thrombus and debris while performing transcatheter aortic valve replacement (TAVR) procedures. The device is percutaneously delivered via the right radial artery and is removed upon completion of the TAVR procedure. The De Novo request for the Sentinel® Cerebral Protection System was granted by FDA on June 1, 2017 (DEN160043).
Aortic stenosis (AS) is a narrowing of the aortic valve opening. AS restricts blood flow from the left ventricle to the aorta and may also affect the pressure in the left atrium. The most common presenting symptoms of AS include dyspnea on exertion or decreased exercise tolerance, exertional dizziness (presyncope) or syncope and exertional angina. Symptoms experienced by patients who have been diagnosed with AS and normal left ventricular systolic function rarely occur until stenosis is severe (defined as valve area is less than 1.0 cm2, the jet velocity is over 4.0 m/sec, and/or the mean transvalvular gradient is greater than or equal to 40 mmHg).
The TAVR procedure is a minimally invasive procedure that does not involve open heart surgery. During a TAVR procedure the prosthetic aortic valve is placed within the diseased native valve. The prosthetic valve then becomes the functioning aortic valve. As previously outlined, stroke is one of the risks associated with TAVR procedures. According to the applicant, the risk of stroke is highest in the early post-procedure period and, as previously outlined, is likely due to mechanical factors occurring during the TAVR procedure.
As stated earlier, the De Novo request for the Sentinel® Cerebral Protection System was granted by FDA on June 1, 2017. The FDA concluded that this device should be classified into Class II (moderate risk). Effective October 1, 2016, ICD-10-PCS Section “X” code X2A5312 (Cerebral embolic filtration, dual filter in innominate artery and left common carotid artery, percutaneous approach) was approved to identify cases involving TAVR procedures using the Sentinel® Cerebral Protection System.
As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.
With 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, the Sentinel® Cerebral Protection System device is inserted at the beginning of the TAVR procedure, via a small tube inserted through a puncture in the right wrist. Next, using a minimally invasive catheter, two small filters are placed in the brachiocephalic and left common carotid arteries. The filters collect debris, preventing it from becoming emboli, which can travel to the brain. These emboli, if left uncaptured, can cause cerebral ischemic lesions, often referred to as silent ischemic cerebral infarctions, potentially leading to cognitive decline or clinically overt stroke. At the completion of the TAVR procedure, the filters, along with the collected debris, are removed. The applicant stated that there are no other similar products for commercial sale available in the United States for cerebral protection during TAVR procedures. Two neuroprotection devices, the Triguard
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, as stated earlier, the Sentinel® Cerebral Protection System is an EP device used to capture and remove thrombus and debris while performing TAVR procedures. Therefore, potential cases representing patients who may be eligible for treatment involving this device would map to the same MS-DRGs as cases involving TAVR procedures.
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, this technology will be used to treat patients who have been diagnosed with severe aortic valve stenosis who are eligible for a TAVR procedure. The applicant asserted that there are currently no approved alternative treatment options for cerebral protection during TAVR procedures, and the Sentinel® Cerebral Protection System is the first and only embolic protection device for use during TAVR procedures and, therefore, meets the newness criterion. The applicant also asserted that the device meets the newness criterion, as evidenced by the FDA's granting of the De Novo request and there was no predicate device.
Based on the above, we stated in the proposed rule that it appears that the Sentinel® Cerebral Protection System is not substantially similar to other existing technologies. We invited public comments on whether the Sentinel® Cerebral Protection System is substantially similar to any existing technology and whether it meets the newness criterion.
The applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. The applicant searched the FY 2016 MedPAR file for cases with the following ICD-10-CM procedure codes to identify cases involving TAVR procedures, which are potential cases representing patients who may be eligible for treatment involving use of the Sentinel® Cerebral Protection System: 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); and 02RF3KH (Replacement of aortic valve with nonautologous tissue substitute, transapical, percutaneous approach). This process resulted in 26,012 potential cases. The applicant limited its search to MS-DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and MS-DRG
Using the 26,012 identified cases, the applicant determined that the average unstandardized case-weighted charge per case was $211,261. No charges were removed for the prior technology because the device is used to capture and remove thrombus and debris while performing TAVR procedures. The applicant then standardized the charges, but did not inflate the charges. The applicant then added charges for the new technology to the average case-weighted standardized charges per case by taking the cost of the device and dividing the amount by the CCR of 0.332 for implantable devices from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38103). The applicant calculated a final inflated average case-weighted standardized charge per case of $187,707 and a Table 10 average case-weighted threshold amount of $170,503. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount, the applicant maintained that the technology met the cost criterion. We invited public comments on whether the Sentinel® Cerebral Protection System meets the cost criterion.
With regard to the substantial clinical improvement criterion, the applicant asserted that the Sentinel® Cerebral Protection System represents a substantial clinical improvement over existing technologies because it is the first and only cerebral embolic protection device commercially available in the United States for use during TAVR procedures. The applicant stated that the data below shows that the Sentinel® Cerebral Protection System effectively captures brain bound embolic debris and significantly improves clinical outcomes (that is, stroke) beyond the current standard of care, that is, TAVR procedures with no embolic protection.
The applicant provided the results of four key studies: (1) The SENTINEL® study
• Safety Arm patients who underwent a TAVR procedure involving the Sentinel® Cerebral Protection System—Patients enrolled in this arm of the study received safety follow-up at discharge, at 30 days and 90 days post-procedure; and neurological evaluation at baseline, discharge, 30 days and 90 days (only in the case of a stroke experienced less than or equal to 30 days) post-procedure. The Safety Arm patients did not undergo MRI or neurocognitive assessments.
• Test Arm patients who underwent a TAVR procedure involving the Sentinel® Cerebral Protection System—Patients enrolled in this arm of the study underwent safety follow-up at discharge, at 30 days and 90 days post-procedure; MRI assessment for efficacy at baseline, 2 to 7 days and 30 days post-procedure; neurological evaluation at baseline, discharge, 30 days and 90 days (only in the case of a stroke experienced less than or equal to 30 days) post-procedure; neurocognitive evaluation at baseline, 2 to 7 days (optional), 30 days and 90 days post-procedure; Quality of Life assessment at baseline, 30 days and 90 days; and histopathological evaluation of debris captured in the Sentinel® Cerebral Protection System's device filters.
• Control Arm patients who underwent a TAVR procedure only—Patients enrolled in this arm of the study underwent safety follow-up at discharge, at 30 days and 90 days post-procedure; MRI assessment for efficacy at baseline, 2 to 7 days and 30 days post-procedure; neurological evaluation at baseline, discharge, 30 days and 90 days (only in the case of a stroke experienced less than or equal to 30 days) post-procedure; neurocognitive evaluation at baseline, 2 to 7 days (optional), 30 days and 90 days post-procedure; and Quality of Life assessment at baseline, 30 days and 90 days.
The primary safety endpoint was occurrence of major adverse cardiac and cerebrovascular events (MACCE) at 30 days compared with a historical performance goal. MACCE was defined as follows: All causes of death; all strokes (disabling and nondisabling, Valve Academic Research Consortium-2 (VARC-2)); and acute kidney injury (stage 3, VARC-2). The point estimate for the historical performance goal for the primary safety endpoint at 30 days post-TAVR procedure was derived from a review of published reports of 30-day TAVR procedure outcomes. The VARC-2 established an independent collaboration between academic research organizations and specialty societies (cardiology and cardiac surgery) in the United States and Europe to create consistent endpoint definitions and consensus recommendations for implementation in TAVR procedure clinical research.
The applicant reported that results of the SENTINEL® study demonstrated the following:
• The rate of MACCE was numerically lower than the control arm, 7.3 percent versus 9.9 percent, but was not statistically significant from that of the control group (p=0.41).
• New lesion volume was 178.0 mm
• Strokes experienced at 30 days were 9.1 percent in control patients and 5.6 percent in patients treated with the Sentinel® Cerebral Protection System devices (p=0.25). Neurocognitive function was similar in control patients
• Debris was found within filters in 99 percent of patients and included thrombus, calcification, valve tissue, artery wall, and foreign material.
• The applicant also noted that the post-hoc analysis of these data demonstrated that there was a 63 percent reduction in 72-hour stroke rate (compared to control), p=0.05.
According to the applicant, the CLEAN-TAVI (Claret Embolic Protection and TAVI) trial, was a small, randomized, double-blind, controlled trial. The trial consisted of 100 patients assigned to either EP (n=50) with the Claret Medical, Inc. device (the Sentinel® Cerebral Protection System) or to no EP (n=50). Patients were all treated with femoral access and self-expandable (SE) devices. The study endpoint was the number of brain lesions at 2 days post-procedure versus baseline. Patients were evaluated with DW-MRI at 2 and 7 days post-TAVR procedure. The mean age of patients was 80 years old; 43 percent were male. The study results showed that patients treated with the Sentinel® Cerebral Protection System had a lower number of new lesions (4.00) than patients in the control group (10.0); (p<0.001).
According to the applicant, the single-center Ulm study, a large propensity matched trial, with 802 consecutive patients, occurred at the University of Ulm between 2014 and 2016. The first 522 patients (65.1 percent of patients) underwent a TAVR procedure without EPs, and the subsequent 280 patients (34.9 percent of patients) underwent a TAVR procedure with EP involving the Sentinel® Cerebral Protection System. For both arms of the study, a TAVR procedure was performed in identical settings except without cerebral EP, and neurological follow-up was performed within 7 days post-procedure. The primary endpoint was a composite of all-cause mortality or all-stroke according to the VARC-2 criteria within 7 days. The authors who documented the study noted the following:
• Patient baseline characteristics and aortic valve parameters were similar between groups, that both filters of the device were successfully positioned in 280 patients, all neurological follow-up was completed by the 7th post-procedure date, and that propensity score matching was performed to account for possible confounders.
• Results indicated a decreased rate of disabling and nondisabling stroke at 7 days post-procedure was seen in those patients who were treated with the Sentinel® Cerebral Protection System device versus control patients (1.6 percent versus 4.6 percent, p=0.03).
• At 48 hours, stroke rates were lower with patients treated with the Sentinel® Cerebral Protection System device versus control patients (1.1 percent versus 3.6 percent, p=0.03).
• In multi-variate analysis, TAVR procedures performed without the use of a EP device was found to be an independent predictor of stroke within 7 days (p=0.04).
The aim of the MISTRAL-C study was to determine if the Sentinel® Cerebral Protection System affects new brain lesions and neurocognitive performance after TAVR procedures. The study was designed as a multi-center, double-blind, randomized trial enrolling patients who were diagnosed with symptomatic severe aortic stenosis and 1:1 randomization to TAVI patients treated with or without the Sentinel® Cerebral Protection System. From January 2013 to August 2015, 65 patients were enrolled in the study. Patients ranged in age from 77 years old to 86 years old, 15 (47 percent) were female and 17 (53 percent) were male patients randomized to the Sentinel® Cerebral Protection System group and 16 (49 percent) were female and 17 (51 percent) were male patients randomized to the control group. There were 3 mortalities between 5 days and 6 months post-procedure for the Sentinel® Cerebral Protection System group. There were no strokes reported for the Sentinel® Cerebral Protection System group. There were 7 mortalities between 5 days and 6 months post-procedure for the control group. There were 2 strokes reported for the control group. Patients underwent DW-MRI and neurological examination, including neurocognitive testing 1 day before and 5 to 7 days after TAVI. Follow-up DW-MRI and neurocognitive testing was completed in 57 percent of TAVI patients treated with the Sentinel® Cerebral Protection System and 80 percent for the group of TAVI patients treated without the Sentinel® Cerebral Protection System. New brain lesions were found in 78 percent of the patients with follow-up MRI. According to the applicant, patients treated with the Sentinel® Cerebral Protection System had numerically fewer new lesions and a smaller total lesion volume (95 mm3 versus 197 mm3). Overall, 27 percent of the patients treated with the Sentinel® Cerebral Protection System and 13 percent of the patients treated in the control group had no new lesions. Ten or more new brain lesions were found only in the patients treated in the control group (20 percent in the control group versus 0 percent in the Sentinel® Cerebral Protection System group, p=0.03). Neurocognitive deterioration was present in 4 percent of the patients treated with the Sentinel® Cerebral Protection System versus 27 percent of the patients treated without (p=0.017). The filters captured debris in all of the patients treated with Sentinel® Cerebral Protection System device.
In the Ulm study, the primary outcome was a composite of all-cause mortality or stroke at 7 days, and occurred in 2.1 percent of the Sentinel® Cerebral Protection System group versus 6.8 percent of the control group(p=0.01, number needed to treat (NNT)=21). Use of the Sentinel® Cerebral Protection System device was associated with a 2.2 percent absolute risk reduction in mortality with NNT 45. Composite endpoint of major adverse cardiac and cerebrovascular events (MACCE) was found in 2.1 percent of those patients undergoing a TAVR procedure with the use of the Sentinel® Cerebral Protection System device versus 7.9 percent in the control group (p=0.01). Similar but statistically nonsignificant trends were found in the SENTINEL® study, with rate of MACCE of 7.3 percent in the Sentinel® Cerebral Protection System group versus 9.9 percent in the control group (p=0.41).
The applicant reported that the four studies discussed above that evaluated the Sentinel® Cerebral Protection System device have limitations because they are either small, nonrandomized and/or had significant loss to follow-up. In the proposed rule, we stated that a meta-analysis of EP device studies, the majority of which included use of the Sentinel® Cerebral Protection System device, found that use of cerebral EP devices was associated with a nonsignificant reduction in stroke and death.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20338), we stated
• The SENTINEL® study, although a randomized study, did not meet its primary endpoint as illustrated by non-statistically significant reduction in new lesion volume on MRI or non-disabling strokes within 30 days (5.6 percent stroke rate in the Sentinel® Cerebral Protection System device group versus a 9.1 percent stroke rate in the control group at 30 days; p=0.25).
• Only with a post-hoc analysis of the SENTINEL® study data were promising trends noted where the device use was associated with a 63 percent reduction in stroke events at 72 hours (p=0.05).
With regard to the above, the applicant responded and explained the following with respect to the SENTINEL® trial:
• The SENTINEL® trial's success criteria were designed with two primary efficacy endpoints that were a surrogate imaging endpoint combination of: (1) Observed reduction of 30 percent in new lesion volume on MRI; and (2) statistical reduction in new lesion volume on MRI. The applicant indicated that the trial was successful in demonstrating a 42 percent reduction in new lesion volume, but as CMS pointed out, it did not, on its own, reach statistical significance, which the applicant stated was because of, in part, the surrogate nature of the endpoint as well as the higher than expected variability. The applicant noted that the variability resulted from the following sources: (1) Variability in the MRI data, in part due to the variability in the allowed time window of 2 to 7 days, logistics of scheduling follow-up MRIs within this time window for elderly patients, and the transient nature of the DW-MRI signal over time which made the signal decay rate very noisy; (2) variability due to multiplicity (total of four types) of TAVR valve types (including balloon expandable and self-expanding) introduced mid-course into the trial (the trial was powered for only two types of TAVR valves originally), which behaved differently and required different procedural parameters in terms of pre-dilatation or post-dilatation and repositioning; and (3) variability in the patient baseline lesion volumes burden or white matter disease, which was unaccounted for because this was new science generated as a result of this trial
• In retrospect, the SENTINEL® trial was underpowered for the surrogate efficacy endpoint. However, according to the applicant, a meta-analysis of all three randomized trials of Claret dual-filter technology in TAVR using MRI endpoints by Latib, et al. (2017), which had an increased number of patients available for analysis, did show statistically significant reduction in new lesion volume.
• The primary safety endpoint for the SENTINEL® trial was occurrence of all Major Adverse Cardiac and Cerebrovascular Events (MACCE) at 30 days compared to a historical performance goal, and the Sentinel® Cerebral Protection System met this endpoint for noninferiority (p<0.001) and superiority (p=0.0026)
• The SENTINEL® trial was not designed to be powered to show a statistically significant reduction in procedural stroke between trial arms at 30-days; therefore, it did not reach statistical significance. However, according to the applicant, investigators were encouraged by the trend to lower rates of stroke in the Sentinel® arms (5.6 percent) as compared to Control (9.1 percent) at 30-days. Additionally, more than 60 percent of ischemic neurological events in TAVR occur during the acute peri procedural phase as a result of thromboembolic debris released from manipulation of TAVR and accessory devices in a heavily atherosclerotic vascular and valvular structures.
The applicant stated that an independent group recently published a similar meta-analysis of the same 5 randomized trials in the
However, in April 2018, based on updated data, the authors for the 2017 Giustino, G., et al. publication updated their conclusion of the 2017 meta-analysis and stated the following: “In conclusion, the totality of the data suggests that use of EP during TAVR appears to be associated with a nonsignificant trend towards reduction in death or stroke.” Therefore, we continue to be concerned that the use of cerebral protection devices may not be associated with a significant reduction in stroke and death beyond 7 days (which is the focus of the meta-analysis). However, we note, as discussed below, the applicant has responded with additional information regarding the reduction in death or stroke within 7 days.
The applicant added that it believed that the 1 to 7 day time period is the most appropriate for evaluation of cerebral protection efficacy because it is difficult to accurately diagnose neurological impairment immediately post-operatively when the patient is recovering from the effects of anesthesia and some sequelae of embolic events can take time to evolve and be diagnosed, and conversely time points later than a week or so are confounded by strokes unrelated to embolic events during the index procedure, such as New Onset of Atrial Fibrillation (NOAF), suboptimal concomitant anti-platelet/anticoagulation medication, and other comorbid history of the patients.
The applicant noted that, in the past few months, a number of TAVR centers have begun to share their data from routine practice using the Sentinel® Cerebral Protection System in TAVR procedures, which are in line with the clinical event reductions seen in the aforementioned trials. The applicant provided information from the following TAVR centers:
• Erasmus Medical Center (Rotterdam, The Netherlands) demonstrated comprehensive and systematic analysis of 747 TAVR patients treated with or without the use of the Sentinel® EP with independent neurological adjudication of the events. The applicant noted that, as presented by Nicolas van Mieghem, MD at the Joint Interventional Meeting (JIM) 2018 and Cardiovascular Research Technologies (CRT) 2018 conferences in February and March, there was an 80 percent relative risk reduction from 5 percent (23/453) to 1 percent (3/294) for all-stroke + TIA at 3 days with use of Sentinel® (p<0.01).
• Data from Cedars-Sinai Medical Center in Los Angeles, CA from a
• Data from Pinnacle Health (Harrisburg, PA) as presented by Hemal Gada, MD at the CMS New Technology Town Hall meeting, February 2018, demonstrated a reduction from 10 percent (7/69) 7-day stroke rate without the use of the Sentinel® to 0 percent (0/53) with the use of the Sentinel®, as of the time at the Town Hall presentation in February.
The applicant concluded that the clinical evidence is robust, consistent, reliable, and repeatable and that the totality of the data shows that Sentinel® Cerebral Protection System represents a substantial clinical improvement for patients undergoing TAVR procedures.
After consideration of the public comments we received, we have determined that the Sentinel® Cerebral Protection System meets all of the criteria for approval for new technology add-on payments. Therefore, we are approving new technology add-on payments for the Sentinel® Cerebral Protection System for FY 2019. Cases involving the use of the Sentinel® Cerebral Protection System that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure code X2A5312. In its application, the applicant estimated that the cost of the Sentinel® Cerebral Protection System is $2,400. Under § 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 the use of the Sentinel® Cerebral Protection System is $1,400 for FY 2019.
PROCEPT BioRobotics Corporation submitted an application for new technology add-on payments for the AquaBeam System (Aquablation) for FY 2019. According to the applicant, the AquaBeam System is indicated for the use in the treatment of patients experiencing lower urinary tract symptoms caused by a diagnosis of benign prostatic hyperplasia (BPH). The AquaBeam System consists of three main components: a console with two high-pressure pumps, a conformal surgical planning unit with trans-rectal ultrasound imaging, and a single-use robotic hand-piece.
The applicant reported that The AquaBeam System provides the operating surgeon a multi-dimensional view, using both ultrasound image guidance and endoscopic visualization, to clearly identify the prostatic adenoma and plan the surgical resection area. Based on the planning inputs from the surgeon, the system's robot delivers Aquablation, an autonomous waterjet ablation therapy that enables targeted, controlled, heat-free and immediate removal of prostate tissue used for the purpose of treating lower urinary tract symptoms caused by a diagnosis of BPH. The combination of surgical mapping and robotically-controlled resection of the prostate is designed to offer predictable and reproducible outcomes, independent of prostate size, prostate shape or surgeon experience.
In its application, the applicant indicated that benign prostatic hyperplasia (BPH) is one of the most commonly diagnosed conditions of the male genitourinary tract
The initial treatment for a patient who has been diagnosed with BPH is watchful waiting and medications.
According to the applicant, while the TURP procedure achieves alleviation of the symptoms that affect the lower urinary tract associated with a diagnosis of BPH, morbidity rates caused by adverse events are high following the procedure. The TURP procedure has a well-documented history of associated adverse effects, such as hematuria, clot retention, bladder wall injury, hyponatremia, bladder neck contracture, urinary incontinence, and retrograde ejaculation.
The applicant asserted that the AquaBeam System provides superior safety outcomes as compared to the TURP procedure, while providing non-inferior efficacy in treating the symptoms that affect the lower urinary tract associated with a diagnosis of BPH. The applicant further stated that the AquaBeam System yields consistent and predictable procedure and resection times regardless of the size and shape of the prostate and the surgeon's experience. Lastly, according to the applicant, the AquaBeam System provides increased efficacy and safety for larger prostates as compared to the TURP procedure.
With respect to the newness criterion, FDA granted the applicant's
As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for the 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, the applicant stated that the AquaBeam System is the first technology to deliver treatment to patients who have been diagnosed with BPH for the symptoms that effect the lower urinary tract caused by BPH via Aquablation therapy. The AquaBeam System utilizes intra-operative image guidance for surgical planning and then Aquablation therapy to robotically resect tissue utilizing a high-velocity waterjet. According to the applicant, all other BPH treatment procedures only utilize cystoscopic visualization, whereas the AquaBeam System utilizes Aquablation therapy, a combination of cystoscopic visualization and intra-operative image guidance. According to the applicant, the AquaBeam System's use of Aquablation therapy qualifies it as the only technology to utilize a high-velocity room temperature waterjet for tissue resection, while most other BPH surgical procedures utilize thermal energy to resect prostatic tissue, or require the implantation of clips to pull back prostatic tissue blocking the urethra. Lastly, according to the applicant, all other surgical modalities are executed by the operating surgeon, while the AquaBeam System allows planning by the surgeon and utilization of Aquablation therapy ensures accurate and efficient tissue resection is autonomously executed by the robot.
With respect to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that potential cases representing potential patients who may be eligible for treatment involving the AquaBeam System's Aquablation therapy technique will ultimately map to the same MS-DRGs as cases for existing BPH 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, the applicant
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20346), we stated we had the following concerns regarding whether the AQUABEAM System meets the newness criterion. Currently, there are many treatment options that utilize varying forms of ablation, such as mono and bipolar TURP procedures, laser, microwave, and radiofrequency, to treat the symptoms associated with a diagnosis of BPH. We stated that we were concerned that, while this device utilizes water to perform any tissue removal, its mechanism of action may not be different from that of other forms of treatment for patients who have been diagnosed with BPH. Further, the use of water to perform tissue removal in the treatment of associated symptoms in patients who have been diagnosed with BPH has existed in other areas of surgical treatment prior to the introduction of this product (for example, endometrial ablation and wound debridement). In addition, the standard operative treatment, such as with the TURP procedure, for patients who have been diagnosed with BPH is to widen the urethra compressed by an enlarged prostate in an effort to alleviate the negative effects of an enlarged prostate. Like other existing methods, the AQUABEAM System's Aquablation therapy also ablates tissue to relieve compression of the urethra. Additionally, while the robotic arm and computer programing may result in different outcomes for patients, we stated we were uncertain that the use of the robotic hand and computer programming result in a new mechanism of action. We invited public comments on this issue.
We also invited public comments on whether the AQUABEAM System's Aquablation therapy is substantially similar to existing technologies and whether it meets the newness criterion.
The applicant also believed that CMS' concerns that the use of water to perform tissue removal may not be different than other forms of tissue removal in treating BPH, the use of water has been used in other areas such as endometrial ablation and wound debridement, and there is uncertainty that the use of a robotic hand and computer programming result in a new mechanism of action reflect a broad interpretation of mechanism of action. The applicant stated that the notion that all ablation techniques are similar ignores the fact that ablation is used to treat a variety of illnesses and conditions throughout the body using a variety of technological approaches with varying effectiveness. The applicant reiterated that it believed the three mechanisms of action of the AquaBeam System are unique in prostate treatment when compared to all other existing prostate treatments, and the AquaBeam System is the only ablation technique that utilizes room-temperature water whereas other ablative approaches such as TURP, laser vaporization (PVP), laser resection (HoLEP/ThuLEP), microwave necrosis (TUMT), and mechanical radio-frequency resection (open simple prostatectomy) utilize heat as the primary mechanism of action. The applicant explained that the waterjet mechanism of action has the advantage of sparing sensitive tissues around the prostate like the bladder neck, verumontanum, and nerve and vascular tissues, whereas other ablative approaches are tissue agnostic. The applicant also disagreed with CMS' comparison of Aquablation therapy to wound debridement and tissue dissection because the surgical goals are different. The applicant stated that, in the application of wound debridement the surgical goal is wound cleansing and debris removal using a waterjet, and in tissue dissection, the goal is tissue separation or disassociating the parenchymal connective tissue. The applicant further stated, in contrast, the goal of all BPH surgical procedures is to remove excessive prostatic tissue. The applicant reiterated that the use of the robotic handpiece and computer programming is the essence of the AquaBeam System to deliver Aquablation therapy, and these components allow the surgeon to visualize the prostate in a way that was previously unavailable in BPH surgery to precisely determine the specific prostatic tissue to resect, which is not possible with existing technologies. The applicant further indicated that the
The applicant also stated that CMS has not historically applied such a broad definition when defining and evaluating mechanism of action, as in example, for new technology add-on payments for the INTUITY and Perceval valves that are aortic valve replacements that share the surgical goal of providing the patient with a functioning aortic valve. The applicant noted that, CMS determined the mechanisms of action of the INTUITY and Perceval valves in achieving the surgical goal were not substantially similar to treatments that were available at the time, and both technologies were approved for new technology add-on payments. In addition, the applicant stated that drug-coated balloons (a new combination of existing balloon and existing drugs) have a surgical goal similar to non-drug coated balloons of creating a lumen in the artery, and CMS determined that the drug-coated balloons used a different mechanism of action and similarly approved both applications for new technology add-on payments. The applicant explained that, in the case of Aquablation therapy, the surgical goal is similar to other BPH technologies in creating an opening in the prostatic urethra. However, the applicant indicated, as described above, the mechanism of action is different from any other technologies currently available. The applicant believed that, applying the same criterion as applied in the historical examples, the AquaBeam System meets the criteria for approval of new technology add-on payments.
The applicant also stated that for large prostates, the MS-DRG assignment for potential cases representing patients eligible for treatment involving the AquaBeam System would be similar to normal transurethral prostate treatments, which is different than the MS-DRG assignment for open prostatectomy (OP). The applicant believed that potential cases involving Aquablation therapy would group to MS-DRGs 713 and 714 (Transurethral Prostatectomy) and open simple prostatectomy procedures would group to MS-DRGs 707 and 708 (Major Male Pelvic Procedures). The applicant stated that, for prostates sized less than 80 ml, potential cases involving Aquablation therapy would map to the same MS-DRGs as other transurethral procedures, and for large prostates greater than 80 ml in size, procedures involving Aquablation therapy in lieu of an open prostatectomy would result in a different MS-DRG assignment. Therefore, the applicant believed AquaBeam System's Aquablation therapy meets this criterion under substantial similarity.
Other commenters believed that the AquaBeam System met the newness criterion. The commenters stated that the use of imaging and ultrasound, the autonomous robotic execution of the procedure, and the use of room temperature water rather than heat, combined make the AquaBeam System a novel treatment for BPH. Another commenter further indicated that many other technologies are surgeon- and experience-dependent, whereas the AquaBeam System's image guided procedure with robotic execution allows for a greater degree of precision and monitoring of the treatment independent of experience or expertise. The commenter believed that the addition of image guidance and robotic execution of the procedure leads to consistent results independent of surgeon experience.
With regard to the cost criterion, the applicant conducted the following analysis to demonstrate that the technology meets the cost criterion. Given that at the time of the analysis, the AquaBeam System's Aquablation therapy procedure did not have a unique ICD-10-PCS procedure code, the applicant searched the FY 2016 MedPAR data file for cases with the following current ICD-10-PCS codes describing other BPH minimally invasive procedures to identify potential cases representing potential patients who may be eligible for treatment involving the AquaBeam System's Aquablation therapy: 0V507ZZ (Destruction of prostate, via natural or artificial opening), 0V508ZZ (Destruction of prostate, via natural or artificial opening endoscopic), 0VT07ZZ (Resection of prostate, via natural or artificial opening), and 0VT08ZZ (Resection of prostate, via natural or artificial opening endoscopic). The applicant identified a total of 133 MS-DRGs using these ICD-10-PCS codes.
In order to calculate the standardized charges per case, the applicant conducted two analyses, based on 100 percent and 75 percent of identified claims in the FY 2016 MedPAR data file. The applicant based its analysis on 100 percent of claims mapping to 133 MS-DRGs, and 75 percent of claims mapping to 6 MS-DRGs. The cases identified in the 75 percent analysis mapped to MS-DRGs 665 (Prostatectomy with MCC), 666 (Prostatectomy with CC), 667 (Prostatectomy without CC/MCC), 713 (Transurethral Prostatectomy with CC/MCC), 714 (Transurethral Prostatectomy without CC/MCC), and 988 (Non-Extensive O.R. Procedures Unrelated to Principal Diagnosis with CC). In situations in which there were fewer than 11 cases for individual MS-DRGs in the MedPAR data file, a value of 11 was imputed to ensure confidentiality for patients. When evaluating 100 percent of the cases identified, the applicant included low-volume MS-DRGs that had equal to or less than 11 total cases to represent potential patients who may be eligible for treatment involving the AquaBeam System's Aquablation therapy in order to calculate the average case-weighted unstandardized and standardized charge amounts. The 75 percent analysis removed those MS-DRGs with 11 cases or less representing potential patients who may be eligible for treatment involving the AquaBeam System's Aquablation therapy, resulting in only 6 of the 133 MS-DRGs remaining for analysis. A total of 8,449 cases were included in the 100 percent analysis and 6,285 cases were included in the 75 percent analysis.
Using the 100 percent and 75 percent samples, the applicant determined that the average case-weighted unstandardized charge per case was $69,662 and $47,475, respectively. The applicant removed 100 percent of total charges associated with the service category “Medical/Surgical Supply Charge Amount” (which includes revenue centers 027x and 062x) because the applicant believed that it was the most conservative choice, as this
The applicant standardized the charges, and inflated the charges using an inflation factor of 1.09357, from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38524). The applicant then added the charges for the new technology. The applicant computed a final inflated average case-weighted standardized charge per case of $69,588 for the 100 percent sample, and $51,022 for the 75 percent sample. The average case-weighted threshold amount was $59,242 for the 100 percent sample, and $48,893 for the 75 percent sample. Because the final inflated average case-weighted standardized charge per case exceeded the average case-weighted threshold amount for both analyses, the applicant maintained that the technology met the cost criterion.
We invited public comment regarding whether the technology meets the cost criterion.
With respect to the substantial clinical improvement criterion, the applicant asserted that the Aquablation therapy provided by the AquaBeam System represents a substantial clinical improvement over existing treatment options for symptoms associated with the lower urinary tract for patients who have been diagnosed with BPH. Specifically, the applicant stated that the AquaBeam System's Aquablation therapy provides superior safety outcomes compared to the TURP procedure, while providing non-inferior efficacy in treating the symptoms that effect the lower urinary tract associated with a diagnosis of BPH; the AquaBeam System's delivery of Aquablation therapy yields consistent and predictable procedure and resection times regardless of the size and shape of the prostate or the surgeon's experience; and the AquaBeam System's Aquablation therapy demonstrated superior efficacy and safety for larger prostates (that is, prostates sized 50 to 80 ml) as compared to the TURP procedure.
The applicant provided the results of one Phase I and one Phase II trial published articles, the WATER Study Clinical Study Report, and a meta-analysis of current treatments with its application as evidence for the substantial clinical improvement criterion.
According to the applicant, the first study
The applicant indicated that 8 of the 15 patients who were enrolled in the trial had at least 1 procedure-related adverse event (for example, catheterization, hematuria, dysuria, pelvic pain, bladder spasms), which the authors reported to be consistent with outcomes from minimally-invasive transurethral procedures.
The second study
The third document provided by the applicant is the Clinical Study Report: WATER Study,
At 3 months, 25 percent of the patients in the AquaBeam System's Aquablation therapy group and 40 percent of the patients in the TURP group had an adverse event. The difference of −15 percent has a 95 percent confidence interval of −29.2 and −1.0 percent. At 6 months, 25.9 percent of the patients in the AquaBeam System's Aquablation therapy group and 43.1 percent of the patients in the TURP group had an adverse event. The difference of −17 percent has a 95 percent confidence interval of −31.5 to −3.0 percent. An analysis of safety events classified with the CD system as possibly, probably or definitely related to the procedure resulted in a CD Grade 1 persistent event difference between −17.7 percent (favoring the AquaBeam System's Aquablation therapy) with 95 percent confidence interval of −30.1 to −7.2 percent and a CD Grade 2 or higher event difference of −3.3 percent with 95 percent confidence interval of −16.5 to 8.7 percent.
The applicant indicated that the primary efficacy endpoint was assessed by a change in IPSS score over time. While change in score and change in percentages are generally higher for the AquaBeam System's Aquablation therapy, no statistically significant differences occurred between the AquaBeam System's Aquablation therapy and the TURP procedure over time. For example, the AquaBeam System's Aquablation therapy group experienced changes in IPSS mean score by visit of 0, −3.8, −12.5, −16.0, and −16.9 at baseline, 1 week, 1 month, 3 months, and 6 months, respectively, while the TURP group had mean scores of 0, −3.6, −11.1, −14.6, and −15.1 at baseline, 1 week, 1 month, 3 months, and 6 months, respectively.
Lastly, the applicant indicated that secondary endpoints were assessed. A mean length of stay for both the AquaBeam System's Aquablation therapy and the TURP procedure groups of 1.4 was achieved. While the mean operative times were similar, the hand piece in and out time was statistically significantly shorter for the AquaBeam System's Aquablation therapy group at 23.3 minutes as compared to 34.2 in the TURP procedure group. The mean resection time was 23 minutes shorter for the AquaBeam System's Aquablation therapy group at 3.9 minutes. No statistically significant difference was seen between the AquaBeam System's Aquablation therapy and the TURP procedure groups on the outcomes of re-intervention and worsening sexual function; 32.9 percent of the AquaBeam System's Aquablation therapy group had worsening sexual function as compared to 52.8 percent of the TURP procedure group. While statistically significant differences occurred across groups for change in ejaculatory function, the difference no longer remained at 6 months. While a greater proportion of the TURP procedure group patients experienced a negative change in erectile function as compared to the AquaBeam System's Aquablation therapy group patients (10 percent versus 6.2 percent at 6 months), no statistically significant differences occurred. No statistically significant differences between groups occurred for major adverse urologic events.
The applicant provided a meta-analysis of landmark studies regarding typical treatments for patients who have been diagnosed with BPH in order to provide supporting evidence for the assertion of superior outcomes achieved with the use of the AquaBeam System's Aquablation therapy. The applicant cited four “landmark clinical trials,” which report on the AquaBeam System's Aquablation therapy,
In the FY 2019 IPPS/LTCH proposed rule (83 FR 20349), we stated that we have several concerns related to the substantial clinical improvement criterion. The applicant performed a meta-analysis comparing results from three separate studies, which tested the effects of three separate treatment options. According to the applicant, the results provided consistently show the AquaBeam System's Aquablation therapy and Urolift as being superior to the standard treatment of the TURP procedure. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20349), we stated we have concerns with the
We noted that the applicant submitted a meta-analysis in an effort to compare currently available therapies to the AquaBeam System's Aquablation therapy. We stated that the possibility of the heterogeneity of samples and methods across studies leads to the possible introduction of bias, which results in the difficulty or inability to distinguish between bias and actual outcomes. We invited public comments on the applicability of this meta-analysis.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20349), we indicated that we had a concern that the differences between the AquaBeam System's Aquablation therapy and standard treatment options may not be as impactful and confined to safety aspects. We stated that it appears that the data on efficacy supported the equivalence of the AquaBeam System's Aquablation therapy and the TURP procedure based upon noninferiority analysis. In the proposed rule, we stated we agree with the applicant that the safety data were reported as showing superiority of the AquaBeam System's Aquablation therapy over the TURP procedure, although the data were difficult to track because adverse consequences were combined into categories; the AquaBeam System's Aquablation therapy was reportedly better in terms of ejaculatory function. It was noted in the application that, while the AquaBeam System's Aquablation therapy was statistically superior to the TURP procedure in the CD Grade 1 + adverse events, it was not statistically different in the CD Grade 2 or greater category. The applicant stated that regardless of the method, the urethra is typically used as the means for performing the BPH treatment procedure, which necessarily increases the likelihood of CD Grade 2 adverse events in all transurethral procedures.
In addition, the applicant noted that the treatment option may depend on the size of the prostate. The applicant stated that the AquaBeam System's Aquablation therapy is appropriate for small and large prostate sizes as a BPH treatment procedure. The AquaBeam System's Aquablation therapy has been shown to have limited positive outcomes as compared to the TURP procedure for prostates sized greater than 50 grams to 80 grams in each of the studies provided by the applicant. However, the applicant noted that the TURP procedure would not be used for prostates larger than 80 grams in size. Therefore, we stated in the proposed rule that we believe that another proper comparator for the AquaBeam System's Aquablation therapy may be laser or radical/open surgical procedures given their respective indication for small and large prostate sizes.
Lastly, the applicant compared AquaBeam System's Aquablation therapy and the standard of care TURP procedure to support a finding of improved safety. We stated that there are other treatment modalities available that may have a similar safety profile as the AquaBeam System's Aquablation therapy and we are interested in information that compares the AquaBeam System's Aquablation therapy to other treatment modalities.
We invited public comments on whether the AquaBeam System's Aquablation therapy meets the substantial clinical improvement criterion.
In response to CMS' concern with regard to the WATER study finding of Aquablation's improved safety relative to TURP and that other treatment modalities demonstrate safety profiles similar to Aquablation, the applicant stated that, while this may be true, treatment modalities such as TUIP, TUNA/RF, Microwave, and PUL have inferior efficacy to TURP in a variety of objective and subjective measures including peak urine flow, PVR reduction and BPH symptom reduction.
In response to CMS' concern that Aquablation has limited positive outcomes for prostates sized 50 to 80 ml, the applicant stated that in a pre-specified subgroup analysis the WATER study showed superior safety and efficacy in prostates sized 50 to 80 ml
In response to CMS' concern that Aquablation therapy performed on larger prostates should be compared with laser (that is, HoLEP) and open simple prostatectomy procedures, the applicant stated that between September and December 2017, 101 men (67 percent were Medicare eligible) with moderate-to-severe BPH symptoms and prostates sized 80 to 150 ml in volume underwent Aquablation therapy in the prospective multi-center international WATER II clinical trial. The applicant indicated that, as noted above, the American Urological Association (AUA) BPH surgical guidelines recommend open simple prostatectomy or laser enucleation for the treatment of large prostates (>80 ml in volume). The applicant explained that the primary purpose of the WATER II was to assess the safety profile for Aquablation therapy in larger prostates. The applicant stated that the overall CD Grades 2, 3, and 4 complications were recorded in 19 percent, 11 percent, and 5 percent, respectively.
In response to CMS' concern regarding the appropriateness of the AquaBeam System for prostates of smaller sizes (for example, <30 mls), the applicant apologized for any inference in its application regarding smaller prostate sizes because it was not its intention to make any specific claims regarding smaller prostates.
Other commenters also believed that the AquaBeam System represented a substantial clinical improvement. Another commenter stated that all of its treated patients experienced improved urinary flow and decreased BPH symptoms following treatment with the AquaBeam System. The commenter further stated that treated patients appreciated the preservation of ejaculatory function and indicated they would undergo the procedure again. Two commenters summarized results from the WATER II study, a single-arm study of the AquaBeam System in patients diagnosed with BPH with >80 ml prostate volumes, and stated that the AquaBeam System decreases operative time, time under anesthesia, decreases the length of inpatient stays, and has fewer complications as compared to open prostatectomy, which is the standard treatment for large prostates greater than 80 ml in volume. Another commenter with an interest in providing the AquaBeam therapy at its facility stated that, if an adequate payment is provided for the therapy, increased volume will most likely reduce the cost of this method of treatment.
After consideration of the public comments we received, we have determined that the AquaBeam System's Aquablation therapy meets all of the criteria for approval of new technology add-on payments. Therefore, we are approving new technology add-on payments for the AquaBeam System for FY 2019. Cases involving the AquaBeam System that are eligible for new technology add-on payments will be identified by ICD-10-PCS procedure code XV508A4 (Destruction of prostate using robotic waterjet ablation, via natural or artificial opening endoscopic, new technology group 4).
In its application, the applicant estimated that the average Medicare beneficiary would require the transurethral procedure of one AQUABEAM System per patient. According to the application, the cost of the AQUABEAM System is $2,500 per procedure. Under § 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 the use of the AQUABEAM System's Aquablation System is $1,250 for FY 2019. In accordance with the current indication for the AQUABEAM System, CMS expects that the AQUABEAM System will be used in the treatment for adult patients experiencing lower urinary tract symptoms caused by a diagnosis of BPH.
Portola Pharmaceuticals, Inc. (Portola) submitted an application for new technology add-on payments for FY 2019 for the use of AndexXa
AndexXa
As stated above, AndexXa
With regard to the “newness” criterion, as discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments. AndexXa
With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant indicated that AndexXa
With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant stated that AndexXa
With regard 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, the applicant indicated that AndexXa
Other commenters stated that AndexXa
With regard to the cost criterion, we stated in the proposed rule that the applicant researched the FY 2015 MedPAR claims data file for potential cases representing patients who may be eligible for treatment using AndexXa
The applicant identified a total of 51,605 potential cases that mapped to 683 MS- DRGs, resulting in an average case-weighted charge per case of $72,291. The applicant also provided an analysis that was limited to cases representing 80 percent of all potential cases identified (41,255 cases) that mapped to the top 151 MS-DRGs. Under this analysis, the average case-weighted charge per case was $69,020. The applicant provided a third analysis that was limited to cases representing 25 percent of all potential cases identified (12,873 cases) that mapped to the top 9 MS-DRGs. This third analysis resulted in an average case-weighted charge per case of $46,974.
Under each of these analyses, the applicant also provided sensitivity analyses based on variables representing two areas of uncertainty: (1) Whether to remove 40 percent or 60 percent of blood and blood administration charges; and (2) whether to remove pharmacy charges based on the ceiling price of factor eight inhibitor bypass activity (FEIBA), a branded anti-inhibitor coagulant complex, or on the pharmacy indicator 5 (PI5) in the MedPAR data file, which correlates to potential cases utilizing generic coagulation factors. Overall, the applicant conducted twelve sensitivity analyses, and provided the following rationales:
• The applicant chose to remove 40 percent and 60 percent of blood and blood administration charges because potential patients who may be eligible for treatment using AndexXa
• The applicant maintained that FEIBA is the highest priced clotting factor used for Factor Xa inhibitor reversal, and it is unlikely that pharmacy charges for Factor Xa reversal would exceed the FEIBA ceiling price of $2,642. Therefore, the applicant capped the charges to be removed at $2,642 to exclude charges unrelated to the reversal of Factor Xa anticoagulation. The applicant also considered an alternative scenario in which charges associated with pharmacy indicator 5 (PI5) were removed from the costs of potential cases that included this indicator in the MedPAR data. On average, charges removed from the costs of potential cases utilizing generic coagulation factors were much lower than the total pharmacy charges.
The applicant noted that, in all 12 scenarios, the average case-weighted standardized charge per case for potential cases representing patients who may be eligible for treatment using AndexXa
The applicant's order of operations used for each analysis is as follows: (1) Removing 60 percent or 40 percent of blood and blood product administration charges and up to 100 percent of pharmacy charges for PI5 or FEIBA from the average case-weighted unstandardized charge per case; and (2) standardizing the charges per cases using the Impact File published with the FY 2015 IPPS/LTCH PPS final rule. After removing the charges for the prior technology and standardizing charges, the applicant applied an inflation factor of 1.154181, which is a combination of 9.8446 percent, the value used in the FY 2017 IPPS final rule as the 2-year outlier threshold inflation factor, and 5.074 percent, the value used in the FY 2018 IPPS final rule as the 1-year outlier threshold inflation factor, to update the charges from FY 2015 to FY 2018. The applicant did not add charges for AndexXa
We invited public comments on whether AndexXa
The applicant indicated that the WAC for 1 gram of AndexXa
The applicant indicated that the addition of charges for AndexXa
With regard to the substantial clinical improvement criterion, the applicant asserted that AndexXa
The applicant stated that the use of any anticoagulant is associated with an increased risk of bleeding, and bleeding complications can be life-threatening. The applicant further indicated that bleeding is especially concerning for patients treated with these Factor Xa inhibitors because, prior to the FDA approval of AndexXa
As noted above, AndexXa
The applicant noted the following: (1) On average, patients with a bleeding complication were hospitalized for 6.3 to 8.5 days, and (2) the most common therapies currently used to manage severe bleeding events in patients undergoing anticoagulant treatment are blood and blood product transfusions, most frequently with packed red blood cells (RBC) or fresh frozen plasma (FFP).
The applicant asserted that laboratory studies have failed to provide consistent evidence of “reversal” of the anticoagulant effect of Factor Xa inhibitors across a range of different PCC products and concentrations. Results of thrombin generation assays have varied depending on the format of the assay. Despite years of experience with low molecular weight heparins and pentasaccharide anticoagulants, neither PCCs nor factor eight inhibitor bypassing activity are recognized as safe and effective reversal agents for these Factor Xa inhibitors.
The applicant provided results from two randomized, double-blind, placebo-controlled Phase III studies,
The applicant stated that the results from the two Phase III studies and previous proof-of-concept Phase II dose-finding studies showed that use of AndexXa
With regard to AndexXa
The applicant also stated that use of AndexXa
The applicant submitted interim data purporting to show substantial clinical improvement within its target patient population as part of an ongoing Phase IIIb/IV open-label ANNEXA-4 study. The ANNEXA-4 study is a multi-center, prospective, open-label, single group study that evaluated 67 patients who had acute, major bleeding within 18 hours of receipt of a Factor Xa inhibitor (32 patients receiving rivarobaxan, 31 receiving apixaban, and 4 receiving enoxaparin). The population in the study was reflective of a real-world population, with mean age of 77 years old, most patients with cardiovascular disease, and the majority of bleeds being intracranial or gastrointestinal. According to the applicant, the results of the ANNEXA-4 study demonstrate safe, reliable, and rapid reversal of Factor Xa levels in patients experiencing acute bleeding and are consistent with the results seen in the Phase II and Phase III trials, based on interim data. However, in the proposed rule, we stated we were concerned that this interim data also indicate 18 percent of patients experienced a thrombotic event and 15 percent of patients died following reversal during
We invited public comments on whether AndexXa
With respect to the 18 percent of patients that experienced a thrombotic event and 15 percent of patients that died following reversal during the 30-day follow-up period in the ongoing ANNEXA-4 trial, the applicant asserted that this is consistent with the high-risk profile of the patients who have an intrinsic risk of dying even if bleeding is reversed. Specifically, the applicant explained that the thrombotic event rate and mortality observed in the ANNEXA-4 study, to date, are a reflection of the patients taking Factor Xa inhibitors due to a prior history of venous thromboembolisms, and reversal of anticoagulation in bleeding patients by use of AndexXa
Several commenters also supported the clinical results as demonstration of substantial clinical improvement for AndexXa
After consideration of the public comments we received, we have determined that AndexXa
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 2019 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 2019 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 2019 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 2019 wage index appears under sections III.E.3. and F. of the preamble of this final rule.
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. 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
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 provided updates to and superseded OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 were 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. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), we continued to use the OMB delineations that were 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.
On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which provided updates to and superseded OMB Bulletin No. 15-01 that was issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 provide detailed information on the update to statistical areas since July 15, 2015, and are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2014 and July 1, 2015. In OMB Bulletin No. 17-01, OMB announced that one Micropolitan Statistical Area now qualifies as a Metropolitan Statistical Area. The new urban CBSA is as follows:
• Twin Falls, Idaho (CBSA 46300). This CBSA is comprised of the principal city of Twin Falls, Idaho in Jerome County, Idaho and Twin Falls County, Idaho.
The OMB bulletin is available on the OMB website at
In sections III.D. and E.2. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule, we provided the proposed FY 2019 unadjusted and occupational mix adjusted national average hourly wages. Taking the estimated average hourly wage of new CBSA 46300 and dividing by the proposed national average hourly wage resulted in the estimated wage indexes shown in the table in the proposed rule (83 FR 20354), which is also provided below.
For FY 2019, we are using the OMB delineations that were adopted beginning with FY 2015 to calculate the area wage indexes, with updates as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20354), we stated that, in the final rule, we would incorporate this change into the final FY 2019 wage index, ratesetting, and tables. We did not receive any public comments regarding this policy area. Therefore, we have incorporated the updates as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01 into the final FY 2019 wage index, ratesetting, and tables for this final FY2019 rule.
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. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130), 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. 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.
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. The Census Bureau maintains a complete list of changes to counties or county equivalent entities on the website at:
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130) we adopted a policy to discontinue the use of the SSA county codes and began using only the FIPS county codes for purposes of crosswalking counties to CBSAs. In addition, in the same rule, we implemented the latest FIPS code updates which were effective October 1, 2017, beginning with the FY 2018 wage indexes. The updated changes were used to calculate the wage indexes in a manner 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 2019, we are continuing to use only the FIPS county codes for purposes of crosswalking counties to CBSAs. For FY 2019, 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 website reflect these county changes.
The FY 2019 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2015 (the FY 2018 wage indexes were based on data from cost reporting periods beginning during FY 2014).
The FY 2019 wage index includes all of the following categories of data associated with costs paid under the IPPS (as well as outpatient costs):
• Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty);
• Home office costs and hours;
• Certain contract labor costs and hours, which include direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315 through 47317)); 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.
Consistent with the wage index methodology for FY 2018, the wage index for FY 2019 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
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.
The wage data for the FY 2019 wage index were obtained from WorksheetS-3, Parts II and III of the Medicare cost report (Form CMS-2552-10, OMB Control Number 0938-0050) for cost reporting periods beginning on or after October 1, 2014, and before October 1, 2015. For wage index purposes, we refer to cost reports during this period as the “FY 2015 cost report,” the “FY 2015 wage data,” or the “FY 2015 data.” Instructions for completing the wage index sections of Worksheet S-3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 40, Sections 4005.2 through 4005.4. The data file used to construct the FY 2019 wage index includes FY 2015 data submitted to us as of June 20, 2018. 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 2019 wage index, we identified and excluded 80 providers with aberrant data that should not be included in the wage index, although we stated in the FY 2019 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 2019 wage index (83 FR 20355). 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 23, 2018. In addition, as a result of the April and May appeals processes, and posting of the April 27, 2018 PUF, we have made additional revisions to the FY 2019 wage data, as described further below. The revised data are reflected in this FY 2019 IPPS/LTCH PPS final rule.
In constructing the proposed FY 2019 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2015, 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); that is, any hospital that is designated as a CAH by 7 days prior to the publication of the preliminary wage index public use file (PUF) is excluded from the calculation of the wage index. For the proposed rule, we removed 8 hospitals that converted to CAH status on or after January 23, 2017, the cut-off date for CAH exclusion from the FY 2018 wage index, and through and including January 26, 2018, the cut-off date for CAH exclusion from the FY 2019 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 3,260 hospitals.
Since the development of the FY 2019 proposed wage index, as a result of further review by the MACs and the April and May appeals processes, we received improved data for 28 hospitals and are including the wage data of these 28 hospitals in the final wage index. However, during our review of the wage data in preparation of the April 27, 2018 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. With regard to CAHs, we have since learned of 3 additional hospitals that converted to CAH status on or after January 23, 2017, the cut-off date for CAH exclusion from the FY 2018 wage index, and through and including January 26, 2018, the cut-off date for CAH exclusion from the FY 2019 wage index. Accordingly, we have removed 11 hospitals that converted to CAH status from the FY 2019 wage index (8 CAHs for the proposed rule, and 3 more CAHs for the final rule). The final FY 2019 wage index is based on the wage index of 3,283 hospitals (3,260 + 28−2−3 = 3,283).
For the final FY 2019 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 2018 wage index (82 FR 38131 through 38132); that is, using campus full-time equivalent (FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51591). Table 2, which contains the final FY 2019 wage index associated with this final rule (available via the internet on the CMS website), includes separate wage data for the campuses of 16 multicampus hospitals. The following chart lists the multicampus hospitals by CSA certification number (CCN) and the FTE percentages on which the wages and hours of each campus were allotted to their respective labor market areas:
We note that, in past years, in Table 2, we have placed a “B” to designate the subordinate campus in the fourth position of the hospital CCN. However, for the FY 2019 proposed rule, this final rule, and future rulemaking, we have moved the “B” to the third position of the CCN. Because all IPPS hospitals have a “0” in the third position of the CCN, we believe that placement of the “B” in this third position, instead of the “0” for the subordinate campus, is the most efficient method of identification and interferes the least with the other, variable, digits in the CCN.
In the FY 2019 IPPS/LTCH PPS proposed rule, we indicated we were committed to transforming the health care delivery system, including the Medicare program, by putting an additional focus on patient-centered care and working with providers, physicians, and patients to improve outcomes. One key to that transformation is ensuring that the Medicare payment rates are as accurate and appropriate as possible, consistent with the law. We invited the public to submit comments, suggestions, and recommendations for regulatory and policy changes to address wage index disparities.
CMS looks forward to continuing to work on wage index disparities, particularly for rural hospitals, to the extent permitted under current law and appreciates responses to our request for public input on this issue. By allowing the imputed floor to expire for all urban States, as described section III.G.2. of the preamble of this final rule, CMS has begun the process of making the wage index more equitable.
The method used to compute the FY 2019 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).
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, 2014, through April 15, 2016, for private industry hospital workers from the BLS'
For example, the midpoint of a cost reporting period beginning January 1, 2015, and ending December 31, 2015, is June 30, 2015. An adjustment factor of 1.01316 was applied to the wages of a hospital with such a cost reporting period.
Using the data as previously described, the FY 2019 national average hourly wage (unadjusted for occupational mix) is $42.997789358.
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 $42.997789358 for this FY 2019 final rule) and the national wage index, which is applied to the national labor share of the national standardized amount. Therefore, for FY 2019, there is no Puerto Rico-specific overall average hourly wage or 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.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20357 through 20358), 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
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38132 through 38136), we clarified that 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 noted 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.
The above instructions for calculating the 1-percent test inadvertently omitted Line 15 for Home Office Part A Administrator on Worksheet S-3, Part II from the denominator. As we stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20357), Line 15 should be included in the denominator because Home Office Part A Administrator is added to Line 1 in the wage index calculation. Therefore, in the proposed rule, we stated that we were correcting the inadvertent omission of Line 15 from the denominator, and we clarified that, for calculating the 1-percent test, each individual category of the other wage-related cost (that is, the numerator) should be divided by the sum of Worksheet S-3, Part III, Lines 3 and 4, Column 4 (that is, the denominator). Line 4 sums the following lines from Worksheet S-3, Part II: Lines 11, 12, 13, 14, 14.01, 14.02, and 15. We also directed readers to instructions for calculating the 1-percent test in the Provider Reimbursement Manual (PRM), Part II, Chapter 40, Section 4005.4, Line 25 and its subscripts on Worksheet S-3, Part IV of the Medicare cost report (Form CMS-2552-10, OMB control number 0938-0050), which state: “Calculate the 1-percent test by dividing each individual category of the other wage-related cost (that is, the numerator) by the sum of Worksheet S-3, Part III, Lines 3 and 4, Column 4, (that is, the denominator).”
In addition to our discussion about calculating the 1-percent test and other criteria for including other wage-related costs in the wage index, we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38133 through 38166) that we would consider proposing to remove other wage-related costs from the wage index entirely.
In the FY 2018 IPPS/LTCH PPS proposed and final rules (82 FR 19901 and 82 FR 38133, respectively), we stated that 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, we stated in the FY 2018 IPPS/LTCH PPS proposed and final rules (82 FR 19901 and 82 FR 38133, respectively) that we were reconsidering allowing other wage-related costs to be included in the wage index because internal reviews of the FY 2018 wage data showed that only a small minority of hospitals were reporting other wage-related costs that meet the 1-percent test described earlier.
We stated in the FY 2019 IPPS/LTCH PPS proposed rule that, as part of the wage index desk review process for FY 2019, internal reviews showed that only 8 hospitals out of the more than 3,000 IPPS hospitals in the wage index had other wage-related costs that were correctly reported for inclusion in the wage index (83 FR 20357). Given the extremely limited number of hospitals nationally using Worksheet S-3, Part IV, Line 25 and subscripts, and Worksheet S-3, Part II, Line 18, to correctly report other wage-related costs in accordance with the criteria to be included in the wage index, we continue to believe that other wage-related costs do not constitute an appropriate and significant portion of wage costs in a particular labor market area. In other words, while other wage-related costs may represent costs that may have an impact on an
Furthermore, in the FY 2019 IPPS/LTCH PPS proposed rule, we also discussed that the open-ended nature of the types of other wage-related costs that may be included on Line 25 and its subscripts of Worksheet S-3 Part IV and Line 18 of Worksheet S-3 Part II, in contrast to the concrete list of core wage-related costs, may hinder consistent and proper reporting of fringe benefits. Our internal reviews indicate widely divergent types of costs that hospitals are reporting as other wage-related costs on these lines. We are concerned that inconsistent reporting of other wage-related costs 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 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 25 and its subscripts of Worksheet S-3 Part IV and Line 18 of Worksheet S-3 Part II for reporting wage-related costs other than the core list indicate that including other wage-related costs in the wage
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20358), for the reasons discussed earlier, for the FY 2020 wage index and subsequent years, we proposed 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. Under our proposal, we stated we would no longer consider any other wage-related costs beginning with the FY 2020 wage index. Considering the extremely limited number of hospitals reporting other wage-related costs and the inconsistency in types of other wage-related costs being reported, we indicated we believe this proposal will help ensure a more consistent and more accurate wage index representative of the relative average hourly wage for each labor market area. In addition, we stated that we believe that this proposal to no longer include other wage-related costs in the wage index calculation benefits the vast majority of hospitals because most hospitals do not report other wage-related costs. We explained that because the wage index is budget neutral, hospitals in an area without other wage-related costs included in the wage index have their wage indexes reduced when other areas' wage indexes are raised by including other wage-related costs in their wage index calculation. We also noted that this proposal to exclude other wage-related costs from the wage index, starting with the FY 2020 wage index, contributes to agency efforts to simplify hospital paperwork burden because it would eliminate the need for Line 18 on Worksheet S-3, Part II and Line 25 and its subscripts on Worksheet S-3, Part IV of the Medicare cost report (Form CMS-2552-10, OMB control number 0938-0050). We noted that we would include in the FY 2019 wage index the other wage-related costs of the 8 hospitals that accurately reported those costs in accordance with the criteria in effect as of FY 2018.
In summary, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20358), we clarified that our policy for calculating the 1-percent test includes Line 15 for Home Office Part A Administrator on Worksheet S-3, Part II in the denominator. In addition, we proposed to eliminate other wage-related costs from the calculation of the wage index for the FY 2020 wage index and subsequent years, as discussed earlier.
A few commenters opposed this proposal. One commenter stated that the proposal would unreasonably exclude legitimate fringe benefits that can be directly linked to individual employment. Another commenter disagreed that other wage-related costs of an individual hospital do not accurately reflect the economic conditions of the labor market as a whole, stating that these costs more accurately represent the economic conditions of the labor market and that the inclusion of these costs is important for the financial sustainability of the minority of hospitals incurring other wage-related costs. The commenter urged CMS to continue allowing costs that meet current criteria for reporting other wage-related costs when hospitals undergo serious circumstantial changes and incur costs to maintain qualified staff; for example, during a nursing strike when a hospital may engage in costly contract nursing agreements that include housing costs. This commenter believed that the cost report should remain a mechanism for CMS to acknowledge unforeseen or changing other labor costs.
Furthermore, the commenters suggested that the number of hospitals reporting physician malpractice costs should be included in the number of hospitals that currently report other wage-related costs. One commenter stated that CMS' count of eight hospitals in the country reporting noncore wage-related costs is incorrect because malpractice cost is a noncore wage-related cost that is required, by cost report instruction, to be included with physician wage-related costs rather than on the noncore wage-related cost line. The commenter explained that CMS required physicians' wage-related costs to be listed separately, effective with FY 1994, because CMS anticipated
In response to the commenters' citation of the September 1, 1994
Regarding the requirement for physician other wage-related costs to be listed separately, the commenters are correct that the instructions for Worksheet S-3, Part II, Line 18, currently include the following note: “Do not include the wage-related costs for physicians Parts A and B, non-physician anesthetists Part A and B, interns and residents in approved programs, and home office personnel.” However, we remind the commenters that
Calculate the 1-percent test only one time for a category of other wage related costs,
In response to the commenter who asserted that CMS is “vastly underestimating” the impact of removal of other wage-related costs and specifically malpractice insurance costs from the wage index, we conducted additional analysis to quantify the number of hospitals reporting malpractice insurance on lines other than Line 18 of Worksheet S-3, Part II, as an other wage-related cost meeting the 1-percent test. For the FY 2019 wage index, only 41 hospitals reported costs on Worksheet S-3, Part II, Line 22 (which includes core wage-related costs and may or may not include malpractice insurance as an other wage-related cost) that were greater than 1 percent of total salaries. Of those 41 hospitals, it is unlikely that the wage-related costs reported for Physician Part A Administrative were entirely comprised of malpractice insurance costs. Therefore, the number of hospitals reporting malpractice insurance as an other wage-related cost and which exceeds 1-percent of total salaries is likely less than 1.25 percent of the total hospitals in the wage index (that is, 41/3,283 IPPS hospitals included in the FY 2019 final wage index). In addition, we conducted further analysis and found that fewer than 30 hospitals indicated a description of malpractice on Line 25 of Worksheet S-3, Part IV, for other wage-related costs, and of those hospitals, only 3 hospitals met the 1-percent test criteria for inclusion. Consequently, we believe that we have conducted the comprehensive review requested by the commenter and thoroughly analyzed the potential impact of this proposal, and concluded that the number of hospitals reporting malpractice as an other wage-related cost is minimal. Therefore, we continue to believe that removing other wage-related costs reported on Line 18 and other lines from the wage index is appropriate because costs reported by only a very small minority of hospitals do not accurately reflect the economic conditions of the labor market area as a whole.
Therefore, after consideration of the public comments we received, for the reasons discussed above and in the proposed rule, we are finalizing our proposal, without modification, to eliminate other wage-related costs from the calculation of the wage index for the FY 2020 wage index and subsequent years. We also are clarifying that all other wage-related costs, even those not reported on Worksheet S-3, Part II, Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, such as contract labor, are being removed from the calculation of the wage index, and we will update the cost report instructions accordingly.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20358 through 20360), we have received an increasing number of inquiries regarding the treatment of multicampus hospitals as the number of multicampus hospitals has grown in recent years. While the regulations at § 412.230(d)(2)(iii) and (v) for geographic reclassification under the MGCRB include criteria for how multicampus hospitals may be reclassified, the regulations at § 412.92 for sole community hospitals (SCHs), § 412.96 for rural referral centers (RRCs), § 412.103 for rural reclassification, and § 412.108 for Medicare-dependent, small rural hospitals (MDHs) do not directly address multicampus hospitals. Thus, in the FY 2019 proposed rule, we proposed to codify in these regulations the policies for multicampus hospitals that we have developed in response to recent questions regarding CMS' treatment of multicampus hospitals for purposes other than geographic reclassification under the MGCRB.
We stated in the proposed rule (83 FR 20358) that the proposals (stated below) applied to hospitals with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the IPPS and that meet the provider-based criteria at § 413.65 as a main campus and a remote location of a hospital, also referred to as multicampus hospitals or hospitals with remote locations. We proposed that a main campus of a hospital cannot obtain an SCH, RRC, or MDH status or rural reclassification independently or separately from its remote location(s), and vice versa. Rather, if the criteria are met in the regulations at § 412.92 for SCHs, § 412.96 for RRCs, § 412.103 for rural reclassification, or § 412.108 for MDHs (as discussed later in this section), the hospital (that is, the main campus and its remote location(s)) would be granted the special treatment or rural reclassification afforded by the aforementioned regulations.
We stated in the proposed rule that we believe this is an appropriate policy for two reasons. First, each remote location of a hospital is included on the main campus's cost report and shares the same provider number. That is, the main campus and remote location(s) would share the same status or rural reclassification because the hospital is a single entity with one provider agreement. Second, it would not be administratively feasible for CMS and the MACs to track every hospital with remote locations within the same CBSA and to assign different statuses or rural reclassifications exclusively to the main campus or to its remote location. We note that, for wage index purposes only, CMS tracks multicampus remote locations located
To qualify for rural reclassification or SCH, RRC, or MDH status, we proposed that a hospital with remote locations must demonstrate that both the main campus and its remote location(s) satisfy the relevant qualifying criteria. A hospital with remote locations submits a joint cost report that includes data from its main campus and remote location(s), and its MedPAR data also combine data from the main campus and remote location(s). We believe that it would not be feasible to separate data by location, nor would it be appropriate, because we consider a main campus and remote location(s) to be one hospital. Therefore, where the regulations at § 412.92, § 412.96, § 412.103, and § 412.108 require data, such as bed count, number of discharges, or case-mix index, for example, to demonstrate that the hospital meets the qualifying criteria, we proposed to codify in our regulations that the combined data from the main campus and its remote location(s) are to be used.
For example, if a hospital with a main campus with 200 beds and a remote location with 75 beds applies for RRC status, the combined count of 275 beds would be considered the hospital's bed count, and the main campus and its remote location would be granted RRC status if the hospital applies during the last quarter of its cost reporting period and both the main campus and the remote location are located in a rural area as defined in 42 CFR part 412, subpart D. This is consistent with the regulation at § 412.96(b)(1), which states, in part, that the number of beds is determined under the provisions of § 412.105(b). For § 412.105(b), beds are counted from the main campus and remote location(s) of a hospital. We believe this is also consistent with § 412.96(b)(1)(ii), which sets forth the
Similarly, combined data would be used for demonstrating the hospital meets criteria at § 412.92 for SCH status. For example, the patient origin data, which are typically MedPAR data used to document the boundaries of the hospital's service area as required in § 412.92(b)(1)(ii) and (iii), would be used from both locations. We reiterate that we believe this is the appropriate policy because the main campus and remote location are considered one hospital and that it is the only administratively feasible policy because there is currently no way to split the MedPAR data for each location.
For § 412.103 rural reclassification, we stated in the proposed rule (83 FR 20359) that a hospital with remote location(s) seeking to qualify under § 412.103(a)(3), which requires that the hospital would qualify as an RRC or SCH if the hospital were located in a rural area, would similarly demonstrate that it meets the criteria at § 412.92 or at § 412.96, such as bed count, by using combined data from the main campus and its remote location(s) (with the exception of certain criteria discussed below related to location, mileage, travel time, and distance requirements). We refer readers to the portions of our discussion that explain how hospitals with remote locations would meet criteria for RRC or SCH status.
A hospital seeking MDH status would also use combined data for bed count and discharges to demonstrate that it meets the criteria at § 412.108(a)(1). For example, if the main campus of a hospital has 75 beds and its remote location has 30 beds, the bed count exceeds 100 beds and the hospital would not satisfy the criteria at § 412.108(a)(1)(i) (which we proposed, and are finalizing, to be redesignated as § 412.108(a)(1)(ii)).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20359), we reminded readers that, under § 412.108(b)(4) and § 412.92(b)(3)(i), an approved MDH or SCH status determination remains in effect unless there is a change in the circumstances under which the status was approved. We stated that while we believe that this proposal is consistent with the policies for multicampus hospitals that we have developed in response to recent questions, current MDHs and SCHs should make sure that this proposal does not create a change in circumstance (such as an increase in the number of beds to more than 100 for MDHs or to more than 50 for SCHs), which an MDH or SCH is required to report to the MAC within 30 days of the event, in accordance with § 412.108(b)(4)(ii) and (iii) and § 412.92(b)(3)(ii) and (iii).
In the FY 2019 proposed rule, we discussed that, with regard to other qualifying criteria set forth in the regulations at §§ 412.92, 412.96, 412.103, and 412.108 that do not involve data that can be combined, specifically qualifying criteria related to location, mileage, travel time, and distance requirements, a hospital would need to demonstrate that the main campus and its remote location(s) each independently satisfy those requirements in order for the entire hospital, including its remote location(s), to be reclassified or obtain a special status.
To qualify for SCH status, for example, it would be insufficient for only the main campus, and not the remote location, to meet distance criteria. Rather, the main campus and its remote location(s) would each need to meet at least one of the criteria at § 412.92(a). Specifically, the main campus and its remote location must each be located more than 35 miles from other like hospitals, or if in a rural area (as defined in § 412.64), be located between 25 and 35 miles from other like hospitals if meeting one of the criteria at § 412.92(a)(1) (and each meet the criterion at § 412.92(a)(1)(iii) if applicable), or between 15 and 25 miles from other like hospitals if the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years (§ 412.92(a)(2)), or travel time to the nearest like hospital is at least 45 minutes (§ 412.92(a)(3)). We believe that this is necessary to show that the hospital is indeed the sole source of inpatient hospital services reasonably available to individuals in a geographic area who are entitled to benefits under Medicare Part A, as required by section 1886(d)(5)(D)(iii)(II) of the Act. For hospitals with remote locations that apply for SCH classification under § 412.92(a)(1)(i) and (ii), combined data are used to document the boundaries of the hospital's service area using data from across both locations, as discussed earlier, and all like hospitals within a 35-mile radius of each location are included in the analysis. To be located in a rural area to use the criteria in § 412.92(a)(1), (2), and (3), the main campus and its remote location(s) must each be either geographically located in a rural area, as defined in § 412.64, or reclassified as rural under § 412.103.
Similarly, for RRC classification under § 412.96 and MDH classification under § 412.108, the main campus and its remote location(s) must each be either geographically located in a rural area, as defined in 42 CFR part 412, subpart D, or reclassified as rural under § 412.103 to meet the rural requirement portion of the criteria at § 412.96(b)(1), § 412.96(c), or § 412.108(a)(1) (or for MDH, be located in a State with no rural area and satisfy any of the criteria under § 412.103(a)(1) or (a)(3) or under § 412.103(a)(2) as of January 1, 2018). For hospitals with remote locations that apply for RRC classification under § 412.96(b)(2)(ii) or § 412.96(c)(4), 25 miles is calculated from each location (the main campus and its remote location(s)), and combined data from both the main campus and its remote location(s) are used to calculate the percentage of Medicare patients, services furnished to Medicare beneficiaries, and discharges.
For hospitals seeking to reclassify as rural by meeting the criteria at § 412.103(a)(1), (a)(2), or (a)(6), we also proposed to codify in our regulations that it would not be sufficient for only the main campus, and not its remote location(s), to demonstrate that its location meets the aforementioned criteria. Rather, under § 412.103(a)(1) and (2) (which also are incorporated in § 412.103(a)(6)), we proposed that the main campus and its remote location(s) must each either be located (1) in a rural census tract of an MSA as determined under the most recent version of the Goldsmith Modification, the Rural-Urban Commuting Area codes (§ 412.103(a)(1)), or (2) in an area designated by any law or regulation of the State in which it is located as a rural area, or be designated as a rural hospital by State law or regulation (§ 412.103(a)(2)). For hospitals seeking to reclassify as rural by meeting the criteria in § 412.103(a)(3), which require that the hospital would qualify as an RRC or a SCH if the hospital were located in a rural area, we refer readers to our discussion presented earlier that explains how hospitals with remote locations would meet criteria for RRC or SCH status.
In the FY 2019 IPPS/LTCH PPS proposed rule, we noted that we have also received questions about how a hospital with remote locations that trains residents in approved medical residency training programs would be treated for IME adjustment purposes if
We proposed to codify these policies regarding the application of the qualifying criteria for hospitals with remote locations in the regulations at § 412.92 for SCHs, § 412.96 for RRCs, § 412.103 for rural reclassification, or § 412.108 for MDHs. Specifically, we proposed to revise these regulations as follows:
We proposed to add paragraph (a)(4) to § 412.92 to specify that, for a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the IPPS and that meets the provider-based criteria at § 413.65 as a main campus and a remote location of a hospital, combined data from the main campus and its remote location(s) are required to demonstrate that the criteria at § 412.92(a)(1)(i) and (ii) are met. For the mileage and rural location criteria at § 412.92(a) and the mileage, accessibility, and travel time criteria specified at § 412.92(a)(1) through (a)(3), the hospital must demonstrate that the main campus and its remote location(s) each independently satisfy those requirements.
In § 412.96, we proposed to redesignate paragraph (d) as paragraph (e) and add a new paragraph (d) to specify that, for a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the IPPS and that meets the provider-based criteria at § 413.65 as a main campus and a remote location of a hospital, combined data from the main campus and its remote location(s) are required to demonstrate that the criteria at § 412.96(b)(1) and (2) and (c)(1) through (c)(5) are met. For purposes of meeting the rural location criteria in § 412.96(b)(1) and (c) and the mileage criteria in § 412.96(b)(2)(ii) and (c)(4), the hospital must demonstrate that the main campus and its remote location(s) each independently satisfy those requirements.
We proposed to add paragraph (a)(7) to § 412.103 to specify that, for a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the IPPS and that meets the provider-based criteria at § 413.65 as a main campus and a remote location of a hospital, the hospital must demonstrate that the main campus and its remote location(s) each independently satisfy the location criteria specified in § 412.103(a)(1) and (2) (which criteria also are incorporated in § 412.103(a)(6)). As discussed in our response to public comments below, we note that we inadvertently referenced § 412.103(a)(6) (which applies to critical access hospitals (CAHs)) in proposed paragraph § 412.103(a)(7). As explained in the proposed rule (83 FR 20358) and above, these policies apply to hospitals where services are provided and billed under the IPPS. Thus, these policies do not apply to CAHs, which are not paid under the IPPS. Accordingly, as discussed in response to comments below, we are not including a reference to § 412.103(a)(6) in § 412.103(a)(7), as finalized in this rule.
We proposed to add paragraph (a)(3) to § 412.108 to specify that, for a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the IPPS and that meets the provider-based criteria at § 413.65 as a main campus and a remote location of a hospital, combined data from the main campus and its remote location(s) are required to demonstrate that the criteria in § 412.108(a)(1) and (2) are met. We stated that for the location requirement specified at proposed amended paragraph (a)(1)(i) of this section, the hospital must demonstrate that the main campus and its remote location(s) each independently satisfy this requirement. (We note that we are finalizing the proposed amendments to § 412.108(a)(1)(i) as discussed in section IV.G.2.a. of the preamble of this final rule.)
Several commenters requested clarification regarding the effective date of the proposals. The commenters asked what will happen to multicampus hospitals that have already reclassified as rural, and whether the proposals would affect new classification requests only and grandfather-in existing SCHs, RRCs, and MDHs, or if those hospitals with existing reclassifications or special statuses would be required to reapply according to the criteria presented in the proposed rule. One commenter specifically questioned CMS' authority to make a rule effective retroactively and asked that CMS clarify that the policy is effective for applications submitted on or after October 1, 2018. Similarly, another commenter stated that while the proposals are presented as a codification, they are a change in longstanding CMS policy because CMS has “long been treating multicampus facilities as distinct entities for a variety of purposes.” Some commenters requested that CMS not finalize the codification without research to demonstrate its impact because they view it as a change in policy. Commenters urged CMS to provide additional guidance and information on the policies for treatment of multicampus hospitals.
In response to the commenters' questions regarding the effective date of the policies discussed in the proposed rule, we reiterate that we proposed to codify in the regulations our existing policies for multicampus hospitals, and thus these policies have been and continue to be in effect. Consequently, there is no need to “grandfather in” multicampus hospitals with existing special statuses or reclassifications. Similarly, we disagree that we are promulgating a rule retroactively because these policies are CMS' longstanding policies. We note that the commenter's assertion that these proposed codifications are a change in longstanding CMS policy were not accompanied by examples of CMS treating multicampus facilities as distinct entities. It is unclear what the commenter was referring to in support of this assertion. If the commenter was referring to CMS' treatment of multicampus facilities for wage index purposes, as mentioned in the proposed rule (83 FR 20358), CMS tracks multicampus remote locations located
Similarly, because we proposed to codify existing policy, multicampus hospitals with existing special status or rural reclassification would not be required to reapply according to the criteria codified in this rule, as the current regulations at §§ 412.92(3)(i), 412.103(f), and 412.108(b)(4) state that an approved SCH classification, rural reclassification, or MDH status determination, respectively, remains in effect without need for reapproval unless there is a change in the circumstances under which the classification or determination was approved. We are reiterating that current MDHs and SCHs should make sure that any change in circumstance (such as an increase in the number of beds to more than 100 for MDHs or to more than 50 for SCHs) as a result of the MDH or SCH opening a remote location, for example, is correctly reported to the MAC within 30 days of the event in accordance with §§ 412.108(b)(4)(ii) and (iii) and 412.92(b)(3)(ii) and (iii).
With regard to the commenters' request that CMS not finalize its proposals to codify in the regulations its existing policies, we note that not finalizing the proposals would still leave our current policies unchanged and in effect with regard to multicampus hospitals and qualification for special statuses and reclassifications, although they would not be codified in regulations. We believe not finalizing the proposals to codify these policies in regulations would create confusion surrounding the existing policies currently in effect.
In response to commenters requesting more information and guidance on our existing policies, we agree and will consider further provider education on our existing policies, where appropriate.
One commenter agreed with CMS' policy in the scenario of the opening of a remote location that provides general inpatient services within 24 miles from an existing SCH. The commenter asserted that, while the remote location might cause the SCH to lose its classification as an SCH, this outcome appears “congruent with the intent of law” because the former SCH is no longer the sole source of inpatient services reasonably available to individuals in the geographic area. However, this commenter and other commenters disagreed with CMS' policy of including a remote location for determining SCH qualification if the remote location (either of a nearby hospital or of the SCH) does not meet the definition of a hospital or a like hospital or does not provide inpatient services reasonably available to individuals in the geographic area, such as a remote clinic with a small inpatient obstetrics and gynecology or labor and delivery unit or a few inpatient psychiatric or rehabilitation beds as a distinct part unit. One commenter stated that examining remote locations for distance requirements would be particularly concerning if the remote location does not provide 24/7 emergency care, because this would allow a small remote clinic with limited hours and providers to result in loss of access to life-saving emergency care. Another commenter similarly stated that the policy may allow a “competitive tactic inconsistent with the intent of the rule” if a hospital could lose SCH status as a result of a competing hospital opening a remote location that does not functionally represent a like provider.
Commenters urged CMS to carefully evaluate the impacts of the proposals on rural health care and consider a range of alternatives, including: Not finalizing the proposal to codify certain policies for multicampus hospitals with respect to SCHs; finalizing the proposal with protections for existing SCHs; excluding SCHs from the evaluation of the qualifying criteria on a combined basis; modifying the policy to apply only if the remote location is a full service inpatient facility; or apply the policy only if the remote location on its own could be licensed as a hospital under State law. One commenter specifically suggested that a remote location providing only limited inpatient services should not be considered a like provider.
However, we recognize that, under our current policies, for purposes of determining whether a nearby hospital consisting of a main campus and a remote location would be considered a like hospital with respect to an SCH or a hospital seeking SCH classification, the inpatient days of the remote location and the main hospital are not distinguishable for purposes of calculating the 8 percent. We also recognize that there may be scenarios in which a remote location that is within range of an SCH or a hospital seeking SCH classification and provides only very limited IPPS services is considered a like hospital by virtue of its being a remote location of a larger main hospital. We acknowledge the concerns raised by the commenters with respect to ensuring access to care in such situations, and we will take the feedback we received on this issue into consideration for potential future rulemaking.
For purposes of these policies, a facility without inpatient beds would not be considered for mileage requirements. We also are clarifying that because these policies apply to hospitals where services are provided and billed under the IPPS, these policies do not apply to CAHs. We note that we inadvertently included in proposed § 412.103(a)(7) a reference to § 412.103(a)(6), which pertains to CAHs. Thus, in this final rule, we are deleting the reference to § 412.103(a)(6) in § 412.103(a)(7).
After consideration of the public comments we received, for the reasons discussed above and in the proposed rule, we are finalizing as proposed, without modification, our codification of policies regarding multicampus hospitals in the regulations at § 412.92, § 412.96, and § 412.108. For the reason discussed in response to a comment above, we are finalizing our codification of policies regarding multicampus hospitals in the regulation at § 412.103(a)(7) with modification to remove an inadvertent reference to § 412.103(a)(6) (which pertains to CAHs). We may further consider commenters' suggestions regarding appropriate modifications to our policies in future rulemaking.
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.
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. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19903) and final rule (82 FR 38137), a new measurement of occupational mix is required for FY 2019.
The FY 2019 occupational mix adjustment is based on a new calendar year (CY) 2016 survey. Hospitals were required to submit their completed 2016 surveys (Form CMS-10079, OMB number 0938-0907) to their MACs by July 3, 2017. The preliminary, unaudited CY 2016 survey data were posted on the CMS website 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 revised or verified data elements in hospitals' occupational mix surveys that resulted in certain edit failures.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20361), for FY 2019, 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 2019 wage index. Similar to the method we use for the calculation of the wage index without occupational mix, salaries and hours for a multicampus hospital are allotted among the different labor market areas where its campuses are located. Table 2 associated with this final rule (which is available via the internet on the CMS website), which contains the final FY 2019 occupational mix adjusted wage index, includes separate wage data for the campuses of 16 multicampus hospitals. We refer readers to section III.C. of the preamble of this final rule for a chart listing the multicampus hospitals and the FTE percentages used to allot their occupational mix data.
Because the statute requires that the Secretary measure the earnings and paid hours of employment by occupational category not less than once every 3 years, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2019 wage index. For the proposed FY 2019 wage index, we used the Worksheet S-3, Parts II and III wage data of 3,260 hospitals, and we used the occupational mix surveys of 3,078 hospitals for which we also have Worksheet S-3 wage data, which represented a “response” rate of 94 percent (3,078/3,260). For the proposed FY 2019 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
In summary, the proposed FY 2019 unadjusted national average hourly wage and the proposed FY 2019 occupational mix adjusted national average hourly wage were:
After consideration of the public comments we received, for FY 2019, 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 2019 wage index, we used the Worksheet S-3, Parts II and III wage data of 3,283 hospitals, and we used the occupational mix surveys of 3,114 hospitals for which we also have Worksheet S-3 wage data, which is a “response” rate of 95 percent (3,114/3,283). (We note that the “response” rate for this final rule differs from that of the proposed rule because for this final rule we have generally been able to include the occupational mix surveys of hospitals whose wage data were aberrant for the proposed rule but have since been improved and were used for this final rule. In addition, for this final rule, we have generally been able to include some occupational mix surveys that had been aberrant for the proposed rule but have since been improved and were used for this final rule.) For the final FY 2019 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 final FY 2019 occupational mix adjusted national average hourly wage is $42.955567020.
In summary, the final FY 2019 unadjusted national average hourly wage and the final FY 2019 occupational mix adjusted national average hourly wage are:
As discussed in section III.E. of the preamble of this final rule, for FY 2019, we are applying the occupational mix adjustment to 100 percent of the FY 2019 wage index. We calculated the occupational mix adjustment using data from the 2016 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 2019 wage index results in a national average hourly wage of $42.955567020.
The FY 2019 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows:
The national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $35.04005228. 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 2016 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 42.1 percent, and the national percentage of hospital employees in the all other occupations category is 57.9 percent. (We note that the percentage for this final rule differs from that of the proposed rule because we have recalculated this percentage based on the occupational mix data we have included for this final rule. That is, for this final rule, we have generally been able to include the occupational mix surveys of hospitals whose wage data were aberrant for the proposed rule but have since been improved and were used for this final rule. In addition, for final rule we have generally been able to include some occupational mix surveys that had been aberrant for the proposed rule but have since been improved and were used for this final rule). At the CBSA level, the percentage of hospital employees in the nurse category ranged from a low of 26.6 percent in one CBSA to a high of 82.0 percent in another CBSA.
We compared the FY 2019 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 233 (57.0 percent) urban areas and 23 (48.9 percent) rural areas increased. The final wage index values for 112 (27.4 percent) urban areas increased by greater than or equal to 1 percent but less than 5 percent, and the
We also compared the FY 2019 wage data adjusted for occupational mix from the 2016 survey to the FY 2019 wage data adjusted for occupational mix from the 2013 survey. This analysis illustrates the effect on area wage indexes of using the 2016 survey data compared to the 2013 survey data; that is, it shows whether hospitals' wage indexes increased or decreased under the 2016 survey data as compared to the prior 2013 survey data. Of the 409 urban CBSAs and 47 rural CBSAs, our analysis shows that the FY 2019 wage index values for 228 (55.7 percent) urban areas and 23 (48.9 percent) rural areas increased using the 2016 survey data. Fifty-two (12.7 percent) urban areas increased by greater than or equal to 1 percent but less than 5 percent, and 3 (0.7 percent) urban areas increased by 5 percent or more. Seven (14.9 percent) rural areas increased by greater than or equal to 1 percent but less than 5 percent, and 0 rural areas increased by 5 percent or more. However, the wage index values for 181 (44.3 percent) urban areas and 24 (51.1 percent) rural areas decreased using the 2016 survey data. Forty nine (12.0 percent) urban areas decreased by greater than or equal to 1 percent but less than 5 percent, and 3 (0.7 percent) urban areas decreased by 5 percent or more. Two (4.3 percent) rural areas decreased by greater than or equal to 1 percent but less than 5 percent, and no rural areas decreased by 5 percent or more. The largest positive impacts using the 2016 survey data compared to the 2013 survey data are 6.31 percent for an urban area and 4.71 percent for a rural area. The largest negative impacts are 14.32 percent for an urban area and 2.34 percent for rural areas. No urban areas and no rural areas are unaffected. These results indicate that the wage indexes of more CBSAs overall (55.0 percent) increased due to application of the 2016 occupational mix survey data as compared to the 2013 occupational mix survey data to the wage index. However, a larger percentage of urban areas (55.7 percent) benefitted from the use of the 2016 occupational mix survey data as compared to the 2013 occupational mix survey data than did rural areas (48.9 percent).
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 2019 wage index associated with this final rule (which is available via the internet on the CMS website), we estimate that 263 hospitals will receive an increase in their FY 2019 wage index due to the application of the rural floor.
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the “imputed floor” policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have 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 eight times, the last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and is set to expire on September 30, 2018. (We refer readers to further discussions of the imputed floor in the IPPS/LTCH PPS final rules from FY 2014 through FY 2018 (78 FR 50589 through 50590, 79 FR 49969 through 49970, 80 FR 49497 through 49498, 81 FR 56921 through 56922, and 82 FR 38138 through 38142, 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 1 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
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 § 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 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 the FY 2018 IPPS/LTCH PPS final rule (82 FR 38138 through 38142), for FY 2018, we extended the imputed floor policy (under both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2018. In these three final rules, we revised the regulations at § 412.64(h)(4) and (h)(4)(vi) to reflect the additional 1-year extensions.
The imputed floor is set to expire effective October 1, 2018, and in the FY 2019 proposed rule (83 FR 20363), we did not propose to extend the imputed floor policy. As we stated in the proposed rule (83 FR 20363), 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 explained in the proposed rule that we have expressed reservations about the 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 2019 proposed rule, we proposed not to apply an imputed floor to wage index calculations and payments for hospitals in all-urban States for FY 2019 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 2019 and subsequent years. Therefore, only States containing both rural areas and hospitals located in such areas (including any hospital reclassified as rural under the provisions of § 412.103 of the regulations) would benefit from the rural floor, in accordance with section 4410 of Public Law 105-33. In addition, we stated that we would 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 2019 IPPS/LTCH PPS proposed rule (which are available via the internet on the CMS website) did not reflect the imputed floor policy, and there was no proposed national budget neutrality adjustment for the imputed floor for FY 2019.
A number of commenters stated that, under the current methodology, areas with few rural hospitals, such as Massachusetts, Arizona, and California, have the ability and incentive to have major urban hospitals reclassify as rural under 42 CFR 412.103 and, by selectively doing so, such an urban to rural reclassification could significantly raise the rural floor in those States. Commenters conveyed that while the establishment of a statewide rural floor is required by statute, the method by which the floor is calculated is entirely at CMS' discretion through regulatory authority and, in fact, CMS has already used its discretion in establishing the imputed rural floor for all-urban States. The commenters indicated that any rural floor calculation should mirror the spirit and intent of the law resulting in only the “natural” rural providers in a State considered when calculating a rural floor. Finally, the commenters suggested that CMS consider immediately issuing a change to the existing calculation that includes only the “natural” rural providers in calculating the rural floor for a State.
A number of commenters believed that eliminating the imputed floor would create the same uneven playing field in all-urban States that existed prior to 2005, in response to which CMS initially established the policy. According to the commenters, 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 is discontinued.
In addition, the commenters stated that there are many Medicare payment programs that redirect scarce Medicare funding to a class of unique hospitals, and that not all States have hospitals that benefit from these programs. For example, according to the commenters, CMS makes payments to CAHs at a rate of 101 percent of their costs and States that do not have any CAHs do not benefit from this program. The commenters stated that while CAHs are paid outside the IPPS program, the dollars continue to come from a finite Medicare trust fund representing a transfer of payments from hospitals in States without any CAHs into States with CAHs, similar to the transfer of payments CMS cites as its rationale to discontinue the imputed floor.
The commenters also pointed out that CMS has upheld the imputed floor for over a decade 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 previous CMS justification for creating and extending the floor in previous years, such as all-urban States are at a disadvantage due to the absence of a rural floor policy and that, in New Jersey, “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.”
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.
The commenters also 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 commenters, 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 use its regulatory authority to curtail the adverse effects of section 3141 of the Affordable Care Act and restore integrity to the hospital wage index system, and further encouraged CMS to publish the effects of the nationwide rural floor on Medicare outpatient services in the proposed and final hospital outpatient prospective payment system payment and policy updates for CY 2019.
Regarding the comment encouraging CMS to publish the effects of the nationwide rural floor on Medicare outpatient services in the proposed and final hospital outpatient prospective payment system payment and policy updates for CY 2019, we will take this comment into consideration and may address them in the development of future rulemaking.
After consideration of public comments received, for the reasons discussed above and in the proposed rule, we believe it is appropriate to allow the imputed floor to expire on its expiration date, September 30, 2018. Therefore, we are allowing the imputed floor to expire under both the original methodology and the alternative methodology on the date it is currently set to expire, September 30, 2018. As proposed, the wage index and impact tables associated with this FY 2019 IPPS/LTCH PPS final rule (which are available on the internet via the CMS website) do not reflect the imputed floor policy and we are not applying a national budget neutrality adjustment for the imputed floor for FY 2019. There are 10 hospitals in New Jersey, 9 hospitals in Rhode Island, and 3
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 2019 IPPS/LTCH PPS proposed rule, we did not propose any changes to the frontier floor policy for FY 2019. We stated in the proposed rule that 50 hospitals would receive the frontier floor value of 1.0000 for their FY 2019 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 FY 2019. In this final rule, 50 hospitals will receive the frontier floor value of 1.0000 for their FY 2019 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 2019 wage index are identified in Table 2 associated with this final rule, which is available via the internet on the CMS website.
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 website. 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). In addition, as discussed in section III.J. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule, we added a Table 4 associated with the proposed rule entitled “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act—FY 2019” (which is available via internet on the CMS website). We intend to make this information available annually via Table 4 in the IPPS/LTCH PPS proposed and final rules. We refer readers to section VI. of the Addendum to this final rule for a discussion of the final wage index tables for FY 2019.
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 (IFC) in the
We discussed that when there is both a § 412.103 redesignation and an MGCRB reclassification, the MGCRB reclassification controls for wage index calculation and payment purposes. We exclude hospitals with § 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 § 412.103 and the MGCRB processes on wage index calculations.
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 2019 reclassification requests. Based on such reviews, there are 303 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2019. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2019, hospitals reclassified beginning in FY 2017 or FY 2018 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 230 hospitals approved for wage index reclassifications in FY 2017 that will continue for FY 2019, and 348 hospitals approved for wage index
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 any time before the MGCRB issues a decision on the application, or after the MGCRB issues a decision, provided the request for withdrawal is received by the MGCRB within 45 days of the date that CMS' annual notice of proposed rulemaking is issued in the
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 2019 are incorporated into the wage index values published in this FY 2019 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.
Applications for FY 2020 reclassifications (OMB control number 0938-0573) are due to the MGCRB by September 4, 2018 (the first working day of September 2018). 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 reclassifications may be obtained, beginning in mid-July 2018, via the internet on the CMS website at:
Under regulations in effect prior to FY 2018 (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. Specifically, in the FY 2017 IPPS/LTCH PPS final rule, we revised § 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
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. However, we note that, beginning with the FY 2020 reclassification application cycle, the MGCRB now requires applications, supporting documents, and subsequent correspondence to be filed electronically through the MGCRB module of the Office of Hearings Case and Document Management System (“OH CDMS”). Also, the MGCRB will issue all of its notices and decisions via email and these documents will be accessible electronically through OH CDMS. Registration instructions and the system user manual are available at
Section 412.230 of the regulations sets forth criteria for an individual hospital to apply for geographic reclassification to a higher rural or urban wage index area. Specifically, under § 412.230(a)(1)(ii), an individual hospital may be redesignated from an urban area to another urban area, from a rural area to another rural area, or from a rural area to an urban area for the purpose of using the other area's wage
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51600 through 51601), we implemented a policy change to allow for a waiver of the average hourly wage comparison criterion under § 412.230(d)(1)(iii) for a hospital in a single hospital MSA for reclassifications beginning in FY 2013 if the hospital could document that it is the single hospital in its MSA that is paid under 42 CFR part 412, subpart D (§ 412.230(d)(5)). In that final rule, we stated that we agreed that the then-current policies for geographic reclassification were disparate for hospitals located in single hospital MSAs compared to hospitals located in multiple hospital MSAs. We also acknowledged commenters' views that this disparity was sometimes a disadvantage because hospitals in single hospital MSAs had fewer options for qualifying for geographic reclassification. As we stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20365), in the years since we implemented this policy change, we have encountered questions and concerns regarding its implementation. In the proposed rule, we stated that to qualify under § 412.230(d)(5) for the waiver of the average hourly wage criterion under § 412.230(d)(1)(iii)(C), a hospital must document to the MGCRB that it is the only hospital in its geographic wage index area that is paid under 42 CFR part 412, subpart D. We noted that to do so, a hospital frequently was required to contact the appropriate CMS Regional Office or MAC for a statement certifying its status as the single hospital in its MSA. We explained that hospitals have indicated that this process may be time-consuming, inconsistent in its application nationally, and poses challenges with respect to accurately reflecting situations where hospitals have recently opened or ceased operations during the application process. We stated in the proposed rule (83 FR 20365) that, in light of these questions and concerns and after reviewing the implementation of this reclassification provision, we believed that a revision of the policy was necessary to reduce unnecessary burden to affected hospitals and enhance consistency while achieving previously stated policy goals.
We explained in the proposed rule that the objective of the 108/106 percent average hourly wage criterion at § 412.230(d)(1)(iii)(C) is to require a reclassifying hospital to document that it has significantly higher average hourly wages than other hospitals in its labor market area. The stated purpose of § 412.230(d)(5) was to provide additional reclassification options for hospitals that, due to their single hospital MSA status, could not mathematically meet the requirements of § 412.230(d)(1)(iii). Therefore, in order to determine whether a hospital is the single hospital in the MSA under § 412.230(d)(5), rather than require the hospital to obtain documentation from the CMS Regional Office or the MAC to prove its single hospital MSA status, we stated that we believe it would be appropriate to use the same data used to determine whether the 108/106 percent criterion is met under § 412.230(d)(1)(iii)(C): That is, the annually published 3-year average hourly wage data as provided in § 412.230(d)(2)(ii). Specifically, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20365), we proposed that, for reclassification applications for FY 2021 and subsequent fiscal years, a hospital would provide the wage index data from the current year's IPPS final rule to demonstrate that it is the only hospital in its labor market area with wage data listed within the 3-year period considered by the MGCRB. Accordingly, we proposed to revise the regulation text at § 412.230(d)(5) to provide that the requirements of § 412.230(d)(1)(iii) would not apply if a hospital is the single hospital in its MSA with published 3-year average hourly wage data included in the current fiscal year inpatient prospective payment system final rule. In proposing this revision, we stated that we would remove the language in this regulation requiring that the hospital be the single hospital “paid under subpart D of this part”, as we believe the proposed revisions to the regulation above more accurately identify the universe of hospitals this policy was intended to address.
As discussed in the proposed rule, the purpose of the single hospital MSA provision was to address situations where a hospital essentially had no means of comparing wages to other hospitals in its labor market area. We stated in the proposed rule that we believe this proposal would allow for a more straightforward and consistent implementation of the single hospital MSA exception and would reduce provider burden. We further stated that we believe the proposed requirements above for meeting the single hospital MSA exception could be easily verified and validated by the applicant and the MGCRB, and would continue to address the concerns expressed by commenters included in the FY 2012 IPPS/LTCH PPS final rule.
After consideration of the public comments we received, for the reasons discussed above and in the proposed rule, we are finalizing our revisions to § 412.230(d)(5) as proposed without modification. Thus, for applications for reclassification for FY 2021 and subsequent fiscal years, a hospital must provide the wage index data from the current year's IPPS final rule to demonstrate that it is the only hospital in its labor market area with wage data listed within the 3-year period considered by the MGCRB. Specifically, a hospital must provide documentation from Table 2 of the Addendum to the current fiscal year IPPS/LTCH PPS final rule demonstrating it is the only CCN listed within the associated “Geographic CBSA” number (currently listed under column H) with a “3-Year Average Hourly Wage (2018, 2019, 2020)” value (currently listed under column G).
Under current policy described in §§ 412.230(d)(2)(v), 412.232(d)(2)(iii), and 412.234(c)(2), and as discussed in the FY 2008 IPPS/LTCH final rule (72 FR 47334 through 47335), remote locations of hospitals in a distinct geographic area from the main hospital campus are eligible to seek wage index reclassification. As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20366), in Table 2 associated with that proposed rule (which is available via the internet on the CMS website), such locations are indicated with a “B” in the third digit of the CCN. (As
We did not receive any public comments specific to this clarification and request. Therefore, when a county group MGCRB reclassification includes a remote location of a hospital located in a different labor market area that has not yet been assigned a “B” number in Table 2 of the applicable IPPS final rule used to evaluate reclassification criteria, to help facilitate the MGCRB's review, the county group should submit the application to the MGCRB listing the remote location with a “B” in the third digit of its CCN. If the application is approved by the MGCRB, CMS will include the “B” location number, with applicable reclassification status and wage index values, in Table 2 of the subsequent IPPS final rule.
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, in that rule, we adopted a minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within 45 days from the publication of the proposed rule) to waive its urban status for the full 3-year period for which its out-migration adjustment is effective. By doing so, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the out-migration adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we 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
The proposed Lugar assignment of the hospital at issue for FY 2019 is not a clerical error. Under OMB's standards for determining whether an outlying county should be considered part of a CBSA, OMB examines commuting to central counties of the CBSA. Our longstanding policy is that, consistent with OMB standards, we examine commuting data to central counties of CBSAs in determining whether a hospital qualifies as a Lugar hospital and in determining the urban area to which it is assigned; we do not view the two steps in isolation. The proposed Lugar assignment of the hospital at issue for FY 2019 reflects proper application of this policy.
In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the “out-migration” adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index.
Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. When the provision of section 1886(d)(13) of the Act was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau that were derived from a special tabulation of the 2000 Census journey-to-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the “long-form” survey, which the Census Bureau used at that time and which contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was “short form” only; information on where residents in each county worked was not collected as part of the 2010 Census. The Census Bureau worked with CMS to provide an alternative dataset based on the latest available data on where residents in each county worked in 2010, for use in developing a new out-migration adjustment based on new commuting patterns developed from the 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 FYs 2016, 2017, and 2018 IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, and 82 FR 38150, respectively), the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment were applicable for FY 2016, FY 2017, and FY 2018, and in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367), we proposed to use them again for FY 2019. We have applied the same policies, procedures, and computations since FY 2012, and we believe they continue to be appropriate for FY 2019. 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 2019, the out-migration adjustment will continue to be based on the data derived from the custom tabulation of the ACS utilizing 2008 through 2012 (5-year) Microdata. For future fiscal years, we may consider determining out-migration adjustments based on data from the next Census or other available data, as appropriate. For FY 2019, 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 on this proposed policy for FY 2019. Therefore, for FY 2019, we are finalizing our proposal, without modification, to continue using the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment and that were applicable for FY 2016, FY 2017, and FY 2018.
Table 2 associated with this final rule (which is available via the internet on the CMS website) includes the final out-migration adjustments for the FY 2019 wage index. In addition, as discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367), we have added a new Table 4, “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act—FY 2019”, associated with this final rule. For this final rule, Table 4 consists of the following: A list of counties that are eligible for the out-migration adjustment for FY 2019 identified by FIPS county code, the final FY 2019 out-migration adjustment, and the number of years the adjustment will be in effect. We believe this new table makes this information more transparent and provides the public with easier access to this information. We intend to make the information available annually via Table 4 in the IPPS/LTCH PPS proposed and final rules, and are including it among the tables associated with this FY 2019 IPPS/LTCH PPS final rule that are available via the internet on the CMS website.
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
Hospitals must meet the criteria to be reclassified from urban to rural status under § 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 stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) that we believed 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 § 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 § 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 (the lock-in 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 § 412.103. We refer readers to the FY 2017 IPPS/LTCH PPS final rule for a full discussion of this policy.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367 through 20368), we proposed to change the lock-in date to provide for additional time in the ratesetting process and to match the lock-in date with another existing deadline. As we discussed in the FY 2017 IPPS/LTCH PPS proposed and final rules (81 FR 25071 and 56931, respectively), the IPPS ratesetting process that CMS undergoes each proposed and final rulemaking is complex and labor-intensive, and subject to a compressed timeframe in order to issue the final rule each year within the timeframes for publication. Accordingly, CMS must ensure that it receives, in a timely fashion, the necessary data, including, but not limited to, the list of hospitals that are reclassified from urban to rural status under § 412.103, in order to calculate the wage indexes and other IPPS rates.
In order to allot more time to the ratesetting process, we proposed to revise the lock-in date such that a hospital's application for rural reclassification under § 412.103 must be approved by the CMS Regional Office no later than 60 days after the public display date of the IPPS notice of proposed rulemaking at the Office of the Federal Register in order for a hospital to be treated as rural in the wage index and budget neutrality calculations under § 412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the next Federal fiscal year. We stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20368) that depending on the public display date of the proposed rule (which may be earlier in future years), this proposed revision to the lock-in date would potentially allow for additional time in the ratesetting process for CMS to incorporate rural reclassification data, which we believe would support efforts to eliminate errors and assist in ensuring a more accurate wage index.
As we stated in the proposed rule, under this revision, there would no longer be a requirement that the hospital file its rural reclassification application by a specified date (which at the time of the proposed rule was 70 days prior to the second Monday in June). While we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930 through 56932) that a hospital would need to file its reclassification application with the CMS Regional Office not later than 70 days prior to the second Monday in June, we stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20368) that timeframe was a precautionary measure to ensure that CMS would receive the approval in time to include the reclassified hospitals in the wage index and budget neutrality calculations for the upcoming Federal fiscal year (60 days for the CMS Regional Office to approve an application, in accordance with § 412.103(c), and an additional 10 days to process the approval and notify CMS Central Office). We explained that while we still believe that it would be prudent for hospitals to apply approximately 70 days prior to the proposed lock-in date, we believe that requiring hospitals to apply by a set date is unnecessary because the Regional Offices may approve a hospital's request to reclassify under § 412.103 in less than 60 days, and CMS may be notified in a timeframe shorter than 10 days. Therefore, we stated that, under our proposal, any hospital with an approved rural reclassification by the lock-in date proposed above (that is, 60 days after the public display date of the IPPS notice of proposed rulemaking at the Office of the Federal Register) would be included in the wage index and budget neutrality calculations for setting payment rates for the next Federal fiscal year, regardless of the date of filing.
In addition, we noted that CMS generally provides 60 days after the public display date of the IPPS notice of proposed rulemaking at the Office of the Federal Register for submitting public comments regarding the proposed rule for consideration in the final rule. Therefore, we believe that, in addition to providing for more time in the ratesetting process, which helps to ensure a more accurate wage index, this proposed revision would also provide clarity and simplify regulations by synchronizing the lock-in date for § 412.103 redesignations with the usual public comment deadline for the IPPS proposed rule.
Accordingly, we proposed to revise § 412.103(b)(6) to specify that in order for a hospital to be treated as rural in the wage index and budget neutrality calculations under § 412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the next Federal fiscal year, the hospital's application must be approved by the CMS Regional Office in accordance with the requirements of § 412.103 no later than 60 days after the public display date at the Office of the Federal Register of the IPPS proposed rule for the next Federal fiscal year.
We also reiterated in the proposed rule 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 § 412.103. As we discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931), this lock-in date also does not change the current regulation that allows hospitals that qualify under § 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 § 412.103(d). The hospital's IPPS claims will be paid
After consideration of the public comments we received, for the reasons discussed above and in the proposed rule, we are finalizing our proposal, without modification, to revise § 412.103(b)(6) to specify that in order for a hospital to be treated as rural in the wage index and budget neutrality calculations under § 412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the next Federal fiscal year, the hospital's application must be approved by the CMS Regional Office in accordance with the requirements of § 412.103 no later than 60 days after the public display date at the Office of the Federal Register of the IPPS proposed rule for the next Federal fiscal year.
The preliminary, unaudited Worksheet S-3 wage data files for the proposed FY 2019 wage index were made available on May 19, 2017, and the preliminary CY 2016 occupational mix data files were made available on July 12, 2017, through the internet on the CMS website at:
On February 2, 2018, we posted a public use file (PUF) at:
In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional PUF on the CMS website that reflects the actual data that are used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door Forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and about the dates of the Hospital Open Door Forums at the CMS website at:
In a memorandum dated April 28, 2017, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the preliminary wage index data files posted on May 19, 2017, and the process and timeframe for requesting revisions. The preliminary CY 2016 occupational mix survey data was posted on CMS' website on July 12, 2017.
If a hospital wished to request a change to its data as shown in the May 19, 2017 preliminary wage data files and the July 12, 2017 preliminary occupational mix data files, the hospital had to submit corrections along with complete, detailed supporting documentation to its MAC by September 1, 2017. 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 15, 2017 was the deadline for MACs to complete all desk reviews for hospital wage and occupational mix data and transmit revised Worksheet S-3 wage data and occupational mix data to CMS.
November 4, 2017 was the date by when MACs notified State hospital associations regarding hospitals that failed to respond to issues raised during the desk reviews. Additional revisions made by the MACs were transmitted to CMS throughout January 2018. CMS published the wage index PUFs that included hospitals' revised wage index data on February 2, 2018. Hospitals had until February 16, 2018, to submit requests to the MACs to correct errors in the February 2, 2018 PUF due to CMS or MAC mishandling of the wage index data, or to revise desk review adjustments to their wage index data as included in the February 2, 2018 PUF. 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 23, 2018. Under our current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38153), the deadline for a hospital to request CMS intervention in cases where a hospital disagreed with a MAC's handling of wage data on any basis (including a policy, factual, or other dispute) was April 5, 2018. Data that were incorrect in the preliminary or February 2, 2018 wage index data PUFs, but for which no correction request was received by the February 16, 2018 deadline, were not considered for correction at this stage. In addition, April 5, 2018 was the deadline for hospitals to dispute data corrections made by CMS of which the hospital was notified after the February 2, 2018 PUF and at least 14 calendar days prior to April 5, 2018 (that is, March 22, 2018), that did not arise from a hospital's request for revisions. We note that, as we did for the FY 2018 wage index, for the FY 2019 wage index, in accordance with the FY 2019 wage index timeline posted on the CMS website at:
Hospitals were given the opportunity to examine Table 2 associated with the proposed rule, which was listed in section VI. of the Addendum to the proposed rule and available via the internet on the CMS website at:
We posted the final wage index data PUFs on April 27, 2018 via the internet on the CMS website at:
After the release of the April 2018 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 23, 2017.
• Requests for correction of errors that were not, but could have been, identified during the hospital's review of the February 2, 2018 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 2018 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
Verified corrections to the wage index data received timely (that is, by May 30, 2018) by CMS and the MACs were incorporated into the final FY 2019 wage index, which is effective October 1, 2018.
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 2019 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth earlier will not be afforded a later opportunity to submit wage index data corrections or to dispute the MAC's decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above (requiring requests to MACs by the specified date in February and, where such requests are unsuccessful, requests for intervention by CMS by the specified date in April) will not be permitted to challenge later, before the PRRB, the failure of CMS to make a requested data revision. We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156), this policy also applies to a hospital disputing corrections made by CMS that do not arise from a hospital's request for a wage index data revision. That is, a hospital disputing an adjustment made by CMS that did not arise from a hospital's request for a wage index data revision would be required to request a correction by the first applicable deadline. Hospitals that do not meet the procedural deadlines set forth earlier will not be afforded a later opportunity to submit wage index data corrections or to dispute CMS' decision with respect to requested changes.
Again, we believe the wage index data correction process described earlier provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC's attention. Moreover, because hospitals had access to the final wage index data PUFs by late April 2018, 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 2019 wage index by August 2018, and the implementation of the FY 2019 wage index on October 1, 2018. 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, 2018, 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, 2018 for the FY 2019 wage index). This provision is not available to a hospital seeking to revise another hospital's data that may be affecting the requesting hospital's wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS website prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 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, 2018 deadline for the FY 2019 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, 2018 deadline for the FY 2019 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.
The process set forth with the wage index timeline discussed in section III.L.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. 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 February 2 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 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 FY 2019 IPPS/LTCH PPS proposed rule, in the calculation of the proposed FY 2019 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 of a hospital's wage-related costs such as pension, CMS would correct that data error and the hospital's average hourly wage would likely increase as a result.
While we maintain CMS' authority to conduct additional review and make resulting corrections at any time during the wage index development process, in accordance with the policy finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156), starting with the FY 2019 wage index, we implemented a process for hospitals to request further review of a correction made by CMS that did not arise from a hospital's request for a wage index data correction. Instances where CMS makes a correction to a hospital's data after the February 2 PUF based on a different understanding than the hospital about certain reported costs, for example, could potentially be resolved using this process before the final wage index is calculated. We believe this process and the timeline for requesting such corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS final rule) bring additional transparency to instances where CMS makes data corrections after the February 2 PUF, and provide opportunities for hospitals to request further review of CMS changes in time for the most accurate data to be reflected in the final wage index calculations. These additional appeals opportunities are described earlier and in the FY 2019 Wage Index Development Time Table, as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).
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 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 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we rebased and revised the hospital market basket. We established a 2014-based IPPS hospital market basket to replace the FY 2010-based IPPS hospital market basket, effective October 1, 2017. Using the 2014-based IPPS market basket, we finalized a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2017. In addition, in FY 2018, we implemented this revised and rebased labor-related share in a budget neutral manner (82 FR 38522). However, consistent with section 1886(d)(3)(E) of the Act, we did not take into account
The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. We include a cost category in the labor-related share if the costs are labor intensive and vary with the local labor market. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20371), for FY 2019, we did not propose to make any further changes to 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. Therefore, for FY 2019, we proposed to continue to use a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2018.
As discussed in section IV.B. of the preamble of this final rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we applied the Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage to the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need for us to calculate a Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage for application to the Puerto Rico-specific standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national labor-related share and nonlabor-related share percentages that are applied to the national standardized amount. Accordingly, for FY 2019, we did not propose a Puerto Rico-specific labor-related share percentage or a nonlabor-related share percentage.
We did not receive any public comments on our proposals related to the labor-related share percentage. Therefore, we are finalizing our proposals, without modification, to continue to use a labor-related share of 68.3 percent for discharges occurring on or after October 1, 2018 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 2019 IPPS/LTCH PPS final rule and available via the internet on the CMS website, reflect the national labor-related share, which is also applicable to Puerto Rico hospitals. For FY 2019, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are applying the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.000, for FY 2019, we are applying the wage index to a labor-related share of 68.3 percent of the national standardized amount.
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 § 412.4(c) defines postacute care transfers. Our policy set forth in § 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 (§ 412.4(f)(1)). Transfer cases also are eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 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 § 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, § 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 (§ 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
As discussed in section II.F. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule, based on our analysis of FY 2017 MedPAR claims data, we proposed to make changes to a number of MS-DRGs, effective for FY 2019. Specifically, we proposed to:
• Assign CAR-T therapy procedure codes to MS-DRG 016 (proposed revised title: Autologous Bone Marrow Transplant with CC/MCC or T-Cell Immunotherapy);
• Delete MS-DRG 685 (Admit for Renal Dialysis) and reassign diagnosis codes from MS-DRG 685 to MS-DRGs 698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively);
• Delete 10 MS-DRGs (MS-DRGs 765, 766, 767, 774, 775, 777, 778, 780, 781, and 782) and create 18 new MS-DRGs relating to Pregnancy, Childbirth and the Puerperium (MS-DRGs 783 through 788, 794, 796, 798, 805, 806, 807, 817, 818, 819, and 831 through 833);
• Assign two additional diagnosis codes to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator);
• Reassign 12 ICD-10-PCS procedure codes from MS-DRGs 329, 330 and 331 (Major Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 344, 345, and 346 (Minor Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively); and
• Reassign ICD-10-CM diagnosis codes R65.10 and R65.11 from MS-DRGs 870, 871, and 872 (Septicemia or Severe Sepsis with and without Mechanical Ventilation >96 Hours with and without MCC, respectively) to MS-DRG 864 (proposed revised title: Fever and Inflammatory Conditions).
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule, in light of the proposed changes to these MS-DRGs for FY 2019, according to the regulations under § 412.4(d), we evaluated these MS-DRGs using the general postacute care transfer policy criteria and data from the FY 2017 MedPAR file. If an MS-DRG qualified for the postacute care transfer policy, we also evaluated that MS-DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6). We stated in the proposed rule that we continue to believe it is appropriate to reassess MS-DRGs when proposing reassignment of procedure codes or diagnosis codes that would result in material changes to an MS-DRG. We noted that MS-DRGs 023, 329, 330, 331, 698, 699, 700, 870, 871, and 872 are currently subject to the postacute care transfer policy. We stated that as a result of our review, these MS-DRGs, as proposed to be revised, would continue to qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy. We note that, as discussed in section II.F.5.b. of the preamble of this final rule, we are finalizing these proposed changes to the MS-DRGs with the exception of our proposed revisions to MS-DRGs 329, 330, 331, 344, 345, and 336, which we are not finalizing. Therefore, MS DRGs 329, 330, 331, 344, 345, and 336 are not included in the updated analysis of the postacute care transfer policy and special payment policy criteria discussed below. We note that MS-DRGs that are subject to the postacute transfer policy for FY 2018 and are not revised will continue to be subject to the policy in FY 2019.
Using the December 2017 update of the FY 2017 MedPAR file, we developed a chart for the proposed rule (83 FR 20378 through 20380) which set forth the analysis of the postacute care transfer policy criteria completed for the proposed rule with respect to each of these proposed new or revised MS-DRGs. We note that, in the proposed rule, we incorrectly stated that we used the March 2018 update for purposes of this analysis rather than the December 2017 update. We indicated that, for the FY 2019 final rule, we would update this analysis using the most recent available data at that time. The following chart reflects our updated analysis for the finalized new and revised MS-DRGs using the postacute care transfer policy criteria and the March 2018 update of the FY 2017 MedPAR file. We note that, with the additional time since the proposed rule, this analysis does take into account the change relating to discharges to hospice care, effective October 1, 2018, discussed in section IV.A.3. of the preamble of this final rule. We also note that the postacute care transfer policy status for all finalized new and revised MS-DRGs remains unchanged from the proposed rule.
Based on our annual review of proposed new or revised MS-DRGs and analysis of the December 2017 update of the FY 2017 MedPAR file, we identified MS-DRGs that we proposed to include on the list of MS-DRGs subject to the special payment methodology policy. We note that, in the proposed rule, we incorrectly stated that we used the March 2018 update for purposes of this analysis rather than the December 2017 update. We noted in the proposed rule that none of the proposed revised MS-DRGs that were listed in the table included in the proposed rule as continuing to meet the criteria for postacute care transfer policy status (specifically, MS-DRGs 023, 330, 331, 698, 699, 700, 870, 871, and 872) are currently listed as being subject to the special payment methodology (as noted
In the proposed rule, we indicated that, for the FY 2019 final rule, we would update this analysis using the most recent available data at that time. The following chart reflects our updated analysis for the finalized new and revised MS-DRGs using our criteria and the March 2018 update of the FY 2017 MedPAR file. We note that with the additional time since the proposed rule this analysis does take into account the change relating to discharges to hospice care, effective October 1, 2018, discussed in section IV.A.3. of the preamble of this final rule. We also note that status for all finalized new and revised MS-DRGs remains unchanged from the proposed rule.
We did not receive any public comments specific to our proposal that MS-DRGs 23 and 24 would be subject to the special payment methodology effective FY 2019. Therefore, we are finalizing this proposal without modification.
The special payment policy status of these MS-DRGs is reflected in Table 5 associated with this final rule, which is listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website.
Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was deemed a “qualified discharge” if the individual was discharged to one of the following postacute care settings:
• A hospital or hospital unit that is not a subsection (d) hospital.
• A skilled nursing facility.
• Related home health services provided by a home health agency provided within a timeframe established by the Secretary (beginning within 3 days after the date of discharge).
Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. Accordingly, effective for discharges occurring on or after October 1, 2018, if a discharge is assigned to one of the MS-DRGs subject to the postacute care transfer policy and the individual is transferred to hospice care by a hospice program, the discharge would be subject to payment as a transfer case. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20381 and 20382), we proposed to make conforming amendments to § 412.4(c) of the regulation to include discharges to hospice care occurring on or after October 1, 2018 as qualified discharges. We proposed that hospital bills with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) would be subject to the postacute care transfer policy in accordance with this statutory amendment. We stated in the proposed rule that, consistent with our policy for other qualified discharges, CMS claims processing software will be revised to identify cases in which hospice benefits were billed on the date of hospital discharge without the appropriate discharge status code. Such claims will be returned as unpayable to the hospital and may be rebilled with a corrected discharge code.
While several commenters recognized the statutory requirement for the proposed changes, they urged CMS to use its administrative discretion to mitigate or delay the potentially harmful effects that the policy could have on access to the hospice benefit by Medicare beneficiaries facing the end of life.
After consideration of the public comments we received, we are finalizing the proposed revisions to § 412.4(c) to include discharges to hospice care occurring on or after October 1, 2018 as qualified discharges, with one minor grammatical modification discussed previously. Hospital bills with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) will be subject to the postacute care transfer policy in accordance with this statutory amendment, effective for discharges occurring on or after October 1, 2018.
In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient hospital operating costs by a factor called the “applicable percentage increase.” For FY 2019, we are setting the applicable percentage increase by applying the adjustments listed in this section in the same sequence as we did for FY 2018. 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 2019 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 final rule (82 FR 38158 through 38175), we replaced the FY 2010-based IPPS operating market basket with the rebased and revised
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20381), we proposed to base the proposed FY 2019 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Inc.'s (IGI's) fourth quarter 2017 forecast of the 2014-based IPPS market basket rate-of-increase with historical data through third quarter 2017, which was estimated to be 2.8 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 2019 market basket update and the MFP adjustment in the final rule.
Based on the most recent data available for this FY 2019 IPPS/LTCH PPS final rule (that is, IGI's second quarter 2018 forecast of the 2014-based IPPS market basket rate-of-increase with historical data through the first quarter of 2018), we estimate that the FY 2019 market basket update used to determine the applicable percentage increase for the IPPS is 2.9 percent.
For FY 2019, 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. Based on the most recent data described above, we determined final applicable percentage increases to the standardized amount for FY 2019, 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 website at
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 regression model. A complete description of the MFP projection methodology is available on the CMS website at:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), for FY 2019, we proposed an MFP adjustment of 0.8 percentage point. Similar to the market basket update, for the proposed rule, we used IGI's fourth quarter 2017 forecast of the MFP adjustment to compute the proposed MFP adjustment. As noted previously, we proposed that if more recent data subsequently became available, we would use such data, if appropriate, to determine the FY 2019 market basket update and the MFP adjustment for the final rule.
Based on the most recent data available for this FY 2019 IPPS/LTCH PPS final rule (that is, IGI's second quarter 2018 forecast of the MFP adjustment with historical data through the first quarter of 2018), for FY 2019, we have determined an MFP adjustment of 0.8 percentage point.
We did not receive any public comments on our proposals 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 2.9 percent and an MFP adjustment of 0.8 percentage point for FY 2019 based on the most recent available data.
Based on the most recent available data for this final rule, as described previously, we have determined four applicable percentage increases to the standardized amount for FY 2019, as specified in the following table:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), we proposed to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law for the FY 2019 update. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we proposed to revise paragraph (vii) of § 412.64(d)(1) to include the applicable percentage increase to the FY 2019 operating standardized amount as the percentage increase in the market basket
We did not receive any public comments on our proposed changes to the regulations at § 412.64(d)(1) 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 and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs also is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. (As discussed in section IV.G. of the preamble of this FY 2019 IPPS/LTCH PPS 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 through FY 2017 (that is, for discharges occurring on or before September 30, 2017). Section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted February 9, 2018, extended the MDH program for discharges on or after October 1, 2017 through September 30, 2022.)
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), for FY 2019, we proposed the following updates to the hospital-specific rates applicable to SCHs and MDHs: A proposed update of 1.25 percent for a hospital that submits quality data and is a meaningful EHR user; a proposed update of 0.55 percent for a hospital that fails to submit quality data and is a meaningful EHR user; a proposed update of −0.85 percent for a hospital that submits quality data and is not a meaningful EHR user; and a proposed update of −1.55 percent for a hospital that fails to submit quality data and is not a meaningful EHR user. As noted previously, for the FY 2019 IPPS/LTCH PPS proposed rule, we used IGI's fourth quarter 2017 forecast of the 2014-based IPPS market basket update with historical data through third quarter 2017. Similarly, we used IGI's fourth quarter 2017 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 and MDHs in this final rule using the most recent available data, specifically, IGI's second quarter 2018 forecast of the 2014-based IPPS market basket rate-of-increase and the MFP adjustment with historical data through the first quarter of 2018.
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 and MDHs: An update of 1.35 percent for a hospital that submits quality data and is a meaningful EHR user; an update of 0.625 percent for a hospital that fails to submit quality data and is a meaningful EHR user; an update of -0.825 percent for a hospital that submits quality data and is not a meaningful EHR user; and an update of -1.55 percent for a hospital that fails to submit quality data and is not a meaningful EHR user.
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 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 IV.B.1. of the preamble of this final rule. Accordingly, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), for FY 2019, we proposed an applicable percentage increase of 1.25 percent to the standardized amount for hospitals located in Puerto Rico. We note that we did not receive any public comments with regard to our proposal. Based on the most recent data available for this final rule (as discussed in section IV.B.1. of the preamble of this final rule), 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 2019.
Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 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
• 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.
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 § 412.96(c)(1)(ii). The national median CMI value for FY 2019 is based on the CMI values of all urban hospitals nationwide, and the regional median CMI values for FY 2019 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 § 413.75). These values are based on discharges occurring during FY 2017 (October 1, 2016 through September 30, 2017), and include bills posted to CMS' records through March 2018.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20383), 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, 2018, they must have a CMI value for FY 2017 that is at least—
• 1.66185 (national—all urban); or
• The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 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 a table in the proposed rule (83 FR 20383). We stated in the proposed rule that we intended to update the proposed CMI values in the FY 2019 final rule to reflect the updated FY 2017 MedPAR file, which would contain data from additional bills received through March 2018.
We did not receive any public comments on our proposals.
Based on the latest available data (FY 2017 bills received through March 2018), 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, 2018, they must have a CMI value for FY 2017 that is at least:
• 1.6612 (national—all urban); or
• The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located.
The final CMI values by region are set forth in the following table.
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.
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 2019 IPPS/LTCH PPS proposed rule (83 FR 20384), for FY 2019, we proposed to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2016 (that is, October 1, 2015 through September 30, 2016), which were the latest cost report data available at the time the 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
• 5,000 (3,000 for an osteopathic hospital); or
• If less, the median number of discharges for urban hospitals in the census region in which the hospital is located. (We refer readers to the table set forth in the FY 2019 IPPS/LTCH PPS proposed rule at 83 FR 20384.) In the proposed rule, we stated that we intended to update these numbers in the FY 2019 final rule based on the latest available cost report data.
We did not receive any public comments on our proposals.
Based on the latest discharge data available at this time, that is, for cost reporting periods that began during FY 2016, the final median number of discharges for urban hospitals by census region are set forth in the following table.
We note that because the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges, under this final rule, 5,000 discharges is the minimum criterion for all hospitals, except for osteopathic hospitals for which the minimum criterion is 3,000 discharges.
Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital under the IPPS beginning in FY 2005. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Act is in addition to any payment calculated under section 1886 of the Act. 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 hospital payment adjustment is based on total per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-volume hospital payment adjustment is based in part on either the Federal rate or the hospital-specific rate, whichever results in a greater operating IPPS payment.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20384), section 50204 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) modified the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals for FYs 2019 through 2022. (Section 50204 also extended prior changes to the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals through FY 2018, as discussed later in this section.). Beginning with FY 2023, the low-volume hospital qualifying criteria and payment adjustment will revert to the statutory requirements that were in effect prior to FY 2011. (For additional information on the low-volume hospital payment adjustment prior to FY 2018, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56941 through 56943). For additional information on the low-volume hospital payment adjustment for FY 2018, we refer readers to the FY 2018 IPPS notice (CMS-1677-N) that appeared in the
Section 50204 of the Bipartisan Budget Act of 2018 extended through FY 2018 certain changes to the low-volume hospital payment policy made by the Affordable Care Act and extended by subsequent legislation. We addressed this extension of the temporary changes to the low-volume hospital payment policy for FY 2018 in a notice that appeared in the
We did not receive any public comments on our proposal. Therefore, we are finalizing, without modification, our proposed conforming changes to paragraphs (b)(2)(ii) and (c)(2) introductory text of § 412.101 to reflect that the low-volume hospital payment adjustment policy in effect for FY 2018 is the same low-volume hospital payment adjustment policy in effect for FYs 2011 through 2017.
As discussed earlier, section 50204 of the Bipartisan Budget Act of 2018 further modified the definition of a low-
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20385), to implement this requirement, we proposed a continuous, linear sliding scale formula to determine the low volume hospital payment adjustment for FYs 2019 through 2022 that is similar to the continuous, linear sliding scale formula used to determine the low-volume hospital payment adjustment originally established by the Affordable Care Act and implemented in the regulations at § 412.101(c)(2)(ii) in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241). Consistent with the statute, we proposed that qualifying hospitals with 500 or fewer total discharges would receive a low-volume hospital payment adjustment of 25 percent. For qualifying hospitals with fewer than 3,800 discharges but more than 500 discharges, the low-volume payment adjustment would be calculated by subtracting from 25 percent the proportion of payments associated with the discharges in excess of 500. That proportion is calculated by multiplying the discharges in excess of 500 by a fraction that is equal to the maximum available add-on payment (25 percent) divided by a number represented by the range of discharges for which this policy applies (3,800 minus 500, or 3,300). In other words, for qualifying hospitals with fewer than 3,800 total discharges but more than 500 total discharges, we proposed the low-volume hospital payment adjustment for FYs 2019 through 2022 would be calculated using the following formula:
As discussed below, the formula as presented in the preamble to the proposed rule (83 FR 20385) contained a typographical error, in that an “×” sign was used in place of a minus (“−”) sign, as follows: (95/330) × (number of total discharges/13,200). The formula set forth in the proposed regulatory text at § 412.101(c)(3)(ii) was correct, and we have also corrected the typographical error in the formula as presented in the preamble of this final rule.
To reflect these changes for FYs 2019 through 2022, we proposed to revise § 412.101(b)(2) by adding paragraph (iii) to specify that a hospital must have fewer than 3,800 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital's most recently submitted cost report, and be located more than 15 road miles from the nearest “subsection (d)” hospital, consistent with the amendments to section 1886(d)(12)(C)(i) of the Act as provided by section 50204(a)(2) of the Bipartisan Budget Act of 2018. We also proposed to add paragraph (3) to § 412.101(c), consistent with section 1886(d)(12)(D) of the Act as amended by section 50204(a)(3) of the Bipartisan Budget Act of 2018, to specify that:
• For low-volume hospitals with 500 or fewer total discharges during the fiscal year, the low-volume hospital payment adjustment is an additional 25 percent for each Medicare discharge.
• For low-volume hospitals with total discharges during the fiscal year of more than 500 and fewer than 3,800, the adjustment for each Medicare discharge is an additional percent calculated using the formula [(95/330) − (number of total discharges/13,200)]. (Similar to above, in the preamble to the proposed rule, we inadvertently included an “×” sign in place of a “−” sign in describing the formula that was specified in the text of proposed § 412.101(c)(3)(ii). As noted, the proposed regulatory text accurately reflected the proposed formula, and we have also corrected the typographical error in the formula as presented in the preamble of this final rule.)
In the proposed rule, we specified that the “number of total discharges” would be determined as total discharges, which includes Medicare and non-Medicare discharges during the fiscal year, based on the hospital's most recently submitted cost report.
In addition, in accordance with the provisions of section 50204(a) of the Bipartisan Budget Act of 2018, for FY 2023 and subsequent fiscal years, we proposed to make conforming changes to paragraphs (b)(2)(i) and (c)(1) of § 412.101 to reflect that the low-volume payment adjustment policy in effect for these years is the same low-volume hospital payment adjustment policy in effect for FYs 2005 through 2010, as described earlier. Lastly, we proposed to make conforming changes to paragraph (d) (which relates to eligibility of new hospitals for the adjustment), consistent with the provisions of section 50204(a) of the Bipartisan Budget Act of 2018, for FY 2019 and subsequent fiscal years, as total discharges are used under the low-volume hospital payment adjustment policy in effect for those years as described earlier.
After consideration of the public comments we received, we are finalizing, without modification, our proposed changes to § 412.101(b)(2), (c), and (d) to reflect the changes in the low-volume hospital payment policy provided by section 50204 of the Bipartisan Budget Act of 2018 as discussed in this section.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414) and subsequent rulemaking (for example, the FY 2018 IPPS/LTCH PPS final rule (82 FR 38186 through 38188)), we discussed the process for requesting and obtaining the low-volume hospital payment adjustment. Under this previously established process, a hospital makes a written request for the low-volume payment adjustment under § 412.101 to its MAC. This request must contain sufficient documentation to establish that the hospital meets the applicable mileage and discharge
As described in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20385), for FY 2019 and subsequent fiscal years, the discharge determination is made based on the hospital's number of total discharges, that is, Medicare and non-Medicare discharges, as was the case for FYs 2005 through 2010. Under § 412.101(b)(2)(i) and new § 412.101(b)(2)(iii), as proposed and finalized in this final rule, a hospital's most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year. We use cost report data to determine if a hospital meets the discharge criterion because this is the best available data source that includes information on both Medicare and non-Medicare discharges. (For FYs 2011 through 2018, the most recently available MedPAR data were used to determine the hospital's Medicare discharges because non-Medicare discharges were not used to determine if a hospital met the discharge criterion for those years.) Therefore, a hospital 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.
As also discussed in the FY 2019 IPPS/LTCH PPS proposed rule, in addition to the discharge criterion, for FY 2019 and for subsequent fiscal years, eligibility for the low-volume hospital payment adjustment is also dependent upon the hospital meeting the applicable mileage criterion specified in § 412.101(b)(2)(i) or proposed new § 412.101(b)(2)(iii) for the fiscal year (as noted in the previous section, we have finalized the amendments to § 412.101(b)(2) and new § 412.101(b)(2)(iii) as proposed). Specifically, to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for FY 2019, as noted earlier, a hospital must be located more than 15 road miles from the nearest subsection (d) hospital. We define in § 412.101(a) the term “road miles” to mean “miles” as defined in § 412.92(c)(1) (75 FR 50238 through 50275 and 50414). For establishing that the hospital meets the mileage criterion, the use of a web-based mapping tool as part of the documentation is acceptable. The MAC will determine if the information submitted by the hospital, such as the name and street address of the nearest hospitals, location on a map, and distance from the hospital requesting low-volume hospital status, is sufficient to document that it meets the mileage criterion. If not, the MAC will follow up with the hospital to obtain additional necessary information to determine whether or not the hospital meets the applicable mileage criterion.
As explained in the proposed rule, in accordance with our previously established process, a hospital must make a written request for low-volume hospital status that is received by its MAC by September 1 immediately preceding the start of the Federal fiscal year for which the hospital is applying for low-volume hospital status in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges for the fiscal year beginning on or after October 1 immediately following the request (that is, the start of the Federal fiscal year). For a hospital whose request for low-volume hospital status is received after September 1, if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC will apply the applicable low-volume hospital payment adjustment to determine payment for the hospital's discharges for the fiscal year, effective prospectively within 30 days of the date of the MAC's low-volume status determination.
Specifically, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20386), for FY 2019, we proposed that a hospital must submit a written request for low-volume hospital status to its MAC that includes sufficient documentation to establish that the hospital meets the applicable mileage and discharge criteria (as described earlier). Consistent with historical practice, for FY 2019, we proposed that a hospital's written request must be received by its MAC no later than September 1, 2018 in order for the low-volume hospital payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2018. If a hospital's written request for low-volume hospital status for FY 2019 is received after September 1, 2018, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC would apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2019 discharges, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination.
Under this process, a hospital receiving the low-volume hospital payment adjustment for FY 2018 may continue to receive a low-volume hospital payment adjustment without reapplying if it continues to meet the mileage criterion (which remains unchanged for FY 2019) and it also meets the applicable discharge criterion as modified for FY 2019 (that is, 3,800 or fewer total discharges). In this case, a hospital's request can include a verification statement that it continues to meet the mileage criterion applicable for FY 2019. (Determination of meeting the discharge criterion is discussed earlier in this section.) We noted in the proposed rule that a hospital must continue to meet the applicable qualifying criteria as a low-volume hospital (that is, the hospital must meet the applicable discharge criterion and mileage criterion for the fiscal year) in order to receive the payment adjustment in that fiscal year; that is, low-volume hospital status is not based on a “one-time” qualification (75 FR 50238 through 50275).
After consideration of the public comments we received, we are finalizing our proposals relating to the process for requesting and obtaining the low-volume hospital payment adjustment as described above, without modification.
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 § 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, for discharges occurring during FY 2019, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2019 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.
We did not receive any comments regarding the IME adjustment factor, which, as noted earlier, is statutorily required. Accordingly, for discharges occurring during FY 2019, the IME formula multiplier is 1.35.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20386), in the regulation governing the IME payment adjustment at § 412.105(f)(1)(vii), we identified an inadvertent omission of a cross-reference relating to an adjustment to a hospital's full-time equivalent cap for a new medical residency training program. Section 412.105(f)(1)(vii) states that if a hospital establishes a new medical residency training program, as defined in § 413.79(l), the hospital's full-time equivalent cap may be adjusted in accordance with the provisions of § 413.79(e)(1) through (e)(4). However, there is a paragraph (e)(5) under § 413.79 that we have inadvertently omitted that applies to the regulation at § 412.105(f)(1)(vii). In the proposed regulation (83 FR 20567), we proposed to correct this omission by amending § 412.105 to remove the reference to “§§ 413.79(e)(1) through (e)(4)” and add in its place the reference “§ 413.79(e)” to make clear that the provisions of § 413.79(e)(1) through (e)(5) apply. This proposed revision was intended to correct the omission and was not intended to substantially change the underlying regulation.
We did not receive any public comments on this proposed technical correction to § 412.105, and therefore are finalizing it as was proposed in the proposed regulation.
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 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 42 CFR 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 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 § 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
In addition to this empirically justified Medicare DSH payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay to such subsection (d) hospital an additional amount equal to the product of three factors. The first factor is the difference between the aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if subsection (r) did not apply and the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act.
The second factor is, for FY 2018 and subsequent fiscal years, 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS), and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified), 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 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.
As explained 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 in the rulemaking for subsequent fiscal years, we have specified our policies for several specific classes of hospitals within the scope of section 1886(r) of the Act. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20388 and 20389), we discussed our specific policies with respect to the following hospitals:
•
•
• Sole community hospitals (
•
•
•
As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the Medicare DSH payment that would otherwise be made under section 1886(d)(5)(F) of the Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did not believe that it was necessary to develop any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision by advising MACs to simply adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the FY 2014 IPPS/LTCH PPS final rule that are available on the CMS website at:
As we discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to the rate of uninsurance in 2013, and each eligible hospital's estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. Below we discuss the data sources and methodologies for computing each of these factors, our final policies for FYs 2014 through 2018, and our proposed and final policies for FY 2019.
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that this factor is equal to the difference between: (1) The aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year (as estimated by the Secretary); and (2) the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payments that would have been made under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year. Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be estimated by the Secretary. Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in a fiscal year, as prescribed under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount.
Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for the fiscal year.
As we did for FY 2018, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20389), in order to determine Factor 1 in the uncompensated care payment formula for FY 2019, we proposed to continue the policy established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule with comment period (78 FR 61194) of determining Factor 1 by developing estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments to hospitals under 1886(r)(1) of the Act. These estimates will not be revised or updated after we know the final Medicare DSH payments for FY 2019.
Therefore, in order to determine the two elements of proposed Factor 1 for FY 2019 (Medicare DSH payments
For purposes of calculating Factor 1 and modeling the impact of the FY 2019 IPPS/LTCH PPS proposed rule, we used the Office of the Actuary's December 2017 Medicare DSH estimates, which were based on data from the September 2017 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2018 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2018 IPPS/LTCH PPS final rule. (We note that the proposed rule included an inadvertent reference to the HCRIS December 2017 update, which we have corrected in this final rule to reflect the September 2017 update of HCRIS, which was used by OACT in developing the December 2017 estimates. The cost report data from the December quarterly update were not available to be used in OACT's December 2017 estimates of Medicare DSH payments.) Because SCHs that are projected to be paid under their hospital-specific rate are excluded from the application of section 1886(r) of the Act, these hospitals also were excluded from the December 2017 Medicare DSH estimates. Furthermore, because section 1886(r) of the Act specifies that the uncompensated care payment is in addition to the empirically justified Medicare DSH payment (25 percent of DSH payments that would be made without regard to section 1886(r) of the Act), Maryland hospitals, which are not eligible to receive DSH payments, were also excluded from the Office of the Actuary's December 2017 Medicare DSH estimates. The 30 hospitals that were then participating in the Rural Community Hospital Demonstration Program were also excluded from these estimates because, under the payment methodology that applies during the second 5 years of the extension period, these hospitals are not eligible to receive empirically justified Medicare DSH payments or interim and final uncompensated care payments.
For the proposed rule, using the data sources discussed above, the Office of the Actuary's December 2017 estimate for Medicare DSH payments for FY 2019, without regard to the application of section 1886(r)(1) of the Act, was approximately $16.295 billion. Therefore, also based on the December 2017 estimate, the estimate of empirically justified Medicare DSH payments for FY 2019, with the application of section 1886(r)(1) of the
Some commenters expressed concern about whether underreporting of Medicaid coverage was factored into the calculation of Factor 1, as it was for Factor 2. The commenters noted that, in the proposed rule, CMS did not explain why OACT assumed that there is an underreporting of Medicaid coverage due to “a perceived stigma associated with being enrolled in the Medicaid program or confusion about the source of health insurance.” The commenters further stated that the proposed rule did not indicate that the same presumption was also applied to the calculation of Factor 1. Many commenters provided examples of other assumptions made by OACT for which CMS did not provide information in rulemaking to explain the basis for or the data used to make the assumptions. The commenters believed that, given the information available to CMS, such as enrollment and utilization information from States that have expanded Medicaid and recently released reports that concluded that the Affordable Care Act had insured fewer individuals than previously estimated (CBO September 2017 report; President's 2018 Economic Report), coverage levels were lower than estimated by CMS; and therefore, DSH payments to hospitals were suppressed. The commenters requested that CMS implement a system to reconcile uncompensated care payments once later data on Medicare DSH payments are available. One commenter thanked CMS for providing a table listing hospital-specific estimated uncompensated care payments and other DSH-related information for FY 2019. Another commenter suggested that, as CMS is permitting revisions to Factor 3, the agency consider completing reconciliation for Factor 1 and Factor 2. The commenter recognized that there are issues pertaining to completing reconciliation for all three factors, such as the determination of when to finalize all cost reports, but suggested using a methodology similar to the one used to determine the wage index by using prior years' data for settlement of a future year and developing time tables for submissions and revisions to the data.
To provide context, we first note that Factor 1 is not estimated in isolation from other OACT projections. The Factor 1 estimates for proposed rules are generally consistent with the economic assumptions and actuarial analysis used to develop the President's Budget estimates under current law, and the Factor 1 estimates for the final rule are generally consistent with those used for the Midsession Review of the President's Budget. As we have in the past, for additional information on the development of the President's Budget, we refer readers to the Office of Management and Budget website at:
For a general overview of the principal steps involved in projecting future inpatient costs and utilization, we refer readers to the “2018 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds” available on the CMS website at:
We also refer the public to the Actuarial Report on the Financial Outlook for Medicaid for a discussion of general issues regarding Medicaid projections.
Second, as described in more detail later in this section, in the FY 2019 IPPS/LTCH PPS proposed rule, we included information regarding the data sources, methods, and assumptions employed by the actuaries in determining the OACT's estimate of Factor 1. In summary, we indicated the historical HCRIS data update OACT used to identify Medicare DSH
Regarding the commenters' assertion that, similar to the adjustment for Medicaid underreporting on survey data in the estimation of Factor 2, we should also account for this underreporting in our estimate of Factor 1, we note that the Factor 1 calculation uses Medicaid enrollment data and estimates and does not require the adjustment because it does not use survey data.
Lastly, regarding the commenters' suggestion that CMS consider reconciling the estimates of Factors 1, 2, and 3, we continue to believe that applying our best estimates prospectively is most conducive to administrative efficiency, finality, and predictability in payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 38195). We believe that, in affording the Secretary the discretion to estimate the three factors used to determine uncompensated care payments and by including a prohibition against administrative and judicial review of those estimates in section 1886(r)(3) of the Act, Congress recognized the importance of finality and predictability under a prospective payment system. As a result, we do not agree with the commenters' suggestion that we should establish a process for reconciling our estimates of the three factors, which would be contrary to the notion of prospectivity. We also address comments specifically requesting that we establish procedures for reconciling Factor 3 later in this section, as part of the discussion of the comments received on the proposed methodology for Facto 3.
After consideration of the public comments we received, we are finalizing, as proposed, the methodology for calculating Factor 1 for FY 2019. We discuss the resulting Factor 1 amount for FY 2019 below.
For this final rule, the OACT used the most recently submitted Medicare cost report data from the March 2018 update of HCIRS to identify Medicare DSH payments and the most recent Medicare DSH payment adjustments provided in the Impact File published in conjunction with the publication of the FY 2018 IPPS/LTCH PPS final rule and applied update factors and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The June 2018 OACT estimate for Medicare DSH payments for FY 2019, without regard to the application of section 1886(r)(1) of the Act, was approximately $16.339 billion. This estimate excluded Maryland hospitals participating in the Maryland All-Payer Model, hospitals participating in the Rural Community Hospital Demonstration, and SCHs paid under their hospital-specific payment rate. Therefore, based on the June 2018 estimate, the estimate of empirically justified Medicare DSH payments for FY 2019, with the application of section 1886(r)(1) of the Act, was approximately $4.085 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY 2019). Under § 412.106(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the OACT. Therefore, in this final rule, Factor 1 for FY 2019 is $12,254,291,878.57, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2019 ($16,339,055,838.09 minus $4,084,763,959.52).
The Office of the Actuary's final estimates for FY 2019 began with a baseline of $13.230 billion in Medicare DSH expenditures for FY 2015. The following table shows the factors applied to update this baseline through the current estimate for FY 2019:
In this table, the discharges column shows the increase in the number of Medicare fee-for-service (FFS) inpatient hospital discharges. The figures for FY 2016 and FY 2017 are based on Medicare claims data that have been adjusted by a completion factor. The discharge figure for FY 2018 is based on preliminary data for 2018. The discharge figure for FY 2019 is an assumption based on recent trends recovering back to the long-term trend and assumptions related to how many beneficiaries will be enrolled in Medicare Advantage (MA) plans. The case-mix column shows the increase in case-mix for IPPS hospitals. The case-mix figures for FY 2016 and FY 2017 are based on actual data adjusted by a completion factor. The FY 2018 increase is based on preliminary data. The FY 2019 increase is an estimate based on the recommendation of the 2010-2011 Medicare Technical Review Panel. The “Other” column shows the increase in other factors that contribute to the Medicare DSH estimates. These factors
The table below shows the factors that are included in the “Update” column of the above table:
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Specifically, section 1886(r)(2)(B)(i) of the Act provides that, for each of FYs 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals (1) 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 (2) who are 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 each of FYs 2015, 2016, and 2017.
Section 1886(r)(2)(B)(ii) of the Act permits the use of a data source other than the CBO estimates to determine the percent change in the rate of uninsurance beginning in FY 2018. In addition, for FY 2018 and subsequent years, the statute does not require that the estimate of the percent of individuals who are uninsured be limited to individuals who are under 65. Specifically, the statute states that, for FY 2018 and subsequent fiscal years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS) and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified), minus 0.2 percentage point for FYs 2018 and 2019.
As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197), in our analysis of a potential data source for the rate of uninsurance for purposes of computing Factor 2 in FY 2018, we considered the following: (a) The extent to which the source accounted for the full U.S. population; (b) the extent to which the source comprehensively accounted for both public and private health insurance coverage in deriving its estimates of the number of uninsured; (c) the extent to which the source utilized data from the Census Bureau; (d) the timeliness of the estimates; (e) the continuity of the estimates over time; (f) the accuracy of the estimates; and (g) the availability of projections (including the availability of projections using an established estimation methodology that would allow for calculation of the rate of uninsurance for the applicable Federal fiscal year). As we explained in the FY 2018 IPPS/LTCH PPS final rule, these considerations are consistent with the statutory requirement that this estimate be based on data from the Census Bureau or other sources the Secretary determines appropriate and help to ensure the data source will provide reasonable estimates for the rate of uninsurance that are available in conjunction with the IPPS rulemaking cycle. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20391), we proposed to use the same methodology as was used in FY 2018 to determine Factor 2 for FY 2019.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we explained that we determined the source that, on balance, best meets all of these considerations is the uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA). The NHEA represents the government's official estimates of economic activity (spending) within the health sector. The information contained in the NHEA has
The NHEA estimates of U.S. population reflect the Census Bureau's definition of the resident-based population, which includes all people who usually reside in the 50 States or the District of Columbia, but excludes residents living in Puerto Rico and areas under U.S. sovereignty, members of the U.S. Armed Forces overseas, and U.S. citizens whose usual place of residence is outside of the United States, plus a small (typically less than 0.2 percent of population) adjustment to reflect Census undercounts. In past years, the estimates for Factor 2 were made using the CBO's uninsured population estimates for the under 65 population. For FY 2018 and subsequent years, the statute does not restrict the estimate to the measurement of the percent of individuals under the age of 65 who are uninsured. Accordingly, as we explained in the FY 2018 IPPS/LTCH PPS proposed and final rules, we believe it is appropriate to use an estimate that reflects the rate of uninsurance in the United States across all age groups. In addition, we continue to believe that a resident-based population estimate more fully reflects the levels of uninsurance in the United States that influence uncompensated care for hospitals than an estimate that reflects only legal residents. The NHEA estimates of uninsurance are for the total U.S. population (all ages) and not by specific age cohort, such as the population under the age of 65.
The NHEA includes comprehensive enrollment estimates for total private health insurance (PHI) (including direct and employer-sponsored plans), Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and other public programs, and estimates of the number of individuals who are uninsured. Estimates of total PHI enrollment are available for 1960 through 2016, estimates of Medicaid, Medicare, and CHIP enrollment are available for the length of the respective programs, and all other estimates (including the more detailed estimates of direct-purchased and employer-sponsored insurance) are available for 1987 through 2016. The NHEA data are publicly available on the CMS website at:
In order to compute Factor 2, the first metric that is needed is the proportion of the total U.S. population that was uninsured in 2013. In developing the estimates for the NHEA, OACT's methodology included using the number of uninsured individuals for 1987 through 2009 based on the enhanced Current Population Survey (CPS) from the State Health Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS), is the primary source of labor force statistics for the population of the United States. (We refer readers to the website at:
To estimate the number of uninsured individuals for 2010 through 2014, the OACT extrapolates from the 2009 CPS data using data from the National Health Interview Survey (NHIS). For both 2015 and 2016, OACT's estimates of the rate of uninsurance are derived by applying the NHIS data on the proportion of uninsured individuals to the total U.S. population as described above. The NHIS is one of the major data collection programs of the National Center for Health Statistics (NCHS), which is part of the Centers for Disease Control and Prevention (CDC). The U.S. Census Bureau is the data collection agent for the NHIS. The NHIS results have been instrumental over the years in providing data to track health status, health care access, and progress toward achieving national health objectives. For further information regarding the NHIS, we refer readers to the CDC website at:
The next metrics needed to compute Factor 2 are projections of the rate of uninsurance in both calendar years 2018 and 2019. On an annual basis, OACT projects enrollment and spending trends for the coming 10-year period. Those projections (currently for years 2017 through 2026) use the latest NHEA historical data, which presently run through 2016. The NHEA projection methodology accounts for expected changes in enrollment across all of the categories of insurance coverage previously listed. The sources for projected growth rates in enrollment for Medicare, Medicaid, and CHIP include the latest Medicare Trustees Report, the Medicaid Actuarial Report, or other updated estimates as produced by OACT. Projected rates of growth in enrollment for private health insurance and the uninsured are based largely on OACT's econometric models, which rely on the set of macroeconomic assumptions underlying the latest Medicare Trustees Report. Greater detail can be found in OACT's report titled “Projections of National Health Expenditure: Methodology and Model Specification,” which is available on the CMS website at:
As discussed in the FY 2018 IPPS/LTCH PPS final rule, the use of data from the NHEA to estimate the rate of uninsurance is consistent with the statute and meets the criteria we have identified for determining the appropriate data source. Section 1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the rate of uninsurance for purposes of Factor 2 based on data from the Census Bureau or other sources the Secretary determines appropriate. The NHEA utilizes data from the Census Bureau; the estimates are available in time for the IPPS rulemaking cycle; the estimates are produced by OACT on an annual basis and are expected to continue to be produced for the foreseeable future; and projections are available for calendar year time periods that span the
Using these data sources and the methodologies described above, the OACT estimates that the uninsured rate for the historical, baseline year of 2013 was 14 percent and for CYs 2018 and 2019 is 9.1 percent and 9.6 percent, respectively.
As with the CBO estimates on which we based Factor 2 in prior fiscal years, the NHEA estimates are for a calendar year. In the rulemaking for FY 2014, many commenters noted that the uncompensated care payments are made for the fiscal year and not on a calendar year basis and requested that CMS normalize the CBO estimate to reflect a fiscal year basis. Specifically, commenters requested that CMS calculate a weighted average of the CBO estimate for October through December 2013 and the CBO estimate for January through September 2014 when determining Factor 2 for FY 2014. We agreed with the commenters that normalizing the estimate to cover FY 2014 rather than CY 2014 would more accurately reflect the rate of uninsurance that hospitals would experience during the FY 2014 payment year. Accordingly, we estimated the rate of uninsurance for FY 2014 by calculating a weighted average of the CBO estimates for CY 2013 and CY 2014 (78 FR 50633). We have continued this weighted average approach in each fiscal year since FY 2014.
We continue to believe that, in order to estimate the rate of uninsurance during a fiscal year more accurately, Factor 2 should reflect the estimated rate of uninsurance that hospitals will experience during the fiscal year, rather than the rate of uninsurance during only one of the calendar years that the fiscal year spans. Accordingly, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20393), we proposed to continue to apply the weighted average approach used in past fiscal years in order to estimate the rate of uninsurance for FY 2019. The OACT has certified this estimate of the fiscal year rate of uninsurance to be reasonable and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act.
The calculation of the proposed Factor 2 for FY 2019 using a weighted average of the OACT's projections for CY 2018 and CY 2019 was as follows:
• Percent of individuals without insurance for CY 2013: 14 percent.
• Percent of individuals without insurance for CY 2018: 9.1 percent.
• Percent of individuals without insurance for CY 2019: 9.6 percent.
• Percent of individuals without insurance for FY 2019 (0.25 × 0.091) + (0.75 × 0.096): 9.48 percent.
Therefore, we proposed that Factor 2 for FY 2019 would be 67.51 percent.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20393), we stated that the proposed FY 2019 uncompensated care amount was: $12,221,027,954.62 × 0.6751 = $8,250,415,972.16.
We invited public comments on our proposed methodology for calculation of Factor 2 for FY 2019.
In response to commenters who stated the increase in the estimated amount available to make uncompensated care payments in FY 2019 was not enough to address the underpayments to hospitals that occurred as a result of using CBO data in the past to estimate the change in the rate of uninsurance, we do not agree that addressing any difference between the prospectively determined estimates using the CBO data and later retrospective estimates would be appropriate for reasons we have articulated in past rulemaking and earlier in this section. We continue to believe that applying our best estimates prospectively is most conducive to administrative efficiency, finality, and predictability in payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 38195). We believe that, in affording the Secretary the discretion to estimate the three factors used to determine uncompensated care payments and by including a prohibition against administrative and judicial review of those estimates in section 1886(r)(3) of the Act, Congress recognized the importance of finality and predictability under a prospective payment system. As a result, we do not agree with the commenters' suggestion that we should establish a process for reconciling our estimate of Factor 2 for any given year using later estimates.
After consideration of the public comments we received, we are finalizing the calculation of Factor 2 for FY 2019 as proposed. The estimates of the percent of uninsured individuals have been certified by the Chief Actuary of CMS, as discussed in the proposed rule. The calculation of the final Factor 2 for FY 2019 using a weighted average of OACT's projections for CY 2018 and CY 2019 is as follows:
• Percent of individuals without insurance for CY 2013: 14 percent.
• Percent of individuals without insurance for CY 2018: 9.1 percent.
• Percent of individuals without insurance for CY 2019: 9.6 percent.
• Percent of individuals without insurance for FY 2019 (0.25 times 0.091) + (0.75 times 0.096): 9.48 percent.
Therefore, the final Factor 2 for FY 2019 is 67.51 percent.
The final FY 2019 uncompensated care amount is: $12,254,291,878.57 × 0.6751 = $8,272,872,447.22.
Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal to the percent, for each subsection (d) hospital, that represents the quotient of: (1) The amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (2) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period (as so estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive Medicare DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary to determine: (1) The definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and the denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive Medicare DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period based on appropriate data. In addition, we note that the statute permits the Secretary to use alternative data in the case where the Secretary determines that such alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured.
In the course of considering how to determine Factor 3 during the rulemaking process for FY 2014, the first year this provision was in effect, we considered defining the amount of uncompensated care for a hospital as the uncompensated care costs of that hospital and determined that Worksheet S-10 of the Medicare cost report potentially provides the most complete data regarding uncompensated care costs for Medicare hospitals. However, because of concerns regarding variations in the data reported on Worksheet S-10 and the completeness of these data, we did not use Worksheet S-10 data to determine Factor 3 for FY 2014, or for FYs 2015, 2016, or 2017. Instead, we believed that the utilization of insured low-income patients, as measured by patient days, would be a better proxy for the costs of hospitals in treating the uninsured and therefore appropriate to use in calculating Factor 3 for these years. Of particular importance in our decision making was the relative newness of Worksheet S-10, which went into effect on May 1, 2010. At the time of the rulemaking for FY 2014, the most recent available cost reports would have been from FYs 2010 and 2011, which were submitted on or after May 1, 2010, when the new Worksheet S-10 went into effect. We believed that concerns about the standardization and completeness of the Worksheet S-10 data could be more acute for data collected in the first year of the Worksheet's use (78 FR 50635). In addition, we believed that it would be most appropriate to use data elements that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes) to determine the amount of uncompensated care for purposes of Factor 3 (78 FR 50635). At the time we issued the FY 2014 IPPS/LTCH PPS final rule, we did not believe that the available data regarding uncompensated care from Worksheet S-10 met these criteria and, therefore, we believed they were not reliable enough to use for determining FY 2014 uncompensated care payments. For FYs 2015, 2016, and 2017, the cost reports used for calculating uncompensated care payments (that is, FYs 2011, 2012, and 2013) were also submitted prior to the time that hospitals were on notice that Worksheet S-10 could be the data source for calculating uncompensated care payments. Therefore, we believed it was also appropriate to use proxy data to calculate Factor 3 for these years. We indicated our belief that Worksheet S-10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3 once hospitals were submitting more accurate and consistent data through this reporting mechanism.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated that we can no longer conclude that alternative data to the Worksheet S-10 are available for FY 2014 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. Hospitals were on notice as of FY 2014 that Worksheet S-10 could eventually become the data source for CMS to calculate uncompensated care payments. Furthermore, hospitals' cost reports from FY 2014 had been publicly available for some time, and CMS had analyses of Worksheet S-10, conducted both internally and by stakeholders, demonstrating that Worksheet S-10 accuracy had improved over time. Analyses performed by MedPAC had already shown that the correlation between audited uncompensated care data from 2009 and the data from the FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of approximately 0.50 between the audited uncompensated care data and 2011 Medicare SSI and Medicaid days. Based on this analysis, MedPAC concluded that use of Worksheet S-10 data was already better than using Medicare SSI and Medicaid days as a proxy for uncompensated care costs, and that the
Subsequent analyses from Dobson/DaVanzo, originally commissioned by CMS for the FY 2014 rulemaking and updated in later years, compared Worksheet S-10 and IRS Form 990 data and assessed the correlation in Factor 3s derived from each of the data sources. The most recent update of this analysis, which used IRS Form 990 data for tax years 2011, 2012, and 2013 (the latest available years) as a benchmark, found that the amounts for Factor 3 derived using the IRS Form 990 and Worksheet S-10 data continue to be highly correlated and that this correlation continues to increase over time, from 0.80 in 2011 to 0.85 in 2013.
This empirical evidence led us to believe that we had reached a tipping point in FY 2018 with respect to the use of the Worksheet S-10 data. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201 through 38203) for a complete discussion of these analyses.
We found further evidence for this tipping point when we examined changes to the FY 2014 Worksheet S-10 data submitted by hospitals following the publication of the FY 2017 IPPS/LTCH PPS final rule. In the FY 2017 IPPS/LTCH PPS final rule, as part of our ongoing quality control and data improvement measures for the Worksheet S-10, we referred readers to Change Request 9648, Transmittal 1681, titled “The Supplemental Security Income (SSI)/Medicare Beneficiary Data for Fiscal Year 2014 for Inpatient Prospective Payment System (IPPS) Hospitals, Inpatient Rehabilitation Facilities (IRFs), and Long Term Care Hospitals (LTCHs),” issued on July 15, 2016 (available at:
We also recognized commenters' concerns that, in using Medicaid days as part of the proxy for uncompensated care, it would be possible for hospitals in States that choose to expand Medicaid to receive higher uncompensated care payments because they may have more Medicaid patient days than hospitals in a State that does not choose to expand Medicaid. Because the earliest Medicaid expansions under the Affordable Care Act began in 2014, the 2011, 2012, and 2013 Medicaid days used to calculate uncompensated care payments in FYs 2015, 2016, and 2017 are the latest available data on Medicaid utilization that do not reflect the effects of these Medicaid expansions. Accordingly, if we had used only low-income insured days to estimate uncompensated care in FY 2018, we would have needed to hold the time period of these data constant and use data on Medicaid days from 2011, 2012, and 2013 in order to avoid the risk of any redistributive effects arising from the decision to expand Medicaid in certain States. As a result, we would have been using older data that may provide a less accurate proxy for the level of uncompensated care being furnished by hospitals, contributing to our growing concerns regarding the continued use of low-income insured days as a proxy for uncompensated care costs in FY 2018.
In summary, as we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38203), when weighing the new information regarding the growing correlation between the Worksheet S-10 data and IRS 990 data that became available to us after the FY 2017 rulemaking in conjunction with the information regarding Worksheet S-10 data and the low-income days proxy that we analyzed as part of our consideration of this issue in prior rulemaking, we determined that we could no longer conclude that alternative data to the Worksheet S-10 are available for FY 2014 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. We also stated that we believe that continued use of Worksheet S-10 will improve the accuracy and consistency of the reported data, especially in light of CMS' concerted efforts to allow hospitals to review and resubmit their Worksheet S-10 data for past years and the use of select audit protocols to trim aberrant data and replace them with more reasonable amounts. We also committed to continue to work with stakeholders to address their concerns regarding the accuracy of the reporting of uncompensated care costs through provider education and refinement of the instructions to Worksheet S-10.
Section 1886(r)(2)(C) of the Act governs both the selection of the data to be used in calculating Factor 3, and also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as the amount of uncompensated care for such hospital for a period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the
In the FY 2017 IPPS/LTCH PPS final rule, in order to mitigate undue fluctuations in the amount of uncompensated care payments to hospitals from year to year and smooth over anomalies between cost reporting periods, we finalized a policy of calculating a hospital's share of uncompensated care based on an average of data derived from three cost reporting periods instead of one cost reporting period. As explained in the preamble to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957 through 56959), instead of determining Factor 3 using data from a single cost reporting period as we did in FY 2014, FY 2015, and FY 2016, we used data from three cost reporting periods (Medicaid data for FYs 2011, 2012, and 2013 and SSI days from the three most recent available years of SSI utilization data (FYs 2012, 2013, and 2014)) to compute Factor 3 for FY 2017. Furthermore, instead of determining a single Factor 3 as we had done since the first year of the uncompensated care payment in FY 2014, we calculated an individual Factor 3 for each of the three cost reporting periods, which we then averaged by the number of cost reporting years with data to compute the final Factor 3 for a hospital. Under this policy, if a hospital had merged, we would combine data from both hospitals for the cost reporting periods in which the merger was not reflected in the surviving hospital's cost report data to compute Factor 3 for the surviving hospital. Moreover, to further reduce undue fluctuations in a hospital's uncompensated care payments, if a hospital filed multiple cost reports beginning in the same fiscal year, we combined data from the multiple cost reports so that a hospital could have a Factor 3 calculated using more than one cost report within a cost reporting period. We codified these changes for FY 2017 by amending the regulations at § 412.106(g)(1)(iii)(C).
For FY 2018, consistent with the methodology used to calculate Factor 3 for FY 2017, we advanced the time period of the data used in the calculation of Factor 3 forward by one year and used data from FY 2012, FY 2013, and FY 2014 cost reports. We believed it would not be appropriate to use Worksheet S-10 data for periods prior to FY 2014, as hospitals did not have notice that the Worksheet S-10 data from these years might be used for purposes of computing uncompensated care payments and, as a result, may not have fully appreciated the importance of reporting their uncompensated care costs as completely and accurately as possible. Rather, for cost reporting periods prior to FY 2014, we believed it would be appropriate to continue to use low-income insured days. Accordingly, for the time period consisting of three cost reporting years, including FY 2014, FY 2013, and FY 2012, we used Worksheet S-10 data for the FY 2014 cost reporting period and the low-income insured days proxy data for the two earlier cost reporting periods. In order to perform this calculation, we drew three sets of data (2 years of Medicaid utilization data and 1 year of Worksheet S-10 data) from the most recent available HCRIS extract. Accordingly, for FY 2018, in addition to the Worksheet S-10 data for FY 2014, we used Medicaid days from FY 2012 and FY 2013 cost reports and FY 2014 and FY 2015 SSI ratios. We also continued to use FY 2012 cost report data submitted to CMS by IHS and Tribal hospitals to determine FY 2012 Medicaid days for those hospitals. (Cost report data from IHS and Tribal hospitals are included in HCRIS beginning in FY 2013 and are no longer submitted separately.) We continued the policies that were finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020) to address several specific issues concerning the process and data to be employed in determining Factor 3 in the case of hospital mergers as well as the policies finalized in the FY 2017 IPPS/LTCH PPS final rule concerning multiple cost reports beginning in the same fiscal year (81 FR 56957).
To limit the effect of aberrant reporting of Worksheet S-10 data, we identified those hospitals that had high levels of reported uncompensated care relative to the total operating costs reported on the cost report. Specifically, for those hospitals where the ratio of uncompensated care costs relative to total operating costs for the hospital's 2014 cost report exceeded 50 percent, we determined the ratio of uncompensated care costs relative to total operating costs from the hospital's 2015 cost report and applied that ratio to the hospital's total operating costs from the 2014 cost report to determine an adjusted amount of uncompensated care costs for FY 2014. We then substituted this amount for the FY 2014 Worksheet S-10 data when determining Factor 3 for FY 2018. We believed that this approach, which affected the data for three hospitals in FY 2018, balanced our desire to exclude potentially aberrant data from a small number of hospitals in the determination of Factor 3 with our concern regarding inappropriately reducing FY 2018 uncompensated care payments to a hospital that may have a legitimately high ratio. We stated our intent to consider in future rulemaking whether continued use of this adjustment or an alternative adjustment is necessary for subsequent years.
Due to concerns that the uncompensated care data reported by Puerto Rico hospitals and Indian Health Service and Tribal hospitals need to be examined further, we concluded that the Worksheet S-10 data for these hospitals should not be used to determine Factor 3 for FY 2018 (82 FR 38209). We also determined that Worksheet S-10 data should not be used to determine Factor 3 for all-inclusive rate providers, whose CCRs were deemed to be potentially erroneous and in need of further examination (82 FR 38212). For the reasons described earlier related to the impact of the Medicaid expansion beginning in FY 2014, we did not believe it was appropriate to calculate a Factor 3 for these hospitals using FY 2014 low-income insured days. Because we did not believe it was appropriate to use the FY 2014 uncompensated care data for these hospitals and we also did not believe it was appropriate to use the FY 2014 low-income insured days, we concluded that the best proxy for the costs of Puerto Rico, Indian Health Service and Tribal hospitals, and all-inclusive rate providers for treating the uninsured was the low-income insured days data for FY 2012 and FY 2013. Accordingly, in order to determine the Factor 3 for FY 2018 for these hospitals, we calculated an average of three individual Factor 3s using the Factor 3 calculated using FY 2013 cost report data twice and the Factor 3 calculated using FY 2012 cost report data once. We believed it was appropriate to double-weight the Factor 3 calculated using FY 2013 data as it reflects the most recent available information regarding the hospital's low-income insured days before any expansion of Medicaid. We stated that we would reexamine the use of the Worksheet S-10 data for Puerto Rico, Indian Health Service and Tribal
Therefore, for FY 2018, we computed a Factor 3 for each hospital by—
• Step 1: Calculating Factor 3 using the low-income insured days proxy based on FY 2012 cost report data and the FY 2014 SSI ratio;
• Step 2: Calculating Factor 3 using the insured low-income days proxy based on FY 2013 cost report data and the FY 2015 SSI ratio;
• Step 3: Calculating Factor 3 based on the FY 2014 Worksheet S-10 data (or using the Factor 3 calculated in Step 2 for Puerto Rico, IHS/Tribal hospitals, and all-inclusive rate providers); and
• Step 4: Averaging the Factor 3 values from Steps 1, 2, and 3; that is, adding the Factor 3 values from FY 2012, FY 2013, and FY 2014 for each hospital, and dividing that amount by the number of cost reporting periods with data to compute an average Factor 3.
We stated our belief that if we were to propose to continue this methodology for FY 2019 and FY 2020, this approach would have the effect of transitioning the incorporation of data from Worksheet S-10 into the calculation of Factor 3 because an additional year of Worksheet S-10 data would be incorporated into the calculation of Factor 3 in FY 2019, and the use of low-income insured days would be phased out by FY 2020.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20396), since the publication of the FY 2018 IPPS/LTCH PPS final rule, we have continued to monitor the reporting of Worksheet S-10 data in anticipation of using Worksheet S-10 data from hospitals' FY 2014 and FY 2015 cost reports in the calculation of Factor 3. We acknowledge the concerns that have been raised regarding the instructions for Worksheet S-10. In particular, commenters have expressed concerns that the lack of clear and concise line level instructions prevents accurate and consistent data from being reported on Worksheet S-10. We note that, in November 2016, CMS issued Transmittal 10, which clarified and revised the instructions for the Worksheet S-10, including the instructions regarding the reporting of charity care charges. Transmittal 10 is available for download on the CMS website at:
During the FY 2018 rulemaking, commenters pointed out that, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56963), CMS agreed to institute certain additional quality control and data improvement measures prior to moving forward with incorporating Worksheet S-10 data into the calculation of Factor 3. However, the commenters indicated that, aside from a brief window in 2016 for hospitals to submit corrected data on their FY 2014 Worksheet S-10 by September 30, 2016, and the issuance of revised instructions (Transmittal 10) in November 2016 that are applicable to cost reports beginning on or after October 1, 2016, CMS had not implemented any additional quality control and data improvement measures. We stated in the FY 2018 IPPS/LTCH PPS final rule that we would continue to work with stakeholders to address their concerns regarding the reporting of uncompensated care through provider education and refinement of the instructions to the Worksheet S-10 (82 FR 38206).
On September 29, 2017, we issued Transmittal 11, which clarified the definitions and instructions for uncompensated care, non-Medicare bad debt, non-reimbursed Medicare bad debt, and charity care, as well as modified the calculations relative to uncompensated care costs and added edits to ensure the integrity of the data reported on Worksheet S-10. Transmittal 11 is available for download on the CMS website at:
We also provided another opportunity for hospitals to submit revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost reports. We refer readers to Change Request 10378, Transmittal 1981, titled “Fiscal Year (FY) 2014 and 2015 Worksheet S 10 Revisions: Further Extension for All Inpatient Prospective Payment System (IPPS) Hospitals,” issued on December 1, 2017 (available at:
However, for the FY 2019 IPPS/LTCH PPS proposed rule, we were able to include data updated in HCRIS through February 15, 2018. Specifically, in light of the impact of the hurricanes in 2017 (Harvey, Irma, Maria, and Nate) and the extension of the deadline for resubmitting Worksheets S-10 for FY 2014 and FY 2015 through January 2, 2018, we believed it was appropriate to use data updated through February 15, 2018, rather than the December 2017 HCRIS update, which we typically use for the annual proposed rule. We believe that providing the additional time to allow cost reports that may have been delayed due to these unique circumstances to be included in our calculations for purposes of the FY 2019 proposed rule, enabled us to use more accurate uncompensated care cost data in calculating the proposed Factor 3 values.
We examined hospitals' FY 2014 and FY 2015 cost reports to determine if the Worksheet S-10 data on those cost reports had changed as a result of the additional opportunity for hospitals to submit revised Worksheet S-10 data for FY 2014 and FY 2015. Specifically, we compared hospitals' FY 2014 and FY 2015 Worksheet S-10 data as reported in the fourth quarter of CY 2016 update of HCRIS to the February 15, 2018 update of HCRIS. We examined hospitals' cost report data to determine if the Worksheet S 10 data had changed for any of the following lines: Total bad debt from Line 26, charity care for uninsured patients from Line 20, Column 1, or charity care for insured patients from Line 20, Column 2. Based on our review, we found that Worksheet S-10 data for both FY 2014 and FY 2015 had changed over that time period for approximately one-half of the hospitals that were eligible to receive Medicare DSH payments in FY 2018. The fact that the Worksheet S-10 data changed for such a significant number of hospitals following the opportunity to review their previously submitted cost report data and submit a revised Worksheet S-10, and that this revised Worksheet S-10 information is available to be used in determining uncompensated care costs, contributes to our determination that it is appropriate to continue to incorporate Worksheet S-10 data into the calculation of Factor 3 values for hospitals that are eligible to receive Medicare DSH payments.
As we stated in the FY 2019 IPPS/LTCH PPS proposed rule, with the additional steps we have taken to ensure the accuracy and consistency of the data reported on Worksheet S-10 since the publication of the FY 2018 IPPS/LTCH PPS final rule, we continue to believe that we can no longer conclude that alternative data to the Worksheet S-10 are currently available for FY 2014 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. Similarly, the actions that we have taken to improve the accuracy and consistency of the Worksheet S-10 data, including the opportunity for hospitals to resubmit Worksheet S-10 data for FY 2015, lead us to conclude that there are no alternative data to the Worksheet S-10 data currently available for FY 2015 that are a better proxy for the costs of subsection (d) hospitals for treating uninsured individuals. As such, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20400), we proposed to advance the time period of the data used in the calculation of Factor 3 forward by 1 year and to use data from FY 2013, FY 2014, and FY 2015 cost reports to determine Factor 3 for FY 2019. For the reasons we described earlier, we stated that we continue to believe it is inappropriate to use Worksheet S-10 data for periods prior to FY 2014. Rather, for cost reporting periods prior to FY 2014, we believe it is appropriate to continue to use low-income insured days. Accordingly, with a time period that includes 3 cost reporting years consisting of FY 2015, FY 2014, and FY 2013, we proposed to use Worksheet S-10 data for the FY 2014 and FY 2015 cost reporting periods and the low-income insured days proxy data for the earliest cost reporting period. As in previous years, in order to perform this calculation, we drew three sets of data (1 year of Medicaid utilization data and 2 years of Worksheet S-10 data) from the most recent available HCRIS extract, which, for purposes of the FY 2019 proposed rule, was the HCRIS data updated through February 15, 2018. In the FY 2019 IPPS/LTCH PPS proposed rule, we stated that we expected to use the March 2018 update of HCRIS for the final rule. However, due to unique circumstances regarding the impact of the hurricanes in 2017 (Harvey, Irma, Maria, and Nate) and the extension of the deadline to resubmit Worksheet S-10 data through January 2, 2018, and the subsequent impact on the MAC review timeline, we indicated that we might consider using data updated through May 31, 2018, in the final rule, if necessary.
Accordingly, for FY 2019, in addition to the Worksheet S-10 data for FY 2014 and FY 2015, we proposed to use Medicaid days from FY 2013 cost reports and FY 2016 SSI ratios. We noted that cost report data from Indian Health Service and Tribal hospitals are included in HCRIS beginning in FY 2013 and no longer need to be incorporated from a separate data source. We also proposed to continue the policies that were finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020) to address several specific issues concerning the process and data to be employed in determining Factor 3 in the case of hospital mergers. In addition, we proposed to continue the policies that were finalized in the FY 2018 IPPS/LTCH PPS final rule to address technical considerations related to the calculation of Factor 3 and the incorporation of Worksheet S-10 data (82 FR 38213 through 38220). In that final rule, we adopted a policy, for purposes of calculating Factor 3, under which we annualize Medicaid days data and uncompensated care cost data reported on the Worksheet S-10 if a hospital's cost report does not equal 12 months of data. As in FY 2018, for FY 2019, we did not propose to annualize SSI days because we do not obtain these data from hospital cost reports in HCRIS. Rather, we obtain these data from the latest available SSI ratios posted on the Medicare DSH homepage (
We noted that we were proposing to discontinue the policy finalized in the FY 2017 IPPS/LTCH PPS final rule concerning multiple cost reports beginning in the same fiscal year (81 FR 56957). Under this policy, we would first combine the data across the multiple cost reports before determining the difference between the start date and the end date to determine if annualization is needed. The policy was developed in response to commenters' concerns regarding the unique circumstances of hospitals that filed cost reports that are shorter or longer than 12 months. As we explained in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957 through 56959) and in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19953), we believed that, for hospitals that file multiple cost reports beginning in the same year, combining the data from these cost reports had the benefit of supplementing the data of hospitals that filed cost reports that are less than 12 months, such that the basis of their uncompensated care payments and those of hospitals that filed full-year 12-month cost reports would be more equitable. As we stated in the FY 2019 IPPS/LTCH PPS proposed rule, we now believe that concerns about the equitability of the data used as the basis of hospital uncompensated care payments are more thoroughly addressed by the policy finalized in the FY 2018 IPPS/LTCH PPS final rule, under which CMS annualizes the Medicaid days and uncompensated care cost data of hospital cost reports that do not equal 12 months of data. Based on our experience, we stated that we believe that in many cases where a hospital files two cost reports beginning in the same fiscal year, combining the data across multiple cost reports before annualizing would yield a similar result to choosing the longer of the two cost reports and then annualizing the data if the cost report is shorter or longer than 12 months. Furthermore, even in cases where a hospital files more than one cost report beginning in the same fiscal year, it is not uncommon for one of those cost reports to span exactly 12 months. In this case, if Factor 3 is determined using only the full 12-month cost report, annualization would be unnecessary as there would already be 12 months of data. Therefore, for FY 2019, we stated that we believed it was appropriate to propose to eliminate the additional step of combining data across multiple cost reports if a hospital filed more than one cost report beginning in the same fiscal year. Instead, for purposes of calculating Factor 3, we would use data from the cost report that is equivalent to 12 months or, if no such cost report exists, the cost report that is closest to 12 months and annualize the data. Furthermore, we acknowledged that, in rare cases, a hospital may have more than one cost report beginning in one fiscal year, where one report also spans the entirety of the following fiscal year, such that the hospital has no cost report beginning in that fiscal year. For instance, a hospital's cost reporting period may have started towards the end of FY 2012 but cover the duration of FY 2013. In these rare situations, we proposed to use data from the cost report that spans both fiscal years in the Factor 3 calculation for the latter fiscal year as the hospital would already have data from the preceding cost report that could be used to determine Factor 3 for the previous fiscal year.
We also proposed to continue to apply statistical trims to anomalous hospital CCRs using the methodology adopted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38217 through 38219), where we stated our belief that, just as we apply trims to hospitals' CCRs to eliminate anomalies when calculating outlier payments for extraordinarily high cost cases (§ 412.84(h)(3)(ii)), it is appropriate to apply statistical trims to the CCRs on Worksheet S-10, Line 1, that are considered anomalies. Specifically, § 412.84(h)(3)(ii) states that the Medicare contractor may use a statewide CCR for hospitals whose operating or capital CCR is in excess of 3 standard deviations above the corresponding national geometric mean (that is, the CCR “ceiling”). This mean is recalculated annually by CMS and published in the proposed and final IPPS rules each year.
Similar to the process used in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38217 through 38218) for trimming CCRs, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20398), we proposed the following steps for FY 2019:
Step 1: Remove Maryland hospitals. In addition, we would remove All Inclusive Rate Providers because they have charge structures that differ from other IPPS hospitals. For providers that did not report a CCR on Worksheet S-10, Line 1, we would assign them the statewide average CCR in step 5 below.
Step 2: For each fiscal year (FY 2014 and FY 2015), calculate a CCR “ceiling” with the following data: For each IPPS hospital that was not removed in Step 1 (including non-DSH eligible hospitals), we would use cost report data to calculate a CCR by dividing the total costs on Worksheet C, Part I, Line 202, Column 3 by the charges reported on Worksheet C, Part I, Line 202, Column 8. (Combining data from multiple cost reports from the same FY is no longer necessary in this step, as the longer cost report would be selected). The ceiling would be calculated as 3 standard deviations above the national geometric mean CCR for the applicable fiscal year. This approach is consistent with the methodology for calculating the CCR ceiling used for high-cost outliers. Remove all hospitals that exceed the ceiling so that these aberrant CCRs do not skew the calculation of the statewide average CCR. (For this final rule, this trim would remove 5 hospitals that have a CCR above the calculated ceiling of 1.031 for FY 2014 and 9 hospitals that have a CCR above the calculated ceiling of 0.93 for FY 2015.)
Step 3: Using the CCRs for the remaining hospitals in Step 2, determine the urban and rural statewide average CCRs for FY 2014 and for FY 2015 for hospitals within each State (including non-DSH eligible hospitals), weighted by the sum of total inpatient discharges and outpatient visits from Worksheet S-3, Part I, Line 14, Column 14.
Step 4: Assign the appropriate statewide average CCR (urban or rural) calculated in Step 3 to all hospitals with a CCR for the applicable fiscal year greater than 3 standard deviations above the corresponding national geometric mean for that fiscal year (that is, the CCR “ceiling”). For this final rule, the statewide average CCR would therefore be applied to 14 hospitals, of which 2 hospitals in FY 2014 have Worksheet S-10 data and 5 hospitals in FY 2015 have Worksheet S-10 data.
After applying the applicable trims to a hospital's CCR as appropriate, we proposed that we would calculate a hospital's uncompensated care costs for the applicable fiscal year as being equal
Hospital Uncompensated Care Costs = Line 30 (Line 23, Column 3 + Line 29), which is equal to—
[(Line 1 CCR (as adjusted, if applicable) × Uninsured patient charity care Line 20, Column 1) − (Payments received from uninsured patient charity care Line 22, Column 1)] + [(Insured patient charity care Line 20, Column 2) − Insured patient charges from days beyond length of stay limit * (1−(Line 1 CCR (as adjusted, if applicable))) − (Payments received from insured patient charity care Line 22, Column 2)] + [(Line 1 CCR (as adjusted, if applicable) × Non-Medicare bad debt Line 28) + (Medicare allowable bad debts Line 27.01 − Medicare reimbursable bad debt Line 27)].
Similar in concept to the policy that we adopted for FY 2018, for FY 2019, we stated in the proposed rule that we continue to believe that uncompensated care costs that represent an extremely high ratio of a hospital's total operating expenses (such as the ratio of 50 percent used in the FY 2018 IPPS/LTCH PPS final rule) may be potentially aberrant, and that using the ratio of uncompensated care costs to total operating costs to identify potentially aberrant data when determining Factor 3 amounts has merit. That is, we stated that we continue to believe that, in the rare situations where a hospital has a ratio of uncompensated care costs to total operating expenditures that is extremely high, the issue is most likely with the hospital's uncompensated care costs and not its total operating costs. We noted that we had instructed the MACs to review situations where a hospital has an extremely high ratio of uncompensated care costs to total operating costs with the hospital, but indicated that we did not intend to make the MACs' review protocols public. As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56964), for program integrity reasons, CMS desk review and audit protocols are confidential and are for CMS and MAC use only. If the hospital cannot justify its reported uncompensated care amount, we stated that we believed it would be appropriate to utilize data from another fiscal year to address the potentially aberrant Worksheet S-10 data for FY 2014 or FY 2015. As we have previously indicated, we do not believe it would be appropriate to use Worksheet S-10 data from years prior to FY 2014 in the determination of Factor 3. Therefore, the most widely available Worksheet S-10 data available to us if a hospital has an extremely high ratio of uncompensated care costs to total operating expenses based on its FY 2014 or FY 2015 Worksheet S-10 data are the FY 2015 and FY 2016 Worksheet S-10 data. Accordingly, similar in concept to the approach we used in FY 2018, in cases where a hospital's uncompensated care costs for FY 2014 are an extremely high ratio of its total operating costs and the hospital cannot justify the amount it reported, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20399), we proposed to determine the ratio of FY 2015 uncompensated care costs to FY 2015 total operating expenses from the hospital's FY 2015 cost report and apply that ratio to the FY 2014 total operating expenses from the hospital's FY 2014 cost report to determine an adjusted amount of uncompensated care costs for FY 2014. We proposed that we would then use this adjusted amount to determine Factor 3 for FY 2019. Similarly, if a hospital has uncompensated care costs for FY 2015 that are an extremely high ratio of its total operating costs for that year and the hospital cannot justify its reported amount, we proposed to follow the same methodology using data from the hospital's FY 2016 cost report to determine an adjusted amount of uncompensated care costs for FY 2015. That is, we would determine the ratio of FY 2016 uncompensated care costs to FY 2016 total operating expenses from a hospital's FY 2016 cost report and apply that ratio to the FY 2015 total operating expenses from the hospital's FY 2015 cost report to determine an adjusted amount of uncompensated care costs for FY 2015. We proposed that we would then use this adjusted amount when determining Factor 3 for FY 2019. We tentatively included the data for hospitals that had a high ratio of uncompensated care costs to total operating expenses when calculating Factor 3 for the proposed rule. However, we noted in the proposed rule that our calculation of Factor 3 for this final rule would be contingent on the results of the ongoing MAC reviews of these hospitals. In the event those reviews necessitate supplemental data edits, we stated that we would incorporate such edits in the final rule for the purpose of correcting aberrant data.
We also stated in the proposed rule that, for FY 2019, we believe that situations where there were extremely large dollar increases or decreases in a hospital's uncompensated care costs when it resubmitted its FY 2014 Worksheet S-10 or FY 2015 Worksheet S-10 data, or when the data it had previously submitted were reprocessed by the MAC, may reflect potentially aberrant data and warrant further review. For example, although we do not make our actual review protocols public, we indicated that we might conclude that it would be appropriate to review hospitals with increases or decreases in uncompensated care costs in the top 1 percent of such changes. We noted that we had instructed our MACs to review these situations with each hospital. If it is determined after this review that an increase or decrease in uncompensated care costs cannot be justified by the hospital, we proposed to follow the same approach that we proposed to use to address situations when a hospital's ratio of its uncompensated care costs to its operating expenses is extremely high and the hospital cannot justify its reported amount. Specifically, if after review, the increase or decrease in uncompensated care costs for FY 2014 or FY 2015 cannot be justified by the hospital, we proposed that we would determine the ratio of the uncompensated care costs to total operating expenses from the hospital's cost report for the subsequent fiscal year and apply that ratio to the total operating expenses from the hospital's resubmitted cost report with the large increase or decrease in uncompensated care payments to determine an adjusted amount of uncompensated care costs for the applicable fiscal year. We indicated that we had tentatively included the data for hospitals where there was an extremely large increase or decrease in uncompensated care payments when calculating Factor 3 for the proposed rule. However, we noted in the proposed rule that our calculation of Factor 3 for the final rule was contingent on the results of the ongoing MAC reviews of these hospitals. In the event those reviews necessitate supplemental data edits, we stated that we would incorporate such edits in the final rule for the purpose of correcting aberrant data.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20400), for Indian Health Service and Tribal hospitals, subsection (d) Puerto Rico hospitals, and all-inclusive rate providers, we proposed to continue the policy we first adopted for FY 2018 of substituting data regarding FY 2013 low-income insured days for the Worksheet S-10 data when determining Factor 3. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38209), the use of data from Worksheet S-10 to calculate the uncompensated care amount for Indian Health Service and Tribal hospitals may jeopardize these hospitals' uncompensated care payments due to their unique funding structure. With
Therefore, for FY 2019, we proposed to compute Factor 3 for each hospital by—
Step 1: Calculating Factor 3 using the low-income insured days proxy based on FY 2013 cost report data and the FY 2016 SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's FY 2013 Medicaid days);
Step 2: Calculating Factor 3 based on the FY 2014 Worksheet S-10 data;
Step 3: Calculating Factor 3 based on the FY 2015 Worksheet S-10 data; and
Step 4: Averaging the Factor 3 values from Steps 1, 2, and 3; that is, adding the Factor 3 values from FY 2013, FY 2014, and FY 2015 for each hospital, and dividing that amount by the number of cost reporting periods with data to compute an average Factor 3 (or for Puerto Rico hospitals, Indian Health Service and Tribal hospitals, and all-inclusive rate providers using the Factor 3 value from Step 1).
We also proposed to amend the regulations at § 412.106(g)(1)(iii)(C) by adding a new paragraph (5) to reflect this proposed methodology for computing Factor 3 for FY 2019.
In the proposed rule, we noted that if a hospital does not have both Medicaid days for FY 2013 and SSI days for FY 2016 available for use in the calculation of Factor 3 in Step 1, we consider the hospital not to have data available for the fiscal year, and will remove that fiscal year from the calculation and divide by the number of years with data. A hospital will be considered to have both Medicaid days and SSI days data available if it reports zero days for either component of the Factor 3 calculation in Step 1. However, if a hospital is missing data due to not filing a cost report in one of the applicable fiscal years, we will divide by the remaining number of fiscal years.
Although we did not make any proposals with respect to the development of Factor 3 for FY 2020 and subsequent fiscal years, in the proposed rule, we noted that the above methodology would have the effect of fully transitioning the incorporation of data from Worksheet S-10 into the calculation of Factor 3 if used in FY 2020. Starting with 1 year of Worksheet S-10 data in FY 2018, an additional year of Worksheet S-10 data will be incorporated into the calculation of Factor 3 in FY 2019 under the policies included in this final rule, and the use of low-income insured days would be phased out by FY 2020 if the same methodology is proposed and finalized for that year. We also indicated that it is possible that when we examine the FY 2016 Worksheet S-10 data, we may determine that the use of multiple years of Worksheet S-10 data is no longer necessary in calculating Factor 3 for FY 2020. For example, given the efforts hospitals have already undertaken with respect to reporting their Worksheet S-10 data and the subsequent reviews by the MACs that had already been conducted prior to the development of this final rule, along with additional review work that may take place following the issuance of this final rule, we may consider using 1 year of Worksheet S-10 data as the basis for calculating Factor 3 for FY 2020.
For new hospitals that do not have data for any of the three cost reporting periods used in the Factor 3 calculation, we proposed to continue to apply the new hospital policy finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50643). That is, the hospital would not receive either interim empirically justified Medicare DSH payments or interim uncompensated care payments. However, if the hospital is later determined to be eligible to receive empirically justified Medicare DSH payments based on its FY 2019 cost report, the hospital would also receive an uncompensated care payment calculated using a Factor 3, where the numerator is the uncompensated care costs reported on Worksheet S-10 of the hospital's FY 2019 cost report, and the denominator is the sum of uncompensated care costs reported on Worksheet S-10 of all DSH eligible hospitals' FY 2015 cost reports. Due to the uncertainty regarding the completeness and accuracy of the FY 2019 uncompensated care cost data at the time this calculation would need to be performed, we stated that we believe it would be more appropriate to use the sum of the uncompensated care costs reported on Worksheet S-10 of all DSH eligible hospitals' cost reports from FY 2015, the most recent year of the 3-year time period used in the development of Factor 3, to determine the denominator of Factor 3 for new hospitals. We noted that, given the time period of the data used to calculate Factor 3, any hospitals with a CCN established after October 1, 2015 would be considered new and subject to this policy.
As we have done for every proposed and final rule beginning in FY 2014, we stated that, in conjunction with both the FY 2019 IPPS/LTCH PPS proposed rule and this final rule, we would publish on the CMS website a table listing Factor 3 for all hospitals that we estimate would receive empirically justified Medicare DSH payments in FY 2019 (that is, those hospitals that would receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) hospitals and subsection (d) Puerto Rico hospitals that have the potential of receiving a Medicare DSH payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. We noted that, at the time of the
In conjunction with the proposed rule, we also published a supplemental data file containing a list of the mergers that we were aware of and the computed uncompensated care payment for each merged hospital. Hospitals had 60 days from the date of public display of the FY 2019 IPPS/LTCH PPS proposed rule to review the table and supplemental data file published on the CMS website in conjunction with the proposed rule and to notify CMS in writing of any inaccuracies. Comments could be submitted to the CMS inbox at
Other commenters opposed the use of Worksheet S-10 to compute Factor 3 and allocate uncompensated care costs in FY 2019. Many of these commenters maintained their position from previous years that, while Worksheet S-10 has the potential to serve as a more exact measure of hospital uncompensated care costs, the data reported are not presently a reliable and accurate reflection of these uncompensated care costs. The commenters also noted that the administrative burden for hospitals to complete Worksheet S-10 is high. These commenters asserted that CMS should suspend its use, or not advance its implementation, until the agency can demonstrate that the data being reported are accurate and consistent, or at least until FY 2021. Some commenters pointed to the evaluation performed by Dobson DaVanzo and asserted that, while the analysis demonstrated correlation between Worksheet S-10 and IRS Form 990, it did not address potentially significant differences in the reporting requirements for the forms.
In the FY 2019 IPPS/LTCH PPS proposed rule, we stated that we could no longer conclude that alternative data to the Worksheet S-10 are available for FY 2014 and FY 2015 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. Our reviews of selected FY 2014 and FY 2015 data and the potential data aberrancies pointed out by commenters have not altered that conclusion. We continue to acknowledge that the Worksheet S-10 data are not perfect, but there are no perfect data sources available to us. We also acknowledge that the approximately $1.5 billion increase in the overall amount available to make uncompensated care payments will help to mitigate the impact of any redistribution of uncompensated care payments due to the continued incorporation of Worksheet S-10 data on hospitals that serve a large number of Medicaid and SSI patients, yet report proportionately lower uncompensated care amounts.
Many commenters recognized the efforts undertaken by CMS in contacting select hospitals to verify reported data, and some commenters noted data improvements since the release of Transmittal 11 and CMS' subsequent contact with individual hospitals. However, a number of commenters provided specific examples of potentially aberrant data that they asserted are a result of the ambiguity of the Worksheet S-10 instructions. These examples of potentially aberrant data related in large part to the reporting of charity care charges and uninsured discounts on Worksheet S-10, Line 20, Columns 1 and 2. For example, commenters noted that some hospitals reported charity care coinsurance and deductibles of more than 25 percent of their total charity care charges; some hospitals reported charity care charges that were, on average, 80 percent of total hospital charges; and some hospitals reported negative charity care charges. Several commenters also noted potentially aberrant data related to bad debt, including, for example, cases in which a hospital reported Medicare allowable bad debt elsewhere on the cost report, but those amounts were not reflected in its Worksheet S-10; hospitals that reported having more Medicare bad debt than total hospital bad debts; and hospitals with significant differences in bad debt charges over time. With respect to uncompensated care costs, commenters noted that, for example, some hospitals reported uncompensated care costs that were 30 to 70 percent of total hospital costs; and some hospitals reported uncompensated care costs that ranged from 0.14 percent to 250 percent of total hospital revenue. Commenters remarked that these results are implausible and indicate that CMS must continue working to improve the reliability of Worksheet S-10. Several commenters observed that the current Worksheet S-10 methodology may provide an incentive to hospitals to overstate charity care, compromising the fidelity of the information collected. Another commenter was concerned that the revisions to the Worksheet S-10 instructions through Transmittal 11 and subsequent opportunity for hospitals to resubmit their cost reports for prior years created an incentive for hospitals to inflate charges for charity care. Finally, some commenters requested that CMS continue to offer hospitals the opportunity to amend, or require them to amend, cost reports for FY 2014, FY 2015, and later years.
As noted in the FY 2019 IPPS/LTCH PPS proposed rule, (83 FR 20396 and 20397), on September 29, 2017, we issued Transmittal 11, which clarified the definitions and instructions for reporting uncompensated care, non-Medicare bad debt, nonreimbursed Medicare bad debt, and charity care, as well as modified the calculations relative to uncompensated care costs and added edits to improve the integrity of the data reported on Worksheet S-10. We also provided another opportunity for hospitals to submit revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost reports. We refer readers to Change Request 10378, Transmittal 1981, titled “Fiscal Year (FY) 2014 and 2015 Worksheet S-10 Revisions: Further Extension for All Inpatient Prospective Payment System (IPPS) Hospitals,” issued on December 1, 2017 (available at:
We believe that the new Worksheet S-10 instructions implemented in Transmittal 11 were sufficiently clear to allow hospitals to accurately complete Worksheet S-10, and that hospitals were provided ample time following the issuance of Transmittal 11 to revise and amend Worksheet S-10 for FY 2014 and FY 2015. Because we recognize that there were delays in processing Worksheet S-10 to reflect the revisions in Transmittal 11 and consistent with our historical practice of using the best data available, we are using the June 30,
In response to the request by some commenters that CMS continue to offer hospitals the opportunity to amend, or require them to amend, cost reports for FY 2014, FY 2015 and later years, we are using data from a June 30, 2018 HCRIS update to determine Factor 3 for this FY 2019 IPPS/LTCH PPS final rule. We believe this gave hospitals ample time to review the revised instructions in Transmittal 11, and to resubmit Worksheet S-10 for these years. Furthermore, as discussed earlier with respect to our estimates of Factors 1 and 2, we continue to believe that applying our best estimates to determine uncompensated care payment amounts prospectively would be most conducive to administrative efficiency, finality, and predictability in payments. We believe that, in affording the Secretary the discretion to estimate the amount of the three factors used to determine uncompensated care payments and by including a prohibition against administrative and judicial review of those estimates in section 1886(r)(3) of the Act, Congress recognized the importance of finality and predictability under a prospective payment system. As a result, we do not agree that we should continue to offer hospitals the opportunity to amend, or require them to amend their FY 2014 and FY 2015 cost reports for purposes of determining uncompensated care payments for FY 2019, as this would be contrary to the notion of prospectivity. To the extent these commenters were requesting a further opportunity to revise their Worksheet S-10 data for use in future rulemaking for FY 2020 or later years, we are not addressing the issue of future resubmissions in this final rule. Therefore, the normal timelines and procedures apply for a hospital to request to amend a cost report.
However, numerous commenters also expressed concerns with the release of the transmittals, noting that between Transmittal 10 and 11, there were significant changes in the instructions and clarifications that resulted in significant modifications to hospitals' reporting. One commenter also pointed out that CMS' requests for data resubmissions in both Transmittal 10 and Transmittal 11 were only 1 year apart, adding to hospitals' administrative burden. One commenter stated that, by the time Transmittal 11 was issued, hospitals had already filed their initial FY 2014 and FY 2015 cost reports, with some hospitals having already updated Worksheet S-10 data through amended cost reports. Several commenters believed that Transmittal 11 added significant strain on and caused confusion for hospitals.
Aside from these concerns about the timing of and differences between Transmittals 10 and 11, numerous commenters pointed out specific reasons as to why the guidelines were confusing and difficult to be carried out, especially with regard to the changes made in Transmittal 11. For example, one commenter pointed out that providers that have already complied with CMS' updated instructions would not have to change submitted data. However, it was not clear from Transmittal 11 how hospitals were supposed to proceed in such a situation or if they simply had to calculate Worksheet S-10 data again and then resubmit.
Among the chief concerns raised by commenters regarding the release of Transmittal 11 was that hospitals did not have enough time or sufficient resources to revise their Worksheet S-10 data. According to commenters, the timeframe afforded by CMS was not long enough, given the administrative burden of complying with all of the changes in Transmittal 11. In addition, a few commenters pointed out that the Electronic Health Record audit by the Office of the Inspector General was earlier than the release of Transmittal 11, contributing to an even shorter timeline for hospitals to respond to changes in cost reporting for Worksheet S-10.
Many commenters also stated that among the factors contributing to restrict hospitals' ability to make timely revisions to their Worksheet S-10 data in response to Transmittal 11 were the limited personnel and financial resources available to make the changes in cost reporting outlined in Transmittal 11. The commenters also indicated that hospitals with inadequate internal financial management tracking systems were at an extreme disadvantage in meeting CMS' timeline.
On a related issue, many commenters stated that the software updates, which were required to accommodate the changes reflected in Transmittal 11, reduced the timeframe hospitals had to amend their cost reports by the deadline for inclusion in the proposed rule. At times, according to one commenter, the changes mandated by Transmittal 11 could not be executed by hospitals' information systems until a software update was possible, which likely did not coincide with the submission timeframe for the revisions.
Some commenters pointed out that the MACs' review of data following the issuance of Transmittal 11 largely focused on FY 2015 data, and perhaps paid much less attention to equally troubling FY 2014 data. Other commenters stated that only limited education efforts accompanied the issuance of Transmittal 11.
Regarding the confusion Transmittal 11 may have caused among stakeholders, we note Transmittal 11 was designed to be responsive to previous stakeholder concerns regarding Worksheet S-10, such as reporting of uninsured patient discounts and the modification of certain calculations to account for nonreimbursable Medicare bad debt. We also note that some commenters indicated that Worksheet S-10 instructions, consistency, and data accuracy have improved as a result Transmittal 11. However, we recognize that there are continuing opportunities to further improve guidance and education, and we will continue to work with our stakeholders to address their concerns through provider education and further refinement of the instructions.
Several commenters specifically requested that their cost data in the proposed FY 2019 DSH Supplemental Data File be updated in a timely manner to reflect the latest HCRIS information in order ensure that their Factor 3 for FY 2019 accurately reflects their uncompensated care costs. A few commenters also expressed concerns that many hospitals were still having challenges in resubmitting their corrections to Worksheet S-10 data and having them accepted by the MACs. One commenter urged CMS to validate the information in HCRIS before pulling data for the proposed and final rules. Another commenter suggested that CMS implement an alternative means for hospitals to submit cost report data to alleviate burden on hospitals and improve accuracy.
We have not previously been able to use such a recent update of HCRIS for purposes of the annual rulemaking, and it was operationally challenging to take the steps necessary to be able to use a June 30, 2018 update to calculate Factor 3 for FY 2019. The time required to complete the public use file process, which involves interactions with the MACs to ensure all reports have been appropriately included, would have exceeded the time we had available. In order to have the data with a bare minimum of time to use it in performing our calculations for the final rule, we needed to use a new expedited ad hoc process outside of the established process normally used to develop the public use file. We were not sure it even would be feasible to develop such an expedited ad hoc process. Ultimately, in order to develop the expedited process that was used, we had to bypass some of the safeguards built into the ordinary process and forgo our opportunity to further review the data. Given the unique circumstances that affected hospitals' ability to resubmit their Worksheet S-10 for FY 2014 and/or FY 2015, and the delays in processing by the MACs, we concluded that the potential to include additional, revised data for the final rule outweighed the risk that we might not include a report that would have been properly included had we been able to follow the usual process for preparing a public use file. Therefore, under ordinary circumstances, we would not even have contemplated this approach because the additional review time afforded by the use of the March extract under the established public use file process is important from an enhanced quality assurance standpoint and the benefits of this enhanced quality assurance were only outweighed by the extenuating circumstances affecting the timeline for both the resubmission of Worksheet S-10 data and the review of these data by the MACs in time to allow the data to be considered in this final rule.
Following the publication of this final rule, hospitals will have until August 31, 2018, to review and submit comments on the accuracy of the table
One commenter also suggested that CMS allow for administrative or judicial review of its Medicare DSH payment calculations, which would provide an important check if the agency makes errors in the calculations. One commenter also asked CMS to reconsider its decision not to reconcile final payments for uncompensated care with actual data for cost reporting periods during FY 2019. One commenter included a request to reopen its cost reports for FY 2014 and FY 2015 to make corrections.
Unless the relevant information was also reflected in the June 30, 2018 HCRIS update, we have not considered information from any revised Worksheets S-10 that were submitted as attachments to comments. We do not believe it would be appropriate to allow a hospital to use the rulemaking process to circumvent the requirement that cost report data need to be submitted to the MAC or the requirement that requests to reopen cost reports need to be submitted to the MAC. Otherwise we would have multiple potentially conflicting sources of information about a hospital's uncompensated care data or, more broadly, any cost report data that might be submitted during the rulemaking process. In addition, there are validity checks and other safeguards incorporated into the cost report submission process that would not be automatically applied to cost reports only submitted through rulemaking.
Furthermore, as noted earlier, under the deadlines established in Change Request 10378, we stated that all amended FY 2014 and FY 2015 cost reports containing a revised Worksheet S-10 (or a completed Worksheet S-10 if no data were included on the previously submitted cost report) received by January 2, 2018 would be available to be considered for purposes of the FY 2019 IPPS/LTCH PPS final rule. This date was important to allow sufficient time for reviews by MACs for potentially aberrant reports prior to the FY 2019 PPS/LTCH PPS final rule.
Also, as discussed earlier, we continue to believe that using the best data available to prospectively estimate Factor 3 is most conducive to administrative efficiency, finality, and predictability in payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 38195). Further, we believe that, in affording the Secretary the discretion to estimate the amount of the three factors used to determine these uncompensated care payments and by including a prohibition against administrative and judicial review of those estimates in section 1886(r)(3) of the Act, Congress recognized the importance of finality and predictability under a prospective payment system. In light of this preclusion, we do not have the ability to allow for administrative or judicial review of our estimates.
Regarding the concerns related to the Administrative Procedure Act, we note that, under the Administrative Procedure Act, a proposed rule is required to include either the terms or substance of the proposed rule or a description of the subjects and issues involved. In this case, the FY 2019 IPPS/LTCH PPS proposed rule included a detailed discussion of our proposed methodology for calculating Factor 3 and the data that would be used. We made public the best data available at the time of the proposed rule, in order to allow hospitals to understand the anticipated impact of the proposed methodology. Moreover, following the publication of the proposed rule, we continued our efforts to ensure that information hospitals properly submitted to their MAC in the prescribed timeframes would be available to be used in this final rule in the event we finalized our proposed methodology. We believe the fact that we provided data with the proposed rule while concurrently continuing to review that data with individual hospitals is entirely consistent with the Administrative Procedure Act. There is no requirement under either the Administrative Procedure Act or the Medicare statute that CMS make the actual data that will be used in a final rule available as part of the notice of proposed rulemaking. Rather, it is sufficient that we provide stakeholders with notice of our proposed methodology and the data sources that will be used, so that they may have a meaningful opportunity to submit their views on the proposed methodology and the adequacy of the data for the intended purpose. This requirement for notice and comment does not, however, extend to a requirement that we make all data that will be used to compute payments available to the public, so that they may have an opportunity to comment on accuracy of the data reported for individual hospitals. Similarly, there is no requirement that we provide an opportunity for comment on the actual payment amounts determined for each hospital.
Many commenters disagreed with CMS' stance on not sharing desk review and audit protocols with hospitals. These commenters pointed out that CMS has indicated that such protocols are confidential, but they believe this opacity could lead to inconsistencies in the reporting of Worksheet S-10 data and different interpretations of the Provider Reimbursement Manual among hospitals and even MACs. The commenters encouraged CMS to release the audit criteria for non-Medicare bad debt and charity care claimed on Worksheet S-10.
One commenter believed that CMS and the MACs hide behind the “bar to judicial review” that exists under the provisions of the statute governing the determination of uncompensated care payments, and this allows the MACs to commit outright errors that go unchecked if a hospital is otherwise unable to convince the MAC of the error. A few commenters expressed disappointment with what they characterized as the inconsistent and arbitrary decisions made by MACs in their reviews of Worksheet S-10 data and expressed the need for CMS to provide guidance to MACs to clarify which uninsured discounts CMS expects MACs to accept when reported on amended and/or corrected cost reports. Commenters pointed out that MACs may lack sufficient guidance, instruction, and training with respect to the inclusion of all discounts under the hospital's financial assistance policy in Line 20 of Worksheet S-10. For example, one commenter mentioned that some hospitals have experienced MAC audit disallowances of certain charity care and uninsured costs reported on Worksheet S-10 and stated that such disallowances can be egregious and cause significant reductions in the hospitals' uncompensated care payments. Commenters also suggested that these disallowances highlight the need for more upfront guidance and clearly defined terms as well as consistency by the MACs in the application of that guidance in their reviews.
Several commenters also were concerned or believed that MACs had created their own audit protocols for the Worksheet S-10 for purposes of auditing Electronic Health Record incentive payments under the HITECH Act without any guidance from CMS, and that any disparate interpretations could create disparities in the accuracy of the data across MACs. This, according to one commenter, allows MACs' audits to be subject to open interpretation. Another commenter expressed concern that the MACs are overstepping their authority to determine what the requirements for hospitals' financial assistance policies should be, when in fact hospitals are free to determine these requirements. The commenter also stated that the IRS already reviews and ensures that hospitals follow their financial assistance policy, and therefore there is no need for CMS and the MACs to duplicate its efforts.
Many commenters approved of the proposal to phase-in the use of data from the Worksheet S-10. However, other commenters had other varying opinions regarding the length of the phase-in period. Some commenters agreed with the proposal to continue the 3-year phase-in. However, other commenters requested that CMS consider a longer phase-in period or delay the transition to the use of Worksheet S 10 data. These commenters recommended a minimum 5-year transition period to gradually phase-in the use of Worksheet S-10 data, once the data have been audited. According to the commenters, this longer phase-in would mitigate the effect on hospitals of the redistribution in uncompensated care payments resulting from the inclusion of data from the Worksheet S-10.
Some commenters stated that the proposed methodology of using 1 year of low-income insured days and 2 years of uncompensated care data from Worksheet S-10 to compute uncompensated care payments for FY 2019 would be highly redistributive, and some commenters asked that CMS implement a stop-loss policy to protect hospitals that lose 5 to 10 percent in DSH payments in any given year as a result of transitioning to the use of Worksheet S-10 data. These commenters suggested that this stop-loss policy should extend beyond the 3-year phase-in to help hospitals with decreasing uncompensated care payments that are disproportionately affected by the transition to Worksheet S-10 data adjust to their new payment levels. However, another commenter noted that a stop-loss policy would not be warranted, given that a 3-year phase-in is an appropriate way to temporarily reduce the impact of new provisions.
Regarding the commenters' recommendation that we adopt a stop-loss policy, we believe that the use of 3 years of data to determine Factor 3 for FY 2019 already provides assurance that hospitals' uncompensated care payments will remain reasonably stable and predictable, and would not be subject to unpredictable swings and anomalies in a hospital's low-income insured days or reported uncompensated care costs. As a result, because there is already a mechanism that has the effect of smoothing the transition from the use of low-income insured days to the use of Worksheet S-10 data in place, we do not believe a stop-loss policy is necessary.
Regarding the commenters' view that CCR trims should not take place before we conduct audits and give providers further opportunities to explain or amend their data, we agree that, in an ideal circumstance, CCR trims without audits would not be needed. However, providers have had sufficient time to amend their data and/or contact CMS to explain that the FY 2019 DSH Supplemental Data File posted in conjunction with FY 2019 IPPS/LTCH PPS proposed rule had incorrect data. As a result, we consider CCRs greater than 3 standard deviations above the national geometric mean CCR for the applicable fiscal year to be aberrant CCRs. We are finalizing the trim methodology as proposed.
With regard to the comment that the CCRs on Worksheet S-10 are reported with the RCE limits applied, we believe the commenter is mistaken. Line 1 of Worksheet S-10 instructs hospitals to compute the CCR by dividing the costs from Worksheet C, Part I, Line 202, Column 3, by the charges on Worksheet C, Part I, Line 202, Column 8. The RCE limits are applied in Column 4, not in Column 3; thus, the RCE limits do not affect the CCR on line 1 of Worksheet S-10.
Several commenters urged CMS to use Worksheet S-10, Line 31 to identify a hospital's share of uncompensated care costs rather than Line 30. These commenters did not believe that Line 30 adequately captures a hospital's uncompensated care because it excludes unreimbursed costs for State and local indigent care programs. Commenters also believed that CMS' use of Line 30 results in a mismatch between payment and costs for care furnished to the uninsured and underinsured due to lack of clear reporting guidelines. The commenters believed that this is because many States support uncompensated care through supplemental Medicaid programs funded through their Federal Medicaid DSH allotment or a Medicaid waiver program. The commenters stated that these supplemental payments are likely reported on Worksheet S-10 as Medicaid revenue while some of the hospital's uncompensated care costs are reported as charity care, as such reporting was at a hospital's discretion at the time of cost report filing.
In addition to comments about the Medicaid shortfalls, commenters observed that States differ in how they define uncompensated care costs, and that not all costs incurred by hospitals in treating the uninsured are categorized as charity care and bad debt, such as in the case of discounts to the uninsured who are unable to pay or unwilling to provide means-tested information. One commenter supported CMS' definition of uncompensated care costs as the cost of all charity care and non-Medicare bad debt but expressed concerns with the proposed expansion under Transmittal 10 to include discounts to the uninsured. The commenter stated that its health system has a long history of providing discounts to the uninsured through a voluntary agreement with the Attorney General's Office. The commenter also argued that higher adoption of high-deductible health plans should be considered.
Conceptual issues aside, we note that even if we were to adjust the definition of uncompensated care to include Medicaid shortfalls, this would not be a feasible option at this time due to computational limitations. Specifically, computing such shortfalls is operationally problematic because Medicaid pays hospitals a single DSH payment that in part covers the hospital's costs in providing care to the uninsured and in part covers estimates of the Medicaid “shortfalls.” Therefore, it is not clear how CMS would determine how much of the “shortfall” is left after the Medicaid DSH payment is made. In addition, in some States, hospitals return a portion of their Medicaid revenues to the State via provider taxes, making the computation of “shortfalls” even more complex.
With regard to the comments that States differ in how they define uncompensated care costs, and that hospitals' costs of treating the uninsured are not always categorized as charity care and bad debt, such as in the case of discounts to the uninsured who are unable to pay or unwilling to provide income information, we believe the commenters are referring to the Worksheet S-10 instructions for Line 20, revised in Transmittal 10, which state, in part, “Enter in column 1, the full charges for uninsured patients and patients with coverage from an entity that does not have a contractual relationship with the provider who meet the hospital's charity care policy or FAP.” We believe that hospitals have the discretion to design their charity care policies as appropriate and may include discounts offered to uninsured patients as “charity care.” Accordingly, for the reasons discussed in the proposed rule and previously in this final rule, we are finalizing our proposal to define uncompensated care costs as the amount on Line 30 of Worksheet S-10, which is the cost of charity care (Line 23) and the cost of non-Medicare bad debt and non-reimbursable Medicare bad debt (Line 29).
A few commenters also expressed concerns about the Financial Accounting Standards Board (FASB) update 2014-09 Topic 606. These commenters noted that the FASB guidelines indicate that bad debt is to be reported based on historical experience and that recoveries may not correlate to reported bad debt expense on the general ledger. Specifically, commenters asked that CMS address whether bad debt should still be reported net of recoveries on the Worksheet S-10.
Several commenters also expressed concerns that instructions pertaining to Worksheet S-10, Line 20 are not clear. The commenters stated, for example, that many hospitals incorrectly report “insured” charity care on Worksheet S-10, Line 20, Column 2 (which is not reduced by CCR), citing, as an example, noncovered Medicaid charges, which need to be reported as “uninsured” on Worksheet S-10 and reduced by CCR, as stated in the Worksheet S-10 instructions. The commenters pointed out that this inconsistency with respect to the reporting of charity care costs is commonly due to misinterpretation of instructions because of lack of clarity, and may be contributing to the overstatement of charity care costs.
Several commenters also pointed out that some hospitals may interpret the instructions literally, while other hospitals do not. The commenters asked CMS to correct this uncertainty and ambiguity to avoid inconsistent interpretations. In relation to this, one commenter asserted that contradictory and confusing language in the instructions leaves key terms undefined,
Some commenters questioned whether guidance on determining indigence of a Medicare beneficiary should be applicable to non-Medicare patients to determine whether charity care was furnished. Several commenters also suggested improvements that could be made to the instructions of Worksheet S-10, such as adding a requirement to report utilization data to add context to the monetary amounts reported for uncompensated care.
One commenter recommended that CMS identify and seek comment on alternate sources of proxy data for Puerto Rico Hospitals for use in future years, such as using data for Medicare beneficiaries with Medicaid eligibility (dual eligible beneficiaries).
After consideration of the public comments we received, and for the reasons discussed in the proposed rule and in this final rule, we are finalizing our proposal to use 2 years of Worksheet S-10 data from FY 2014 and FY 2015 cost reports in conjunction with data on low-income insured days that reflects Medicaid days from FY 2013 and SSI days from FY 2016, to calculate Factor 3 for FY 2019.
Therefore, for FY 2019, we are finalizing a policy to compute Factor 3 for each hospital by—
Step 1: Calculating Factor 3 using the low-income insured days proxy based on FY 2013 cost report data and the FY 2016 SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's FY 2013 Medicaid days);
Step 2: Calculating Factor 3 based on the FY 2014 Worksheet S-10 data;
Step 3: Calculating Factor 3 based on the FY 2015 Worksheet S-10 data; and
Step 4: Averaging the Factor 3 values from Steps 1, 2, and 3; that is, adding the Factor 3 values from FY 2013, FY 2014, and FY 2015 for each hospital, and dividing that amount by the number of cost reporting periods with data to compute an average Factor 3 (or for Puerto Rico hospitals, Indian Health Service and Tribal hospitals, and all-inclusive rate providers using the Factor 3 value from Step 1).
We also are finalizing the following proposals: (1) For providers with multiple cost reports beginning in the same fiscal year, to use the longest cost report and annualize Medicaid data and uncompensated care data if a hospital's cost report does not equal 12 months of data; (2) to discontinue the policy of combining cost reports for providers with multiple cost reports beginning during the same fiscal year; (3) where a provider has multiple cost reports beginning in the same fiscal year, but one report also spans the entirety of the following fiscal year such that the hospital has no cost report for that fiscal year, to use the cost report that spans both fiscal years for the latter fiscal year; and (4) to apply statistical trim methodologies to potentially aberrant CCRs and potentially aberrant uncompensated care costs.
For this FY 20019 IPPS/LTCH PPS final rule, we are finalizing a HCRIS cutoff of June 30. This cutoff also applies to revised reports from providers who were contacted by their MAC regarding potentially aberrant uncompensated care costs.
We are also finalizing our proposal to amend the regulations at § 412.106(g)(1)(iii)(C) by adding a new paragraph (
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, or is located in an all-urban State but meets one of the specified statutory criteria for rural reclassification (as added by section 50205 of the Bipartisan Budget Act of 2018, Pub. L. 115-123), 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
Since the extension of the MDH program through FY 2012 provided by section 3124 of the Affordable Care Act, the MDH program has been extended by subsequent legislation. Most recently, section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 2018, extended the MDH program for FYs 2018 through 2022 (that is, for discharges occurring before October 1, 2022). (Additional information on the extensions of the MDH program after FY 2012 and through FY 2017 can be found in the FY 2016 interim final rule with comment period (80 FR 49596).)
Section 50205 of the Bipartisan Budget Act of 2018 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH program for discharges occurring on or after October 1, 2017, through FY 2022 (that is, for discharges occurring on or before September 30, 2022).
We noted in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20401) that, consistent with the previous extensions of the MDH program, generally, a provider that was classified as an MDH as of September 30, 2017, was reinstated as an MDH effective October 1, 2017, with no need to reapply for MDH classification. However, if the MDH had classified as an SCH or cancelled its rural classification under § 412.103(g) effective on or after October 1, 2017, the effective date of MDH status may not be retroactive to October 1, 2017. We refer readers to the FY 2018 IPPS notice that appeared in the
In addition to extending the MDH program, section 50205 amended section 1886(d)(5)(G)(iv) of the Act to include in the definition of an MDH a hospital that is located in a State with no rural area (as defined in paragraph (2)(D)) and satisfies any of the criteria in section 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act, in addition to the other qualifying criteria.
Section 50205 of the Bipartisan Budget Act of 2018 also amended section 1886(d)(5)(G)(iv) of the Act by adding a provision following section 1886(d)(5)(G)(iv)(IV), which specifies that new section 1886(d)(5)(G)(iv)(I)(bb) of the Act applies for purposes of the MDH payment under sections 1886(d)(5)(G)(ii) of the Act (that is, 75 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rate from certain specified base years) only for discharges of a hospital occurring on or after the effective date of a determination of MDH status made with respect to the hospital after the date of the enactment of this provision. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20401), we noted that, under existing regulations, the effective date for a determination of MDH status is 30 days after the date the MAC provides written notification of MDH status. We also noted that we were proposing in section IV.G.3. of the preamble of the proposed rule to change the effective date for a determination of MDH status. We stated that if the proposal is finalized, the policy would not be effective until FY 2019 (October 1, 2018) and therefore would not apply to hospitals applying for MDH classification before October 1, 2018. Furthermore, this new provision also specifies that, for purposes of new section 1886(d)(5)(G)(iv)(I)(bb) of the Act, section 1886(d)(8)(E)(ii)(II) of the Act shall be applied by inserting “as of January 1, 2018,” after “such State” each place it appears. Section 50205 of the Bipartisan Budget Act also made conforming amendments to sections 1886(b)(3)(D) (in the language proceeding clause (i)) and 1886(b)(3)(D)(iv) of the Act.
Section 1886(d)(8)(E) of the Act provides for an IPPS hospital that is located in an urban area to be reclassified as a rural hospital if it submits an application in accordance with CMS' established process and meets certain criteria at section 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act (these statutory criteria are implemented in the regulations at § 412.103(a)(1) through (3)). A subsection (d) hospital that is located in an urban area and meets one of the three criteria under § 412.103(a) can reclassify as rural and is treated as being located in the rural area of the State in which it is located. However, a hospital that is located in an all-urban State is ineligible to reclassify as rural in accordance with the provisions of § 412.103 because the State in which it is located does not have a rural area into which it can reclassify. Prior to the amendments made by the Bipartisan Budget Act, a hospital could only qualify for MDH status if it was either geographically located in a rural area or if it reclassified as rural under the regulations at § 412.103. This precluded hospitals in all-urban States from being classified as MDHs. The newly added provision in the Bipartisan Budget Act of 2018 allows a hospital in an all-urban State to be eligible for MDH classification if, in addition to meeting the other criteria for MDH eligibility, it satisfies one of the criteria for rural reclassification under section 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act (as of January 1, 2018, where applicable), notwithstanding its location in an all-urban State.
As noted earlier, prior to the enactment of the Bipartisan Budget Act of 2018, a hospital in an all-urban State was ineligible for MDH classification because it could not reclassify as rural. With the new provision added by section 50205 of the Bipartisan Budget Act of 2018, a hospital in an all-urban State can apply and be approved for MDH classification if it can demonstrate that: (1) It meets the criteria at § 412.103(a)(1) or (3) or the criteria at § 412.103(a)(2) as of January 1, 2018, for the sole purposes of qualifying for MDH classification; and (2) it meets the MDH classification criteria at § 412.108(a)(1)(i) through (iii), which, as amended, would be redesignated as § 412.108(a)(1)(i) through (iv). We noted in the proposed rule that for a hospital in an all-urban State to demonstrate that it would have qualified for rural reclassification notwithstanding its location in an all-urban State (as of January 1, 2018, where applicable), it must follow the applicable procedures for rural reclassification and MDH classification at § 412.103(b) and § 412.108(b), respectively. We also noted that we were not proposing any changes to the reclassification criteria under § 412.103 and that a hospital in an all-urban State that qualifies as an MDH under the newly added statutory provision will not be considered as having reclassified as rural but only as having satisfied one of the criteria at section 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act (as of January 1, 2018, as applicable) for purposes of MDH classification, in accordance with amended section 1886(d)(5)(G)(iv) of the Act.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20402), we proposed to make conforming changes to the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the extension of the MDH program for FY 2018 through FY 2022 and the additional MDH classification provision made for hospitals located in all-urban States by section 50205 of the Bipartisan Budget
After consideration of the public comments we received, we are adopting as final the proposed conforming changes to the regulations text at §§ 412.90 and 412.108 to reflect the extension of the MDH program through FY 2022 and the additional MDH classification provision made for hospitals located in all-urban States in accordance with section 50205 of the Bipartisan Budget Act of 2018. We are finalizing the proposed changes in paragraphs (a)(1) and (c)(2)(iii) of § 412.108 and paragraph (j) of § 412.90 without modification.
The regulations at 42 CFR 412.92(b)(2)(i) set forth an effective date for SCH classification of 30 days after the date of CMS' written notification of approval. Similarly, § 412.92(b)(2)(iv) specifies that a hospital classified as an SCH receives a payment adjustment effective with discharges occurring on or after 30 days after the date of CMS' approval of the classification.
Section 401 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113, Appendix F) amended section 1886(d)(8) of the Act to add paragraph (E) which authorizes reclassification of certain urban hospitals as rural if the hospital applies for such status and meets certain criteria. The effective date for rural reclassification status under section 1886(d)(8)(E) of the Act is set forth at 42 CFR 412.103(d)(1) as the filing date, which is the date CMS receives the reclassification application (§ 412.103(b)(5)). One way that an urban hospital can reclassify as rural under § 412.103 (specifically, § 412.103(a)(3)) is if the hospital would qualify as a rural referral center (RRC) as set forth in § 412.96, or as an SCH as set forth in § 412.92, if the hospital were located in a rural area. A geographically urban hospital may simultaneously apply for reclassification as rural under § 412.103(a)(3) by meeting the criteria for SCH status (other than being located in a rural area), and apply to obtain SCH status under § 412.92 based on that acquired rural reclassification. However, the rural reclassification is effective as of the filing date, while the SCH status is effective 30 days after approval. In addition, while § 412.103(c) states that the CMS Regional Office will review the application and notify the hospital of its approval or disapproval of the request within 60 days of the filing date, the regulations do not set a timeframe by which CMS must decide on an SCH request. Therefore, geographically urban hospitals that obtain rural reclassification under § 412.103 for the purposes of obtaining SCH status may face a payment disadvantage because they are paid as rural until the SCH application is approved and the SCH classification and payment adjustment become effective 30 days after approval.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20402 and 20403), to minimize the lag between the effective date of rural reclassification under § 412.103 and the effective date for SCH status, we proposed to revise § 412.92(b)(2)(i) and (b)(2)(iv) so that the effective date for SCH classification and for the payment adjustment would be the date that CMS receives the complete SCH application, effective for SCH applications received on or after October 1, 2018. However, as discussed in response to comments below, because the MAC receives SCH applications and not CMS, we are clarifying in this final rule that under our policy, as finalized below, the effective date is the date that the MAC receives the complete application. We have revised our finalized regulatory text and this preamble throughout to reflect that the MAC, and not CMS, receives the SCH application. A complete application includes a request and all supporting documentation needed to demonstrate that the hospital meets criteria for SCH status as of the date of application, which includes documentation of rural reclassification in the case of a geographically urban hospital. We stated in the proposed rule that for an application to be complete, all criteria must be met as of the date CMS receives the SCH application, but, similar to above, we are clarifying in this final rule and revising this preamble discussion to reflect that all criteria must be met as of the date the MAC receives the SCH application, because the MAC, and not CMS, receives SCH applications. For example, a hospital applying for SCH status on the basis of a § 412.103 rural reclassification must submit its § 412.103 application no later than its SCH application in order to be considered rural as of the date the MAC receives the SCH application.
Similar to rural reclassification obtained under § 412.103, we proposed that the effective date for SCH status would be the date that CMS receives the complete application. We also proposed conforming changes to the effective date at § 412.92(b)(2)(ii) for instances when a court order or a determination by the Provider Reimbursement Review Board (PRRB) reverses a CMS denial of SCH status and no further appeal is made. In the interest of a clear and consistent policy, we proposed that this change in the SCH effective date would also apply for hospitals not reclassifying as rural under § 412.103, such as geographically rural hospitals obtaining SCH status. We stated that we believe these proposals to update the regulations at § 412.92 to provide an effective date for SCH status that is consistent with the effective date for rural reclassification under § 412.103 would benefit hospitals by minimizing any payment disadvantage caused by the lag between the effective date of rural reclassification and the effective date of SCH status. We also stated that we believe this proposal to align the SCH effective date with the § 412.103 effective date supports agency efforts to reduce regulatory burden because it would provide for a more uniform policy.
In addition, we proposed to make parallel changes to the effective date for an MDH status determination under § 412.108(b)(4). As discussed earlier, section 50205 of the Bipartisan Budget Act of 2018 extended the MDH program through FY 2022 by amending section 1886(d)(5)(G) of the Act. Similar to the proposed change in effective date for SCH status approvals, we proposed that a determination of MDH status would be effective as of the date that CMS receives the complete application, for applications received on or after October 1, 2018, rather than the current effective date at § 412.108(b)(4) of 30 days after the date the MAC provides written notification to the hospital. However, as discussed in response to comments below, because the MAC receives MDH applications and not CMS, we are clarifying in this final rule that under our policy, as finalized below, the effective date is the date that the MAC receives the complete application. We have revised our finalized regulatory text and this preamble throughout to reflect that the MAC, and not CMS, receives the MDH application. Similar to applications for SCH status, a complete application includes a request and all supporting documentation needed to demonstrate that the hospital meets criteria for MDH status as of the date of application. We stated in the proposed rule that for an application to be complete, all criteria must be met as of the date CMS receives
We stated that we believe that concurrently changing the SCH and MDH status effective dates from 30 days after the date of approval to the date the complete application is received would allow for consistency in the regulations governing effective dates of special rural hospital status. In addition, we stated that this proposal would benefit urban hospitals that are requesting § 412.103 rural reclassification at the same time as MDH status because it would synchronize effective dates to eliminate any payment consequences caused by a lag between effective dates for rural reclassification and MDH status.
After consideration of the public comments we received, we are finalizing our proposed changes to § 412.92(b)(2)(i) and (b)(2)(iv), with modification, so that for applications received on or after October 1, 2018, the effective date for SCH classification and for the payment adjustment is the date that the MAC, rather than CMS, receives the complete SCH application. We also are finalizing with modification conforming changes to the effective date at § 412.92(b)(2)(ii) for instances when a court order or a determination by the PRRB reverses a CMS denial of SCH status and no further appeal is made, so that if the hospital's application for SCH status was received on or after October 1, 2018, the effective date is the date the MAC receives the complete application.
Similarly, we are finalizing our proposed changes to § 412.108(b)(4), with modification, to specify that for applications received on or after October 1, 2018, a determination of MDH status made by the MAC is effective as of the date the MAC receives the complete application.
We note that, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20403), we also proposed to make technical conforming changes to the regulations in § 412.92 and § 412.108 to reflect the change CMS made some time ago to identify fiscal intermediaries as Medicare administrative contractors (MACs).
We did not receive any public comments on the proposed conforming changes to the regulations text at §§ 412.92 and 412.108 to reflect the change CMS made some time ago to identify fiscal intermediaries as MACs. Therefore, in this final rule, we are adopting as final the proposed revisions to § 412.92 and § 412.108 without modification.
Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, amended by section 10309 of the Affordable Care Act, and further amended by section 15002 of the 21st Century Cures Act, established the Hospital Readmissions Reduction Program. Under the Program, Medicare payments under the acute inpatient prospective payment system for discharges from an applicable hospital, as defined under section 1886(d) of the Act, may be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act requires the Secretary to compare peer groups of hospitals with respect to the number of their Medicare-Medicaid dual-eligible beneficiaries (dual-eligibles) in determining the extent of excess readmissions. We refer readers to section IV.E.1. of the preamble of the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49531) and section V.I.1. of the preamble of the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240) for a detailed discussion of and additional information on the statutory history of the Hospital Readmissions Reduction Program.
We refer readers to the following final rules for detailed discussions of the regulatory background and descriptions of the current policies for the Hospital Readmissions Reduction Program:
• FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676);
• FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401);
• FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 50676);
• FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 50048);
• FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543);
• FY 2017 IPPS/LTCH PPS final rule (81 FR 56973 through 56979); and
• FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240).
These rules describe the general framework for the implementation of the Hospital Readmissions Reduction Program, including: (1) The selection of measures for the applicable conditions/procedures; (2) the calculation of the excess readmission ratio, which is used,
We also have codified certain requirements of the Hospital Readmissions Reduction Program at 42 CFR 412.152 through 412.154.
The Hospital Readmissions Reduction Program strives to put patients first by ensuring they are empowered to make decisions about their own healthcare along with their clinicians, using information from data-driven insights that are increasingly aligned with meaningful quality measures. We support technology that reduces costs and allows clinicians to focus on providing high quality health care for their patients. We also support innovative approaches to improve quality, accessibility, and affordability of care, while paying particular attention to improving clinicians' and beneficiaries' experiences when interacting with CMS programs. In combination with other efforts across the Department of Health and Human Services, we believe the Hospital Readmissions Reduction Program incentivizes hospitals to improve health care quality and value, while giving patients the tools and information needed to make the best decisions for them.
We note that we received public comments on the effectiveness and design of the Hospital Readmissions Reduction Program in response to the FY 2019 IPPS/LTCH PPS proposed rule. While we appreciate the commenters' feedback, because we did not include in the proposed rule any proposals related to these topics, we consider the public comments to be out of the scope of the proposed rule. Therefore, we are not addressing most of these comments in this final rule. All other topics that we consider to be out of scope of the proposed rule will be taken into consideration when developing policies and program requirements for future years.
We would like to clarify for the commenters that the Hospital Readmissions Reduction Program is required by statute, and we cannot decline to administer it.
However, we note that the basic readmissions payment adjustment formula for assessing readmissions and penalties under the Hospital Readmissions Reduction Program are specified in the Act, and we are required to implement the statute as written. In particular, the 21st Century Cures Act, which amended section 1886(q) of the Act, directs the Hospital Readmissions Reduction Program to develop a transitional methodology based on dual-eligible beneficiaries that allows for separate comparisons for hospitals within peer groups to determine a hospital's payment adjustment factor. It also allows the program to consider other risk-adjustment methodologies, taking into account studies conducted and recommendations made by the Secretary in reports required under section 2(d)(1) of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), Public Law 113-185. We will continue to review our risk-adjustment methodologies and monitor
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20403 through 20407), we proposed to: (1) Establish the applicable period for FY 2019, FY 2020 and FY 2021; (2) codify the previously adopted definition of “dual-eligible”; (3) codify the previously adopted definition of “proportion of dual-eligibles”; and (4) codify the previously adopted definition of “applicable period for dual-eligibility.”
These proposals are described in more detail below.
The Hospital Readmissions Reduction Program currently includes six applicable conditions/procedures: Acute myocardial infarction (AMI); heart failure (HF); pneumonia; total hip arthroplasty/total knee arthroplasty (THA/TKA); chronic obstructive pulmonary disease (COPD); and coronary artery bypass graft (CABG).
By publicly reporting quality data, we strive to prioritize patients by ensuring that they, along with their clinicians, are empowered to make decisions about their own healthcare using information aligned with meaningful quality measures. The Hospital Readmissions Reduction Program, together with the Hospital VBP Program and the HAC Reduction Program, represents a key component of the way that we bring quality measurement, transparency, and improvement together with value-based purchasing to the inpatient care setting. We have undertaken efforts to review the existing measure set in the context of these other programs, to identify how to reduce costs and complexity across programs while continuing to incentivize improvement in the quality and value of care provided to patients. To that end, we have begun reviewing our programs' measures in accordance with the Meaningful Measures Initiative that we described in section I.A.2. of the preambles of the proposed rule (82 FR 20167 through 20168) and this final rule.
As part of this review, we have taken a holistic approach to evaluating the appropriateness of the Hospital Readmissions Reduction Program's current measures in the context of the measures used in two other IPPS value-based purchasing programs (that is, the Hospital VBP Program and the HAC Reduction Program), as well as the Hospital IQR Program. We view the three value-based purchasing programs together as a collective set of hospital value-based purchasing programs. Specifically, we believe the goals of the three value-based purchasing programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC Reduction Programs) and the measures used in these programs together cover the Meaningful Measures Initiative quality priorities of making care safer, strengthening person and family engagement, promoting coordination of care, promoting effective prevention and treatment, and making care affordable,—but that the programs should not add unnecessary complexity or costs associated with duplicative measures across programs. The Hospital Readmissions Reduction Program focuses on care coordination measures, which address the quality priority of promoting effective communication and care coordination within the Meaningful Measures Initiative. The HAC Reduction Program focuses on patient safety measures, which address the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care.
As part of this holistic quality payment program strategy, we believe the Hospital VBP Program should focus on the measurement priorities not covered by the Hospital Readmissions Reduction Program or the HAC Reduction Program. The Hospital VBP Program would continue to focus on measures related to: (1) The clinical outcomes, such as mortality and complications (which address the Meaningful Measures Initiative quality priority of promoting effective treatment); (2) patient and caregiver experience, as measured using the HCAHPS survey (which addresses the Meaningful Measures Initiative quality priority of strengthening person and family engagement as partners in their care); and (3) healthcare costs, as measured using the Medicare Spending per Beneficiary measure (which addresses the Meaningful Measures Initiative priority of making care affordable). We believe this framework will allow hospitals and patients to continue to obtain meaningful information about hospital performance and incentivize quality improvement while also streamlining the measure sets to reduce duplicative measures and program complexity so that the costs to hospitals associated with participating in these programs does not outweigh the benefits of improving beneficiary care.
Measures in the Hospital Readmissions Reduction Program are important markers of quality of care, particularly of the care of a patient in transition from an acute care setting to a non-acute care setting. By including these measures in the Program, we seek to encourage hospitals to address the serious problems indicated by the necessity of a hospital readmission and to reduce them and improve care coordination and communication. Therefore, after thoughtful review, we have determined that the six readmission measures in the Hospital Readmissions Reduction Program, which we proposed for removal from the Hospital IQR Program as discussed in section VIII.A.5.b.(3) of the preambles of the proposed rule and this final rule, are nevertheless appropriately included as part of the Hospital Readmissions Reduction Program.
We continue to believe that the measures that we have adopted adequately address the conditions and procedures specified in the Hospital Readmissions Reduction Program statute. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20404), we did not propose to adopt any new measures.
We note that we received public comments on the program's measures and our holistic approach to the value-based purchasing program and the program's measures. Because we did not propose any measure changes to the program in the FY 2019 IPPS/LTCH PPS proposed rule, we consider these public comments out of the scope of the proposed rule and, therefore, we are not addressing most of them in this final rule. All other topics that we consider to be out of the scope of the proposed rule will be taken into consideration when developing policies and program requirements for future years. However, we address some public comments pertaining to our holistic review of the value-based purchasing programs below.
We received numerous comments from stakeholders regarding our holistic approach to evaluating the appropriateness of measures previously adopted under the Hospital Readmissions Reduction Program, the Hospital VBP Program, the HAC Reduction Program, and the Hospital IQR Program and our vision for the future of these programs. While program-specific comments and policies are discussed in more detail in each program-specific section of this final rule, we would like to clarify that, in light of our mission to prioritize patients in the provision of services, we are expanding the stated scope of the Hospital VBP Program to include patient safety measures. While we initially sought to delineate measure focus areas between the Hospital VBP Program and the HAC Reduction Program, we agree with commenters that patient safety is a critical component of quality improvement efforts. Therefore, we believe it is appropriate and important to provide incentives under more than one program to ensure that hospitals take every reasonable precaution to avoid adverse patient safety events. In addition, we believe including patient safety measures in both the HAC Reduction Program and the Hospital VBP Program will best promote transparency through publicly reporting hospital performance on these measures, as stakeholders will be able to see both hospitals' performance compared to all other hospitals and hospitals' performance improvement over time. Finally, we note that this approach will also reduce provider burden associated with safety measure data collection and reporting because these measures are being finalized for removal from the Hospital IQR Program, as discussed in section VIII.A.5.b.(2) of the preamble of this final rule.
We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50039) for a discussion of the maintenance of technical specifications for quality measures for the Hospital Readmissions Reduction Program. Technical specifications of the readmission measures are provided on our website in the Measure Methodology Reports at:
Under section 1886(q)(5)(D) of the Act, the Secretary has the authority to specify the applicable period with respect to a fiscal year under the Hospital Readmissions Reduction Program. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671), we finalized our policy to use 3 years of claims data to calculate the readmission measures. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition of “applicable period” in the regulations at 42 CFR 412.152 as the 3-year period from which data are collected in order to calculate excess readmissions ratios and payment adjustment factors for the fiscal year, which includes aggregate payments for excess readmissions and aggregate payments for all discharges used in the calculation of the payment adjustment. The applicable period for dual-eligibles is the same as the applicable period that we otherwise adopt for purposes of the Program.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20405), for FY 2019, consistent with the definition specified at § 412.152, we proposed that the “applicable period” for the Hospital Readmissions Reduction Program would be the 3-year period from July 1, 2014 through June 30, 2017. In other words, we proposed that the proportion of dual-eligibles, excess readmissions ratios and the payment adjustment factors (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2019 would be calculated using data for
In the FY 2019 IPPS/LTCH PPS proposed rule, for FY 2020, consistent with the definition specified at § 412.152, we proposed that the “applicable period” for the Hospital Readmissions Reduction Program would be the 3-year period from July 1, 2015 through June 30, 2018. As noted earlier, we define the applicable period for dual-eligibles as the applicable period that we otherwise adopted for purposes of the Program; therefore, for FY 2020, the applicable period for dual-eligibles would be the 3-year period from July 1, 2015 through June 30, 2018.
In addition, in the FY 2019 IPPS/LTCH PPS proposed rule, for FY 2021, consistent with the definition specified at § 412.152, we proposed that the “applicable period” for the Hospital Readmissions Reduction Program would be the 3-year period from July 1, 2016 through June 30, 2019. The applicable period for dual-eligibles for FY 2021 would similarly be the 3-year period from July 1, 2016 through June 30, 2019.
In addition, we have examined changes in risk-standardized readmission rates at the hospital level and the distribution of changes in rates for all claims-based readmission measures, comparing the results of the 2015, 2016, 2017, and 2018 reporting periods. These analyses suggest no more than typical year-to-year variability in hospital-level rates before and after the introduction of ICD-10 codes for most measures. Year-to-year changes between 2015 and 2016, which both contained only ICD-9 claims, are similar to year-to-year changes for the following years, which included a mix of ICD-9 and ICD-10 claims. Risk-standardized readmission rates for 2018 public reporting are similar to those for 2015, 2016, and 2017 public reporting, which also indicates that the results using ICD-9 codes and ICD-10 codes are comparable. Overall, these results suggest that we have successfully created measure specifications in ICD-10 that align with the intent of the measure, which allows us to compare rates with measures calculated using ICD-9 codes and ICD-10 codes.
We will continue to use a 3-year measurement period rather than a 1-year measurement period, despite the implementation of ICD-10. We use a 3-year measurement period because some small and rural hospitals do not have at least 25 admissions for Medicare FFS patients who are 65 years and older for each of the measure conditions in a single year or even over the course of 2 years. The 3-year period allows us to include the maximum possible number of hospitals in scoring and public reporting.
After consideration of the public comments we received, we are finalizing as proposed, without modification, the applicable period of the 3-year time period of July 1, 2014 through June 30, 2017 for FY 2019; the applicable period of the 3-year time period July 1, 2015 through June 30, 2018 for FY 2020; and the applicable period of the 3-year time period of July 1, 2016 through June 30, 2019 for FY 2021 to calculate readmission payment adjustment factor for FYs 2019, FY 2020, and FY 2021, respectively, under the Hospital Readmissions Reduction Program.
When calculating the numerator (aggregate payments for excess readmissions), we determine the base operating DRG payment amount for an individual hospital for the applicable period for such condition/procedure, using Medicare inpatient claims from the MedPAR file with discharge dates that are within the applicable period. Under our established methodology, we use the update of the MedPAR file for each Federal fiscal year, which is updated 6 months after the end of each
In identifying discharges for the applicable conditions/procedures to calculate the aggregate payments for excess readmissions, we apply the same exclusions to the claims in the MedPAR file as are applied in the measure methodology for each of the applicable conditions/procedures. For the FY 2019 applicable period, this includes the discharge diagnoses for each applicable condition/procedure based on a list of specific ICD-9-CM or ICD-10-CM and ICD-10-PCS code sets, as applicable, for that condition/procedure, because diagnoses and procedure codes for discharges occurring prior to October 1, 2015 were reported under the ICD-9-CM code set, while discharges occurring on or after October 1, 2015 (FY 2016) were reported under the ICD-10-CM and ICD-10-PCS code sets.
We only identify Medicare FFS claims that meet the criteria described above for each applicable condition/procedure to calculate the aggregate payments for excess readmissions (that is, claims paid for under Medicare Part C or Medicare Advantage, are not included in this calculation). This policy is consistent with the methodology to calculate excess readmissions ratios based solely on admissions and readmissions for Medicare FFS patients. Therefore, consistent with our established methodology, for FY 2019, we proposed to continue to exclude admissions for patients enrolled in Medicare Advantage as identified in the Medicare Enrollment Database.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20405), for FY 2019, we proposed to determine aggregate payments for excess readmissions, aggregate payments for all discharges using data from MedPAR claims with discharge dates that are on or after July 1, 2014, and no later than June 30, 2017. As we stated in FY 2018 IPPS/LTCH PPS final rule (82 FR 38232), we will determine the neutrality modifier using the most recently available full year of MedPAR data. However, we noted that, for the purpose of modeling the proposed FY 2019 readmissions payment adjustment factors for the proposed rule, we used the proportion of dual-eligibles, excess readmissions ratios, and aggregate payments for each condition/procedure and all discharges for applicable hospitals from the FY 2018 Hospital Readmissions Reduction Program applicable period. For the FY 2019 program year, applicable hospitals will have the opportunity to review and correct calculations based on the proposed FY 2019 applicable period of July 1, 2014 to June 30, 2017, before they are made public under our policy regarding reporting of hospital-specific information. Again, we reiterate that this period is intended to review the program calculations, and not the underlying data. For more information on the review and corrections process, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53401).
In the proposed rule, for FY 2019, we proposed to use MedPAR data from July 1, 2014 through June 30, 2017 for FY 2019 Hospital Readmissions Reduction Program calculations. Specifically, for the final rule, we proposed to use the following MedPAR files—
• March 2015 update of the FY 2014 MedPAR file to identify claims within FY 2014 with discharges dates that are on or after July 1, 2014;
• March 2016 update of the FY 2015 MedPAR file to identify claims within FY 2015;
• March 2017 update of the FY 2016 MedPAR file to identify claims within FY 2016;
• March 2018 update of the FY 2017 MedPAR file to identify claims within FY 2017.
We did not receive any public comments on our proposal to use of the above stated MedPAR files, and therefore are finalizing as proposed, without modification, the use of the above listed MedPAR files to identify claims.
As discussed earlier, the final FY 2019 readmissions payment adjustment factors are not available at this time because hospitals have not yet had the opportunity to review and correct the data (program calculations based on the FY 2019 applicable period of July 1, 2014 to June 30, 2017) before the data are made public under our policy regarding the reporting of hospital-specific data. After hospitals have been given an opportunity to review and correct their calculations for FY 2019, we will post Table 15 (which will be available via the internet on the CMS website) to display the final FY 2019 readmissions payment adjustment factors that will be applicable to discharges occurring on or after October 1, 2018. We expect Table 15 will be posted on the CMS website in the fall of 2018.
As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226), section 1886(q)(3)(D) of the Act requires the Secretary to group hospitals and apply a methodology that allows for separate comparisons of hospitals within peer groups in determining a hospital's adjustment factor for payments applied to discharges beginning in FY 2019.
To implement this provision, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226 through 38237), we finalized several changes to the payment adjustment methodology for FY 2019. First, we finalized that an individual would be counted as a full-benefit dual-eligible patient if the beneficiary was identified as full-benefit dual status in the State Medicare Modernization Act (MMA) files for the month he/she was discharged from the hospital (82 FR 38226 through 38228). Second, we finalized our policy to define the proportion of full benefit dual-eligible beneficiaries as the proportion of dual-eligible patients among all Medicare FFS and Medicare Advantage stays (82 FR 38226 through 38228). Third, we finalized our policy to define the data period for determining dual-eligibility as the 3-year data period corresponding to the Program's applicable period (82 FR 38229). Fourth, we finalized our policy to stratify hospitals into quintiles, or five peer groups, based on their proportion of dual-eligible patients (82 FR 38229 through 38231). Finally, we finalized our policy to use the median Excess Readmission Ratio (ERR) for the hospital's peer group in place of 1.0 in the payment adjustment formula and apply a uniform modifier to maintain budget neutrality (82 FR 38231 through 38237). The payment adjustment formula would then be:
• “Applicable period for dual-eligibility” is the 3-year data period corresponding to the applicable period as established by the Secretary for the Hospital Readmissions Reduction Program.
• “Dual-eligible” is a patient beneficiary who has been identified as having full benefit status in both the Medicare and Medicaid programs in the State MMA files for the month the beneficiary was discharged from the hospital.
• “Proportion of dual-eligibles” is the number of dual-eligible patients among all Medicare FFS and Medicare Advantage stays during the applicable period.
We did not propose changes with respect to our previously finalized proposals. However, commenters provided many suggestions on the Hospital Readmissions Reduction Program's risk-adjustment methodology. While we appreciate the commenters' feedback, we consider these topics to be out of the scope of the proposed rule. Therefore, we are not addressing most of them in this final rule. However, because there is stakeholder interest in this topic, we have included summaries of some of these comments with responses below. All other topics that we consider to be out of the scope of the proposed rule, even if not addressed below, will be taken into consideration when developing policies and program requirements for future years.
After consideration of the public comments we received, we are finalizing as proposed, without modification, our decision to codify the definitions of “applicable period for dual-eligibility”; “dual-eligible”; and “proportion of dual-eligibles” as stated above at 42 CFR 412.152.
Section 1886(q)(3)(A) of the Act defines the payment adjustment factor for an applicable hospital for a fiscal year as equal to the greater of: (i) The ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio used to calculate the adjustment factor. Specifically, it states that the ratio is equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions, and (ii) the aggregate payments for all discharges, scaled by the neutrality modifier. The calculation of this ratio is codified at § 412.154(c)(1) of the regulations and the floor adjustment factor is codified at § 412.154(c)(2) of the regulations. Section 1886(q)(3)(C) of the Act specifies the floor adjustment factor at 0.97 for FY 2015 and subsequent fiscal years.
Consistent with section 1886(q)(3) of the Act, codified in our regulations at § 412.154(c)(2), for FY 2019, the payment adjustment factor will be either the greater of the ratio or the floor adjustment factor of 0.97. Under our established policy, the ratio is rounded to the fourth decimal place. In other words, for FY 2019, a hospital subject to the Hospital Readmissions Reduction Program would have an adjustment factor that is between 1.0 (no reduction) and 0.9700 (greatest possible reduction).
After consideration of the public comments we received, we are finalizing as proposed, without modification, the calculation of payment adjustment for FY 2019.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20406 through 20407), we discussed accounting for social risk factors in the Hospital Readmissions Reduction Program.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38237 through 38239), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018 and CY 2018 proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a hospital or provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS to explore whether factors could be used to stratify or risk adjust the measures (beyond dual eligibility); considering the full range of differences in patient backgrounds that might affect outcomes; exploring risk adjustment approaches; and offering careful consideration of what type of information display would be most useful to the public.
We also sought public comment on confidential reporting and future public reporting of some of our measures stratified by patient dual eligibility. In general, commenters noted that stratified measures could serve as tools for hospitals to identify gaps in outcomes for different groups of patients, improve the quality of health care for all patients, and empower consumers to make informed decisions about health care. Commenters encouraged us to stratify measures by other social risk factors such as age, income, and educational attainment. With regard to value-based purchasing programs, commenters also cautioned to balance fair and equitable payment while avoiding payment penalties that mask health disparities or discouraging the provision of care to more medically complex patients. Commenters also noted that value-based payment program measure selection, domain weighting, performance scoring, and payment methodology must account for social risk.
As a next step, CMS is considering options to improve health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We also are considering how this work applies to other CMS quality programs in the future. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, where we discuss the potential stratification of certain Hospital IQR Program outcome measures. Furthermore, we continue to consider options to address equity and disparities in our value-based purchasing programs.
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
While we did not specifically request public comment on social risk factors in the FY 2019 IPPS/LTCH PPS proposed rule, we received a number of comments with respect to social risk factors. We thank commenters for sharing their views and their willingness to support the efforts of CMS and NQF on this important issue. We will take this feedback into account as we continue to review social risk factors on an ongoing and continuous basis. In addition, we both welcome and appreciate stakeholder feedback as we continue our work on these issues.
Section 1886(o) of the Act, as added by section 3001(a)(1) of the Affordable Care Act, requires the Secretary to establish a hospital value-based purchasing program (the Hospital VBP Program) under which value-based incentive payments are made in a fiscal year (FY) to hospitals that meet performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary.
For more of the statutory background and descriptions of our current policies for the Hospital VBP Program, we refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547); the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660); the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 74547); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 53614); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676 through 50707); the CY 2014 OPPS/ASC final rule (78 FR 75120 through 75121); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087); the FY 2016 IPPS/LTCH PPS final rule (80 FR 49544 through 49570); the FY 2017 IPPS/LTCH PPS final rule (81 FR 56979 through 57011); the CY 2017 OPPS/ASC final rule with comment period (81 FR 79855 through 79862); and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38240 through 38269).
We also have codified certain requirements for the Hospital VBP Program at 42 CFR 412.160 through 412.167.
Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce the base operating DRG payment amount for a hospital for each discharge in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) of the Act, the sum total of these reductions in a fiscal year must equal the total amount available for value-based incentive payments for all eligible hospitals for the fiscal year, as estimated by the Secretary. We finalized details on how we would implement these provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), and we refer readers to that rule for further details.
Under section 1886(o)(7)(C)(iv) of the Act, the applicable percent for the FY 2019 program year is 2.00 percent. Using the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), we estimate that the total amount available for value-based incentive payments for FY 2019 is approximately $1.9 billion, based on the March 2018 update of the FY 2017 MedPAR file.
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 through 53576), we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its Total Performance Score (TPS). We will then calculate a value-based incentive payment adjustment factor that will be applied to the base operating DRG payment amount for each discharge occurring in FY 2019, on a per-claim basis. We published proxy value-based incentive payment adjustment factors in Table 16 associated with the FY 2019 IPPS/LTCH PPS proposed rule (which is available via the internet on the CMS website). We are publishing updated proxy value-based incentive payment adjustment factors in Table 16A associated with this final rule (which is available via the internet on the CMS website). The proxy factors are based on the TPS from the FY 2018 program year. These FY 2018 performance scores are the most recently available performance scores hospitals have been given the opportunity to review and correct. The updated slope of the linear exchange function used to calculate the proxy value-based incentive payment adjustment factors in Table 16A is 2.8887004713. This slope, along with the estimated amount available for value-based incentive payments, has been updated based on the March 2018 update to the FY 2017 MedPAR file and is also published in Table 16A (which is available via the internet on the CMS website).
After hospitals have been given an opportunity to review and correct their actual TPSs for FY 2019, we will post Table 16B (which will be available via the internet on the CMS website) to display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2019 program year. We expect Table 16B will be posted on the CMS website in the fall of 2018.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized a policy to retain measures from prior program years for each successive program year, unless otherwise proposed and finalized. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20408), we did not propose any changes to this policy.
In the FY 2019 IPPS/LTCH/PPS proposed rule (83 FR 20408), we proposed to revise our regulations at 42 CFR 412.164(a) to clarify that once we have complied with the statutory prerequisites for adopting a measure for the Hospital VBP Program (that is, we have selected the measure from the Hospital IQR Program measure set and included data on that measure on
Other commenters expressed confusion regarding the proposed revisions to the Hospital VBP Program's regulatory text, and requested clarification about whether measures would continue to be adopted in the Hospital IQR Program and publicly reported on
We also disagree that removing measures from the Hospital IQR Program after adoption by the Hospital VBP Program undermines the Hospital IQR Program's statutory requirements or purpose. The Hospital IQR Program will continue to serve as the primary quality reporting program for the inpatient hospital setting of care, and its authority to collect and report data is unaffected by this revision to the Hospital VBP Program's regulatory text. We believe removing certain measures from the Hospital IQR Program that have transitioned to the Hospital VBP Program will better enable the Hospital IQR Program to consider new quality measures and collect and publicly report these data for both patients and providers without imposing an unduly high burden on providers.
After consideration of the public comments we received, we are finalizing the proposed revisions to our regulations at 42 CFR 412.164(a).
As discussed earlier, we have adopted a policy to generally retain measures from prior year's Hospital VBP Program for subsequent years' measure sets unless otherwise proposed and finalized. We have previously removed measures from the Hospital VBP Program for reasons such as being topped out (80 FR 49550), the measure
The reasons we cited above to support the removal of measures from the Hospital VBP Program generally align with measure removal factors that have been adopted by the Hospital IQR Program. We believe that these factors are also applicable in evaluating Hospital VBP Program quality measures for removal, and that their adoption in the Hospital VBP Program will help ensure consistency in our measure evaluation methodology across our programs. Accordingly, in the FY 2019 IPPS/LTCH/PPS proposed rule (83 FR 20408 through 20409), we proposed to adopt the Hospital IQR Program measure removal factors that we finalized in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185) and further refined in the FY 2015 IPPS/LTCH PPS and FY 2016 IPPS/LTCH PPS final rules (79 FR 50203 through 50204 and 80 FR 49641 through 49643, respectively) for use in determining whether to remove Hospital VBP Program measures:
• Factor 1. Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (“topped out” measures), defined as: Statistically indistinguishable performance at the 75th and 90th percentiles; and truncated coefficient of variation ≤0.10;
• Factor 2. A measure does not align with current clinical guidelines or practice;
• Factor 3. The availability of a more broadly applicable measure (across settings or populations), or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic;
• Factor 4. Performance or improvement on a measure does not result in better patient outcomes;
• Factor 5. The availability of a measure that is more strongly associated with desired patient outcomes for the particular topic;
• Factor 6. Collection or public reporting of a measure leads to negative unintended consequences other than patient harm; and
• Factor 7. It is not feasible to implement the measure specifications.
We noted that these removal factors would be considerations taken into account when deciding whether or not to remove measures, not firm requirements. We continue to believe that there may be circumstances in which a measure that meets one or more factors for removal should be retained regardless, because the drawbacks of removing a measure could be outweighed by other benefits to retaining the measure.
Also, in alignment with proposals that were made for other quality reporting and value-based purchasing programs, we proposed to adopt the following additional factor to consider when evaluating measures for removal from the Hospital VBP Program measure set: Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
As we discuss in section I.A.2. of the preamble of the proposed rule with respect to our new Meaningful Measures Initiative and in this final rule, we are engaging in efforts to ensure that the Hospital VBP Program measure set continues to promote improved health outcomes for beneficiaries while minimizing the overall costs associated with the program. We believe these costs are multifaceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining the program. We have identified several different types of costs, including, but not limited to: (1) Provider and clinician information collection burden and related cost and burden associated with the submission/reporting of quality measures to CMS; (2) the provider and clinician cost associated with complying with other quality programmatic requirements; (3) the provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs; (4) the CMS cost associated with the program oversight of the measure, including measure maintenance and public display; and (5) the provider and clinician cost associated with compliance with other federal and/or state regulations (if applicable). For example, it may be needlessly costly and/or of limited benefit to retain or maintain a measure which our analyses show no longer meaningfully supports program objectives (for example, informing beneficiary choice or payment scoring). It may also be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. CMS may also have to expend unnecessary resources to maintain the specifications for the measure, as well as the tools needed to collect, validate, analyze, and publicly report the measure data. Furthermore, beneficiaries may find it confusing to see public reporting on the same measure in different programs.
When these costs outweigh the evidence supporting the continued use of a measure in the Hospital VBP Program, we believe it may be appropriate to remove the measure from the program. Although we recognize that one of the main goals of the Hospital VBP Program is to improve beneficiary outcomes by incentivizing health care providers to focus on specific care issues and making public data related to those issues, we also recognize that those goals can have limited utility where, for example, the publicly reported data (including percentage payment adjustment data) are of limited use because they cannot be easily interpreted by beneficiaries to influence their choice of providers. In these cases, removing the measure from the Hospital VBP Program may better accommodate the costs of program administration and compliance without sacrificing improved health outcomes and beneficiary choice.
We proposed that we would remove measures based on this factor on a case-by-case basis. We might, for example, decide to retain a measure that is burdensome for health care providers to report if we conclude that the benefit to beneficiaries justifies the reporting burden. Our goal is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients.
We also recognize that hospitals would still be required to monitor measures removed from one program but retained in another quality program. However, we believe that the simplification benefits hospitals because they will no longer be required to identify discrepancies in reporting and identify whether those discrepancies are due to differing measure specifications or due to potential CMS measure calculation error. Furthermore, we believe this simplification will benefit patients and caregivers because they will not need to review data submitted on the same or similar metrics through multiple programs to compare quality of care across multiple providers.
The other factors suggested by commenters are additional factors that we will consider in evaluating the costs and benefits of each measure on a case-by-case basis under measure removal Factor 8. For example, resources for quality improvement is an example of a cost that would be evaluated on a case-by-case basis because we believe that investing resources in quality improvement is an inherent part of delivering high-quality, patient-centered care, and is therefore, generally not considered a part of the quality reporting program requirements. However, there may be cases where a measure would require such a specific quality improvement initiative that it would be appropriate to consider this cost to be associated with the measure. We also value transparency in our processes, and continually seek stakeholder input through education and outreach activities, such as webinars and national provider calls, stakeholder listening sessions, through rulemaking, and other collaborative engagements with stakeholders.
We also understand that while a measure's use in the Hospital VBP Program may benefit many entities, the primary benefit is to patients and caregivers through incentivizing the provision of high quality care and through providing publicly reported data regarding the quality of care available. One key aspect of patient benefits is assessing the improved beneficiary health outcomes if a measure is retained in our measure set. We believe that these benefits are multifaceted, and are illustrated through the domains of the Meaningful Measures Initiative. When the costs associated with a measure outweigh the evidence supporting the benefits to patients with the continued use of a measure in the Hospital VBP Program we believe it may be appropriate to remove the measure from the program.
After consideration of the public comments we received, we are finalizing our proposals to adopt for the Hospital VBP Program the measure removal factors currently in the Hospital IQR Program, and a measure removal Factor 8, where “the costs associated with a measure outweigh the benefit of its continued use in the program” beginning with FY 2019 program year.
In addition to the proposals discussed above, to further align with policies adopted in the Hospital IQR Program (74 FR 43864), we proposed that if we believe continued use of a measure in the Hospital VBP Program poses specific patient safety concerns, we may promptly remove the measure from the program without rulemaking and notify hospitals and the public of the removal of the measure along with the reasons for its removal through routine communication channels to hospital, vendors, and QIOs, including, but not limited to, issuing memos, emails, and notices on the QualityNet website. We would then confirm the removal of the measure from the Hospital VBP Program measure set in the next IPPS rulemaking. In circumstances where we do not believe that continued use of a measure raises specific patient safety concerns, we would use the regular rulemaking process to remove a measure.
After consideration of the public comments we received, we are finalizing our proposal to allow the Hospital VBP Program to promptly remove a measure without rulemaking if we believe the measure poses specific patient safety concerns.
By publicly reporting quality data, we strive to put patients first, ensuring they, along with their clinicians, are empowered to make decisions about their own healthcare using information that are aligned with meaningful quality measures. The Hospital VBP Program, together with the Hospital Readmissions Reduction Program and the HAC Reduction Program, represents a key component of the way that we bring quality measurement, transparency, and improvement together with value-based purchasing to the inpatient care setting. We have undertaken efforts to review the existing Hospital VBP Program measure set in the context of these other programs, to identify how to reduce costs and complexity across programs while continuing to incentivize improvement in the quality and value of care provided to patients. To that end, we have begun reviewing our programs' measures in accordance with the Meaningful Measures Initiative we described in section I.A.2. of the preambles of the proposed rule and in this final rule.
As part of this review, we stated in the proposed rule that we have taken a holistic approach to evaluating the appropriateness of the Hospital VBP Program's current measures in the context of the measures used in two other IPPS value-based purchasing programs (that is, the Hospital Readmissions Reduction Program and the HAC Reduction Program), as well as in the Hospital IQR Program. We view the three value-based purchasing programs together as a collective set of hospital value-based purchasing
As part of this holistic quality payment program strategy, we stated in the proposed rule that we believe the Hospital VBP Program should focus on the measurement priorities not covered by the Hospital Readmissions Reduction Program or the HAC Reduction Program. We stated that the Hospital VBP Program would continue to focus on measures related to: (1) The clinical outcomes, such as mortality and complications (which address the Meaningful Measures Initiative quality priority of promoting effective treatment); (2) patient and caregiver experience, as measured using the HCAHPS survey (which addresses the Meaningful Measures Initiative quality priority of strengthening person and family engagement as partners in their care); and (3) healthcare costs, as measured using the Medicare Spending per Beneficiary measure (which addresses the Meaningful Measures Initiative priority of making care affordable). We stated that we believe this framework will allow hospitals and patients to continue to obtain meaningful information about hospital performance and incentivize quality improvement while also streamlining the measure sets to reduce duplicative measures and program complexity so that the costs to hospitals associated with participating in these programs does not outweigh the benefits of improving beneficiary care.
In the FY 2019 IPPS/LTCH/PPS proposed rule (83 FR 20409 through 20412), we proposed to remove the following 10 measures previously adopted for the Hospital VBP Program:
• Elective Delivery (NQF #0469) (PC-01);
• National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) (CAUTI);
• National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) (CLABSI);
• American College of Surgeons-Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753) (Colon and Abdominal Hysterectomy SSI);
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset
• Patient Safety and Adverse Events (Composite) (NQF #0531) (PSI 90);
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) (AMI Payment);
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); and
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Pneumonia (NQF #2579) (PN Payment).
In addition to the measure-specific comments discussed below, we received a number of comments addressing all measures proposed for removal as a single set.
We proposed to remove the Elective Delivery (NQF #0469) (PC-01) measure beginning with the FY 2021 program year because the costs associated with the measure outweigh the benefit of its continued use in the program—proposed removal Factor 8. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38262), we finalized both the benchmark at 0.000000 and the achievement threshold at 0.000000 for the PC-01 measure for the FY 2020 program year, meaning that at least 50 percent of hospitals that met the case minimum performed 0 elective deliveries for the measure during the baseline period of CY 2016. We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS final rules (77 FR 53599 through 53605; 78 FR 50694 through 50699; and 79 FR 50080 through 50081, respectively) for a more detailed discussion of the general scoring methodology used in the Hospital VBP Program. Based on past performance on the measure, we anticipate that continued use of the PC-01 measure in the Hospital VBP Program would result in more than half of hospitals with a calculable score for this measure earning the maximum 10 achievement points. We anticipate that the remaining hospitals with a calculable score would be awarded points based on improvement only because they will not have met the achievement threshold, earning zero to nine improvement points. Therefore, we believe the measure no longer meaningfully differentiates performance among most participating hospitals for scoring purposes in the Hospital VBP Program.
We continue to believe that avoiding early elective delivery is important; however, because overall performance on the PC-01 measure has improved over time and we anticipate the measure will have little meaningful effect on the TPS for most hospitals, we believe the measure is no longer appropriate for the Hospital VBP Program. In order to continue tracking and reporting rates of elective deliveries to incentivize continued high performance on the measure, this measure would remain in the Hospital IQR Program. We believe that maintaining the measure in the Hospital IQR Program, which publicly reports measure performance, will be sufficient to incentivize continued high performance or improvement on the measure. At the same time, we believe that removing the measure from the Hospital VBP Program will reduce costs and potential confusion for providers and clinicians to track the measure in both the Hospital IQR and Hospital VBP Programs, which may include reviewing different reports and tracking slightly different measure rates across programs.
Based on the reasons described above, we believe that under the measure removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program, which we are finalizing in section IV.I.2.b. of the preamble of this final rule, the costs of keeping the PC-01 measure in the Hospital VBP Program outweigh the benefits because the measure is costly for health care providers and clinicians to review multiple reports on this measure that is being retained in the Hospital IQR Program and our analyses show that the measure no longer meaningfully differentiates performance among participating hospitals for scoring purposes in the Hospital VBP Program.
Therefore, we proposed to remove the PC-01 measure from the Hospital VBP Program beginning with the FY 2021 program year, with data collection on this measure for purposes of the Hospital VBP Program ending with December 31, 2018 discharges, based on proposed removal Factor 8—because the costs associated with the measure outweigh the benefit of its continued use in the program.
After consideration of the public comments we received, we are finalizing our proposal to remove the Elective Delivery (NQF #0469) (PC-01) measure from the Hospital VBP Program beginning with the FY 2021 program year.
We proposed to remove the following five measures of healthcare-associated infections (HAIs) from the Hospital VBP Program beginning with the FY 2021 program year because the costs associated with the measures outweigh the benefit of their continued use in the program—proposed removal Factor 8:
• National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) (CAUTI);
• National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) (CLABSI);
• American College of Surgeons-Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection Outcome Measure (NQF #0753) (Colon and Abdominal Hysterectomy SSI);
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset
We also proposed to remove the Patient Safety and Adverse Events (Composite) (PSI 90) (NQF #0531) because the costs associated with the measure outweigh the benefit of its continued use in the program—proposed removal Factor 8.
As discussed in section IV.I.2.b. of the preamble of the proposed rule, one of the main goals of our Meaningful Measures Initiative is to apply a parsimonious set of the most meaningful measures available to track patient outcomes and impact. While we continue to consider patient safety and reducing HAIs as high priorities (as reflected in the Meaningful Measures Initiative quality priority of making care safer by reducing harms caused in the delivery of care), the six measures listed above are all used in the HAC Reduction Program, which specifically focuses on reducing hospital-acquired conditions and improving patient safety outcomes. While there are differences in the scoring methodology between the Hospital VBP Program and the HAC Reduction Program, the HAC Reduction Program's incentive payment structure, like the Hospital VBP Program, ties hospitals' payment adjustments on claims paid under the IPPS to their performance on selected measures, thereby incentivizing performance improvement on these measures among participating hospitals. In the proposed rule, we stated that we believe removing these measures from the Hospital VBP Program would reduce costs and complexity for hospitals to separately track the confidential feedback, preview reports, and publicly reported information on these measures in both the Hospital VBP and HAC Reduction Programs. We further stated that we believe retaining these measures in the HAC Reduction Program and removing them from the Hospital VBP Program would best support the holistic approach to the measures used in the three quality payment programs as described above, while continuing to keep patient safety and improvements in patient safety as high priorities. We refer readers to section IV.J.4.b., d. and h. of the preambles of the proposed rule and this final rule for how data for the same HAI measures in the HAC Reduction Program will continue to be reported by hospitals to CMS via the CDC's NHSN and posted on our
Therefore, we proposed to remove the CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI measures from the Hospital VBP Program beginning with the FY 2021 program year, with data collection on these measures for purposes of the Hospital VBP Program ending with December 31, 2018 discharges, based on proposed removal Factor 8—because the costs associated with the measures outweigh the benefit of their continued use in the program. We also proposed to remove the PSI 90 measure from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule based on proposed removal Factor 8—because the costs associated with the measure outweigh the benefit of its continued use in the program.
We appreciate the many commenters who provided feedback and recommendations on this important topic. In particular, we appreciate commenters who conveyed the multifaceted benefits of retaining the safety measures in more than one value-based purchasing program, and we agree that while a measure's use in the Hospital VBP Program may benefit many entities, the primary benefit is to patients and their caregivers through incentivizing the provision of high quality care. While we initially sought to clearly delineate the safety focus between the Hospital VBP Program and the HAC Reduction Program for program simplification, we agree with commenters that these measures cover topics of critical importance to quality improvement and patient safety in the inpatient hospital setting. These measures track infections and adverse events that could cause significant health risks and other costs to Medicare beneficiaries; therefore, we agree it is appropriate and important to provide appropriate incentives for hospitals to avoid them through inclusion in more than one program.
In addition, regarding performance over time on the HAI measures, we refer readers to recently updated AHRQ/CMS results that show continued improvement on several hospital acquired conditions.
For these reasons, we are not finalizing our proposal to remove the five HAI measures or the PSI 90 measure from the Hospital VBP Program. We will retain the HAI measures and PSI 90 measure in both the Hospital VBP and HAC Reduction Programs. However, in order to reduce some cost and burden for providers in having to track these safety measures in multiple programs, while maintaining a strong financial incentive to perform well on the measures, we are finalizing our proposal to remove these measures from the Hospital IQR Program. We refer readers to section VIII.A.5.b.(2) of the preamble of this final rule where we discuss these measures in the Hospital IQR Program.
One commenter specifically recommended retaining the PSI 90 measure in the Hospital VBP Program because the commenter believes the specific measures in the composite target the most important quality priorities, directly address patient outcomes that impact vulnerable Medicare beneficiaries, and encourage hospitals to prioritize the prevention of adverse events that are costly to treat. Another commenter expressed concern that removing these measures from the Hospital VBP Program will also eliminate hospitals' ability to receive positive incentive payments for HAI measure performance in the Hospital VBP Program. A third commenter noted the importance of recognizing that each
Therefore, although these measures will continue to exist in more than one program, we clarify that they will be used and calculated under different scoring methodologies. Because we continue to consider patient safety and reducing hospital-acquired conditions high priorities (as reflected in the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care), we will continue to monitor the HAC Reduction and Hospital VBP Programs and analyze the impact of our program policies, including any unintended consequences associated with continuing to use these measures in more than one program. We refer readers to section VIII.A.5.b.(2) of the preamble of this final rule where we discuss finalizing our proposals to remove these measures from the Hospital IQR Program. We also refer readers to section IV.J.4.b., e. and h. of the preamble of this final rule for additional discussion of how the measures in the HAC Reduction Program will continue to be reported by hospitals, validated, and posted on the
We note that all of these safety measures apply risk adjustment methodologies that have been reviewed by the NQF and are endorsed measures. We will continue to consult with the CDC and take feedback about measure risk adjustment into consideration for measure maintenance and future refinement of measure specifications.
We further note that section 1886(o)(10)(A) of the Act requires the Hospital VBP Program to make information available to the public regarding the performance of individual hospitals, including performance with respect to each measure, on the
After consideration of the public comments we received, we are not finalizing our proposals to remove the CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI measures from the Hospital VBP Program or our proposal to remove the PSI 90 measure from the Hospital VBP Program.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20411 through 20412), we proposed to remove the following three condition-specific payment measures from the Hospital VBP Program, effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule, because the costs associated with the measures outweigh the benefit of their continued use in the program—proposed removal Factor 8:
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) (AMI Payment);
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); and
• Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Pneumonia (NQF #2579) (PN Payment).
As discussed in section IV.I.2.b. of the preamble of this final rule, one of the main goals of our Meaningful Measures Initiative is to apply a parsimonious set of the most meaningful measures. We also seek to reduce costs and complexity across the hospital quality programs.
Currently, the Hospital IQR and Hospital VBP Programs both include the Medicare Spending Per Beneficiary (MSPB)—Hospital (NQF #2158) (MSPB) measure, as well as the three condition-specific payment measures listed above. We continue to believe the condition-specific payment measures provide important data for patients and hospitals, and we will continue to use these measures in the Hospital IQR Program along with the Hospital-Level, Risk-Standardized Payment Associated with an Episode-of-Care for Primary Elective Total Hip and/or Total Knee Arthroplasty measure, to provide more granular information to hospitals for reducing costs and resource use while maintaining quality care. However, we believe that continuing to retain the AMI Payment, HF Payment, and PN Payment measures in both the Hospital VBP and Hospital IQR Programs no longer aligns with current CMS and HHS policy priorities for reducing program costs and complexity. We believe the Hospital IQR Program's public reporting of these condition-specific payment measures provide hospitals and patients with sufficient information to make decisions about care and to drive resource use improvement efforts, while removing them from the Hospital VBP Program would reduce the costs and complexity for hospitals to separately track the confidential feedback, preview reports, and publicly reported information on these measures in both programs. We note that the Hospital VBP Program would still retain the MSPB measure, which is an overall hospital efficiency measure required under section 1886(o)(2)(B)(ii) of the Act. We also refer readers to section VIII.A.5.b.(6) of the preamble of this final rule, where we discuss finalizing our proposal to remove the MSPB measure from the Hospital IQR Program.
Therefore, we proposed to remove the AMI Payment, HF Payment, and PN Payment measures from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule based on proposed removal Factor 8—because the costs associated with the measures outweigh the benefit of their continued use in the program. As the AMI Payment and HF Payment measures
We disagree with commenters' suggestions that removing these condition-specific payment measures from the Hospital VBP Program would reduce hospitals' incentive to provide quality care by reducing transparency in public reporting or reduce patients or providers from receiving actionable or meaningful data. As listed in the tables of previously adopted measures for the Hospital IQR Program in sections VIII.A.7. and 8. of the preamble of this final rule, these three measures will remain in the Hospital IQR Program. Therefore, these three measures will continue to be publicly reported under the Hospital IQR Program. In addition, we proposed to remove these measures before they have been incorporated into hospitals' Total Performance Scores (TPS) or public reporting under the Hospital VBP Program. Therefore, removing these measures at this time will not change performance scoring or public reporting under the Hospital VBP Program.
We continue to believe that using condition-specific payment measures that can be paired directly with clinical quality measures, aligned by comparable populations, performance periods, or risk-adjustment methodologies will help move toward enabling patients, payers, and providers to better assess the overall value of care provided at a hospital. However, we believe retaining MSPB, an overall hospital efficiency measure, while removing these condition-specific payment measures will allow for reduced costs and complexity from the Hospital VBP Program and across the hospital quality programs.
After consideration of the public comments we received, we are finalizing our proposals to remove the AMI Payment, HF Payment, and PN Payment measures from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38244), we finalized the following measure set for the Hospital VBP Program for the FY 2020 program year. We note that we did not propose any changes to this measure set.
We refer readers to the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20413 through 20414) for tables showing summaries of measures for the FY 2021, FY 2022, and FY 2023 program years if the measure removals proposed in the proposed rule were finalized. Set out below are summaries of measures for the FY 2021, FY 2022, and FY 2023 program years based on our finalized policies in this final rule.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38241 through 38242), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018 IPPS/LTCH PPS and CY 2018 OPPS/ASC proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS: To explore whether factors that could be used to stratify or risk adjust the measures (beyond dual eligibility); to consider the full range of differences in patient backgrounds that might affect outcomes; to explore risk adjustment approaches; and to offer careful consideration of what type of information display would be most useful to the public.
We also sought public comment on confidential reporting and future public reporting of some of our measures stratified by patient dual eligibility. In general, commenters noted that stratified measures could serve as tools for hospitals to identify gaps in outcomes for different groups of patients, improve the quality of health care for all patients, and empower consumers to make informed decisions about health care. Commenters encouraged us to stratify measures by other social risk factors such as age, income, and educational attainment. With regard to value-based purchasing programs, commenters also cautioned CMS to balance fair and equitable payment while avoiding payment penalties that mask health disparities or discouraging the provision of care to more medically complex patients. Commenters also noted that value-based purchasing program measure selection, domain weighting, performance scoring, and payment methodology must account for social risk.
As a next step, CMS is considering options to improve health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We also are considering how this work applies to other CMS quality programs in the future. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, where we discuss the potential stratification of certain Hospital Inpatient Quality Reporting Program outcome measures. Furthermore, we continue to consider options to address equity and disparities in our value-based purchasing programs.
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
We thank the commenters for their views and will take them into consideration as we continue our work on these issues.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49553 through 49554), we renamed the Clinical Care—Outcomes subdomain as the Clinical Care domain beginning with the FY 2018 program year. As discussed in the section I.A.2. of the preamble of this final rule, we strive to have measures in our programs that can drive improvement in patients' health outcomes. We also strive to align quality measurement and value-based payment programs with other national strategies, such as the Meaningful Measures Initiative. As discussed in section IV.I.2.c. of the preamble of this final rule, we believe that one of the primary areas of focus for the Hospital VBP Program should be on measures of clinical outcomes, such as measures of mortality and complications, which address the Meaningful Measures Initiative quality priority of promoting effective treatment. The Clinical Care domain currently contains these types of measures; therefore, to better align the name of the domain with our priority area of focus, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20415), we proposed to change the domain name from Clinical Care to Clinical Outcomes, beginning with the FY 2020 program year. We believe this proposed domain name better captures our goal of driving improvement in health outcomes and focusing on those outcomes that are most meaningful to patients and their providers.
After consideration of the public comments we received, we are finalizing our proposal to change the domain name from Clinical Care to Clinical Outcomes, beginning with the FY 2020 program year.
We previously adopted five HAI measures and the PC-01 measure for the Safety domain (82 FR 38242 through 38244). We also previously adopted PSI 90 as a measure in the Safety domain beginning with the FY 2023 program year (82 FR 38251 through 38256). However, as discussed in section IV.I.2.c.(1) and (2) of the preambles of the proposed rule and this final rule, above, we proposed to remove the PC-01 measure and the five HAI measures from the Hospital VBP Program beginning with the FY 2021 program year and to remove the PSI 90 measure effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule, as the PSI 90 measure and all five of the HAI measures will be retained in the HAC Reduction Program. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20415 through 20416), we did not propose any new measures for the Safety domain. In addition, as discussed in section IV.I.2.c. of the preamble of the proposed rule, we stated that by taking a holistic approach to evaluating the appropriateness of the measures used in the three hospital value-based purchasing programs—the Hospital VBP, Hospital Readmissions Reduction, and HAC Reduction Programs—we believed the HAC Reduction Program is the primary part of the quality payment framework that should focus on the safety aspect of care quality for the inpatient hospital setting (Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care). We stated we believe this framework will allow hospitals and patients to continue to obtain meaningful information about hospital performance and incentivize quality improvement while also streamlining the measure sets to reduce the costs of duplicative measures and program complexity.
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50056) and FY 2016 IPPS/LTCH PPS final rule (80 FR 49546), we noted that hospital acquired condition measures comprise some of the most critical patient safety areas, therefore justifying the use of the measures in more than one program. However, we have also stated that we will monitor the HAC Reduction and Hospital VBP Programs and analyze the impact of our measures selection, including any unintended consequences with having a measure in more than one program, and will revise the measure set in one or both programs if needed (79 FR 50056). In the proposed rule, we stated that we have continued to receive stakeholder feedback expressing concern about overlapping measures amongst different payment programs, such as the Hospital VBP and HAC Reduction Programs. We further stated that for the Hospital VBP Program, specifically, we believed
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20415 through 20416), we proposed to remove the Safety domain from the Hospital VBP Program, beginning with the FY 2021 program year, because there would no longer be any measures in that domain if our measure removal proposals are finalized. We acknowledged that by removing the Safety domain and its measures from the Hospital VBP Program, the overall effect would be to decrease the total percent of hospital payment at risk that is based on performance on these measures (by no longer tying performance on them to Hospital VBP Program reimbursement), and that it might reduce the current incentive for hospitals to perform as well on them. However, we stated we believed hospitals would still be sufficiently incentivized to perform well on the measures even if they are only in one value-based purchasing program, and we intended to monitor the effects of this proposal, if finalized, as the patient safety measures would be maintained in the HAC Reduction Program, validated, and publicly reported on the
We also referred readers to section IV.I.4.b.(2) of the preamble of the proposed rule, where we discussed how we considered keeping the Safety domain and the current domain weighting of 25 percent weight for each of the four domains with proportionate reweighting if a hospital has sufficient data on only three domains, which would include retaining in the Hospital VBP Program one or more of the measures in the Safety domain (such as measures which are also used in the HAC Reduction Program). However, based on the considerations discussed above, we decided to propose removal of the Safety domain measures and the Safety domain from the Hospital VBP Program. If our proposals to remove the Safety domain measures (PC-01, the five HAI measures, and PSI 90) were adopted, there would be no measures left in the Safety domain beginning with the FY 2021 program year.
Therefore, we proposed to remove the Safety domain from the Hospital VBP Program beginning with the FY 2021 program year.
After consideration of the public comments we received, we are not finalizing our proposal to remove the Safety domain from the Hospital VBP Program beginning with the FY 2021 program year.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266), we finalized our proposal to retain the equal weight of 25 percent for each of the four domains in the FY 2020 program year and subsequent years for hospitals that receive a score in all domains. For the FY 2017 program year and subsequent years, we adopted a policy that hospitals must receive domain scores on at least three of four quality domains in order to receive a TPS, and hospitals with sufficient data on only three domains will have their TPSs proportionately reweighted (79 FR 50084 through 50085).
In the FY 2019 IPPS/LTCH PPS proposed rule, we discussed our proposal to remove the Hospital VBP Program Safety domain beginning with the FY 2021 program year in connection with our proposal to remove all of the measures previously adopted for the Safety domain. We stated that if these proposals are adopted, there would be only three domains remaining in the Hospital VBP Program, beginning with the FY 2021 program year—Clinical Outcomes (currently referred to as the Clinical Care domain), Person and Community Engagement, and Efficiency and Cost Reduction. The Clinical Outcomes domain would have five measures of mortality and complications for the FY 2021 program year and 6 measures beginning with the FY 2022 program year, the Person and Community Engagement domain would have the HCAHPS survey with its eight dimensions of patient experience, and the Efficiency and Cost Reduction domain would include only the MSPB measure. However, as discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing the removal of the 5 HAI measures or the PSI 90 measure from the Safety domain, and as discussed in section IV.I.4.a.(2) of the preamble of this final rule, we are not finalizing removal of the Safety domain from the Hospital VBP Program. Therefore, we are not finalizing any changes to the Hospital VBP Program domain weighting policies in this final rule, as further discussed below.
In the proposed rule, we discussed that to account for these proposed changes, we assessed the weighting of scores on the three remaining domains in constituting each hospital's TPS. Specifically, we considered: (1) Weighting the Clinical Outcomes domain at 50 percent of a hospital's TPS, and to weight the Person and Community Engagement and Efficiency and Cost Reduction at 25 percent each; and (2) weighting all three domains equally, each as one-third (
For the reasons discussed in the proposed rule, we proposed to weight the domains as follows beginning with the FY 2021 program year:
In the proposed rule, we stated that we believe the proposed domain weighting best aligns with our emphasis on clinical outcomes, which address the Meaningful Measures Initiative quality priority of promoting effective treatment, and would provide a greater weight for the domain with the greatest number of measures (Clinical Outcomes), while providing appropriate weighting to the domains that focus on patient experience and cost reduction commensurate with their continued importance. In proposing to increase the weight of the Clinical Outcomes domain from 25 percent to 50 percent of hospitals' TPSs, we stated that we took into account that the Clinical Outcomes domain will include five outcome measures for the FY 2021 program year (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN (updated cohort), and THA/TKA) and six outcome measures for the FY 2022 program year (MORT-30-CABG, MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN (updated cohort), and THA/TKA), while the Person and Community Engagement domain includes the HCAHPS survey measure, and the Efficiency and Cost Reduction domain would include only one measure (MSPB) if our proposals to remove the condition-specific payment measures, discussed in section IV.I.2.c.(3) of the preamble of the proposed rule, were adopted.
Under the proposed domain weighting, each measure in the Clinical Outcomes domain (measures of mortality and complications) would have comprised 10 percent of each hospital's TPS for the FY 2021 program year and 8.33 percent for the FY 2022 program year and subsequent years, if a hospital met the case minimum for each measure in the domain, and no more than 25 percent for each measure if a hospital could only meet the minimum two measure scores for the Clinical Outcomes domain. The MSPB measure would continue to be weighted at 25 percent, if our proposals to remove the condition specific payment measures are adopted; and each of the eight HCAHPS dimensions would continue to be weighted at 3.125 percent for a total of 25 percent for the Person and Community Engagement domain. In the proposed rule, we stated that we believed the proposed domain weighting would better balance the contributing weights of each individual measure that would be retained in the Hospital VBP Program (assuming there were no Safety domain measures) compared to the alternative weighting we considered of equal weights (one-third (
In the proposed rule, we stated that we also believed the proposal to increase the weight of the Clinical Outcomes domain would help address concerns expressed by the Government Accountability Office (GAO) in a June 2017 report.
Using actual FY 2018 program data,
In further analyzing the potential impacts of the proposed domain weighting on hospitals' TPSs using actual FY 2018 program data, our analysis showed that, on average, hospitals with large bed size, hospitals in urban areas, teaching hospitals, and safety net status hospitals,
On average, hospitals with small bed size, rural hospitals, and non-teaching hospitals, which were historically high scorers on average (generally due to higher average performance on the Efficiency and Cost Reduction and Patient and Community Engagement domains), also moved closer to the average TPS under the proposed domain weighting (generally due to lower average performance on the Clinical Outcomes domain). With average scores for these types of hospitals also moving closer to the average TPS for all hospitals, this would decrease their TPSs, on average, and thereby decrease their chances for a positive payment adjustment. This would also be consistent with our analysis discussed above that the proposed domain weighting would better address GAO's recommendations for the Hospital VBP Program by reducing the percent of hospitals receiving positive payment adjustments that have composite quality scores below the median.
Our analysis also simulated that removing the Safety domain and increasing the weight of the Clinical Outcomes domain would have decreased the slope of the linear exchange function from 2.89 (actual FY 2018) to 2.78 (estimated using actual FY 2018 program data) and would have decreased the percent of hospitals receiving a positive payment adjustment from 57 percent to 45 percent. We believe this is mainly due to hospitals with greater total MS-DRGs payments (such as larger hospitals that generally have higher average performance on the Clinical Outcomes domain) earning higher TPSs relative to hospitals with smaller total MS-DRGs payments in this estimated budget-neutral program. We refer readers to the tables in section IV.I.4.b.(3) of the preambles of the proposed rule and this final rule summarizing the results of these analyses.
In the proposed rule, we stated that as an alternative, we also considered weighting each of the three domains equally, meaning that each domain (Clinical Outcomes, Person and Community Engagement, and Efficiency and Cost Reduction) would be weighted as one-third (
In the proposed rule, we stated that we also considered keeping the Safety domain and the current domain weighting (25 percent weight for each of the four domains with proportionate reweighting if a hospital has sufficient data on only three domains), which would include retaining in the Hospital VBP Program one or more of the measures in the Safety domain (such as measures which are also used in the HAC Reduction Program). As discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposal to remove the PSI 90 and five HAI measures from the Hospital VBP Program.
In the proposed rule, we stated that our priority is to adopt a domain weighting policy that appropriately reflects hospital performance under the Hospital VBP Program, aligns with CMS policy goals, including the more holistic quality payment program strategy for hospitals discussed in the proposed rule, and continues to incentivize quality improvement. As noted in the proposed rule, to understand the potential impacts of the proposed domain weighting on hospitals' TPSs, we conducted analyses using FY 2018 program data that estimated the potential impacts of our proposed domain weighting policy to increase the weight of the Clinical Outcomes domain from 25 percent to 50 percent of a hospital's TPS and an alternative weighting policy we considered of equal weights whereby each domain would constitute one-third (
The table below provided a summary of the estimated impacts on average TPSs and payment adjustments for all hospitals,
The estimated total number of hospitals with a payment adjustment was lower under the proposed domain weighting and equal weighting alternative considered (2,701), compared to the current four domain policy (2,808), because under the proposed domain weighting and equal weighting alternative, scores would be
We also refer readers to section I.H.6.b. of Appendix A of the proposed rule (83 FR 20620 through 20621) for detailed discussions regarding the estimated impacts of the proposed domain weighting and equal weighting alternative on hospital percentage payment adjustments.
In the proposed rule, we stated that based on our analyses and all of the other considerations discussed above, we believed our proposed domain weighting policy to increase the weight of the Clinical Outcomes domain from 25 percent to 50 percent of a hospital's TPS would best align with the goal of the Hospital VBP Program to make value-based incentive payment adjustments based on hospitals' performance on quality and cost, as well as emphasizes the Meaningful Measures Initiative's focus on high impact areas that are meaningful to patients and providers.
Because we proposed to remove the Safety domain and its measures from the Hospital VBP Program, we considered the two options for weighting the three remaining domains. Increasing the weight of the Clinical Outcomes domain from 25 percent to 50 percent of each hospital's TPS emphasizes our priority and focus on improving patients' health outcomes, without decreasing the weight of the Efficiency and Cost Reduction or Person and Communities Engagement domains. By contrast, equally weighting each of the three domains at one-third (
We note that in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49568 through 49570), we adopted equal weights of 25 percent for each of the four domains in the FY 2018 program year for hospitals that receive a score in all domains. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57009 through 57010), for the FY 2019 program year, we retained this domain weighting. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38265 through 38266) we finalized our proposal to retain the equal weight of 25 percent for each of the four domains in the FY 2020 program year and subsequent years for hospitals that receive a score in all domains. Because we did not propose to change the domain weighting policies based on consideration of four domains (including retention of the Safety domain) in the FY 2019 IPPS/LTCH PPS proposed rule, and in response to stakeholder concerns of changes to the program's scoring and weighting methodology creating volatility for providers, we are not making changes to the previously finalized equal weight of 25 percent for each of the four domains for hospitals that receive a score in all domains in this final rule.
After consideration of the public comments we received, we are not finalizing our proposal to use three domains, beginning with the FY 2021 program year, with the Clinical Outcomes domain weighted at 50 percent; the Person and Community Engagement domain weighted at 25 percent; and the Efficiency and Cost Reduction domain weighted at 25 percent. We are also not finalizing our proposal to remove the Safety domain because we are not removing all of the measures in that domain. Therefore, in accordance with our current policy, we will maintain four domains in the Hospital VBP Program, each with a weight of 25 percent, for hospitals that receive a score in all domains, and hospitals with sufficient data on only three domains will have their TPSs proportionately reweighted.
Based on previously finalized policies (82 FR 38266), for a hospital to receive a domain score for the FY 2021 program year and subsequent years:
• A hospital must report a minimum number of 100 completed HCAHPS surveys for a hospital to receive a Person and Community Engagement domain score.
• A hospital must receive a minimum of two measure scores within the Clinical Outcomes domain (currently referred to as the Clinical Care domain).
• A hospital must receive a minimum of one measure score within the Efficiency and Cost Reduction domain.
As discussed in section IV.I.4.a.(2) of the preamble of this final rule, we are not finalizing our proposal to remove the Safety domain from the Hospital VBP Program beginning with the FY 2021 program year. Therefore, based on previously finalized policies (82 FR 38266), we are clarifying in this final rule that additionally:
• A hospital must receive a minimum of two measure scores within the Safety domain.
We note that we are finalizing our proposal to remove the condition-specific payment measures from the Hospital VBP Program and, therefore, a hospital's Efficiency and Cost Reduction domain score would be based solely on its MSPB measure score. In the proposed rule (83 FR 20420), we did not propose any changes to this policy.
Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to exclude for the fiscal year hospitals that do not report a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for the fiscal year. For additional discussion of the previously finalized minimum numbers of cases for measures under the Hospital VBP Program, we refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26527 through 26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 through 74534); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a minimum number of 25 cases for the MORT-30-AMI, MORT-30-HF, and MORT-30-PN measures. We adopted the same 25-case minimum for the MORT-30-COPD measure in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49570), and for the MORT-30-CABG, MORT-30-PN (updated cohort), and THA/TKA measures in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57011).
In the proposed rule (83 FR 20420), we did not propose any changes to these policies.
In the Hospital Inpatient VBP Program final rule (76 FR 26527 through 26531), we adopted a minimum number of 100 completed HCAHPS surveys for a hospital to receive a score on the HCAHPS measure.
In the proposed rule (83 FR 20420), we did not propose any changes to this policy.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53609 through 53610), we adopted a minimum of 25 cases in order to receive a score for the MSPB measure. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50085 through 50086), we retained the same MSPB measure case minimum for the FY 2016 program year and subsequent years. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38267), we adopted a policy that hospitals must report a minimum number of 25 cases per measure in order to receive a measure score for the condition-specific payment measures (namely, the AMI Payment, HF Payment, and PN Payment measures), for the FY 2021 program year, FY 2022 program year, and subsequent years.
In the proposed rule (83 FR 20420), we did not propose any changes to these policies for the MSPB measure; however, as discussed in section IV.I.2.c.(3) of the preamble of this final rule, we are finalizing our proposals to remove the three condition-specific payment measures (AMI Payment, HF Payment, and PN Payment) from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule.
The previously adopted minimum numbers of cases for these measures are set forth in the table below.
As discussed in section IV.I.2.c.(1) of the preamble of this final rule, we are finalizing our proposal to remove the PC-01 measure from the Hospital VBP Program beginning with the FY 2021 program year. However, as discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposals to remove the HAI measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia) beginning with the FY 2021 program year, or to remove the PSI 90 measure effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule. Therefore, previously adopted minimum numbers of cases for those measures are also set forth in the table below. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we adopted a minimum of one predicted infection for NHSN-based surveillance measures (that is, the CAUTI, CLABSI, CDI, MRSA, and SSI measures) based on CDC's minimum case criteria. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50085), we adopted this case minimum for the NHSN-based surveillance measures for the FY 2016 Hospital VBP Program and subsequent years. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38267), beginning with the FY 2023 program year, we adopted a policy that hospitals must report a minimum of three eligible cases on any one underlying indicator during the baseline period in order to receive an improvement score and three eligible cases on any one underlying indicator during performance period in order to receive an achievement score on the Patient Safety and Adverse Events (Composite) (PSI 90) measure. For the purposes of the PSI 90 measure, a case is “eligible” for a given indicator if it meets the criterion for inclusion in the indicator measure population.
Section 1886(o)(4) of the Act requires the Secretary to establish a performance period for the Hospital VBP Program that begins and ends prior to the beginning of such fiscal year. We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for baseline and performance periods that we have adopted for the FY 2019, FY 2020, FY 2021, and FY 2022 program years. In the same rule, we finalized a schedule for all future baseline and performance periods for previously adopted measures. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38256 through 38261) for additional baseline and performance periods that we have adopted for the FY 2022, FY 2023, and subsequent program years.
Since the FY 2015 program year, we have adopted a 12-month baseline period and 12-month performance period for measures in the Person and Community Engagement domain (previously referred to as the Patient- and Caregiver-Centered Experience of Care/Care Coordination domain) (77 FR 53598; 78 FR 50692; 79 FR 50072; 80 FR 49561). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998), we finalized our proposal to adopt a 12-month performance period for the Person and Community Engagement domain that runs on the calendar year 2 years prior to the applicable program year and a 12-month baseline period that runs on the calendar year 4 years prior to the applicable program year, for the FY 2019 program year and subsequent years.
In the proposed rule (83 FR 20421), we did not propose any changes to these policies.
Since the FY 2016 program year, we have adopted a 12-month baseline period and 12-month performance period for the MSPB measure in the Efficiency and Cost Reduction domain (78 FR 50692; 79 FR 50072; 80 FR 49562). In the FY 2017 IPPS/LTCH PPS final rule, we finalized our proposal to adopt a 12-month performance period for the MSPB measure that runs on the calendar year 2 years prior to the applicable program year and a 12-month baseline period that runs on the calendar year 4 years prior to the applicable program year for the FY 2019 program year and subsequent years (81 FR 56998).
In the proposed rule (83 FR 20421), we did not propose any changes to these policies.
For the FY 2020 and FY 2021 program years, we adopted a 36-month baseline period and 36-month performance period for measures in the Clinical Outcomes domain (currently referred to as the Clinical Care domain) (78 FR 50692 through 50694; 79 FR 50073; 80 FR 49563).
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38259), we adopted a 36-month performance period and 36-month baseline period for the MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN (updated cohort), and THA/TKA measures for the FY 2023 program year and subsequent years. Specifically, for the mortality measures (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, and MORT-30-PN (updated cohort)), the performance period runs for 36 months from July 1, five years prior to the applicable fiscal program year, to June 30, two years prior to the applicable fiscal program year, and the baseline period runs for 36 months from July 1, ten years prior to the applicable fiscal program year, to June 30, seven years prior to the applicable fiscal program year. For the THA/TKA measure, the performance period runs for 36 months from April 1, five years prior to the applicable fiscal program year, to March 31, two years prior to the applicable fiscal program year, and the baseline period runs for 36 months from April 1, ten years prior to the applicable fiscal program year, to March 31, seven years prior to the applicable fiscal program year.
In the proposed rule (83 FR 20421), we did not propose any changes to the length of these performance or baseline periods.
In the FY 2017 IPPS/LTCH PPS final rule, we finalized our proposal to adopt a performance period for all measures in the Safety domain—with the exception of the PSI 90 measure—that runs on the calendar year two years prior to the applicable program year and a baseline
As discussed in section IV.I.2.c.(1) of the preamble of this final rule, we are finalizing our proposal to remove the PC-01 measure from the Hospital VBP Program beginning with the FY 2021 program year. However, as discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposals to remove the HAI measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia) beginning with the FY 2021 program year, or to remove the PSI 90 measure effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule.
The tables below summarize the baseline and performance periods that we have previously adopted. In the FY 2019 IPPS/LTCH PPS proposed rule, we did not summarize the previously adopted baseline and performance periods for the Safety domain or its measures for the FY 2021 program year or subsequent years due to our proposal to remove the Safety domain and its measures. However, because we are not finalizing our proposals to remove the five HAI measures, the PSI 90 measure, or the Safety domain as a whole, we are providing the previously adopted baseline and performance periods for those measures in this final rule, below.
Section 1886(o)(3)(A) of the Act requires the Secretary to establish performance standards for the measures selected under the Hospital VBP Program for a performance period for the applicable fiscal year. The performance standards must include levels of achievement and improvement, as required by section 1886(o)(3)(B) of the Act, and must be established no later than 60 days before the beginning of the performance period for the fiscal year involved, as required by section 1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513) for further discussion of achievement and improvement standards under the Hospital VBP Program.
In addition, when establishing the performance standards, section 1886(o)(3)(D) of the Act requires the Secretary to consider appropriate factors, such as: (1) Practical experience with the measures, including whether a significant proportion of hospitals failed to meet the performance standard during previous performance periods; (2) historical performance standards; (3) improvement rates; and (4) the opportunity for continued improvement.
We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS final rules (77 FR 53599 through 53605; 78 FR 50694 through 50699; and 79 FR 50080 through 50081, respectively) for a more detailed discussion of the general scoring methodology used in the Hospital VBP Program.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38263), we summarized the previously adopted performance standards for the FY 2021 program year for the Clinical Care domain (proposed Clinical Outcome domain) measures (MORT-30-HF, MORT-30-AMI, MORT-30-COPD, THA/TKA, and MORT-30-PN (updated cohort)) and the Efficiency and Cost Reduction domain measure (MSPB). We note that the performance standards for the MSPB measure are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. The previously adopted performance standards for the measures in the Clinical Care (proposed Clinical Outcome domain) and Efficiency and Cost Reduction domains for the FY 2021 program year are set out in the tables below. As discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of this final rule, we are not finalizing our proposals to remove the five HAI measures, the PSI 90 measure, or the Safety domain from the Hospital VBP Program; therefore, below we are displaying newly finalized performance standards for the following Safety domain measures for the FY 2021 program year: CAUTI, CLABSI, CDI, MRSA Bacteremia, Colon and Abdominal Hysterectomy SSI.
The eight dimensions of the HCAHPS measure are calculated to generate the HCAHPS Base Score. For each of the eight dimensions, Achievement Points (0-10 points) and Improvement Points (0-9 points) are calculated, the larger of which is then summed across the eight dimensions to create the HCAHPS Base Score (0-80 points). Each of the eight dimensions is of equal weight, thus the HCAHPS Base Score ranges from 0 to 80 points. HCAHPS Consistency Points are then calculated, which range from 0 to 20 points. The Consistency Points take into consideration the scores of all eight Person and Community Engagement dimensions. The final element of the scoring formula is the summation of the HCAHPS Base Score and the HCAHPS Consistency Points, which results in the Person and Community Engagement Domain score that ranges from 0 to 100 points.
In accordance with our finalized methodology for calculating performance standards (discussed more fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 through 26513)), we proposed to adopt performance standards for the FY 2021 program year for the Person and Community Engagement domain. In the proposed rule, we noted that the numerical values for the proposed performance standards displayed in the proposed rule represent estimates based on the most recently available data, and that we intended to update the numerical values in the FY 2019 IPPS/LTCH PPS final rule.
Although we invited public comment on the proposed performance standards for the eight HCAHPS survey dimensions, we did not receive any public comments on the proposed performance standards, and are adopting the performance standards listed in the table below. These HCAHPS survey dimension performance standards in the table below have been updated from the FY 2018 IPPS/LTCH PPS proposed rule and represent the most recently available data.
We have adopted certain measures for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) and the Efficiency and Cost Reduction domain for future program years in order to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57009), we adopted performance standards for the FY 2022 program year for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) measures (THA/TKA, MORT-30-HF, MORT-30-AMI, MORT-30-PN (updated cohort), MORT-30-COPD, and MORT-30-CABG) and the Efficiency and Cost Reduction domain measure (MSPB). We note that the performance standards for the MSPB measure are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. The previously adopted performance standards for these measures are set out in the table below.
In the proposed rule (83 FR 20425 through 20426), we noted that we have adopted certain measures for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) and the Efficiency and Cost Reduction domain for future program years in order to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38264 through 38265), we adopted the following performance standards for the FY 2023 program year for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) measures (THA/TKA, MORT-30-AMI, MORT-30-HF, MORT-30-PN (updated cohort), MORT-30-COPD, and MORT-30-CABG) and for the Efficiency and Cost Reduction domain measure (MSPB). In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38264), we stated our intent to propose performance standards for the PSI 90 measure in this year's rulemaking.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20425 through 20426), we proposed to remove the PSI 90 measure from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule. For this reason, we did not include proposed performance standards for this measure in the proposed rule. However, as discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposal to remove the PSI 90 measure from the Hospital VBP Program. Therefore, we are displaying newly finalized performance standards for the PSI 90 measure for the FY 2023 program year, in the table below. We note that the performance standards for the MSPB measure are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. The previously adopted and newly displayed performance standards for the other measures are also set out in the table below.
We have adopted certain measures for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) and the Efficiency and Cost Reduction domain for future program years in order to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20427), we proposed the following performance standards for the FY 2024 program year for the Clinical Care domain (newly finalized as the Clinical Outcomes domain) and the Efficiency and Cost Reduction domain. We note that the performance standards for the MSPB measure are based on performance period data; therefore, we are unable to provide numerical equivalents for the standards at this time. These newly proposed performance standards for these measures are set out in the table below.
Although we invited public comments on these proposed performance standards for the FY 2024 program year, we did not receive any public comments on the proposed performance standards for the FY 2024 program year, and are adopting the performance standards listed below.
We refer readers to section V.I.1.a. of the preamble of the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50708) for a general overview of the HAC Reduction Program. For a detailed discussion of the statutory basis of the HAC Reduction Program, we refer readers to section V.I.2. of the preamble of the FY 2014 IPPS/LTCH PPS final rule (78 FR 50708 through 50709). For a further description of our previously finalized policies for the HAC Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50729), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 through 50104), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49570 through 49581), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57011 through 57026) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through 38278). These policies describe the general framework for implementation of the HAC Reduction Program, including: (1) The relevant definitions applicable to the program; (2) the payment adjustment under the program; (3) the measure selection process and conditions for the program, including a risk-adjustment and scoring methodology; (4) performance scoring; (5) the process for making hospital-specific performance information available to the public, including the opportunity for a hospital to review the information and submit corrections; and
We also have codified certain requirements of the HAC Reduction Program at 42 CFR 412.170 through 412.172.
By publicly reporting quality data, we strive to put patients first by ensuring they, along with their clinicians, are empowered to make decisions about their own healthcare using information aligned with meaningful quality measures. The HAC Reduction Program, together with the Hospital VBP Program and the Hospital Readmissions Reduction Program, represents a key component of the way that we bring quality measurement, transparency, and improvement together with value-based purchasing programs to the inpatient care setting. We have undertaken efforts to review the existing HAC Reduction Program measure set in the context of these other programs, to identify how to reduce costs and complexity across programs while continuing to incentivize improvement in the quality and value of care provided to patients. To that end, we have begun reviewing our programs' measures in accordance with the Meaningful Measures Initiative we described in section I.A.2. of the preambles of the proposed rule and this final rule.
As part of this review, as discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20426 through 20428), we took a holistic approach to evaluating the appropriateness of the HAC Reduction Program's current measures in the context of the measures used in two other IPPS value-based purchasing programs (that is, the Hospital VBP Program and the Hospital Readmissions Reduction Program), as well as in the Hospital IQR Program. We view the three value-based purchasing programs together as a collective set of hospital value-based purchasing programs. Specifically, we believe the goals of the three value-based purchasing programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC Reduction Programs) and the measures used in these programs together cover the Meaningful Measures Initiative quality priorities of making care safer, strengthening person and family engagement, promoting coordination of care, promoting effective prevention and treatment, and making care affordable—but that the programs should not add unnecessary complexity or costs associated with duplicative measures across programs. The Hospital Readmissions Reduction Program focuses on care coordination measures, which address the quality priority of promoting effective communication and care coordination within the Meaningful Measures Initiative. The HAC Reduction Program focuses on patient safety measures, which address the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care. As part of this holistic quality payment program strategy, we believe the Hospital VBP Program should focus on the measurement priorities not covered by the Hospital Readmissions Reduction Program or the HAC Reduction Program. The Hospital VBP Program would continue to focus on measures related to: (1) The clinical outcomes, such as mortality and complications (which address the Meaningful Measures Initiative quality priority of promoting effective treatment); (2) patient and caregiver experience, as measured using the HCAHPS survey (which addresses the Meaningful Measures Initiative quality priority of strengthening person and family engagement as partners in their care); and (3) healthcare costs, as measured using the Medicare Spending per Beneficiary measure (which addresses the Meaningful Measures Initiative priority of making care affordable). We believe this framework will allow hospitals and patients to continue to obtain meaningful information about hospital performance and incentivize quality improvement while also streamlining the measure sets to reduce duplicative measures and program complexity so that the costs to hospitals associated with participating in these programs does not outweigh the benefits of improving beneficiary care.
As previously stated, the HAC Reduction Program focuses on making care safer by reducing harm caused in the delivery of care. Measures in the HAC Reduction Program, generally represent “never events”
The HAC Reduction Program has historically relied on Hospital IQR Program processes for administrative support; we therefore proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20429 through 20437) HAC Reduction Program specific healthcare-associated infection measure data collection and validation requirements, and scoring associated with data completeness, timeliness, and accuracy. Contingent upon the Hospital IQR Program finalizing its proposal to remove NHSN HAI measures from its program (section VIII.A.5.b.(2)(b) of the preamble of the proposed rule), the HAC Reduction Program proposed to formally adopt analogous processes and independently manage these administrative processes to receive CDC NHSN data and begin validation seamlessly with January 1, 2019 infectious events. In the proposed rule, we noted that if the Hospital IQR Program did not finalize its proposal to remove NHSN HAI measures from its program, then the HAC Reduction Program would subsequently not finalize its proposals to manage the associated administrative processes.
In the proposed rule (83 FR 20426 through 20437), for the HAC Reduction Program, we proposed to: (1) Establish administrative policies for the HAC Reduction Program to collect, validate, and publicly report quality measure data independently instead of conducting these activities through the Hospital IQR Program; (2) adjust the scoring methodology by removing domains and assigning equal weighting to each measure for which a hospital has a measure score in order to improve
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38273 through 38276), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018 and CY 2018 proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a hospital or provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS to explore whether factors that could be used to stratify or risk adjust the measures (beyond dual eligibility); considering the full range of differences in patient backgrounds that might affect outcomes; exploring risk adjustment approaches; and offering careful consideration of what type of information display would be most useful to the public.
We also sought public comment on confidential reporting and future public reporting of some of our measures stratified by patient dual eligibility. In general, commenters noted that stratified measures could serve as tools for hospitals to identify gaps in outcomes for different groups of patients, improve the quality of health care for all patients, and empower consumers to make informed decisions about health care. Commenters encouraged us to stratify measures by other social risk factors such as age, income, and educational attainment. With regard to value-based purchasing programs, commenters also cautioned to balance fair and equitable payment while avoiding payment penalties that mask health disparities or discouraging the provision of care to more medically complex patients. Commenters also noted that value-based purchasing program measure selection, domain weighting, performance scoring, and payment methodology must account for social risk.
As a next step, CMS is considering options to improve health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We also are considering how this work applies to other CMS quality programs in the future. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, where we discuss the potential stratification of certain Hospital IQR Program outcome measures. Furthermore, we continue to consider options to address equity and disparities in our value-based purchasing programs.
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
While we did not specifically request comment on social risk factors in the FY 2019 proposed rule, we received a number of comments with respect to social risk factors. We thank commenters for sharing their views and their willingness to support the efforts of CMS and NQF on this important issue. We take this feedback seriously and will continue to review social risk factors on an on-going and continuous basis. In addition, we both welcome and appreciate stakeholder feedback as we continue our work on these issues.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57013 through 57020), we finalized the CMS Patient Safety and Adverse Events Composite (CMS PSI 90)
As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505) for the Hospital IQR Program and subsequently finalized for the HAC Reduction Program in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50100 through 50101), we will use a subregulatory process to make nonsubstantive updates to measures used for the HAC Reduction Program and to use rulemaking to adopt substantive updates to measures. As with the Hospital IQR Program, we will determine what constitutes a substantive versus nonsubstantive change on a case-by-case basis. As we also stated in that rulemaking (79 FR 50100), examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hospice exclusion to the 30-day mortality measures). We believe nonsubstantive changes may also include nonsubstantive updates to NQF-endorsed measures based upon changes to the measures' underlying clinical guidelines.
We will continue to use rulemaking to adopt substantive updates, and a subregulatory process to make nonsubstantive updates, to measures we have adopted for the HAC Reduction Program. As stated in past rules (78 FR 50776), examples of changes that we might consider to be substantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes more stringent (for example, changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new setting, such as extending a measure from the inpatient setting to hospice. These policies regarding what is considered substantive versus nonsubstantive would apply to all measures in the HAC Reduction Program.
We also note that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process, which is available through its website at:
Technical specifications for the CMS PSI 90 in Domain 1 can be found on the QualityNet website at:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20429 through 20430), we proposed to adopt data collection processes for the HAC Reduction Program to receive CDC NHSN data beginning with January 1, 2019 infection events to correspond with the Hospital IQR Program's calendar year reporting period and maintain the HAC Reduction Program's annual performance period start date. All reporting requirements, including quarterly frequency, CDC collection system, and deadlines would remain constant from current Hospital IQR Program requirements to aid continued hospital reporting through clear and consistent requirements. This proposed start date aligns with the effective date of the Hospital IQR Program's proposed removal of these measures beginning with CY 2019 reporting period/FY 2021 payment determination as discussed in section VIII.A.5.b.(2)(b) of the preamble of this final rule, and should allow for a seamless transition.
The HAC Reduction Program identifies the worst-performing quartile of hospitals by calculating a Total HAC Score derived from the CMS PSI 90 and NHSN HAI measures, which are derived from claims-based and chart-abstracted measures data, respectively. No additional collection mechanisms are required for the CMS PSI 90 measure because it is a claims-based measure calculated using data submitted to CMS by hospitals for Medicare payment, and therefore imposes no additional administrative or reporting requirements on participating hospitals. For the NHSN HAI measures, we proposed to adopt the NHSN HAI data collection process established in the Hospital IQR Program if the Hospital IQR Program removed the NHSN HAI
We also proposed to adopt the Hospital IQR Program's exception policy to reporting and data submission requirements for the CAUTI, CLABSI, and Colon and Abdominal Hysterectomy SSI measures. As noted in FY 2013 IPPS/LTCH PPS final rule (77 FR 53539) and in FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 through 50822) for the Hospital IQR Program and in FY 2015 IPPS/LTCH PPS final rule (79 FR 50096) for the HAC Reduction Program, CMS acknowledges that some hospitals may not have locations that meet the NHSN criteria for CLABSI or CAUTI reporting and that some hospitals may perform so few procedures requiring surveillance under the Colon and Abdominal Hysterectomy SSI measure that the data may not be meaningful for public reporting nor sufficiently reliable to be utilized for a program year. If a hospital does not have adequate locations or procedures, it should submit the Measure Exception Form to the HAC Reduction Program beginning on January 1, 2019. The IPPS Quality Reporting Programs Measure Exception Form is located using the link located on the QualityNet website under the Hospitals − Inpatient > Hospital Inpatient Quality Reporting Program tab at:
Beginning in CY 2019,
We received numerous comments from stakeholders regarding our holistic approach to evaluating the appropriateness of measures previously adopted under the Hospital Readmissions Reduction Program, Hospital VBP Program, HAC Reduction Program, and Hospital IQR Program and our vision for the future of these programs. While program-specific comments and policies are discussed in more detail in each program-specific section of the preamble of this final rule, we would like to clarify that in light of our mission to prioritize patients in the provision of services, we are expanding the stated scope of the Hospital VBP Program to include patient safety measures. While we initially sought to delineate measure focus areas between the Hospital VBP Program and HAC Reduction Program, we agree with commenters that patient safety is a critical component of quality improvement efforts, and we appreciate commenters who conveyed the multifaceted benefits of retaining the safety measures in more than one value-based purchasing program. Therefore, we believe it is appropriate and important to provide incentives under more than one program to ensure that hospitals take every precaution to avoid adverse patient safety events.
In addition, because the incentive payment structure is different under the HAC Reduction and Hospital VBP Programs, we believe including patient safety measures in both programs will provide hospitals with strong incentives to continually strive for both improvement and high performance on these measures. In addition, retaining the measures in both programs will best promote transparency through publicly reporting hospital performance on these measures, as stakeholders will continue to be able to see both hospitals' performance compared to all other hospitals and hospitals' performance improvement over time. Finally, we note this approach will also reduce provider burden associated with these measures because these measures are being finalized for removal from the Hospital IQR Program, as discussed in section VIII.A.5.b.(2)(b) of the preamble of this final rule.
As we discussed in the proposed rule, the reporting of NHSN HAI measures and the CMS PSI-90 will not change in any substantive way. The CMS PSI 90 measure is reported on the
In order for the HAC Reduction Program to continue to receive its NHSN HAI data following the removal of NHSN HAI measures from the Hospital IQR Program, the HAC Reduction Program must establish the CDC NHSN as its mechanism to receive the required data. We believe that the collection and reporting of safety and NHSN HAI data is essential to reducing hospital-acquired conditions and improving patient safety. We also note that the HAC Reduction Program proposed to adopt validation policies for NSHN HAI data to ensure accurate data is received and used in the program. We provide more information on our validation policies in section IV.J.4.e.(1) of the preamble of this final rule below.
After consideration of the public comments we received, we are finalizing our proposal to adopt the CDC NHSN as the mechanism by which hospitals will report NHSN HAI measures for the HAC Reduction Program. However, we are delaying implementation of these reporting requirements until January 1, 2020 in order to align with a corresponding delay in removing these NHSN HAI measures from the Hospital IQR Program. We are also finalizing our proposal to adopt the IPPS Quality Reporting Programs Measure Exception Form beginning on January 1, 2020.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726 through 50727), we detailed the process for the review and correction of claims-based data, and we did not propose any changes. We calculate the measure in Domain 1 using a static snapshot (data extract) taken after the 90-day period following the last date of discharge used in the applicable period. We create data extracts using claims in CMS' Common Working File (CWF) 90 days after the last discharge date in the applicable period which we will use for the calculations. For example, if the last discharge date in the applicable period for a measure is June 30, 2018, we would create the data extract on September 30, 2018, and use those data to calculate the claims based measures for that applicable period.
Hospitals are not able to submit corrections to the underlying claims snapshot used for the Domain 1 measure calculations after the extract date, and are not be able to add claims to this data set. Therefore, hospitals are encouraged to ensure that their claims are accurate prior to the snapshot date. We consider hospitals' claims data to be complete for purposes of calculating the Domain 1 for the HAC Reduction Program after the 90-day period following the last date of discharge used in the applicable period.
For more information, we refer readers to FY 2014 IPPS/LTCH PPS final rule (78 FR 50726 through 50727). We reiterate that under this process, hospitals retain the ability to submit new claims and corrections to submitted claims for payment purposes in line with CMS' timely claims filing policies, but the administrative claims data used to calculate the Domain 1 measure and the resulting Domain Score reflect the state of the claims at the time of extraction from CMS' CWF.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20430), we did not propose any change to our current administrative policy regarding the submission, review, and correction of claims data.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726), we stated that the HAC Reduction Program would use the same process as the Hospital IQR Program for hospitals to submit, review, and correct data for chart-abstracted NHSN HAI measures. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38270 through 38271), we clarified that hospitals had an opportunity to submit, review, and correct any of the chart-abstracted information for the full 4
For a detailed description of the process, we refer readers to FY 2014 IPPS/LTCH PPS final rule (78 FR 50726) where we explained that hospitals can begin submitting data on the first discharge day of any reporting quarter. Hospitals are encouraged to submit data early in the submission schedule not only to allow them sufficient time to identify errors and resubmit data before the quarterly submission deadline, but also to identify opportunities for continued improvement. Users may view and make corrections to the data that they submit starting immediately following submission. The data are populated into reports that are updated immediately with all data that have
We wish to clarify that this HAI review and correction process is intended to permit hospitals review of measure performance and data submission feedback. Hospitals can use the NHSN system during the quarterly data submission period to identify any errors made in the reporting of a patient's specific “infection event,” the denominator (that is, overall admissions data), and other NHSN protocol data used to calculate measure results before the quarterly submission deadline. The HAI review and correction process is different than and occurs prior to the annual Scoring Calculations Review and Correction Process, which is intended to ensure the accurate calculation of measure scoring used for payment, and was discussed in section IV.J.4.g. of the preamble of the proposed rule.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20430), we did not propose any changes to our current administrative policy regarding the submission, review, and correction of chart-abstracted HAI data.
As discussed in above in section IV.J.1. of the preamble of the proposed rule (83 FR 20431 through 20433), we proposed to adopt processes to validate the NHSN HAI measure data used in the HAC Reduction Program if the Hospital IQR Program finalizes its proposals to remove NHSN HAI measures from its program. While the HAC Reduction Program cannot adopt the Hospital IQR Program's process as is for various reasons as discussed below, we intend for the HAC Reduction Program's processes to reflect, to the greatest extent possible, the current processes previously established the Hospital IQR Program. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 53553), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50835), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 through 50273), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49710 through 49712), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 57181), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38403) for detailed information on the Hospital IQR Program's validation processes.
Currently, CMS estimates accuracy for the hospital-reported data submitted to the clinical warehouse and data submitted to NHSN as reproduced by a trained abstractor using a standardized NHSN HAI measure abstraction protocol created by CDC and CMS and posted on the QualityNet website at:
We also appreciate the comment concerning validation. Our validation process is designed to ensure nationwide accuracy across all States reporting NHSN data through objective, clear, and specific feedback to hospitals about their reported data. We use a single nationwide methodology for validating NHSN data, which ensures a uniform application to this CMS requirement. We also recognize that over 20 State health departments do not currently validate NHSN data for hospitals. Our validation is the only known process to ensure accuracy in these States with no current validation process.
After consideration of the public comments we received, we are finalizing our proposal to adopt a validation process for the NHSN HAI measures for the HAC Reduction Program as described in greater detail in the following sections of the preamble of this final rule. However, we are delaying adoption of this NHSN HAI measure validation process into the HAC Reduction Program until Q3 2020
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50828 through 50832) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50264 through 50265), the Hospital IQR Program identified the following chart-abstracted NHSN HAI measures submitted via NHSN as being subject to validation: CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, and MRSA Bacteremia.
In the proposed rule, we proposed that chart-abstracted NHSN HAI measures submitted via NHSN would be subject to validation in the HAC Reduction Program beginning with the Q3 2019 discharges for FY 2022. As stated in section IV.J.3. of the preamble of the proposed rule, and as finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), the HAC Reduction Program currently includes five NHSN HAI measures: CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, and MRSA Bacteremia.
After consideration of the public comments we received, we are finalizing our proposal to validate chart-abstracted NHSN HAI measures (CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, and MRSA Bacteremia) submitted via NHSN under the HAC Reduction Program, but are delaying implementation to begin with Q3 2020 discharges for FY 2023.
For chart-abstracted data validation in the Hospital IQR Program, CMS currently performs a random and targeted selection of participating hospitals on an annual basis, as initially set out in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50833 through 50834). For example, in December of 2017, CMS randomly selected 400 hospitals for validation for the FY 2020 payment determination. In April/May of 2018, an additional targeted provider sample of up to 200 hospitals are selected (78 FR 50833 through 50834). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20431), we stated that we intend to mirror these policies for the HAC Reduction Program, and thus, we proposed annual random selection of 400 hospitals and the annual targeted selection of 200 hospitals using the targeting criteria proposed below in section IV.J.4.e.(3) of the preamble of the proposed rule.
Unlike the Hospital IQR Program, which includes only hospitals with active Notices of Participation (77 FR 53536), we intend to include all subsection (d) hospitals in these proposed validation procedures, since all subsection (d) hospitals are subject to the HAC Reduction Program. Therefore, for the HAC Reduction Program, we proposed to include all subsection (d) hospitals in the provider sample for validation beginning with the Q3 2019 discharges for FY 2022. We believe this would be better representative of hospitals impacted by the Program. We note that for the FY 2018 HAC Reduction Program, which uses CY 2015 and 2016 NHSN HAI data, 44 hospitals were subject to the HAC Reduction Program, but chose not to participate in the Hospital IQR Program. These hospitals would be included in the validation process.
After consideration of the public comments we received, we are finalizing our proposal to randomly select 400 hospitals. Again, we note that we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process to begin with Q3 2020 discharges for FY 2023.
As stated above, the Hospital IQR Program currently performs a random and targeted selection of hospitals for validation on an annual basis (78 FR 50833 through 50834). In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227 through 50229), the Hospital IQR Program finalized that the targeted selection will include all hospitals that failed validation the previous year. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 through 53553), the Hospital IQR Program finalized additional criteria for selecting targeted hospitals: Any hospital with abnormal or conflicting data patterns; any hospital with rapidly changing data patterns; any hospital that submits data to NHSN after the Hospital IQR Program data submission deadline has passed; any hospital that joined the Hospital IQR Program within the previous 3 years, and which has not been previously validated; any hospital that has not been randomly selected for validation in any of the previous 3 years; and any hospital that passed validation in the previous year, but had a two-tailed confidence interval that included 75 percent. In the FY 2014 IPPS/LTCH PPS final rule, the Hospital IQR Program expanded its targeting criteria to include any hospital which failed to report to NHSN at least half of actual HAI events detected as determined during the previous year's validation effort. We intend to propose similar policies for the HAC Reduction Program.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20431 through 20432). We proposed the following targeting criteria for the HAC Reduction Program beginning with the Q3 2019 discharges for FY 2022:
• Any hospital that failed validation the previous year;
• Any hospital that submits data to NHSN after the HAC Reduction Program data submission deadline has passed;
• Any hospital that not been randomly selected for validation in the past 3 years;
• Any hospital that passed validation in the previous year, but had a two-tailed confidence interval that included 75 percent;
• Any hospital which failed to report to NHSN at least half of actual HAI events detected as determined during the previous year's validation effort.
Although we invited public comment on our proposals, because commenters did not specify whether their responses were directed to general provider selection, or the targeted selection proposals, we have included all validation selection comments under the provider selection section above, located at section IV.J.4.e.(2) of the preamble of this final rule.
After consideration of the public comments we received, we are finalizing our proposal to select 200 additional hospitals for targeted validation. Again, we note that we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process to begin with Q3 2020 discharges for FY 2023.
The Hospital IQR Program scores hospitals based on an agreement rate between hospital-reported infections compared to events identified as infections by a trained CMS abstractor using a standardized protocol (77 FR 53548). As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53550 through 53551), the Hospital IQR Program uses the upper bound of a two-tailed 90 percent confidence interval around the combined clinical process of care and HAI scores to determine if a hospital passes or fails validation; if this number is greater than or equal to 75 percent, then the hospital passes validation.
We believe that a similar computation of the confidence interval is appropriate for the HAC Reduction Program, but that it include only the NHSN HAI measures and not the clinical process of care measures, which are not a part of the Program's measure set. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432), we proposed that for the HAC Reduction Program beginning in FY 2022: (1) We would score hospitals based on an agreement rate between hospital-reported infections compared to events identified as infections by a trained CMS abstractor using a standardized protocol; (2) we would compute a confidence interval; (3) if the upper bound of this confidence interval is 75 percent or higher, the hospital would pass the HAC Reduction Program validation requirement; and (4) if the upper bound is below 75 percent, the hospital would fail the HAC Reduction Program validation requirement.
After consideration of the public comments we received, we are finalizing our proposals to score hospitals based on an agreement rate between hospital-reported infections compared to events identified as infections by a trained CMS abstractor using a standardized protocol by computing a confidence interval. If the upper bound of this confidence interval is 75 percent or higher, the hospital would pass the HAC Reduction Program validation requirement; if the upper bound is below 75 percent, the hospital would fail the HAC Reduction Program validation requirement. However, as discussed above, we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process to begin with Q3 of FY 2020 discharges for FY 2023.
Under the Hospital IQR Program, within 30 days of validation results being posted on the QualityNet Secure Portal at:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432), we stated that we plan to have similar procedures under the HAC Reduction Program. Therefore, for the HAC Reduction Program beginning with the Q3 2019 data validation, we proposed to have an educational review process, such that hospitals selected for validation would have a 30-day period following the receipt of quarterly validation results to seek educational review. During this 30-day period, hospitals may review, seek
After consideration of the public comments we received, we are finalizing an educational review process, such that hospitals selected for validation would have a 30-day period following the receipt of quarterly validation results to seek educational review. During this 30-day period, hospitals may review, seek clarification, and potentially identify a CMS validation error. If an educational review is timely requested for any of the first three quarters and the review yields an incorrect CMS validation result, the corrected quarterly score would be used to compute the final confidence interval. If an educational review is timely requested and an error is identified in the 4th quarter of review, we would use the corrected quarterly score to compute the final confidence interval. Again, we note we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process to begin with Q3 2020 discharges for FY 2023.
Currently, under the Hospital IQR Program, we randomly assign half of the hospitals selected for validation to submit CLABSI and CAUTI Validation Templates and the other half of hospitals to submit MRSA and CDI Validation Templates (78 FR 50826 through 50834). CMS selects up to four candidate NHSN HAI cases per hospital from each of the assigned Validation Templates (79 FR 50263 through 50265). CMS also selects up to two candidate Colon and Abdominal Hysterectomy SSI cases from Medicare claims data for patients who had colon surgeries or abdominal hysterectomies that appear suspicious of infection (78 FR 50826 through 50834). The Hospital IQR Program applies a full payment reduction if a hospital fails to meet any part of the validation process (75 FR 50219 through 50220; 81 FR 57180).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432), for the HAC Reduction Program, if a hospital could not meet the overall validation requirement, we proposed to penalize hospitals that failed validation by assigning the maximum Winsorized z-score only for the set of measures CMS validated. For example, if a hospital was in the half selected to submit CLABSI and CAUTI Validation Templates but failed the validation, we proposed that hospital would receive the maximum Winsorized z-score for CLABSI, CAUTI, and Colon and Abdominal Hysterectomy SSI. Although it would better align with the Hospital IQR Program's current “all or nothing” approach (75 FR 50219 through 50220; 81 FR 57180) to penalize hospitals by assigning the maximum Winsorized z-scores for the entire domain, we believe that our chosen approach would be fairer to hospitals and would reduce the likelihood of their automatically ranking in the worst-performing quartile based on validation results. Furthermore, we believe our proposed approach better aligns with the current HAC Reduction Program policy of assigning the maximum Winsorized z-score if hospitals do not submit data to NHSN for a given NHSN HAI measure (81 FR 57013).
After consideration of the public comments we received, we are finalizing our proposal that if a hospital does not meet the overall validation requirement, we will penalize it by assigning the maximum Winsorized z-score only for the set of measures CMS validated. Again, we note we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process to begin with Q3 2020 discharges for FY 2023.
The Hospital IQR Program currently uses a calendar year reporting period for NHSN HAI measures (76 FR 51644). For example, the FY 2020 measure reporting quarters include Q1 2018, Q2 2018, Q3 2018, and Q4 2018. Under the Hospital IQR Program, FY 2020 data validation consists of the following quarters: Q3 2017, Q4 2017, Q1 2018, and Q2 2018, the Hospital IQR Program schedule is available on QualityNet at:
When determining the proposed validation period for the HAC Reduction Program, we considered the performance and validation cycles currently in place under the Hospital IQR Program, and we considered key public reporting dates for the HAC Reduction Program. HAC Reduction Program scores must be calculated in time for hospital specific reports (HSRs) to be issued annually, usually in July, and the 30-day Scoring Calculations Review and Correction period of the HSRs serves as the preview period for
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432 through 20433), we stated that after consideration, we proposed that the HAC Reduction Program's performance period would remain 2 calendar years and that the validation period would include the four middle quarters in the HAC Reduction Program performance period (that is, third quarter through second quarter). This approach aligns with current the HAC Reduction Program performance period, it also aligns with current NHSN HAI validation quarters, and because we would continue to collect eight quarters of measure data, we anticipate no impact on the reliability of NHSN HAI results.
Because our validation sample of hospitals is selected annually and because of the time needed to build the required infrastructure, we believe the earliest opportunity to seamlessly begin this work under the HAC Reduction Program is Q3 2019. Therefore, we proposed that the HAC Reduction Program would begin validation of NHSN HAI measures data with July 2019 infection event data. The proposed commencement of validation, along with key validation dates, is shown in the table
To maintain symmetry with the current Hospital IQR Program validation schedule as set forth on QualityNet at:
We did not receive any comments on our validation proposals; however, as discussed above, we are delaying adoption of the Hospital IQR Program's NHSN HAI measure validation process into the HAC Reduction Program in order to align with a corresponding delay in removal of these measures from the Hospital IQR Program. We are therefore finalizing our proposal to begin validation with Q3 discharges for FY 2020 for the FY 2023 program year.
The commencement of validation, along with key validation dates, is shown in the table below.
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554) for DACA requirements previously adopted by the Hospital IQR Program. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20433), we proposed that if the Hospital IQR Program finalizes its proposal to remove NHSN HAI measures from its program, then the HAC Reduction Program would adopt this same process. Hospitals would have to electronically acknowledge the data submitted are accurate and complete to the best of their knowledge. Hospitals would be required to complete and sign the DACA on an annual basis via the QualityNet Secure Portal:
After consideration of the public comment we received, we are finalizing our proposal to require that hospitals electronically acknowledge the data submitted are accurate and complete to the best of their knowledge. Hospitals
Although we did not propose any changes to the review and correction procedures for FY 2019 (83 FR 20433 through 20434), we intend to rename the annual 30-day review and correction period to the “Scoring Calculations Review and Correction Period.” The purpose of the annual 30-day review and corrections period is to allow hospitals to review the calculation of their HAC Reduction Program scores, and the new name would more clearly convey both the intent and limitation. The naming convention would further distinguish this period from earlier opportunities during which hospitals can review and correct their underlying data.
The HAC Reduction Program will continue to provide annual confidential hospital-specific reports and discharge level information used in the calculation of their Total HAC Scores via the QualityNet Secure Portal. As noted in section IV.J.4.b. of the preamble of the proposed rule regarding quarterly reports, hospitals must also register at:
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725 through 50728), hospitals have a period of 30 days after the information is posted to the QualityNet Secure Portal to review their HAC Reduction Program scores, submit questions about the calculation of their results, and request corrections for their HAC Reduction Program scores prior to public reporting. Hospitals may use the 30-day Scoring Calculations Review and Correction Period to request corrections to the following information prior to public reporting:
As we clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38270 through 38271), this 30-day period is not an opportunity for hospitals to submit additional corrections related to the underlying claims data for the CMS PSI 90, or to add new claims to the data extract used to calculate the results. Hospitals have an opportunity to review and correct claims data used in the HAC Reduction Program as described in section IV.J.4.c. of the preamble of the proposed rule, and detailed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726 through 50727).
As we also clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38270 through 38271), this 30-day period is not an opportunity for hospitals to submit additional corrections related to the underlying NHSN HAI data used to calculate the scores, including: reported number of NSHN HAIs; Standardized Infection Ratios (SIRs); or reported central-line days, urinary catheter days, surgical procedures performed, or patient days. Hospitals would have an opportunity to review and correct chart-abstracted NHSN HAI data used in the HAC Reduction Program as described in section IV.J.4.d. of the preamble of the proposed rule.
Section 1886(p)(6)(A) of the Act requires the Secretary to “make information available to the public regarding HAC rates of each subsection (d) hospital” under the HAC Reduction Program. Section 1886(p)(6)(B) of the Act also requires the Secretary to “ensure that an applicable hospital has the opportunity to review, and submit corrections for, the HAC information to be made public for each hospital.” Section 1886(p)(6)(C) of the Act requires the Secretary to post the HAC information for each applicable hospital on the
As finalized in FY 2014 IPPS/LTCH PPS final rule (78 FR 50725), we will make the following information public on the
As we stated in the proposed rule, we intend to maintain as much consistency as possible in how the measures are currently reported on
Section 1886(p)(6)(C) of the Act, as codified at 42 CFR 412.172(f), requires that HAC information be posted on the
Section 1886(p)(7) of the Act, as codified at 42 CFR 412.172(g), provides that there will be no administrative or judicial review under section 1869 of the Act, under section 1878 of the Act, or otherwise for any of the following:
• The criteria describing an applicable hospital in paragraph 1886(p)(2)(A) of the Act;
• The specification of hospital acquired conditions under paragraph 1886(p)(3) of the Act;
• The specification of the applicable period under paragraph 1886(p)(4) of the Act;
• The provision of reports to applicable hospitals under paragraph 1886(p)(5) of the Act; and
• The information made available to the public under paragraph 1886(p)(6) of the Act.
For additional information, we refer readers to FY 2014 IPPS/LTCH PPS final rule (78 FR 50729) and FY 2015 IPPS/LTCH PPS final rule (79 FR 50100).
We regularly examine the HAC Reduction Program's scoring methodology for opportunities for improvement. This year, we examined several alternative scoring options that would allow the scoring methodology to continue to fairly assess all hospitals.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57022 through 57025), we adopted a Winsorized z-score scoring methodology for FY 2018 in which we rank hospitals by calculating a Total HAC Score based on hospitals' performance on two domains: patient safety (Domain 1) and NHSN HAIs (Domain 2). Domain 1 includes the CMS PSI 90 measure. Domain 2 includes the CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI,
As shown in the first table above, under the currently methodology, the weight applied to the CMS PSI 90 and each Domain 2 measure is almost the same (15.0 and 17.0 percent, respectively) for hospitals with measure scores for all six program measures. However, for hospitals with between one and four Domain 2 measures, the weight applied to the CMS PSI 90 is lower (and in some cases much lower) than the weight applied to each Domain 2 measure. For hospitals with a measure score for only one or two Domain 2 measures (that is, low-volume hospitals in particular), a disproportionately large weight is applied to each Domain 2 measure. Several stakeholders voiced concerns about the disproportionately large weight applied to the one or two Domain 2 measures for which low-volume hospitals have a measure score. As seen in the tables above; under the currently methodology, the weighting for the Domain 2 measures is dependent on the number of measures with data for those hospitals without a Domain 1 score.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20434 through 20437), we discussed two alternative scoring methodologies for calculating hospitals' Total HAC Scores. Our preferred approach, the Equal Measure Weights policy, involves removing domains and applying an equal weight to each measure for which a hospital has a measure score in Total HAC Score calculations. However, we sought public comment on an additional approach: applying a different weight to each domain depending on the number of measures for which a hospital has a measure score (Variable Domain Weights).
In the proposed rule, we stated that our preferred approach is the Equal Measure Weights Policy. We would remove domains from the HAC Reduction Program and simply assign equal weight to each measure for which a hospital has a measure score. We would calculate each hospital's Total HAC Score as the equally weighted average of the hospital's measure scores. The table below displays the weights applied to each measure under this approach. All other aspects of the HAC Reduction Program scoring methodology would remain the same, including the calculation of measure scores as Winsorized z-scores, the determination of the 75th percentile Total HAC Score, and the determination of the worst-performing quartile.
As shown in the table above, by applying an equal weight to each measure for all hospitals, the Equal Measure Weights approach addresses stakeholders' concerns about the disproportionately large weight applied to Domain 2 measures for certain hospitals under the current scoring methodology.
We also analyzed a Variable Domain Weights approach. Under this approach, the weights applied to Domain 1 and Domain 2 depend upon the number of measure scores a hospital has in each domain. The table below displays the weights applied to each domain under this approach.
As shown in the table above, under the Variable Domain Weights approach, the difference in the weight applied to the CMS PSI 90 and each Domain 2 measure is smaller than the difference under the current scoring methodology for hospitals that have a Domain 1 score (the first table under the Equal Measure Weights approach discussion, above).
Our priority is to adopt a policy that improves the scoring methodology and increases fairness for all hospitals. Both proposed approaches address stakeholders' concerns about the disproportionate weight applied to Domain 2 measures for low-volume hospitals. We simulated results under each scoring approach using FY 2019 HAC Reduction Program data. We compared the percentage of hospitals in the worst-performing quartile in FY 2019 to the percentage that would be in the worst-performing quartile under each scoring approach. The table below provides a high-level overview of the impact of these approaches on several key groups of hospitals.
As shown in the table above, the Equal Measure Weights approach generally has a larger impact than the Variable Domain Weights approach. Under the Equal Measure Weights approach, as compared to the current methodology using FY 2019 HAC Reduction Program data, the percentage of hospitals in the worst-performing quartile decreases by 1.7 percent for small hospitals (that is, fewer than 100 beds), 4.1 percent for hospitals with one Domain 2 measure, 3.8 percent for hospitals with two Domain 2 measures, while it increases by 2.5 percent for large urban hospitals (that is, 400 or more beds) and 3.6 percent for large teaching hospitals (that is, 100 or more residents). The Variable Domain Weights approach decreases the percentage of hospitals in the worst-performing quartile by 1.0 percent for small hospitals, 2.9 percent for hospitals with one Domain 2 measure, and 3.3 for
We prefer the Equal Measure Weights approach because it reduces the percentage of low-volume hospitals in the worst-performing quartile in the simplest manner to hospitals, while not greatly increasing the potential costs on other hospital groups. In addition, should we add measures or remove measures from the program in the future, we would not need to modify the weighting scheme under the Equal Measure Weights approach, unlike the current scoring methodology or the Variable Domain Weights approach.
Finally, the Equal Measure Weights policy aligns with the intent of the original program design to apply a similar weight to each measure. That is, we applied a weight of 35 percent to Domain 1 and 65 percent to Domain 2 in FY 2015, so that the weight applied to each measure would be roughly the same for hospitals with measure scores for all measures. When we added Colon and Abdominal Hysterectomy SSI to Domain 2 in FY 2016 and CDI and MRSA Bacteremia in FY 2017, we increased the weight of Domain 2 to 75 percent and 85 percent, respectively, so that the weight applied to each measure would be nearly the same for hospitals with measure scores for all measures. However, the static domain weights we applied for these program years led to a substantially lower weight being applied to the CMS PSI 90 compared with Domain 2 measures for hospitals with only one or two Domain 2 measures. After assessing the results of our analysis and these additional considerations, we proposed to adopt the Equal Measure Weights Policy starting in FY 2020.
We also recognize that under this proposal the NHSN HAI portfolio of up to five measures would continue to be weighted much more highly than the CMS PSI 90 for the vast majority of hospitals with more than one NHSN HAI data meeting minimum precision criteria (MPC) of 1.0. For example, hospitals reporting five NHSN HAI measures meeting the MPC of 1.0 and CMS PSI 90 would be weighted as 83.33 percent using the equal weighting proposal for the set of NHSN HAI measures and 16.67 percent for the CMS PSI 90. Hospitals reporting fewer NHSN HAIs meeting the MPC of 1.0 would receive lower total HAI weighting to account for the reduced number of NHSN HAI measures.
This proposal is intended to address the impact of disproportionate weighting at the measure level for the subset of hospitals with relatively few NHSN HAI measures. Under the current weighting methodology, hospitals reporting on a single NHSN HAI measure receive 85 percent measure level weight for that one measure.
After consideration of the public comments we received, we are finalizing our policy to adopt an Equal Measure Weights scoring methodology beginning in FY 2020.
Consistent with the definition specified at § 412.170, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20437), we proposed to adopt the applicable period for the FY 2021 HAC Reduction Program for the CMS PSI 90 as the 24-month period from July 1, 2017 through June 30, 2019, and the applicable period for NHSN HAI measures as the 24-month period from
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38271), we finalized a return to a 24-month data collection period for the calculation of HAC Reduction Program measure results. As we stated then, we believe that using 24 months of data for the CMS PSI 90 and the NHSN HAI measures balances the Program's needs against the burden imposed on hospitals' data-collection processes, and allows for sufficient time to process the data for each measure and calculate the measure results.
After consideration of the public comments we received, we are finalizing, consistent with 42 CFR 412.170, the applicable period for the FY 2021 HAC Reduction Program for the CMS PSI 90 as the 24-month period from July 1, 2017 through June 30, 2019, and the applicable period for NHSN HAI measures as the 24-month period from January 1, 2018 through December 31, 2019.
As we did in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19986 through 19990), and as part of our ongoing efforts to evaluate and strengthen the HAC Reduction Program, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20437), we sought stakeholder feedback on the adoption of additional Program measures.
We welcomed public comment and suggestions for additional HAC Reduction Program measures, specifically on whether electronic clinical quality measures (eCQMs) would benefit the program at some point in the future. We first raised the potential future consideration of electronically specified measures in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50104), and stated that we would continue to review the viability of including electronic measures. We are now specifically interested in stakeholder comments regarding the potential for the Program's future adoption of eCQMs. These measures use data from electronic health records (EHRs) and/or health information technology systems to measure health care quality. We believe eCQMs will allow for the improved measurement of processes, observations, treatments and outcomes. Measuring and reporting eCQMs provide information on the safety, effectiveness, and timeliness of care. We are also interested in adopting eCQMs because we support technology that reduces burden and allows clinicians to focus on providing high-quality healthcare for their patients. We also support innovative approaches to improve quality, accessibility, and affordability of care while paying attention to improving clinicians' and beneficiaries' experience when interacting with CMS programs. We believe eCQMs offer many benefits to clinicians and quality reporting and are an improvement over traditional quality measures because they leverage the EHR to generate chart-abstracted data, which is less resource intensive and likely to produce fewer human errors than traditional chart-abstraction.
We believe that our continued efforts to reduce HACs are vital to improving patients' quality of care and reducing complications and mortality, while simultaneously decreasing costs. The reduction of HACs is an important marker of quality of care and has a positive impact on both patient outcomes and cost of care. Our goal for the HAC Reduction Program is to heighten the awareness of HACs and reduce the number of incidences that occur.
Most commenters believed that hospitals should have the measure publicly reported for at least a year without penalty. Some commenters suggested that this should be accomplished by including measures in the Hospital IQR Program prior to adopting them to the HAC Reduction Program, or by reported on them
Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99-272), establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital's updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital's Medicare share of total inpatient days. The provisions of section 1886(h) of the Act are implemented in regulations at 42 CFR 413.75 through 413.83.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the IPPS for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulation regarding the calculation of this additional payment is located at 42 CFR 412.105. The hospital's IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital's number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital to the number of inpatient hospital beds.
The calculation of both direct GME and IME payments is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. Therefore, Congress, through the Balanced Budget Act of 1997 (Pub. L. 105-33), established a limit (that is, a cap) on the number of allopathic and osteopathic residents that a hospital may include in its FTE resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of residents for purposes of direct GME may not exceed the hospital's unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap.
Section 1886(h)(4)(H)(ii) of the Act authorizes the Secretary to prescribe rules that allow hospitals that form affiliated groups to elect to apply direct GME caps on an aggregate basis, and such authority applies for purposes of aggregating IME caps under section 1886(d)(5)(B)(viii) of the Act. Under such authority, the Secretary promulgated rules to allow hospitals that are members of the same Medicare GME affiliated group to elect to apply their direct GME and IME FTE caps on an aggregate basis. As specified in §§ 412.105(f)(1)(vi) and 413.79(f) of the regulations, hospitals that are part of the same Medicare GME affiliated group are permitted to apply their IME and direct GME FTE caps on an aggregate basis, and to temporarily adjust each hospital's caps to reflect the rotation of residents among affiliated hospitals during an academic year. Sections 413.75(b) and 413.79(f) specify the rules for Medicare GME affiliated groups. Generally, two or more hospitals may form a Medicare GME affiliated group if the hospitals have a shared rotational arrangement and are either located in the same urban or rural area or in contiguous urban or rural areas, are under common ownership, or are jointly listed as program sponsors or major participating institutions in the same program. Sections 413.75(b) and 413.79(f) also address emergency Medicare GME affiliation agreements, which can apply in the event of a section 1135 waiver and if certain conditions are met.
For a new urban teaching hospital that received an adjustment to its FTE cap under § 412.105(f)(1)(vii) or § 413.79(e)(1), or both, § 413.79(e)(1)(iv) provides that the new urban hospital may enter into a Medicare GME affiliation agreement only if the resulting adjustment is an increase to its direct GME and IME FTE caps (for purposes of this discussion, the term “urban” is defined as that term is described at § 412.64(b) of the regulations). We adopted this policy in the FY 2006 IPPS final rule (70 FR 47452 through 47454). Prior to that final rule, new urban teaching hospitals were not permitted to participate in a Medicare GME affiliation agreement (63 FR 26333). In modifying our rules to allow new urban teaching hospitals to participate in Medicare GME affiliation agreements, we noted our concerns about such affiliation agreements (70 FR 47452). Specifically, we were concerned that hospitals with existing medical residency training programs could otherwise, with the cooperation of new teaching hospitals, circumvent the statutory FTE caps by establishing new medical residency programs in the new teaching hospitals solely for the purpose of affiliating with the new teaching hospitals to receive an upward adjustment to their FTE caps under an affiliation agreement. This would effectively allow existing teaching hospitals to achieve an increase in their FTE resident caps beyond the number allowed by their statutory caps (70 FR 47452). Accordingly, we adopted the restriction under § 413.79(e)(1)(iv). We refer readers to the FY 2006 IPPS final rule for a discussion of the regulatory history of this provision (70 FR 47452 through 47454).
As we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20438), we have received questions about whether two (or more) new urban teaching hospitals can form a Medicare GME affiliated group; that is, whether an affiliated group consisting solely of new urban teaching hospitals is permissible, considering that, under § 413.79(e)(1)(iv), a new urban teaching hospital may only enter into a Medicare GME affiliation agreement if the resulting adjustments to its direct GME and IME FTE caps are increases to those caps. The type of Medicare GME affiliated group allowed under the current regulation at § 413.79(e)(1)(iv) involves an existing teaching hospital(s) (a hospital with caps based on training occurring in 1996) and a new teaching hospital(s) (a hospital with caps established after 1996), and therefore, we do not believe a Medicare GME affiliation agreement consisting solely of new urban teaching hospitals is
In the proposed rule, we emphasized that the existing restriction under § 413.79(e)(1)(iv) would still apply to Medicare GME affiliated groups composed of existing and new urban teaching hospitals, given our concerns about gaming. We stated that we do not share the same level of concern in regards to Medicare GME affiliated groups consisting solely of new urban teaching hospitals because we believe these teaching hospitals are similarly situated in terms of size and scope of residency training programs and, therefore, less likely to participate in a Medicare GME affiliated group where the outcome of that agreement would only provide advantages to one of the participating hospitals. However, we still believe it is important to ensure that Medicare GME affiliation agreements entered into between new urban teaching hospitals are consistent with the intent of the Medicare GME affiliation agreement provision; that is, to promote the cross-training of residents at the participating hospitals and not to provide for an unfair advantage of one participating hospital at the expense of another hospital.
Therefore, we proposed to revise § 413.79(e)(1)(iv) by designating the existing provision of paragraph (iv) as paragraph (A) and adding paragraph (B) to specify that an urban hospital that qualifies for an adjustment to its FTE cap under this section is permitted to be part of a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap and receive an adjustment that is a decrease to the urban hospital's FTE cap only if the decrease results from a Medicare GME affiliated group consisting solely of two or more urban hospitals that qualify to receive adjustments to their FTE caps under paragraph (e)(1). Because Medicare GME affiliation agreements can only be entered into at the start of an academic year (that is, July 1), we proposed that this change would be effective beginning with affiliation agreements entered into for the July 1, 2019 through June 30, 2020 residency training year. We noted that, if the proposed change is adopted in the final rule, it would apply to both Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements.
In response to the request that CMS confirm that the proposed provision was meant to apply to hospitals that have already established FTE caps, we note that the proposal, which we are finalizing, to allow a new urban teaching hospital to be part of a Medicare GME affiliated group composed solely of new urban teaching hospitals requires that a least one of the new urban teaching hospitals participating in the Medicare GME affiliated group has established FTE caps. (As explained further below, our proposal does not require that all participating hospitals have established FTE caps.) If a Medicare GME affiliated group were to consist solely of new urban teaching hospitals that do not have established FTE caps, there would be no cap amounts to transfer under the agreement. In addition, we note that when a new teaching hospital is within the cap-building period for a new program(s), the hospital's caps are not yet established and it is paid for IME and direct GME based on its actual count of FTE residents in the new program (§ 413.79(e)(1)(ii)). Because these FTEs are not capped, they cannot be decreased under a Medicare GME affiliation agreement.
However, the proposal was not meant to exclude new teaching hospitals that do not yet have FTE caps established from participating in a Medicare GME affiliated group. Rather, such hospitals have always been able to participate in a Medicare GME affiliated group as long as these hospitals are the entities receiving increases to their FTE caps of zero under the affiliation agreement(s). For example, under our proposal, a new urban teaching hospital that does
In response to the request that CMS look for ways to increase FTE caps under current regulations, we note that the current regulations do provide some means of establishing and increasing FTE resident caps. New urban and rural teaching hospitals that do not have caps established can receive permanent FTE caps when they train residents in a new program after a 5-year cap-building period (§§ 413.79(e) and 412.105(f)(1)(vii)). Furthermore, both new and existing rural teaching hospitals that train residents in a new program receive an increase to their permanent FTE caps each time they train residents in a new program (§ 413.79(e)(3)). Urban teaching hospitals that participate in a rural track program can receive an add-on to their permanent FTE caps for the time the residents spend training at the urban teaching hospital as part of the rural track program (§§ 412.105(f)(x) and 413.79(k)) (we refer readers to the August 22, 2016
One commenter stated the practicality of two new teaching hospitals in close vicinity to have shared rotational arrangements is minimal. The commenter understood and appreciated CMS' concern that some teaching hospitals with existing medical residency training programs may try and circumvent the statutory FTE caps by establishing new residency training programs at new teaching hospitals solely for the purposes of affiliation. However, the commenter stated that, under these restrictions, CMS limits the ability to cross-train future physicians, especially in multihospital settings in rural areas. The commenter stated many “new” teaching hospitals started training programs after the 1996 caps were established, and these hospitals have since become associated with larger teaching hospitals and medical schools. The commenter suggested that after a specified time-period in which the new teaching hospital first began training residents, CMS allow a new teaching hospital to lend cap slots to existing teaching hospitals that are part of related organizations. The commenter suggested a 10-year waiting period, which is consistent with the length of time a hospital must remain reclassified as rural in order to retain any increases to its IME cap associated with being rural, as described in the regulations at § 412.105(f)(1)(xv).
The commenter also suggested a policy alternative that would be associated with putting a limit on the proportion of FTE cap slots a new teaching hospital could lend to an existing teaching hospital. The commenter suggested that CMS could simply limit the number of shared FTE cap slots to some reasonable percentage, thereby ensuring that the new teaching hospital's cap generally “stays” with it. The commenter noted that, for example, CMS could specify that a new teaching hospital could enter into a Medicare GME affiliation agreement with an existing teaching hospital such that it may experience a decrease in its FTE cap but for no more than more than 20 percent of the new teaching hospital's FTE cap slots. The commenter stated there is nothing explicit in the statute to guide the selection of a particular percentage. However, the commenter believed that such a policy determination would be well within CMS' rulemaking authority.
The commenter discussed teaching hospitals located in the same health system. The commenter noted that that CMS' extremely limited policy restrictions, even with the addition of the flexibility included within the FY 2019 IPPS/LTCH PPS proposed rule, seem extremely outdated in an era where hospitals are entering into system arrangements to create centers of excellence and to locate services where they best serve their communities. The commenter stated that for CMS to hold one teaching hospital within an integrated delivery system to one set of Medicare GME affiliation agreement requirements and another teaching hospital within that same health system to a different set of requirements (seemingly to protect one from the other) is inconsistent with the intent of joint membership in the system. The commenter stated that CMS' current policy is contrary to the very notion of “systemness” and clinical/academic integration, which many health care leaders and policymakers are trying to promote as a means of improving quality of care for patients and improved training experiences for residents. Therefore, the commenter suggested that, in addition to the policy change included as part of the FY 2019 IPPS/LTCH PPS proposed rule, CMS, at a minimum, permit new urban teaching hospitals to enter into Medicare GME affiliation agreements with any existing teaching hospital under the same corporate parent whereby the existing urban teaching hospital could experience an increase to its FTE cap.
In response to the commenter's suggestion to permit a new urban teaching hospital to participate in a Medicare GME affiliation agreement and receive a decrease to its FTE cap for a certain proportion of FTE cap slots, we believe it would be challenging to determine an appropriate percentage of FTE cap slots from a new urban teaching hospital that should be permitted to be transferred to an existing teaching hospital. Furthermore, an appropriate percentage may differ among new urban teaching hospitals based on their individual training needs, adding to the administrative complexity.
However, we do believe that a time-limited approach may provide new urban teaching hospitals the opportunity to receive decreases to their caps while at the same time addressing our concern that existing teaching hospitals not use new teaching hospitals to circumvent their FTE caps. Specifically, we believe that requiring a new urban teaching hospital to wait a certain period of time prior to lending its cap slots to an existing teaching hospital through a Medicare GME affiliation agreement (that is, the new urban teaching hospital would receive a decrease to its FTE caps as part of the affiliation agreement) would demonstrate that the new teaching hospital is, in fact, establishing and expanding its own new residency training programs rather than serving as a means for an existing teaching hospital to receive additional FTE caps. We further believe that a time-limited approach would be a more equitable way of providing new urban teaching hospitals with the opportunity to decrease their FTE caps instead of using a percentage of slots or determining whether a new urban teaching hospital falls under the same corporate structure as an existing teaching hospital. As previously stated, hospitals participating in a Medicare GME affiliation agreement may have different training needs such that a single percentage would not be advantageous to all new urban teaching hospitals. In addition, not all new urban teaching hospitals may have existing teaching hospitals within the same corporate structure that are in a position to receive FTE cap slots as part of a Medicare GME affiliation agreement.
As noted earlier, one commenter made the suggestion of a time-limited period of 5 years after the establishment of a cap, or 10 years after first training residents. Based on the comments received, we believe that the potential misuse of Medicare GME affiliation agreements can be mitigated after a certain period of time. We agree that a 5-year waiting period after the establishment of an FTE cap is a suitable waiting period for purposes of allowing a new urban teaching hospital to participate in a Medicare GME affiliation agreement with an existing teaching hospital and receive a decrease to its FTE cap as a result of that affiliation agreement. We are comfortable with a 5-year waiting period because it is consistent with our already established policies regarding the use of FTE cap slots received under sections 5503 and 5506 of the Affordable Care Act. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72194), we stated that a hospital that received FTE cap slots under section 5503 may use those FTE cap slots for Medicare GME affiliation agreements after 5 years, which coincides with the end of the period of
We are finalizing a policy that, effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital (that is, a hospital that established permanent FTE caps after 1996) may enter into a Medicare GME affiliated group and receive a decrease to its FTE caps if the decrease results from a Medicare GME affiliated group consisting solely of two or more new urban teaching hospitals. In addition, we are finalizing a policy that, effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital(s) may enter into a Medicare GME affiliated group with an existing teaching hospital(s) (that is, a hospital(s) with 1996 FTE caps) and receive a decrease to its FTE caps, as long as the new urban teaching's hospitals caps have been in effect for 5 or more years. That is, once a new urban teaching hospital's caps are effective, after a cap-building period, the new urban teaching hospital can participate in a Medicare GME affiliation agreement with an existing teaching hospital and receive a decrease to its FTE caps after an additional 5-year waiting period.
Because Medicare GME affiliation agreements are effective consistent with the residency training year (July 1 through June 30), under the policy finalized in this rule, the new urban teaching hospital will be able to participate in an affiliation agreement with an existing teaching hospital and receive a decrease to its FTE caps effective with the July 1 date (the residency training year) that begins at least 5 years after the new urban teaching hospital's caps are effective. In the August 22, 2014
• Effective for Medicare GME affiliation agreements entered into on or after October 1, 2005, except as provided in § 413.79(e)(1)(iv)(B)(
• Effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, an urban hospital that received an adjustment to its FTE cap under § 413.79(e)(1) is permitted to be part of a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap and receive an adjustment that is a decrease to the urban hospital's FTE cap, provided the Medicare GME affiliated group meets one of the following conditions:
□ The Medicare GME affiliated group consists solely of two or more urban hospitals that qualify for adjustments to their FTE caps under § 413.79(e)(1).
□ The Medicare GME affiliated group includes an urban hospital(s) that received FTE cap(s) under § 413.79(c)(2)(i) and/or § 412.105(f)(1)(iv)(A). This Medicare GME affiliated group must be established effective with a July 1 date (the residency training year) that is at least 5 years after the start of the cost reporting period that coincides with or follows the start of the sixth program year of the first new program for which the hospital's FTE cap was adjusted in accordance with § 413.79(e)(1) or § 412.105(f)(1)(v)(C) or (D), or both.
We note that we have made a conforming change to § 413.79(e)(1)(iv)(A) to clarify that new teaching hospitals can continue to participate in Medicare GME affiliated groups with existing teaching hospitals wherein the new teaching hospitals receive increases to their FTE caps. In addition, we are clarifying that the terms “qualifies” and “qualify” used at § 413.79(e)(1)(iv)(A) and § 413.79(e)(1)(iv)(B)(
The 5-year waiting period and the policy described at § 413.79(e)(1)(iv)(B)(
Because the policy finalized in this final rule is consistent with the start of the residency training year, that is, July 1, new urban teaching hospitals with fiscal years other than July 1 through June 30 may have to wait some additional time before being able to receive a decrease to their FTE resident caps through a Medicare GME affiliation agreement with an existing teaching hospital. However, the delay for these new urban teaching hospitals is a one-time delay, consistent with the timing of implementation of FTE caps, and we believe any negative aspect of this delay is far outweighed by the additional flexibility provided to these new urban teaching hospitals for purposes of Medicare GME affiliation agreements.
Unlike the examples provided above for Hospitals A, B, and C, the commenters mentioned “new” urban teaching hospitals that established their FTE caps after 1996, but have had those caps in place already for close to 20 years. These new urban teaching hospitals have already completed the 5-year waiting period and can receive a decrease to their FTE caps through Medicare GME affiliation agreements with existing teaching hospitals effective July 1, 2019. For example, assume Hospital D (a new urban teaching hospital that was not training residents in 1996) established its caps effective July 1, 2000. Hospital D can receive a decrease to its FTE caps through a Medicare GME affiliation agreement with an existing teaching hospital effective July 1, 2019.
In summary, we are finalizing our proposed policy with modifications. Effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital may enter into a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap and receive an adjustment that is a decrease to the urban hospital's FTE caps if the decrease results from a Medicare GME affiliated group consisting solely of two or more new urban teaching hospitals. In addition, effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital may participate in a Medicare GME affiliated group with an existing teaching hospital and receive an adjustment that is a decrease to the urban hospital's FTE caps, provided the Medicare GME affiliation agreement is effective with a July 1 date (the residency training year) that is at least 5 years after the start of the new urban teaching hospital's cost reporting period that coincides with or follows the start of the sixth program year of the first new program. Other requirements for Medicare GME affiliated groups and agreements at §§ 413.75(b) and 413.79(f) remain unchanged. The policies included in this final rule apply to both Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements.
We received public comments regarding GME issues that were outside of the scope of the proposals included in the FY 2019 IPPS/LTCH PPS proposed rule. These comments requested that—
• CMS not establish FTE caps and PRAs for hospitals that have trained a de minimis number of FTE residents.
• CMS extend the cap-building window for teaching hospitals in rural, underserved, underresourced communities and/or areas currently lacking medical training infrastructure.
• CMS permit hospitals with new or established GME programs in areas of need to apply for additional residency slots through a “Cap Flexibility” demonstration project; prioritizing those supplying psychiatric residency training to regions with a maldistribution of physicians that provide mental health care and treatment.
• CMS use “Cap Flexibility” to allow new GME teaching hospitals in areas of need to have up to an additional 5 years beyond the current 5-year window to add residents to their training programs.
• Indian Health Service and Tribal Hospitals be made eligible to receive Medicare funding for residency training programs.
• CMS review the “frozen cap” for the Psychiatric Teaching Status Adjustment Cap for rural providers and CMS re-review the current care needs at the national level across inpatient psychiatric facilities and adjust regulations accordingly.
• CMS release its findings regarding awardee hospitals' use of their section 5503 slots and their compliance with the terms and conditions of section 5503.
Because we consider these public comments to be outside of the scope of the proposed rule, we are not addressing them in this final rule.
Section 5506 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, the “Affordable Care Act”), authorizes the Secretary to redistribute residency slots after a hospital that trained residents in an approved medical residency program closes. Specifically, section 5506 of the Affordable Care Act amended the Act by adding subsection (vi) to section 1886(h)(4)(H) of the Act and modifying language at section 1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a process to increase the FTE resident caps for other hospitals based upon the FTE resident caps in teaching hospitals that closed “on or after a date that is 2 years before the date of enactment” (that is, March 23, 2008). In the CY 2011 Outpatient Prospective Payment System (OPPS) final rule with comment period (75 FR 72212), we established regulations (42 CFR 413.79(o)) and an application process for qualifying hospitals to apply to CMS to receive direct GME and IME FTE resident cap slots from the hospital that closed. We made certain modifications to those regulations in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to the section 5506 application process in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The procedures we established apply both to teaching hospitals that closed on or after March 23, 2008, and on or before August 3, 2010, and to teaching hospitals that close after August 3, 2010.
CMS has learned of the closure of Memorial Hospital of Rhode Island, located in Pawtucket, RI (CCN 410001). Accordingly, this notice serves to notify the public of the closure of this teaching hospital and initiate another round of the section 5506 application and selection process. This round will be the 13th round (“Round 13”) of the application and selection process. The table below contains the identifying information and IME and direct GME FTE resident caps for the closed
The application period for hospitals to apply for slots under section 5506 of the Affordable Care Act is 90 days following notice to the public of a hospital closure (77 FR53436). Therefore, hospitals that wish to apply for and receive slots from the FTE resident caps of closed Memorial Hospital of Rhode Island, located in Pawtucket, RI, must submit applications (Section 5506 Application Form posted on Direct Graduate Medical Education (DGME) website as noted at the end of this section) directly to the CMS Central Office no later than October 31, 2018. The mailing address for the CMS Central Office is included on the application form. Applications must be received by the CMS Central Office by the October 31, 2018 deadline date. It is
After an applying hospital sends a hard copy of a section 5506 slot application to the CMS Central Office mailing address, the hospital is strongly encouraged to notify the CMS Central Office of the mailed application by sending an email to:
We have not established a deadline by when CMS will issue the final determinations to hospitals that receive slots under section 5506 of the Affordable Care Act. However, we review all applications received by the deadline and notify applicants of our determinations as soon as possible.
We refer readers to the CMS Direct Graduate Medical Education (DGME) website at:
The Rural Community Hospital Demonstration was originally authorized for a 5-year period by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-255), enacted December 13, 2016, amended section 410A of Public Law 108-173 to require a 10-year extension period (in place of the 5-year extension required by the Affordable Care Act, as further discussed below). Section 15003 also requires that, no later than 120 days after enactment of Public Law 114-255, the Secretary must issue a solicitation for applications to select additional hospitals to participate in the demonstration program for the second 5 years of the 10-year extension period, so long as the maximum number of 30 hospitals stipulated by the Affordable Care Act is not exceeded. In this final rule, we are providing a summary of the previous legislative provisions and their implementation; a description of the provisions of section 15003 of Public Law 114-255; our final policies for implementation; the finalized budget neutrality methodology for the extension period authorized by section 15003 of Public Law 114-255, including a discussion of the budget neutrality methodology used in previous final rules for periods prior to the extension period; and an update on the reconciliation of actual and estimated costs of the demonstration for previous years (2011, 2012, and 2013).
Section 410A(a) of Public Law 108-173 required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing rural community hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost-based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that—
• Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act;
• Has fewer than 51 beds (excluding beds in a distinct part psychiatric or
• Provides 24-hour emergency care services; and
• Is not designated or eligible for designation as a CAH under section 1820 of the Act.
Section 410A(a)(4) of Public Law 108-173 specified that the Secretary was to select for participation no more than 15 rural community hospitals in rural areas of States that the Secretary identified as having low population densities. Using 2002 data from the U.S. Census Bureau, we identified the 10 States with the lowest population density in which rural community hospitals were to be located in order to participate in the demonstration: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003).
CMS originally solicited applicants for the demonstration in May 2004; 13 hospitals began participation with cost reporting periods beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals withdrew from the demonstration program and converted to CAH status. This left 9 hospitals participating at that time. In 2008, we announced a solicitation for up to 6 additional hospitals to participate in the demonstration program. Four additional hospitals were selected to participate under this solicitation. These 4 additional hospitals began under the demonstration payment methodology with the hospitals' first cost reporting period starting on or after July 1, 2008. At that time, 13 hospitals were participating in the demonstration.
Five hospitals withdrew from the demonstration program during CYs 2009 and 2010. In CY 2011, one hospital among this original set of participating hospitals withdrew. These actions left 7 of the hospitals that were selected to participate in either 2004 or 2008 participating in the demonstration program as of June 1, 2011.
Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148) amended section 410A of Public Law 108-173, changing the Rural Community Hospital Demonstration program in several ways. First, the Secretary was required to conduct the demonstration program for an additional 5-year period, to begin on the date immediately following the last day of the initial 5-year period. Further, the Affordable Care Act required the Secretary to provide for the continued participation of rural community hospitals in the demonstration program during the 5-year extension period, in the case of a rural community hospital participating in the demonstration program as of the last day of the initial 5-year period, unless the hospital made an election to discontinue participation.
In addition, the Affordable Care Act required, during the 5-year extension period, that the Secretary expand the number of States with low population densities determined by the Secretary to 20. Further, the Secretary was required to use the same criteria and data that the Secretary used to determine the States for purposes of the initial 5-year period. The Affordable Care Act also allowed not more than 30 rural community hospitals in such States to participate in the demonstration program during the 5-year extension period.
We published a solicitation for applications for additional participants in the Rural Community Hospital Demonstration program in the
In addition to the 7 hospitals that were selected in either 2004 or 2008, the new selection led to a total of 23 hospitals in the demonstration. During CY 2013, one additional hospital of the set selected in 2011 withdrew from the demonstration, which left 22 hospitals participating in the demonstration, effective July 1, 2013, all of which continued their participation through December 2014. Starting from that date and extending through the end of FY 2015, the 7 hospitals that were selected in either 2004 or 2008 ended their scheduled 5-year periods of performance authorized by the Affordable Care Act on a rolling basis. Likewise, the participation period for the 14 hospitals that entered the demonstration, following the mandate of the Affordable Care Act and that were still participating, ended their scheduled periods of performance on a rolling basis according to the end dates of the hospitals' cost report periods, respectively, from April 30, 2016 through December 31, 2016. (One hospital among this group closed in October 2015.)
As stated earlier, section 15003 of Public Law 114-255 further amended section 410A of Public Law 108-173 to require the Secretary to conduct the Rural Community Hospital Demonstration for a 10-year extension period (in place of the 5-year extension period required by the Affordable Care Act), beginning on the date immediately following the last day of the initial 5-year period under section 410A(a)(5) of Public Law 108-173. Thus, the Secretary is required to conduct the demonstration for an additional 5-year period. Specifically, section 15003 of Public Law 114-255 amended section 410A(g)(4) of Public Law 108-173 to require that, for hospitals participating in the demonstration as of the last day of the initial 5-year period, the Secretary shall provide for continued participation of such rural community hospitals in the demonstration during the 10-year extension period, unless the hospital makes an election, in such form and manner as the Secretary may specify, to discontinue participation. Furthermore, section 15003 of Public Law 114-255 added subsection (g)(5) to section 410A of Public Law 108-173 to require that, during the second 5 years of the 10-year extension period, the Secretary shall apply the provisions of section 410A(g)(4) of Public Law 108-173 to rural community hospitals that are not described in subsection (g)(4) but that were participating in the demonstration as of December 30, 2014, in a similar manner as such provisions apply to hospitals described in subsection (g)(4).
In addition, section 15003 of Public Law 114-255 amended section 410A of Public Law 108-173 to add paragraph (g)(6)(A) which requires that the Secretary issue a solicitation for applications no later than 120 days after enactment of paragraph (g)(6), to select additional rural community hospitals located in any State to participate in the demonstration program for the second 5 years of the 10-year extension period, without exceeding the maximum number of hospitals (that is, 30) permitted under section 410A(g)(3) of Public Law 108-173 (as amended by the Affordable Care Act). Section 410A(g)(6)(B) of Public Law 108-173 provides that, in determining which hospitals submitting an application pursuant to this solicitation are to be selected for participation in the demonstration, the Secretary must give priority to rural community hospitals
As required under section 15003 of Public Law 114-255, we issued a solicitation for additional hospitals to participate in the demonstration. We released this solicitation on April 17, 2017. As described in the FY 2018 IPPS/LTCH PPS proposed rule, the solicitation identified the 20 States with the lowest population density according to the population estimates from the Census Bureau for 2013, from the
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19994), we stated that our goal was to finalize the selection of participants for the extension period authorized by Public Law 114-255 by June 2017, in time to include in the FY 2018 IPPS/LTCH PPS final rule an estimate of the costs of the demonstration during FY 2018 and the resulting budget neutrality offset amount, for these newly participating hospitals, as well as for those hospitals among the previously participating hospitals that decided to participate in the extension period. (The specific method for ensuring budget neutrality under section 410A of Pub. L. 108-173 was described in the FY 2018 IPPS proposed rule, consistent with general policies adopted in previous years.) We indicated that upon announcing the selection of new participants, we would confirm the start dates for the periods of performance for these newly selected hospitals and for previously participating hospitals. We stated, on the other hand, that if final selection were not to occur by June 2017, we would not be able to include an estimate of the costs of the demonstration or an estimate of the budget neutrality offset amount for FY 2018 for these additional hospitals in the FY 2018 IPPS/LTCH PPS final rule.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38280), we finalized our policy with regard to the effective date for the application of the reasonable cost-based payment methodology under the demonstration for those previously participating hospitals choosing to participate in the second 5-year extension period. According to our finalized policy, each previously participating hospital began the second 5 years of the 10-year extension period and the cost-based payment methodology under section 410A of Public Law 108-173 (as amended by section 15003 of Pub. L. 114-255) on the date immediately after the period of performance under the first 5-year extension period ended. However, by the time of the FY 2018 IPPS/LTCH PPS final rule, we had not been able to verify which among the previously participating hospitals would be continuing participation, and thus were not able to estimate the costs of the demonstration for that year's final rule. We stated in the final rule that we would instead include the estimated costs of the demonstration for all participating hospitals for FY 2018, along with those for FY 2019, in the budget neutrality offset amount for the FY 2019 proposed and final rules.
Seventeen of the 21 hospitals that completed their periods of participation under the extension period authorized by the Affordable Care Act elected to continue in the second 5-year extension period for the full second 5-year extension period. Of the four hospitals that did not elect to continue participating, three hospitals converted to CAH status during the time period of the second 5-year extension period. Thus, the 5-year period of performance for each of these hospitals started on dates beginning May 1, 2015 and extending through January 1, 2017. On November 20, 2017, we announced that, as a result of the solicitation issued earlier in the year, 13 additional hospitals were selected to participate in the demonstration in addition to these 17 hospitals continuing participation from the first 5-year extension period. (Hereafter, these two groups are referred to as “newly participating” and “previously participating” hospitals, respectively.) We announced, as well, that each of these newly participating hospitals would begin its 5-year period of participation effective the start of the first cost reporting period on or after October 1, 2017.
We described these provisions in the FY 2019 IPPS/LTCH PPS proposed rule. Since the publication of the proposed rule, one of the hospitals selected in 2017 has withdrawn from the demonstration, prior to beginning participation in the demonstration on July 1, 2018. Thus, 29 hospitals are participating during FY 2018.
Section 410A(c)(2) of Public Law 108-173 requires that, in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented. This requirement is commonly referred to as “budget neutrality.” Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral on its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. Typically, this form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program's participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, made it extremely unlikely that this demonstration program could be held to budget neutrality under the methodology normally used to calculate it—that is, cost-based payments to participating small rural hospitals were likely to
We have generally incorporated two components into the budget neutrality offset amounts identified in the final IPPS rules in previous years. First, we have estimated the costs of the demonstration for the upcoming fiscal year, generally determined from historical, “as submitted” cost reports for the hospitals participating in that year. Update factors representing nationwide trends in cost and volume increases have been incorporated into these estimates, as specified in the methodology described in the final rule for each fiscal year. Second, as finalized cost reports became available, we have determined the amount by which the actual costs of the demonstration for an earlier, given year, differed from the estimated costs for the demonstration set forth in the final IPPS rule for the corresponding fiscal year, and we have incorporated that amount into the budget neutrality offset amount for the upcoming fiscal year. If the actual costs for the demonstration for the earlier fiscal year exceeded the estimated costs of the demonstration identified in the final rule for that year, this difference was added to the estimated costs of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the upcoming fiscal year. Conversely, if the estimated costs of the demonstration set forth in the final rule for a prior fiscal year exceeded the actual costs of the demonstration for that year, this difference was subtracted from the estimated cost of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the upcoming fiscal year. (We note that we have calculated this difference for FYs 2005 through 2010 between the actual costs of the demonstration as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years.)
We finalized our budget neutrality methodology for periods of participation under the second 5 years of the 10-year extension period in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38285 through 38287). Similar to previous years, we stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20444) that we would incorporate an estimate of the costs of the demonstration, generally determined from historical, “as submitted” cost reports for the participating hospitals and appropriate update factors, into a budget neutrality offset amount to be applied to the national IPPS rates for the upcoming fiscal year. In addition, we stated that we would continue to apply our general policy from previous years of including, as a second component to the budget neutrality offset amount, the amount by which the actual costs of the demonstration for an earlier, given year (as determined from finalized cost reports when available) differed from the estimated costs for the demonstration set forth in the final IPPS rule for the corresponding fiscal year. As we described in the FY 2018 final rule and FY 2019 proposed rule, we are incorporating several distinct components into the budget neutrality offset amount for FY 2019:
• For each previously participating hospital that has decided to participate in the second 5 years of the 10-year extension period, the cost-based payment methodology under the demonstration began on the date immediately following the end date of its period of performance for the first 5-year extension period. In addition, for previously participating hospitals that converted to CAH status during the time period of the second 5-year extension period, the demonstration payment methodology has been applied to the date following the end date of its period of performance for the first extension period to the date of conversion. As we finalized in the FY 2018 IPPS/LTCH PPS final rule, we are applying a specific methodology for ensuring that the budget neutrality requirement under section 410A of Public Law 108-173 is met. To reflect the costs of the demonstration for the previously participating hospitals, for their cost reporting periods starting in FYs 2015, 2016, and 2017, we will use available finalized cost reports that detail the actual costs of the demonstration for each of these fiscal years. We will then incorporate these amounts in the budget neutrality offset amount to be included in a future IPPS final rule. We expect to do this in either FY 2020 or FY 2021, based on the availability of finalized reports.
• In addition, we will include a component to our overall methodology similar to previous years, according to which an estimate of the costs of the demonstration for both previously and newly participating hospitals for the upcoming fiscal year is incorporated into a budget neutrality offset amount to be applied to the national IPPS rates for the upcoming fiscal year. For FY 2019, in this final rule, we are including the estimated costs of the demonstration for FYs 2018 and 2019 in accordance with the methodology finalized in the FY 2018 IPPS/LTCH PPS final rule.
• Similar to previous years, in order to meet the budget neutrality requirement in section 410A(c)(2) of Public Law 108-173 with respect to the second 5-year extension period, we will continue to implement the policy according to when finalized cost reports become available for each of the second 5 years of the 10-year extension period for the newly participating hospitals and for cost reporting periods starting in or after FY 2018 that occur during the second 5-year extension period for the previously participating hospitals. We will determine the difference between the actual costs of the demonstration as determined from these finalized cost reports and the estimated cost indicated in the corresponding fiscal year IPPS final rule, and include that difference either as a positive or negative adjustment in the upcoming year's final rule.
As described earlier, we have calculated this difference for FYs 2005 through 2010 between the actual costs of the demonstration, as determined
As we finalized in the FY 2018 IPPS/LTCH PPS final rule (and again described in the FY 2019 IPPS/LTCH PPS proposed rule), for each previously participating hospital, the cost-based payment methodology under the demonstration will be applied to the date immediately following the end date of its period of performance for the first 5-year extension period. We are applying the same methodology as previously finalized to account for the costs of the demonstration and ensure that the budget neutrality requirement under section 410A of Public Law 108-173 is met for the previously participating hospitals for cost reporting periods starting in FYs 2015, 2016, and 2017. We believe it is appropriate to determine such a specific methodology applicable to these cost reporting periods because they are a component of the payment methodology for the demonstration under the second extension period, authorized by section 15003 of Public Law 114-255, yet encompass the provision of services and incurred costs occurring prior to the start of FY 2018, when the terms of continuation for these hospitals under this second extension period were finalized.
To reflect the costs of the demonstration for the previously participating hospitals for their cost reporting periods under the second extension period starting before FY 2018 (that is, cost reporting periods starting in FYs 2015, 2016, and 2017), we will determine the actual costs of the demonstration for each of these fiscal years when finalized cost reports become available. Thus, for a hospital with an end date of June 30, 2015 for the first participation period, we will determine from finalized cost reports the specific amount contributing to the total costs of the demonstration for the 3 cost reporting years from July 1, 2015 through June 30, 2018; for a hospital with an end date of June 30, 2016, we will determine from finalized cost reports the amount contributing to costs of the demonstration for the 2 cost reporting periods from July 1, 2016 through June 30, 2018.
We note that, for these hospitals, this last cost report period may include services occurring since the enactment of Public Law 114-255 and also during FY 2018. However, we believe that applying a uniform method for determining costs across a cost report year would be more reasonable from the standpoint of operational feasibility and consistent application of cost determination principles. Under this approach, we will incorporate these amounts for the previously participating hospitals for cost reporting periods starting in FYs 2015, 2016, and 2017 into a single amount to be included in the calculation of the budget neutrality offset amount to the national IPPS rates in a future final rule after such finalized cost reports become available. As noted above, we expect to do this in FY 2020 or FY 2021.
As discussed earlier and as we described in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20444), as a component of the overall budget neutrality methodology, we are using a methodology similar to previous years, according to which an estimate of the costs of the demonstration for the upcoming fiscal year is incorporated into a budget neutrality offset amount to be applied to the national IPPS rates for the upcoming fiscal year. As explained above, for FY 2019, we will be including the estimated costs of the demonstration for FYs 2018 and 2019.
As described in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38286) and FY 2019 IPPS/LTCH PPS proposed rule, we are incorporating a specific calculation to account for the fact that the cost reporting periods for the participating hospitals applicable to the estimate of the costs of the demonstration for FY 2018 would start at different points of time during FY 2018. That is, we are prorating estimated reasonable cost amounts and amounts that would be paid without the demonstration for FY 2018 according to the fraction of the number of months within the hospital's cost reporting period starting in FY 2018 that fall within the total number of months in the fiscal year. For example, if a hospital started its cost reporting period on January 1, 2018, we are multiplying the estimated cost and payment amounts, derived as described below, by a factor of 0.75. (In this discussion of how the overall calculations are conducted, this factor is referred to as “the hospital-specific prorating factor.”) The methodology for calculating the amount applicable to FY 2018 to be incorporated into the budget neutrality offset amount for FY 2019 was described in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38286) and proceeds according to the following steps:
For each hospital, we multiply each of these amounts by the FY 2017 and 2018 IPPS market basket percentage increases, which are formulated by the CMS Office of the Actuary. The result for each participating hospital would be the general estimated reasonable cost amount for covered inpatient hospital services for FY 2018.
Consistent with our methods in previous years for formulating this estimate, we apply the IPPS market basket percentage increases for FYs 2017 through 2018 to the applicable estimated reasonable cost amounts (described above) in order to model the estimated FY 2018 reasonable cost amount under the demonstration. We believe that the IPPS market basket percentage increases appropriately indicate the trend of increase in inpatient hospital operating costs under the reasonable cost methodology for the years involved.
We note that, in the FY 2019 IPPS/LTCH PPS proposed rule, we had applied a 3-percent volume adjustment to the estimates resulting from each of Steps 1 and 2. This increase was consistent with previous policy, and intended to reflect the possibility that hospitals' inpatient caseloads might increase. However, we stated in the proposed rule that we would evaluate the appropriateness of this increase in light of empirical trends specific to the participating hospitals. For each of the 17 previously participating hospitals, we compared the number of Medicare inpatient discharge reported on their cost reports for cost reporting years ending in 2012 and in 2016, and found an overall decline between these years of approximately 14 percent. For the 12 newly selected hospitals, we examined statistics on inpatient discharges for 2014 and 2016 reported on their applications, and found an increase between these years of approximately 1.7 percent. Considering that the overall trend reflects declining Medicare inpatient discharges, we have determined that the additional 3-percent adjustment is no longer justified and, therefore, are omitting it from these estimated amounts in this final rule.
In the FY 2019 IPPS/LTCH PPS proposed rule, the resulting amount applicable to FY 2018 was $33,254,247. We stated that this estimated amount was based on specific assumptions regarding the data sources used, and that if updated data became available prior to the FY 2019 IPPS/LTCH PPS final rule, we would use them as appropriate to estimate the costs for the demonstration program applicable to FY 2018 in accordance with our methodology for determining the budget neutrality estimate.
For this final rule, the estimated amount for the costs of the demonstration applicable to FY 2018 differs from that in the proposed rule because of the following factors, which we have identified: (1) Removing the hospital that has withdrawn; and (2) omitting the 3-percent volume adjustment. Based on these updated data, for this final rule, the resulting amount applicable to FY 2018 is $31,070,880, which we have included in the budget neutrality offset adjustment for FY 2019.
As described in the FY 2019 IPPS/LTCH PPS proposed rule, we are applying two differences specific to the methodology described for FY 2018 to estimate the costs of the demonstration for FY 2019. We are using the same set of “as submitted” cost reports in determining preliminary cost and payment amounts for covered inpatient hospital services. However, in updating these amounts to reflect increases in cost and payment, our methodology for determining the component of the budget neutrality offset amount applicable to FY 2019 entails applying the market basket percentage increase and applicable percentage increase for FY 2019, in addition to these update factors for FYs 2017 and 2018. The finalized amounts for FY 2019 for these respective update factors are found in section IV.B. of the preamble to this final rule. Also, because we are expecting all of the participating hospitals to participate for the entire 12-month period encompassing FY 2019, there will be no application of any prorating factor in determining the estimated costs of the demonstration for FY 2019. (In addition, for the reasons described earlier, we are omitting the 3-percent volume adjustment in determining this estimate.)
For the FY 2019 IPPS/LTCH PPS proposed rule, the resulting amount for FY 2019 was $78,409,842. Similar to above, we stated that if updated data became available prior to the final rule, we would use them to the extent appropriate to estimate the costs for the demonstration program in FY 2019 in accordance with our finalized methodology. Thus, the estimated amount of the costs of the demonstration for FY 2019 included in this FY 2019 IPPS/LTCH PPS final rule differs from that in the proposed rule because of several factors: (1) We are using the finalized market basket percentage and applicable percentage increase for FY 2019; (2) we are omitting cost report data on the one hospital that withdrew from the demonstration program; and (3) similar to our earlier discussion, we are omitting the 3-percent volume adjustment for FY 2019. Based on updated data, for this FY 2019 final rule, the resulting amount for FY 2019 is $70,929,313, which we are including in the budget neutrality offset adjustment for FY 2019.
Similar to previous years, as finalized in the FY 2018 IPPS/LTCH PPS final rule, we plan to operationalize the second specific component to the budget neutrality requirement. That is, when finalized cost reports become available for each of the second 5 years of the 10-year extension period for the newly participating hospitals and for cost reporting periods starting in or after FY 2018 that occur during the second 5-year extension period for the previously participating hospitals, we will calculate the difference between the actual costs of the demonstration as determined from these finalized cost reports and the estimated cost indicated in the corresponding fiscal year IPPS final rule, and include that difference either as a positive or negative
Therefore, in keeping with the methodologies used in previous final rules, we will continue to use a methodology for calculating the budget neutrality offset amount for the second 5 years of the 10-year extension period consisting of two components: (1) The estimated demonstration costs in the upcoming fiscal year (as described earlier); and (2) the amount by which the actual demonstration costs corresponding to an earlier, given year (which would be known once finalized cost reports become available for that year) differed from the budget neutrality offset amount finalized in the corresponding year's IPPS final rule.
As described earlier, we have calculated the difference for FYs 2005 through 2010 between the actual costs of the demonstration, as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57037), we finalized a proposal to reconcile the budget neutrality offset amounts identified in the IPPS final rules for FYs 2011 through 2016 with the actual costs of the demonstration for those years, considering the fact that the demonstration was scheduled to end December 31, 2016. In that final rule, we stated that we believed it would be appropriate to conduct this analysis for FYs 2011 through 2016 at one time, when all of the finalized cost reports for cost reporting periods beginning in FYs 2011 through 2016 are available. We stated that such an aggregate analysis encompassing the cost experience through the end of the period of performance of the demonstration would represent an administratively streamlined method, allowing for the determination of any appropriate adjustment to the IPPS rates and obviating the need for multiple, fiscal year-specific calculations and regulatory actions. Given the general lag of 3 years in finalizing cost reports, we stated that we expected any such analysis would be conducted in FY 2020.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38287), with the extension of the demonstration for another 5-year period, as authorized by section 15003 of Public Law 114-255, we modified the plan outlined in the FY 2017 IPPS/LTCH PPS final rule, and instead returned to the general procedure in previous final rules; that is, as finalized cost reports become available, we would determine the amount by which the actual costs of the demonstration for an earlier, given year differ from the estimated costs for the demonstration set forth in the IPPS final rule for the corresponding fiscal year, and then incorporate that amount into the budget neutrality offset amount for an upcoming fiscal year. We finalized a policy that if the actual costs of the demonstration for the earlier fiscal year exceeded the estimated costs of the demonstration identified in the final rule for that year, this difference would be added to the estimated costs of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the final rule. Likewise, we finalized a policy that if the estimated costs of the demonstration set forth in the final rule for a prior fiscal year exceeded the actual costs of the demonstration for that year, this difference would be subtracted from the estimated cost of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for an upcoming fiscal year. However, given that this adjustment for specific years could be positive or negative, we would combine this reconciliation for multiple prior years into one adjustment to be applied to the budget neutrality offset amount for a single fiscal year, thus reducing the possibility of both positive and negative adjustments to be applied in consecutive years, and enhancing administrative feasibility. Specifically, when finalized cost reports for FYs 2011, 2012, and 2013 are available, we stated that we would include this difference for these years in the budget neutrality offset adjustment to be applied to the national IPPS rates in a future final rule. We stated that we expected that this would occur in FY 2019. We also stated that when finalized cost reports for FYs 2014 through 2016 are available, we would include the difference between the actual costs as reflected on these cost reports and the amounts included in the budget neutrality offset amounts for these fiscal years in a future final rule. We stated that we plan to provide an update in a future final rule regarding the year that we would expect that this analysis would occur.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, we identified the differences between the total cost of the demonstration as indicated on finalized FY 2011 and 2012 cost reports and the estimates for the costs of the demonstration for the corresponding year in each of these years' final rules, and we proposed to adjust the current year's budget neutrality offset amount by the combined difference. We stated that if any information relevant to the determination of these amounts (for example, a cost report reopening) would necessitate a revision of these amounts, we would make the appropriate change and include the determination in the FY 2019 IPPS/LTCH PPS final rule. We stated, furthermore, that if the needed costs reports are available in time for the FY 2019 IPPS/LTCH PPS final rule, we also would identify the difference between the total cost of the demonstration based on finalized FY 2013 cost reports and the estimates for the costs of the demonstration for that year, and incorporate that amount into the budget neutrality offset amount for FY 2019.
As described in the FY 2019 IPPS/LTCH PPS proposed rule, finalized cost reports are available for the 16 hospitals that completed a cost reporting period beginning in FY 2011 according to the demonstration cost-based payment methodology. We note that the estimate of the costs of the demonstration for FY 2011 that was incorporated into the budget neutrality offset amount was formulated prior to the selection of hospitals under the expansion of the demonstration authorized by the Affordable Care Act. Accordingly, we based the estimate of the costs of the demonstration for FY 2011 on projected costs for 30 hospitals, the maximum number allowed by the authorizing statute in the Affordable Care Act. The actual costs of the demonstration for FY 2011 (that is, the amount from finalized cost reports for the 16 hospitals that were paid under the demonstration payment methodology for cost reporting periods with start dates during FY 2011), fell short of the estimated amount that was finalized in the FY 2011 IPPS/LTCH PPS final rule for FY 2011 by $29,971,829. We have identified no factors that require a change to this number for this FY 2019 final rule.
In addition, as also described in the FY 2019 IPPS/LTCH PPS proposed rule, finalized cost reports for the 23 demonstration hospitals that began a cost reporting period in FY 2012 are also now available. The actual costs of the demonstration as determined from these finalized cost reports fell short of the estimated amount that was finalized in the FY 2012 IPPS final rule by $8,500,373. Similarly, we have identified no factors that require a change to this number for this year's final rule.
For this final rule, finalized cost reports for the 22 hospitals that
We note that the amounts identified for the actual cost of the demonstration for each of FYs 2011, 2012, and 2013 (determined from finalized cost reports) is less than the amount that was identified in the final rule for the respective year. Therefore, in keeping with previous policy finalized in situations when the costs of the demonstration fell short of the amount estimated in the corresponding year's final rule, we are including this component as a negative adjustment to the budget neutrality offset amount for the current fiscal year.
For this FY 2019 IPPS/LTCH PPS final rule, we are incorporating the following components into the calculation of the total budget neutrality offset for FY 2019:
In keeping with previously finalized policy, we are applying these differences, according to which the actual costs of the demonstration for each of FYs 2011, 2012, and 2013 fell short of the estimated amount determined in the final rule for each of these fiscal years, by reducing the budget neutrality offset amount to the national IPPS rates for FY 2019 by these amounts.
Thus, the total budget neutrality offset amount that we are applying to the national IPPS rates for FY 2019 is: The amount determined under Step 1 ($31,070,880) plus the amount determined under Step 2 ($70,929,313) minus the amount determined under Step 3 ($29,971,829) minus the amount determined under Step 4 ($8,500,373) minus the amount determined under Step 5 ($5,398,382). This total is $58,129,609.
In addition, in accordance with the policy finalized in the FY 2018 IPPS/LTCH PPS final rule, we will incorporate the actual costs of the demonstration for the previously participating hospitals for cost reporting periods starting in FYs 2015, 2016, and 2017 into a single amount to be included in the calculation of the budget neutrality offset amount to the national IPPS rates in a future final rule after such finalized cost reports become available. We expect to do this in FY 2020 or FY 2021.
In response to the FY 2019 IPPS/LTCH PPS proposed rule, we received one public comment in support of continuing the demonstration. We appreciate the commenter's support.
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426 through 68433), we solicited public comments for potential policy changes to improve clarity and consensus among providers, Medicare, and other stakeholders regarding the relationship between hospital admission decisions and appropriate Medicare payment, such as when a Medicare beneficiary is appropriately admitted to the hospital as an inpatient and the cost to hospitals associated with making this decision. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50938 through 50942), we adopted a set of policies widely referred to as the “2 midnight” payment policy. Among the finalized changes, we codified through regulations at 42 CFR 412.3 the longstanding policy that a beneficiary becomes a hospital inpatient if formally admitted pursuant to the order of a physician (or other qualified practitioner as provided in the regulations) in accordance with the hospital conditions of participation (CoPs). In addition, we required that a written inpatient admission order be present in the medical record as a specific condition of Medicare Part A payment. In response to public comments that the requirement of a written admission order as a condition of payment is duplicative and burdensome on hospitals, we responded that the physician order reflects affirmation by the ordering physician or other qualified practitioner that hospital inpatient services are medically necessary, and the “order serves the unique purpose of initiating the inpatient admission and documenting the physician's (or other qualified practitioner as provided in the regulations) intent to admit the patient, which impacts its required timing.” Therefore, we finalized the policy requiring a written inpatient order for all hospital admissions as a specific condition of payment. We acknowledged that in the extremely rare circumstance the order to admit is missing or defective, yet the intent, decision, and recommendation of the ordering physician or other qualified practitioner to admit the beneficiary as an inpatient can clearly be derived from the medical record, medical review
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20447 and 20448), despite the discretion granted to medical reviewers to determine that admission order information derived from the medical record constructively satisfies the requirement that a written hospital inpatient admission order is present in the medical record, as we have gained experience with the policy, it has come to our attention that some medically necessary inpatient admissions are being denied payment due to technical discrepancies with the documentation of inpatient admission orders. Common technical discrepancies consist of missing practitioner admission signatures, missing co-signatures or authentication signatures, and signatures occurring after discharge. We have become aware that, particularly during the case review process, these discrepancies have occasionally been the primary reason for denying Medicare payment of an individual claim. In looking to reduce unnecessary administrative burden on physicians and providers and having gained experience with the policy since it was implemented, we have concluded that if the hospital is operating in accordance with the hospital CoPs, medical reviews should primarily focus on whether the inpatient admission was medically reasonable and necessary rather than occasional inadvertent signature documentation issues unrelated to the medical necessity of the inpatient stay. It was not our intent when we finalized the admission order documentation requirements that they should by themselves lead to the denial of payment for medically reasonable and necessary inpatient stays, even if such denials occur infrequently.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20447 and 20448), we proposed to revise the admission order documentation requirements by removing the requirement that written inpatient admission orders are a specific requirement for Medicare Part A payment. Specifically, we proposed to revise the inpatient admission order policy to no longer require a written inpatient admission order to be present in the medical record as a specific condition of Medicare Part A payment. Hospitals and physicians are still required to document relevant orders in the medical record to substantiate medical necessity requirements. If other available documentation, such as the physician certification statement when required, progress notes, or the medical record as a whole, supports that all the coverage criteria (including medical necessity) are met, and the hospital is operating in accordance with the hospital conditions of participation (CoPs), we stated that we believe it is no longer necessary to also require specific documentation requirements of inpatient admission orders as a condition of Medicare Part A payment. We stated that the proposal would not change the requirement that an individual is considered an inpatient if formally admitted as an inpatient under an order for inpatient admission. While this continues to be a requirement, as indicated earlier, technical discrepancies with the documentation of inpatient admission orders have led to the denial of otherwise medically necessary inpatient admission. To reduce this unnecessary administrative burden on physicians and providers, we proposed to no longer require that the specific documentation requirements of inpatient admission orders be present in the medical record as a condition of Medicare Part A payment.
Accordingly, we proposed to revise the regulations at 42 CFR 412.3(a) to remove the language stating that a physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A. We note that we did not propose any changes with respect to the “2 midnight” payment policy.
Other commenters believed that the proposal would make the payment process even more difficult, especially in instances where patients were not registered by the hospital admissions staff, did not receive the required notice of their inpatient status, and there was no valid admission order related to their visit. The commenters were concerned that these particular cases would prevent patients from being knowledgeable of their appeal rights and financial liability.
Some commenters believed that, without an inpatient admission order, Medicare coverage of SNF services would be at risk due to issues such as lack of clarity in the medical record or a MAC's misinterpretation of physician intent, and stated that denial of such needed services would negatively impact patients' health.
Regarding the concerns of some commenters regarding orders that were intentionally not signed because the practitioner responsible for signing disagreed with the decision to admit, it should never have been the case that the only evidence in the medical record regarding this uncommon situation was the absence of the physician's or other qualified practitioner's signature. The medical record as a whole should reflect whether there was a decision by a physician or other qualified practitioner to admit the beneficiary as an inpatient or not. This fact is precisely why, under our current guidance, we acknowledged
Regarding the commenters who were concerned that our proposal would remove the requirement for an order altogether, affecting patient appeal rights, or increase financial liability, as stated earlier, the physician order remains a requirement for purposes of reflecting a determination by the ordering physician or other qualified practitioner that hospital inpatient services are medically necessary, initiating the inpatient admission. Additionally, regardless of this proposal and other physician order requirements described earlier, the hospital CoPs include the requirement that all Medicare inpatients must receive written information about their hospital discharge appeal rights.
Regarding the comment about retroactive orders, it has been and continues to be longstanding Medicare policy to not permit retroactive orders. The order must be furnished at or before the time of the inpatient admission. The order can be written in advance of the formal admission (for example, for a prescheduled surgery), but the inpatient admission does not occur until hospital services are provided to the beneficiary.
In regards to the comment regarding whether this proposed policy would require documentation of how a technical discrepancy occurred, we refer readers to the following subregulatory guidance from the Medicare Benefits Policy Manual (MBPM), Chapter 1, Section 10.2.: “The order to admit may be missing or defective (that is, illegible, or incomplete, for example `inpatient' is not specified), yet the intent, decision, and recommendation of the ordering practitioner to admit the beneficiary as an inpatient can clearly be derived from the medical record. In these situations, contractors have been provided with discretion to determine that this information provides acceptable evidence to support the hospital inpatient admission. However, there can be no uncertainty regarding the intent, decision, and recommendation by the ordering practitioner to admit the beneficiary as an inpatient, and no reasonable possibility that the care could have been adequately provided in an outpatient setting.” This guidance will remain in effect after this rule is finalized.
The commenters stated that because of perceived uncertainty and lack of clarity in comparing previous CMS guidance and rulemaking language to the language in the policy proposal, providers are going to need assistance in how to proceed in determining how to document inpatient admission orders and ensure proper processing of Medicare Part A payment. The commenters requested that the proposed policy be incorporated into hospital's post-discharge review in addition to the audits performed by Medicare contractors.
In addition, commenters believed that the 2-midnight rule amended the Medicare CoPs to require an inpatient admission order. The commenters explained that if CMS proceeds with its proposal, the Agency would have to revise the CoPs to clarify that an order is no longer a condition for Medicare Part A payment.
However, as we have gained experience with the policy, it has come to our attention that, despite the discretion granted to medical reviewers to determine that admission order information derived from the medical record constructively satisfies the requirement that a written hospital inpatient admission order is present in the medical record, some medically necessary inpatient admissions are being denied payment due to technical discrepancies with the documentation of inpatient admission orders. Particularly during the case review process, these discrepancies have occasionally been the primary reason for denying Medicare payment of an individual claim. We note that when we finalized the admission order documentation requirements in past rulemaking and guidance, it was not our intent that admission order documentation requirements should, by themselves, lead to the denial of payment for medically reasonable and necessary inpatient stay, even if such denials occur infrequently. It is our intention that this revised policy will properly adjust the focus of the medical review process towards determining whether an inpatient stay was medically reasonable and necessary and intended by the admitting physician rather than towards occasional inadvertent signature or documentation issues unrelated to the medical necessity of the inpatient stay or the intent of the physician.
Regarding whether CMS would also need to make revisions to the CoPs in order to support this finalized revised regulation, we note that CMS did not make any amendments to the CoPs when we adopted the 2-midnight payment policy or our current inpatient admission order policy; therefore, there is no need to revise the CoPs as a result of the regulatory change we are now finalizing.
After consideration of the public comments we received, we are finalizing our proposal to revise the inpatient admission order policy to no longer require a written inpatient admission order to be present in the medical record as a specific condition of Medicare Part A payment. Specifically, we are finalizing our proposal to revise the regulation at 42 CFR 412.3(a) to remove the language stating that a physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A.
Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services in accordance with a prospective payment system established by the Secretary. Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capital-related costs. We initially implemented the IPPS for capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In that final rule, we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capital-related costs from a reasonable cost-based payment methodology to a prospective payment methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period that was established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.)
The basic methodology for determining capital prospective payments using the Federal rate is set forth in the regulations at 42 CFR 412.312. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows:
(Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable).
In addition, under § 412.312(c), hospitals also may receive outlier payments under the capital IPPS for extraordinarily high-cost cases that
The regulations at 42 CFR 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under § 412.348(b) through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at § 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).
Under § 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital's control. Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186).
Under the capital IPPS, the regulations at 42 CFR 412.300(b) define a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with § 412.304(c)(2), under the capital IPPS, a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital-related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised the regulations at 42 CFR 412.374 relating to the calculation of capital IPPS payments to hospitals located in Puerto Rico beginning in FY 2017 to parallel the change in the statutory calculation of operating IPPS payments to hospitals located in Puerto Rico, for discharges occurring on or after January 1, 2016, made by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 601 of Public Law 114-113 increased the applicable Federal percentage of the operating IPPS payment for hospitals located in Puerto Rico from 75 percent to 100 percent and decreased the applicable Puerto Rico percentage of the operating IPPS payments for hospitals located in Puerto Rico from 25 percent to zero percent, applicable to discharges occurring on or after January 1, 2016. As such, under revised § 412.374, for discharges occurring on or after October 1, 2016, capital IPPS payments to hospitals located in Puerto Rico are based on 100 percent of the capital Federal rate.
The final annual update to the national capital Federal rate, as provided for in 42 CFR 412.308(c), for FY 2019 is discussed in section III. of the Addendum to this FY 2019 IPPS/LTCH PPS final rule.
In section II.D. of the preamble of this FY 2019 IPPS/LTCH PPS final rule, we present a discussion of the MS-DRG documentation and coding adjustment, including previously finalized policies and historical adjustments, as well as the adjustment to the standardized amount under section 1886(d) of the Act that we proposed and are finalizing for FY 2019, in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 414 of the MACRA. Because these provisions require us to make an adjustment only to the operating IPPS standardized amount, we are not making a similar adjustment to the national capital Federal rate (or to the hospital-specific rates).
Certain hospitals excluded from a prospective payment system, including children's hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. A per discharge limit (the target amount, as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital's own cost experience in its base year, and updated annually by a rate-of-increase percentage. For each cost reporting period, the updated target amount is multiplied by total Medicare discharges during that period and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) of Medicare reimbursement for total inpatient operating costs for a hospital's cost reporting period. In accordance with § 403.752(a) of the regulations, religious nonmedical health care institutions (RNHCIs) also are subject to the rate-of-increase limits established under § 413.40 of the regulations discussed previously. Furthermore, in accordance with § 412.526(c)(3) of the regulations, extended neoplastic disease care hospitals also are subject to the rate-of-increase limits established under § 413.40 of the regulations discussed previously.
As explained in the FY 2006 IPPS final rule (70 FR 47396 through 47398), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children's hospitals, cancer hospitals, and RNHCIs. Consistent with the regulations at §§ 412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update target amounts for short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. In the FYs 2014 and 2015 IPPS/LTCH PPS final rules (78 FR 50747 through 50748 and 79 FR 50156 through 50157, respectively), we adopted a policy of using the percentage increase in the FY 2010-based IPPS operating market basket to update the target amounts for FY 2014 and subsequent fiscal years for children's hospitals, cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. However, in the FY 2018 IPPS/LTCH PPS final rule, we rebased and revised the IPPS operating basket to a 2014 base year, effective for FY 2018 and subsequent years (82 FR 38158 through 38175), and finalized the use of the percentage increase in the 2014-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2018 and subsequent years. Accordingly, for FY 2019, the rate-of-increase percentage to be applied to the target amount for these hospitals is the FY 2019 percentage increase in the 2014-based IPPS operating market basket.
For the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20449), based on IGI's 2017 fourth quarter forecast, we estimated that the 2014-based IPPS operating market basket update for FY 2019 would be 2.8 percent (that is, the estimate of the market basket rate-of-increase). Based on this estimate, we stated in the proposed rule that the FY 2019 rate-of-increase percentage that would be applied to the FY 2018 target amounts in order to calculate the FY 2019 target amounts for children's hospitals, cancer hospitals, RNCHIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa would be 2.8 percent, in accordance with the applicable regulations at 42 CFR 413.40. However, we indicated in the proposed rule that if more recent data became available for the final rule, we would use them to calculate the final IPPS operating market basket update for FY 2019. For this FY 2019 IPPS/LTCH PPS final rule, based on IGI's 2018 second quarter forecast (which is the most recent data available), we calculated the 2014-based IPPS operating market basket update for FY 2019 to be 2.9 percent. Therefore, the FY 2019 rate-of-increase percentage that is applied to the FY 2018 target amounts in order to calculate the FY 2019 target amounts for children's hospitals, cancer hospitals, RNCHIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is 2.9 percent, in accordance with the applicable regulations at 42 CFR 413.40.
In addition, payment for inpatient operating costs for hospitals classified under section 1886(d)(1)(B)(vi) of the Act (which we refer to as “extended neoplastic disease care hospitals”) for cost reporting periods beginning on or after January 1, 2015, is to be made as described in 42 CFR 412.526(c)(3), and payment for capital costs for these hospitals is to be made as described in 42 CFR 412.526(c)(4). (For additional information on these payment regulations, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 38322).) Section 412.526(c)(3) provides that the hospital's Medicare allowable net inpatient operating costs for that period are paid on a reasonable cost basis, subject to that hospital's ceiling, as determined under § 412.526(c)(1), for that period. Under section 412.526(c)(1), for each cost reporting period, the ceiling was determined by multiplying the updated target amount, as defined in § 412.526(c)(2), for that period by the number of Medicare discharges paid during that period. Section 412.526(c)(2)(i) describes the method for determining the target amount for cost reporting periods beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for cost reporting periods beginning during fiscal years after FY 2015, the target amount will equal the hospital's target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period (79 FR 50197).
For FY 2019, in accordance with § 412.22(i) and § 412.526(c)(2)(ii) of the regulations, for cost reporting periods beginning during FY 2019, the update to the target amount for long-term care neoplastic disease hospitals (that is, hospitals described under § 412.22(i)) is the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for FY 2019, which would be equal to the percentage increase in the hospital market basket index, which, in the proposed rule, was estimated to be the percentage increase in the 2014-based IPPS operating market basket (that is, the estimate of the market basket rate-of-increase). Accordingly, for the FY 2019 proposed rule, the update to an extended neoplastic disease care hospital's target amount for FY 2019 was 2.8 percent, which was based on IGI's 2017 fourth quarter forecast. Furthermore, we proposed that if more recent data became available for the final rule, we would use that updated data to calculate the IPPS operating market basket update for FY 2019. For this final rule, based on IGI's second quarter 2018 forecast (which is the most recent data available), the update to an extended neoplastic disease care hospital's target amount for FY 2019 is 2.9 percent.
We did not receive any public comments in response to these proposals. Therefore, we are finalizing them as proposed.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38292 through 38294), we finalized a change to our hospital-within-hospital (HwH) regulations at 42 CFR 412.22(e) to only require, as of October 1, 2017, that IPPS-excluded HwHs that are co-located with IPPS hospitals comply with the separateness and control requirements in those regulations. We adopted this change because we believe that the policy concerns that underlay the previous HwH regulations (that is, inappropriate patient shifting and hospitals acting as illegal de facto units) are sufficiently moderated in situations where IPPS-excluded hospitals are co-located with each other, in large part due to changes that have been made to the way most types of IPPS-excluded hospitals are paid under Medicare. In response to our proposal on this issue, we received some public comments requesting that CMS make analogous changes to the rules governing satellite facilities, and we responded in the FY 2018 IPPS/LTCH PPS final rule that we would take that request under consideration for future rulemaking.
Under 42 CFR 412.22(h), a satellite facility is defined as part of a hospital that provides inpatient services in a building also used by another hospital, or in one or more entire buildings located on the same campus as buildings used by another hospital.
There are significant similarities between the definition of a satellite facility and the definition of an HwH as those definitions relate to their co-location with host hospitals. Our policies on satellite facilities have also been premised on many of the same concerns that formed the basis for our HwH policies. That is, the separateness and control policies for satellite facilities at 42 CFR 412.22(h) were aimed at mitigating our concern that the co-location of a satellite facility and a host hospital raised a potential for inappropriate patient shifting that we believed could be guided more by attempts to maximize Medicare reimbursements than by patient welfare (71 FR 48107). However, just as changes to the way most types of IPPS-excluded hospitals are paid under Medicare have sufficiently moderated this concern in situations where IPPS-excluded hospitals are co-located with each other, we believe that these payment changes also sufficiently moderate these concerns in situations where IPPS-excluded satellite facilities are co-located with IPPS-excluded host hospitals. Furthermore, we believe that there is no compelling policy rationale for treating satellite facilities and HwHs differently on the issue of separateness and control because there is no meaningful distinction between these types of facilities that would justify a satellite facility having to comply with separateness and control requirements in a situation in which an HwH would not be required to comply (we note that the separateness and control requirements for satellite facilities are not the same as those for HwHs; however, they are similar). Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20450 and 20451), we proposed to revise our regulations at
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20451), we also proposed that, for cost reporting periods beginning on or after October 1, 2019, an IPPS-excluded hospital would no longer be precluded from having an excluded psychiatric and/or rehabilitation unit. Consistent with our proposed changes to the regulations governing satellite facilities discussed earlier, we also proposed to add new paragraph (iv) to § 412.25(e)(2) to specify that an IPPS-excluded satellite facility of an IPPS-excluded unit of an IPPS-excluded hospital would not have to comply with the separateness and control requirements so long as the satellite of the excluded unit is not co-located with an IPPS hospital, and to make conforming revisions to § 412.25(e)(2)(iii)(A) to subject that provision to paragraph (iv), which we are finalizing without modification after consideration of public comments, as discussed in section VI.C. of the preamble of this final rule.
In the FY 2019 IPPS/LTCH PPS proposed rule, we stated that it is important to point out that payment rules, such as the HwH or satellite facility rules, never waive or supersede the requirement that all hospitals must comply with the hospital conditions of participation (CoPs). All hospitals, regardless of payment status, must always demonstrate separate and independent compliance with the hospital CoPs, even when an entire hospital or a part of a hospital is located in a building also used by another hospital, or in one or more entire buildings located on the same campus as buildings used by another hospital. We further noted that the proposal would not affect IPPS-excluded satellite facilities that are co-located with IPPS hospitals that are currently grandfathered under § 412.22(h)(2)(iii)(A)(
We note that, in response to the proposed rule, several commenters addressed issues relating to HwHs and satellite facilities that were outside the scope of the proposals in the proposed rule related to the CoPs and our existing regulations concerning HwHs. We are not addressing those comments in this final rule. However, we may take them into consideration for future rulemaking.
After consideration of the public comments received, we are finalizing our proposals without modification. Specifically, we are adding a new paragraph (
Under existing regulations at 42 CFR 412.25, an excluded psychiatric or rehabilitation unit cannot be part of an institution that is excluded in its entirety from the IPPS. These regulations were codified in the FY 1994 IPPS final rule (58 FR 46318). However, as we explained in that rule, while this prohibition was not explicitly stated in the regulations until that time, the prohibition had been our longstanding policy. This policy was adopted at that time because it would have been redundant to allow an IPPS-excluded hospital to have an IPPS-excluded unit because both the hospital and the unit would have been paid under the same Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) payment system methodology, described in section VI.A. of this final rule. In addition, we were concerned about the possibility of IPPS-excluded hospitals artificially inflating their target amounts by operating IPPS-excluded units (58 FR 46318).
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38292 through 38294), we finalized a change to the HwH regulations to only require, as of October 1, 2017, that IPPS-excluded HwHs that are co-located with IPPS hospitals comply with the separateness and control requirements in those regulations. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20451), we proposed to make similar changes to the regulations governing satellite facilities, which would allow these facilities, including satellite facilities of hospital units, to maintain their IPPS-excluded status without complying with the separateness and control requirements so long as they are not co-located with an IPPS hospital. In conjunction with
In the FY 2019 IPPS/LTCH PPS proposed rule, we proposed to revise § 412.25(a)(1)(ii) to specify that the requirement that an excluded psychiatric or rehabilitation unit cannot be part of an IPPS-excluded hospital is only effective through cost reporting periods beginning on or before September 30, 2019. Under the proposal, effective with cost reporting periods beginning on or after October 1, 2019, an IPPS-excluded hospital would be permitted to have an excluded psychiatric and/or rehabilitation unit. In addition, we proposed to revise § 412.25(d) to specify that an IPPS-excluded hospital may not have an IPPS-excluded unit of the same type (psychiatric or rehabilitation) as the hospital (for example, an IRF may not have an IRF unit). We stated that we believe that this proposed change would be consistent with the current preclusion in § 412.25(d) that prevents one hospital from having more than one of the same type of IPPS-excluded unit. However, we noted that if these proposed changes to the payment rules are finalized, an IPPS-excluded hospital operating an IPPS-excluded unit must continue to be in compliance with other Medicare regulations and CoPs applicable to the hospital or unit. An IPPS-excluded unit within a hospital is part of the hospital. Noncompliance with any of the hospital CoPs at 42 CFR 482.1 through 482.58 at any part of a certified hospital is noncompliance for the entire Medicare-certified hospital. Therefore, noncompliance with the hospital CoPs in an IPPS excluded unit is CoP noncompliance for the entire certified hospital. For example, the CoPs that govern IPFs would apply to an IPF that operates an excluded rehabilitation unit, and those CoPs require that certain psychiatric treatment protocols apply to every IPF patient (including those in the rehabilitation unit).
We proposed that cost reporting periods beginning on or after October 1, 2019 would be the effective date of these changes to allow sufficient time for both CMS and IPPS-excluded hospitals to make the necessary administrative and operational changes to fully implement the proposed changes. We stated that we believed this proposed effective date would, to the best of our ability, ensure that these units can begin to operate without unnecessary administrative issues and delays.
While we appreciate the concern expressed by some commenters relating to the care accessible to Medicare beneficiaries, we disagree that such concerns are valid or germane to our proposed revisions. As discussed in more detail earlier, the reason why we prohibited IPPS-excluded hospitals from operating IPPS-excluded units was because we were concerned that the IPPS-excluded hospital could artificially manipulate its TEFRA ceiling. As we also discussed in more detail earlier, that concern is no longer valid, given reforms in payment systems for IPPS-excluded hospitals. Therefore, we believe it is appropriate to retire a policy that no longer serves its purpose. In addition, while the commenters stated their concern, they did not provide data or information to indicate that the proposed change would adversely affect patients nor did they
With respect to the comment that the proposed changes are inconsistent with the hospital CoPs, as we stated earlier, our proposal to allow IPPS-excluded hospitals to operate IPPS-excluded units is a payment rule, which cannot supersede the hospital CoPs. We believe that our proposal is consistent with the CoPs as well as with the finalized changes to the separateness and control rules for HwHs and satellite facilities discussed in section VI.B. of the preamble of this final rule.
We note that, in response to the proposed rule, some commenters requested other changes in light of our proposals—for example, changing the hospital CoPs to allow additional integration between co-located hospitals—that were outside the scope of the provisions in the proposed rule. While we are not addressing those comments in this final rule, we will take these suggestions into consideration for possible future rulemaking.
We received several public comments that addressed issues related to services provided in excluded units that were outside the scope of the provisions of the proposed rule. We are not addressing those comments in this final rule but may take them under consideration for future rulemaking.
After consideration of the public comments we received, we are finalizing our changes to § 412.25(a)(1)(ii) as proposed without modification, making a conforming change to § 412.25(a)(1)(iii) by replacing the phrase “beds that are not excluded from the inpatient prospective payment system” with the phrase “beds that are paid under the applicable payment system under which the hospital is paid”, as described earlier in our response to comments, revising § 412.25(d) to specify that an IPPS-excluded hospital may not have an IPPS-excluded unit of the same type (psychiatric or rehabilitation) as the hospital, and revising § 412.23(e)(3) to specify that discharges from IPPS-excluded units will not be included in the calculation of an LTCH's average length of stay.
Section 4419(b) of Public Law 105-33 requires the Secretary to publish annually in the
The process of requesting, adjusting, and awarding an adjustment payment is likely to occur over a 2-year period or longer. First, generally, an excluded hospital must file its cost report for the fiscal year in accordance with § 413.24(f)(2) of the regulations. The MAC reviews the cost report and issues a notice of provider reimbursement (NPR). Once the hospital receives the NPR, if its operating costs are in excess of the ceiling, the hospital may file a request for an adjustment payment. After the MAC receives the hospital's request in accordance with applicable regulations, the MAC or CMS, depending on the type of adjustment requested, reviews the request and determines if an adjustment payment is warranted. This determination is sometimes not made until more than 180 days after the date the request is filed because there are times when the request applications are incomplete and additional information must be requested in order to have a completed request application. However, in an attempt to provide interested parties with data on the most recent adjustment payments for which we have data, we
The table below includes the most recent data available from the MACs and CMS on adjustment payments that were adjudicated during FY 2017. As indicated above, the adjustments made during FY 2017 only pertain to cost reporting periods ending in years prior to FY 2017. Total adjustment payments made to excluded hospitals during FY 2017 are $8,811,316. The table depicts for each class of hospitals, in the aggregate, the number of adjustment requests adjudicated, the excess operating costs over the ceiling, and the amount of the adjustment payments.
Section 1820 of the Act provides for the establishment of Medicare Rural Hospital Flexibility Programs (MRHFPs), under which individual States may designate certain facilities as critical access hospitals (CAHs). Facilities that are so designated and meet the CAH conditions of participation under 42 CFR part 485, subpart F, will be certified as CAHs by CMS. Regulations governing payments to CAHs for services to Medicare beneficiaries are located in 42 CFR part 413.
As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20451 through 20453), section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126 of the Affordable Care Act, authorizes a demonstration project to allow eligible entities to develop and test new models for the delivery of health care services in eligible counties in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries. The demonstration is titled “Demonstration Project on Community Health Integration Models in Certain Rural Counties,” and is commonly known as the Frontier Community Health Integration Project (FCHIP) demonstration.
The authorizing statute states the eligibility criteria for entities to be able to participate in the demonstration. An eligible entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as amended, is an MRHFP grantee under section 1820(g) of the Act (that is, a CAH); and is located in a State in which at least 65 percent of the counties in the State are counties that have 6 or less residents per square mile.
The authorizing statute stipulates several other requirements for the demonstration. Section 123(d)(2)(B) of Public Law 110-275, as amended, limits participation in the demonstration to eligible entities in not more than 4 States. Section 123(f)(1) of Public Law 110-275 requires the demonstration project to be conducted for a 3-year period. In addition, section 123(g)(1)(B) of Public Law 110-275 requires that the demonstration be budget neutral. Specifically, this provision states that in conducting the demonstration project, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project under the section were not implemented. Furthermore, section 123(i) of Public Law 110-275 states that the Secretary may waive such requirements of titles XVIII and XIX of the Act as may be necessary and appropriate for the purpose of carrying out the demonstration project, thus allowing the waiver of Medicare payment rules encompassed in the demonstration.
In January 2014, CMS released a request for applications (RFA) for the FCHIP demonstration. Using 2013 data from the U.S. Census Bureau, CMS identified Alaska, Montana, Nevada, North Dakota, and Wyoming as meeting the statutory eligibility requirement for participation in the demonstration. The RFA solicited CAHs in these five States to participate in the demonstration, stating that participation would be limited to CAHs in four of the States. To apply, CAHs were required to meet the eligibility requirements in the authorizing legislation, and, in addition, to describe a proposal to enhance health-related services that would complement those currently provided by the CAH and better serve the community's needs. In addition, in the RFA, CMS interpreted the eligible entity definition in the statute as meaning a CAH that receives funding through the MHRFP. The RFA identified four interventions, under which specific waivers of Medicare payment rules would allow for enhanced payment for telehealth, ambulance services, and home health services, and an increase in the number of swing beds available to furnish skilled nursing facility/nursing facility services. These waivers were formulated with the goal of increasing access to care with no net increase in costs.
Ten CAHs were selected for participation in the demonstration, which started on August 1, 2016. These CAHs are located in Montana, Nevada, and North Dakota, and they are participating in three of the four interventions identified in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065) and FY 2018 IPPS/LTCH PPS final rule (82 FR 38294 through 38296). Eight CAHs are participating in the telehealth intervention, three CAHs are participating in the skilled nursing facility/nursing facility bed intervention, and two CAHs are participating in the ambulance services intervention. Each CAH is allowed to participate in more than one of the interventions. None of the selected CAHs are participants in the home health intervention, which was the fourth intervention included in the RFA.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065) and FY 2018 IPPS/LTCH PPS final rule (82 FR 38294 through 38296), we finalized a policy to address the budget neutrality requirement for the demonstration. As explained in the FY 2018 IPPS/LTCH PPS final rule, we based our selection of CAHs for participation with the goal of maintaining the budget neutrality of the demonstration on its own terms (that is,
Based on actuarial analysis using cost report settlements for FYs 2013 and 2014, the demonstration is projected to satisfy the budget neutrality requirement and likely yield a total net savings. As we estimated for the FY 2019 IPPS/LTCH PPS proposed rule, for this FY 2019 IPPS/LTCH PPS final rule, we estimate that the total impact of the payment recoupment will be no greater than 0.03 percent of CAHs' total Medicare payments within one fiscal year (that is, Medicare Part A and Part B). The final budget neutrality estimates for the FCHIP demonstration will be based on the demonstration period, which is August 1, 2016 through July 31, 2019.
The demonstration is projected to impact payments to participating CAHs under both Medicare Part A and Part B. As stated in the FY 2018 IPPS/LTCH PPS final rule, in the event the demonstration is found not to have been budget neutral, any excess costs will be recouped over a period of 3 cost reporting years, beginning in CY 2020. The 3-year period for recoupment will allow for a reasonable timeframe for the payment reduction and to minimize any impact on CAHs' operations. Therefore, because any reduction to CAH payments in order to recoup excess costs under the demonstration will not begin until CY 2020, this policy will have no impact for any national payment system for FY 2019.
We did not receive any public comments on our discussion of the FCHIP demonstration in the FY 2019 IPPS/LTCH PPS proposed rule.
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554), provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH as a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days. Section 1886(d)(1)(B)(iv)(II) of the Act (“subclause II” LTCHs) also provided an alternative definition of LTCHs. However, section 15008 of the 21st Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to exclude former “subclause II” LTCHs from being paid under the LTCH PPS and created a new category of IPPS-excluded hospitals, which we refer to as “extended neoplastic disease care hospitals”), to be paid as hospitals that were formally classified as “subclause (II)” LTCHs (82 FR 38298).
Section 123 of the BBRA requires the PPS for LTCHs to be a “per discharge” system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.
In the August 30, 2002
The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) for payments for inpatient services provided by an LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable cost-based payment provisions are located at 42 CFR part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and were paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospital-
In the August 30, 2002 final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, an LTCH's total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless an LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs' cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate.
In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR part 412, subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954).
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623), we implemented the provisions of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated the application of the “site neutral” payment rate under the LTCH PPS for discharges that do not meet the statutory criteria for exclusion beginning in FY 2016. For cost reporting periods beginning on or after October 1, 2015, discharges that do not meet certain statutory criteria for exclusion are paid based on the site neutral payment rate. Discharges that do meet the statutory criteria continue to receive payment based on the LTCH PPS standard Federal payment rate. For more information on the statutory requirements of the Pathway for SGR Reform Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068 through 57075).
In the FY 2018 IPPS/LTCH PPS final rule, we implemented several provisions of the 21st Century Cures Act (“the Cures Act”) (Pub. L. 114-255) that affected the LTCH PPS:
• Section 15004(a), which changed the moratorium on increasing the number of beds in existing LTCHs and LTCH satellite facilities. However, we note that this moratorium expired effective October 1, 2017.
• Section 15004(b), which specifies that, beginning in FY 2018, the estimated aggregate amount of HCO payments in a given year is equal to 99.6875 percent of the 8 percent estimated aggregate payments for standard Federal payment rate cases (that is, 7.975 percent) while requiring that we adjust the standard Federal payment rate each year to ensure budget neutrality for HCO payments as if estimated aggregate HCO payments made for standard Federal payment rate discharges remained at 8 percent as done through our previous regulatory requirement. (We note these provisions do not apply with respect to the computation of the applicable site neutral payment rate under section 1886(m)(6) of the Act.)
• Section 15006, which amended sections 114(c)(1)(A) and (c)(2) of the MMSEA, which provided a statutory extension on the moratoria on the full implementation of the 25-percent threshold policy on LTCH PPS discharges for LTCHs governed under § 412.534, § 412.536, and § 412.538 based on the LTCH's cost reporting period beginning dates. In addition to the statutory moratorium, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38318 through 38320), we also implemented a 1-year regulatory delay on the full implementation of the 25-percent threshold policy under § 412.538.
• Section 15007, which extends the exclusion of Medicare Advantage plans' and site neutral payment rate discharges from the calculation of the average length of stay for all LTCHs, for discharges occurring in any cost reporting period beginning on or after October 1, 2015.
• Section 15008, which changed the classification of certain hospitals. Specifically, section 15008 of Public Law 114-255 provided for the change in Medicare classification for “subclause (II)” LTCHs by redesignating such hospitals from section 1886(d)(1)(B)(iv)(II) of the Act to section 1886(d)(1)(B)(vi) of the Act, which is described earlier.
• Section 15009, which provides for a temporary exception to the site neutral payment rate for certain spinal cord specialty hospitals for discharges occurring in cost reporting periods beginning during FY 2018 and 2019 for LTCHs that meet specified statutory criteria to be excepted from the site neutral payment rate.
• Section 15010, which created a new temporary exception to the site neutral payment rate for certain severe wound discharges from certain LTCHs during such LTCHs' cost reporting periods beginning during FY 2018.
As we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20465), we are making conforming changes to our regulations to implement the provisions of section 51005 of the Bipartisan Budget Act of 2018, Public Law 115-123, which extends the transitional blended payment rate for site neutral payment rate cases for an additional 2 years. We refer readers to section VII.C of the preamble of this final rule for a discussion of our final policy.
We received several public comments that addressed issues that were outside the scope of the FY 2019 proposed rule. Therefore we are not responding to them in this final rule. We may take these public comments under consideration in future rulemaking.
Under the regulations at § 412.23(e)(1), to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare. Furthermore, § 412.23(e)(2)(i), which implements section 1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average Medicare inpatient length of stay of greater than 25 days to be paid under the LTCH PPS. In accordance with section 1206(a)(3) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by section 15007 of Public Law 114-255, we amended our regulations to specify that Medicare Advantage plans' and site neutral payment rate discharges are excluded from the calculation of the average length of stay for all LTCHs, for discharges occurring in cost reporting period beginning on or after October 1, 2015.
The following hospitals are paid under special payment provisions, as described in § 412.22(c) and, therefore, are not subject to the LTCH PPS rules:
• Veterans Administration hospitals.
• Hospitals that are reimbursed under State cost control systems approved under 42 CFR part 403.
• Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1), section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject to the rate-of-increase test at section 1814(b) of the Act), or section 3201 of the Patient Protection and Affordable Care Act (Pub. L. 111-148 (42 U.S.C. 1315a).
• Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries.
In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). This discussion was further clarified in the RY 2005 LTCH PPS final rule (69 FR 25676). In keeping with those discussions, if the Medicare payment to the LTCH is the full LTC-DRG payment amount, consistent with other established hospital prospective payment systems, § 412.507 currently provides that an LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87 and for items and services specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for days for which the beneficiary has coverage until the short-stay outlier (SSO) threshold is exceeded. If the Medicare payment was for a SSO case (§ 412.529), and that payment was less than the full LTC-DRG payment amount because the beneficiary had insufficient remaining Medicare days, the LTCH is currently also permitted to charge the beneficiary for services delivered on those uncovered days (§ 412.507). In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to expressly limit the charges that may be imposed on beneficiaries whose discharges are paid at the site neutral payment rate under the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we amended the regulations under § 412.507 to clarify our existing policy that blended payments made to an LTCH during its transitional period (that is, payment for discharges occurring in cost reporting periods beginning in FY 2016 or 2017) are considered to be site neutral payment rate payments.
Section 123 of the BBRA required that the Secretary implement a PPS for LTCHs to replace the cost-based payment system under TEFRA. Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine the feasibility and the impact of basing payment under the LTCH PPS on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients.
When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system utilized at that time under the IPPS. As a component of the LTCH PPS, we refer to this patient classification system as the “long-term care diagnosis-related groups (LTC-DRGs).” Although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect the differences in patient resource use of LTCH patients, consistent with section 123(a)(1) of the BBRA (Pub. L. 106-113).
As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), the MS-DRGs and the Medicare severity long-term care diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR part 412, subpart O applicable to LTCHs for policy descriptions and payment calculations, all references to LTC-DRGs would be considered a reference to MS-LTC-DRGs. For the remainder of this section, we present the discussion in terms of the current MS-LTC-DRG patient classification system unless specifically referring to the previous LTC-DRG patient classification system that was in effect before October 1, 2007.)
The MS-DRGs adopted in FY 2008 represent an increase in the number of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG classifications are updated annually. There are currently 757 MS-DRG groupings. For FY 2019, there are 761 MS-DRG groupings based on the changes, as discussed in section II.F. of the preamble of this FY 2019 IPPS/LTCH PPS final rule. Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515 of the regulations, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS-LTC-DRGs based on clinical characteristics and estimated resource needs. We then assign an appropriate weight to the MS-LTC-DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs.
In this section of the final rule, we provide a general summary of our existing methodology for determining the FY 2019 MS-LTC-DRG relative weights under the LTCH PPS.
As we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20455), in general, for FY 2019, we are continuing to use our existing methodology to determine the MS-LTC-DRG relative weights (as discussed in greater detail in section VII.B.3. of the preamble of this final rule). As we established when we implemented the dual rate LTCH PPS payment structure codified under § 412.522, which began in FY 2016, as we proposed, the annual recalibration of the MS-LTC-DRG relative weights are determined: (1) Using only data from available LTCH PPS claims that would have qualified for payment under the new LTCH PPS standard Federal payment rate if that rate had been in effect at the time of discharge when claims data from time periods before the dual rate LTCH PPS payment structure applies are used to calculate the relative weights; and (2) using only data from available LTCH PPS claims that qualify for payment under the new LTCH PPS standard Federal payment rate when claims data
Furthermore, for FY 2019, in using data from applicable LTCH cases to establish MS-LTC-DRG relative weights, as we proposed, we are continuing to establish low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less than 25 cases) using our quintile methodology in determining the MS-LTC-DRG relative weights because LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. Therefore, for purposes of determining the relative weights for the large number of low-volume MS-LTC-DRGs, we grouped all of the low-volume MS-LTC-DRGs into five quintiles based on average charges per discharge. Then, under our existing methodology, we accounted for adjustments made to LTCH PPS standard Federal payments for short-stay outlier (SSO) cases (that is, cases where the covered length of stay at the LTCH is less than or equal to five-sixths of the geometric average length of stay for the MS-LTC-DRG), and we made adjustments to account for nonmonotonically increasing weights, when necessary. The methodology is premised on more severe cases under the MS-LTC-DRG system requiring greater expenditure of medical care resources and higher average charges such that, in the severity levels within a base MS-LTC-DRG, the relative weights should increase monotonically with severity from the lowest to highest severity level. (We discuss each of these components of our MS-LTC-DRG relative weight methodology in greater detail in section VII.B.3.g. of the preamble of this final rule.)
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted previously in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs although they are structurally identical to the MS-DRGs used under the IPPS.
The MS-DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD-10-PCS procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKGs), or minor surgical procedures (for example, a biopsy of skin and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge that varies based on the MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are classified into MS-LTC-DRGs for payment based on the following six data elements:
• Principal diagnosis;
• Additional or secondary diagnoses;
• Surgical procedures;
• Age;
• Sex; and
• Discharge status of the patient.
Currently, for claims submitted using version ASC X12 5010 format, up to 25 diagnosis codes and 25 procedure codes are considered for an MS-DRG assignment. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. (For additional information on the processing of up to 25 diagnosis codes and 25 procedure codes on hospital inpatient claims, we refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127).)
Under the HIPAA transactions and code sets regulations at 45 CFR parts 160 and 162, covered entities must comply with the adopted transaction standards and operating rules specified in Subparts I through S of Part 162. Among other requirements, on or after January 1, 2012, covered entities were required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102(c)).
HIPAA requires covered entities to use the applicable medical data code set requirements when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the patient, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, both of which were required to be implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For additional information on the implementation of the ICD-10 coding system, we refer readers to section II.F.1. of the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section II.F.1. of the preamble of this final rule. Additional coding instructions and examples are published in the AHA's
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS-DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a detailed discussion about the creation of MS-DRGs based on severity of illness levels (72 FR 47141 through 47175).
MACs enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to
After screening through the MCE, each claim is classified into the appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS-LTC-DRG assignment, the MAC determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospital-specific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG assignments made by the MAC and to submit additional information within a specified timeframe as provided in § 412.513(c).
The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS-LTC-DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS-DRG and MS-LTC-DRG classification changes and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively.
As specified by our regulations at § 412.517(a), which require that the MS-LTC-DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, in this FY 2019 IPPS/LTCH PPS final rule, as we proposed, we updated the MS-LTC-DRG classifications effective October 1, 2018, through September 30, 2019 (FY 2019), consistent with the changes to specific MS-DRG classifications presented in section II.F. of the preamble of this final rule. Accordingly, the MS-LTC-DRGs for FY 2019 presented in this final rule are the same as the MS-DRGs that are being used under the IPPS for FY 2019. In addition, because the MS-LTC-DRGs for FY 2019 are the same as the MS-DRGs for FY 2019, the other changes that affect MS-DRG (and by extension MS-LTC-DRG) assignments under GROUPER Version 36 as discussed in section II.F. of the preamble of this final rule, including the changes to the MCE software and the ICD-10-CM/PCS coding system, also are applicable under the LTCH PPS for FY 2019.
One of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH's case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment rate by the applicable relative weight in determining payment to LTCHs for each case. In order to make these annual adjustments under the dual rate LTCH PPS payment structure, beginning with FY 2016, we recalibrate the MS-LTC-DRG relative weighting factors annually using data from applicable LTCH cases (80 FR 49614 through 49617). Under this policy, the resulting MS-LTC-DRG relative weights would continue to be used to adjust the LTCH PPS standard Federal payment rate when calculating the payment for LTCH PPS standard Federal payment rate cases.
The established methodology to develop the MS-LTC-DRG relative weights is generally consistent with the methodology established when the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). However, there have been some modifications of our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity resulting from the adoption of the MS-LTC-DRGs, along with the change made in conjunction with the implementation of the dual rate LTCH PPS payment structure beginning in FY 2016 to use LTCH claims data from only LTCH PPS standard Federal payment rate cases (or LTCH PPS cases that would have qualified for payment under the LTCH PPS standard Federal payment rate if the dual rate LTCH PPS payment structure had been in effect at the time of the discharge). (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550).) For details on the change in our historical methodology to use LTCH claims data only from LTCH PPS standard Federal payment rate cases (or cases that would have qualified for such payment had the LTCH PPS dual payment rate structure been in effect at the time) to determine the MS-LTC-DRG relative weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49614 through 49617). Under the LTCH PPS, relative weights for each MS-LTC-DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS-LTC-DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS-LTC-DRG that represents the resources needed by an average inpatient LTCH case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a relative weight of 2 would, on average, cost twice as much to treat as cases in an MS-LTC-DRG with a relative weight of 1.
In this FY 2019 IPPS/LTCH PPS final rule, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20456), we are continuing to use our current methodology to determine the MS-LTC-DRG relative weights for FY 2019, including the continued application of established policies related to: The hospital-specific relative value methodology, the treatment of severity levels in the MS-LTC-DRGs, low-volume and no-volume MS-LTC-DRGs, adjustments for nonmonotonicity, the steps for calculating the MS-LTC-DRG relative weights with a budget neutrality factor, and only using data from applicable LTCH cases (which includes our policy of only using cases that would meet the criteria for exclusion from the site neutral payment rate (or, for discharges occurring prior to the implementation of the dual rate LTCH PPS payment structure, would have met the criteria for exclusion had those criteria been in effect at the time of the discharge)).
In this section, we present our application of our existing methodology for determining the MS-LTC-DRG relative weights for FY 2019, and we
In previous fiscal years, Table 13A—Composition of Low-Volume Quintiles for MS-LTC-DRGs (which was listed in section VI. of the Addendum to the proposed and final rules and available via the internet on the CMS website) listed the composition of the low-volume quintiles for MS-LTC-DRGs for the respective year, and Table 13B—No-Volume MS-LTC-DRG Crosswalk (also listed in section VI. of the Addendum to the proposed rule final rules and available via the internet on the CMS website) listed the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked MS-LTC-DRGs). The information contained in Tables 13A and 13B is used in the development Table 11—MS-LTC-DRGs, Relative Weights, Geometric Average Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS Discharges, which contains the proposed and final MS-LTC-DRGs and their respective proposed and final relative weights, geometric mean length of stay, and five-sixths of the geometric mean length of stay (used to identify SSO cases) for the respective fiscal year (and also is listed in section VI. of the Addendum to the proposed and final rules and is available via the internet on the CMS website). Because the information contained in Tables 13A and 13B does not contain payment rates or factors for the applicable payment year, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20457), we proposed to generally provide the data previously published in Tables 13A and 13B for each annual proposed and final rule as one of our supplemental IPPS/LTCH PPS related data files that are made available for public use via the internet on the CMS website for the respective rule and fiscal year (that is, FY 2019 and subsequent fiscal years) at:
We did not receive any public comments on these proposals. Therefore, we are finalizing, without modification, the proposals and the continued use of the existing policies, as proposed.
For the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20457), consistent with our proposals regarding the calculation of the proposed MS-LTC-DRG relative weights for FY 2019, we obtained total charges from FY 2017 Medicare LTCH claims data from the December 2017 update of the FY 2017 MedPAR file, which was the best available data at that time, and we proposed to use Version 36 of the GROUPER to classify LTCH cases. Consistent with our historical practice, we proposed that if more recent data become available, we would use those data and the finalized Version 36 of the GROUPER in establishing the FY 2019 MS-LTC-DRG relative weights in the final rule. For this final rule, based on updated from FY 2017 Medicare LTCH claims data from the March 2018 update of the FY 2017 MedPAR file, which is the best available data at the time of development of this final rule, and we used Version 36 of the GROUPER to classify LTCH cases. To calculate the FY 2019 MS-LTC-DRG relative weights under the dual rate LTCH PPS payment structure, as we proposed, we continued to use applicable LTCH data, which includes our policy of only using cases that meet the criteria for exclusion from the site neutral payment rate (or would have met the criteria had they been in effect at the time of the discharge) (80 FR 49624). Specifically, we began by first evaluating the LTCH claims data in the March 2018 update of the FY 2017 MedPAR file to determine which LTCH cases would meet the criteria for exclusion from the site neutral payment rate under § 412.522(b) had the dual rate LTCH PPS payment structure applied to those cases at the time of discharge. We identified the FY 2017 LTCH cases that were not assigned to MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945 and 946, which identify LTCH cases that do not have a principal diagnosis relating to a psychiatric diagnosis or to rehabilitation; and that either—
• The admission to the LTCH was “immediately preceded” by discharge from a subsection (d) hospital and the immediately preceding stay in that subsection (d) hospital included at least 3 days in an ICU, as we define under the ICU criterion; or
• The admission to the LTCH was “immediately preceded” by discharge from a subsection (d) hospital and the claim for the LTCH discharge includes the applicable procedure code that indicates at least 96 hours of ventilator services were provided during the LTCH stay, as we define under the ventilator criterion. Claims data from the FY 2017 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z were used to identify cases involving at least 96 hours of ventilator services in accordance with the ventilator criterion. We note that, for purposes of developing the FY 2019 MS-LTC-DRG relative weights using our current methodology, we did not make any exceptions regarding the identification of cases that would have been excluded from the site neutral payment rate under the statutory provisions that provided for temporary exception from the site neutral payment rate under the LTCH PPS for certain severe wound care discharges from certain LTCHs or for certain spinal cord specialty hospitals provided by sections 15009 and 15010 of Public Law 114-255, respectively, had our implementation of that law and the dual rate LTCH PPS payment structure been in effect at the time of the discharge. At this time, it is uncertain how many LTCHs and how many cases in the claims data we used for this final rule meet the criteria to be excluded from the site neutral payment rate under those exceptions (or would have met the criteria for exclusion had the dual rate LTCH PPS payment structure been in effect at the time of the discharge). Therefore, for the remainder of this section, when we refer to LTCH claims only from cases that meet the criteria for exclusion from the site neutral payment rate (or would have met the criteria had the applicable statutes been in effect at the time of the discharge), such data do not include any discharges that would have been paid based on the LTCH PPS standard Federal payment rate under the provisions of sections 15009 and 15010 of Public Law 114-255, had the exception been in effect at the time of the discharge.
Furthermore, consistent with our historical methodology, we excluded any claims in the resulting data set that were submitted by LTCHs that were all-inclusive rate providers and LTCHs that are paid in accordance with demonstration projects authorized under section 402(a) of Public Law 90-248 or section 222(a) of Public Law 92-603. In addition, consistent with our historical practice and our policies, we excluded any Medicare Advantage (Part
In summary, in general, we identified the claims data used in the development of the FY 2019 MS-LTC-DRG relative weights in this final rule, as we proposed, by trimming claims data that were paid the site neutral payment rate (or would have been paid the site neutral payment rate had the dual payment rate structure been in effect, except for discharges which would have been excluded from the site neutral payment under the temporary exception for certain severe wound care discharges from certain LTCHs and under the temporary exception for certain spinal cord specialty hospitals), as well as the claims data of 9 all-inclusive rate providers reported in the March 2018 update of the FY 2017 MedPAR file and any Medicare Advantage claims data. (We note that, there were no data from any LTCHs that are paid in accordance with a demonstration project reported in the March 2018 update of the FY 2017 MedPAR file. However, had there been we would trim the claims data from those LTCHs as well, in accordance with our established policy.) As we proposed, we used the remaining data (that is, the applicable LTCH data) to calculate the relative weights for FY 2019.
By nature, LTCHs often specialize in certain areas, such as ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS-LTC-DRGs has the potential to inappropriately distort the measure of average charges. To account for the fact that cases may not be randomly distributed across LTCHs, consistent with the methodology we have used since the implementation of the LTCH PPS, in this FY 2019 IPPS/LTCH PPS final rule, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20458), we continued to use a hospital-specific relative value (HSRV) methodology to calculate the MS-LTC-DRG relative weights for FY 2019. We believe that this method removes this hospital-specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, under this methodology, we reduced the impact of the variation in charges across providers on any particular MS-LTC-DRG relative weight by converting each LTCH's charge for an applicable LTCH case to a relative value based on that LTCH's average charge for such cases.
Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each applicable LTCH case to hospital-specific relative charge values and then adjusting those values for the LTCH's case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for an LTCH is its case-mix; therefore, it is reasonable to scale each LTCH's average relative charge value by its case-mix. In this way, each LTCH's relative charge value is adjusted by its case-mix to an average that reflects the complexity of the applicable LTCH cases it treats relative to the complexity of the applicable LTCH cases treated by all other LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases across all LTCHs).
In accordance with our established methodology, for FY 2019, as we proposed, we continued to standardize charges for each applicable LTCH case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in section VII.B.3.g. (Step 3) of the preamble of this final rule) by the average adjusted charge for all applicable LTCH cases at the LTCH in which the case was treated. SSO cases are cases with a length of stay that is less than or equal to five-sixths the average length of stay of the MS-LTC-DRG (§ 412.529 and § 412.503). The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio was multiplied by that LTCH's case-mix index to determine the standardized charge for the case.
Multiplying the resulting ratio by the LTCH's case-mix index accounts for the fact that the same relative charges are given greater weight at an LTCH with higher average costs than they would at an LTCH with low average costs, which is needed to adjust each LTCH's relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. By standardizing charges in this manner, we count charges for a Medicare patient at an LTCH with high average charges as less resource intensive than they would be at an LTCH with low average charges. For example, a $10,000 charge for a case at an LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at an LTCH with the same case-mix, but an average adjusted charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account.
For purposes of determining the MS-LTC-DRG relative weights, under our historical methodology, there are three different categories of MS-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-DRGs with at least 25 applicable LTCH cases in the data used to calculate the relative weight, which are each assigned a unique relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1 and 24 applicable LTCH cases that are grouped into quintiles (as described later in this section of the final rule) and assigned the relative weight of the quintile); and (3) no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the clinical similarities and assigned the relative weight of the cross-walked MS-LTC-DRG (as described in greater detail below). For FY 2019, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20459), we are continuing to use applicable LTCH cases to establish the same volume-based categories to calculate the FY 2019 MS-LTC-DRG relative weights.
In determining the FY 2019 MS-LTC-DRG relative weights, when necessary, as is our longstanding practice, as we proposed, we made adjustments to account for nonmonotonicity, as discussed in greater detail later in Step 6 of section VII.B.3.g. of the preamble of this final rule. We refer readers to the discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule for our rationale for including an adjustment for nonmonotonicity (74 FR 43953 through 43954).
In order to account for MS-LTC-DRGs with low-volume (that is, with fewer than 25 applicable LTCH cases), consistent with our existing methodology, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20459), we are continuing to employ the quintile methodology for low-
In this final rule, based on the best available data (that is, the March 2018 update of the FY 2017 MedPAR files), we identified 271 MS-LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume quintiles, each containing at least 54 MS-LTC-DRGs (271/5 = 54 with a remainder of 1). We assigned the low-volume MS-LTC-DRGs to specific low-volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending order by average charge in accordance with our established methodology. Based on the data available for this final rule, the number of MS-LTC-DRGs with less than 25 applicable LTCH cases was not evenly divisible by 5 and, therefore, as we proposed, we employed our historical methodology for determining which of the low-volume quintiles would contain the additional low-volume MS-LTC-DRG. Specifically for this final rule, after organizing the MS-LTC-DRGs by ascending order by average charge, we assigned the first 55 (1st through 55th) of low-volume MS-LTC-DRGs (with the lowest average charge) into Quintile 1. The 54 MS-LTC-DRGs with the highest average charge cases were assigned into Quintile 5. Because the average charge of the 55th low-volume MS-LTC-DRG in the sorted list was closer to the average charge of the 54th low-volume MS-LTC-DRG (assigned to Quintile 1) than to the average charge of the 56th low-volume MS-LTC-DRG (assigned to Quintile 2), we assigned it to Quintile 1 (such that Quintile 1 contains 55 low-volume MS-LTC-DRGs before any adjustments for nonmonotonicity, as discussed below). This resulted in 4 of the 5 low-volume quintiles containing 54 MS-LTC-DRGs (Quintiles 2, 3, 4, and 5) and 1 low-volume quintile containing 55 MS-LTC-DRGs (Quintile 1). As discussed earlier, for this final rule, as we proposed, we are providing the list of the composition of the low-volume quintiles for MS-LTC-DRGs for FY 2019 (previously displayed in Table 13A, which was in previous fiscal years listed in section VI. of the Addendum to the respective proposed and final rules and available via the internet on the CMS website) in a supplemental data file for public use posted via the internet on the CMS website for this final rule at:
In order to determine the FY 2019 relative weights for the low-volume MS-LTC-DRGs, consistent with our historical practice, as we proposed, we used the five low-volume quintiles described previously. We determined a relative weight and (geometric) average length of stay for each of the five low-volume quintiles using the methodology described in section VII.B.3.g. of the preamble of this final rule. We assigned the same relative weight and average length of stay to each of the low-volume MS-LTC-DRGs that make up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS-LTC-DRGs with a low-volume of applicable LTCH cases will vary in the future. Furthermore, we note that we continue to monitor the volume (that is, the number of applicable LTCH cases) in the low-volume quintiles to ensure that our quintile assignments used in determining the MS-LTC-DRG relative weights result in appropriate payment for LTCH cases grouped to low-volume MS-LTC-DRGs and do not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases.
In this final rule, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20460), we are continuing to use our current methodology to determine the FY 2019 MS-LTC-DRG relative weights.
In summary, to determine the FY 2019 MS-LTC-DRG relative weights, as we proposed, we grouped applicable LTCH cases to the appropriate MS-LTC-DRG, while taking into account the low-volume quintiles (as described above) and cross-walked no-volume MS-LTC-DRGs (as described later in this section). After establishing the appropriate MS-LTC-DRG (or low-volume quintile), as we proposed, we calculated the FY 2019 relative weights by first removing cases with a length of stay of 7 days or less and statistical outliers (Steps 1 and 2 below). Next, as we proposed, we adjusted the number of applicable LTCH cases in each MS-LTC-DRG (or low-volume quintile) for the effect of SSO cases (Step 3 below). After removing applicable LTCH cases with a length of stay of 7 days or less (Step 1 below) and statistical outliers (Step 2 below), which are the SSO-adjusted applicable LTCH cases and corresponding charges (Step 3 below), as we proposed, we calculated “relative adjusted weights” for each MS-LTC-DRG (or low-volume quintile) using the HSRV method.
The first step in our calculation of the FY 2019 MS-LTC-DRG relative weights is to remove cases with a length of stay of 7 days or less. The MS-LTC-DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in an LTCH because these stays do not fully receive or benefit from treatment that is typical in an LTCH stay, and full resources are often not used in the earlier stages of admission to an LTCH. If we were to include stays of 7 days or less in the computation of the FY 2019 MS-LTC-DRG relative weights, the value of many relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at an LTCH by including data from these very short stays. Therefore, consistent with our existing relative weight methodology, in determining the FY 2019 MS-LTC-DRG relative weights, as we proposed, we removed LTCH cases with a length of stay of 7 days or less from applicable LTCH cases. (For additional information on what is removed in this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
The next step in our calculation of the FY 2019 MS-LTC-DRG relative weights is to remove statistical outlier cases from the LTCH cases with a length of stay of at least 8 days. Consistent with our existing relative weight methodology, as we proposed, we continued to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS-LTC-DRG. These statistical outliers were removed prior to calculating the relative
As the next step in the calculation of the FY 2019 MS-LTC-DRG relative weights, consistent with our historical approach, as we proposed, we adjusted each LTCH's charges per discharge for those remaining cases (that is, trimmed applicable LTCH cases) for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). Specifically, we made this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the MS-LTC-DRG for non-SSO cases. This had the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the MS-LTC-DRG. This process produced the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient's length of stay been equal to the average length of stay of the MS-LTC-DRG.
Counting SSO cases as full LTCH cases with no adjustment in determining the FY 2019 MS-LTC-DRG relative weights would lower the FY 2019 MS-LTC-DRG relative weight for affected MS-LTC-DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within a MS-LTC-DRG. This would result in an “underpayment” for non-SSO cases and an “overpayment” for SSO cases. Therefore, as we proposed, we continued to adjust for SSO cases under § 412.529 in this manner because it would result in more appropriate payments for all LTCH PPS standard Federal payment rate cases. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Consistent with our historical relative weight methodology, as we proposed, we calculated the FY 2019 MS-LTC-DRG relative weights using the HSRV methodology, which is an iterative process. First, for each SSO-adjusted trimmed applicable LTCH case, we calculated a hospital-specific relative charge value by dividing the charge per discharge after adjusting for SSOs of the LTCH case (from Step 3) by the average charge per SSO-adjusted discharge for the LTCH in which the case occurred. The resulting ratio was then multiplied by the LTCH's case-mix index to produce an adjusted hospital-specific relative charge value for the case. We used an initial case-mix index value of 1.0 for each LTCH.
For each MS-LTC-DRG, we calculated the FY 2019 relative weight by dividing the SSO-adjusted average of the hospital-specific relative charge values for applicable LTCH cases for the MS-LTC-DRG (that is, the sum of the hospital-specific relative charge value from above divided by the sum of equivalent cases from Step 3 for each MS-LTC-DRG) by the overall SSO-adjusted average hospital-specific relative charge value across all applicable LTCH cases for all LTCHs (that is, the sum of the hospital-specific relative charge value from above divided by the sum of equivalent applicable LTCH cases from Step 3 for each MS-LTC-DRG). Using these recalculated MS-LTC-DRG relative weights, each LTCH's average relative weight for all of its SSO-adjusted trimmed applicable LTCH cases (that is, its case-mix) was calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative weights by its total number of SSO-adjusted trimmed applicable LTCH cases. The LTCHs' hospital-specific relative charge values (from previous) were then multiplied by the hospital-specific case-mix indexes. The hospital-specific case-mix adjusted relative charge values were then used to calculate a new set of MS-LTC-DRG relative weights across all LTCHs. This iterative process continued until there was convergence between the relative weights produced at adjacent steps, for example, when the maximum difference was less than 0.0001.
Using the trimmed applicable LTCH cases, consistent with our historical methodology, we identified the MS-LTC-DRGs for which there were no claims in the March 2018 update of the FY 2017 MedPAR file and, therefore, for which no charge data was available for these MS-LTC-DRGs. Because patients with a number of the diagnoses under these MS-LTC-DRGs may be treated at LTCHs, consistent with our historical methodology, we generally assign a relative weight to each of the no-volume MS-LTC-DRGs based on clinical similarity and relative costliness (with the exception of “transplant” MS-LTC-DRGs, “error” MS-LTC-DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a psychiatric diagnosis or rehabilitation (referred to as the “psychiatric or rehabilitation” MS-LTC-DRGs), as discussed later in this section of this final rule). (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through 43960.)
As we proposed, we cross-walked each no-volume MS-LTC-DRG to another MS-LTC-DRG for which we calculated a relative weight (determined in accordance with the methodology described above). Then, the “no-volume” MS-LTC-DRG was assigned the same relative weight (and average length of stay) of the MS-LTC-DRG to which it was cross-walked (as described in greater detail in this section of this final rule).
Of the 761 MS-LTC-DRGs for FY 2019, we identified 346 MS-LTC-DRGs for which there were no trimmed applicable LTCH cases (the number identified includes the 8 “transplant” MS-LTC-DRGs, the 2 “error” MS-LTC-DRGs, and the 15 “psychiatric or rehabilitation” MS-LTC-DRGs, which are discussed below). As we proposed, we assigned relative weights to each of the 346 no-volume MS-LTC-DRGs that contained trimmed applicable LTCH cases based on clinical similarity and relative costliness to 1 of the remaining 415 (761−346 = 415) MS-LTC-DRGs for which we calculated relative weights based on the trimmed applicable LTCH cases in the FY 2017 MedPAR file data using the steps described previously. (For the remainder of this discussion, we refer to the “cross-walked” MS-LTC-DRGs as the MS-LTC-DRGs to which we cross-walked 1 of the 346 “no volume” MS-LTC-DRGs.) Then, as we generally proposed, we assigned the 346 no-volume MS-LTC-DRGs the relative weight of the cross-walked MS-LTC-DRG. (As explained below in Step 6, when necessary, we made adjustments to account for nonmonotonicity.)
We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which we calculated relative weights based on the March 2018 update of the FY 2017 MedPAR file, and to which it is similar
We then assigned the relative weight of the cross-walked MS-LTC-DRG as the relative weight for the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative weight (and average length of stay) for FY 2019. We note that, if the cross-walked MS-LTC-DRG had 25 applicable LTCH cases or more, its relative weight (calculated using the methodology described in Steps 1 through 4 above) was assigned to the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was cross-walked had 24 or less cases and, therefore, was designated to 1 of the low-volume quintiles for purposes of determining the relative weights, we assigned the relative weight of the applicable low-volume quintile to the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative weight for FY 2019. (As we noted previously, in the infrequent case where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, additional adjustments as described in Step 6 were required in order to maintain monotonically increasing relative weights.)
As discussed earlier, for this final rule, as we proposed, we are providing the list of the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked MS-LTC-DRGs) for FY 2019 (previously displayed in Table 13B, which was in previous fiscal years listed in section VI. of the Addendum to the respective proposed and final rules and available via the internet on the CMS website) in a supplemental data file for public use posted via the internet on the CMS website for this final rule at:
To illustrate this methodology for determining the relative weights for the FY 2019 MS-LTC-DRGs with no applicable LTCH cases, we are providing the following example, which refers to the no-volume MS-LTC-DRGs crosswalk information for FY 2019 (which, as previously stated, we are providing in a supplemental data file posted via the internet on the CMS website for this final rule).
Again, we note that, as this system is dynamic, it is entirely possible that the number of MS-LTC-DRGs with no volume will vary in the future. Consistent with our historical practice, we used the most recent available claims data to identify the trimmed applicable LTCH cases from which we determined the relative weights in this final rule.
For FY 2019, consistent with our historical relative weight methodology, as we proposed, we established a relative weight of 0.0000 for the following transplant MS-LTC-DRGs: Heart Transplant or Implant of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 007); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 008); Pancreas Transplant (MS-LTC-DRG 010); and Kidney Transplant (MS-LTC-DRG 652). This is because Medicare only covers these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. At the present time, we include these eight transplant MS-LTC-DRGs in the GROUPER program for administrative purposes only. Because we use the same GROUPER program for LTCHs as is used under the IPPS, removing these MS-LTC-DRGs would be administratively burdensome. (For additional information regarding our treatment of transplant MS-LTC-DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, consistent with our historical policy, as we proposed, we established a relative weight of 0.0000 for the 2 “error” MS-LTC-DRGs (that is, MS-LTC-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis) and MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH cases grouped to these MS-LTC-DRGs cannot be properly assigned to an MS-LTC-DRG according to the grouping logic.
As discussed in section VII.C. of the preamble of this final rule, section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) extended the transitional blended payment rate for site neutral payment rate cases for an additional 2 years (that is, discharges occurring in cost reporting periods beginning in FYs 2018 and 2019 will continue to be paid under the blended payment rate). Therefore, in this final rule, consistent with our practice in FYs 2016 through 2018, as we proposed, we established a relative weight for FY 2019 equal to the respective FY 2015 relative weight of the MS-LTC-DRGs for the following “psychiatric or rehabilitation” MS-LTC-DRGs: MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 (Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality & Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 (Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-
In summary, for FY 2019, we established a relative weight (and average length of stay thresholds) equal to the respective FY 2015 relative weight of the MS-LTC-DRGs for the 15 “psychiatric or rehabilitation” MS-LTC-DRGs listed previously (that is, MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945, and 946). Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the internet on the CMS website, reflects this policy.
The MS-DRGs contain base DRGs that have been subdivided into one, two, or three severity of illness levels. Where there are three severity levels, the most severe level has at least one secondary diagnosis code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one secondary diagnosis code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as “without CC/MCC.” When data do not support the creation of three severity levels, the base MS-DRG is subdivided into either two levels or the base MS-DRG is not subdivided. The two-level subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG without CC/MCC. Alternatively, the other type of two-level subdivision may consist of the MS-DRG with MCC and the MS-DRG without MCC.
In those base MS-LTC-DRGs that are split into either two or three severity levels, cases classified into the “without CC/MCC” MS-LTC-DRG are expected to have a lower resource use (and lower costs) than the “with CC/MCC” MS-LTC-DRG (in the case of a two-level split) or both the “with CC” and the “with MCC” MS-LTC-DRGs (in the case of a three-level split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and would result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the relative weights decrease as severity increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher relative weight than one with MCC, or the MS-LTC-DRG “without CC/MCC” has a higher relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base MS-LTC-DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base MS-LTC-DRG (which are generally expected to have lower resource use and costs). Therefore, in determining the FY 2019 MS-LTC-DRG relative weights, consistent with our historical methodology, as we proposed, we continued to combine MS-LTC-DRG severity levels within a base MS-LTC-DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity is maintained. For a comprehensive description of our existing methodology to adjust for nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any adjustments for nonmonotonicity that were made in determining the FY 2019 MS-LTC-DRG relative weights in this final rule by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the internet on the CMS website.
In accordance with the regulations at § 412.517(b) (in conjunction with § 412.503), the annual update to the MS-LTC-DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS-
The MS-LTC-DRG classifications and relative weights are updated annually based on the most recent available LTCH claims data to reflect changes in relative LTCH resource use (§ 412.517(a) in conjunction with § 412.503). To achieve the budget neutrality requirement at § 412.517(b), under our established methodology, for each annual update, the MS-LTC-DRG relative weights are uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, as we proposed, we updated the MS-LTC-DRG classifications and relative weights for FY 2019 based on the most recent available LTCH data for applicable LTCH cases, and continued to apply a budget neutrality adjustment in determining the FY 2019 MS-LTC-DRG relative weights.
In this FY 2019 IPPS/LTCH PPS final rule, to ensure budget neutrality in the update to the MS-LTC-DRG classifications and relative weights under § 412.517(b), as we proposed, we continued to use our established two-step budget neutrality methodology.
To calculate the normalization factor for FY 2019, we grouped applicable LTCH cases using the FY 2019 Version 36 GROUPER, and the recalibrated FY 2019 MS-LTC-DRG relative weights to calculate the average case-mix index (CMI); we grouped the same applicable LTCH cases using the FY 2018 GROUPER Version 35 and MS-LTC-DRG relative weights and calculated the average CMI; and computed the ratio by dividing the average CMI for FY 2018 by the average CMI for FY 2019. That ratio is the normalization factor. Because the calculation of the normalization factor involves the relative weights for the MS-LTC-DRGs that contained applicable LTCH cases to calculate the average CMIs, any low-volume MS-LTC-DRGs are included in the calculation (and the MS-LTC-DRGs with no applicable LTCH cases are not included in the calculation).
To calculate the budget neutrality adjustment factor, we simulated estimated total FY 2019 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the FY 2019 normalized relative weights and GROUPER Version 36; simulated estimated total FY 2018 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the FY 2018 MS-LTC-DRG relative weights and the FY 2018 GROUPER Version 35; and calculated the ratio of these estimated total payments by dividing the simulated estimated total LTCH PPS standard Federal payment rate payments for FY 2018 by the simulated estimated total LTCH PPS standard Federal payment rate payments for FY 2019. The resulting ratio is the budget neutrality adjustment factor. The calculation of the budget neutrality factor involves the relative weights for the LTCH cases used in the payment simulation, which includes any cases grouped to low-volume MS-LTC-DRGs or to MS-LTC-DRGs with no applicable LTCH cases, and generally does not include payments for cases grouped to a MS-LTC-DRG with no applicable LTCH cases. (Occasionally, a few LTCH cases (that is, those with a covered length of stay of 7 days or less, which are removed from the relative weight calculation in step (2) that are grouped to a MS-LTC-DRG with no applicable LTCH cases are included in the payment simulations used to calculate the budget neutrality factor. However, the number and payment amount of such cases have a negligible impact on the budget neutrality factor calculation).
In this final rule, to ensure budget neutrality in the update to the MS-LTC-DRG classifications and relative weights under § 412.517(b), as we proposed, we continued to use our established two-step budget neutrality methodology. Therefore, in this final rule, in the first step of our MS-LTC-DRG budget neutrality methodology, for FY 2019, as we proposed, we calculated and applied a normalization factor to the recalibrated relative weights (the result of Steps 1 through 6 discussed previously) to ensure that estimated payments are not affected by changes in the composition of case types or the changes to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the MS-LTC-DRG relative weights (that is, the process itself) neither increases nor decreases the average case-mix index.
To calculate the normalization factor for FY 2019 (the first step of our budget neutrality methodology), we used the following three steps: (1.a.) Used the most recent available applicable LTCH cases from the most recent available data (that is, LTCH discharges from the FY 2017 MedPAR file) and grouped them using the FY 2019 GROUPER (that is, Version 36 for FY 2019) and the recalibrated FY 2019 MS-LTC-DRG relative weights (determined in Steps 1 through 6 above) to calculate the average case-mix index; (1.b.) grouped the same applicable LTCH cases (as are used in Step 1.a.) using the FY 2018 GROUPER (Version 35) and FY 2018 MS-LTC-DRG relative weights and calculated the average case-mix index; and (1.c.) computed the ratio of these average case-mix indexes by dividing the average CMI for FY 2018 (determined in Step 1.b.) by the average case-mix index for FY 2019 (determined in Step 1.a.). As a result, in determining the MS-LTC-DRG relative weights for FY 2019, each recalibrated MS-LTC-DRG relative weight was multiplied by the normalization factor of 1.275254 (determined in Step 1.c.) in the first step of the budget neutrality methodology, which produced “normalized relative weights.”
In the second step of our MS-LTC-DRG budget neutrality methodology, we calculated a second budget neutrality factor consisting of the ratio of estimated aggregate FY 2019 LTCH PPS standard Federal payment rate payments for applicable LTCH cases (the sum of all calculations under Step 1.a. mentioned previously) after reclassification and recalibration to estimated aggregate payments for FY 2019 LTCH PPS standard Federal payment rate payments for applicable LTCH cases before reclassification and recalibration (that is, the sum of all calculations under Step 1.b. mentioned previously).
That is, for this final rule, for FY 2019, under the second step of the budget neutrality methodology, as we proposed, we determined the budget neutrality adjustment factor using the following three steps: (2.a.) Simulated estimated total FY 2018 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the normalized relative weights for FY 2019 and GROUPER Version 35 (as described above); (2.b.) simulated estimated total FY 2018 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the FY 2018 GROUPER (Version 35) and the FY 2018 MS-LTC-DRG relative weights in Table 11 of the FY 2018 IPPS/LTCH PPS final rule available on the internet, as described in section VI. of the Addendum of that final rule; and (2.c.) calculated the ratio of these estimated total payments by dividing the value determined in Step 2.b. by the value determined in Step 2.a. In determining the FY 2019 MS-LTC-DRG relative weights, each normalized relative weight was then multiplied by a budget neutrality factor of 0.9931052 (the value determined in Step 2.c.) in
Accordingly, in determining the FY 2019 MS-LTC-DRG relative weights in this final rule, consistent with our existing methodology, as we proposed, we applied a normalization factor of 1.275254 and a budget neutrality factor of 0.9931052. Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the internet on the CMS website, lists the MS-LTC-DRGs and their respective relative weights, geometric mean length of stay, and five-sixths of the geometric mean length of stay (used to identify SSO cases under § 412.529(a)) for FY 2019.
Section 1206 of Pathway for SGR Reform Act (Pub. L. 113-67) mandated the new dual rate payment system under the LTCH PPS beginning with LTCH discharges occurring in cost reporting periods beginning on or after October 1, 2015. In addition, the statute established a transitional blended payment method for cases that would be paid the site neutral payment rate for LTCH discharges occurring in cost reporting periods beginning during FY 2016 or FY 2017. For those discharges, the applicable site neutral payment rate is the transitional blended payment rate specified in section 1886(m)(6)(B)(iii) of the Act. Section 1886(m)(6)(B)(iii) of the Act specifies that the transitional blended payment rate is comprised of 50 percent of the site neutral payment rate for the discharge under section 1886(m)(6)(B)(ii) of the Act and 50 percent of the LTCH PPS standard Federal payment rate that would have applied to the discharge if paragraph (6) of section 1886(m) of the Act had not been enacted.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49610 through 49612), we specified under § 412.522(c)(3), for LTCH discharges occurring in cost reporting periods beginning on or after October 1, 2015, and on or before September 30, 2017 (that is, discharges occurring in cost reporting periods beginning during FYs 2016 and 2017), that the payment amount for site neutral payment rate cases is a blended payment rate, which is calculated as 50 percent of the applicable site neutral payment rate amount for the discharge as determined under § 412.522(c)(1) and 50 percent of the applicable LTCH PPS standard Federal payment rate determined under § 412.523. In addition, we established that the payment amounts determined under § 412.522(c)(1) (the site neutral payment rate) and under § 412.523 (the LTCH PPS standard Federal rate) include any applicable adjustments, such as HCO payments, as applicable.
Section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) extended the transitional blended payment rate period for site neutral payment rate cases for 2 years, and provided for an adjustment to the payment for discharges paid under the site neutral payment rate through FY 2026. Specifically, section 51005(a) of Public Law 115-123 amended section 1886(m)(6)(B)(i) of the Act to extend the transitional blended payment rate for site neutral payment rate cases for an additional 2 years; that is, discharges occurring in cost reporting periods beginning in FYs 2018 and 2019 will continue to be paid under the blended payment rate. To codify the provisions of section 51005(a) of Public Law 115-123, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20464 through 20465), we proposed to revise our regulations at § 412.522(c)(3) to reflect the extension of the transitional blended payment rate period for discharges paid at the site neutral payment rate to include discharges occurring in cost reporting periods beginning on or before September 30, 2019.
In addition, as initially enacted, section 1886(m)(6)(B)(iii) of the Act specified that, for LTCH discharges occurring in cost reporting periods beginning during FY 2018 or later, the applicable site neutral payment rate would be the site neutral payment rate as defined in section 1886(m)(6)(B)(ii) of the Act. Section 51005(b) of Public Law 115-123 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined at section 1886(m)(6)(B)(ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2026. In order to implement section 51005(b) of Public Law 115-123, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed to revise § 412.522(c)(1) by adding new paragraph (iii) to specify that, for discharges occurring in FYs 2018 through 2026, the amount payable under § 412.522(c)(1)(i) (that is, the IPPS comparable amount) will be reduced by 4.6 percent.
We also proposed to make a conforming amendment to § 412.500, which specifies the basis and scope of subpart O of 42 CFR part 412, by adding paragraph (a)(9) to reflect the provisions of section 51005 of the Bipartisan Budget Act of 2018.
With regard to the commenters' concern regarding the brevity of our proposal, we believe that the provisions of section 51005 of Public Law 115-123 are clear and self-implementing, and merely require updating the regulations to be consistent with the statutory directive. Therefore, because of the clear, unambiguous statutory directive in the statute, we used subregulatory guidance to implement the provision of section 51005(b) of Public Law 115-123. The statutory language of section 51005 (b) states that the amendments to Act applies for each of Federal fiscal years 2018 through 2026, and does not contain any reference to cost reporting periods. We believe that the “legislative intent” is defined by use of the language in the statute, which is clear and unambiguous.
With respect to the commenters' request that we delay implementation of the application of the 4.6 percent payment reduction until FY 2020, we note that the statute specifically directs us to apply the payment reduction beginning in FY 2018. Therefore, we believe that we lack the authority to delay beginning the application of the 4.6 percent payment reduction after FY 2018, again due to the explicit, unambiguous statutory direction.
We agree with the commenters that the application of the 4.6 percent payment reduction on a Federal fiscal year basis is not based on the same language as surrounding areas of the statute. However, we believe that this fact supports our interpretation and implementation manner. That is, the plain language of surrounding statutory provisions explicitly bases payment provisions on a hospital's cost reporting period, while the plain language of section 51005(b) of Public Law 115-123 expressly fails to do so with regard to the 4.6 percent payment reduction. Given this obvious difference, we believe that it is clear the 4.6 percent payment reduction specified under section 1886(m)(6)(B)(iv) of the Act, as added by section 51005(b) of Public Law 115-123, is to be applied on a Federal fiscal year basis.
In response to the commenters' opinion that CMS' application of the 4.6 percent payment reduction on a Federal fiscal year basis is inconsistent with the way in which CMS has interpreted and implemented certain other statutes, we believe that these perceived inconsistencies are sufficiently distinguishable due to the statutory language of the provisions of section 51005 of Public Law 115-123 and section 1886(m)(6)(B) of the Act. For example, some commenters cited CMS' implementation of the uncompensated care payments under section 1886(r)(2) of the Act, which the commenters stated are made on the basis of a hospital's cost reporting period. In general, under our uncompensated care payment methodology, an eligible hospital's uncompensated care payment for a Federal fiscal year is determined annually in the IPPS/LTCH PPS rulemaking. For a hospital with a cost reporting period that coincides with the Federal fiscal year, its uncompensated care payment for that cost reporting period is its uncompensated care payment for that Federal fiscal year. (Interim uncompensated care payments, which are made on a per-claim basis during the Federal fiscal year, are reconciled as needed as part of the standard cost report settlement process.) For a hospital with a cost reporting period that spans 2 Federal fiscal years, its uncompensated care payment for the cost reporting period is based on a pro rata ratio of the proportion of the cost reporting period that occurred in each applicable Federal fiscal year (78 FR 61193). While the reconciliation of interim uncompensated care payments may operationally occur based on a hospital's cost reporting period, the hospital's final uncompensated care payment is, nevertheless, a payment amount determined for each Federal fiscal year (not each cost reporting period), and, as applicable, paid proportionally when a hospital's cost reporting period spans the Federal fiscal year. Another purported example of inconsistent interpretation and manner of implementation cited by commenters is CMS' implementation of various moratoria on the establishment of LTCHs. However, we are not persuaded by this comparison because those statutory provisions required interpretation to implement. The provision of section 51005(b) of Public Law 115-123 is distinguishable in this respect. There is no impediment to implementing the 4.6 percent payment reduction exactly as written and, given the explicit statutory direction, we do not believe that we have any authority to superimpose regulatory interpretation to clear statutory direction.
After consideration of the public comments we received, we are finalizing, as proposed, the codification of the provision of section 51005(b) of Public Law 115-123 in regulations. Specifically, we are: (1) Revising § 412.522(c)(3) to extend the transitional blended payment for site neutral payment rate cases to include discharges occurring in cost reporting periods beginning on or before September 30, 2019; (2) under § 412.522(c)(1), providing for the application of a 4.6 percent payment reduction to the IPPS comparable amount for discharges occurring in FYs 2018 through 2026; and making a conforming amendment to § 412.500, which specifies the basis and scope of subpart O of 42 CFR part 412, by adding paragraph (a)(9) to reflect the provisions of section 51005 of the Bipartisan Budget Act of 2018.
We note that we received several public comments that addressed issues related to site neutral payment rate payments that were outside the scope of the provisions of the proposed rule. Therefore, we are not responding to those comments in this final rule. We will take these public comments into consideration, as feasible, in future rulemaking.
The basic methodology for determining LTCH PPS standard Federal payment rates is currently set forth at 42 CFR 412.515 through 412.538. In this section, we discuss the factors that we used to update the LTCH PPS standard Federal payment rate for FY 2019, that is, effective for LTCH discharges occurring on or after October 1, 2018 through September 30, 2019. Under the dual rate LTCH PPS payment structure required by statute, beginning with discharges in cost reporting periods beginning in FY 2016, only LTCH discharges that meet the criteria for exclusion from the site neutral payment rate are paid based on the LTCH PPS standard Federal payment rate specified at § 412.523. (For additional details on our finalized policies related to the dual rate LTCH PPS payment structure required by statute, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623).)
Prior to the implementation of the dual payment rate system in FY 2016, all LTCHs were paid similarly to those now exempt from the site neutral payment rate. That legacy payment rate was called the standard Federal rate. For details on the development of the initial standard Federal rate for FY 2003, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent updates to the standard Federal rate (FYs 2003 through 2015)/LTCH PPS standard
In this FY 2019 IPPS/LTCH PPS final rule, we present our policies related to the annual update to the LTCH PPS standard Federal payment rate for FY 2019.
The update to the LTCH PPS standard Federal payment rate for FY 2019 is presented in section V.A. of the Addendum to this final rule. The components of the annual update to the LTCH PPS standard Federal payment rate for FY 2019 are discussed below, including the statutory reduction to the annual update for LTCHs that fail to submit quality reporting data for FY 2019 as required by the statute (as discussed in section VII.E.2.c. of the preamble of this final rule). In addition, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20592), we made an adjustment to the LTCH PPS standard Federal payment rate to account for the estimated effect of the changes to the area wage level adjustment for FY 2019 on estimated aggregate LTCH PPS payments, in accordance with § 412.523(d)(4) (as discussed in section V.B. of the Addendum to this final rule).
Historically, the Medicare program has used a market basket to account for input price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. We adopted the 2013-based LTCH market basket for use under the LTCH PPS beginning in FY 2017 (81 FR 57100 through 57102). For additional details on the historical development of the market basket used under the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476), and for a complete discussion of the LTCH market basket and a description of the methodologies used to determine the operating and capital-related portions of the 2013-based LTCH market basket, we refer readers to section VII.D. of the preamble of the FY 2017 IPPS/LTCH PPS proposed and final rules (81 FR 25153 through 25167 and 81 FR 57086 through 57099, respectively).
Section 3401(c) of the Affordable Care Act provides for certain adjustments to any annual update to the LTCH PPS standard Federal payment rate and refers to the timeframes associated with such adjustments as a “rate year.” We note that, because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we adopted the term “fiscal year” (FY) rather than “rate year” (RY) under the LTCH PPS beginning October 1, 2010, to conform with the standard definition of the Federal fiscal year (October 1 through September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the language of sections 3004(a), 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as “rate year,” consistent with our change in the terminology used under the LTCH PPS from “rate year” to “fiscal year,” for purposes of clarity, when discussing the annual update for the LTCH PPS standard Federal payment rate, including the provisions of the Affordable Care Act, we use “fiscal year” rather than “rate year” for 2011 and subsequent years.
CMS has used an estimated market basket increase to update the LTCH PPS. As noted above, we adopted the 2013-based LTCH market basket for use under the LTCH PPS beginning in FY 2017. The 2013-based LTCH market basket is based solely on the Medicare cost report data submitted by LTCHs and, therefore, specifically reflects the cost structures of only LTCHs. (For additional details on the development of the 2013-based LTCH market basket, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57085 through 57099).) We continue to believe that the 2013-based LTCH market basket appropriately reflects the cost structure of LTCHs for the reasons discussed when we adopted its use in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57100). Therefore, in this final rule, as we proposed, we used the 2013-based LTCH market basket to update the LTCH PPS standard Federal payment rate for FY 2019.
Section 1886(m)(3)(A) of the Act provides that, beginning in FY 2010, any annual update to the LTCH PPS standard Federal payment rate is reduced by the adjustments specified in clauses (i) and (ii) of subparagraph (A). Clause (i) of section 1886(m)(3)(A) of the Act provides for a reduction, for FY 2012 and each subsequent rate year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (that is, “the multifactor productivity (MFP) adjustment”). Clause (ii) of section 1886(m)(3)(A) of the Act provides for a reduction, for each of FYs 2010 through 2019, by the “other adjustment” described in section 1886(m)(4)(F) of the Act.
Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) of section 1886(m) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year.
In accordance with section 1886(m)(5) of the Act, the Secretary established the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). The reduction in the annual update to the LTCH PPS standard Federal payment rate for failure to report quality data under the LTCH QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent fiscal years by section 1886(m)(5)(A)(i) of the Act, applies a 2.0 percentage point reduction to any update under § 412.523(c)(3) for an LTCH that does not submit quality reporting data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a year (that is, in the form and manner and at the time specified by the Secretary under the LTCH QRP) (§ 412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 percentage points reduction may result in an annual update that is less than 0.0
Consistent with our historical practice, we estimate the market basket increase and the MFP adjustment based on IGI's forecast using the most recent available data. Based on IGI's second quarter 2018 forecast, the FY 2019 full market basket estimate for the LTCH PPS using the 2013-based LTCH market basket is 2.9 percent. The current estimate of the MFP adjustment for FY 2019 based on IGI's second quarter 2018 forecast is 0.8 percent.
For FY 2019, section 1886(m)(3)(A)(i) of the Act requires that any annual update to the LTCH PPS standard Federal payment rate be reduced by the productivity adjustment (“the MFP adjustment”) described in section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, as we proposed, we are reducing the full estimated FY 2019 market basket increase by the FY 2019 MFP adjustment. To determine the market basket increase for LTCHs for FY 2019, as reduced by the MFP adjustment, consistent with our established methodology, we subtracted the FY 2019 MFP adjustment from the estimated FY 2019 market basket increase. Furthermore, sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act requires that any annual update to the LTCH PPS standard Federal payment rate for FY 2019 be reduced by the “other adjustment” described in paragraph (4), which is 0.75 percent for FY 2019. Therefore, following application of the productivity adjustment, as we proposed, we are further reducing the adjusted market basket update (that is, the full FY 2019 market basket increase less the MFP adjustment) by the “other adjustment” specified by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on our established methodology for adjusting the market basket increase by the MFP adjustment and the “other adjustment” required by the statute, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
For FY 2019, section 1886(m)(5) of the Act requires that for LTCHs that do not submit quality reporting data as required under the LTCH QRP, any annual update to an LTCH PPS standard Federal payment rate, after application of the adjustments required by section 1886(m)(3) of the Act, shall be further reduced by 2.0 percentage points. Therefore, the update to the LTCH PPS standard Federal payment rate for FY 2019 for LTCHs that fail to submit quality reporting data under the LTCH QRP, the full LTCH PPS market basket increase estimate, subject to the MFP adjustment as required under section 1886(m)(3)(A)(i) of the Act and an additional reduction required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is also further reduced by 2.0 percentage points.
In this FY 2019 IPPS/LTCH PPS final rule, in accordance with the statute, as we proposed, we reduced the FY 2019 full market basket estimate of 2.9 percent (based on IGI's second quarter 2018 forecast of the 2013-based LTCH market basket) by the FY 2019 MFP adjustment of 0.8 percentage point (based on IGI's second quarter 2018 forecast). Following application of the MFP adjustment, as we proposed, we are reducing the adjusted market basket update of 2.1 percent (2.9 percent minus 0.8 percentage point) by 0.75 percentage point, as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(F) of the Act. Therefore, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we are establishing an annual market basket update to the LTCH PPS standard Federal payment rate for FY 2019 of 1.35 percent (that is, the most recent estimate of the LTCH PPS market basket increase of 2.9 percent, less the MFP adjustment of 0.8 percentage point, and less the 0.75 percentage point required under section 1886(m)(4)(F) of the Act). Accordingly, consistent with our proposal, we are revising § 412.523(c)(3) by adding a new paragraph (xv), which specifies that the LTCH PPS standard Federal payment rate for FY 2019 is the LTCH PPS standard Federal payment rate for the previous LTCH PPS payment year updated by 1.35 percent, and as further adjusted, as appropriate, as described in § 412.523(d) (including the budget neutrality adjustment for the elimination of the 25-percent threshold policy under § 412.523(d)(6) discussed in section VII.E. of the preamble of this final rule). For LTCHs that fail to submit quality reporting data under the LTCH QRP, under § 412.523(c)(3)(xv) in conjunction with § 412.523(c)(4), as we proposed, we further reduced the annual update to the LTCH PPS standard Federal payment rate by 2.0 percentage points, in accordance with section 1886(m)(5) of the Act. Accordingly, we are establishing an annual update to the LTCH PPS standard Federal payment rate of −0.65 percent (that is, 1.35 percent minus 2.0 percentage points) for FY 2019 for LTCHs that fail to submit quality reporting data as required under the LTCH QRP. Consistent with our historical practice, as we proposed, we used a more recent estimate of the market basket and the MFP adjustment in this final rule to establish an annual update to the LTCH PPS standard Federal payment rate for FY 2019 under § 412.523(c)(3)(xv). (We note that, consistent with historical practice, we also are adjusting the FY 2019 LTCH PPS standard Federal payment rate by an area wage level budget neutrality factor in accordance with § 412.523(d)(4) (as discussed in section V.B.5. of the Addendum to this final rule).)
The “25-percent threshold policy” is a per discharge payment adjustment in the LTCH PPS that is applied to payments for Medicare patient discharges from an LTCH when the number of such patients originating from any single referring hospital is in excess of the applicable threshold for a given cost reporting period (such threshold is generally set at 25 percent, with exceptions for rural and urban single or MSA-dominant hospitals). If an LTCH exceeds the applicable threshold during a cost reporting period, payment for the discharge that puts the LTCH over its threshold and all discharges subsequent to that discharge in the cost reporting period from the referring hospital are adjusted at cost report settlement (discharges not in excess of the threshold are unaffected by the 25-percent threshold policy). The 25-percent threshold policy was originally established in the FY 2005 IPPS final rule for LTCH HwHs and satellites (69 FR 49191 through 49214). We later expanded the 25-percent threshold policy in the RY 2008 LTCH PPS final rule to include all LTCHs and LTCH satellite facilities (72 FR 26919 through 26944). Several laws have mandated delayed implementation of
In light of the further statutory delays and our continued consideration of public comments received in response to our proposal to consolidate and streamline the 25-percent threshold policy in the FY 2017 IPPS/LTCH PPS proposed rule, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38320), we adopted a 1-year regulatory moratorium on the implementation of the 25-percent threshold policy; that is, we imposed a regulatory moratorium on our implementation of the provisions of § 412.538 until October 1, 2018.
Since the introduction of the site neutral payment rate in FY 2016, many public commenters have asserted that the new site neutral payment rate would alleviate the policy concerns underlying the establishment of the 25-percent threshold policy. As we stated in our response to those comments in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57106) and in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38320), at that time, we were not convinced that this was the case. In addition, we received many public comments urging CMS to permanently rescind the 25-percent threshold policy in response to the Request for Information on CMS Flexibilities and Efficiencies that was included in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 20159). These public comments also asserted that this policy is no longer necessary in light of the new dual payment rate system.
As discussed in the FY 2018 IPPS/LTCH PPS proposed and final rules (82 FR 20028 and 82 FR 38318 through 38319, respectively), the best available LTCH claims data at the time of the development of both rules (FY 2016 discharges) included many LTCH discharges that occurred during FY 2016 that were not yet subject to the site neutral payment rate because the statute provides that the site neutral payment rate be phased in, effective with LTCH cost reporting periods beginning on or after October 1, 2015 (that is, LTCH cost reporting periods beginning in FY 2016). Therefore, all FY 2016 discharges that occurred in a LTCH cost reporting period that began prior to October 1, 2016 were not subject to the site neutral payment rate.
Given these widespread concerns, the longstanding statutory delays, and the limited experience under the new dual rate payment system, we implemented the 1-year regulatory moratorium for FY 2018 to allow for the opportunity to do an analysis of LTCH admission practices under the new dual payment rate under the LTCH PPS based on more complete data. This implementation plan was, in part, intended to avoid confusion and expending unnecessary resources in implementation should our analysis ultimately conclude that the policy concerns underlying the 25-percent threshold policy have been moderated (82 FR 38320).
Since establishing the current regulatory moratorium in the FY 2018 IPPS/LTCH PPS rulemaking, we have continued to receive additional communications seeking an end to our 25-percent threshold policy. We have considered these requests, along with reconsidering the many requests and public comments received through rulemaking, as we have reviewed our policies in the context of our ongoing initiative to reduce unnecessary regulatory burden. Our review also took note of the significant changes to LTCH admission practices and the LTCH PPS payment structure since the advent of the 25-percent threshold policy's adoption, such as the introduction of the site neutral payment rate beginning in FY 2016. One effect of these changes is the creation of a financial incentive for LTCHs to limit admissions according to the criteria for payment at the LTCH PPS standard Federal payment rate. While these changes do not specifically address our regulatory requirement to ensure that an LTCH does not act as an IPPS step-down unit, we believe that the creation of these financial incentives likely results in LTCH providers closely considering the appropriateness of admitting a potential transfer to an LTCH setting, regardless of the referral source, thereby lessening the concerns that led to the introduction of the 25-percent threshold policy.
In light of these factors, we recognize that the policy concerns that led to the 25-percent threshold policy may have been ameliorated, and that implementation of the 25-percent threshold policy would place a regulatory burden on providers. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20468), we stated that we believe it was appropriate at that time to propose the removal of this payment adjustment policy. We also stated that, for these same reasons, we believe the specific regulatory framework of the 25-percent threshold policy at § 412.538 is no longer an appropriate mechanism to ensure that the statutory requirement that an LTCH does not act as a defacto unit of an IPPS hospital is not violated. Therefore, in the proposed rule, we proposed to eliminate the 25-percent threshold policy under § 412.538.
In the proposed rule, we indicated the goal of our proposal to eliminate the 25-percent threshold policy is to reduce unnecessary regulatory burden. Independent of this goal, we continue to believe aggregate LTCH PPS payments are sufficient. Therefore, we do not believe that it would be appropriate to change the aggregate amount of LTCH PPS payments on a permanent basis. As described earlier, the 25-percent threshold policy would have reduced the LTCH PPS payments for certain discharges, and if finalized, the elimination of the 25-percent threshold policy would result in an increase in aggregate LTCH PPS payments. As a result, we also stated in the proposed rule that we believe this proposal should be accomplished in a budget-neutral manner.
With respect to the issue about the adequacy of LTCH payment levels, we note that MedPAC, in each of its annual updates to Congress since 2011, has concluded that current LTCH PPS payment levels are appropriate, and thus has recommended since 2011 the elimination of the annual update to the LTCH payment rates. (For example, we refer readers to MedPAC's March 2011 “Report to the Congress: Medicare Payment Policy,” Chapter 10, page 246, and MedPAC's March 2018 “Report to the Congress: Medicare Payment Policy,” Chapter 11, page 315.) We believe application of this burden reduction-related proposal to eliminate the 25-percent threshold policy would result in an unwarranted increase in aggregate payment levels. Therefore, in the proposed rule, we stated that, if we finalized our proposal to eliminate the 25-percent threshold policy, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we also would make a one-time, permanent adjustment to the FY 2019 LTCH PPS standard Federal payment rate. That adjustment would be set such that our projection of aggregate LTCH payments in FY 2019 that would have been paid if the 25-percent threshold policy had gone into effect (that is, as if the 25-percent threshold policy under § 412.538 remained in effect during FY 2019) are equal to our projection of aggregate LTCH payments in FY 2019 payments for such cases in the absence of that policy.
To do this, we proposed to remove the provisions of § 412.538, reserving this section, and add a new paragraph (d)(6) to § 412.523 to provide for a one-time permanent budget neutrality factor adjustment to the LTCH PPS standard Federal payment rate to ensure that
While the statutory and regulatory delays in prior years were not implemented in a budget neutrality manner, this does not preclude the application of such an adjustment at this time. We also note that, both the past statutory and regulatory delays were temporary, unlike our proposal to permanently eliminate the 25-percent threshold policy, which differentiates our proposal from past policy.
After consideration of the public comments we received, we are finalizing, without modification, our proposal to remove and reserve the provisions of § 412.538, add a new paragraph (d)(6) to § 412.523, and make further conforming changes to existing regulations.
As described earlier, in the proposed rule, we proposed to make a one-time, permanent adjustment to the FY 2019 LTCH PPS standard Federal payment rate, which would be set such that our projection of aggregate LTCH payments in FY 2019 that would have been paid if the 25-percent threshold policy had gone into effect (that is, as if the 25-percent threshold policy under § 412.538 remained in effect during FY 2019) are equal to our projection of aggregate LTCH payments in FY 2019 payments for such cases in the absence of that policy. We also proposed that this budget neutrality adjustment would only be applied to the LTCH PPS standard Federal payment rate (or such portion of a transitional blended payment) because payments made under the site neutral payment rate would have been unaffected by the 25-percent threshold policy. (Discharges in excess of the 25-percent threshold policy would be paid the lesser of the applicable LTCH payment or an IPPS equivalent payment. The site neutral payment rate would remain set at the lesser of the IPPS comparable amount or cost, neither of which would exceed the IPPS equivalent payment amount.) However, because the applicable site neutral payment rate for all LTCHs during all of FY 2019 is based on the transitional blended payment rate (that is, 50 percent of the site neutral payment rate and 50 percent of the LTCH PPS standard Federal payment rate), any adjustment applied to the LTCH PPS standard Federal payment rate would also need to be applied to the LTCH PPS standard Federal rate portion of payments that affect site neutral payment rate cases.
Therefore, as noted earlier, in the proposed rule, we stated that we must account for the change in payments to both LTCH PPS standard Federal payment rate cases and site neutral payment rate cases when determining the budget neutrality adjustment. To do so, we proposed to use the following methodology to determine the budget neutrality factor that would be applied to the FY 2019 LTCH PPS standard Federal payment rate using the best available LTCH claims data (the December 2017 update of the FY 2017 MedPAR files). Consistent with historical practice, in the proposed rule, we stated that if more recent data became available, we would use such data for the final rule (83 FR 20468 through 20469).
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(i) Determine the LTCH's discharges that are in excess of the applicable percentage threshold by comparing the LTCH's percentage of Medicare discharges admitted from each single referring IPPS hospital (Step 2b) to the LTCH's applicable percentage threshold (Step 2a).
(ii) Estimate the aggregate payment reduction under the 25-percent threshold policy for the Medicare discharges that caused the LTCH to exceed or remain in excess of the threshold by summing the difference between:
• The original LTCH PPS payment amount (that is, the otherwise applicable LTCH PPS payment without an adjustment under the 25-percent threshold policy); and
• The estimated adjusted payment amount under the 25-percent threshold policy. (We note that there is no payment adjustment under the 25-percent threshold policy for discharges that are not in excess of the LTCH's applicable percentage threshold.)
We also note that, under this step, the proposed budget neutrality adjustment factor would be applied to the FY 2019 LTCH PPS standard Federal payment rate after the application of the FY 2019 annual update and the FY 2019 area wage level adjustment budget neutrality factor.
However, while we agree with the commenters that there are behavioral assumptions that could lower the estimated cost of the elimination of the 25-percent threshold policy (such as those suggested by commenters), we believe that there are equally viable behavioral assumptions that could raise the estimated cost of eliminating the 25-percent threshold policy that are also not accounted for in our proposed estimate. For example, once the 25-percent threshold policy is retired, there would be no incentive for a hospital to limit admissions from a single referring hospital, which could lead to behaviors
We agree with commenters that our estimated cost of eliminating the 25-percent threshold policy based on the transitional blended payment rate for FY 2019 does not take into account that site neutral payment rate cases will no longer be paid based on a transitional blended payment basis in FY 2020 and subsequent years, and, therefore, applying a single one-time permanent budget neutrality adjustment would overly reduce payments for FY 2020 and beyond. To address this, we are modifying our proposed methodology for calculating the budget neutrality adjustment as described below to address the rolling end of the transitional blended payment rate to site neutral payment rate cases.
In this FY 2019 IPPS/LTCH PPS final rule, to account for the rolling end to the transitional blended payment rate, we are determining individual budget neutrality adjustments that correspond to the various stages of the phase-out of the transitional blended payment rate as follows:
• For FY 2019, the budget neutrality adjustment under § 412.523(d)(6) will be calculated using the estimated cost of eliminating the 25-percent threshold policy, whereby all site neutral payment rate discharges are paid the transitional blended payment rate. This temporary adjustment will only apply to the LTCH PPS standard Federal payment rate for FY 2019.
• For FY 2020, the budget neutrality adjustment will be calculated using the estimated cost of eliminating the 25-percent threshold policy, whereby all site neutral payment rate discharges that would occur in cost reporting periods beginning before October 1, 2019, are paid the transitional blended payment, and those site neutral discharges that would occur in cost reporting periods beginning on or after October 1, 2019, are paid the full site neutral payment rate. This temporary adjustment will only apply to the LTCH PPS standard Federal payment rate for FY 2020.
• For FY 2021 and beyond, the budget neutrality adjustment will be calculated using the estimated cost of eliminating the 25-percent threshold policy, whereby all site neutral payment rate discharges are paid the full site neutral payment rate. As such, the budget neutrality adjustment will be calculated using only aggregated estimated LTCH PPS standard Federal rate payments because there will be no portion of site neutral payment rate payments based on the LTCH PPS standard Federal rate for discharges occurring in FY 2021 and subsequent years. This permanent adjustment will apply to the LTCH PPS standard Federal payment rate for FY 2021 and subsequent years (consistent with our proposal prior to this modification to address the rolling end to the transitional blended payment rate).
As proposed, this budget neutrality adjustment will only be applied to the LTCH PPS standard Federal payment rate (or such portion of a transitional blended payment) because payments made under the site neutral payment rate are unaffected by the 25-percent threshold policy. We also are revising our proposed changes to § 412.523(d)(6) to reflect the a one-time, temporary budget neutrality adjustment in FY 2019 and FY 2020 and a one-time, permanent budget neutrality adjustment in FY 2021, as described above.
In summary, for the reasons discussed earlier, we are not making any adjustments to our methodology for calculating the budget neutrality adjustment for potential behavioral responses. As discussed in more detail above, we agree with the commenters that there are potential behavior responses to the full implementation of the 25-percent threshold policy, but we believe that none of these can be estimated with sufficient justification to be incorporated into an actuarial assumption in a nonarbitrary manner. We also agree with commenters that the most recent available historical data is the most appropriate source to use to calculate the budget neutrality adjustment and, as such, used claims from the March 2018 update of the FY 2017 MedPAR files for our budget neutrality calculations in this final rule. Finally, in response to public comments we received, we are modifying our proposed budget neutrality adjustment methodology so that the rolling end of the transitional blended payment rate for site neutral payment rate cases is accounted for in our estimated cost of eliminating the 25-percent threshold policy.
After consideration of the public comments we received, we are finalizing our proposed methodology, with the modification described above to account for the transitional blended payment rate payments to site neutral cases. Based on the updated LTCH claims data used for this final rule (the March 2018 update of the FY 2017 MedPAR files), we estimate that the costs of the elimination of the 25-percent threshold policy will increase aggregate LTCH PPS payments by approximately $35 million (compared to $36 million as stated in the proposed rule) in FY 2019; by approximately $33 million in FY 2020 (during the rolling end of the transitional blended payment rate for site neutral payment rate cases); and by approximately $28 million in FY 2021 and subsequent years. For this final rule, using the steps in the methodology described above, we have determined the following budget neutrality adjustment factors for the costs of the elimination of the 25-percent threshold policy:
• For FY 2019, a temporary, one-time factor of 0.990884;
• For FY 2020, a temporary, one-time factor of 0.990741; and
• For FY 2021 and subsequent years, a permanent, one-time factor of 0.991249.
To determine the budget neutrality adjustment for FY 2020, the rolling end of the transitional blended payment rate for site neutral payment rate cases in FY 2020 requires us to estimate the LTCH PPS standard Federal payment rate payments to LTCH PPS standard Federal payment rate cases and the portion of the transitional blended payment rate payments to site neutral payment rate cases that are paid based on the LTCH PPS standard Federal
In summary, under this approach, we grouped LTCHs based on the quarter their cost reporting periods will begin during FY 2020. For example, the 35 LTCHs with cost reporting periods that begin between October and December 2020 begin during the first quarter of FY 2020. For LTCHs grouped in each quarter of FY 2020, we modeled those LTCHs' estimated site neutral payment rate payments under the transitional blended payment rate based on the quarter in which the LTCHs in each group would continue to be paid the transitional payment method for the site neutral payment rate cases.
For purposes of this estimate, then we assume the cost reporting period is the same for all LTCHs in each of the quarterly groups, and that this cost reporting period begins on the first day of that quarter. (For example, our first group consists of 35 LTCHs, whose cost reporting periods will begin in the first quarter of FY 2020. Therefore, for purposes of this estimate, we assumed all 35 LTCHs will begin their FY 2020 cost reporting periods on October 1, 2019.) Next, we estimated the proportion of site neutral payment rate cases in each of the quarterly groups, and we then assume this proportion is applicable for all four quarters of FY 2020. (For example, we estimate the first quarter group will discharge 6.2 percent of all FY 2020 site neutral payment rate cases and, therefore, we estimate that group of LTCHs will discharge 6.2 percent of all FY 2020 site neutral payment rate cases in each quarter of FY 2020.) Then, we used our model of estimated payments to estimate quarterly-based payments under the LTCH PPS standard Federal payment rate based on the assumptions described above.
Based on the fiscal year begin date information in the March 2018 update of the PSF and the LTCH claims from the March 2018 update of the FY 2017 MedPAR files, we found the following: 6.2 percent of site neutral payment rate cases are from 35 LTCHs whose cost reporting periods will begin during the first quarter of FY 2020; 22.2 percent of site neutral payment rate cases are from 102 LTCHs whose cost reporting periods will begin in the second quarter of FY 2020; 9.2 percent of site neutral payment rate cases are from 56 LTCHs whose cost reporting periods will begin in the third quarter of FY 2020; and 62.4 percent of site neutral payment rate cases are from 217 LTCHs whose cost reporting periods will begin in the fourth quarter of FY 2020. Therefore, the following percentages apply in the approach described above:
• First Quarter FY 2020: 6.2 percent of site neutral payment rate cases (that is, the percentage of discharges from LTCHs whose FY 2020 cost reporting periods will begin in the first quarter of FY 2020) are no longer eligible for the transitional payment method, while the remaining 93.8 percent of site neutral payment rate discharges are eligible to be paid under the transitional payment method.
• Second Quarter FY 2020: 28.4 percent of site neutral payment rate second quarter discharges (that is, the percentage of discharges from LTCHs whose FY 2020 cost reporting periods will begin in the first or second quarter of FY 2020) are no longer eligible for the transitional payment method, while the remaining 71.6 percent of site neutral payment rate second quarter discharges are eligible to be paid under the transitional payment method.
• Third Quarter FY 2020: 37.6 percent of site neutral payment rate third quarter discharges (that is, the percentage of discharges from LTCHs whose FY 2020 cost reporting periods will begin in the first, second, or third quarter of FY 2020) are no longer eligible for the transitional payment method, while the remaining 62.4 percent of site neutral payment rate third quarter discharges are eligible to be paid under the transitional payment method.
• Fourth Quarter FY 2020: 100.0 percent of site neutral payment rate fourth quarter discharges (that is, the percentage of discharges from LTCHs whose FY 2020 cost reporting periods will begin in the first, second, third, or fourth quarter of FY 2020) are no longer eligible for the transitional payment method. Therefore, no site neutral payment rate case discharges are eligible to be paid under the transitional payment method.
Using this approach under the modified methodology for calculating the budget neutrality adjustment described above to address the rolling end of the transitional blended payment rate to site neutral payment rate cases, as noted above, we calculated a temporary, one-time budget neutrality adjustment factor of 0.990741 that will be applied to the LTCH PPS standard Federal payment rate for FY 2020.
For all LTCH discharges occurring in FY 2021 and beyond, all site neutral payment rate discharges will be paid the full site neutral payment rate. Therefore, as described above, the permanent budget neutrality adjustment that will be applied to the LTCH PPS standard Federal payment rate for FY 2021, and subsequent years was calculated using only aggregate estimated LTCH PPS standard Federal rate payments because there will be no portion of site neutral payment rate payments based on the LTCH PPS standard Federal rate for discharges occurring in FY 2021 and subsequent years. Using the modified methodology for calculating the budget neutrality adjustment described above to address the rolling end of the transitional blended payment rate to site neutral payment rate cases, as noted above, we calculated a temporary, permanent budget neutrality adjustment factor of 0.991249 that will be applied to the LTCH PPS standard Federal payment rate for FY 2021 and subsequent years.
As noted above, using the modified methodology for calculating the budget neutrality adjustment we are adopting in this final rule, we calculated a temporary, one-time budget neutrality adjustment factor of 0.990884 for FY 2019. Accordingly, in section V. of the Addendum to this final rule, to determine the FY 2019 LTCH PPS standard Federal payment rate, as we proposed, we applied the temporary one-time budget neutrality adjustment factor of 0.990884 for the costs of the elimination of the 25-percent threshold policy. The FY 2019 LTCH PPS standard Federal payment rate shown in Table 1E reflects this adjustment.
In section VIII. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20470 through 20515; 83 FR 20683 through 28604), we proposed changes to the following Medicare quality reporting systems:
• In section VIII.A., the Hospital IQR Program;
• In section VIII.B., the PCHQR Program; and
• In section VIII.C., the LTCH QRP.
In addition, in section VIII.D. of the preamble of the proposed rule (83 FR 20515 through 20544), we proposed changes to the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) for
We refer readers to section I.A.2. of the preamble of this final rule for a discussion of the Meaningful Measures Initiative.
The Hospital IQR Program strives to put patients first by ensuring they are empowered to make decisions about their own healthcare along with their clinicians using information from data-driven insights that are increasingly aligned with meaningful quality measures. We support technology that reduces burden and allows clinicians to focus on providing high quality health care for their patients. We also support innovative approaches to improve quality, accessibility, and affordability of care, while paying particular attention to improving clinicians' and beneficiaries' experiences when interacting with CMS programs. In combination with other efforts across the Department of Health and Human Services, we believe the Hospital IQR Program incentivizes hospitals to improve health care quality and value, while giving patients the tools and information needed to make the best decisions for them.
We seek to promote higher quality and more efficient health care for Medicare beneficiaries. This effort is supported by the adoption of widely-agreed upon quality measures. We have worked with relevant stakeholders to define measures of quality in almost every setting and currently measure some aspect of care for almost all Medicare beneficiaries. These measures assess structural aspects of care, clinical processes, patient experiences with care, and outcomes. We have implemented quality measure reporting programs for multiple settings of care. To measure the quality of hospital inpatient services, we implemented the Hospital IQR Program, previously referred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program. We refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through 50181) for detailed discussions of the history of the Hospital IQR Program, including the statutory history, and to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50217 through 50249), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49660 through 49692), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57148 through 57150), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38326 through 38328 and 82 FR 38348) for the measures we have previously adopted for the Hospital IQR Program measure set through the FY 2019 and FY 2020 payment determinations and subsequent years.
The technical specifications for chart-abstracted clinical process of care measures used in the Hospital IQR Program, or links to websites hosting technical specifications, are contained in the CMS/The Joint Commission (TJC) Specifications Manual for National Hospital Inpatient Quality Measures (Specifications Manual). This Specifications Manual is posted on the QualityNet website at:
The technical specifications for electronic clinical quality measures (eCQMs) used in the Hospital IQR Program are contained in the CMS Annual Update for Hospital Quality Reporting Programs (Annual Update). This Annual Update is posted on the Electronic Clinical Quality Improvement (eCQI) Resource Center web page at:
In addition, we believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates to the measure specifications for measures we have adopted for the Hospital IQR Program so that these measures remain up-to-date. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203) for our policy for using a subregulatory process to make nonsubstantive updates to measures used for the Hospital IQR Program.
We recognize that some changes made to measures undergoing maintenance review are substantive in nature and might not be appropriate for adoption using a subregulatory process. For substantive measure updates, after submission to the Measures Under Consideration list and evaluation by the Measure Applications Partnership (MAP), we will continue to use rulemaking to adopt those substantive measure updates for the Hospital IQR Program. We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57111) for additional discussion of the maintenance of technical specifications for quality measures for the Hospital IQR Program. We also refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50202 through 50203) for additional details on the measure maintenance process.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20470), we did not propose any changes to our policies on the measure maintenance process.
Section 1886(b)(3)(B)(viii)(VII) of the Act was amended by the Deficit Reduction Act (DRA) of 2005. Section 5001(a) of the DRA requires that the Secretary establish procedures for making information regarding measures available to the public after ensuring that a hospital has the opportunity to review its data before they are made public. Our current policy is to report data from the Hospital IQR Program as soon as it is feasible on CMS websites such as the
Information is available to the public on the
Other information that may not be as relevant to or easily understood by beneficiaries and information for which there are unresolved display issues or design considerations are not reported on the
We note that in section VIII.A.10. of the preamble of this final rule, we discuss our efforts to provide stratified data in hospital confidential feedback reports and potentially making stratified data publicly available on the
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20470 through 20500), we proposed a number of new policies for the Hospital IQR Program. We developed these proposals after conducting an overall review of the Program under our new “Meaningful Measures Initiative,” which is discussed in more detail in section I.A.2. of the preamble of this final rule. The proposals reflected our efforts to ensure that the Hospital IQR Program measure set continues to promote improved health outcomes for our beneficiaries while minimizing costs, which can consist of several different types of costs, including, but not limited to: (1) Provider and clinician information collection burden and related cost and burden associated with the submitting/reporting of quality measures to CMS; (2) the provider and clinician cost associated with complying with other quality programmatic requirements; (3) the provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs; (4) the CMS cost associated with the program oversight of the measure, including measure maintenance and public display; and (5) the provider and clinician cost associated with compliance with other federal and/or State regulations (if applicable). They also reflect our efforts to improve the usefulness of the data that we publicly report in the Hospital IQR Program. Our goal is to improve the usefulness and usability of CMS quality program data by streamlining how providers are reporting and accessing data, while maintaining or improving consumer understanding of the data publicly reported on a
As part of this review, we stated that we took a holistic approach to evaluating the Hospital IQR Program's current measures in the context of the measures used in the other IPPS quality programs (that is, the Hospital Readmissions Reduction Program, the HAC Reduction Program, and the Hospital VBP Program). We view the value-based purchasing programs together as a collective set of hospital value-based programs. Specifically, we believe the goals of the three value-based purchasing programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC Reduction Programs) and the measures used in these programs together cover the Meaningful Measures Initiative quality priorities of making care safer, strengthening person and family engagement, promoting coordination of care, promoting effective prevention and treatment of illness, and making care affordable—but that the programs should not add unnecessary complexity or costs associated with duplicative measures across programs.
The Hospital Readmissions Reduction Program focuses on care coordination measures, which address the quality priority of promoting effective communication and care coordination within the Meaningful Measures Initiative. The HAC Reduction Program focuses on patient safety measures, which address the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care. As part of this holistic quality payment program strategy, we believe the Hospital VBP Program should focus on the measurement priorities not covered by the Hospital Readmissions Reduction Program or the HAC Reduction Program. The Hospital VBP Program would continue to focus on measures related to: (1) The clinical outcomes, such as mortality and complications (which address the Meaningful Measures Initiative quality priority of promoting effective treatment); (2) patient and caregiver experience, as measured using the HCAHPS Survey (which addresses the Meaningful Measures Initiative quality priority of strengthening person and family engagement as partners in their care); and (3) healthcare costs, as measured using the Medicare Spending Per Beneficiary (MSPB)—Hospital measure (which addresses the Meaningful Measures Initiative priority of making care affordable). As part of this larger quality program strategy, we believe the Hospital IQR Program should focus on measure topics not covered in the other programs' measures. Although new Hospital VBP measures will be selected from the measures specified under the Hospital IQR Program, the Hospital VBP Program measure set will no longer necessarily be a subset of the Hospital IQR Program measure set. As discussed in section I.A.2. of the preamble of this final rule, we are engaging in efforts aimed at evaluating and streamlining regulations with the goal to reduce unnecessary costs, increase efficiencies, and improve beneficiary experience. While there may be some overlap between the Hospital IQR Program measure set and the Hospital VBP measure set, allowing removal of duplicative measures from the Hospital IQR Program once they have been adopted into the Hospital VBP Program would further these goals. We believe this framework will allow hospitals and patients to continue to obtain meaningful information about hospital performance and incentivize quality improvement while also streamlining the measure sets to reduce duplicative measures and program complexity so that the costs to hospitals associated with participating in these programs does not outweigh the benefits of improving beneficiary care.
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53512 through 53513) for our finalized measure retention policy. Pursuant to this policy, when we adopt measures for the Hospital IQR Program beginning with a particular payment determination, we automatically readopt these measures for all subsequent payment determinations unless we propose to remove, suspend, or replace the measures. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20471), we did not propose any changes to this policy.
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53510 through 53512) for a discussion of the previous considerations we have used to expand and update quality measures under the Hospital IQR Program. In the proposed rule, we did not propose any changes to these policies. We also refer readers to section I.A.2. of the preamble of this final rule, in which we describe the Meaningful Measures quality topics that we have identified as high impact measurement areas that are relevant and meaningful to both patients and providers.
Furthermore, in selecting measures for the Hospital IQR Program, we are mindful of the conceptual framework we have developed for the Hospital VBP Program. Because measures adopted for the Hospital VBP Program must first have been adopted under the Hospital IQR Program and publicly reported on the
We most recently updated our measure removal and retention factors in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49641 through 49643).
• Factor 1. Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (that is, “topped-out” measures): Statistically indistinguishable performance at the 75th and 90th percentiles; and truncated coefficient of variation ≤0.10.
• Factor 2. A measure does not align with the current clinical guidelines or practice.
• Factor 3. The availability of a more broadly applicable measure (across settings, populations, or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic).
• Factor 4. Performance or improvement on a measure does not result in better patient outcomes.
• Factor 5. The availability of a measure that is more strongly associated with desired patient outcomes for the particular topic.
• Factor 6. Collection or public reporting of a measure leads to negative unintended consequences other than patient harm.
• Factor 7. It is not feasible to implement the measure specifications.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472), we did not propose to modify any existing removal factors.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472), we proposed to adopt an additional factor to consider when evaluating measures for removal from the Hospital IQR Program measure set: Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
As we discuss in section I.A.2. of the preamble of this final rule with respect to our new “Meaningful Measures Initiative,” we are engaging in efforts to ensure that the Hospital IQR Program measure set continues to promote improved health outcomes for beneficiaries while minimizing the overall costs associated with the program. We believe these costs are multifaceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining the program. We have identified several different types of costs, including, but not limited to: (1) Provider and clinician information collection burden and related cost and burden associated with the submission/reporting of quality measures to CMS; (2) the provider and clinician cost associated with complying with other quality programmatic requirements; (3) the provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs; (4) the CMS cost associated with the program oversight of the measure, including measure maintenance and public display; and (5) the provider and clinician cost associated with compliance with other federal and/or State regulations (if applicable). For example, it may be needlessly costly and/or of limited benefit to retain or maintain a measure which our analyses show no longer meaningfully supports program objectives (for example, informing beneficiary choice or payment scoring). It may also be costly for health care providers to track confidential feedback preview reports and publicly reported information on a measure where we use the measure in more than one program. CMS may also have to expend unnecessary resources to maintain the specifications for the measure, as well as the tools needed to collect, validate, analyze, and publicly report the measure data. Furthermore, beneficiaries may find it confusing to see public reporting on the same measure in different programs.
When these costs outweigh the evidence supporting the continued use of a measure in the Hospital IQR Program, we believe it may be appropriate to remove the measure from the Program. Although we recognize that one of the main goals of the Hospital IQR Program is to improve beneficiary outcomes by incentivizing health care providers to focus on specific care issues and making public data related to those issues, we also recognize that those goals can have limited utility where, for example, the publicly reported data (including payment determination data) are of limited use because they cannot be easily interpreted by beneficiaries to influence their choice of providers. In these cases, removing the measure from the Hospital IQR Program may better accommodate the costs of program administration and compliance without sacrificing improved health outcomes and beneficiary choice.
We proposed that we would remove measures based on this factor on a case-by-case basis. We might, for example, decide to retain a measure that is burdensome for health care providers to report if we conclude that the benefit to beneficiaries justifies the reporting burden. Our goal is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients.
We refer readers to section VIII.A.5.b. of the preamble of this final rule, where we discuss our proposals to remove a number of measures based on this proposed removal factor.
A number of commenters supported the adoption of removal Factor 8 because it would allow for the removal of inappropriately burdensome measures, and noted that costs are an important factor to consider when evaluating measures for removal from the Hospital IQR Program measure set. Other commenters appreciated that CMS has identified costs beyond those associated with data collection and submission as part of its evaluation of measures under this new removal factor.
Numerous commenters supported the adoption of removal Factor 8 because it would allow for the removal of measures with limited utility, such as measures that do not support program objectives of informing beneficiary decision-making and improving hospital quality of care, as well as for the removal of duplicative measures contained in multiple quality programs.
• Insights from stakeholders, including patients and providers, on costs and benefits, as well as potential unintended consequences of removal (such as a decline in performance, particularly if the measure would not be captured in any of the other IPPS programs);
• Benefits of consistent measure sets;
• Multiple methods of data collection and reporting;
• Costs associated with designing, developing, and implementing a measure;
• Costs associated with updating clinical processes and workflows to adapt to an updated measure set;
• Providers' costs to contract with vendors for data collection or reporting;
• Development and implementation of processes to perform well on the measure; and
• Whether measure implementation adds or duplicates tasks within provider processes.
We also understand that while a measure's use in the Hospital IQR Program may benefit many entities, the primary benefit is to patients and caregivers through incentivizing the provision of high quality care and through providing publicly reported data regarding the quality of care available. One key aspect of patient benefits is assessing the improved beneficiary health outcomes if a measure is retained in our measure set. We believe that these benefits are multifaceted, and are illustrated through the domains of the Meaningful Measures Initiative. When the costs associated with a measure outweigh the evidence supporting the benefits to patients with the continued use of a measure in the Hospital IQR Program we believe it may be appropriate to remove the measure from the program.
We appreciate commenters' suggestions for other types of costs and benefits to consider when evaluating the costs and benefits of each measure on a case-by-case basis under measure removal Factor 8, and will take these into consideration for future years.
In addition, we note that the benefits we will consider center around benefits to patients and caregivers as the primary beneficiaries of our quality reporting and value-based payment programs. When we propose a measure for removal under this measure removal factor, we will provide information on the costs and benefits we considered in evaluating the measure. We continue to monitor and evaluate our programs to identify their benefit with respect to quality of care and patient safety as well as their costs with respect to provider burden, potentially contradictory public information for beneficiaries to analyze in their decision making, and measure maintenance. When our analyses indicate that a measure's costs outweigh the benefit of continuing to use the measure in the program, we will propose to remove that measure through notice and comment rulemaking.
• Saving lives;
• Ensuring high quality care;
• Ensuring patient safety; and
• Facilitating consumer access to information.
We also disagree with the assertion that removing measures from the program inherently decreases the effectiveness of the program itself. We believe one of the Hospital IQR Program's primary benefits to patients and the public is its ability to collect and publicly report data for patients to use in making decisions about their care. We further believe maintaining an unnecessarily large or complicated measure set including measures that are not meaningful to patients hampers the program's effectiveness at presenting valuable data in a useful or usable manner. For this reason, we believe it is in the interest of patients for the Hospital IQR Program to ensure an individual measure continues to benefit patients. Furthermore, we note that removal of such measures would free up CMS programmatic resources to focus on other priority measures or areas of the Hospital IQR Program.
After consideration of the public comments we received, we are finalizing our proposal to adopt measure removal Factor 8, “the costs associated with a measure outweigh the benefit of its continued use in the program,” beginning with the effective date of the FY 2019 IPPS/LTCH PPS final rule as proposed.
We refer readers to section VIII.A.4. of the preamble of this final rule for a discussion of our current and proposed measure removal criteria. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472 through 20485), we proposed to remove a total of 39 measures from the Hospital IQR Program across the FYs 2020, 2021, 2022, and 2023 payment determinations. In this final rule, we are finalizing removal of all 39 of those measures with some modification as discussed below.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473), we proposed to remove the Hospital Survey on Patient Safety Culture measure beginning with the CY 2018 reporting period/FY 2020 payment determination based on removal Factor 4, “performance or improvement on a measure does not result in better patient outcomes.” The Hospital Survey on Patient Safety Culture measure was adopted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49662 through 49664) for the FY 2018 payment determination and subsequent years, to allow us to assess whether and which patient safety culture surveys were being utilized by hospitals and the frequency of their use. In that rule, we stated our belief that this would be a time-limited measure that would assist us in assessing the feasibility of implementing a single survey on patient safety culture in the future (80 FR 49661). When we adopted the measure, we acknowledged that we had not yet determined for how many years we would keep the measure in the Hospital IQR Program (80 FR 49664). By design, this structural measure does not provide information on patient outcomes, because hospitals are asked only whether they administer a patient safety culture survey, and therefore, does not result in better patient outcomes, removal Factor 4.
Our data indicate that 98 percent of hospitals have reported they use some version of a patient safety culture survey; a large majority of hospitals (69.6 percent) that reported on the measure for the CY 2016 reporting period/FY 2018 payment determination use the AHRQ Surveys on Patient Safety Culture (SOPS).
However, we disagree that the measure allows for meaningful comparisons between hospitals due to its design as a structural measure. The Hospital Survey on Patient Safety Culture measure does not collect data on either a hospital's survey results or those results' impact on patient safety outcomes. As a result, comparisons between hospitals on this measure only inform the public about whether or not hospitals use a patient safety culture survey. Because the data indicate 98 percent of hospitals are now administering patient safety culture surveys, we believe continuing to collect and publicly report this data does not capture information that will incentivize specific improvements for hospitals or provide valuable information for use by patients in making decisions about where to seek care. Therefore, we do not believe continuing to collect—or, conversely, ceasing to collect—data under this measure will assess or affect the patient safety culture within hospitals.
After consideration of the public comments we received, we are finalizing removal of the Hospital Survey on Patient Safety Culture from the Hospital IQR Program measure set beginning with the CY 2018 reporting period/FY 2020 payment determination as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473 through 20484), we proposed to remove a number of measures under our proposed new removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program, across the FYs 2020, 2021, 2022, and 2023 payment determinations. These proposals are presented by measure type: (1) Structural measure: Safe Surgery Checklist Use; (2) patient safety; (3) claims-based readmission; (4) claims-based mortality; (5) hip/knee complications; (6) Medicare Spending Per Beneficiary (MSPB)—Hospital (NQF #2158); (7) clinical episode-based payment; (8) chart-abstracted clinical process of care; and (9) eCQMs. These are discussed in detail below.
We refer readers to the FY 2013 IPPS/LTCH PPS final rule where we adopted the Safe Surgery Checklist Use measure (77 FR 53531 through 53533). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473 through 20474), we proposed to remove the Safe Surgery Checklist Use measure beginning with the CY 2018 reporting period/FY 2020 payment determination under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
We refer readers to section VIII.A.4.b. of the preamble of the proposed rule, where we acknowledge that costs are multi-faceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining the program. For example, we believe it may be unnecessarily costly for health care providers to report a measure for which our analyses show that there is no meaningful difference in performance or there is little room for continued improvement.
Based on our review of reported data on this measure, there is no meaningful difference in performance or there is little room for continued improvement. Our analysis is captured by the table below:
Based on the analysis above, the national rate of “Yes” response for this measure is nearly 1.0, or 100 percent, nationwide, and has remained at this level for the last two years, such that there is no distinguishable difference in hospital performance between the 75th and 90th percentiles. In addition, the truncated coefficient of variation (COV) has decreased such that it is trending towards 0.10. Our analysis indicates that performance on this measure is trending towards topped-out status, that is to say, safe surgery checklists for surgical procedures are widely in use and there is little room for improvement on this structural measure.
In addition, we believe this measure is of more limited utility for internal hospital quality improvement efforts. This structural measure of hospital process determines whether a hospital utilizes a safe surgery checklist that assesses whether effective communication and safe practices are performed during three distinct perioperative periods. For the measure, hospitals indicate by “Yes” or “No” whether or not they use a safe surgery checklist for surgical procedures that includes safe surgery practices during each of the aforementioned perioperative periods. The measure does not require a hospital to report whether it uses a checklist in connection with each individual inpatient procedure.
Furthermore, removal of this measure would alleviate burden to hospitals associated with reporting on this measure. We anticipate a reduction in information collection burden because reporting on this measure takes hospitals approximately two minutes each year (77 FR 53666). As such, we believe the costs associated with reporting on this measure outweigh the associated benefits of keeping it in the Hospital IQR Program because it no longer meaningfully supports the Program objective of informing beneficiary choice since safe surgery checklists are widely in use.
Therefore, we proposed to remove the Safe Surgery Checklist Use measure beginning with the CY 2018 reporting period/FY 2020 payment determination, for which the data submission period is April 1, 2019 through May 15, 2019, under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We also refer readers to the CY 2018 OPPS/ASC PPS final rule in which the Hospital Outpatient Quality Reporting (OQR) and Ambulatory Surgical Center Quality Reporting (ASCQR) Programs finalized removal of the Safe Surgery Checklist Use measure beginning with the CY 2018 reporting period/CY 2020 payment determination for the Hospital OQR Program and with the CY 2019 payment determination for the ASCQR Program (82 FR 52363 through 52364; 82 FR 52571 through 52572; and 82 FR 52588 through 52589).
One commenter stated that while there is value in ensuring quality communication during critical phases of the surgical patient experience, the high level of compliance for this measure strongly suggests that the measure is deeply embedded in clinical workflows and processes, leaving little to be gained from continued reporting of the measure. The commenter agreed that use of a safe surgery checklist has been widely adopted by hospitals, but asserted that there is little evidence demonstrating that the measure provides educational opportunities for improving the ongoing competency of surgical teams regarding patient harm prevention. The commenter asserted that education aimed at reducing near-miss events has been proven to be effective and recommended that CMS revisit and refine the measure criteria to ensure that it requires education to be provided and to demonstrate improved communication ongoing surgical team competency.
After consideration of the public comments we received, we are finalizing removal of the Safe Surgery Checklist Use measure from the Hospital IQR Program measure set beginning with the CY 2018 reporting period/FY 2020 payment determination as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20474 through 20475), we proposed to remove the Patient Safety and Adverse Events Composite
In this final rule, we wish to clarify that our proposals in the FY 2019 IPPS/LTCH PPS proposed rule, and ultimately, our finalized policy as discussed below, to remove these measures from the Hospital IQR Program will not end or otherwise interfere with collection or public reporting of these data. The HAI data will continue to be made publicly available on a quarterly basis and the PSI 90 data on an annual basis in a consumer-friendly manner on the
We proposed to remove the PSI 90 measure beginning with the FY 2020 payment determination (which would use a performance period of July 1, 2016 through June 30, 2018). As the PSI 90 measure is a claims-based measure, it uses claims and administrative data to calculate the measure without any additional data collection from hospitals. Thus, operationally, we would be able to remove the PSI 90 measure sooner than the NHSN HAI measures. Our reasons for proposing to remove this measure are discussed further below.
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset
• National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) (adopted at 76 FR 51616 through 51618);
• National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) (adopted at 75 FR 50200 through 50202);
• National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-Resistant
• American College of Surgeons—Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753) (Colon and Abdominal Hysterectomy SSIs) (adopted at 75 FR 50200 through 50202).
We proposed to remove the CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI measures from the Hospital IQR Program beginning with the CY 2019 reporting period/FY 2021 payment determination. These measures would remain in the Hospital IQR Program until that time, and their reporting would still be tied to FY 2019 and FY 2020 payment determinations under the Hospital IQR Program. Although we proposed to remove these measures from the Hospital IQR Program, we did not propose to remove them from the HAC Reduction Program, and they will continue to be tied to the payment adjustment under that program (section IV.J.1. of the preamble of the proposed rule). After removal from the Hospital IQR Program, these measures would continue to be reported on the
We proposed to remove these six patient safety measures under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We believe that removing the PSI 90, CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI measures from one program would eliminate development and release of duplicative and potentially confusing CMS confidential feedback reports provided to hospitals across multiple hospital quality and value-based purchasing programs. We refer readers to section VIII.A.4.b. of the preamble of this final rule where we discuss examples of the costs associated with implementing and maintaining these measures for the
We stated in the proposed rule that we believe the costs as discussed above outweigh the associated benefit to maintaining these measures in multiple programs, because that information can be captured through inclusion of these measures in the HAC Reduction Program. Although we are finalizing our proposals to remove these six patient safety measures from the Hospital IQR Program, we continue to recognize that improving patient safety and reducing NHSN HAIs is a critical quality area for which continued progress and improvement is needed, and that patient safety should be a high priority focus of quality programs. For these reasons, and as discussed below, we will continue to use these measures in the HAC Reduction Program and we will not finalize their removal from the Hospital VBP Program. (We refer readers to section IV.I.2.c.(2) of the preamble of this final rule where we discuss retaining these safety measures in the Hospital VBP Program.) Unlike the Hospital IQR Program, performance data on measures maintained in the HAC Reduction and Hospital VBP Programs are used both to assess the quality of care provided at a hospital and to calculate incentive payment adjustments for a given year of each respective program based on performance. Also, the HAC Reduction and Hospital VBP Programs' incentive payment structures tie hospitals' payment adjustments on claims paid under the IPPS to their performance on selected quality measures, including the above measures sufficiently incentivizing high performance as well as performance improvement on these measures among participating hospitals. By keeping the measures in the HAC Reduction and Hospital VBP Programs, patients, hospitals, and the public also continue to receive information about the quality of care provided with respect to these measures.
We discussed in the proposed rule that we believed removing these measures from the Hospital IQR Program, while keeping them in the HAC Reduction Program, would strike an appropriate balance of benefits in driving improvement on patient safety and costs associated with retaining these measures in more than one program, while continuing to keep patient safety improvement and reducing NHSN HAIs as high priorities. We refer readers to section IV.J.1. of the preamble of this final rule where we discuss safety measures included in the HAC Reduction Program and section IV.I.2.c.(2) of the preamble of this final rule for this discussion in the Hospital VBP Program. As discussed in section VIII.A.4.b. of the preamble this final rule, one of our main goals is to move forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients. We believe retaining these measures in the HAC Reduction Program and the Hospital VBP Program addresses the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care.
In the proposed rule, we proposed to remove the: (1) PSI 90 measure for the FY 2020 payment determination (which applies to the performance period of July 1, 2016 through June 30, 2018) and subsequent years; and (2) CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI measures for the CY 2019 reporting period/FY 2021 payment determination and subsequent years.
Because these measures will be publicly reported under the HAC Reduction and Hospital VBP Programs while also being used to assess hospital performance and impose payment adjustments on hospitals that perform poorly on these measures, we believe retaining the measures in two value-based purchasing programs and removing them from the Hospital IQR Program, will at least partly address the concerns of both the commenters who want to retain these measures and the commenters who supported their removal and de-duplication. We are, however, removing the PSI 90 measure for the FY 2020 payment determination (which applies to the performance period of July 1, 2016 through June 30, 2018) and subsequent years as proposed, because the data used to assess performance under this measure are collected via claims and therefore require no additional collection processes. We reiterate that removing the patient safety measures from the Hospital IQR Program beginning with the CY 2020 reporting period/FY 2022 payment determination for the five NHSN HAIs, and beginning with the FY 2020 payment determination for the PSI 90 measure, will not end or otherwise interfere with collection or public reporting of these data under other CMS quality programs. Under the HAC Reduction Program: (1) The NHSN HAI measures data will continue to be made publicly available on the
While we recognize that the payment structures of the HAC Reduction Program and Hospital VBP Program are different, particularly in that the Hospital VBP Program scoring methodology scores hospitals on the higher of improvement or achievement on each measure, and incentivizes all hospitals to improve and achieve high performance with both positive and negative payment adjustments. Because many commenters have expressed this similar concern about the potential reduced incentive for hospitals to continue to improve and achieve high performance on these safety measures, we are not finalizing our proposal to remove these measures from the Hospital VBP Program and refer readers to section IV.I.2.c.(2) of the preamble of this final rule where we discuss this decision in detail.
We note that the HAC Reduction Program was designed to include risk-adjusted measures that are reflective of hospital performance (78 FR 50712 through 50715). We will continue to consult with the CDC and take this feedback into consideration for measure maintenance and future refinement of measure specifications. Furthermore, we will continue to monitor hospital performance on these measures under both the HAC Reduction and Hospital VBP Programs, including any unintended consequences. We will take the commenter's feedback regarding the HAC Reduction Program incentive structure into consideration for future years to the extent authorized under section 1886(p) of the Act.
In order to ensure continuity under the HAC Reduction Program for the public reporting of the NHSN HAI data quarterly and to assess payment penalties based on hospitals' performance on the measures, we believe it is appropriate to transfer collection of these patient safety measure data to that program. We further note that in retaining these measures in the Hospital VBP Program, performance on these measures will also continue to be tied to that program's payment incentive structure, reinforcing improvement and high achievement on the measures, and providing positive as well as negative payment adjustments. We acknowledge commenters' concern regarding future potential statutory changes, and would address any such changes in future rulemaking.
We believe removing measures that have transitioned to a value-based purchasing program from the Hospital IQR Program will better enable us to focus on new quality measures and collecting and publicly reporting these data for both patients and providers without imposing additional cost or burden on providers for duplicative measures unless the benefits outweigh the costs. (For example, we refer readers to section IV.I.2.c.(2) of the preamble of this final rule where we discuss retaining these patient safety measures in the Hospital VBP Program.)
We would like to clarify that the payment provision established by section 5001(c) of the Deficit Reduction Act (DRA) of 2005 (also known as DRA-HAC or the Hospital-Acquired Conditions (Present on Admission Indicator) payment provision), is a policy under which hospitals no longer receive additional payment for cases in which one of a selected set of HACs occurred but was not present on admission.
We further disagree that the HAC Reduction Program lacks statutory authority to publicly report measures that are not also in the Hospital IQR Program, and refer readers to section 1886(p)(6) of the Act, which specifically requires the Secretary to make publicly available information regarding hospital acquired conditions under the HAC Reduction Program and to post such information on
After consideration of the public comments we received, we are finalizing our proposal to remove the PSI 90 measure beginning with the FY 2020 payment determination (which applies to the performance period of July 1, 2016 through June 30, 2018) as proposed. Furthermore, we are finalizing our proposals to remove the CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI measures with modification; instead of removing them beginning with the CY 2019 reporting period/FY 2021 payment determination as proposed, we are finalizing a delay in the removal of these measures until the CY 2020 reporting period/FY 2022 payment determination.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20475 through 20476), we proposed to remove the following seven claims-based readmission measures beginning with the FY 2020 payment determination:
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0505) (READM-30-AMI) (adopted at 73 FR 68781);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2515) (READM-30-CABG) (adopted at 79 FR 50220 through 50224);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1891) (READM-30-COPD) (adopted at 78 FR 50790 through 50792);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Heart Failure (HF) Hospitalization (NQF #0330) (READM-30-HF) (adopted at 73 FR 48606);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneumonia Hospitalization (NQF #0506) (READM-30-PN) (adopted at 73 FR 68780 through 68781);
• Hospital-Level 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551) (READM-30-THA/TKA) (adopted at 77 FR 53519 through 53521); and
• 30-Day Risk-Standardized Readmission Rate Following Stroke Hospitalization (READM-30-STK) (adopted at 78 FR 50794 through 50798).
We proposed to remove READM-30-AMI, READM-30-CABG, READM-30-COPD, READM-30-HF, READM-30-PN, and READM-30-THA/TKA under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. (The READM-30-STK measure is discussed further below.) We believe removing these measures from the Hospital IQR Program would eliminate costs associated with implementing and maintaining these measures for the program, and in particular, development and release of duplicative and potentially confusing CMS confidential feedback reports provided to hospitals across multiple hospital quality and value-based purchasing programs. We refer readers to section VIII.A.4.b. of the preamble of the proposed rule where we discuss examples of the costs associated with implementing and maintaining these measures for the programs. For example, it may be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. Health care providers incur additional cost to monitor measure performance in multiple programs for internal quality improvement and financial planning purposes when measures are used across value-based purchasing programs. Beneficiaries may also find it confusing to see public reporting on the same measures in different programs. In addition, maintaining the specifications for the measures, as well as the tools we need to analyze and publicly report the measure data result in costs to CMS. We believe the costs as described above outweigh the associated benefit to beneficiaries of receiving the same information from multiple programs, because that information can be captured through inclusion of these measures solely in the Hospital Readmissions Reduction Program. We believe the benefit to beneficiaries of keeping this measure in the Hospital IQR Program is limited because the public would continue to receive measure information via another CMS quality program.
Because we continue to believe these measures provide important data on patient outcomes following inpatient hospitalization (addressing the Meaningful Measures Initiative quality priority of promoting effective communication and coordination of care), we will continue to use these measures in the Hospital Readmissions Reduction Program. By keeping the measures in the Hospital Readmissions Reduction Program, patients, hospitals, and the public would continue to receive information about the quality of care provided with respect to these measures.
Unlike the Hospital IQR Program, performance data on measures maintained in the Hospital Readmissions Reduction Program are used both to assess the quality and value of care provided at a hospital and to calculate incentive payment adjustments for a given year of the program based on performance. The Hospital Readmissions Reduction Program's incentive payment structure ties hospitals' payment adjustments on claims paid under the IPPS to their performance on selected quality measures, including the above measures which are already in the Hospital Readmissions Reduction Program, sufficiently incentivizing performance improvement on these measures among participating hospitals. As discussed in section VIII.A.4.b. of the preamble of the proposed rule, one of our main goals is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients, and we believe removing these measures from the Hospital IQR Program is the best way to achieve this. In addition, as discussed in section I.A.2. of the preamble of this final rule, we believe keeping these measures in both programs no longer aligns with our goal of not adding unnecessary complexity or cost with duplicative measures across programs.
Furthermore, we proposed to remove the READM-30-STK measure under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. The READM-30-STK measure collects important hospital-level, risk-standardized readmission rates following inpatient hospitalizations for strokes (78 FR 50794). However, these data also are captured in the Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) adopted into the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53521 through 53528), because that measure comprises a single summary score, derived from the results of different models for each of the following specialty cohorts: Medicine; surgery/gynecology; cardiorespiratory; cardiovascular; and neurology (77 FR 53522). These cohorts cover conditions and procedures defined by the AHRQ Clinical Classification Software (CCS), which collapsed more than 17,000 different ICD-9-CM diagnoses and procedure codes into 285 clinically-coherent, mutually-exclusive condition categories and 231 mutually-exclusive procedure categories (77 FR 53525). The transition of the CCS-based measure specifications to the ICD-10-CM version of the CCS is underway. The ICD-10 to CCS map and tools for its use are currently available at:
We recognize, however, that including condition- and procedure-specific clinical quality measure data can provide hospitals with actionable feedback to better equip them to implement targeted improvements in comparison to an overall quality measure. In addition, condition- and procedure-specific measures can provide valuable data to specialty societies by clearly assessing performance for their specialty, and may be valuable to persons and families who prefer information on certain conditions and procedures relevant to them. The Hospital-Wide Readmission measure, unlike condition- and procedure-specific measures, also requires improvement in quality across multiple service lines to produce improvement in the overall rate, which may give the perception of slower or smaller gains in hospital quality. Conversely, hospitals would still have a strong motivation to improve stroke readmissions performance if they want to improve their overall performance on the Hospital-Wide Readmission measure posted on
Therefore, we proposed to remove the READM-30-AMI, READM-30-CABG, READM-30-COPD, READM-30-HF, READM-30-PN, READM-30-THA/TKA, and READM-30-STK measures for the FY 2020 payment determination (which would apply to the performance period of July 1, 2015 through June 30, 2018) and subsequent years.
We invited public comment on our proposal to remove these measures from the Hospital IQR Program as well as feedback on whether there are reasons to retain one or more of the measures in the Hospital IQR Program.
We note that, as discussed in section IV.H.4. of the preamble of this final rule, these measures will continue to be used in the Hospital Readmissions Reduction Program. However, we will take commenters' recommendations into consideration as we continue to evaluate the other quality programs' measure sets in future years.
After consideration of the public comments we received, we are finalizing removal of the READM-30-AMI, READM-30-CABG, READM-30-COPD, READM-30-HF, READM-30-PN, READM-30-THA/TKA, and READM-30-STK measures from the Hospital IQR Program measure set beginning with the FY 2020 payment determination as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20476 through 20477), we proposed to remove five claims-based mortality measures across the FYs 2020, 2021, and 2022 payment determinations and subsequent years:
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0230) (MORT-30-AMI) beginning with the FY 2020 payment determination (adopted at 71 FR 68206);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure (HF) Hospitalization Surgery (NQF #0229) (MORT-30-HF) beginning with the FY 2020 payment determination (adopted at 71 FR 68206);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) (NQF #1893) (MORT-30-COPD) beginning with the FY 2021 payment determination (adopted at 78 FR 50792 through 50794);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization (NQF #0468) (MORT-30-PN) beginning with the FY 2021 payment determination (adopted at 72 FR 47351); and
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2515) (MORT-30-CABG) beginning with the FY 2022 payment determination (adopted at 79 FR 50224 through 50227).
We proposed to remove MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN, and MORT-30-CABG under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. Removing these measures from the Hospital IQR Program would eliminate costs associated with implementing and maintaining these measures for the program, and in particular, development
We continue to believe these measures provide important data on patient outcomes following inpatient hospitalization (addressing the Meaningful Measures Initiative quality priority of promoting effective prevention and treatment of chronic disease), which is why we will continue to use these measures in the Hospital VBP Program. Unlike the Hospital IQR Program, performance data on measures maintained in the Hospital VBP Program are used both to assess the quality and value of care provided at a hospital and to calculate incentive payment adjustments for a given year of the program based on performance. The Hospital VBP Program's incentive payment structure ties hospitals' payment adjustments on claims paid under the IPPS to their performance on selected quality measures, including the above listed measures, sufficiently incentivizing performance improvement on these measures among participating hospitals. By keeping the measures in the Hospital VBP Program, patients, hospitals, and the public continue to receive information about the quality of care provided with respect to these measures.
As discussed in section VIII.A.4.b. of the preamble of this final rule, one of our main goals is to move forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing incentivize improvement in the quality of care provided to patients, and we believe removing these measures from the Hospital IQR Program is the best way to achieve that goal. In addition, as discussed in section I.A.2. of the preamble of this final rule, we believe keeping these measures in both programs no longer aligns with our goal of not adding unnecessary complexity or cost with duplicative measures across programs.
We note that the Hospital VBP Program has adopted the MORT-30-COPD measure beginning with the FY 2021 program year (80 FR 49558), the MORT-30-PN measure (modified with the expanded cohort) beginning with the FY 2021 program year (81 FR 56996), and the MORT-30-CABG measure beginning with the FY 2022 program year (81 FR 56998). Therefore, we proposed to stagger the beginning date of the removals of these measures from the Hospital IQR Program to avoid a gap in public reporting of measure data. For the Hospital IQR Program, we proposed to remove the: (1) MORT-30-AMI and MORT-30-HF measures for the FY 2020 payment determination (which would use a performance period of July 1, 2015 through June 30, 2018) and subsequent years; (2) MORT-30-COPD and MORT-30-PN measures for the FY 2021 payment determination (which would use a performance period of July 1, 2016 through June 30, 2019) and subsequent years; and (3) MORT-30-CABG measure for the FY 2022 payment determination (which would use a performance period of July 1, 2017 through June 30, 2020) and subsequent years.
After consideration of the public comments we received, we are finalizing removal of MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN, and MORT-30-CABG from the Hospital IQR Program measure set across the FYs 2020, 2021, and 2020 payment determinations as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20477 through 20478), we proposed to remove one complications measure, Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications), beginning with the FY 2023 payment determination, under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 FR 53516 through 53518), where we adopted this measure.
We believe that removing this measure from the Hospital IQR Program would eliminate costs associated with implementing and maintaining the measure for the program, and in particular, development and release of duplicative and potentially confusing CMS confidential feedback reports provided to hospitals across multiple hospital quality and value-based purchasing programs. We refer readers to section VIII.A.4.b. of the preamble of this final rule where we discuss examples of the costs associated with implementing and maintaining these measures for the programs. For example, it may be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on this measure as we also use the measure in the Hospital VBP Program and the Comprehensive Care for Joint Replacement model (CJR model). Health care providers incur additional cost to monitor measure performance in multiple programs for internal quality improvement and financial planning purposes when measures are used across value-based purchasing programs. Beneficiaries may also find it confusing to see public reporting on the same measure in different programs. In addition, maintaining the specifications for the measure, as well as the tools we need to analyze and publicly report the measure data result in cost to CMS. We believe the costs as discussed above outweigh the associated benefit to beneficiaries of receiving the same information from more than one program, because that information can be captured through inclusion of this measure in the Hospital VBP Program.
As discussed in section VIII.A.4.b. of the preamble of this final rule, one of our main goals is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients, and we believe removing this measure from the Hospital IQR Program is the best way to achieve this goal. We believe retaining the Hip/Knee Complications measure in both the Hospital IQR Program and the Hospital VBP Program no longer aligns with our current goal of not adding unnecessary complexity or cost with duplicative measures across programs, as stated in section I.A.2. of the preamble of this final rule.
We continue to believe this measure provides important data on patient outcomes following inpatient hospitalization (addressing the Meaningful Measures Initiative quality priority of promoting effective treatment), which is why we will continue to use this measure in the Hospital VBP Program. Unlike the Hospital IQR Program, performance data on measures maintained in the Hospital VBP Program are used both to assess the quality and value of care provided at a hospital and to calculate incentive payment adjustments for a given year of the program based on performance. The Hospital VBP Program's incentive payment structure ties hospitals' payment adjustments on claims paid under the IPPS to their performance on selected quality measures, including the Hip/Knee Complications measure, sufficiently incentivizing performance improvement on this measure among participating hospitals. By keeping the measure in the Hospital VBP Program, patients, hospitals, and the public continue to receive information about the quality of care provided with respect to this measure.
Therefore, we proposed to remove the Hip/Knee Complications measure from the Hospital IQR Program beginning with the FY 2023 payment determination (which applies to the performance period of April 1, 2018 through March 31, 2021) and subsequent years. We chose to propose this timeframe because the Comprehensive Care for Joint Replacement model (CJR model) previously adopted the same measure and requires use of data collected under the Hospital IQR Program through the FY 2022 payment determination (which would use a performance period of April 1, 2017 through March 31, 2020) (80 FR 73507). After removal from the Hospital IQR Program, we note that this measure would continue to be reported on the
After consideration of the public comments we received, we are finalizing removal of the Hip/Knee Complications measure from the Hospital IQR Program measure set beginning with the FY 2023 payment determination and for subsequent years as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20478 through 20479), we proposed to remove one resource use measure, Medicare Spending Per Beneficiary (MSPB)—Hospital (NQF #2158) (MSPB), from the Hospital IQR Program beginning with the FY 2020 payment determination, under the proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618) where we adopted this measure.
We believe that removing this measure from the Hospital IQR Program would eliminate costs associated with implementing and maintaining the measure, and in particular, development and release of duplicative and potentially confusing CMS confidential feedback reports provided to hospitals across multiple hospital quality and value-based purchasing programs. We refer readers to section VIII.A.4.b. of the preamble of this final rule where we discuss examples of the costs associated with implementing and maintaining these measures for the programs. For example, it may be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on this measure as we use the measure in the Hospital VBP Program. Health care providers incur additional cost to monitor measure performance in multiple programs for internal quality improvement and financial planning purposes when measures are used across value-based purchasing programs. Beneficiaries may also find it confusing to see public reporting on the same measure in different programs. In addition, maintaining the specifications for the measure, as well as the tools we need to analyze and publicly report the measure data result in costs to CMS. We believe the costs as discussed above outweigh the associated benefit to beneficiaries of receiving the same information from multiple programs, because that information can be captured through inclusion of this measure solely in the Hospital VBP Program.
As discussed in section VIII.A.4.b. of the preamble this final rule, one of our main goals is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to
We continue to believe this measure provides important data on resource use (addressing the Meaningful Measures Initiative priority of making care affordable), which is why we will continue to use this measure in the Hospital VBP Program. Unlike the Hospital IQR Program, performance data on measures maintained in the Hospital VBP Program are used both to assess the quality and value of care provided at a hospital and to calculate incentive payment adjustments for a given year of the program based on performance. The Hospital VBP Program's incentive payment structure ties hospitals' payment adjustments on claims paid under the IPPS to their performance on selected quality measures, including the MSPB measure, sufficiently incentivizing performance improvement on this measure among participating hospitals. By keeping the measure in the Hospital VBP Program, patients, hospitals, and the public continue to receive information about the quality of care provided with respect to these measures.
Therefore, we proposed to remove the MSPB measure from the Hospital IQR Program beginning with the FY 2020 payment determination (which applies to the performance period of January 1, 2018 through December 31, 2018) and subsequent years. As a claims-based measure, which uses claims and administrative data to calculate the measure without any additional data collection from hospitals, we can operationally remove the MSPB measure sooner than certain other measures we proposed for removal in the proposed rule.
After consideration of the public comments we received, we are finalizing our proposal to remove the Medicare Spending Per Beneficiary—Hospital (NQF #2158) (MSPB) measure from the Hospital IQR Program, beginning with the FY 2020 payment determination as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20479 through 20480), we proposed to remove six clinical episode-based payment measures from the Hospital IQR Program beginning with the FY 2020 payment determination:
• Cellulitis Clinical Episode-Based Payment Measure (Cellulitis Payment) (adopted at 80 FR 49664 through 49674);
• Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure (GI Payment) (adopted at 80 FR 49664 through 49674);
• Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure (Kidney/UTI Payment) (adopted at 80 FR 49664 through 49674);
• Aortic Aneurysm Procedure Clinical Episode-Based Payment Measure (AA Payment) (adopted at 81 FR 57133 through 57142);
• Cholecystectomy and Common Duct Exploration Clinical Episode-Based Payment Measure (Chole and CDE Payment) (adopted at 81 FR 57133 through 57142); and
• Spinal Fusion Clinical Episode-Based Payment Measure (SFusion Payment) (adopted at 81 FR 57133 through 57142).
We proposed to remove the Cellulitis Payment, GI Payment, Kidney/UTI Payment, AA Payment, Chole and CDE Payment, and SFusion Payment measures under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We refer readers to section VIII.A.4.b. of the preamble of this final rule where we discuss examples of the costs associated with implementing and maintaining these measures for the programs. Specifically, maintaining the specifications for the measure, as well as the tools we need to analyze and publicly report the measure data result in costs to CMS. We believe the costs associated with interpreting the requirements for multiple measures with overlapping data points outweigh the benefit to beneficiaries and providers of the additional information provided by these measures, because the measure data are already captured within the overall hospital MSPB measure, which will be retained in the Hospital VBP Program.
These measures are clinically coherent groupings of health care services that can be used to assess providers' resource use associated with the clinically coherent groupings (80 FR
As discussed in section VIII.A.4.b. of the preamble of this final rule, above, one of our main goals is to move forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients, and we believe that removing these measures from the Hospital IQR Program helps achieve that goal. We recognize, however, that including specific episode-based payment measure data can provide hospitals with actionable feedback to better equip them to implement targeted improvements in comparison to an overall payment measure. In addition, these measures were only recently implemented in the Hospital IQR Program in the FY 2017 IPPS/LTCH PPS final rule and data have not yet become publicly available on the
Therefore, we proposed to remove the Cellulitis Payment, GI Payment, Kidney/UTI Payment, AA Payment, Chole and CDE Payment, and SFusion Payment measures for the FY 2020 payment determination (which applies to the performance period of January 1, 2018 through December 31, 2018) and subsequent years. Because these are claims-based measures, operationally, we are able to remove them sooner than certain other measures we proposed for removal in the proposed rule.
We invited public comment on our proposal to remove these measures from the Hospital IQR Program as well as feedback on whether there are reasons to retain one or more of the measures in the Hospital IQR Program.
Finally, we agree that the clinical episode-based payment measures, if tied to corresponding clinical quality measures, have the potential to improve coordination and transitions of care and thereby increase the efficiency of care across the full continuum, and will take these recommendations into consideration for future program years. However, as the clinical episode-based payment measures are not currently tied directly to other clinical quality measures, we believe that the data derived from these measures may be of lower utility to patients in deciding where to seek care, as well as to providers in receiving feedback to reduce cost and improve efficiency while maintaining high quality care.
After consideration of the public comments we received, we are finalizing our proposal as proposed to remove the six clinical episode-based payment measures from the Hospital IQR Program beginning with the FY 2020 payment determination: (1) Cellulitis Clinical Episode-Based Payment Measure (Cellulitis Payment); (2) Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure (GI Payment); (3) Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure (Kidney/UTI Payment); (4) Aortic Aneurysm Procedure Clinical Episode-Based Payment Measure (AA Payment); (5) Cholecystectomy and Common Duct Exploration Clinical Episode-Based Payment Measure (Chole and CDE Payment); and (6) Spinal Fusion Clinical Episode-Based Payment Measure (SFusion Payment).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20480 through 20481), we proposed to remove the Influenza Immunization, Incidence of Potentially Preventable Venous Thromboembolism, Median Time from ED Arrival to ED Departure for Admitted ED Patients, and Admit Decision Time to ED Departure Time for Admitted Patients measures as discussed in detail below. Manual abstraction of these chart-abstracted measures is highly burdensome. We have previously stated our intent to move away from chart-abstracted measures in order to reduce this information collection burden (78 FR 50808; 79 FR 50242; 80 FR 49693). We refer readers to our discussion below and to section XIV.B.3.b. of the preamble of the proposed rule, where we discuss the information collection burden associated with each of these measures with greater specificity.
We invited public comment on our proposals and received the following general comments. Measure-specific comments are discussed further below.
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50211) where we adopted the Influenza Immunization measure (NQF #1659) (IMM-2). In the proposed rule, we proposed to remove IMM-2 beginning with the CY 2019 reporting period/FY 2021 payment determination under removal Factor 1—topped-out measure and under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
Hospital performance on IMM-2 is statistically “topped-out”—removal Factor 1. The Hospital IQR Program previously finalized two criteria for determining when a measure is “topped out”: (1) When there is statistically indistinguishable performance at the 75th and 90th percentiles; and (2) when the measure's truncated coefficient of variation is less than or equal to 0.10 (79 FR 50203). Our analysis indicates that performance on this measure has been topped-out for the past three payment determination years and also for Q1 and Q2 of 2017 encounters. This analysis is captured by the table below:
Our topped-out analysis shows that administration of the influenza vaccination to admitted patients is widely in practice and there is little room for improvement. We believe that hospitals will continue this practice even after the measure is removed; thus, utility in the program is limited.
Moreover, we proposed to remove this measure under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We believe the information collection burden associated with manual chart abstraction, as discussed above, outweighs the associated benefit to beneficiaries of receiving this information, because: (1) It is topped out and there is little room for improvement (discussed above); and (2) it does not directly measure patient outcomes.
As discussed in section I.A.2. of the preamble of this final rule, one of the goals of the Meaningful Measures Initiative is to reduce costs associated with payment policy, quality measures, documentation requirements, conditions of participation, and health information technology. Another goal of the Meaningful Measures Initiative is to utilize measures that are “outcome-based where possible.” IMM-2 is a
We recognize and agree that influenza prevention is an important public health issue. We note that the Influenza Vaccination Coverage Among Healthcare Personnel (HCP) measure (adopted at 76 FR 51631 through 51633), which assesses the percentage of healthcare personnel at a facility who receive the influenza vaccination, remains in the Hospital IQR Program. Although the HCP measure is focused on vaccination of providers and other hospital personnel and not beneficiaries, it promotes improved health outcomes among beneficiaries because: (1) Health care personnel that have received the influenza vaccination are less likely to transmit influenza to patients under their care; and (2) vaccination of health care personnel reduces the probability that hospitals may experience staffing shortages as a result of illness that would impact ability to provide adequate patient care. Thus, we believe the costs associated with reporting this chart-abstracted measure outweighs the associated benefits of keeping it in the Hospital IQR Program.
We proposed to remove the IMM-2 measure beginning with the CY 2019 reporting period/FY 2021 payment determination (which applies to the performance period of January 1, 2019 through December 31, 2019) because hospitals already would have collected and reported data for the first three quarters of the CY 2018 reporting period for the FY 2020 payment determination by the time of publication of the FY 2019 IPPS/LTCH PPS final rule. In addition, there are operational limitations associated with updating CMS systems in time to remove this measure sooner for the CY 2018 reporting period/FY 2020 payment determination. This proposed timeline (that is, beginning with the CY 2019 reporting period/FY 2021 payment determination) would subsequently allow us to use the data already reported by hospitals in the CY 2018 reporting period for public reporting on our
Therefore, we proposed to remove the IMM-2 measure from the Hospital IQR Program for the CY 2019 reporting period/FY 2021 payment determination and subsequent years.
After consideration of the public comments we received, we are finalizing our proposal to remove the IMM-2 measure from the Hospital IQR Program for the CY 2019 reporting period/FY 2021 payment determination and subsequent years as proposed.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51634 through 51636), where we adopted the Incidence of Potentially Preventable Venous Thromboembolism measure (VTE-6), and to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50210 through 50211), where we adopted both the chart-abstracted version of the Median Time from ED Arrival to ED Departure for Admitted ED Patients measure (NQF #0495) (ED-1) and the Admit Decision Time to ED Departure Time for Admitted Patients measure (NQF #0497) (ED-2). In the proposed rule, we proposed to remove VTE-6 and the chart-abstracted version of ED-1 beginning with the CY 2019 reporting period/FY 2021 payment determination; in addition, we proposed to remove the chart-abstracted version of ED-2 beginning with the CY 2020 reporting period/FY 2022 payment determination. We proposed to remove these three measures under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
As discussed in section I.A.2. of the preamble of this final rule, one of the goals of our Meaningful Measures Initiative is to reduce costs associated with payment policy, quality measures, documentation requirements, conditions of participation, and health information technology. We believe the information collection burden associated with manual chart abstraction, as discussed above, outweighs the associated benefit to beneficiaries of receiving information provided by these measures because much of the information provided by these measures is available through other Program measure data (as further discussed below).
Furthermore, in the case of ED-2, hospitals still would have the opportunity to submit data since the eCQM version will remain part of the Hospital IQR Program measure set. We note that in section VIII.A.5.b.(9)(c) of the preamble of the proposed rule, we proposed to remove the eCQM version of ED-1, but to retain the eCQM version of ED-2 due to the continued importance of assessing ED wait times for admitted patients. Although ED-1 is an important metric for patients, ED-2 has greater clinical significance for quality improvement because it provides more actionable information such that hospitals have greater ability to allocate resources to consistently reduce the time between decision to admit and time of inpatient admission. Hospitals have somewhat less control to consistently reduce wait time between ED arrival and decision to admit, as measured by ED-1, due to the need to triage and prioritize more complex or urgent patients. Also, the Hospital OQR Program includes an ED throughput measure, OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients (81 FR 79755), which publicly reports similar data as captured by ED-1. Therefore, we believe the costs to providers for submitting data on the chart-abstracted ED-1 and ED-2 measures outweigh the associated benefits of keeping the measures in the program given that other measures in the Hospital IQR Program and in other CMS hospital quality programs are able to capture actionable data on ED wait times.
Furthermore, although the eCQM version of VTE-6 is not included in the Hospital IQR Program, hospitals still would have the opportunity to submit data for two other VTE related measures (eCQMs), which were already adopted in the Hospital IQR Program measure set—Venous Thromboembolism Prophylaxis (VTE-1) (NQF #0371) eCQM (adopted at 78 FR 50809) and Intensive Care Unit Venous Thromboembolism Prophylaxis (VTE-2) (NQF #0372) eCQM (adopted at 78 FR 50809). The VTE-1 eCQM assesses the number of patients who received venous thromboembolism (VTE) prophylaxis or have documentation why no VTE prophylaxis was given the day of or day after hospital admission or surgery end date for surgeries that start the day of or the day after hospital admission; the VTE-2 eCQM assesses the number of patients who received VTE prophylaxis or have documentation why no VTE prophylaxis was given on the day of or the day after the initial admission (or transfer) to the Intensive Care Unit (ICU) or surgery end date for surgeries that start the day of or the day after ICU admission (or transfer). The VTE-1 and VTE-2 measures will be retained in the Hospital IQR Program to encourage best clinical practices to those patients in this high risk population by providing prophylactic steps which will decrease the incidence of preventable VTE. In contrast, the VTE-6 measure assesses the number of patients diagnosed with confirmed VTE during hospitalization (not present at admission) who did not receive VTE prophylaxis between hospital admission and the day before the VTE diagnostic testing order date. While awareness of the occurrence of preventable VTE is valuable knowledge, the prevention of the initial occurrence is more actionable and meaningful for both providers and beneficiaries. Therefore, we believe the costs to providers of submitting data on this chart-abstracted measure outweigh its limited clinical utility given other VTE measures in the Program are able to capture more actionable data on VTE.
As discussed in section VIII.A.4.b. of the preamble of this final rule, one of our main goals is to move the program
We proposed to remove the VTE-6 measure and chart-abstracted version of the ED-1 measure beginning with the CY 2019 reporting period/FY 2021 payment determination, because hospitals already would have collected and reported data for the first three quarters of the CY 2018 reporting period for the FY 2020 payment determination by the time of publication of the FY 2019 IPPS/LTCH PPS final rule. Moreover, we would not be able to overcome operational limitations associated with updating our systems in time to support removal of the VTE-6 and chart-abstracted version of the ED-1 measures for the CY 2018 reporting period/FY 2020 payment determination. In addition, we proposed to remove the chart-abstracted version of the ED-2 measure beginning with the CY 2020 reporting period/FY 2022 payment determination, because the first results from validation of ED-2 eCQM data will be available beginning with the FY 2021 payment determination. We believe it is important to keep the chart-abstracted version of ED-2 in the program until after the validated data from the eCQM version of ED-2 is available for comparative analysis to evaluate the accuracy and completeness of the eCQM data. Further, removing these three measures on the proposed timelines would allow us to use the data already reported by hospitals in the CY 2018 reporting period for public reporting on our
Therefore, we proposed to remove: (1) VTE-6 and the chart-abstracted version of ED-1 beginning with the CY 2019 reporting period/FY 2021 payment determination; and (2) the chart-abstracted version of ED-2 beginning with the CY 2020 reporting period/FY 2022 payment determination.
After consideration of the public comments we received, we are finalizing our proposals to remove the VTE-6 measure and the chart-abstracted version of ED-1 beginning with the CY 2019 reporting period/FY 2021 payment determination and the chart-abstracted version of ED-2 beginning with the CY 2020 reporting period/FY 2022 payment determination, as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20481 through 20484), in alignment with the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) for eligible hospitals and CAHs, we proposed to reduce the number of electronic Clinical Quality Measures (eCQMs) in the Hospital IQR Program eCQM measure set from which hospitals must select four to report, by proposing to remove seven eCQMs (of the 15 measures currently in the measure set) beginning with the CY 2020 reporting period/FY 2022 payment determination. The seven eCQMs we proposed to remove are:
• Primary PCI Received Within 90 Minutes of Hospital Arrival (AMI-8a) (adopted at 79 FR 50246);
• Home Management Plan of Care Document Given to Patient/Caregiver (CAC-3) (adopted at 79 FR 50243 through 50244);
• Median Time from ED Arrival to ED Departure for Admitted ED Patients (NQF #0495) (ED-1) (adopted at 78 FR 50807 through 50710);
• Hearing Screening Prior to Hospital Discharge (NQF #1354) (EHDI-1a) (adopted at 79 FR 50242);
• Elective Delivery (NQF #0469) (PC-01) (adopted at 78 FR 50807 through 50810);
• Stroke Education (STK-08) (adopted at 78 FR 50807 through 50810); and
• Assessed for Rehabilitation (NQF #0441) (STK-10) (adopted at 78 FR 50807 through 50810).
We proposed to remove all seven eCQMs under proposed removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. As discussed in section I.A.2. of the preamble of this final rule, two of the goals of our Meaningful Measures Initiative are to: (1) Reduce costs associated with payment policy, quality measures, documentation requirements, conditions of participation, and health information technology; and (2) to apply a parsimonious set of the most meaningful measures available to track patient outcomes and impact. In section VIII.A.11.d.(2) of the preamble of this final rule, for the CY 2019 reporting
In order to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients, we believe it is appropriate to propose to remove additional eCQMs at this time to develop an even more streamlined set of the most meaningful eCQMs for hospitals. In selecting which eCQMs to propose for removal, we considered the relative benefits and costs associated with each eCQM in the measure set. Individual eCQMs are discussed in more detail below.
We proposed to remove AMI-8a because the costs associated with implementing and maintaining this eCQM outweigh the associated benefit to beneficiaries because too few hospitals select to report on this measure. Only a single hospital reported on this measure for the CY 2016 reporting period. Because we do not receive enough data to conduct meaningful, statistically significant analysis, we believe the costs of maintaining this measure in the Program outweigh any associated benefit to patients, consumers, and providers—proposed removal Factor 8.
We proposed to remove the CAC-3, STK-08, and STK-10 eCQMs, because we believe the costs associated with implementing and maintaining these eCQMs outweigh the benefit to beneficiaries because they do not provide information evaluating the clinical quality of the activity. Home Management Plan of Care Document Given to Patient/Caregiver (CAC-3) assesses the proportion of pediatric asthma patients discharged from an inpatient hospital stay with a Home Management Plan of Care (HMPC) document given to the pediatric asthma patient/caregiver. Stroke Education (STK-08) captures ischemic or hemorrhagic stroke patients or their caregivers who were given educational materials during the hospital stay and at discharge. Assessed for Rehabilitation (STK-10) captures ischemic or hemorrhagic stroke patients who were assessed for rehabilitation.
We have issued guidance that measure developers should avoid selecting or constructing measures that can be met primarily through documentation without evaluating the clinical quality of the activity—often satisfied with a checkbox, date, or code—for example, a completed assessment, care plan, or delivered instruction.
Furthermore, we stated that if our proposals to remove the STK-08 and STK-10 eCQMs are finalized as proposed, we believe the resulting set of four stroke eCQMs (STK-02, STK-03, STK-05, and STK-06) will be more meaningful to both patients and providers because they capture the proportion of ischemic stroke patients who are prescribed a statin medication,
We proposed to remove the Median Time from ED Arrival to ED Departure for Admitted ED Patients (ED-1) eCQM because we believe that among the ED measures in the eCQM measure set, Admit Decision Time to ED Departure Time for Admitted Patients (ED-2) is more effective at driving quality improvement. We note that in section VIII.A.5.b.(8)(b) of the preamble of the proposed rule, we proposed to remove the chart-abstracted versions of ED-1 and ED-2. As stated above, we believe that although ED-1 is an important metric for patients, ED-2 has greater clinical significance for quality improvement because it provides more actionable information—hospitals have greater ability to allocate resources and align inter-departmental communication to consistently reduce the time between decision to admit and time of inpatient admission. Hospitals have somewhat less ability to consistently reduce wait time between ED arrival and decision to admit, as measured by ED-1, due to the need to triage and prioritize more complex or urgent patients, which might inadvertently prolong ED wait times for less urgent patients. Also, the Hospital OQR Program includes an ED
We proposed to remove the EHDI-1a eCQM because we believe the costs associated with implementing and maintaining the measure, as discussed above, outweigh the benefits to beneficiaries because newborn hearing screening is already widely practiced by hospitals as the standard of care and already mandated by many State laws. Forty-three States currently have statutes or rules related to newborn hearing screening and 28 of the 43 States require babies to be screened.
We proposed to remove the eCQM version of PC-01. Due to the importance of child and maternal health, we did not propose to also remove the chart-abstracted version of the measure because we believe all hospitals with a sufficient number of cases should be required to report data on this measure (adopted at 77 FR 53530). Although we have expressed in section XIII.A.4.b.ii.(8) of the preamble of the proposed rule our intent to move away from the use of chart-abstracted measures in quality reporting programs, our previously adopted policy requires that hospitals should need less time to submit data for this measure because, unlike the other chart-abstracted measures, hospitals are only required to submit several aggregate counts instead of potentially numerous patient-level charts. We note that submission of this measure places less information collection burden on hospitals than the other chart-abstracted measures because of the ease with which hospitals can simply submit their aggregate counts using our Web-Based Measure Tool through the QualityNet website (77 FR 53537). In addition, if the chart-abstracted version of this measure were removed from the Program, and hospitals could only elect to report the eCQM version of this measure as one of four required eCQMs, we believe that due to the low volume of patients relative to total adult hospital population, we would not receive enough data to produce meaningful analyses. Also, PC-01 is one of only two measures of child and maternal health in the Hospital IQR Program measure set (PC-05 eCQM being the other) and since eCQM data are not currently publicly reported, the chart-abstracted version of PC-01 is currently the only publicly reported measure of child and maternal health in the Program. However, retaining this measure in both eCQM and chart-abstracted form may be duplicative and costly. Consequently, we proposed to remove the eCQM version of PC-01 while retaining the chart-abstracted version of PC-01.
Therefore, we believe the costs associated with implementing and maintaining the eCQM, as discussed above, outweigh the associated benefit to beneficiaries because the information is already collected and publicly reported in the chart-abstracted form of this measure for the Hospital IQR Program.
Thus, we proposed to remove seven eCQMs as discussed above beginning with the CY 2020 reporting period/FY 2022 payment determination. If our proposals are finalized as proposed, the eCQMs remaining in the eCQM measure set would focus on: (a) ED wait times for admitted patients (ED-2), which addresses the Meaningful Measures Initiative quality priority of promoting effective communication and coordination of care; (b) Exclusive Breast Milk Feeding (PC-05), which addresses the Meaningful Measures Initiative quality priority that care is personalized and aligned with patients' goals; and (c) stroke care (STK-02, STK-03, STK-05, and STK-06) and VTE care (VTE-1 and VTE-2), which address the Meaningful Measures Initiative quality priority of promoting effective prevention and treatment.
In crafting our proposals to remove these seven eCQMs from the Hospital IQR Program for the CY 2020 reporting period/FY 2022 payment determination and subsequent years, we also considered proposing to remove these seven eCQMs one year earlier, beginning with the CY 2019 reporting period/FY 2021 payment determination. We establish program requirements considering all hospitals that participate in the Hospital IQR Program at a national level, which involves a wide spectrum of capabilities and resources with respect to eCQM reporting. In establishing our eCQM policies, we must balance the needs of hospitals with variable preferences and capabilities. Overall, across the range of capabilities and resources for eCQM reporting, stakeholders have expressed that they want more time to prepare for eCQM changes. Specifically, as noted in the FY 2018 IPPS/LTCH PPS final rule, we have continued to receive frequent feedback (via email, webinar questions, help desk questions, and conference call discussions) from hospitals and health IT vendors about ongoing challenges of implementing eCQM reporting, including, “a need for at least one year between new EHR requirements due to the varying 6- to 24-month cycles needed for vendors to code new measures, test and institute measure updates, train hospital staff, and rollout other upgraded features (82 FR 38355).”
We recognize that some hospitals and health IT vendors may prefer earlier removal in order to forgo maintenance on those eCQMs proposed for removal. In preparation for the proposed rule, we weighed the relative burdens and costs associated with removing these measures beginning with the CY 2019 reporting period/FY 2021 payment determination or beginning with the CY 2020 reporting period/FY 2022 payment determination. Ultimately, in order to be responsive to the previous stakeholder feedback we have received, we proposed to remove these seven eCQMs beginning with the CY 2020 reporting period/FY 2022 payment determination and subsequent years, even if as a result some hospitals may have to perform measure maintenance on measures that would be removed the following year. We believe our proposal to remove these eCQMs would spare hospitals that have already allocated and expended resources in 2018 in preparation for the CY 2019 reporting period that begins January 1, 2019 from the burden of unnecessarily expended resources or expending additional time and resources to update their EHR systems or adjust the eCQMs they selected to report for the CY 2019 reporting period/FY 2021 payment determination.
In the proposed rule, we noted that we are striving to establish program requirements that reflect the wide range of capabilities and resources of hospitals for eCQM reporting. Our proposal would allow more advanced notice of eCQMs that would and would not be available to report for the CY 2020 reporting period/FY 2022 payment determination. Therefore, we proposed
We invited public comment on our proposal as discussed above, including the specific measures proposed for removal and the timing of removal from the program.
We refer readers to section IV.I.2.c.(1) of the preamble of this final rule for a discussion of the reasons we are removing the chart-abstracted version of the PC-01 measure from the Hospital VBP Program as soon as practicable, beginning with the CY 2019 performance period for the FY 2021 program year. We note that the chart-abstracted version of the PC-01 measure will continue to be included in the Hospital IQR Program and therefore, removing the chart-abstracted version of the PC-01 measure from the Hospital VBP Program will have no effect on hospital data collection burden whether it occurs beginning with the CY 2019 performance period or the CY 2020 performance period.
We will continue working to provide hospitals with the education, tools, and resources necessary to help reduce eCQM reporting burden and more seamlessly account for the removal/addition of eCQMs. Further, we will consider the issues associated with new software, workflow changes, training, et cetera as we continue to improve our education and outreach efforts for eCQM submission and validation. We note that, as stated in the proposed rule, these eCQMs would not be removed until the CY 2020 reporting period/FY 2022 payment determination as a result of stakeholder feedback requesting more notice before making changes to the eCQM measure set in order to give hospitals additional time to select alternate eCQMs, and to modify workflows and systems as necessary, in the case that eCQMs they had previously been reporting are being removed. We will try to be as proactive as possible in providing lead time about the removal of measures from the Hospital IQR Program measure set.
In addition, a few commenters noted that reducing the number of available eCQMs may present a challenge for hospitals to select measures that are well developed in data collection, workflow, and add value to the patient population of the organization. Commenters urged CMS to continue to work with stakeholders to develop measures that focus on quality and safety, and to ensure that eCQMs truly provide comparable data across institutions to better assist our hospitals in understanding the methodology and ways to improve patient care.
Alternatively, similar to the Promoting Interoperability Program's
We respectfully disagree that removing the ED-1 eCQM would not reduce some burden on providers and their health IT vendors. Focusing on a more streamlined measure set gives hospitals and their health IT vendors more time and resources to accommodate new reporting requirements by reducing measure maintenance and specification requirements. As we have stated above, the ED-2 eCQM captures more actionable information and hospitals have greater control over allocating resources and aligning inter-departmental communication to consistently reduce the time between the decision to admit and the time of admission. In addition, the Hospital OQR Program includes an ED throughput measure which publicly reports similar data as is captured by ED-1.
One commenter did not support CMS' proposal to remove the PC-01 eCQM because the commenter believed it could be useful to retain both the eCQM and chart-abstracted versions of the measure to allow for comparison of the data. The commenter recommended CMS work to improve the PC-01 eCQM so that it can replace the chart-abstracted measure in the future. The PC-01 eCQM could collect all the cases in the population rather than sampling of cases as is done with the chart-abstracted measure. In addition, the electronic version of the measure would reduce the burden to the hospitals having to abstract, aggregate, and submit the measure data elements via the CMS web-based tool.
Further, hospitals are only required to submit several aggregate counts for the chart-abstracted version of this measure,
A few commenters recommended CMS allow hospitals to use the eCQM Extraordinary Circumstances Exception to apply for an exception from the eCQM reporting requirements for the CY 2019 reporting period/FY 2021 payment determination if the hospital cannot use four of the remaining eight eCQMs. One commenter believed that the request to lengthen the time period between changes applies to the updating of specifications or introduction of new eCQMs, not to the complete removal as there is minimal work associated with removing an eCQM compared to updating or implementing an eCQM.
Under the Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) Policy, hospitals may request an exception when they are unable to submit required data due to extraordinary circumstances not within their control. We note that ECE requests for the Hospital IQR Program are considered on a case-by-case basis (81 FR 57182). We will assess the hospital's request on a case-by-case basis to determine if an exception is merited. Therefore, our decision whether or not to grant an ECE will be based on the specific circumstances of the hospital. For additional information about eCQM-related ECE requests, we refer readers to section VIII.A.16 of the preamble of this final rule.
After consideration of the public comments we received, we are finalizing our proposal to remove the AMI-8a, CAC-3, ED-1, EHDI-1a, PC-01, STK-08, and STK-10 eCQMs from the Hospital IQR Program for the CY 2020 reporting period/FY 2022 payment determination and subsequent years as proposed. We refer readers to section VIII.D.9 of the preamble of this final rule where we also remove these seven eCQMs from the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs.
In the proposed rule, we proposed to remove a total of 39 measures from the program, as summarized in the table in section VIII.A.5.c. of the preamble of the proposed rule (83 FR 20484 through 20485). We are finalizing the removal of those 39 measures as they are summarized in the table below:
The table below summarizes the Hospital IQR Program measure set for the FY 2020 payment determination (including previously adopted measures, but not including measures finalized for removal beginning with the FY 2020 payment determination in this final rule):
The
The table below summarizes the Hospital IQR Program measure set for the FY 2022 payment determination (including previously adopted measures, but not including measures finalized for removal beginning with the FY 2022 payment determination in this final rule) and subsequent years:
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53510 through 53512), we outlined considerations to guide us in selecting new quality measures to adopt into the Hospital IQR Program. We also refer readers to section I.A.2. of the preamble of this final rule where we describe the Meaningful Measures Initiative—quality priorities that we have identified as high impact measurement areas that are relevant and meaningful to both patients and providers.
In keeping with these considerations, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20489 through 20495), we invited public comment on the potential future inclusion of a hospital-wide mortality measure in the Hospital IQR Program, specifically whether to propose to adopt a Claims-Only, Hospital-Wide, All-Cause, Risk-Standardized Mortality measure or a Hybrid Hospital-Wide, All-Cause, Risk-Standardized Mortality measure. We are also considering a newly specified eCQM for possible concurrent inclusion in future years of the Hospital IQR and Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs), the Opioid Harm Electronic Clinical Quality Measure (eCQM). We also sought public input on the future development and adoption of eCQMs more generally (for example, burdens, incentives). These topics are discussed in more detail below.
Mortality is an important health outcome that is meaningful to patients and providers, and the vast majority of patients admitted to the hospital have survival as a primary goal. However, estimates using data from 2002 to 2008 suggest that more than 400,000 patients die each year from preventable harm in hospitals.
Existing condition-specific mortality measures adopted into the Hospital IQR Program support quality improvement work targeted toward patients with a set of common medical conditions, such as heart failure, acute myocardial infarction, or pneumonia. The use of these measures may have contributed to national declines in hospital mortality rates for the measured conditions and/or procedures.
We developed two versions of a hospital-wide, all-cause, risk-standardized mortality measure: One that is calculated using only claims data (the Claims-Only Hospital-Wide All-Cause Risk Standardized Mortality Measure (hereinafter referred to as the “Claims-Only HWM measure”)); and a hybrid version that uses claims data to define the measure cohort and a combination of data from electronic health records (EHRs) and claims for risk adjustment (Hybrid Hospital-Wide All-Cause Risk Standardized Mortality Measure (hereinafter referred to as the “Hybrid HWM measure”)). The goal of developing hospital-wide mortality measures is to assess hospital performance on patient outcomes among patients for whom mortality is likely to present an important quality signal and those where the hospital can positively influence the outcome for the patient. Both versions of the measure address the Meaningful Measures Initiative quality priority of promoting effective treatment to reduce risk-adjusted mortality.
Several stakeholder groups were engaged throughout the development process, including a Technical Work Group and a Patient and Family Work Group, as well as a national, multi-stakeholder Technical Expert Panel (TEP) consisting of a diverse set of stakeholders, including providers and patients. These groups were convened by the measure developer under contract with us and provided feedback on the measure concept, outcome, cohort, risk model variables, and reporting results. The measure developer also solicited stakeholder feedback during measure development as required in the Measures Management System (MMS) Blueprint.
We developed a Hybrid HWM measure in addition to a Claims-Only HWM measure in order to move toward greater use of EHR data for quality measurement, and in response to stakeholder feedback that is important to include clinical data in outcome measures (80 FR 49702 through 49703). The Hybrid HWM measure is harmonized with the Claims-Only HWM measure. Both measures use the same cohort definition, outcome assessment, and claims-based risk variables (discussed in more detail below). The Hybrid HWM measure builds upon prior efforts to use of a set of core clinical data elements extracted from hospital EHRs for each hospitalized Medicare FFS beneficiary over the age of 65 years, as outlined in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49698). The core clinical data elements are data which are routinely collected on hospitalized adults, extraction from hospital EHRs is feasible, and the data can be utilized as part of specific quality outcome measures. The Hybrid HWM measure's core clinical data elements are very similar to, but not precisely that same as, those used in the Hybrid Hospital-Wide Readmission Measure with Claims and Electronic Health Record Data measure (NQF #2879), for which we are currently collecting data from hospitals on a voluntary basis and are considering proposing as a required measure as early as the FY 2023 payment determination (82 FR 38350 through 38355). For more detail about the core clinical data elements used in the Hybrid Hospital-Wide Readmission Measure with Claims and Electronic Health Record Data measure (NQF #2879), we refer readers to our discussion in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49698 through 49704) and the Hybrid Hospital-Wide Readmission Measure with Electronic Health Record Extracted Risk Factors report (available at:
The Claims-Only Hospital-Wide All-Cause Risk Standardized Mortality Measure (MUC17-195) and the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality Measure (MUC17-196) were included in a publicly available document entitled “2017 Measures Under Consideration List” (available at:
The MAP noted both measures are important measures for patient safety, and that these measures could help reduce deaths due to medical errors.
The MAP further suggested that condition-specific mortality measures may be more actionable for providers and informative for consumers.
Both the Claims-Only HWM measure and the Hybrid HWM measure capture hospital-level, risk-standardized mortality within 30 days of hospital admission for most conditions or procedures. The measures are reported as a single summary score, derived from the results of risk-adjustment models for 13 mutually exclusive service-line divisions (categories of admissions grouped based on discharge diagnoses or procedures), with a separate risk model for each of the 13 service-line divisions. The 13 service-line divisions include: 8 non-surgical divisions and 5 surgical divisions. The non-surgical divisions are: Cancer; cardiac; gastrointestinal; infectious disease; neurology; orthopedics; pulmonary; and renal. The surgical divisions are: Cancer; cardiothoracic; general; neurosurgery; and orthopedics. Hospitalizations are eligible for inclusion in the measure if the patient was hospitalized at a non-Federal, short-stay acute care hospital. To compare mortality performance across hospitals, the measure accounts for differences in patient characteristics (patient case mix) as well as differences in the medical services provided and procedures performed by hospitals (hospital service
Our goal is to more comprehensively measure the mortality rates of hospitals, including to improve the ability to measure mortality rates in smaller volume hospitals. The cohort definition attempts to capture as many admissions as possible for which survival would be a reasonable indicator of quality and for which adequate risk adjustment is possible. We assume survival would be a reasonable indicator of quality for admissions fulfilling two criteria: (1) Survival is most likely the primary goal of the patient when they enter the hospital; and (2) the hospital can reasonably influence the patient's chance of survival through quality of care. These measures would provide information to hospitals that can facilitate quality improvement efforts for hospital settings, types of care, and types of patients not included in currently available condition-and procedure-specific mortality measures. Also, these measures would provide more transparency about the quality of care in clinical areas not captured in the current condition- and procedure-specific measures.
Additional information on the development of both the Claims-Only and Hybrid versions of the HWM measure can be found on the CMS website at:
Both the Claims-Only and Hybrid versions of the HWM measure use Part A Medicare administrative claims data from Medicare FFS beneficiaries aged between 65 and 94 years, and use one year of data. Part A data from the 12 months prior to the index admission are used for risk adjustment.
The Hybrid HWM measure uses two sources of data for the calculation of the measure: Medicare Part A claims and a set of core clinical data elements from hospitals' EHRs. Claims and enrollment data are used to identify index admissions included in the measure cohort, in the risk-adjustment model, and to assess the 30-day mortality outcome. These data are merged with the core clinical data elements for eligible patient admissions from each hospital's EHR. The data elements are the values for a set of vital signs and common laboratory tests collected at presentation and used for risk-adjustment of patients' severity of illness (for Medicare FFS beneficiaries who are aged between 65 and 94 years), in addition to data from claims.
The outcome of interest for both the Claims-Only and Hybrid versions of the HWM measure is the same, all-cause 30-day mortality. We define all-cause mortality as death from any cause within 30 days of the index hospital admission date.
The cohorts for both the Claims-Only HWM and Hybrid versions of the HWM measure are the same. The measure cohorts consist of Medicare FFS beneficiaries, aged between 65 and 94 years, discharged from non-federal acute care hospitals.
The Claims-Only HWM measure and Hybrid HWM measure were developed using ICD-9 codes. The measures are currently being updated for use with ICD-10 codes; ICD-10 updates will be completed prior to NQF submission and potential future implementation. Similar to the existing Hospital-Wide All-Cause Unplanned Readmission measure (NQF #1789), which was adopted into the Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule beginning with the FY 2015 payment determination (77 FR 53521 through 53528), the Claims-Only HWM measure and Hybrid HWM measure include a large and diverse number of admissions represented by thousands of included ICD-9 codes. During measure development, we used the AHRQ Clinical Classification Software (CCS)
For the AHRQ CCSs and individual ICD-9-CM codes that define the measure development cohort, we refer readers to the measure methodology reports on our website at:
The inclusion and exclusion criteria for both the Claims-Only and Hybrid versions of the HWM measure are the same. For both versions of the HWM measure, the cohort currently includes Medicare FFS patients who: (1) Were enrolled in Medicare FFS Part A for the 12 months prior to the date of admission and during the index admission; (2) have not been transferred from another inpatient facility; (3) were admitted for acute care (do not have a principal discharge diagnosis of a psychiatric disease or do not have a principal discharge diagnosis of “rehabilitation care; fitting of prostheses and adjustment devices”); (4) are aged between 65 and 94 years; (5) are not enrolled in hospice at the time of or in the 12 months prior to their index admission; (6) are not enrolled in hospice within two days of admission; (7) are without a principal diagnosis of cancer and enrolled in hospice during their index admission; (8) are without any diagnosis of metastatic cancer; and (9) are without a principal discharge diagnosis of a condition which hospitals have limited ability to influence survival, including: Anoxic brain damage; persistent vegetative state; prion diseases such as Creutzfeldt-Jakob disease, Cheyne-Stokes respiration; brain death; respiratory arrest; or cardiac arrest without a secondary diagnosis of acute myocardial infarction.
Both the Claims-Only and Hybrid versions of the HWM measure currently exclude the following index admissions for patients: (1) With inconsistent or unknown vital status; (2) discharged against medical advice; (3) with an admission for crush injury, burn, intracranial injury, or spinal cord injury; (4) with specific principal discharge diagnosis codes for which mortality may not be a quality signal; (5) with an admission in a CCS condition or procedure categorized as in the service-line divisions: Other Surgical Procedures or Other Non-Surgical Conditions (this exclusion is being reassessed to include these patients in the final measure); and (6) with an admission in a low-volume CCS (within a particular service-line division), defined as equal to or less than 100 patients with that principle diagnosis across all hospitals.
For both the Claims-Only and Hybrid versions of the HWM measure, each index admission is assigned to one of 13
Both the Claims-Only and Hybrid versions of the HWM measure adjust for both case mix differences (clinical status of the patient, accounted for by adjusting for age and comorbidities) and service-mix differences (the types of conditions and procedures cared for and procedures conducted by the hospital, accounted for by the discharge condition category), and use the same patient comorbidities in the risk models. Patient comorbidities are based on inpatient hospital administrative claims during the 12 months prior to and including the index admission derived from ICD-9 codes grouped into the CMS condition categories (CMS-CCs). The measures are currently being updated for use with ICD-10 codes; ICD-10 updates will be completed prior to NQF submission and potential future adoption.
The Hybrid HWM measure also includes the core clinical data elements from patients' EHRs in the case mix adjustment. The core clinical data elements are derived from information captured in the EHR during the index admission only, and are listed below.
The core clinical data elements are clinical information meant to reflect a patient's clinical status upon arrival to the hospital. For more details on how the risk variables in each measure were chosen, we refer readers to the methodology reports found on the CMS website at:
The method for calculating the RSMR for both the Claims-Only and the Hybrid versions of the HWM measure is the same. Index admissions are assigned to one of 13 mutually exclusive service-line divisions consisting of related conditions or procedures. For each service-line division, the standardized mortality ratio (SMR) is calculated as the ratio of the number of “predicted” deaths to the number of “expected” deaths at a given hospital. For each hospital, the numerator of the ratio is the number of deaths within 30 days predicted based on the hospital's performance with its observed case mix and service mix, and the denominator is the number of deaths expected based on the nation's performance with that hospital's case mix and service mix. This approach is analogous to a ratio of “observed” to “expected” used in other types of statistical analyses.
The service-line SMRs are then pooled for each hospital using an inverse variance-weighted mean to create a hospital-wide composite SMR. The inverse variance-weighted mean can be interpreted as a weighted average of all SMRs that takes into account the precision of SMRs. The composite SMR is multiplied by the national observed mortality rate to produce the RSMR. For additional details regarding the measure specifications to calculate the RSMR, we refer readers to the Claims-Only Hospital-Wide (All-Condition, All-Procedure) Risk-Standardized Mortality Measure: Measure Methodology for Public Comment report and Hybrid Hospital-Wide (All-Condition, All-Procedure) Risk-Standardized Mortality Measure with Electronic Health Record Extracted Risk Factors: Measure Methodology for Public Comment report, which are posted on the CMS website at:
We invited public comment on the possible future inclusion of one or both hospital-wide mortality measures in the Hospital IQR Program simultaneously. We are also considering possible future inclusion of the Hybrid HWM measure in the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) for Clinical Quality Measures (CQM) electronic reporting by eligible hospitals and CAHs. We also invited public comment on other aspects of the measure. Specifically, we sought public comment on the following: (1) Feedback about the service-line division structure of the measure; (2) input on the measure testing approach, particularly if there is any additional validity testing that would be meaningful; and (3) how the measure results might be presented to the public, including ways that we could present supplemental hospital performance information in public reporting, such as service-line division-level results, to create a more meaningful and usable measure and ways that we could report more information about hospitals in a No Different From National Average group (defined using 95 percent confidence intervals) to help clinicians and patients use the measure results to improve patient care and make informed choices.
To demonstrate this further, we note that in the case of surgical and non-surgical orthopedics, as well as surgical and non-surgical cancer, the hospital-level risk-standardized mortality rates (RSMR) are quite different. For example, for non-surgical cancer, the median RSMR in the development sample was 2.5 percent (range 1.3 percent-6.0 percent) for surgical cancer, compared to 19.3 percent (range 9.3 percent-33.7 percent) for non-surgical cancer. Furthermore, prior experience with other quality measures suggests that hospitals do not perform equally well across different service lines, thus it benefits hospitals and consumers to provide quality information on more narrow cohorts. Therefore, in order to make this measure useful in terms of quality improvement and patient choice, we designed the measure to report the surgical and non-surgical divisions separately.
Further, we note that some commenters observed that cancer care is complex and often includes surgical procedures, and advocated for both surgical and non-surgical cancer divisions to better capture cancer patients and allow providers, and possibly consumers, to view more detailed quality information related to cancer.
At this time it is not feasible to develop and implement an eCQM measuring the outcome of mortality 30-days after admission to an acute care hospital. Deaths recorded as outcomes in CMS' claims-based mortality measures are derived from the Medicare Enrollment Database which provides information about deaths among Medicare beneficiaries.
Regarding the use of specialty registry data, we agree that registry data are a useful source of data to consider, in particular because registry data address care for all patients (not limited to Medicare fee-for-service patients). Registry data, however, are generally reported on a voluntary basis among registry participants only, and accordingly are not currently an available source of measurement data from all hospitals. However, we will continue to consider the potential use, feasibility, and availability of registry data for future measures.
The measure addresses risk adjustment in several ways. First, since the risk of death differs between surgical and non-surgical patients, the measure separates patients who underwent major surgical procedures from those who did not. The measure then further divides the surgical and non-surgical groups into a total of 13 service-line divisions (Surgical divisions: General, Orthopedics, Cardiac, Cancer, and Neurosurgery; Non-surgical divisions: Cardiac, Infectious Disease, Pulmonary, Gastrointestinal, Renal, Orthopedic, Neurology, and Cancer). The surgical divisions are created by combining clinically related groups of procedures, considering the risk of death and the reason for admission (the principal discharge diagnosis) during the combination step. For the non-surgical division, the measure categorizes patients based on medical conditions that would typically be cared for by the same group of clinicians, as well as based on the risk of death.
To further account for differences in risk among patients, the measure adjusts for both patient-level factors (the medical condition of the patient when admitted to the hospital, accounted for by adjusting for illnesses and diagnoses the patient has when admitted) and hospital service mix differences (the types of conditions/procedures cared for by the hospital). Each of the 13 service-line divisions is risk-adjusted independently of the others, which helps account for differences in the mortality risks of procedures in the separate divisions. The hybrid version of the measure uses the same service-line division risk models, patient case mix, and hospital service mix, but adds an additional 10 clinical risk variables extracted from the EHR. Although no measure is perfectly able to assess each harm or death, the detailed approach to risk adjustment of individual groups of procedures and conditions is intended to prevent inaccurate performance assessment by this measure.
The work described above was done with the careful and systematic input of clinicians. In addition, the steps described above were presented to the measure developer's Patient & Family Caregiver workgroup, technical and clinical workgroup, and the TEP, all of whom generally supported the approach. For more details about the risk-adjustment approach, we refer readers to the measure methodology report on the CMS website at:
During measure development, we sought to identify and exclude cases in which survival was not the primary goal and in which hospitals cannot influence survival through quality of care. This was achieved by excluding patients who had enrolled in hospice within the past 12 months of the index hospitalization, upon admission, or within two days after admission to the hospital. Most patients who have enrolled in hospice do not have the same goals of care as those who are not enrolled. In addition, based on feedback from stakeholders and experts consulted during measure development, it is likely that for most patients and/or families who discussed and agreed to enroll in hospice within two days of admission, survival is not the primary goal due to a condition that was present on admission and therefore, mortality should not be used as a marker of quality care. Longer enrollment windows were considered in our discussions with experts, patients, and families. However, the TEP felt that the risk of excluding patients who enrolled in hospice care due to the outcome of poor quality of care provided by a hospital outweighed the potential benefit of extending the window for the exclusion of these patients. We recognize that there is no single, correct approach to identifying patients at the end-of-life and the use of hospice enrollment does not perfectly differentiate between patients who have a goal of survival from those who do not. Similarly, we cannot perfectly distinguish every preventable harm. However, we feel the current approach accurately identifies most patients we intend to assess through the HWM measure and errs on the side of protecting a patient's choice to defer aggressive treatment at the end of life.
Should we move forward with proposing to include either of these measures for inclusion in the Hospital IQR Program in the future, in advance of public reporting, hospitals would receive confidential, service-line division and patient-level data to support quality improvement. This information would allow for thorough investigation of patient scenarios that resulted in mortality and, therefore, that contributed to each division-level standardized mortality ratios, which are rolled up into the overall risk-standardized mortality rate. We will continue to consider the best approach for communicating meaningful variation in performance and optimizing the usefulness of this measure for the public. This includes consideration of reporting improvement in scores in addition to hospitals' performance in a single measurement period.
In addition, the Hospital-Wide Mortality measure was developed to broadly measure the quality of care across hospitals, including the quality of care in smaller volume hospitals that might lack sufficient numbers of patients to be included in condition-specific mortality measures. Mortality is an important health outcome that is meaningful to patients and providers, and updated estimates suggest that more than 400,000 patients die each year from preventable harm in hospitals.
The Hospital-Wide Mortality Measure was also designed to support quality improvement efforts. By giving a hospital-wide quality score, the measure provides hospitals and the public with an overall evaluation of a hospital's performance on an important outcome. The Hospital-Wide Mortality measure, both with respect to the overall score as well as the division-level results, provides actionable information to hospitals that can support important quality improvements. Should we move forward with proposing to include either or both the hybrid or claims-based version of these measures for inclusion in the Hospital IQR Program, hospitals would receive detailed service-line and patient-level data along with their hospital-wide mortality performance scores. This patient-level detail can help a hospital decide where to focus its quality improvement efforts.
We thank the commenters and we will consider their views as we develop future policy regarding the potential inclusion of claims-only hospital-wide mortality measure and hybrid hospital-wide mortality measure with electronic health record data in the Hospital IQR Program.
Opioids are among the most frequently implicated medications in adverse drug events among hospitalized patients. The most serious opioid-related adverse events include those with respiratory depression, which can lead to brain damage and death. Opioid-related adverse events have both negative patient impacts and financial implications. These patients have been noted to have 55 percent longer lengths of stay, 47 percent higher costs, 36 percent higher risk of 30-day readmission, and 3.4 times higher payments than patients without these adverse events.
Most opioid-related adverse events are preventable. Of the opioid-related adverse drug events reported to The Joint Commission's Sentinel Event database,
Administration of opioids also varies widely by hospital, ranging from 5 percent in the lowest-use hospital to 72 percent in the highest-use hospital.
The Hospital Harm—Opioid-Related Adverse Events eCQM outcome measure assesses, by hospital, the proportion of patients who had an opioid-related adverse event. This measure addresses the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care. The measure uses the administration of naloxone, an opioid reversal agent that has been used in a number of studies as an indicator of opioid-related adverse respiratory events, to indicate a harm to a patient.
As with all quality measures we develop, testing was performed to establish the feasibility of the measure, data elements, and validity of the numerator. Clinical adjudicators reviewed medical records on each instance of a harm identified through query of the EHR data to confirm naloxone was in fact administered to reverse symptoms of opioid overdose. Additional testing is currently being performed to establish the data element validity using output from the Measure Authoring Tool (MAT)
This measure addresses the Meaningful Measures Initiative quality priority of making care safer by reducing harm caused in the delivery of care discussed in section I.A.2. of the preamble of the proposed rule. The Hospital Harm—Opioid-related Adverse Events (MUC17-210) was included in a publicly available document entitled “2017 Measures Under Consideration List” (available at:
MAP stakeholders acknowledged the significant health risks associated with opioid-related adverse events, but recommended adjusting the numerator to consider the impact on chronic opioid users.
The measure denominator includes all patients 18 years or older discharged from an inpatient hospital encounter during the 1-year measurement period. The measure includes inpatient admissions that were initially seen in the emergency department or in observational status and then admitted to the hospital.
The numerator for this electronic outcome measure is the number of patients who received naloxone outside of the operating room either: (1) After 24 hours from hospital arrival; or (2) during the first 24 hours after hospital arrival with evidence of hospital opioid administration prior to the naloxone administration. We narrowed cases to exclude naloxone use in the operating room where it could be part of the sedation plan as administered by an anesthesiologist. Use of naloxone for procedures outside of the operating room (such as bone marrow biopsy) are counted in the numerator as it would indicate the patient was over sedated. These criteria exist to ensure patients are not considered to have experienced harm if they receive naloxone in the first 24 hours due to an opioid overdose that occurred in the community prior to hospital arrival. We do not require the administration of an opioid prior to naloxone after 24 hours from hospital arrival because an event occurring 24 hours after admission is most likely due to hospitals' administration of opioids. By limiting the requirement of documented opioid administration to the first 24 hours of the encounter, we are reducing the complexity of the measure logic and therefore the burden of implementation for hospitals. For more information about the measure specifications, we refer readers to our MAT Header (measure specs) and framing document (available at:
We invited public comment on the possible future inclusion of the Hospital Harm—Opioid-related Adverse Events eCQM in the Hospital IQR Program. Specifically, we sought public comment on whether to: (1) Initially introduce this measure as voluntary; (2) adopt the measure into the existing eCQM measure set from which hospitals currently select four to report; or (3) adopt the measure as mandatory for all hospitals to report. In addition, we sought public comment on ways to address any potential unintended consequences resulting from future implementation of this measure. We are also considering future adoption of this measure in the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) for Clinical Quality Measures (CQM) electronic reporting by eligible hospitals and CAHs.
One commenter suggested that CMS limit the use of this measure to public reporting and quality improvement programs, rather than value-based purchasing programs. A few commenters recommended that CMS complete measure specification and testing prior to implementation and consider implementation only after the 2018 eCQM annual updates. Several commenters suggested that CMS provide education to hospitals on how to utilize this measure to improve patient safety. A few commenters asked for clarification on whether health IT developers will be required to support or certify the measure if it is introduced on a voluntary basis.
Regarding commenters' suggestions about measure stratification and risk adjustment, this measure does not require a data element for chronic opioid users. We do not anticipate risk adjusting this measure for chronic opioid use, as most instances of opioid-related adverse events should be preventable for all patients regardless of prior exposure to opioids or chronic opioid use. In addition, there are several risk factors that affect sensitivity to opioids that physicians should consider when dosing opioids. Risk adjustment would only be needed if certain hospitals have patients with distinctly different risk profiles that cannot be mitigated by providing high-quality care. Similarly, the current measure specification does not include stratification of patients for chronic opioid use for three reasons: (1) This is a challenging data element to capture consistently in the EHR; (2) chronic opioid use should be taken into consideration by clinicians in determining dosing in the hospital and theoretically should not be considered a different risk level for patients; and (3) stratification can reduce the effective sample size of a measure and make it less useable.
Moreover, naloxone administration has been used in a number of studies as an indicator of opioid-related adverse respiratory events.
The measure does capture only a single harm for each patient and does not capture multiple harms on a single patient during a single inpatient encounter. The numerator captures the number of patients who experience a harm, rather than the number of harms occurring to simplify the measure and limit the reporting burden, while still capturing a signal of hospital quality. For more information on the specifications of this measure, we refer readers to the MAT Header (measure specifications) and framing document (available at:
We thank the commenters and we will consider their views as we develop future policy regarding the potential inclusion of the Hospital Harm—Opioid-Related Adverse Events Electronic Clinical Quality outcome measure (eCQM) in the Hospital IQR Program.
Stakeholders continue to identify areas for improvement in the implementation of eCQMs under a variety of CMS programs, including the Hospital IQR Program and the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs). While effective utilization of eCQMs promises greater efficiency and more timely access to data to support quality improvement activities, various types of costs associated with these measurement approaches detract from these benefits. Moreover, some providers may have low awareness of the resources and tools available to help address issues that arise in utilizing eCQMs.
Program design and operations associated with measurement aspects of these programs can be a significant source of cost for providers. Uncertainty around rapidly shifting timelines and requirements can pose significant financial and operational planning challenges for organizations, while lack of alignment across programs results in further complexity. In addition, the implementation of eCQMs within the
Stakeholders have expressed support for increasing the availability of new eCQMs, developing eCQMs that focus on patient outcomes and higher impact measurement areas, and exploring how eCQMs can reduce the costs and information collection burden associated with chart-abstracted measures. However, they have also identified barriers which may contribute to a lack of adequate development of eCQMs and limit their potential, including long development timelines, lack of guidelines/prioritization of and participation in eCQM development, limited field testing, and program policies that limit innovation by focusing on “least common denominator” approaches.
We sought stakeholder feedback on ways that we could address these and other challenges related to eCQM use. Specifically, we invited comment on the following questions: (1) What aspects of the use of eCQMs are most costly to hospitals and health IT vendors?; (2) What program and policy changes, such as improved regulatory alignment, would have the greatest impact on addressing eCQM costs?; (3) What are the most significant barriers to the availability and use of new eCQMs today?; (4) What specifically would stakeholders like to see us do to reduce costs and maximize the benefits of eCQMs?; (5) How could we encourage hospitals and health IT vendors to engage in improvements to existing eCQMs?; (6) How could we encourage hospitals and health IT vendors to engage in testing new eCQMs?; (7) Would hospitals and health IT vendors be interested in or willing to participate in pilots or models of alternative approaches to quality measurement that would explore less burdensome ways of approaching quality measurement, such as sharing data with third parties that use machine learning and natural language processing to classify quality of care or other approaches?; (8) What ways could we incentivize or reward innovative uses of health IT that could reduce costs for hospitals?; and (9) What additional resources or tools would hospitals and health IT vendors like to have publicly available to support testing, implementation, and reporting of eCQMs?
Many commenters also noted high personnel costs, including the personnel time and cost associated with keeping pace with on-going certification, mandated reporting, and annual program update change requirements, as well as the costs associated with training personnel if changes to eCQM reporting requirements are outside out of the normal workflow. A few commenters added that eCQM implementation requires utilization of resources from multiple disciplines, including IT, data science, quality, analytics, clinicians, laboratory, radiology, coding, and billing.
Many commenters believed that eCQMs are costly because of the uncertainty around the reporting and submission requirements, including the high burden associated with making preparations to report measures that have been identified for removal in the near future. In addition, several commenters noted that the time between the finalization of a new quality measure in the rules and its inclusion in a government incentive or penalty program is too short, resulting in heightened resource use and high burden.
A few commenters expressed concern that there are high costs associated with collecting and reporting data on measures that they believe are fundamentally unusable or not valuable because they include errors or do not appropriately serve clinician needs. Other commenters noted that the manual abstraction and documentation requirements associated with some eCQMs add to the total administrative burden placed on clinicians. One commenter explained that there is high burden associated with alignment following a facility's merger with a larger system.
Several commenters recommended that CMS regulate the amount charged by health IT vendors for new packages and updates, reimburse hospitals for the cost of software updates needed to meet quality reporting requirements, or provide grants to hospitals for these purposes.
Some commenters provided feedback specifically related to eCQM testing, including: (1) Releasing technical measure specifications earlier; (2) allowing vendors to engage in early testing; (3) making the Pre-Submission Validation Application (PSVA) tool and QualityNet secure portal available before the start of the reporting year; (4) facilitating testing through shared infrastructure; and (5) providing timely answers to questions submitted via the JIRA case system.
A number of commenters focused on improvements that could be made regarding measure development, measure specification, and measure standards, including: (1) Developing eCQMs based on available data and the provision of care; (2) working with the Office of the National Coordinator to develop interoperability and EHR data standards, including defining standards for quality reporting and further aligning existing QRDA standards; (3) working with industry stakeholders in the early stages of measure development; (4) promoting accurate provider attribution; and (5) utilizing eCQMs that pull from common data fields rather than data codes.
Some commenters recommended changes that could be made with regards to measure submission, including: (1) Developing a mechanism to allow facilities to manually correct data once pulled; (2) providing updates to the value set and QRDA I file submission in advance; (3) providing more detailed information on submission errors and providing submission reports earlier; (4) providing avenues for data submission other than hospitals submissions, such as having The Joint Commission obtain eCQM data from QualityNet; and (5) creating a single submission reporting platform for multiple CMS programs and State Medicaid agencies to accept quality data submissions provided to CMS.
One commenter recommended that CMS limit costs by imposing requirements related to pricing or reimbursement for the purchase of additional reporting modules. Another commenter recommended that CMS consolidate available information on eCQMs into one website that would provide both technical and operational information, and requested additional resources to help standardize and simplify the complexity of codes. A few commenters asserted their belief that measure accuracy and the vague wording of measures causes confusion between developers and providers regarding the intent of the measure, which can present a significant barrier to reporting on new eCQMs. A few commenters remarked on their perceived lack of value or impact on quality improvement associated with eCQM reporting.
Some commenters recommended that CMS provide additional support to vendors, to identify how best to capture required eCQM data, and to offer technical expert teams to organizations that lack the resources to participate in eCQM development or testing. One commenter expressed concern that hospitals and vendors are not ready to fully report on eCQMs and recommended that CMS work with EHR vendors, hospital quality staff, and other affected stakeholders to identify underlying structural problems and barriers to successful eCQM reporting. A few commenters noted that a major hurdle to reporting on new eCQMs is that EHR vendors are unwilling to participate in mapping or supporting voluntary measures, or prioritize certifying to report on existing measures above new measures. One commenter suggested that CMS work with the ONC to advance standards for CEHRT to develop robust interoperability and EHR data standards. Several commenters expressed their belief that more time is needed between the adoption of a new eCQM into the Hospital IQR Program and its required implementation by providers in part to accommodate vendors' need to build and test processes and develop reports. One commenter recommended that CMS identify a date by which the QualityNet Secure Portal will open for 2018 testing. One commenter stated that a barrier to the availability of new eCQMs was the measure development process, and suggested that CMS work to improve the development and approval process. One commenter recommended that CMS explore whether the burden of eCQM reporting could be shifted to billing operations.
A number of commenters provided feedback on how CMS could reduce costs and maximize the benefits of eCQM development, including: (1) Streamlining the measure development process; (2) developing measures that rely on data elements already present in EHRs and that have direct links to improved outcomes; (3) refining current eCQMs to reflect different settings of care and patient populations; (4) refining measures to add exclusions instead of requiring extra chart documentation; (5) considering moving to improved standards-based eCQM development and reporting; (6) working with health IT vendors to identify and implement ways to present eCQM data to support quality improvements; (7) seeking feedback from other industry stakeholders; (8) connecting novice eCQM measure developers with experts; and (9) establishing a national testing infrastructure for eCQMs.
Several commenters provided feedback on how CMS could reduce costs and maximize the benefits of eCQM reporting, including: (1) Making
Some commenters provided feedback on how CMS could reduce costs and maximize the benefits of eCQM through policy changes including: (1) Aligning the eCQM reporting requirements across CMS programs; (2) requiring that vendors support reporting on all eCQMs in the Hospital IQR Program; (3) allowing hospitals to voluntarily report on new eCQMs rather than requiring reporting on new measures; (4) refraining from retroactively applying standards that are updated mid-year; (5) requiring reporting of the eCQM version only for measures also available in chart-abstracted form; (6) utilizing other sources of data rather than having hospitals report the eCQM data directly; (7) constraining the costs of vendor services; (8) sharing a plan for future eCQM use in the Hospital IQR Program; (9) changing the eCQM measure set less often and providing a longer time period to implement program changes (including adding new eCQMs or updating existing eCQMs); and (10) reducing the number of eCQMs available for reporting and only including those that are actionable with the highest return on investment.
A number of commenters recommended that CMS develop new eCQMs for specific chart-abstracted measures, including SEP-1, IMM-2, TOB-1, TOB-2, TOB-3, acute renal failure, ventilator use, and stroke. One commenter suggested refinements to EHDI-1a eCQM. One commenter recommended that CMS require reporting on the PC-01 eCQM.
A few commenters noted that participation would be enriched if hospitals were able to discuss eCQM improvement in the context of data from prior eCQM data submissions and be given an opportunity to inform future eCQM priorities that reduce reporting burden to advance improvements in the quality of care. One commenter suggested that CMS provide real-time feedback to hospitals on eCQM performance in order to encourage participating in eCQM improvement efforts.
Several commenters observed that successfully meeting mandatory eCQM reporting requirements depends on hospitals using the correct version of specifications, which is generally in the control of the EHR vendors, not the hospitals. Commenters urged CMS to continue outreach to EHR vendors, hospital quality staff, and other affected stakeholders to identify underlying structural problems and barriers to successful eCQM reporting. A number of commenters recommended coordinating efforts between CMS, CMS subcontractors, and measure stewards to solicit feedback from hospitals in order to implement a more efficient feedback loop.
One commenter believed that the introduction of voluntary measures has received increased interest and participation by providers, as it allows for more flexibility without the requirement for mandatory submissions.
Many commenters suggested that CMS should vet new eCQMs across a selection of vendors and hospitals prior to considering the measures for inclusion in a CMS quality reporting program for implementation.
A few commenters noted that the data produced by chart-abstracted measures varies significantly from eCQM data, and recommended that CMS adopt a validation process and conduct robust testing to ensure eCQM data are accurate and comparable to chart-abstracted information. One commenter proposed a hybrid approach to eCQM adoption in which hospitals would submit eCQM data, but in the event of a measure failure, the hospital could also supplement the data with manual chart abstraction. The commenter noted that this approach would be mutually beneficial, as CMS would receive more accurate data and hospitals would learn their workflows and documentation gaps for improvement efforts. Moreover, this approach would be less burdensome than manual abstraction, without the fear of penalizing hospitals who are still working through the burden to transition to eCQMs. The commenter also advised that completed testing of eCQMs under development should demonstrate reliability and validity in the acute care setting and should also be submitted to NQF for review and endorsement prior to inclusion in CMS quality programs.
A few commenters noted that providers and vendors likely would be encouraged to engage more in testing if additional time were available by, for example, delaying major program changes to a biennial timeframe.
A number of commenters also recommended that CMS create a public “playbook” outlining eCQM development and testing activities available for hospitals, as well as issuing standardized expectations and processes for hospitals engaging in testing, and doing so with more advanced notice. One commenter also noted that the legal concerns with release of patient detail files sometimes limits involvement, and thus encouraged CMS to explicitly clarify policies with regard to sharing PHI in a protected and legal manner for testing and development.
A few commenters expressed that hospitals and vendors would not want to participate in pilots because they would not want to divert resources necessary to pilot models that may never be incorporated into quality reporting, or expressed concern about the costs and resource tolls associated with participating.
One commenter specifically did not support research and pilot projects on the use of machine learning and natural language processing.
Other commenters suggested that CMS provide standards, and perhaps incentives, for health IT vendors to standardize their practices, particularly with respect to the standardized reports commonly used for quality data and internal quality review. One commenter noted that currently, providers must pay extra and wait for reports to be developed for their EHR.
A few commenters suggested that CMS provide public acknowledgement of organizations who develop or participate in innovative uses of health IT, similar to The Joint Commission's Pioneers in Quality Award or Healthcare Information and Management Systems Society (HIMSS) Davies Award.
A number of commenters suggested that CMS allow providers to receive credit for meeting the eCQM reporting requirement in the Promoting Interoperability Programs, work with hospitals to identify areas of innovative use of health IT that align with the Meaningful Measures framework, and collaborate with federal partners to encourage health IT vendors to support hospitals in their efforts to use eCQMs and health IT to address the highest priority areas for quality measurement and improvement.
One commenter recommended that CMS reward providers and developers working on population health initiatives and require data integration with hospitals with access to adequate data, such as claims data at the patient level. Another commenter recommended that CMS reward the internal quality improvement programs and processes using health IT that already exist and are utilized by hospitals.
A few commenters suggested allowing hospitals to submit and develop quality measures that are meaningful to their patient populations, local needs, and interests, instead of focusing on measures addressing national healthcare quality priorities.
One commenter suggested that CMS grant funding to encourage measure development. Some commenters suggested that CMS could increase efficiency of measure testing by: (1) Improving available testing resources; (2) developing a shared infrastructure to test eCQMs or providing a universal testing tool kit for health IT vendors; (3) providing reports that specifically identify how a hospital “failed” reporting on a measure; (4) providing immediate and detailed feedback on all errors; (5) encouraging participation in HL7 FHIR® Development Days and HL7 Connect-a-thons for testing capabilities of vendors; and (6) publicly releasing the criteria used to evaluate success or failure in reporting of eCQMs, along with releasing actual results for new measure development and testing.
Commenters' suggestions for improved guidance included: (1) Providing clearer documentation; (2) offering a single source of information and resource to ask questions related to eCQM reporting; (3) clarifying abstraction questions via QualityNet; (4) providing more avenues of communication with CMS; (5) identifying which tools stakeholders should use for which purposes; (6) providing resources geared toward quality improvement to staff and clinicians; (7) providing novice-level guidance on measure development and additional opportunities for engagement with experts; (8) creating a resource to allow stakeholders to share information such as best practices and codes used; (9) adding guidance related to the use of CQL and other newer standards; (10) creating an eCQM measure specification manual similar to the manual for chart-abstracted measures; (11) providing comparisons of how eCQM specifications change between years; and (12) identifying errors in past iterations when new eCQM measure specifications are released.
Some commenters' suggestions focused on improvements that could be made to measure development and measure specifications, including: (1) Simplifying the measure development tools and measure logic; (2) using a standard approach to capturing data elements; (3) exploring natural language processing to capture discrete data elements; (4) developing a standard for EHRs to help implement eCQM reporting; (5) including thresholds and goals for all measures; (6) defining data fields using the Core Measures Data Dictionary; (7) standardizing references to measure timeframes by referencing the reporting period as well as the
Other commenters focused on how CMS could improve the submissions process, including: (1) Providing workflow documents and technical release notes earlier; (2) opening the portal for eCQM data submissions earlier; and (3) implementing a system through which CMS could pull documents from hospitals using a secure direct file transfer or application.
Some commenters suggested refining the reporting requirements for eCQMs, including: (1) Aligning the regulatory and reporting requirements of CMS quality programs; (2) offering flexibility to allow providers to select measures to submit from a pool of available measures in multiple forms; and (3) allowing more time to implement new and updated eCQMs.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324 through 38326), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018 and CY 2018 proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS: To explore other factors that could be used to stratify or risk adjust the measures (beyond dual eligibility); to consider the full range of differences in patient backgrounds that might affect outcomes; to explore risk adjustment approaches; and to offer careful consideration of what type of information display would be most useful to the public. We also sought public comment on confidential reporting and future public reporting of some of our measures stratified by patient dual eligibility. In general, commenters noted that stratified measures could serve as tools for hospitals to identify gaps in outcomes for different groups of patients, improve the quality of health care for all patients, and empower consumers to make informed decisions about health care. Commenters encouraged CMS to stratify measures by other social risk factors such as age, income, and educational attainment. With regard to value-based purchasing programs, commenters also cautioned CMS to balance fair and equitable payment while avoiding payment penalties that mask health disparities or discouraging the provision of care to more medically complex patients. Commenters also noted that value-based purchasing program measure selection, domain weighting, performance scoring, and payment methodology must account for social risk.
Specifically, in the FY 2018 IPPS/LTCH PPS proposed and final rules for the Hospital Inpatient Quality Reporting (IQR) Program, we invited and received public comment on: (1) Which social risk factors provide the most valuable information to stakeholders; (2) providing hospitals with confidential feedback reports containing stratified results for certain Hospital IQR Program measures, specifically the Pneumonia Readmission measure (NQF #0506) and the Pneumonia Mortality measure (NQF #0468); (3) a potential methodology for illuminating differences in outcomes rates among patient groups within a hospital that would also allow for a comparison of those differences, or
As a next step, we are considering options to reduce health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We are considering implementing the two above-mentioned methods to promote health equity and improve healthcare quality for patients with social risk factors. The first method (the hospital-specific disparity method) would promote quality improvement by calculating differences in outcome rates among patient groups within a hospital while accounting for their clinical risk factors. This method would also allow for a comparison of those differences, or disparities, across hospitals, so hospitals could assess how well they are closing disparities gaps compared to other hospitals. The second methodological approach is complementary and would assess hospitals' outcome rates for subgroups of patients, such as dual eligible patients, across hospitals, allowing for a comparison among hospitals on their performance caring for their patients with social risk factors.
We acknowledge the complexity of interpreting stratified outcome measures. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38404 through 38409), due to this complexity, and prior to any future public reporting of stratified measure data, we plan to stratify the Pneumonia Readmission measure (NQF #0506) data by highlighting both hospital-specific disparities and readmission rates specific for dual-eligible beneficiaries across hospitals for dual-eligible patients in hospitals' confidential feedback reports beginning fall 2018. In FY 2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38409), we explained that we believe the Pneumonia Readmission measure and the Pneumonia Mortality measure are appropriate first measures to stratify, because we currently publicly report the results of both measures for a large cohort of hospitals. In addition, both measures include a large number of admissions per hospital and therefore have sufficiently large sample sizes for most hospitals to support adequate reliability of stratified calculations. As a first step, in the interest of simplicity and to minimize confusion for hospitals, we are planning to provide confidential feedback reports for the Pneumonia Readmission measure only, using both methodologies.
For the future, we are considering: (1) Expanding our efforts to provide stratified data in hospital confidential feedback reports for other measures; (2) including other social risk factors beyond dual-eligible status in hospital confidential feedback reports; and (3) eventually, making stratified data publicly available on the
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
The Assistant Secretary for Planning and Evaluation (ASPE), as required by the IMPACT Act of 2014, studied the impact of social risk factors, including socioeconomic status, on quality and payment measures used in nine Medicare value-based purchasing programs. The report discussed several strategies to account for social risk factors in these programs.
We will continue to work with measure developers to determine the most accurate way to include and account for social risk factors within each measure, including exploring stratification of social risk factors at the individual measure level. We intend to continue to study social risk factors at a program level and evaluate the effect of social risk factors on outcomes measures and quality programs. As to the commenter's request for detailed technical specifications demonstrating a measure's attribution model, such specifications are available on QualityNet for the readmission measures and include information about the attributed hospital.
With regard to commenters' suggestion that we risk-adjust measures for patient SES status when appropriate, but until risk-adjusted measures are available, publicly report stratified measure performance rates on the
We will continue to explore multiple options to account for the effect of social risk factors on quality measures and in quality programs.
Several commenters supported the use of the second proposed method. One commenter requested that CMS utilize the second proposed method as soon as feasibly possible because they wanted comparison data available to drive improvement. One commenter did not support the second proposed approach because it believed patients would choose to avoid facilities that provide care to large volumes of patients with social risk factors. The commenter noted that considering how the data would be presented on the
We will continue to explore a variety of methodological approaches to ensure we produce accurate and reliable disparity results. In addition, we will work to align approaches to risk stratification across measures to minimize burden on providers. We would like to highlight that the proposed disparity measures would not place any additional burden on hospitals. The two proposed methods focus on dual eligibility as the social risk factor. We use this indicator as a proxy of low income and assets. It has the advantage of being readily available in claims data and therefore does not
As to the commenter's concern that the second disparity method might lead patients to avoid hospitals with a large proportion of patients with social risk factors, we note that the goal of the second method (the group-specific outcome rate method) is not to provide patients with information on hospitals' volume of patients with social risk factors, but rather to provide specific outcome rates for patients with social risk factors at the individual hospital level (for example readmission rates for dual eligible patients). Preliminary results have shown that both hospitals caring for a low and a high proportion of patients with social risk factors can perform well or poorly on this measure.
We will also continue to evaluate what may be the best method or methods of publicly displaying stratified outcome measures and disparity information to ensure the public's understanding of the data.
We agree with commenters that the confidential reporting period will allow hospitals to understand the stratified measure data prior to any future public reporting. We acknowledge commenters' concerns about having sufficient time to review and analyze stratified measure data prior to any public reporting on that data. We have not yet determined any future plans with respect to publicly reporting stratified data, and intend to continue to engage with hospitals and relevant stakeholders about their experiences with and recommendations for the stratification of measure data and to ensure the reliability of such data before proposing to publicly display stratified measure data in the future. Any proposal to display stratified quality measure data on the
A few commenters recommended that CMS work with vendors to collect SES and SDS variables through their EHRs, potentially through the implementation of demonstration projects. The commenters noted that the collected data elements could be used to supplement the claims data already captured by CMS to greatly improve the measure's risk adjustment methodology.
A number of commenters requested that CMS be more transparent during efforts to address social risk factors and to continuously seek stakeholder input, including measure stewards, in order to achieve the goals of attaining health equity for all beneficiaries while also minimizing unintended consequences, as well as to ensure the adjustment approach keeps up with the evolving measurement science around accounting for social risk factors. One commenter requested that CMS provide a work plan and timeline, as well as increase opportunities for collaboration with Medicare Advantage and Medicaid health plans.
We also thank commenters for their support on our approach to engaging stakeholders in our stratification methodology development process. As noted, a TEP was convened to receive feedback on the two methods we developed to illuminate disparities. The TEP members came from diverse perspectives and backgrounds, including clinicians, hospitals, purchasers, consumers, and experts in quality improvement and health care disparities. CMS contractors also regularly consulted with an advisory
We agree with the commenter's concern that race and ethnicity data for Medicare beneficiaries are currently not consistently captured in claims. We believe that examining racial and ethnic disparities in outcomes within hospitals is important since race and ethnicity have been shown to be associated with health care quality, and will continue to examine how best to improve the collection of such data.
We thank the commenters for their views and will take them into consideration as we continue our work on these issues.
Sections 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act state that the applicable percentage increase for FY 2015 and each subsequent year shall be reduced by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) hospital that does not submit data required to be submitted on measures specified by the Secretary in a form and manner, and at a time, specified by the Secretary. Previously, the applicable percentage increase for FY 2007 and each subsequent fiscal year until FY 2015 was reduced by 2.0 percentage points for subsection (d) hospitals failing to submit data in accordance with the description above. In accordance with the statute, the FY 2019 payment determination will begin the fifth year that the Hospital IQR Program will reduce the applicable percentage increase by one-quarter of such applicable percentage increase.
In order to participate in the Hospital IQR Program, hospitals must meet specific procedural, data collection, submission, and validation requirements. For each Hospital IQR Program payment determination, we require that hospitals submit data on each specified measure in accordance with the measure's specifications for a particular period of time. The data submission requirements, Specifications Manual, and submission deadlines are posted on the QualityNet website at:
The Hospital IQR Program's procedural requirements are codified in regulation at 42 CFR 412.140. We refer readers to these codified regulations for participation requirements, as further explained by the FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57168). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20496 through 20497), we did not propose any changes to these procedural requirements.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) for details on the Hospital IQR Program data submission requirements for chart-abstracted measures. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20497), we did not propose any changes to the data submission requirements for chart-abstracted measures.
For a discussion of our previously finalized eCQMs and policies, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 through 50810; 50811 through 50819), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50241 through 50253; 50256 through 50259; and 50273 through 50276), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49692 through 49698; and 49704 through 49709), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57150 through 57161; and 57169 through 57172), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38355 through 38361; 38386 through 38394; 38474 through 38485; and 38487 through 38493).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20497 through 20498), we clarified measure logic used in eCQM development; proposed to extend previously established eCQM reporting and submission requirements for the CY 2019 reporting period/FY 2021 payment determination; and proposed to require hospitals to use the 2015 Edition certification criteria for CEHRT beginning with the CY 2019 reporting period/FY 2021 payment determination. These matters are discussed in detail below.
Although the measure logic, which represents the lines of logic that comprise a single AND/OR statement composing each population, used in eCQM development is not generally specified through notice and comment rulemaking, in the proposed rule (83 FR 20497), we notified the public that all eCQM specifications published in CY 2018 for the CY 2019 reporting period/FY 2021 payment determination and subsequent years (beginning with the Annual Update that was published in May 2018 and for implementation in CY 2019) will use the Clinical Quality Language (CQL). CQL is a Health Level Seven (HL7) International standard
Prior to CY 2017, eCQM logic was defined by “Quality Data Model (QDM) Logic,” an information model that defines relationships between patients and clinical concepts in a standardized format to enable electronic quality performance measurement.
Measure developers successfully tested CQL for expressing eCQMs from 2016 through 2017.
For additional information about the CQL transition and its impact on eCQM development, we refer readers to the eCQI Resource Center website at:
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38361), we finalized eCQM reporting and submission requirements such that hospitals are required to report only one, self-selected calendar quarter of data for four self-selected eCQMs for the CY 2018 reporting period/FY 2020 payment determination. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20498), in alignment with the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs), we proposed to extend the same eCQM reporting and submission requirements, such that hospitals would be required to report one, self-selected calendar quarter of data for four self-selected eCQMs for the CY 2019 reporting period/FY 2021 payment determination. We believe continuing the same eCQM reporting and submission requirements is appropriate because doing so continues to offer hospitals reporting flexibility and does not increase the information collection burden on data submitters, allowing them to shift resources to support system upgrades, data mapping, and staff training related to eCQM documentation and reporting. We also refer readers to section VIII.D.9. of the preamble of this final rule where similar proposals are discussed for the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs).
After consideration of the public comments we received, we are finalizing our proposal to extend the eCQM reporting and submission requirements previously finalized for the CY 2018 reporting period/FY 2020 payment determination, such that hospitals would be required to report one, self-selected calendar quarter of data for four self-selected eCQMs for the CY 2019 reporting period/FY 2021 payment determination as proposed. We also refer readers to section VIII.D.9. of the preamble of this final rule where we are finalizing similar policy under the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs).
In the FY 2018 IPPS/LTCH PPS final rule, we finalized a policy to allow flexibility for hospitals to use the 2014 Edition certification criteria, the 2015 Edition certification criteria, or a combination of both for the CY 2018 reporting period/FY 2020 payment determination only (82 FR 38388). This was a change to the policy previously finalized in the FY 2017 IPPS/LTCH PPS final rule that required hospitals to use the 2015 Edition certification criteria for CEHRT for the CY 2018 reporting period/FY 2020 payment determination and subsequent years (81 FR 57171).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20498), to align with the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs), for the Hospital IQR Program we proposed to require hospitals to use only the 2015 Edition certification criteria for CEHRT beginning with the CY 2019 reporting period/FY 2021 payment determination. We refer readers to section VIII.D.3. of the preamble of this final rule in which the Medicare and Medicaid Promoting Interoperability Programs discuss more broadly the reasons for and benefits of requiring hospitals to use the 2015 Edition certification criteria for CEHRT, beginning with the CY 2019 reporting period/FY 2021 payment determination. There are certain functionalities in the 2015 Edition of certified electronic health record technology that were not available in the 2014 Edition that we believe will increase interoperability and the flow of information between providers and patients.
In addition, as we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38387 through 38388), specifically as to eCQM reporting, the 2015 Edition includes updates to standards for structured data capture as well as data elements in the common clinical data set which can be captured in a structured format. We continue to believe the use of relevant, up-to-date, standards-based structured data capture with an EHR certified to the 2015 Edition supports electronic clinical quality measurement.
The 2015 Edition certification criteria (that make up CEHRT) within the certification testing process includes features that are designed to improve the functionality and quality of eCQM
The 2015 Edition certification criteria for CEHRT also includes optional certification criteria and program specific testing which can also support electronic clinical quality reporting. The filter criteria ensure a product can filter an electronic file based on demographics like sex or race, based on provider or site characteristics like TIN/NPI, and based on a diagnosis or problem. The testing for this function checks that patients are appropriately aggregated and calculated for this new function which supports flexibility, specificity, and more robust analysis of eCQM data. Finally, the 2015 Edition provides optional testing to CMS requirements for reporting, such as form and manner specifications and implementation guides. For these reasons, in the proposed rule, we proposed to require hospitals to use the 2015 Edition certification criteria for CEHRT when reporting eCQMs beginning with the CY 2019 reporting period/FY 2021 payment determination.
We note that the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) previously finalized the requirement that hospitals use the 2015 Edition certification criteria for CEHRT beginning with the CY 2019 reporting period/FY 2021 payment determination (80 FR 62873 through 62875), such that hospitals participating in both the Hospital IQR Program and the Medicare and Medicaid Promoting Interoperability Programs already would be required to use the 2015 Edition certification criteria for CEHRT beginning with the CY 2019 reporting period/FY 2021 payment determination.
Several commenters also believed that a majority of health IT vendors have successfully completed, or are in the process of completing, their certification(s) under the 2015 Edition CEHRT Criteria, and it would significantly and unfairly penalize the diligence of these parties by any delay in order to accommodate those companies who have not complied with the 2015 Edition CEHRT criteria by now.
With regard to commenters' suggestion that hospitals unable to migrate to the 2015 Edition due to health IT vendor backlogs in updating
With respect to the commenter's observation that the number of products currently certified to the 2015 Edition are limited as compared to the number of products available certified to the 2014 Edition, we expect that as more hospitals begin to use the 2015 Edition, the number of products included in the Certified Health IT Product List
With regard to commenters' suggestion that CMS make the reporting period for all programs that require the use of 2015 Edition CEHRT be 90 days for the CY 2019 reporting period, we are committed to the Hospital IQR and Promoting Interoperability Programs' eCQM-related policies staying in alignment to the greatest extent feasible. We refer readers to sections VIII.A.11.d.(2) and VIII.D.9. of the preamble of this final rule where we are finalizing eCQM reporting requirements in both the Hospital IQR Program and the Promoting Interoperability Programs, which will bring them into greater alignment for the CY 2019 reporting period/FY 2021 payment determination, including with regard to the number of eCQMs (4 measures), the number of calendar quarters of data (one calendar quarter of data), and which Edition of CEHRT to use (2015 Edition) for eCQM reporting. However, we are not able to align the Hospital IQR Program with the Promoting Interoperability Program's requirements for attesting to measures and objectives, which allow for one consecutive 90-day reporting period. We refer readers to section VIII.D.4. of the preamble of this final rule for more information on those requirements. We note that the Hospital IQR Program is limited to measures appropriate for the measurement of quality of care and does not allow for an attestation option.
After consideration of the public comments we received, we are finalizing our proposal to require hospitals to use the 2015 Edition certification criteria for CEHRT when reporting eCQMs beginning with the CY 2019 reporting period/FY 2021 payment determination as proposed.
We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50256 through 50259) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 through 49708) for our previously adopted policies to align eCQM data reporting periods and submission deadlines for both the Hospital IQR Program and the Medicare Promoting Interoperability Program (previously known as the Medicare EHR Incentive Program). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57172), we established eCQM submission deadlines for the Hospital IQR Program. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20498 through 20499), we did not propose any changes to the eCQM submission deadlines.
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49709) for details on our sampling and case thresholds for the FY 2016 payment determination and subsequent years. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we did not propose any changes to our sampling and case threshold policies.
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 53538), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 through 50820) for details on previously-adopted HCAHPS requirements. We also refer hospitals and HCAHPS Survey vendors to the official HCAHPS website at:
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51643 through 51644) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53538 through 53539) for details on the data submission requirements for structural measures. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we did not propose any changes to those requirements; however, we refer readers to sections VIII.A.5.a. and VIII.A.5.b.(1) of the preamble of this final rule, in which we discuss finalizing our proposal to remove the Hospital Survey on Patient Safety Culture and Safe Surgery Checklist Use measures as proposed. As a result, no structural measures will remain in the Hospital IQR Program and hospitals will not be required to submit any data for structural measures for the CY 2019 reporting period/FY 2021 payment determination or subsequent years.
For details on the data submission and reporting requirements for HAI measures reported via the CDC's NHSN website, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51633; 51644 through 51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 through 50822), and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50259 through 50262). The data submission deadlines are posted on the QualityNet website at:
While we did not propose any changes to these requirements in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we refer readers to section VIII.A.5.b.(2)(b) of the preamble of this final rule, in which we discuss finalizing our proposal to remove these measures from the Hospital IQR Program with modification to delay removal for one year. As a result, hospitals will not be required to submit any data for HAI measures via NHSN for the Hospital IQR Program for the CY 2020 reporting period/FY 2022 payment determination or subsequent years. We note that the five HAI measures will remain in the HAC Reduction and Hospital VBP Programs and will continue to be reported via NHSN. We further note that the HCP measure remains in the Hospital IQR Program and will continue to be reported via NHSN. We refer readers to section IV.J. of the preamble of this final rule for more information about how the NHSN HAI measures will be collected and validated under the HAC Reduction Program. We also refer readers to section IV.I.2.c.(2) of the preamble of this final rule where we discuss retaining the NHSN HAI measures in the Hospital VBP Program.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 53553), we finalized the processes and procedures for validation of chart-abstracted measures in the Hospital IQR Program for the FY 2015 payment determination and subsequent years. The FY 2013 IPPS/LTCH PPS final rule also contains a comprehensive summary of all procedures finalized in previous years
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 57181), we finalized updates to the validation procedures in order to incorporate a process for validating eCQM data for the FY 2020 payment determination and subsequent years (starting with the validation of CY 2017 eCQM data that would impact FY 2020 payment determinations). We also refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38403), in which we finalized several proposals regarding processes and procedures for validation of CY 2017 eCQM data for the FY 2020 payment determination, validation of CY 2018 eCQM data for the FY 2021 payment determination, and eCQM data validation for subsequent years. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we did not propose any changes to the existing processes for validation of Hospital IQR Program eCQM data.
In the FY 2015 IPPS/LTCH PPS final rule, we stated that we rely on hospitals to request an educational review or appeal cases to identify any potential CDAC or CMS errors (79 FR 50260). We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38403) for more details on the formalized Educational Review Process for Chart-Abstracted Measures Validation. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499 through 20500), we did not propose any changes to the validation of chart-abstracted measures, including the educational review process.
While we did not propose any changes to our previously established validation procedures in the proposed rule (83 FR 20499 through 20500), we refer readers to: (1) Section VIII.A.5.b.(8) of the preamble of this final rule, in which we discuss finalizing our proposal to remove three clinical process of care measures (IMM-2, ED-1, and VTE-6) beginning with the CY 2019 reporting period/FY 2021 payment determination, and one clinical process of care measure (ED-2) beginning with the CY 2020 reporting period/FY 2022 payment determination; and (2) section VIII.A.5.b.(2)(b) of the preamble of this final rule, in which we discuss finalizing our proposals to remove five Hospital-Acquired Infection (HAI) chart-abstracted measures from the Hospital IQR Program with modification, such that removal would be delayed by one year beginning with the CY 2020 reporting period/FY 2022 payment determination. As a result: Two chart-abstracted clinical process of care measures (ED-2 and Sepsis measures) and five HAI chart-abstracted measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI measures) will remain in the Hospital IQR Program that will require validation for the FY 2021 and 2022 payment determinations; and only one chart-abstracted clinical process of care measure (Sepsis measure) will remain in the program that would require validation for the FY 2023 payment determination and subsequent years. As our validation processes remain unchanged, we will continue to sample up to 8 cases for each selected chart-abstracted clinical process of care measure. We plan to evaluate our existing validation scoring methodology to ensure that there will be no significant impact to the estimated reliability (ER) of Hospital IQR Program chart-abstracted data validation activities despite any measure removals.
In addition, the CY 2020 reporting period/FY 2022 payment determination will be the last year for which validation will occur under the Hospital IQR Program with respect to the CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI measures because, as discussed in section VIII.A.5.b.(2)(b) of the preamble of this final rule, we are finalizing our proposal to remove these measures with modification to delay removal for one year. Beyond the FY 2022 payment determination, validation of those measures will occur under the HAC Reduction Program, as further discussed in section IV.J.4.e. of the preamble of this final rule.
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554) for previously adopted details on DACA requirements. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did not propose any changes to the DACA requirements.
We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47364), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53554), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49712 through 49713), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for details on public display requirements. The Hospital IQR Program quality measures are typically reported on the
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did not propose any changes to the public display requirements. However, we note that in section VIII.A.10. of the preamble of this final rule, we discuss our efforts to provide stratified data by patient dual eligibility status in hospital confidential feedback reports and considerations to make stratified data publicly available on the
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), and 42 CFR 412.140(e) for details on reconsideration and appeal procedures for the FY 2017 payment determination and subsequent years. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did not propose any changes to the reconsideration and appeals procedures.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 through 50837), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57181 through 57182), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38409 through 38411), and 42 CFR 412.140(c)(2) for details on the current Hospital IQR Program ECE
Section 1866(k) of the Act 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” or “PCHs”) that specifically applies to PCHs that meet the requirements under 42 CFR 412.23(f). Section 1866(k)(1) of the Act states that, for FY 2014 and each subsequent fiscal year, a PCH must submit data to the Secretary in accordance with section 1866(k)(2) of the Act with respect to such fiscal year.
The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program strives to put patients first by ensuring they, along with their clinicians, are empowered to make decisions about their own health care using data-driven insights that are increasingly aligned with meaningful quality measures. To this end, we support technology that reduces burden and allows clinicians to focus on providing high quality health care to their patients. We also support innovative approaches to improve quality, accessibility, and affordability of care, while paying particular attention to improving clinicians' and beneficiaries' experiences when participating in CMS programs. In combination with other efforts across the Department of Health and Human Services (HSS), we believe the PCHQR Program incentivizes PCHs to improve their health care quality and value, while giving patients the tools and information needed to make the best decisions.
For additional background information, including previously finalized measures and other policies for the PCHQR Program, we refer readers to the following final rules: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through 50846); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277 through 50288); the FY 2016 IPPS/LTCH PPS final rule (80 FR 49713 through 49723); the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 through 57193); and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38411 through 38425).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500 through 20510), we proposed a number of new policies for the PCHQR Program. We developed these proposals after conducting an overall review of the program under our new Meaningful Measures Initiative, which is discussed in more detail in section I.A.2. of the preambles of the proposed rule and this final rule. The proposals reflect our efforts to ensure that the PCHQR Program measure set continues to promote improved health outcomes for our beneficiaries while minimizing the following: (1) The reporting burden associated with submitting/reporting quality measures; (2) the burden associated with complying with other programmatic requirements; and/or (3) the burden associated with compliance with other Federal and/or State regulations (if applicable). In addition, we aim to minimize beneficiary confusion by reducing duplicative reporting and streamlining the process of analyzing publicly reported quality measures data. The proposals also reflect our efforts to improve the usefulness of the data that we publicly report in the PCHQR Program, which are guided by the following two goals: (1) To improve the usefulness of CMS quality program data by providing providers with adequate measure information from one program; and (2) to improve consumer understanding of the data publicly reported on
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 through 57183), we adopted policies for measure retention and removal. We generally retain measures from the previous year's PCHQR Program measure set for subsequent years' measure sets, except when we specifically propose to remove or replace a measure. We adopted the following measure removal factors
• Factor 1. Measure performance among PCHs is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made (that is, “topped-out” measures): Statistically indistinguishable performance at the 75th and 90th percentiles; and truncated coefficient of variation ≤ 0.10;
• Factor 2. A measure does not align with current clinical guidelines or practice;
• Factor 3. The availability of a more broadly applicable measure (across settings or populations) or the availability of a measure that is more proximal in time to desired patient outcomes for the particular topic;
• Factor 4. Performance or improvement on a measure does not result in better patient outcomes;
• Factor 5. The availability of a measure that is more strongly associated with desired patient outcomes for the particular topic;
• Factor 6. Collection or public reporting of a measure leads to negative unintended consequences other than patient harm; and
• Factor 7. It is not feasible to implement the measure specifications.
For the purposes of considering measures for removal from the program, we consider a measure to be “topped-out” if there is statistically indistinguishable performance at the 75th and 90th percentiles and the truncated coefficient of variation is less than or equal to 0.10.
We have also recognized that there are times when measures may meet some of the outlined criteria for removal from the program, but continue to bring value to the program. Therefore, we adopted the following factors for consideration in determining whether to retain a measure in the PCHQR Program, which also are based on factors established in the Hospital IQR Program (80 FR 49641 through 49642):
• Measure aligns with other CMS and HHS policy goals;
• Measure aligns with other CMS programs, including other quality reporting programs; and
• Measure supports efforts to move PCHs towards reporting electronic measures.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20501 through 20502), we proposed to adopt an additional factor to consider when evaluating potential measures for
As we discussed in section I.A.2. of the preambles of the proposed rule and this final rule, with respect to our new Meaningful Measures Initiative, we are engaging in efforts to ensure that the PCHQR measure set continues to promote improved health outcomes for beneficiaries while minimizing the overall costs associated with the program. We believe these costs are multifaceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining the program. We have identified several different types of costs, including, but not limited to: (1) Provider and clinician information collection burden and burden associated with the submission/reporting of quality measures to CMS; (2) the provider and clinician cost associated with complying with other programmatic requirements; (3) the provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs; (4) the cost to CMS associated with the program oversight of the measure including measure maintenance and public display; and (5) the provider and clinician cost associated with compliance with other Federal and/or State regulations (if applicable). For example, it may be needlessly costly and/or of limited benefit to retain or maintain a measure which our analyses show no longer meaningfully supports program objectives (for example, informing beneficiary choice or payment scoring). It may also be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. CMS may also have to expend unnecessary resources to maintain the specifications for the measure, as well as the tools we need to collect, validate, analyze, and publicly report the measure data. Furthermore, beneficiaries may find it confusing to see public reporting on the same measure in different programs.
When these costs outweigh the evidence supporting the continued use of a measure in the PCHQR Program, we believe it may be appropriate to remove the measure from the program. Although we recognize that one of the main goals of the PCHQR Program is to improve beneficiary outcomes by incentivizing health care providers to focus on specific care issues and making public data related to those issues, we also recognize that those goals can have limited utility where, for example, the publicly reported data is of limited use because it cannot be easily interpreted by beneficiaries and used to influence their choice of providers. In these cases, removing the measure from the PCHQR Program may better accommodate the costs of program administration and compliance without sacrificing improved health outcomes and beneficiary choice.
We proposed that we would remove measures based on this factor on a case-by-case basis. We might, for example, decide to retain a measure that is burdensome for health care providers to report if we conclude that the benefit to beneficiaries justifies the reporting burden. Our goal is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients.
We invited public comment on our proposal to adopt an additional measure removal factor, “the costs associated with a measure outweigh the benefit of its continued use in the program,” beginning with the effective date of the FY 2019 IPPS/LTCH PPS final rule.
After consideration of the public comments we received, we are finalizing our proposal to adopt the new measure removal Factor 8, “the costs associated with a measure outweigh the benefit of its continued use in the program,” beginning with the effective date of the FY 2019 IPPS/LTCH PPS final rule.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561), we finalized five quality measures for the FY 2014 program year and subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50847), we finalized one new quality measure for the FY 2015 program year and subsequent years and 12 new quality measures for the FY 2016 program year and subsequent years. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50278 through 50280), we finalized one new quality measure for the FY 2017 program year and subsequent years. In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49713 through 49719), we finalized three new Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) measures for the FY 2018 program year and subsequent years, and finalized the removal of six previously finalized measures for fourth quarter (Q4) 2015 discharges and subsequent years. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57183 through 57184), for the FY 2019 program year and subsequent years, we finalized one additional quality measure and updated the Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382) measure. In the FY 2018 IPPS/LTCH PPS final rule, we finalized four new quality measures (82 FR 38414 through 38420) for the FY 2020 program year and subsequent years, and finalized the removal of three previously finalized measures (82 FR 38412 through 38414).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20502 through 20503), we proposed to remove four web-based, structural measures from the PCHQR Program beginning with the FY 2021 program year because they are topped-out:
• Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382);
• Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384);
• Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and
• Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389).
We also proposed (83 FR 20503) to apply the newly proposed measure removal factor to two National Healthcare Safety Network (NHSN) chart-abstracted measures and, if that factor is finalized, to remove both measures from the PCHQR Program beginning with the FY 2021 program year because we have concluded that the costs associated with these measures outweigh the benefit of their continued use in the program. The measures we proposed to remove on this basis are as follows:
• NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138); and
• NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139).
We proposed to remove the following web-based, structural measures beginning with the FY 2021 program year because they are topped-out: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389). We first adopted these measures for the FY 2016 program year in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50841 through 50844). We refer readers to that final rule for a detailed discussion of the measures.
Based on an analysis of data from January 1, 2015 through December 31, 2016, we have determined that these three measures meet our topped-out criteria. This analysis evaluated data sets and calculated the 5th, 10th, 25th, 50th, 75th, 90th, and 95th percentiles of national facility performance for each measure. For measures where higher values indicate better performance, the percent relative difference (PRD) between the 75th and 90th percentiles were obtained by taking their absolute difference divided by the average of their values and multiplying the result by 100. To calculate the truncated coefficient of variation (TCV), the lowest 5 percent and the highest 5 percent of hospital rates were discarded before calculating the mean and standard deviation for each measure.
The following criteria were applied to the results:
• For measures ranging from 0-100 percent, with 100 percent being best, national measure data for the 75th and 90th percentiles have a relative difference of <=5 percent, or for measures ranging from 0-100 percent, with 100 percent being the best, performance achieved by the median hospital is >=95 percent, and national measure data have a truncated coefficient of variation <=0.10.
• For measures ranging from 0-100 percent, with 0 percent being best, national measure data for the complement of the 10th and 25th percentiles have a relative difference of <=5 percent, or for measures ranging from 0-100 percent, with 0 percent being best, national measure data for the median hospital is <=5 percent, or for other measures with a low number indicating good performance, national measure data for the 10th and 25th percentiles have a relative difference of <=5 percent, and national measure data have a truncated coefficient of variation <=0.10.
The results for 2015 and 2016 are set out in the tables below.
Based on this analysis, we have concluded that these four measures are topped-out and, as discussed below, we believe that collecting PCH data on these measures does not further program goals.
We also believe that continuing to collect PCH data on these measures does not further program goals of improving quality, given that performance on the measures is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made. We believe that these measures also do not meet the criteria for retention of an otherwise topped-out measure, as they: Do not align with the HHS and CMS policy goal to focus our measure set on outcome measures; do not align with measures used in other CMS programs; and do not support our efforts to develop electronic clinical quality measure reporting for PCHs. If we determine at a subsequent point in the future that PCH adherence to the aforementioned HHS and CMS policy goals, the aforementioned program efforts, and the standard of care established by the measure has unacceptably declined, we may propose to readopt these measures in future rulemaking.
We invited public comment on our proposal to remove these four measures from the PCHQR Program beginning with the FY 2021 program year.
After consideration of the public comments we received, we are finalizing the removal of the following web-based, structural measures beginning with the FY 2021 program year: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389).
We proposed to remove two measures from the PCHQR Program beginning with the FY 2021 program year if the measure removal factor “the costs associated with the measure outweigh the benefit of its continued use in the program,” proposed for adoption in section VIII.B.2.c. of the preamble of the proposed rule, is finalized because we have concluded that the costs associated with these measures outweigh the benefit of their continued use in the PCHQR Program. These measures are: (1) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138); and (2) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139). We first adopted the CAUTI and CLABSI measures for the FY 2014 program year in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53557 through 53559); we refer readers to this final rule for a detailed discussion of the measures.
As discussed in section I.A.2. of the preambles of the proposed rule and this final rule, above, our Meaningful Measures Initiative is intended to reduce costs and minimize burden. We continue to believe the CAUTI and CLABSI measures provide important data for patients and hospitals in making decisions about care and informing quality improvement efforts. However, we believe that removing these measures in the PCHQR Program will reduce program costs and complexities associated with the use of these data by patients in decision-making. We believe the costs, coupled with the high technical and administrative burden on PCHs, associated with collecting and reporting this measure data outweigh the benefits to continued use in the program. Further, we note that it has become difficult to publicly report these measures due to the low volume of data produced and reported by the small number of facilities participating in the PCHQR Program and the corresponding lack of an appropriate methodology to publicly report this data. Consequently, we have been unable to offer beneficiaries the benefit of pertinent information on how these measures assess hospital-acquired infections and impact patient safety.
As we state in section I.A.2. of the preambles of the proposed rule and this final rule, we strive to ensure that patients are empowered to make decisions about their health care by using information from data-driven insights. We continue to believe that these measures evaluate important aspects of patient safety. However, as discussed earlier, we believe the high costs, reporting burden, and difficulties associated with publicly reporting this data for use by patients in making decisions about their care outweigh the benefit associated with the measures' continued use in the PCHQR Program. Therefore, in the proposed rule we stated that if our proposal to adopt the new measure removal factor described in section VIII.B.2.c. of the preambles of the proposed rule and this final rule is finalized as proposed, we proposed that under that factor, we would remove the CAUTI and CLABSI measures from the PCHQR Program beginning with the FY 2021 program year.
We invited public comment on our proposal to remove these two measures from the PCHQR Program beginning with the FY 2021 program year. We are conducting additional data analyses to assess measure performance based on new information provided by the CDC. In acknowledgement of the importance of these measures in assessing patient safety in the PCH setting, we want to be cautious to not prematurely remove measures from the PCHQR Program. As such, we wish to evaluate these data for trends that link positive improvements (
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50837 through 50838), and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50278), we indicated that we take many principles into consideration when developing and selecting measures for the PCHQR Program, and that many of these principles are modeled on those we use for measure development and selection under the Hospital IQR Program. In section I.A.2. of the preambles of the proposed rule and this final rule, we also discuss our Meaningful Measures Initiative, and its relation to how we will assess and select quality measures for the PCHQR Program.
Section 1866(k)(3)(A) of the Act requires that any measure specified by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act (the NQF is the entity that currently holds this contract). Section 1866(k)(3)(B) of the Act provides an exception under which, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization.
Using these principles for measure selection in the PCHQR Program, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20503 through 20506), we proposed one new measure, described below.
In an effort to expand the PCHQR Program measure set to include
In compliance with section 1890A(a)(2) of the Act, the proposed measure was included on a publicly available document entitled “2017 Measures under Consideration Spreadsheet,”
Cancer is the second leading cause of death in the United States, with nearly 600,000 cancer-related deaths expected this year. It is estimated roughly 1.7 million Americans will be diagnosed with cancer in 2016, and the number of Americans living with a cancer diagnosis reached nearly 14.5 million in 2014.
Given the current and projected increases in cancer prevalence and costs of care, it is essential that health care providers look for opportunities to lower the costs of cancer care. Reducing readmissions after hospital discharge has been proposed as an effective means of lowering health care costs and improving the outcomes of care.
Preventing these readmissions improves the quality of care for cancer patients. Existing studies in cancer patients have largely focused on postoperative readmissions, reporting readmission rates of between 6.5 percent and 25 percent.
Readmission rates have been developed for pneumonia, acute myocardial infarction, and heart failure. However, the development of validated readmission rates for cancer patients has lagged. In 2012, the Comprehensive Cancer Center Consortium for Quality Improvement, or C4QI (a group of 18 academic medical centers that collaborate to measure and improve the quality of cancer care in their centers), began development of a cancer-specific unplanned readmissions measure: 30-Day Unplanned Readmissions for Cancer Patients. This measure incorporates the unique clinical characteristics of oncology patients and results in readmission rates that more accurately reflect the quality of cancer care delivery, when compared with broader readmissions measures. Likewise, this measure addresses gaps in existing readmissions measures (such as the Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) stewarded by CMS) related to the evaluation of hospital readmissions associated cancer patients. The 30-Day Unplanned Readmissions for Cancer Patients measure can be used by PCHs to inform their quality improvement efforts. Through adoption in the PCHQR Program, it can increase transparency around the quality of care delivered to patients with cancer.
The 30-Day Unplanned Readmissions for Cancer Patients measure is NQF-
The proposed readmission measure fits within the Promote Effective Communication and Coordination of Care measurement domain (categorical area), and specifically applies to the associated clinical topic of “Admissions and Readmissions to Hospitals” of our Meaningful Measures Initiative. This measure is intended to assess the rate of unplanned readmissions among cancer patients treated at PCHs and to support improved care delivery and quality of life for this patient population. By providing an accurate and comprehensive assessment of unplanned readmissions within 30 days of discharge, PCHs can better identify and address preventable readmissions. Through routine monitoring of these performance data by PCHs, this measure can be used to improve patient outcomes and quality of care.
The proposed 30-Day Unplanned Readmissions for Cancer Patients measure is claims-based. Therefore, PCHs would not be required to submit any new data for purposes of reporting this measure. We proposed that we would calculate this measure on a yearly basis using Medicare administrative claims data. Specifically, we proposed that the data collection period for each program year would span from July 1 of the year, three years prior to the program year to June 30 of the year, two years prior to the program year. Therefore, for the FY 2021 program year, we would calculate measure rates using PCH claims data from October 1, 2018 through September 30, 2019.
We assessed the measure's reliability, and set a minimum case count of 50 index admissions (25 per subset) per PCH. There were 3,502 facilities
Overall, the consistent calculations between the two data randomly-split subsets for each period provided evidence that performance variations between PCHs were attributable to hospital-level factors, rather than patient-level factors. Regarding the validity of this measure, global sensitivity and specificity scores of 0.879 and 0.896, respectively, confirmed the validity of the Type of Admission/Visit reported via the UB-04 Uniform Bill Locator 14 (Claim Inpatient Admission Type Code
This outcome measure utilizes claims data to demonstrate the rate at which adult cancer patients have unplanned readmissions within 30 days of discharge from an eligible index admission. The numerator includes all eligible unplanned readmissions to the PCH within 30 days of the discharge date from an index admission to the PCH that is included in the measure denominator. The denominator includes inpatient admissions for all adult Medicare fee-for-service (FFS) beneficiaries where the patient is discharged from a short-term acute care hospital (PCH, short-term acute care PPS hospital, or CAH) with a principal or secondary diagnosis (that is, not admitting diagnosis) of malignant cancer within the defined measurement period. The measure excludes readmissions for patients readmitted for chemotherapy or radiation therapy treatment or with disease progression. The measure will be calculated as the numerator divided by the denominator. Measure specifications for the proposed measure can be accessed on the NQF's website at:
This measure includes inpatient admissions for all adult Medicare FFS beneficiaries where the patient is discharged from a short-term acute care hospital (PCH, short-term acute care PPS hospital, or CAH) with a principal or secondary diagnosis (that is, not admitting diagnosis) of malignant cancer within the defined measurement period. Additional methodology and measure development details are available on the NQF's website at:
This measure is risk-adjusted based on a comparison of observed versus expected readmission rates. Logistic regression analysis is used to estimate the probability of an unplanned readmission, based on the measure specifications and risk factors described herein. The probability of unplanned readmission is then summed over the index admissions for each hospital to calculate the
We invited public comment on our proposal to adopt the 30-Day Unplanned Readmissions for Cancer Patients measure (NQF #3188) for the FY 2021 program year and subsequent years.
With regards to patient illness severity, we understand that there are confounding healthcare factors that contribute to the severity of illness that many patients experience related to their cancer diagnosis; however, we believe that assessing patient readmissions is a proactive method that PCHs can use to hone in on which (if any) of these factors could be remedied and/or prevented with improved quality care. We believe that it is most beneficial to patients to be able to understand causes and/or, where possible, observe trends in cancer patient readmissions, in an effort to establish practices that eliminate readmissions. We reiterate that we are only assessing the care provided within a one-year timeframe. We also reiterate that the measure excludes readmissions for patients readmitted for chemotherapy or radiation therapy treatment or with disease progression.
After consideration of the public comments we received, we are finalizing the adoption of the 30-Day Unplanned Readmissions for Cancer Patients measure (NQF #3188) for the FY 2021 program year and subsequent years. We are also finalizing that the data collection period for the FY 2021 program year and subsequent years for this measure will be October 1 through September 30 of the following calendar year, for each respective program year.
The table below summarizes the PCHQR Program measure set for the FY 2021 program year:
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428 through 38429), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018/CY 2018 proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a hospital or provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS to explore whether factors that could be used to stratify or risk adjust the measures (beyond dual eligibility); considering the full range of differences in patient backgrounds that might affect outcomes; exploring risk adjustment approaches; and offering careful
As a next step, CMS is considering options to improve health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We also are considering how this work applies to other CMS quality programs in the future. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, where we discuss the potential stratification of certain Hospital IQR Program outcome measures. Furthermore, we continue to consider options to address equity and disparities in our value-based purchasing programs.
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
As discussed in sections section I.A.2. of the preambles of the proposed rule and this final rule, we have begun analyzing our programs' measures using the framework we developed for the Meaningful Measures Initiative. We have also discussed future quality measure topics and quality measure domain areas in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50280), the FY 2016 IPPS/LTCH PPS final rule (80 FR4979), the FY 2017 IPPS/LTCH PPS final rule (81 FR 25211), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38421 through 38423). Specifically, we discussed public comment and suggestions for measure topics addressing: (1) Making care affordable; (2) communication and care coordination; and (3) working with communities to promote best practices of healthy living. In addition, in the FY 2018 IPPS/LTCH PPS final rule, we welcomed public comment and specific suggestions for measure topics that we should consider for future rulemaking, including considerations related to risk adjustment and the inclusion of social risk factors in risk adjustment for any individual performance measures.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20507 through 20508), we again sought public comment on the types of measure topics we should consider for future rulemaking. We also sought public comment on two measures for potential future inclusion in the PCHQR Program:
• Risk-Adjusted Morbidity and Mortality for Lung Resection for Lung Cancer (NQF #1790); and
• Shared Decision Making Process (NQF #2962).
We discuss these measures and measurement topic areas in more detail below.
The Risk-Adjusted Morbidity and Mortality for Lung Resection for Lung Cancer (NQF #1790) measure is an outcome measure. It assesses postoperative complications and operative mortality, which are important negative outcomes associated with lung cancer resection surgery. Specifically, the measure assesses the number of patients 18 years of age or older undergoing elective lung resection (Open or video-assisted thoracoscopic surgery (VATS) wedge resection, segmentectomy, lobectomy, bilobectomy, sleeve lobectomy, pneumonectomy) for lung cancer who developed one of the listed postoperative complications described in the measure's specifications.
This measure aligns with recent initiatives to incorporate more outcome measures in quality reporting programs. This measure also aligns with the Promote Effective Prevention and Treatment of Chronic Disease domain of our Meaningful Measures Initiative,
We requested public comment on the possible inclusion of this measure in future years of the program.
We thank the commenters and we will consider their views as we develop future policy regarding the potential inclusion of the Risk-Adjusted Morbidity and Mortality for Lung Resection for Lung Cancer (NQF #1790) measure in the PCHQR Program.
The Shared Decision Making Process (NQF #2962) measure is a patient-reported outcome measure. This measure asks patients who have had any of seven preference-sensitive surgical interventions to report on the interactions they had with their providers when the decision was made to have the surgery. Specifically, this measure assesses patient answers to four questions about whether three essential elements of shared decision-making: (1) Laying out options; (2) discussing the reasons to have the intervention and not to have the intervention; and (3) asking for patient input—were part of the patient's interactions with providers when the decision was made to have the procedure. When faced with a medical problem for which there is more than one reasonable approach to treatment or management, shared decision-making means providers should outline for patients that there is a choice to be made, discuss the pros and cons of the available options, and make sure that patients have input into the final decision. The result will be decisions that align better with patient goals, concerns, and preferences.
This measure aligns with recent initiatives to include patient-reported outcomes and experience of care into quality reporting programs, as well as to incorporate more outcome measures generally. This measure also aligns with the Strengthen Person and Family Engagement as Partners in Their Care domain of our Meaningful Measures Initiative,
We requested public comment on the possible inclusion of this measure in future years of the program.
We thank the commenters and we will consider their views related to the inclusion of a question that gauges patients' assessment of cost, and the inclusion of procedure-specific questions as we develop future policy regarding the potential inclusion of the Shared Decision Making Process (NQF #2962) measure in the PCHQR Program.
We thank the commenters and we will consider their views as we develop future policy regarding the potential inclusion of the Shared Decision Making Process (NQF #2962) measure in the PCHQR Program.
As discussed in section I.A.2. of the preambles of the proposed rule and this final rule, we intend to review and assess the quality measures that we collect and score in our quality programs. As a part of the review process, we are continually evaluating the existing PCHQR measures portfolio and identifying gap areas for future measure adoption and/or development. In tandem with this portfolio evaluation, we have conducted a measure environmental scan. We believe that staying abreast of the cancer measurement environment and staying in communication with the cancer measure development community are vital to the ensure that the PCHQR Program measure portfolio remains aligned with current CMS and HHS goals. As a part of our efforts to include a comprehensive set of cancer measures in the PCHQR Program, we are currently assessing whether we should redefine the scope of new quality metrics we implement in the PCHQR Program in future years. Specifically, we are trying to determine whether the PCHQR Program would most benefit from the inclusion of more quality measures that examine general cancer care (that is, outcome measures that assess cancer care) or more measures that examine cancer-specific clinical conditions (such as prostate cancer, esophageal cancer, colon cancer, or uterine cancer).
We welcomed public comment and specific suggestions on the inclusion of quality measures that examine general cancer care versus the inclusion of quality measures that examine cancer-specific clinical conditions in future rulemaking.
We thank the commenters and we will consider their views as we develop future policy regarding the inclusion of quality measures that examine general cancer care versus the inclusion of quality measures that examine cancer-specific clinical conditions.
We maintain technical specifications for the PCHQR Program measures, and we periodically update those specifications. The specifications may be found on the QualityNet website at:
We also refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), where we adopted a policy under which we use a subregulatory process to make nonsubstantive updates to measures used for the PCHQR Program.
Under section 1866(k)(4) of the Act, we are required to establish procedures for making the data submitted under the PCHQR Program available to the public. Such procedures must ensure that a PCH has the opportunity to review the data that are to be made public with respect to the PCH prior to such data being made public. Section 1866(k)(4) of the Act also provides that the Secretary must report quality measures of process, structure, outcome, patients' perspective on care, efficiency, and costs of care that relate to services furnished in such hospitals on the CMS website.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 through 57192), we finalized that although we would continue to use rulemaking to establish what year we would first publicly report data on each measure, we would publish the data as soon as feasible during that year. We also stated that our intent is to make the data available on at least a yearly basis, and that the time period for PCHs to review their data before the data are made public would be approximately 30 days in length. We announce the exact data review and public reporting timeframes on a CMS website and/or on our applicable Listservs.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38422 through 38424), we listed our finalized public display requirements for the FY 2020 program year.
We recognize the importance of being transparent with stakeholders and keeping them abreast of any changes that arise with the PCHQR Program measure set. As such, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20508 through 20509), we provided a discussion of some recent changes affecting the timetable for the public display of data for specific PCHQR Program measures in the section below.
We adopted the Colon and Abdominal Hysterectomy SSI (NQF #0753) measure in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50839 through 50840) and the MRSA measure (NQF #1716), the CDI measure (NQF #1717) and the HCP measure (NQF #0431) in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49715 through 49718).
At present, all PCHs are reporting Colon and Abdominal Hysterectomy SSI, MRSA, CDI, and HCP data to the NHSN under the PCHQR Program. However, performance data for these measures are new, and do not span a long enough measurement period to draw conclusions about their statistical significance at this point. Specifically, in 2016, the Centers for Disease Control and Prevention (CDC) announced that HAI data reported to NHSN for 2015 will be used as the new baseline, serving as a new “reference point” for comparing progress.
We invited public comment on our proposal to delay public reporting of these four measures until CY 2019.
After consideration of the public comments we received, we are finalizing a modification to our proposal to delay public reporting of data for the SSI, MRSA, CDI, and HCP measures until CY 2019. Instead, we are finalizing that we will provide stakeholders with performance data as soon as practicable (that is, if useable data is available sooner than CY 2019, we will publicly report it on Hospital Compare via the next available Hospital Compare release. We will continue to monitor the progress of the current rebaselining efforts being made by CDC.
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50282 through 50283), we finalized that PCHs would begin reporting the External Beam Radiotherapy for Bone Metastases (EBRT) (NQF #1822) measure beginning with January 1, 2015 discharges and for subsequent years. We finalized that PCHs would report this measure to us via a CMS web-based tool on an annual basis (July 1 through August 15 of each respective year). Lastly, we finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57192) that we would begin to display the measure data during CY 2017, and that we would use a CMS website and/or our applicable Listservs to announce the exact timeframe.
We publicly reported data on this measure in December of 2017, and that data can be accessed on
Our public display requirements for the FY 2021 program year are shown in the following table:
Data submission requirements and deadlines for the PCHQR Program are posted on the QualityNet website at:
As further described in section VIII.B.4.b. of the preamble of this final rule, we are finalizing the adoption of a new measure beginning with the FY 2021 program year, the 30-Day Unplanned Readmissions for Cancer Patients measure. This is a claims-based measure, therefore, there will be no separate data submission requirements for PCHs related to this measure as CMS will calculate measure rates using PCH claims data. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20510), we proposed that the data collection period would be from July 1 of the year, three years prior to the program year to June 30 of the year, two years prior to the program year. Therefore, for the FY 2021 program year, we would collect data from October 1, 2018 through September 30, 2019.
We invited public comment on this proposal.
After consideration of the public comment we received, we are finalizing the proposal to collect data on this measure from October 1, 2018 through September 30, 2019, for the FY 2021 program year.
In our experience with other quality reporting and performance programs, we have noted occasions when providers have been unable to submit required quality data due to extraordinary circumstances that are not within their control (for example, natural disasters). We do not wish to increase their burden unduly during these times. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our policy that, for the FY 2014 program year and subsequent years, PCHs may request and we may grant exceptions (formerly referred to as waivers)
The LTCH QRP is authorized by section 1886(m)(5) of the Act, and it applies to all hospitals certified by Medicare as long-term care hospitals (LTCHs). Under the LTCH QRP, the Secretary reduces by 2 percentage points the annual update to the LTCH PPS standard Federal rate for discharges for an LTCH during a fiscal year if the LTCH has not complied with the LTCH QRP requirements specified for that fiscal year. For more detailed information on the requirements we have adopted for the LTCH QRP, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 51744), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50853), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50286), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49723 through 49725), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57193), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38425 through 38426).
Although we have historically used the preamble to the IPPS/LTCH PPS proposed and final rules each year to remind stakeholders of all previously finalized program requirements, we have concluded that repeating the same discussion each year is not necessary for every requirement, especially if we have codified it in our regulations. Accordingly, the following discussion is limited as much as possible to a discussion of our proposals, responses to comments submitted on those proposals, and policies we are finalizing for future years of the LTCH QRP, and represents the approach we intend to use in our rulemakings for this program going forward.
For a detailed discussion of the considerations we historically used for the selection of LTCH QRP quality, resource use, and other measures, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49728).
We received comments related to the IMPACT Act and the availability of data for LTCHs, both of which are summarized and discussed below.
Commenters also supported the development of standardized patient assessment data elements. One commenter recommended that, as part of the standardized patient assessment data elements that could be incorporated into the post-acute care assessment instruments, CMS streamline adult immunization quality measures across health care settings. One commenter expressed that CMS communicate and collaborate more with LTCHs and other post-acute care providers on IMPACT Act implementation, encouraging CMS to include LTCHs in the development of standardized patient assessment data elements and all other CMS initiatives related to the implementation of the IMPACT Act. The commenter also noted that CMS should develop and refine measures that are either required by the IMPACT Act or will otherwise facilitate cross-setting measurement and eliminate measures that are not required under the IMPACT Act.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428 through 38429), we discussed the importance of improving beneficiary outcomes including reducing health disparities. We also discussed our commitment to ensuring that medically complex patients, as well as those with social risk factors, receive excellent care. We discussed how studies show that social risk factors, such as being near or below the poverty level as determined by HHS, belonging to a racial or ethnic minority group, or living with a disability, can be associated with poor health outcomes and how some of this disparity is related to the quality of health care.
In the FY 2018/CY 2018 proposed rules for our quality reporting and value-based purchasing programs, we solicited feedback on which social risk factors provide the most valuable information to stakeholders and the methodology for illuminating differences in outcomes rates among patient groups within a provider that would also allow for a comparison of those differences, or disparities, across providers. Feedback we received across our quality reporting programs included encouraging CMS: to explore whether factors that could be used to stratify or risk adjust the measures (beyond dual eligibility); to consider the full range of differences in patient backgrounds that might affect outcomes; to explore risk adjustment approaches; and to offer careful consideration of what type of information display would be most useful to the public.
We also sought public comment on confidential reporting and future public reporting of some of our measures stratified by patient dual eligibility. In general, commenters noted that stratified measures could serve as tools for hospitals to identify gaps in outcomes for different groups of patients, improve the quality of health care for all patients, and empower consumers to make informed decisions about health care. Commenters encouraged us to stratify measures by other social risk factors such as age, income, and educational attainment. With regard to value-based purchasing programs, commenters also cautioned CMS to balance fair and equitable payment while avoiding payment penalties that mask health disparities or discouraging the provision of care to more medically complex patients. Commenters also noted that value-based payment program measure selection, domain weighting, performance scoring, and payment methodology must account for social risk.
As a next step, we are considering options to improve health disparities among patient groups within and across hospitals by increasing the transparency of disparities as shown by quality measures. We also are considering how this work applies to other CMS quality programs in the future. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more details, where we discuss the potential stratification of certain Hospital IQR Program outcome measures. Furthermore, we continue to consider options to address equity and disparities in our value-based purchasing programs.
We plan to continue working with ASPE, the public, and other key stakeholders on this important issue to identify policy solutions that achieve the goals of attaining health equity for all beneficiaries and minimizing unintended consequences.
As a part of our Meaningful Measures Initiative, discussed in section I.A.2. of the preambles of the proposed rule and this final rule, we strive to put patients first, ensuring that they, along with their clinicians, are empowered to make decisions about their own healthcare using data-driven information that is increasingly aligned with a parsimonious set of meaningful quality measures. We began reviewing the LTCH QRP's measures in accordance with the Meaningful Measures Initiative, and we are working to identify how to move the LTCH QRP forward in the least burdensome manner possible, while continuing to incentivize improvement in the quality of care provided to patients.
Specifically, we believe the goals of the LTCH QRP and the measures used in the program cover most of the Meaningful Measures Initiative priorities, including making care safer, strengthening person and family engagement, promoting coordination of care, promoting effective prevention and treatment, and making care affordable.
We also evaluated the appropriateness and completeness of the LTCH QRP's current measure removal factors. We have previously finalized that we would use notice and comment rulemaking to remove measures from the LTCH QRP based on the following factors:
• Factor 1. Measure performance among LTCHs is so high and unvarying that meaningful distinctions in improvements in performance can no longer be made.
• Factor 2. Performance or improvement on a measure does not result in better patient outcomes.
• Factor 3. A measure does not align with current clinical guidelines or practice.
• Factor 4. A more broadly applicable measure (across settings, populations, or conditions) for the particular topic is available.
• Factor 5. A measure that is more proximal in time to desired patient outcomes for the particular topic is available.
• Factor 6. A measure that is more strongly associated with desired patient outcomes for the particular topic is available.
• Factor 7. Collection or public reporting of a measure leads to negative
We continue to believe that these measure removal factors are appropriate for use in the LTCH QRP. However, even if one or more of the measure removal factors applies, we may nonetheless choose to retain the measure for certain specified reasons. Examples of such instances could include when a particular measure addresses a gap in quality that is so significant that removing the measure could, in turn, result in poor quality, or in the event that a given measure is statutorily required. We note further that, consistent with other quality reporting programs, we apply these factors on a case-by-case basis.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20511 through 20512), we proposed to adopt an additional factor to consider when evaluating potential measures for removal from the LTCH QRP measure set: Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
As we discussed in section I.A.2. of the preambles of the proposed rule and this final rule, with respect to our new Meaningful Measures Initiative, we are engaging in efforts to ensure that the LTCH QRP measure set continues to promote improved health outcomes for beneficiaries while minimizing the overall costs associated with the program. We believe these costs are multi-faceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining the program. We have identified several different types of costs, including, but not limited to: (1) The provider and clinician information collection burden and burden associated with the submission/reporting of quality measures to CMS; (2) the provider and clinician cost associated with complying with other programmatic requirements; (3) the provider and clinician cost associated with participating in multiple quality programs, and tracking multiple similar or duplicative measures within or across those programs; (4) the cost to CMS associated with the program oversight of the measure including measure maintenance and public display; and (5) the provider and clinician cost associated with compliance with other federal and/or State regulations (if applicable).
For example, it may be needlessly costly and/or of limited benefit to retain or maintain a measure which our analyses show no longer meaningfully supports program objectives (for example, informing beneficiary choice). It may also be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. CMS may also have to expend unnecessary resources to maintain the specifications for the measure, as well as the tools we need to collect, validate, analyze, and publicly report the measure data. Furthermore, beneficiaries may find it confusing to see public reporting on the same measure in different programs.
When these costs outweigh the evidence supporting the continued use of a measure in the LTCH QRP, we believe it may be appropriate to remove the measure from the program. Although we recognize that one of the main goals of the LTCH QRP is to improve beneficiary outcomes by incentivizing health care providers to focus on specific care issues and making public data related to those issues, we also recognize that those goals can have limited utility where, for example, the publicly reported data is of limited use because it cannot be easily interpreted by beneficiaries and used to influence their choice of providers. In these cases, removing the measure from the LTCH QRP may better accommodate the costs of program administration and compliance without sacrificing improved health outcomes and beneficiary choice.
We proposed that we would remove measures based on this factor on a case-by-case basis. We might, for example, decide to retain a measure that is burdensome for health care providers to report if we conclude that the benefit to beneficiaries justifies the reporting burden. Our goal is to move the program forward in the least burdensome manner possible, while maintaining a parsimonious set of meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients.
One commenter cautioned that measure removal should not be solely based on associated cost and recommended that CMS implement measures even at a high cost if it benefits patients. Another commenter requested clarification about the methods or criteria used to assess when the measure cost or burden outweighs the benefits of retaining it.
Lastly, one commenter expressed concern that Factor 8 compares the costs with the “use in the program,” indicating that the usefulness of the measures should be self-evident and directly relate to the purpose of the program. The commenter believed that the removal of a measure would decrease the ability of that measure to improve patient care and reduce Medicare costs and, as a result, would reduce the effectiveness of the quality reporting program. The commenter also noted that Factor 8 does not describe a specific method to be used to evaluate the usefulness of a measure or describe how the number of measures kept within the program shall be determined.
With regard to the request for clarification about criteria used to assess costs and burden, we provided examples of five different costs that could be considered in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20512). We note that we intend to assess the costs and benefits to all program stakeholders, including but not limited to, those listed above. We intend to be transparent in our assessment of costs and burden for each measure. As described above, there are various considerations of costs and benefits, direct and indirect, financial and otherwise, that we will evaluate when evaluating a measure under removal Factor 8, and we will take into consideration the perspectives of multiple stakeholders. However, because we intend to evaluate each measure on a case-by-case basis, and because each measure has been adopted to fill different needs in the LTCH QRP, we do not believe it would be meaningful to identify a specific set of assessment criteria to apply to all measures.
Lastly, in response to the comment that the removal of measures would reduce the effectiveness of the LTCH QRP, we do not believe that more measures equate to better care. Retaining a strong measure set that addresses critical issues is one benefit that we would consider in analyzing measures for potential removal from the LTCH QRP measure set. We will continue to monitor and evaluate our programs to identify their benefit with respect to quality of care and patient safety as well as their costs.
After consideration of the public comments we received, we are finalizing our proposal to adopt an additional measure removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program, in the LTCH QRP.
We also proposed to codify both the removal factors we previously finalized for the LTCH QRP, as well as the new the measure removal Factor 8 that we are finalizing in this final rule, at § 412.560(b)(3) of our regulations.
After consideration of the public comments we received, we are finalizing our proposal to codify both the removal factors we previously finalized for the LTCH QRP, as well as the new the measure removal factor that we are finalizing in this final rule, at § 412.560(b)(3) of our regulations. We are also making minor grammatical edits to the LTCH QRP measure removal factor language to align with the language of other programs.
The LTCH QRP currently has 19 measures for the FY 2020 program year, which are outlined in the following table:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20513 through 20515), we proposed to remove three measures from the LTCH QRP measure set. Beginning with the FY 2020 LTCH QRP, we proposed to remove two measures: (1) National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
We proposed to remove the measure, National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-Resistant
As discussed in section VIII.C.3. of the preambles of the proposed rule and this final rule, one of the main goals of our Meaningful Measures Initiative is to apply a parsimonious set of the most meaningful measures available to track patient outcomes and impact. We currently collect data on two measures of healthcare-associated bacteremia infections in the LTCH QRP: (1) NHSN Central line-associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139); and (2) NHSN Facility-wide Inpatient Hospital-onset Methicillin-resistant
In our review of these measures used in the LTCH QRP, we believe that it is appropriate to remove the NHSN Facility-wide Inpatient Hospital-onset Methicillin-resistant
We believe that the NHSN CLABSI Outcome Measure (NQF #0139) is more strongly associated with the desired patient outcome for bloodstream infections than the NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716). Bloodstream infections are serious infections typically causing a prolongation of hospital stay and increased cost and risk of mortality. The NHSN CLABSI Outcome Measure (NQF #0139) assesses the results of the quality of care provided to patients, and it is risk-adjusted to compare the infection rate for a particular location or locations in a hospital with an expected infection rate for those locations (which is calculated using national NHSN data for those locations in a predictive model). The NHSN CLABSI Outcome Measure (NQF #0139) is more strongly associated with the desired patient outcome of better results in the quality of care provided to patients because it covers a wide range of blood-stream infections, while the NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) only covers MRSA observed hospital-onset unique blood source MRSA laboratory-identified events. The NHSN CLABSI Outcome Measure (NQF #0139) also captures the MRSA blood-stream events, creating potential duplicative collection and reporting.
We also believe that the costs associated with the NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) outweigh the benefit of its continued use in the LTCH QRP. The NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) was adopted to assess MRSA infections caused by a strain of MRSA bacteremia that has become resistant to antibiotics commonly used to treat MRSA infections. The NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) and NHSN CLABSI Outcome Measure (NQF #0139) capture the same type of MRSA infection. This overlap results in the data submission on two measures that cover the same quality issue. We believe that this results in redundant efforts on the part of LTCHs that are costly and burdensome. In addition, the maintenance of these two measures in the LTCH QRP is costly for CMS. Lastly, we believe that the removal of the NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) would benefit the public by eliminating the potential confusion of seeing two different measure rates on LTCH Compare that capture MRSA bacteremia.
We stated in the proposed rule that if our proposal is finalized, LTCHs would continue to report MRSA bacteremia events associated with central line use as part of the NHSN CLABSI Outcome Measure (NQF #0139), and LTCHs would also report as part of that measure other acquired central line-associated bloodstream infections. As a result, duplication of data submission of the same MRSA bacteremia event for these two measures would be eliminated and only a single bacteremia outcome measure would be publicly reported on
For these reasons, we proposed to remove the NHSN Facility-wide Inpatient Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716) from the LTCH QRP beginning with the FY 2020 LTCH QRP under: (1) Factor 6, a measure that is more strongly associated with desired patient outcomes for the particular topic is available; and (2) Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
We stated in the proposed rule that if our proposal is finalized as proposed, LTCHs would no longer be required to submit data on this measure for the purposes of the LTCH QRP beginning with October 1, 2018 admissions and discharges.
In addition, several commenters agreed that the NHSN CLABSI Outcome Measure (NQF #0139) is more strongly associated with the desired patient outcome for bloodstream infections than the NHSN MRSA Bacteremia Outcome Measure (NQF #1716) and that maintaining both measures in the LTCH QRP would represent duplicative data collection and reporting. Another commenter qualified its support with a recommendation that CMS study the overlap between MRSA and CLABSI since MRSA bacteremias are often, but not always, CLABSIs.
Some commenters expressed concern that removing this measure would decrease the ability of providers to continually monitor and address critical patient safety issues and the ability of patients and families, employers, and payers to make informed decisions about their health care. These commenters stated that the public reporting of patient safety measures helps focus and strengthen efforts to improve healthcare quality and safety.
Commenters also stated that patient safety should continue to be assessed in
Other commenters believed that the NHSN CLABSI Outcome Measure (NQF #0139), alone, was not sufficient to capture the desired outcome of bloodstream infections, and stated that the two measures on this topic address different issues which are dependent upon different processes for prevention.
We agree with the commenters that patient safety should continue to be assessed in a manner that provides minimal interruption to data collection and burden on LTCHs. Through the Meaningful Measures Initiative, it is our goal to maximize patient safety with minimal burden on providers. We continue to monitor hospital acquired infections in the LTCH setting through the NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138), the NHSN Central Line-associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139), and the NHSN Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). In addition, we agree with several commenters that CMS should strive to maintain key outcome measures, and we will continually review, evaluate, and amend, if necessary, these measures within our quality programs.
Lastly, we disagree with the commenter who stated that the CLABSI and MRSA measures address different issues which are dependent upon different processes for prevention. We are clarifying that MRSA bacteremia LabID event reporting is only based on the proxy measure of a positive laboratory finding with no clinical consideration. MRSA bacteremia LabID event reporting is different from CLABSI reporting, which is based on specific infection criteria. Since CLABSI reporting is based on standardized case definitions, there is confidence in the data that can be used to impact prevention efforts as well as increased comparability between clinical settings.
For example, an increased CLABSI standardized infection ratio (SIR) would be viewed as an opportunity for improvement in overall standard of care practices. In addition, the monitoring conducted under CLABSI reporting is not limited to MRSA bloodstream infections and includes all organisms identified in blood culture collection, pathogens and common commensal organisms. Thus, the CLABSI measure data can inform broader preventive programs than the NHSN Facility-wide Inpatient Hospital-Onset Methicillin-Resistant
After consideration of the public comments we received, we are finalizing our proposal to remove the NHSN Facility-wide Inpatient Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716) from the LTCH QRP beginning with the FY 2020 LTCH QRP. LTCHs will no longer be required to submit data on this measure for the purposes of the LTCH QRP beginning with October 1, 2018 admissions and discharges.
We proposed to remove the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH QRP beginning with the FY 2020 LTCH QRP based on Factor 6, a measure that is more strongly associated with desired patient outcomes for the particular topic is available.
We finalized the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50301 through 50305) to assess whether LTCHs monitor ventilator use and identify improvements in preventing complications associated with mechanical ventilation. We have also adopted for the LTCH QRP three other assessment-based quality measures on the topic of ventilator support: (1) Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support (NQF #2632) (79 FR 50298 through 50301); (2) Compliance with Spontaneous Breathing Trials (SBT) by Day 2 of the LTCH Stay (82 FR 38439 through 38443); and (3) Ventilator Liberation Rate (82 FR 38443 through 38446).
We believe that these three other assessment-based quality measures are more strongly associated with desired patient outcomes than the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure that we proposed to remove. The three assessment-based measures assess activities that reduce the potential for serious complications and other adverse events as a result of mechanical ventilation. Specifically, the Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital Patients Requiring Ventilator Support (NQF #2632) focuses on improvement in functional mobility for patients requiring mechanical ventilation. The Compliance with SBT by Day 2 of the LTCH Stay measure focuses on successfully liberating patients from mechanical ventilation as soon as possible, which reduces the risk associated with events as a result of prolonged ventilator support. The Ventilator Liberation Rate measure assesses whether the patient was fully liberated from mechanical ventilation at discharge. Together, these three ventilator-related assessment-based quality measures assess positive outcomes and track patient goals of avoiding adverse outcomes associated with mechanical ventilation and successful ventilator weaning.
The inclusion in the LTCH QRP measure set of these three ventilator-related assessment-based measures, which focus on quality of care through promotion of positive outcomes, have reduced poor outcomes associated with the complications of ventilator care, which is the same focus of the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure (for example, worsening oxygenation, infection or inflammation, ventilator-associated pneumonia, or even death). As a result, we do not believe that it is necessary to retain all four of these measures in the LTCH QRP. By retaining the three ventilator-related assessment-based measures but removing the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure, we believe that we can focus on the topic of mechanical ventilation measures that promote positive outcomes while indirectly promoting a reduction in ventilator support complications.
For these reasons, we proposed to remove the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH QRP beginning with the FY 2020 LTCH QRP under Factor 6, the measure that is more strongly associated with
We stated in the proposed rule that if our proposal is finalized as proposed, LTCHs would no longer be required to submit data on this measure for the purposes of the LTCH QRP beginning with October 1, 2018 admissions and discharges.
As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38439 through 38440), the Compliance with SBT by Day 2 of the LTCH Stay measure is important for encouraging implementation of evidence-based weaning protocols that reduces the risk of negative ventilator-associated outcomes such as ventilator-associated pneumonia.
Several commenters stated that patient safety should continue to be assessed in a manner that provides minimal interruption to data collection and burden on LTCHs. In addition, several commenters noted that, with such a small measure set, CMS should strive to maintain key outcome measures. Several commenters also emphasized the importance of the NHSN VAE Outcome Measure for epidemiological tracking, with a few commenters adding that this measure has only been required since January 2016 and that only a baseline has been established. Another commenter advised CMS to monitor rates of worsening oxygenation, infection, inflammation, and ventilator-associated pneumonia to ensure that the measure's removal does not unintentionally lead to a rising trend in these events. A few commenters stated that preventing VAEs requires different processes than preventing central line infections and thus, should continue to be monitored in addition to the three current ventilator assessment-based quality measures currently in the LTCH QRP.
We agree with the commenters that patient safety should continue to be assessed in a manner which provides minimal interruption to data collection and burden on LTCHs. Through the Meaningful Measures Initiative, one of our goals is to ensure that our measures are strongly associated with the desired patient outcomes. We are continuing to monitor hospital acquired infections in the LTCH setting with the NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138), the NHSN Central Line-associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) and the NHSN Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). In addition, we agree with several commenters that CMS should strive to maintain key outcome measures, and we will continually review, evaluate, and amend, if necessary, these measures within our quality programs.
We also agree that epidemiological tracking of VAE is important and that providers should be able to continue monitoring events such as worsening oxygenation, infection, inflammation, and ventilator-associated pneumonia to ensure these events will not rise. LTCHs can continue to report VAE data to NHSN on a voluntary basis, as well as use NHSN for their own internal tracking of local VAE incidence.
Data on LTCH QRP measures that are also collected by the CDC for other purposes are reported by LTCHs to the CDC through the NHSN, and the CDC then transmits the relevant data to CMS. Even with the removal of the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH QRP, the CDC will continue to use VAE data in the production of national and State-level SIRs as a way to track progress towards prevention goals. We recognize that preventing VAEs requires different processes than preventing central line infections. However, as noted above, we believe that the other LTCH QRP VAE-related measures assess positive outcomes and track patient goals of avoiding adverse outcomes associated with mechanical ventilation and successful liberation off the ventilator.
After consideration of the public comments we received, we are finalizing our proposal to remove the National Healthcare Safety Network
We proposed to remove the process measure, Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680), beginning with the FY 2021 LTCH QRP under measure removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
This process measure reports the percentage of stays in which a patient was assessed and appropriately given the influenza vaccine for the most recent influenza vaccination season and was adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627) to assess vaccination rates among older adults with the goal of reducing the incidence of influenza in this population. Specifically, adoption of the measure in the LTCH QRP was intended to act as a safeguard for patients who did not receive vaccinations prior to admission to an LTCH, since many patients receiving care in the LTCH setting are older adults (those 65 years and older) and are considered to be the target population for the influenza vaccination.
In our evaluation of the LTCH QRP measure set, our analysis of this particular measure revealed that for the 2016-2017 influenza season, nearly every patient was assessed by the LTCH upon admission and that less than 0.04 percent of patients were not assessed for the vaccination. Of those assessed, the data show that most patients who could receive the vaccine had already received the vaccine outside of the LTCH facility, prior to admission.
In addition, we have heard from stakeholders that the data collection associated with this measure is administratively costly and burdensome for LTCHs, and that the process of assessing whether vaccination is needed is often a duplicative process for patients who were already screened during their proximal stay at an acute care facility. We believe that removing this measure would reduce provider costs and burden by eliminating duplicative patient assessments across healthcare settings, minimizing data collection and reporting, and avoiding potentially confusing public reporting of other influenza-related quality measures, such as the Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) measure.
We recognize that influenza is a major public health issue. However, based on our analysis of the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure, including data showing that most LTCH patients are vaccinated before they are admitted to the LTCH, we believe that LTCH patients will continue to be assessed and immunized when appropriate in the absence of this measure. As a result, removal of this measure would alleviate the operational costs and burden that LTCHs currently incur with respect to collecting the data necessary to report this measure.
Therefore, we proposed to remove this measure from the LTCH QRP beginning with the FY 2021 LTCH QRP under measure removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program.
We stated in the proposed rule that if our proposal is finalized as proposed, LTCHs would no longer be required to report the data elements necessary to calculate this measure beginning with October 1, 2018
We strive to align with the Meaningful Measures Initiative by prioritizing measures most vital to improving patient outcomes and focusing on issues that are most meaningful to patients and their families. We considered feedback from subject matter experts who have noted the potential for confusion between the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) and the Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) measures. Removal of measures will ultimately ease provider burden and allow LTCHs to devote more time to provide efficient and effective care to improve patient outcomes.
After consideration of the public comments we received, we are finalizing our proposal to remove the Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure from the LTCH QRP, beginning with the FY 2021 LTCH QRP. LTCHs will no longer be required to report the data elements necessary to calculate this measure beginning with October 1, 2018 admissions and discharges.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38449), we stated that we intended to specify two measures that would satisfy the domain of accurately communicating the existence and provision of the transfer of health information and care preferences under section 1899B(c)(1)(E) of the Act no later than October 1, 2018, and intended to propose to adopt them for the FY 2021 LTCH QRP with data collection beginning on or about April 1, 2019.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we stated that as a result of the input provided during a public comment period between November 10, 2016 and December 11, 2016, input provided by a technical expert panel (TEP), and pilot measure testing conducted in 2017, we are engaging in continued development work on these two measures, including supplementary measure testing and providing the public with an opportunity for comment in 2018. We stated that we would reconvene a TEP for these measures in mid-2018 which occurred in April 2018. We stated that we now intend to specify the measures under section 1899B(c)(1)(E) of the Act no later than October 1, 2019 and intend to propose to adopt the measures for the FY 2022 LTCH QRP, with data collection beginning with April 1, 2020 admissions and discharges. For more information on the pilot testing, we refer readers to:
We did not receive any public comments regarding this IMPACT Act implementation update.
Under our current policy, LTCHs report data on LTCH QRP assessment-based measures and standardized patient assessment data by reporting the designated data elements for each applicable patient on the LTCH CARE Data Set patient assessment instrument and then submitting the completed instruments to CMS using the Quality Improvement and Evaluation System (QIES) Assessment and Submission Processing (ASAP) system. Data on LTCH QRP measures that are also collected by the CDC for other purposes are reported by LTCHs to the CDC through the NHSN, and the CDC then transmits the relevant data to CMS. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38454 through 38456) for the data collection and submission timeframes that we finalized for the LTCH QRP.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we sought input on whether we should move the implementation date of any new version of the LTCH CARE Data Set from the usual release date of April to October in the future.
Section 412.560(d)(1) of our regulations states that CMS will send an LTCH written notification of a decision of noncompliance with the measures data and standardized patient assessment data reporting requirements for a particular fiscal year. It also states that CMS will use the QIES ASAP system to provide notification of noncompliance to the LTCH.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we proposed to revise § 412.560(d)(1) to expand the methods by which we would notify an LTCH of noncompliance with the LTCH QRP requirements for a program year. Revised § 412.560(d)(1) would state that we would notify LTCHs of noncompliance with the LTCH QRP requirements via a letter sent through at least one of the following notification methods: the QIES ASAP system, the United States Postal Service, or via an email from the Medicare Administrative Contractor (MAC). We believe this change will address feedback from providers who requested additional methods for notification.
We also proposed to revise § 412.560(d)(3) to clarify that we will notify LTCHs, in writing, of our final decision regarding any reconsideration request using the same notification process.
In addition, some commenters expressed concerns that multiple notification methods and lack of specificity would cause confusion, add uncertainty, and cause delays in the notification process. One commenter suggested that CMS revise the process so that: (1) LTCHs can designate one person at the hospital or within the hospital organization to receive these notices, and (2) LTCHs can choose one method of notification from CMS out of the three options.
In response to the concerns regarding the multiple notification methods, it is our intent that the announcements posted on our website and sent via the PAC listserv will alleviate any confusion regarding noncompliance decisions and the reconsideration process. With regard to the comment about specifying the recipients of notifications for a specific facility, our notifications are sent to the point of contact on file in the QIES database. This information is populated via the Automated Survey Processing Environment (ASPEN) system. It is the responsibility of the facility to ensure that this information is up-to-date. For information regarding how to update provider information in QIES, we refer providers to:
After consideration of the public comments we received, we are finalizing our proposal to revise § 412.560(d)(1) of our regulations to state that we will notify LTCHs of noncompliance with the LTCH QRP via a notification sent through at least one of the following methods: the QIES ASAP system, the United States Postal Service, or via an email from the MAC. We are also finalizing our proposal to revise § 412.560(d)(3) of our regulations to clarify that we will notify LTCHs, in writing, of our final decision regarding any reconsideration request using the same notification process.
The HITECH Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA) authorizes incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified electronic health record technology (CEHRT). Incentive payments under Medicare are available to eligible hospitals and CAHs for certain payment years (as authorized under sections 1886(n) and 1814(l) of the Act, respectively) if they successfully demonstrate meaningful use of CEHRT, which includes reporting on clinical quality measures (CQMs or eCQMs) using CEHRT. Incentive payments are available to Medicare Advantage (MA) organizations under section 1853(m)(3) of the Act for certain affiliated hospitals that meaningfully use CEHRT.
Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act also establish downward payment adjustments under Medicare, beginning with FY 2015, for eligible hospitals and CAHs that do not successfully demonstrate meaningful use of CEHRT for certain associated reporting periods. Section 1853(m)(4) of the Act establishes a negative payment adjustment to the monthly prospective payments of a qualifying MA organization if its affiliated eligible hospitals are not meaningful users of CEHRT, beginning in 2015. Section 1903(a)(3)(F)(i) of the Act establishes 100 percent Federal financial participation (FFP) to States for providing incentive payments to eligible Medicaid providers (described in section 1903(t)(2) of the Act) to adopt, implement, upgrade and meaningfully use CEHRT.
In this final rule, we are adopting final policies based on proposals in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515 through 20544) to continue advancement of CEHRT utilization, focusing on burden reduction, interoperability and patient access to their health information.
For the reasons discussed in section VIII.D.4. of the preamble of this final rule, we are finalizing an EHR reporting period of a minimum of any continuous 90-day period in CY 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency.
For the reasons discussed in sections VIII.D.5. and VIII.D.6. of the preamble of this final rule, we are finalizing with modification the proposed performance-based scoring methodology, which consists of a smaller set of objectives including e-Prescribing, Health Information Exchange, Provider to Patient Exchange and Public Health and Clinical Data Exchange. We are finalizing the Query of PDMP measure as proposed.
We are finalizing the Verify Opioid Treatment Agreement measure as optional in CY 2019 and CY 2020, with the ability to earn 5 bonus points per year. In addition, eligible hospitals and CAHs must earn a minimum total score of 50 points in order to satisfy the requirement to report on the objectives and measures of meaningful use, which is one of the requirements for an eligible hospital or CAH to be considered a meaningful EHR user and earn an incentive payment and/or avoid a Medicare payment reduction.
For the reasons discussed in section VIII.D.6. of the preamble of this final rule, we are finalizing the new measures Query of PDMP, Verify Opioid Treatment Agreement, and Support Electronic Referral Loops by Receiving and Incorporating Health Information. In addition, we are finalizing the removal of the Coordination of Care Through Patient Engagement objective and its associated measures Secure Messaging, View, Download or Transmit, and Patient Generated Health Data as well as the measures Request/Accept Summary of Care, Clinical Information Reconciliation and Patient-Specific Education. Finally, we are renaming measures within the Health Information Exchange objective. These changes include changing the name from Send a Summary of Care to Support Electronic Referral Loops by Sending Health Information and
For reasons discussed in section VIII.D.9. of the preamble of this final rule, we are finalizing the removal of certain CQMs beginning with the reporting period in CY 2020 as well as the CY 2019 reporting requirements as proposed to align the CQM reporting requirements for the Promoting Interoperability Programs with the Hospital IQR Program.
For reasons discussed in sections VIII.D.10. and VIII.D.11. of the preamble of this final rule, we are finalizing the proposed codification of policies for subsection (d) Puerto Rico hospitals and amending our regulations under Parts 412 and 495 such that the provisions that apply to eligible hospitals would include subsection (d) Puerto Rico hospitals unless otherwise indicated.
For reasons discussed in section VIII.D.12. of the preamble of this final rule, we are finalizing the $500,000 prior approval threshold for contracts and RFPs by amending §§ 495.324(b)(2) and (3) and 495.324(d). We are also finalizing the deadlines for enhanced FFP under the Medicaid Promoting Interoperability Programs,
We also note that we received many comments that were unrelated to the Promoting Interoperability Programs or otherwise outside the scope of the proposed rule, and we have not responded to these comments in this final rule. These comments included requirements specific to the Merit-based Incentive Payment System (MIPS), regulation pertaining to vendors, information blocking clarification, functionality requirements for application programming interfaces (APIs), the 2015 Edition of CEHRT and issuance of Medicaid incentive payments in CY 2021. We thank all the commenters for their suggestions and feedback on the Promoting Interoperability Programs.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20516), we proposed scoring and measurement policies to move beyond the three stages of meaningful use to a new phase of EHR measurement with an increased focus on interoperability and improving patient access to health information. To better reflect this focus, we have changed the name of the Medicare and Medicaid EHR Incentive Programs to the Promoting Interoperability (PI) Programs, and the new name applies for Medicare fee-for-service, Medicare Advantage, and Medicaid. We believe this change will help highlight the enhanced goals of the program and better contextualize the program changes discussed in the following sections. We also noted that the former name, Medicare and Medicaid EHR Incentive Programs, does not adequately reflect the current status of the programs, as the incentive payments under Medicare generally have ended (with the exception of subsection (d) Puerto Rico hospitals as discussed in section VIII.D.10. of the preambles of the proposed rule and this final rule) and will end under Medicaid in 2021.
Beginning with the EHR reporting period in CY 2019, participants in the Promoting Interoperability Programs are required to use the 2015 Edition of CEHRT pursuant to the definition of CEHRT under § 495.4. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20516 through 20517), we did not propose to change this policy, and we continue to believe it is appropriate to require the use of 2015 Edition CEHRT beginning in CY 2019. In reviewing the state of health information technology, it is clear the 2014 Edition certification criteria are out of date and insufficient for provider needs in the evolving health IT industry. In addition, we indicated it would be beneficial to health IT developers and health care providers to move to more up-to-date standards and functions that better support interoperable exchange of health information and improve clinical workflows.
Eligible hospitals and CAHs will see a reduction in burden through relief from being required to certify to a legacy system, and can use the 2015 Edition to better streamline workflows and utilize more comprehensive functions to meet patient safety goals and improve care coordination across the continuum. Maintaining only one edition of certification requirements would also reduce the burden for health IT developers as well as ONC-authorized testing laboratories and certification bodies because they would no longer have to support two, increasingly distant sets of requirements.
One of the major improvements in the 2015 Edition is the API functionality. API functionality supports health care providers and patient electronic access to health information, contributes to quality improvement, and offers greater interoperability between systems.
The 2015 Edition also includes certification criterion specifying a core set of data that health care providers have noted are critical to interoperable exchange and can be exchanged across a wide variety of other settings and use cases, known as the Common Clinical Data Set (C-CDS) (80 FR 62603). The US Core Data for Interoperability (USCDI) builds off the Common Clinical Data Set definition adopted for the 2015 Edition of certified health IT and referenced in the EHR Incentive Program, for instance as the data which must be included in a summary care record. The USCDI aims to support the goals set forth in the 21st Century Cures Act by specifying a common set of data classes that are required for interoperable exchange and identifying a predictable, transparent, and collaborative process for achieving those goals. The USCDI is referenced by the Draft Trusted Exchange Framework,
We also note that the Provide Patients Electronic Access to Their Health Information measure's technical requirements are updated in the 2015 Edition and support health care providers' interest in providing patients with access to their data in a manner that is helpful to the patient and aligns with the API requirement in the Promoting Interoperability Program. This includes a new function that supports patient access to their health information through email transmission to any third party the patient chooses and through a second encrypted method of transmission.
In working with ONC we were able to estimate the percentage of eligible clinicians, eligible hospitals and CAHs that have 2015 Edition CEHRT available
We continue to recognize there is a burden associated with development and deployment of new technology, but we believe requiring use of the most recent version of CEHRT is important in ensuring health care providers use technology that has improved interoperability features and up-to-date standards to collect relevant patient health information. The 2015 Edition includes key updates to functions and standards that support improved interoperability and clinical effectiveness through the use of health IT.
We received many comments regarding the requirement to use the 2015 Edition of CEHRT beginning in 2019. As we stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20516), we were not proposing to change the requirement. Because the requirement was not a subject of this rulemaking, we are not responding to the comments we received, although we will consider them to inform our future policy making in this subject area.
For the reasons discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20517 through 20518), we proposed that the EHR reporting periods in 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency would be a minimum of any continuous 90-day period within each of the respective calendar years. Eligible professionals (EPs) that attest to a State for the State's Medicaid Promoting Interoperability Program and eligible hospitals and CAHs attesting to CMS or the State's Medicaid Promoting Interoperability Program would attest to meaningful use of CEHRT for an EHR reporting period of a minimum of any continuous 90-day period from January 1, 2019 through December 31, 2019 and from January 1, 2020 through December 31, 2020, respectively.
We proposed corresponding changes to the definition of “EHR reporting period” and “EHR reporting period for a payment adjustment year” at 42 CFR 495.4.
After consideration of the public comments we received, we are finalizing as proposed that the EHR reporting period is a minimum of any continuous 90-day period in CY 2019 and 2020 for new and returning participants in the Promoting Interoperability Programs attesting to CMS or their State Medicaid agency. Eligible professionals, eligible hospitals, and CAHs may select an EHR reporting period of a minimum of any continuous 90-day period in CY 2019 from January 1, 2019 through December 31, 2019 and in CY 2020 from January 1, 2020 through December 31, 2020.
The applicable incentive payment year and payment adjustment years for the EHR reporting period in 2019 and 2020, as well as the deadlines for attestation and other related program requirements, will remain the same as established in prior rulemaking.
We are finalizing as proposed the corresponding changes to the definition of “EHR reporting period” and “EHR reporting period for a payment adjustment year” at 42 CFR 495.4.
As we considered the future direction of EHR reporting for the Promoting Interoperability Program, we considered how to increase the focus of EHR reporting on interoperability and sharing data with patients. We also considered the history of the program stages, as well as the increased flexibility provided by Public Law 115-123, the Bipartisan Budget Act of 2018. We refer readers to section VIII.D.5. of the preamble of the proposed rule for a discussion of the program stages. In light of these considerations, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20518 through 20524), we proposed a new performance-based scoring methodology with fewer measures, which would move away from the threshold-based methodology that we currently use. We stated that we believe this change would provide a more flexible, less burdensome structure, allowing eligible hospitals and CAHs to put their focus back on patients. The introduction of a performance-based scoring methodology would continue to encourage hospitals to push themselves on measures that we continue to hear are most applicable to how they deliver care to patients, instead of increasing thresholds on measures that may not be as applicable to an individual hospital. We stated that our goal is to provide increased flexibility to eligible hospitals and CAHs without compromising the integrity of the Medicare Promoting Interoperability Program and enable them to focus more on patient care and health data exchange through interoperability.
We proposed that the performance-based scoring methodology would apply to eligible hospitals and CAHs that submit an attestation to CMS under the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2019. This would include “Medicare-only” eligible hospitals and CAHs (those that are eligible for an incentive payment under Medicare for meaningful use of CEHRT and/or subject to the Medicare payment reduction for failing to demonstrate meaningful use) as well as “dual-eligible” eligible hospitals and CAHs (those that are eligible for an incentive payment under Medicare for meaningful use of CEHRT and/or subject to the
We did not propose to apply the performance-based scoring methodology to “Medicaid-only” eligible hospitals (those that are only eligible to earn a Medicaid incentive payment for meaningful use of CEHRT, and are not eligible for an incentive payment under Medicare for meaningful use and/or subject to the Medicare payment reduction for failing to demonstrate meaningful use) that submit an attestation to their State Medicaid agency for the Medicaid Promoting Interoperability Program. Instead, as discussed in section VIII.D.7. of the preambles of the proposed rule and this final rule, we proposed to give States the option to adopt the performance-based scoring methodology along with the measure proposals discussed in section VIII.D.6. of the preambles of the proposed rule and this final rule for their Medicaid Promoting Interoperability Programs through their State Medicaid HIT Plans.
To accomplish our goal of a performance-based program that reduces burden while promoting interoperability, and taking into account the feedback from our stakeholders, we outlined a proposal using a performance-based scoring methodology in the proposed rule and the following sections of the preamble of this final rule. We believe the proposal promotes interoperability, helps to maintain a focus on patients, reduces burden and provides greater flexibility. The proposal takes an approach that weighs each measure based on performance, and allows eligible hospitals and CAHs to emphasize measures that are most applicable to their care delivery methods, while putting less emphasis on those measures that may be less applicable.
We stated that if we did not finalize a new scoring methodology, we would maintain the current Stage 3 methodology with the same objectives, measures and requirements, but we would include the two new opioid measures proposed in section VIII.D.6.b. of the preamble of the proposed rule, if finalized. The current structure of the Stage 3 objectives and measures under § 495.24(c) for eligible hospitals and CAHs attesting to CMS requires them to report on six objectives that include 16 measures. This structure requires the eligible hospital or CAH to report on all measures and meet the thresholds for most of the measures or claim an exclusion as part of demonstrating meaningful use to avoid the payment adjustment, or to earn an incentive in the case of subsection (d) Puerto Rico hospitals. A general summary overview of the current objectives, measures, and reporting requirements is included in the table below.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20518 through 20524), we proposed a new scoring methodology to include a combination of new measures, as well as the existing Stage 3 measures of the EHR Incentive Program, broken into a smaller set of four objectives and scored based on performance and participation. We believe this is a significant overhaul of the existing program requirements, which include six objectives, scored on a pass/fail basis. The smaller set of objectives would include e-Prescribing, Health Information Exchange, Provider to Patient Exchange, and Public Health and Clinical Data Exchange. We proposed these objectives to promote specific HHS priorities. We included the e-Prescribing and Health Information Exchange objectives in part to capture what we believe are core goals for the 2015 Edition in line with section 1886(n)(3)(A) of the Act. These core goals promote interoperability between health care providers and health IT systems to support safer, more coordinated care. The Provider to Patient Exchange objective promotes patient awareness and involvement in their health care through the use of APIs, and ensures patients have access to their medical data. Finally, the Public Health and Clinical Data Exchange objective supports the ongoing systematic collection, analysis, and interpretation of data that may be used in the prevention and controlling of disease through the estimation of health status and behavior. The integration of health IT systems into the national network of health data tracking and promotion improves the efficiency, timeliness, and effectiveness of public health surveillance.
Under the proposed scoring methodology, eligible hospitals and CAHs would be required to report certain measures from each of the four objectives, with performance-based scoring occurring at the individual measure-level. Each measure would be scored based on the eligible hospital or CAH's performance for that measure, except for the Public Health and Clinical Data Exchange objective, which requires a yes/no attestation. Each
While this approach maintains some of the same requirements of the EHR Incentive Program, we note that we proposed to reduce the overall number of required measures from 16 to 6. We also note that the measures we proposed to include contribute to the goal of increased interoperability and patient access, and no longer require the burdensome predefined thresholds of the EHR Incentive Program, and thus allow new flexibility for eligible hospitals and CAHs in how they are scored. We stated that we believe this proposal allows eligible hospitals and CAHs to achieve high performance in one area where they excel, in order to offset performance in an area where they may need additional improvement. In this manner, we stated that we believe eligible hospitals and CAHs could still be considered meaningful EHR users while continuing to monitor their progress on each of the measures. This approach also helps further promote interoperability by requiring all measures and thus all forms of interoperability across the three objectives.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20520), we also considered an alternative approach in which scoring would occur at the objective level, instead of the individual measure level, and eligible hospitals or CAHs would be required to report on only one measure from each objective to earn a score for that objective. Under this scoring methodology, instead of six required measures, the eligible hospital or CAH's total Promoting Interoperability score would be based on only four measures, one measure from each objective. Each objective would be weighted similarly to how the objectives are weighted in our proposed methodology, and bonus points would be awarded for reporting any additional measures beyond the required four. In the proposed rule, we sought public comment on this alternative approach, and whether additional flexibilities should be considered, such as allowing eligible hospitals and CAHs to select which measures to report on within an objective and how those objectives should be weighted, as well as whether additional scoring approaches or methodologies should be considered.
In our proposed scoring methodology, the Electronic Prescribing objective would contain three measures each weighted differently to reflect their potential availability and applicability to the hospital community. In addition to the existing e-Prescribing measure, we proposed to add two new measures to the Electronic Prescribing objective: Query of Prescription Drug Monitoring Program (PDMP) and Verify Opioid Treatment Agreement. For more information about these two proposed measures, we refer readers to section VIII.D.6.b. of the preambles of the proposed rule and this final rule. The e-Prescribing measure would be required for reporting and weighted at 10 points in CY 2019, because we believe it would be applicable to most eligible hospitals and CAHs. In the event that an eligible hospital or CAH meets the criteria and claims the exclusion for the e-Prescribing measure in 2019, the 10 points available for that measure would be redistributed equally among the measures under the Health Information Exchange objective:
• Support Electronic Referral Loops By Sending Health Information Measure (25 points)
• Support Electronic Referral Loops By Receiving and Incorporating Health Information (25 points)
In the proposed rule, we sought public comment on whether this redistribution is appropriate for 2019, or whether the points should be distributed differently.
We stated that the Query of Prescription Drug Monitoring Program (PDMP) and Verify Opioid Treatment Agreement measures would be optional for EHR reporting periods in 2019. These new measures may not be available to all eligible hospitals and CAHs for an EHR reporting period in 2019 as they may not have been fully developed by their health IT vendor, or not fully implemented in time for data capture and reporting. Therefore, we did not propose to require these two new measures in 2019, although eligible hospitals and CAHs may choose to report them and earn up to 5 bonus points for each measure. We proposed to require these measures beginning with the EHR reporting period in 2020, and we sought public comment on this proposal. We note that due to varying State requirements, not all eligible hospitals and CAHs would be able to e-prescribe controlled substances, and thus these measures would not be available to them. For these reasons, we proposed an exclusion for these two measures beginning with the EHR reporting period in 2020. The exclusion would provide that any eligible hospital or CAH that is unable to report the measure in accordance with applicable law would be excluded from reporting the measure, and the 5 points assigned to that measure would be redistributed to the e-Prescribing measure.
As the two new opioid measures become more broadly available in CEHRT, we proposed each of the three measures within the Electronic Prescribing objective would be worth 5 points beginning in 2020. We note that requiring these two measures would add 10 points to the maximum total score as these measures would no longer be eligible for optional bonus points. To maintain a maximum total score of 100 points, beginning with the EHR reporting period in 2020, we proposed to reweight the e-Prescribing measure from 10 points down to 5 points, and reweight the Provide Patients Electronic Access to Their Health Information measure from 40 points down to 35 points as illustrated in the table below. We proposed that if the eligible hospital or CAH qualifies for the e-Prescribing exclusion and is excluded from reporting all three of the measures associated with the Electronic Prescribing objective as described in section VIII.D.6.b. of the preambles of the proposed rule and this final rule, the 15 points for the Electronic Prescribing objective would be redistributed evenly among the two measures associated with the Health Information Exchange objective and the Provide Patients Electronic Access to Their Health Information measure by adding 5 points to each measure.
In the proposed rule, we sought public comment on the proposed distribution of points beginning with the EHR reporting period in 2020, but we did not receive any comments on this proposal.
After consideration of the public comments we received, we are finalizing our proposed scoring for the Electronic Prescribing objective as proposed but with the modifications discussed at the end of this section VIII.D.5. of the preamble of this final rule. The e-Prescribing measure is finalized as proposed, the Query of PDMP measure is finalized as proposed, and the Verify Opioid Treatment Agreement measure is finalized with
For the Health Information Exchange objective, we proposed to change the name of the existing Send a Summary of Care measure to Support Electronic Referral Loops by Sending Health Information, and proposed a new measure which combines the functionality of the existing Request/Accept Summary of Care and Clinical Information Reconciliation measures into a new measure, Support Electronic Referral Loops by Receiving and Incorporating Health Information. For more information about the proposed measure and measure changes, we refer readers to section VIII.D.6.c. of the preambles of the proposed rule and this final rule. Eligible hospitals and CAHs would be required to report both of these measures, each worth 20 points toward their total Promoting Interoperability score. These measures are weighted heavily to emphasize the importance of sharing health information through interoperable exchange in an effort to promote care coordination and better patient outcomes. Similar to the two new measures in the Electronic Prescribing objective, the new Support Electronic Referral Loops by Receiving and Incorporating Health Information measure may not be available to all eligible hospitals and CAHs as it may not have been fully developed by their health IT vendor, or not fully implemented in time for an EHR reporting period in 2019. For these reasons, we proposed an exclusion for the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure; any eligible hospital or CAH that is unable to implement the measure for an EHR reporting period in 2019 would be excluded from having to report this measure.
In the event that an eligible hospital or CAH claims an exclusion for the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure, the 20 points would be redistributed to the Support Electronic Referral Loops by Sending Health Information measure, and that measure would then be worth 40 points. In the proposed rule, we sought public comment on whether this redistribution is appropriate, or whether the points should be redistributed to other measures instead.
We did not receive any comments regarding the redistribution of points if an exclusion is claimed for the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure.
We are finalizing our proposed scoring of the Health Information Exchange objective as proposed. We are finalizing the regulation text for the Health Information Exchange objective and measure scoring at § 495.24(e)(6). In addition, measure specification details can also be found in section VIII.D.6.c. of the preamble of this final rule.
We proposed to weight the one measure in the Provider to Patient Exchange objective, the Provide Patients Electronic Access to Their Health Information measure, at 40 points toward the total Promoting Interoperability score in 2019 and 35 points beginning in 2020. We proposed that this measure would be weighted at 35 points beginning in 2020 to account for the two new opioid measures, which would be worth 5 points each beginning in 2020 as proposed above. We believe this objective and its associated measure get to the core of improved access and exchange of patient data in promoting interoperability and are the crux of the Medicare Promoting Interoperability Program. This exchange of data between health care provider and patient is imperative in order to continue to improve interoperability, data exchange and improved health outcomes. We believe that it is important for patients to have control over their own health information, and through this highly weighted objective, we are aiming to show our dedication to this effort.
After consideration of the comments, we are finalizing with modification the Provider to Patient Exchange objective scoring. The Provide Patients Electronic Access to Their Health Information measure will be worth up to 40 points beginning in CY 2019. We are finalizing the regulation text for this final policy at § 495.24(e)(7). For additional measure information, we refer readers to section VIII.6.d. of the preamble of this final rule.
The measures under the Public Health and Clinical Data Exchange objective are reported using yes/no responses and thus cannot be scored based on performance. We proposed that for this objective, the eligible hospital or CAH would be required to meet this objective in order to receive a score and be considered a meaningful user of EHR. We proposed that the eligible hospital
After consideration of the public comments we received, we are finalizing our proposal for scoring the Public Health and Clinical Data Exchange objective as proposed but with the following modification. Instead of requiring eligible hospitals and CAHs to report the Syndromic Surveillance Reporting measure and one additional measure of their choosing, we will allow them to choose both of the measures that they will report. Eligible hospitals and CAHs must select two of the following measures to report on: Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting, Public Health Registry Reporting, Clinical Data Registry Reporting, and Electronic Reportable Laboratory Result Reporting. As stated in section VIII.6.e. of the preamble of this final rule, we believe the Syndromic Surveillance Reporting measure should not be required as we understand some hospitals and local jurisdictions are not able to send and receive syndromic surveillance files. In addition, allowing eligible hospitals and CAHs to report on any two measures of their choice promotes flexibility in reporting and allows them to focus on the public health measures that are most relevant to them and their patient populations. For additional measure information, we refer readers to section VIII.6.e. of the preamble of this final rule. We are finalizing the regulation text for this policy at § 495.24(e)(8).
We proposed that the Stage 3 objective, Protect Patient Health Information, and its associated measure, Security Risk Analysis, would remain part of the program, but would no longer be scored as part of the objectives and measures, and would not contribute to the hospital's total score for the objectives and measures. To earn any score in the Promoting Interoperability Program, we proposed eligible hospitals and CAHs would have to attest that they completed the actions included in the Security Risk Analysis measure at some point during the calendar year in which the EHR reporting period occurs. We believe the Security Risk Analysis measure involves critical tasks and note that the Health Insurance Portability and Accountability Act (HIPAA) Security Rule requires covered entities to conduct a risk assessment of their health care organization. This risk assessment will help eligible hospitals and CAHs comply with HIPAA's administrative, physical, and technical safeguards.
After consideration of the public comments we received, we are finalizing our proposal to require, as a condition of earning a score in the Promoting Interoperability Program, eligible hospitals and CAHs to attest that they completed the actions included in the Security Risk Analysis measure at some point during the calendar year in which the EHR reporting period occurs. We are finalizing the regulation text for this policy at § 495.24(e)(4).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20522), we stated that, similar to how eligible hospitals and CAHs currently submit data, the eligible hospital or CAH would submit their numerator and denominator data for each performance measure, and a yes/no response for each of the two reported measures under the proposed Public Health and Clinical Data Exchange objective. To earn a score greater than zero, in addition to completing the activities required by the Security Risk Analysis measure, the hospital would submit their complete numerator and denominator or yes/no data for all required measures. The numerator and denominator for each performance measure would then translate to a performance rate for that measure and would be applied to the total possible points for that measure. For example, the e-Prescribing measure is worth 10 points. A numerator of 200 and denominator of 250 would yield a performance rate of (200/250) = 80 percent. This 80 percent would be applied to the 10 total points available for the e-Prescribing measure to determine the performance score. A performance rate of 80 percent for the e-Prescribing measure would equate to a measure score of 8 points (performance rate * total possible measure points = points awarded toward the total Promoting Interoperability score; 80 percent * 10 = 8 points). These calculations and application to the total Promoting Interoperability score, as well as an example of how they would apply are set out in the tables below.
When calculating the performance rates and measure and objective scores, we stated that we would generally round to the nearest whole number. For example, if an eligible hospital or CAH received a score of 8.53 the nearest whole number would be 9. Similarly, if the eligible hospital or CAH received a score of 8.33 the nearest whole number would be 8. In the event that the eligible hospital or CAH receives a performance rate or measure score of less than 0.5, as long as the eligible hospital or CAH reported on at least one patient for a given measure, a score of 1 would be awarded for that measure. We stated that we believe this is the best method for the issues that might arise with the decimal points and is the easiest for computations.
In order to meet statutory requirements and HHS priorities, we stated that the eligible hospital or CAH would need to report on all of the required measures across all objectives in order to earn any score at all. Failure to report the numerator and denominator of any required measure, or reporting a “no” response on a required yes/no response measure, unless an exclusion applies would result in a score of zero.
As stated earlier, an eligible hospital or CAH would need to earn a total Promoting Interoperability score of 50 points or more in order to satisfy the requirement to report on the objectives and measures of meaningful use under § 495.4. Our aim is that every patient has control of and access to their health data, and we believe that the proposed minimum Promoting Interoperability score is consistent with the current goals of the program that focus on interoperability and providing patients access to their health information. Our vision is for every eligible hospital and CAH to perform at 100 percent for all of the objectives and associated measures. However, we understand the constraints that health care providers face in providing care to patients and seek to provide flexibility for hospitals to create their own score using measures that are best suited to their practice. We also believe it is important to be realistic about what can be achieved. This required score may be adjusted over time as eligible hospitals and CAHs adjust to the new focus and scoring methodology of the Medicare Promoting Interoperability Program. We believe that the 50-point minimum Promoting Interoperability score provides the necessary benchmark to encourage progress in interoperability and also allows us to continue to adjust this benchmark as eligible hospitals and CAHs progress in health IT. We believe that this approach allows eligible hospitals and CAHs to achieve high performance in one area to offset performance in an area where a participant may need additional improvement. In the proposed rule, we sought public comment on whether this minimum score is appropriate, or whether a higher or lower minimum score would be better suited for the first year of this new scoring methodology.
After consideration of the public comments we received, we are finalizing that for an eligible hospital or CAH to earn a score greater than zero, in addition to completing the activities required by the Security Risk Analysis measure, the hospital must submit their complete numerator and denominator or yes/no data for all required measures. The numerator and denominator for each performance measure will translate to a performance rate for that measure and will be applied to the total possible points for that measure. In addition, we are finalizing that an eligible hospital or CAH must earn a total Promoting Interoperability score of 50 points or more in order to satisfy the requirement to report on the objectives and measures of meaningful use under § 495.24, which is one of the requirements for an eligible hospital or CAH to be considered a meaningful EHR user under § 495.4. We are finalizing regulatory text at § 495.24(e) to reflect this final policy.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20522), we stated that we believe our proposal increases flexibility and helps to ease the burden on eligible hospitals and CAHs as well as provide additional options for meeting the required objectives. The proposed changes would allow the eligible hospital or CAH to focus on the measures that are more appropriate for the ways in which they deliver care to patients and types of services that they provide and improve on areas in which an eligible hospital or CAH might need some support. We believe that with this new proposed approach we are reducing administrative burden and allowing
In the proposed rule, we sought public comment on whether these measures are weighted appropriately, or whether a different weighting distribution, such as equal distribution across all measures would be better suited to this program and this proposed scoring methodology. We also sought public comment on other scoring methodologies such as the alternative we considered and described earlier in this section.
We also sought public comment on the feasibility of the new scoring methodology in 2019 and whether eligible hospitals and CAHs would be able to implement the new measures and reporting requirements under this performance-based scoring methodology. In addition, we note that in section VIII.D.8. of the preamble of the proposed rule, we sought public comment on how the Promoting Interoperability Program should evolve in future years regarding the future of the new scoring methodology and related aspects of the program.
We proposed to codify the proposed new scoring methodology in a new paragraph (e) under § 495.24. We also proposed to revise the introductory text of § 495.24 and the heading to paragraph (c) of this section to provide that the criteria specified in proposed new paragraph (e) would be applicable for eligible hospitals and CAHs attesting to CMS for 2019 and subsequent years. Further, we proposed to revise the introductory text of § 495.24 and the heading to paragraph (d) of this section to provide that the criteria specified in paragraph (d) would be applicable for eligible hospitals and CAHs attesting to a State for the Medicaid Promoting Interoperability Program for 2019 and subsequent years.
Some commenters supported CMS' alternative approach to scoring in which scoring would occur at the objective level, instead of the individual measure level, and eligible hospitals or CAHs would be required to report on only one measure from each objective to earn a score for that objective.
One commenter disagreed with the scoring methodology of reporting “at least one unique patient” for each proposed measure and recommended that CMS maintain threshold scoring for measures.
We decline to maintain the current threshold based scoring methodology. In changing the scoring methodology to a performance-based, we are allowing hospitals the flexibility to focus on measures that are most applicable to how they delivery care to patients. This flexibility allows eligible hospitals and CAHs the opportunity to push themselves on measures they do well in, while continuing to improve in challenging areas. This provides them the opportunity to reach the minimum total score of 50 points in order to satisfy the requirement to report on the objectives and measures of meaningful use. This is one of the requirements for an eligible hospital or CAH to be considered a meaningful EHR user and earn an incentive payment and/or avoid a Medicare payment reduction.
In addition, we proposed two new opioid measures, which we are finalizing as optional for EHR reporting periods in 2019. We are requiring reporting on the Query of PDMP measure in CY 2020. This will allow additional time for vendors to update EHR systems. The Verify Opioid Treatment Agreement measure will remain as optional in CY 2020. For additional information regarding our rationale we refer readers to section VIII.D.6.b. of the preamble of this final rule. The Support Electronic Referral Loops by Receiving and Incorporating Health information combines the functionality of the existing Request/
As discussed above, after consideration of the comments we received, we are finalizing our proposed performance-based scoring methodology for eligible hospitals and CAHs that submit an attestation to CMS under the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2019, with modifications, as described below.
For additional measure-specific information, we refer readers to section VIII.D.6. of the preamble of this final rule.
We are finalizing that eligible hospitals and CAHs are required to report certain measures from each of the four objectives, with performance-based scoring occurring at the individual measure-level. Each measure is scored based on the eligible hospital or CAH's performance for that measure, except for the measures associated with the Public Health and Clinical Data Exchange objective, which require a yes/no attestation. Each measure will contribute to the eligible hospital or CAH's total Promoting Interoperability score. The scores for each of the individual measures are added together to calculate the total Promoting Interoperability score of up to 100 possible points for each eligible hospital or CAH. A total score of 50 points or more will satisfy the requirement to report on the objectives and measures of meaningful use under § 495.24, which is one of the requirements for an eligible hospital or CAH to be considered a meaningful EHR user under § 495.4 and thus earn an incentive payment and/or avoid a Medicare payment reduction. Eligible hospitals and CAHs scoring below 50 points will not be considered meaningful EHR users.
We are finalizing that for an eligible hospital or CAH to earn a score greater than zero, in addition to completing the actions included in the Security Risk Analysis measure, the hospital must submit their complete numerator and denominator or yes/no data for all required measures. The numerator and denominator for each performance measure will translate to a performance rate for that measure and will be applied to the total possible points for that measure. The eligible hospital or CAH must report on all of the required measures across all of the objectives in order to earn any score at all. Failure to report any required measure, or reporting a “no” response on a yes/no response measure, unless an exclusion applies will result in a score of zero. We are finalizing the regulation text for this final policy is at § 495.24(e).
We are finalizing our proposal that eligible hospitals and CAHs must attest to having completed the actions included in the Security Risk Analysis measure at some point during the calendar year in which the EHR reporting period occurs. The Security Risk Analysis measure is not scored and does not contribute any points to the hospital's total score for the objectives and measures. We are finalizing the regulation text for this final policy is at § 495.24(e)(4).
We are finalizing the Electronic Prescribing objective as proposed with the following modifications. The e-Prescribing measure is worth up to 10 points in CY 2019 and up to 5 points in CY 2020. The Query of Prescription Drug Monitoring Program (PDMP) measure is optional in CY 2019 and worth up to 5 bonus points and is a required measure beginning in CY 2020, worth up to 5 points.
The Verify Opioid Treatment Agreement measure is optional in CY 2019 and 2020, and worth up to five bonus points. We intend to reevaluate the status of the Verify Opioid Treatment Agreement measure for subsequent years in future rulemaking.
An exclusion is available for the e-Prescribing measure as described in section VIII.D.6. of the preamble of this final rule. If an exclusion is claimed for the e-Prescribing measure for CY 2019, the 10 points for the e-Prescribing measure will be redistributed equally among the measures associated with the Health Information Exchange objective. We are finalizing a policy beginning in CY 2020 that an eligible hospital or CAH that qualifies for the e-Prescribing measure exclusion is also excluded from reporting on the Query of PDMP measure.
In addition, separate exclusion criteria are available for the Query of PDMP measure beginning in CY 2020 as described in section VIII.D.6. of the preamble of this final rule. If an exclusion is claimed for the Query of PDMP measure in CY 2020, the points will be equally redistributed among the measures associated with the Health Information Exchange objective. Since the Verify Opioid Treatment Agreement measure is optional and eligible for bonus points, no exclusions are available. We are finalizing our proposal with modification and finalizing § 495.24(e)(5) of the regulation text to reflect this policy.
We are finalizing the Health Information Exchange objective as proposed. The Support Electronic Referral Loops by Sending Health Information measure is worth up to 20 points. There are no exclusions available for the measure. The new measure, Support Electronic Referral Loops by Receiving and Incorporating Health Information, is worth up to 20 points. An exclusion is available for this measure in CY 2019, as described in section VIII.D.6. of the preamble of this final rule. If the exclusion is claimed, the 20 points would be redistributed to the other measure within this objective, the Support Electronic Referral Loops by Sending Health Information measure, which would be worth up to 40 points. We are finalizing the regulation text for this final policy is at § 495.24(e)(6).
We are finalizing the Provider to Patient Exchange objective with modifications. The Provide Patients Electronic Access to Their Health Information measure is worth up to 40 points beginning with the EHR reporting period in CY 2019. No exclusions are available for this measure. We are finalizing the regulation text for this final policy is § 495.24(e)(7).
We are finalizing the Public Health and Clinical Data Exchange objective as proposed with the following modifications. Eligible hospitals and CAHs must submit a yes/no response for any two measures associated with the Public Health and Clinical Data Exchange objective to earn 10 points for the objective. Failure to report on two measures or submitting a “no” response for a measure will earn a score of zero. Exclusions available for this objective are discussed in section VII.6.e. of the preamble of this final rule. If an exclusion is claimed for one measure, but the eligible hospital or CAH submits a “yes” response for another measure, they would earn the 10 points for the Public Health and Clinical Data Exchange objective. If an eligible hospital or CAH claims exclusions for both measures they select to report on, the 10 points would be redistributed to the Provide Patients Electronic Access to Their Health Information measure under the Provider to Patient Exchange objective. We are finalizing the regulation text for this policy at § 495.24(e)(8).
The tables below reflects the final policy for the objectives, measures, and maximum points available for the EHR reporting periods in CY 2019 and CY 2020. Please note, the maximum points available do not include points that would be redistributed in the event that an exclusion is claimed:
We are finalizing the codification of the scoring methodology in new paragraph (e) under § 495.24. We are finalizing the revisions to the introductory text of § 495.24 and the heading to paragraph (c) of this section to provide that the criteria specified in the new paragraph (e) are applicable for eligible hospitals and CAHs attesting to CMS for CY 2019 and subsequent years. Further, we are finalizing the revisions to the introductory text of § 495.24 and the heading to paragraph (d) of this section to provide that the criteria specified in paragraph (d) are applicable for eligible hospitals and CAHs attesting to a State for the Medicaid Promoting Interoperability Program for 2019 and subsequent years.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20524 through 20537), we proposed a number of changes to the Stage 3 objectives and measures in connection with the proposed scoring methodology for
We proposed three new measures: Query of PDMP; Verify Opioid Treatment Agreement; and Support Electronic Referral Loops by Receiving and Incorporating Health Information.
We proposed to remove the Coordination of Care Through Patient Engagement objective and its three associated measures (Secure Messaging; View, Download or Transmit; and Patient Generated Health Data), as well as the measures Request/Accept Summary of Care, Clinical Information Reconciliation, and Patient-Specific Education.
Finally, we proposed to rename the Send a Summary of Care measure to Support Electronic Referral Loops by Sending Health Information; rename the Public Health and Clinical Data Registry Reporting objective to Public Health and Clinical Data Exchange; rename the Patient Electronic Access to Health Information objective to Provider to Patient Exchange; and rename the Provide Patient Access measure to Provide Patients Electronic Access to Their Health Information.
We proposed to remove the exclusion criteria from all of the Stage 3 measures we are retaining, except for the measures associated with the Electronic Prescribing objective, Public Health and Clinical Data Exchange objective, and the new measures (Query of PDMP, Verify Opioid Treatment Agreement, and Support Electronic Referral Loops by Receiving and Incorporating Health Information), which would include exclusion criteria.
We proposed the changes as certain measures have proven burdensome to health care providers in ways that were unintended and detract from health care providers' progress on current program priorities, align with broader HHS priorities and/or focus on program priorities related to increasing interoperability, exchange of health care information, patient access to their health information and advanced functions of CEHRT.
We indicated in the proposed rule that the measures would no longer need to be attested to if we finalize the proposal to remove them, although health care providers may still continue to use the standards and functions of those measures based on their preferences and practice needs.
In addition, we sought public comment on a potential new measure Health Information Exchange Across the Care Continuum under the Health Information Exchange objective in which an eligible hospital or CAH would send an electronic summary of care record, or receive and incorporate an electronic summary of care record, for transitions of care and referrals with a provider of care other than an eligible hospital or CAH including but not limited to long term care facilities, and postacute care providers such as skilled nursing facilities, home health, and behavioral health settings.
We proposed that all of these measure proposals would apply to eligible hospitals and CAHs that submit an attestation to CMS under the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2019, including Medicare-only and dual-eligible eligible hospitals and CAHs. We did not propose to apply these measure proposals to Medicaid-only eligible hospitals that submit an attestation to their State Medicaid agency for the Medicaid Promoting Interoperability Program. Instead, as discussed in section VIII.D.7. of the preambles of the proposed rule and this final rule, we proposed to give States the option to adopt these measure proposals along with the proposed performance-based scoring methodology for the Medicaid Promoting Interoperability Program through their State Medicaid HIT Plans.
We proposed that if we did not finalize a new scoring methodology, we would maintain the current Stage 3 methodology with the same objectives, measures and requirements, but we would include the two new opioid measures, if they are finalized. In addition, we proposed if we did not finalize a new scoring methodology, the proposals to remove objectives and measures as well as proposals to change objective and measure names would no longer be applicable.
After consideration of the public comments we received, we are finalizing the changes to the objectives, measures, and exclusion criteria as proposed for eligible hospitals and CAHs that submit an attestation to CMS under the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2019, including Medicare-only and dual-eligible eligible hospitals and CAHs, with the modifications described in the sections below.
We are finalizing amendments to the regulation text at § 495.24(e) and § 495.24(c) to reflect these final policies.
The table below provides a summary of the measures we are finalizing in this final rule.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20526 through 20530), we proposed to add two new measures to the Electronic Prescribing objective under § 495.24(e)(5)(iii) that are based on electronic prescribing for controlled substances (EPCS): Query of PDMP, and Verify Opioid Treatment Agreement, which align with the broader HHS efforts to increase the use of PDMPs to reduce inappropriate prescriptions, improve patient outcomes and promote more informed prescribing practices. We refer readers to the proposed rule for a detailed discussion of the rationale for these proposals. These measures build upon the meaningful use of CEHRT as well as the security of electronic prescribing of Schedule II controlled substances while preventing diversion. For both measures, we proposed to define opioids as Schedule II controlled substances under 21 CFR 1308.12, as they are recognized as having a high potential for abuse with potential for severe psychological or physical dependence. We also proposed to apply the same policies for the existing e-Prescribing measure under § 495.24(e)(5)(iii) to both the Query of PDMP and Verify Opioid Treatment Agreement measures, including the requirement to use CEHRT as the sole means of creating the prescription and for transmission to the pharmacy. Eligible hospitals and CAHs have the option to include or exclude controlled substances in the e-Prescribing measure denominator as long as they are treated uniformly across patients and all available schedules and in accordance with applicable law (80 FR 62834; 81 FR 77227). However, we indicated because the intent of these two new measures is to improve prescribing practices for controlled substances, eligible hospitals and CAHs would have to include Schedule II opioid prescriptions in the numerator and denominator of the Query of PDMP and Verify Opioid Treatment Agreement measures or claim the applicable exclusion.
In addition, we stated if we finalized the new scoring methodology proposed in the proposed rule, eligible hospitals and CAHs that claim the broader exclusion under the e-Prescribing measure would automatically receive an exclusion for all three of the measures under the Electronic Prescribing objective; they would not have to also claim exclusions for the other two measures—Query of PDMP and Verify Opioid Treatment Agreement.
However, we stated if we did not finalize the new scoring methodology we proposed in the proposed rule, but we finalized the proposed measures of Query of Prescription Drug Monitoring Program and Verify Opioid Treatment Agreement under the Electronic Prescribing objective, we would continue to apply the Stage 3 requirements finalized in previous rulemaking, and we proposed that eligible hospitals and CAHs would be required to report all three measures under the Electronic Prescribing objective, but would only be required to meet the threshold for the e-Prescribing measure, or claim an exclusion. In addition, if the new scoring methodology we proposed was not finalized, we would retain the existing e-Prescribing measure threshold of 25 percent under § 495.24(c)(2)(ii).
In addition to comments specific to each proposed measure, we received general public comments on both these proposals, which we summarize below.
We are finalizing the Query of PDMP measure as proposed. As stated above, we anticipate that integration of PDMPs into certified EHR technology will become more widespread increasing efficiency with health care provider workflows. We believe that requiring the Query of PDMP measure beginning in CY 2020 promotes specific HHS priorities. These priorities include encouraging the increased use of PDMPs to reduce prescription drug abuse and diversion, improving patient outcomes and allowing for more informed prescribing practices. Therefore, we are finalizing this measure as proposed.
Under the final policy we are adopting, the Verify Opioid Treatment Agreement measure will be optional for both CYs 2019 and 2020 with bonus point scoring as finalized in section VIII.D.5. of the preamble of this final rule. We plan to re-evaluate the status of the Verify Opioid Treatment Agreement measure for an EHR reporting period beginning in CY 2021.
We also believe that extending the optional reporting status into CY 2020 for the Verify Opioid Treatment Agreement measure will give health care providers the additional time required to research and implement methods for verification of such agreements in practice and development of system changes and clinical workflows. We also believe the extension of the optional reporting status will provide additional time for CMS and ONC to review and assess findings from pilot studies as described in the proposed rule (83 FR 20529). We will also consider additional feedback from stakeholders and consider further advancement in developing standards. We further discuss the rationale in section VIII.D.6. of the preamble of this final rule.
For the Query of PDMP measure, in the proposed rule (83 FR 20528), we proposed that in order to meet the measure, eligible hospitals and CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(3) and 170.315(a)(10)(ii), therefore, certification and standards criteria would be associated with this measure. We stated in the proposed rule that there were no current exact certification and standards criteria available for querying a PDMP but believe the use of structured data in CEHRT could support querying through broader use of health IT (83 FR 20528). As previously stated, health care providers would have the flexibility to query the PDMP in any manner allowed as legal and practicable under their State law (83 FR 20527) which we believe provides more flexibility for health care providers to successfully demonstrate meaningful use and be able to report on this measure beginning in CY 2020.
In the proposed rule (83 FR 20530), we proposed that in order to meet the Verify Opioid Treatment Agreement measure eligible hospitals and CAHs must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(3), 170.315(a)(10) and 170.205(b)(2), however, there are no current exact standards for identification or exchange of treatment agreements. As we noted in the proposed rule (83 FR 20529 through 20530), there are a variety of standards available within CEHRT that may be able to support the electronic exchange of opioid abuse related treatment data such as the Consolidated Clinical Document Architecture (C-CDA) care plan template.
For these reasons, we are finalizing the Query of PDMP as proposed and the Verify Opioid Treatment Agreement measure as optional for CYs 2019 and CY 2020. For more information, we refer readers to the discussion in section VIII.D.6. of the preamble of this final rule. In addition, we intend to propose specific certification criteria and standards in separate future rulemaking for the Query of PDMP and the Verify Opioid Treatment Agreement measures.
We are finalizing the definition of opioids as Schedule II controlled substances under 21 CFR 1308.12 as proposed.
We are finalizing the proposal to apply the same policies for the existing e-Prescribing measure under § 495.24(e)(5)(iii) to the Query of PDMP measure and Verify Opioid Treatment Agreement measure, including the requirement to use CEHRT as the sole means of creating the prescription and for transmission to the pharmacy, except that unlike the e-Prescribing measure, eligible hospitals and CAHs must include Schedule II opioid prescriptions in the numerator and denominator of the Query of PDMP and Verify Opioid Treatment Agreement measures if they choose to report on them.
In addition, we are finalizing that an eligible hospital or CAH that qualifies for the e-Prescribing measure exclusion is excluded from reporting on the Query of PDMP measure beginning in CY 2020.
A PDMP is an electronic database that tracks prescriptions of controlled substances at the State level and play an important role in patient safety by assisting in the identification of patients who have multiple prescriptions for controlled substances or may be misusing or overusing them. Querying the PDMP is important for tracking the prescribed controlled substances and improving prescribing practices. The intent of the Query of PDMP measure is to build upon the current PDMP initiatives from Federal partners focusing on prescriptions generated and dispensing of opioids.
We proposed that the query of the PDMP for prescription drug history
We proposed to include in this measure all permissible prescriptions and dispensing of Schedule II opioids regardless of the amount prescribed during an encounter and that multiple Schedule II opioid prescriptions prescribed on the same date by the same eligible hospital or CAH would not require multiple queries of the PDMP. In the proposed rule, we requested comment on whether we should further refine the measure to limit queries of the PDMP to once during a hospital stay regardless of whether multiple eligible medications are prescribed during this time.
CMS and ONC worked together to define the following:
We proposed that the exclusion criteria would be limited to prescriptions of controlled substances as the measure action is specific to prescriptions of Schedule II opioids only and does not include any other types of electronic prescriptions.
We stated that if we finalized the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, an additional exclusion would be available beginning in 2020 for eligible hospitals and CAHs that could not report on this measure in accordance with applicable law.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20528), we stated that we understood PDMP integration is not currently in widespread use for CEHRT, and many eligible hospitals and CAHs may require additional time and workflow changes at the point of care before they can meet this measure without experiencing significant burden and that manual data entry and manual calculation of the measure may be necessary. We also acknowledged that there are no existing certification criteria for the query of a PDMP but we believed the use of structured data captured in the CEHRT, could support querying a PDMP through the broader use of health IT. In the proposed rule, we sought public comment on whether ONC should consider adopting standards and certification criteria to support the query of a PDMP, and if such criteria were to be adopted, on what timeline should CMS require their use to meet this measure.
We sought public comment especially from health care providers and health IT developers on whether they believe use of the NCPDP SCRIPT 2017071 standard for e-prescribing could support eligible hospitals and CAHs seeking to report on this measure, and whether HHS should encourage use of this standard through separate rulemaking.
In the proposed rule, we sought public comment on the challenges associated with querying the PDMP with and without CEHRT integration and whether this proposed measure should require certain standards, methods or functionalities to minimize burden.
In including EPCS as a component of the measure we proposed, we acknowledged and sought input on perceived and real technological barriers as part of its effective implementation including but not limited to input on two-factor authentication and on the effective and appropriate uses of technology, including the use of telehealth modalities to support established patient provider relationships subsequent to in-person visit(s) and for prescribing purposes.
In the proposed rule, we also requested comment on limiting the exclusion criteria to electronic prescription for controlled substances and whether there are circumstances which may justify any additional exclusions for the Query of PDMP measure and what those circumstances might be.
We noted that under the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, measures would not have required thresholds for reporting. Therefore, if the proposed scoring methodology and this measure were finalized, this measure would not have a reporting threshold. We proposed a threshold of at least one prescription for this measure if we did not finalize the proposed scoring methodology as varying State laws related to integration of a PDMP into CEHRT can lead to differing standards for querying.
We also proposed that in order to meet this measure, an eligible hospital or CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(3) and 170.315(a)(10)(ii).
We proposed to codify the Query of PDMP measure at § 495.24(e)(5)(iii)(B).
One commenter indicated that standards should include PDMP onboarding, interstate access agreements, improved access to PDMPs via national brokers, support for patient and user ID matching between CEHRT and PDMPs. One commenter stated that
Our goal on burden reduction also includes consideration of costs associated with meeting the Promoting Interoperability Programs requirements. We will continue to listen to stakeholders on concerns related to costs and work to mitigate burdens whenever practicable within our programs' responsibilities and authorities.
In addition, 45 CFR 170.315(a)(10)(ii) drug formulary checks are most useful when performed in combination with e-prescribing which could increase the efficiency and safety of care and lower costs. We believe that the use of capabilities and standards at 45 CFR 170.315(b)(3) for electronic prescribing for Query of PDMP, which include the ability of the user to reconcile a patient's active medication list, medication allergy list, and problem list, are key to system interoperability. This reconciliation will allow for the seamless flow of medication history data between disparate systems to help prescribers and pharmacists improve patient outcomes. As noted in the proposed rule and elsewhere in this final rule, given the variance in State level requirements and actions used to perform the query, health care providers have flexibility to satisfy this measure by querying the PDMP in any manner legal and practicable in their State.
We decline to finalize exclusion criteria for eligible hospitals and CAHs whose States do not allow for direct integration through an API. We believe that finalization of exclusion criteria such as this would enable a significant number of health care providers to avoid reporting on the measure, even though they would have the ability to query a PDMP through other means. In addition, we believe that although additional time and workflow changes may be necessary in order for health care providers to meet the measure, it is still possible without direct integration as long as it is conducted using CERHT in accordance with applicable State law.
We agree that the ability to automate real-time clinical decision support informed by a patient's complete prescription drug history would be helpful to providers. We believe that as the measure is more widely implemented, and concurrently as advanced CDS functionalities become more widely available to providers via their CEHRT, both are vital to successfully combating the opioid crisis. To that end, we will continue to work across HHS and with our stakeholders to develop the necessary standards and complementary resources that will support such use. This will include further development of technical interoperability standards and may include revisions to this measure in future rulemaking.
In addition, next year we intend to propose in rulemaking that EHR-integrated PDMP querying would be required beginning in CY 2020 as part of this measure. In connection with that proposed requirement, we also intend to propose an additional exclusion for providers in States where integration with a Statewide PDMP is not yet feasible or not yet widely available. This exclusion would require confirmation from the State acknowledging that PDMP integration of EHRs is not yet in place. We will seek comment and suggestions in future rulemaking to ascertain if additional exclusions are needed for eligible hospitals or CAHs located in one of the States where PDMPs are not integrated into EHRs. We understand the lack of certification criteria and standards that are currently available as it relates to the Query of PDMP measure, but believe that this measure is essential to ensuring that we are working to combat the opioid crisis. We will continue to collaborate with our Federal partners to advance the capabilities, standards and
After consideration of the public comments we received, we are finalizing the Query of PDMP measure as proposed.
We are finalizing that in order to meet this measure, an eligible hospital or CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(3) and 170.315(a)(10)(ii).
We are codifying the Query of PDMP measure at § 495.24(e)(5)(iii)(B).
We are adopting the measure as follows:
Any eligible hospital and CAH that could not report on this measure in accordance with applicable law.
The intent of this measure is for eligible hospitals and CAHs to identify whether there is an existing opioid treatment agreement when they electronically prescribe a Schedule II opioid using CEHRT if the total duration of the patient's Schedule II opioid prescriptions is at least 30 cumulative days. We believe seeking to identify an opioid treatment agreement will further efforts to coordinate care between health care providers and foster a more informed review of patient therapy.
In the proposed rule (83 FR 20529), we stated that we understood there are varied opinions regarding opioid treatment agreements amongst health care providers. Because of the debate among practitioners, we requested comment on the challenges this proposed measure may create for health care providers, how those challenges might be mitigated, and whether this measure should be included as part of the Promoting Interoperability Program. We also acknowledged challenges related to prescribing practices and multiple State laws, which may present barriers to the uniform implementation of this proposed measure. In the proposed rule, we sought public comment on the challenges and concerns associated with opioid treatment agreements and how they could impact the feasibility of the proposal.
We proposed this measure would include all Schedule II opioids prescribed for a patient electronically using CEHRT by the eligible hospital or CAH during the EHR reporting period, as well as any Schedule II opioid prescriptions identified in the patient's medication history request and response transactions during a 6 month look-back period, where the total number of days for which a Schedule II opioid was prescribed for the patient is at least 30 days.
In the proposed rule, we acknowledged in part, that completing the Verify Opioid Treatment Agreement measure might prove burdensome to health care providers as it could be difficult to identify an existing treatment agreement. Attempting to identify whether there is a treatment agreement in place would likely require additional time and changes to existing workflows. In the proposed rule, we sought public comment on pathways to facilitate the identification and exchange of treatment agreements and opioid abuse treatment planning.
We proposed that the 6-month look-back period would begin on the date on which the eligible hospital or CAH electronically transmits its Schedule II opioid prescription using CEHRT.
We proposed a 6-month look-back period in order to identify more egregious cases of potential overutilization of opioids and to cover timeframes for use outside the EHR reporting period. We proposed that the 6-month look-back period would utilize at a minimum the industry standard NCDCP SCRIPT v10.6 medication history request and response transactions codified at 45 CFR 170.205(b)(2).
In the proposed rule, we did not propose to define an opioid treatment agreement as a standardized electronic document; nor did we propose to define the data elements, content structure, or clinical purpose for a specific document to be considered a “treatment agreement.” We sought public comment on what characteristics should be included in an opioid treatment agreement and incorporated into CEHRT, such as clinical data, information about the patient's care team, and patient goals and objectives, as well as which functionalities could be utilized to accomplish the incorporation of this information. In the proposed rule, we also sought public comment on methods or processes for incorporation of the treatment agreement into CEHRT, including which functionalities could be utilized to accomplish this. We sought public comment on whether there are specific data elements that are currently standardized that should be incorporated via reconciliation and if the “patient health data capture” functionality could be used to incorporate a treatment plan that is not a structured document with structured data elements.
We proposed that the exclusion criteria would be limited to prescriptions of controlled substances as the measure action is specific to electronic prescriptions of Schedule II opioids only and does not include any other types of electronic prescriptions and that an additional exclusion would be available beginning in 2020 for eligible hospitals and CAHs that could not report on this measure in accordance with applicable law under the proposed scoring methodology in the proposed rule. We requested public comment on limiting the exclusion criteria to electronic prescriptions for controlled substances and whether there are circumstances which may require an additional exclusion for the Verify Opioid Treatment Agreement measure and what those circumstances might be.
We stated in the proposed rule that if the proposed scoring methodology and measure were finalized, this measure would not have a reporting threshold. We also proposed that if we did not finalize the proposed scoring methodology, but we finalized this proposed measure, that there would be a threshold of at least one unique patient for this new measure. We also noted there are medical diagnoses and conditions that could necessitate prescribing Schedule II opioids for a cumulative period of more than 30 days.
We also proposed that, in order to meet this measure, an eligible hospital or CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(3), 170.315(a)(10) and 170.205(b)(2).
Lastly, we requested comment on whether we should explore adoption of a measure focused only on the number of Schedule II opioids prescribed and the successful use of EPCS for permissible prescriptions electronically prescribed. We sought public comment about the feasibility of such a measure, and whether stakeholders believe this would help to encourage broader adoption of EPCS.
We proposed to codify the Verify Opioid Treatment Agreement measure at § 495.24(e)(5)(iii)(C).
However, we also have considered the lack of standards and agreement on the effectiveness of opioid treatment agreements. Therefore, we are finalizing the Verify Opioid Treatment Agreement measure as optional for 2019 and 2020. We will reevaluate the status of the measure for an EHR reporting period beginning in CY 2021.
In addition, a few commenters were concerned that finalization of this measure may result in unintended negative consequences such as a decline of pain management therapies and treatment for patients who are post-surgical or recovering from acute illnesses, reluctance of patients to seek treatment or health care related to pain or reluctance on part of health care providers to prescribe short term opioids when appropriate.
Another commenter stated there are no current standards for exchange of opioid treatment agreements, they are not usually based on clinical information, and are primarily provider requested. One commenter stated there is no evidence that opioid treatment agreements improve patient outcomes. One commenter stated opioid treatment agreements are more commonly used by outpatient programs where use of CEHRT is limited.
As noted in the proposed rule (83 FR 20529), there are a number of ways certified health IT may be able to support the electronic exchange of opioid abuse related treatment data, such as use of the C-CDA care plan template that is currently optional in CEHRT. This template contains information on health concerns, goals, interventions, health status evaluation & outcomes sections that could support the development of an opioid treatment agreement. In addition, the “patient health data capture” functionality which is part of the 2015 Edition (45 CFR 170.315(e)(3)) could be used to incorporate a treatment plan that is not a structured document with structured data elements.
We disagree that this measure will result in unintended consequences, such as the decline of pain management therapies. As we discussed in the proposed rule (83 FR 20530), we are only including patients where the total duration of the patient's Schedule II opioid prescriptions is at least 30 cumulative days within a 6-month look-back period. We also believe this measure could encourage discussion and additional treatment options between health care providers and patients. In addition, this measure would help to rule out issues related to pain management therapies for certain post-surgical patients and those recovering from acute illnesses. We also understand that certain medical conditions and diagnoses could necessitate prescribing for over 30 days, including some terminal illnesses, recovery from some surgeries or their underlying conditions, and other diagnoses that cause pain requiring alleviation by opioids. It is not our intention to be a barrier to the most effective and clinically appropriate pain alleviating therapies available to patients in need, or to impose an undue burden on health care providers. Our goal is to work on improving patient outcomes and we do believe that this measure has merits, as the opioid treatment agreement can be an integral part of clinically effective, patient-empowering pain management plans developed and implemented in the course of shared decision-making by a clinical team and a patient with serious, chronic pain.
Opioid treatment agreements may be more commonly used by outpatient
Finally, we reiterate that this measure will be optional for hospitals in 2019 and 2020. We acknowledge many providers may not find this measure applicable for their setting, and believe it is most likely to be adopted by those providers already engaged in treatment scenarios where the verification of an Opioid Treatment Agreement would be beneficial, such as providers offering treatment for substance use disorders, or providers closely integrated with behavioral health treatment facilities.
One commenter disagreed with use of medication history transaction for the measure denominator as this does not support the concept of prescription days but uses a duration, which has no start or stop date.
Moreover, as we discuss in more detail in reference to the preceding comment, we do not believe that confirming an opioid treatment agreement is inconsistent with sound clinical practices for developing and implementing holistic, patient-centered pain management plans for patients affected by conditions causing pain for which opioid treatment for more than 30 days is a clinically appropriate component of an effective overall treatment approach.
We decline to the modify the denominator for this measure as we indicated that we are seeking the cumulative days for an opioid prescription over a 6 month look back period to identify egregious cases (83 FR 20529). We understand that each prescription would include a quantity based on the number of doses allowed. However, the intent is to also look at prescriptions from other health care providers as well for episodes of prescription shopping. As we indicated in the proposed rule (83 FR 20529), the 6 month look back would begin on the date in which the eligible hospital or CAH electronically transmits its Schedule II Opioid prescription using CEHRT.
We also recognize that a provider's attempt to verify whether a treatment agreement is in place may be difficult to capture in an automated fashion in cases where a machine readable treatment agreement cannot be queried. While we believe some providers do currently have the ability to query for an electronic treatment agreement, which could support machine capture of this data, we recognize that for most health care providers this will require additional workflow steps.
As a result of these issues, we are also finalizing this measure as optional for CYs 2019 and 2020, and expect this measure is likely to be adopted by a limited set of providers in treatment arrangements that already possess the infrastructure to support capture and calculation of this measure. We intend to revisit this measure along with the necessary data elements in future rulemaking.
One commenter stated the patient's medical history is not clearly laid out in external prescription history and may require manual calculation with no system ability to determine if users are identifying applicable patients or not.
Moreover, as the clinical practice this measure tracks is more widely adopted, we believe health care providers and their health IT vendors will develop innovative solutions to accurately capture needed data elements and calculate the measure while reducing workflow complexity and inconvenience to prescribers and other personnel involved in the care and/or measurement process. Therefore, we are taking into account these limitations and are finalizing this measure as optional for CYs 2019 and 2020 and will reevaluate the status of the measure for an EHR reporting period beginning in CY 2021.
After consideration of the comments we received, and for the reasons stated above, we are finalizing the Verify Opioid Treatment Agreement measure as proposed with the modification discussed in section VIII.D.6. of the preamble of this final rule, that the measure will be optional in CYs 2019 and 2020. We are codifying the measure at § 495.24(e)(5)(iii)(C). In addition, we are finalizing that, in order to meet this measure, an eligible hospital or CAH
We are adopting the measure as follows:
The Health Information Exchange measures for eligible hospitals and CAHs hold particular importance because of the role they play within the care continuum. In addition, these measures encourage and leverage interoperability on a broader scale and promote health IT-based care coordination. However, through our review of existing measures, we determined that we could potentially improve the measures to further reduce burden and better focus the measures on interoperability in provider to provider exchange. Such modifications would address a number of concerns raised by stakeholders including:
• Supporting the implementation of effective health IT supported workflows based on a specific organization's needs;
• Reducing complexity and burden associated with the manual tracking of workflows to support health IT measures; and
• Emphasizing within these measures the importance of using health IT to support closing the referral loop to improve care coordination.
The Health Information Exchange objective currently includes three measures under § 495.24(c)(7)(ii) (in the proposed rule (83 FR 20530) we inadvertently referred to § 495.24(e)(6)(ii)), and we believe we can potentially improve each to streamline measurement, remove redundancy, reduce complexity and burden, and address stakeholders' concerns about the focus and impact of the measures on the interoperable use of health IT.
As discussed in section VIII.D.6.a. of the preamble of the proposed rule, we proposed to remove the exclusions from all three of the measures associated with the Health Information Exchange objective under § 495.24(c)(7)(iii), as reflected in the two measures proposed under § 495.24(e)(6). However, we stated that if we finalized the new scoring methodology we proposed, eligible hospitals and CAHs would be able to claim an exclusion under the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure.
We proposed several changes to the current measures under the Stage 3 Health Information Exchange objective. First, we proposed to change the name of Send a Summary of Care measure to Support Electronic Referral Loops by Sending Health Information. We also proposed to remove the current Stage 3 Clinical Information Reconciliation measure and combine it with the Request/Accept Summary of Care measure to create a new measure, Support Electronic Referral Loops by Receiving and Incorporating Health Information. This proposed new measure would include actions from both the current Request/Accept Summary of Care measure and Clinical Information Reconciliation measure and focus on the exchange of the health care information while reducing the administrative burden of reporting on two separate measures.
We stated that if we did not finalize the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, we would maintain the current Health Information Exchange objective, associated measures and exclusions under § 495.24(c)(7) as described in section VIII.D.5. of the preamble of the proposed rule and as outlined in the table in that section which describes Stage 3 objectives and measures if new scoring methodology is not finalized.
We disagree the measure name will create undue confusion with the HIPAA electronic transaction as both fall under separate programs and are associated with differing actions.
One commenter stated that since other document types/templates for the 2015 Edition are not required, availability and delivery within the suggested timeframe for implementation of the 2015 Edition may be unlikely; therefore, healthcare providers should not be limited to the three document types as part of the 2015 Edition.
At a minimum, all CEHRT will be able to support exchange of those three document types therefore, testing should not be necessary. However, that does not preclude developers of CEHRT in supporting additional document templates.
While eligible hospitals' and CAHs' CEHRT must be capable of sending the full C-CDA upon request, we believe this additional flexibility will help support clinicians efforts to ensure the information supporting a transition is relevant. We note that in the use of a document template beyond those available in the certification program, the provider would need to work with their developer to determine appropriate technical workflows and implementation.
In the proposed rule (83 FR 20531), we proposed to change the name of the Send a Summary of Care measure at 42 CFR 495.24(c)(7)(ii)(A) to Support Electronic Referral Loops by Sending Health Information at 42 CFR 495.24(e)(6)(ii)(A), to better reflect the emphasis on completing the referral loop and improving care coordination. We proposed to change the measure description only to remove the previously defined threshold from Stage 3, in alignment with our proposed implementation of a performance-based scoring system, to require that the eligible hospital or CAH create a summary of care record using CEHRT and electronically exchange the summary of care record for at least one transition of care or referral.
We stated in the proposed rule that if an eligible hospital or CAH is the recipient of a transition of care or referral, and subsequent to providing care the eligible hospital or CAH transitions or refers the patient back to the referring provider of care, this transition of care should be included in the denominator of the measure for the eligible hospital or CAH.
We proposed that eligible hospitals and CAHs may use any document template within the C-CDA standard for purposes of the measures under the Health Information Exchange objective. While eligible hospitals' and CAHs' CEHRT must be capable of sending the full C-CDA upon request, we believe this additional flexibility will help support efforts to ensure the information supporting a transition is relevant.
For instance, when the eligible hospital or CAH is referring to another health care provider, the recommended document is the “Referral Note,” which is designed to communicate pertinent information from a health care provider who is requesting services of another health care provider of clinical or nonclinical services. When the receiving health care provider sends back the information, the most relevant C-CDA document template may be the “Consultation Note,” which is generated by a request from a clinician for an opinion or advice from another clinician. However, eligible hospitals and CAHs may choose to utilize other documents within the C-CDA to support transitions, for instance the “Discharge Summary” document.
We noted that if the new scoring methodology and measure were finalized, this measure would not have a reporting threshold and if we did not finalize the proposed scoring methodology, we would maintain the current Stage 3 requirements finalized in previous rulemaking. Therefore, eligible hospitals and CAHs would be required report on the Stage 3 Send a Summary of Care measure under the Health Information Exchange objective codified at § 495.24(c)(7)(ii)(A).
After consideration of the public comments we received, we are finalizing the name change of Send a Summary of Care to Support Electronic Referral Loops by Sending Health Information and codifying this measure at 42 CFR 495.24(e)(6)(ii)(A).
We are finalizing that eligible hospitals and CAHs may use any document template within the C-CDA standard for purposes of the measures under the Health Information Exchange objective.
We are adopting the measure description as proposed, in alignment with the scoring methodology in section VIII.D.5. of the preamble of this final rule:
We are finalizing the proposal to remove the exclusion from this measure.
In the proposed rule (83 FR 20531), we proposed to remove the Request/Accept Summary of Care measure at § 495.24(c)(7)(ii)(B) under the proposed § 495.24(e)(6). Our analysis of the existing measure and stakeholder input indicated the measure specification does not effectively identify when health care providers are engaging with other providers of care or care team members to obtain up-to-date patient health information and to subsequently incorporate relevant data into the patient record, resulting in unintended consequences where health care providers implement either:
• A burdensome workflow to document the manual action to request or obtain an electronic record, for example, clicking a check box to document each phone call or similar manual administrative task, or
• A workflow which is limited to only querying internal resources for the existence of an electronic document.
Further, stakeholder feedback highlights the fact that the requirement to incorporate data is insufficiently clear regarding what data must be incorporated.
In addition, as indicated in the proposed rule, stakeholders noted that when approached separately, the incorporate portion of the Request/Accept Summary of Care measure is both inconsistent with and redundant to the Clinical Information Reconciliation measure which causes unnecessary burden and duplicative measure calculation.
Several commenters disagreed with the new Support Electronic Referrals Loops By Receiving and Incorporating Health Information measure as they believed it is too burdensome under one measure and does not align with their current workflows creating a potential for errors.
A few commenters stated this measure would be more complex and difficult to calculate as it includes multiple actions under one measure. One commenter stated there was not enough time allowed for implementation since it is a new measure and requires testing and certification.
For instance, under the prior Request/Accept Summary of Care measure, a provider receiving a transition of care was required to obtain the patient's record (if not already received via a Direct message), through querying for the record or a manual request (such as a phone call). Once received, the provider was then required to “incorporate” this information into the patient's record. Each individual action in this process, from querying and requesting to incorporating, had to be tracked for each individual use case in order to calculate the measure. Under the Clinical Information Reconciliation measure, the provider was required to review a record received electronically or by other means, or capture information through verbal discussion with the patient, and then use this information to reconcile the medications, medication allergies, and problem list within the record. As with the Request/Accept Summary of Care measure, each of these actions had to be tracked in order to calculate the measure.
The combined measure, Support Electronic Referral Loops by Receiving and Incorporating Health Information, significantly simplifies these actions, specifying that upon receipt of an electronic record, the provider must reconcile information regarding medications, medication allergies, and problem list. Rather than tracking individual actions as required by existing measures, this new measure would instead focus on the result of these actions when an electronic summary of care record is successfully identified, received, and reconciled with the patient record. We believe that moving away from the actions requiring manual or other tracking in the existing measures will reduce burden for providers and developers and more closely align with provider workflows.
In addition, with regard to the commenter's concerns about implementation timing, we are establishing an exclusion to this measure for 2019. We believe that all eligible hospitals and CAHs should be able to perform the actions required by this measure by 2020. We also note that this measure aligns with our goals to have a truly interoperable system which includes the free flow of health information between EHR systems.
After consideration of the public comments we received, we are finalizing the removal of the Request/Accept Summary of Care measure as proposed.
In the proposed rule (83 FR 20532), we proposed to remove the Clinical Information Reconciliation measure at
As discussed in the proposed rule, we believe the Clinical Information Reconciliation measure is redundant in regard to the requirement to “incorporate” electronic summaries of care in light of the requirements of the Request/Accept Summary of Care measure. In addition, the measure is not fully health IT based as the exchange of health care information is not required to complete the measure action and the measure specification is not limited to only the reconciliation of electronic information in health IT supported workflows. In addition, feedback from hospitals, clinicians, and health IT developers indicates that because the measure is not fully based on the use of health IT to meet the measurement requirements, eligible hospitals and CAHs must engage in burdensome tracking of manual workflows.
After consideration of the public comments we received, we are finalizing the removal of the Clinical Information Reconciliation measure as proposed.
In the proposed rule (83 FR 20532 through 20533), we proposed to add the following new measure for inclusion in the Health Information Exchange objective at § 495.24(e)(6)(ii)(B): Support Electronic Referral Loops by Receiving and Incorporating Health Information. This measure would build upon and replace the existing Request/Accept Summary of Care and Clinical Information Reconciliation measures.
We proposed to combine two existing measures, the Request/Accept Summary of Care measure and the Clinical Information Reconciliation measure, in this new Support Electronic Referral Loops by Receiving and Incorporating Health Information measure to focus on the exchange of health care information as the current Clinical Information Reconciliation measure is not reliant on the exchange of health care information nor use of CEHRT to complete the measure action. We did not propose to change the actions associated with the existing measures; rather, we proposed to combine the two measures to focus on the exchange of the health care information, reduce administrative burden, and streamline and simplify reporting.
CMS and ONC worked together to define the following for this measure:
We proposed the denominator would increment on the receipt of an electronic summary of care record after the eligible hospital or CAH engages in workflows to obtain an electronic summary of care record for a transition, referral or patient encounter in which the health care provider has never before encountered the patient and the numerator would increment upon completion of clinical information reconciliation of the electronic summary of care record for medications, medication allergies, and current problems. The eligible hospital or CAH would no longer be required to manually count each individual non-health-IT-related action taken to engage with other providers of care and care team members to identify and obtain the electronic summary of care record. Instead, the measure would focus on the result of these actions when an electronic summary of care record is successfully identified, received, and reconciled with the patient record. We believe this approach would allow eligible hospitals and CAHs to determine and implement appropriate workflows supporting efforts to receive the electronic summary of care record consistent with the implementation of effective health IT information exchange at an organizational level.
Finally, we proposed to apply our existing policy for cases in which the eligible hospital or CAH determines no update or modification is necessary within the patient record based on the electronic clinical information received, and the eligible hospital or CAH may count the reconciliation in the numerator without completing a redundant or duplicate update to the record. We sought public comment on methods by which this specific action could potentially be electronically measured by the provider's health IT system—such as incrementing on electronic signature or approval by an authorized provider—to mitigate the risk of burden associated with manual tracking of the action.
In addition, we sought public comment on methods and approaches to quantify the reduction in burden for eligible hospitals and CAHs implementing streamlined workflows for this proposed measure. We also sought public comment on the impact these proposals may have for health IT developers in updating, testing, and implementing new measure calculations related to these proposed changes. Specifically, we sought public comment on whether ONC should require developers to recertify their EHR technology as a result of the changes proposed, or whether they should be able to make the changes and engage in testing without recertification. Finally, we sought public comment on whether this proposed new measure that combines the Request/Accept Summary of Care and Clinical Information Reconciliation measures should be adopted, or whether either or both of the existing Request/Accept Summary of Care and Clinical Information Reconciliation measures should be retained in lieu of this proposed new measure.
We stated if we finalize the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, an exclusion would be available for eligible hospitals and CAHs that could not implement the Support Electronic Referral Loops by Receiving and Incorporating Health
We proposed that we would maintain the current Stage 3 requirements finalized in previous rulemaking if we did not finalize the new scoring methodology proposed in section VIII.D.5. of the preamble of the proposed rule. Therefore, eligible hospitals and CAHs would be required report on the Stage 3 Request/Accept Summary of Care measure and Clinical Information Reconciliation measures under the Health Information Exchange objective codified at § 495.24(c)(7)(ii)(B) and (C).
We also proposed that, in order to meet this measure, an eligible hospital or CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(1) and (b)(2).
One commenter stated that health care providers are querying for external data but not consistently “closing the referral loop” by sending information back, and recommended automating a closed loop referral workflow process.
Similarly, we believe that it is up to the referring provider to ensure that they are taking into account the care of their patients in order to make necessary and relevant clinical decisions. We believe that this consolidated measure gets to that end.
We appreciate the commenter's support for efforts to improve processes and technology solutions around closing referral loops. We believe that the measures finalized in this rule will help incentivize further innovation around interoperable exchange of information to support these processes. We also encourage providers to work with health IT developers to pursue products that deliver greater automation around key care coordination functions.
We will continue to collaborate with ONC in future rulemaking on possible functionalities which could support an automated processes for closing the referral loop.
After consideration of the public comments we received, we are finalizing the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure as proposed and codifying this measure at § 495.24(e)(6)(ii)(B). We are finalizing the proposal to apply the existing policy for cases in which the eligible hospital or CAH determines no update or modification is necessary within the patient record based on the electronic clinical information received, and the eligible hospital or CAH may count the reconciliation in the numerator without completing a redundant or duplicate update to the record.
We are finalizing an eligible hospital or CAH must use the capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(1) and (b)(2).
We are adopting the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure as follows:
We are finalizing an exclusion for eligible hospitals and CAHs that could not implement the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure for an EHR reporting period in CY 2019.
The Provider to Patient Exchange objective for eligible hospitals and CAHs builds upon the goal of improved access and exchange of patient health information, patient centered communication and coordination of care using CEHRT. In section VIII.D.5. of the preamble of the proposed rule, we proposed to rename the Patient Electronic Access to Health Information objective to Provider to Patient Exchange, remove the Patient Specific Education measure and rename the Provide Patient Access measure to Provide Patients Electronic Access to Their Health Information. In addition, we proposed to remove the Coordination of Care through Patient Engagement objective and all associated measures. The existing Stage 3 Patient Electronic Access to Health Information objective includes two measures under § 495.24(c)(5)(ii) and the existing Stage 3 Coordination of Care through Patient Engagement objective includes three measures under § 495.24(c)(6)(ii).
We reviewed the existing Stage 3 requirements and determined that the proposals for the Patient Electronic Access to Health Information objective and Coordination of Care through Patient Engagement objective could reduce program complexity and burden and better focus on leveraging the most current health IT functions and standards for patient flexibility of access and exchange of health information. We proposed the Provider to Patient Exchange objective would include one measure, the existing Stage 3 Provide Patient Access measure, which we proposed to rename to Provide Patients Electronic Access to Their Health Information. In addition, we proposed to revise the measure description for the Provide Patients Electronic Access to Their Health Information measure to change the threshold from more than 50 percent to at least one unique patient in accordance with the proposed scoring methodology proposed in section VIII.D.5. of the preamble of the proposed rule. As discussed in section VIII.D.6.a. of the preamble of the proposed rule, we proposed to remove the exclusion for the Provide Patients Electronic Access to Their Health Information measure.
We proposed that if we finalized the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, we would remove all of the other measures currently associated with the Patient Electronic Access to Health Information objective and the Coordination of Care through Patient Engagement objective.
We stated that if we did not finalize the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, we would maintain the existing Stage 3 requirements finalized in previous rulemaking as outlined in the table in that section which describes Stage 3 objectives and measures if new scoring methodology is not finalized. Therefore, we would retain the existing Patient Electronic Access to Health Information objective, associated measures and exclusions under § 495.24(c)(5) and the existing Coordination of Care through Patient Engagement objective, associated measures and exclusions under § 495.24(c)(6).
In the proposed rule (83 FR 20534), we proposed to change the name of the Provide Patient Access measure at 42 CFR 495.24(c)(5)(ii)(A) to Provide Patients Electronic Access to Their Health Information at proposed 42 CFR 495.24(e)(7)(ii) (in the proposed rule (83 FR 20534), we inadvertently referred to 42 CFR 495.24(e)(7)(ii)(A)) to better reflect the emphasis on patient engagement in their health care and patient's electronic access of their health information through use of APIs. We proposed to change the measure description only to remove the previously established threshold from Stage 3, in alignment with our proposed implementation of a performance-based scoring methodology, to require that the eligible hospital or CAH provide timely access for viewing, downloading or transmitting their health information for at least one unique patient discharged using any application of the patient's choice.
• The patient (or the patient authorized representative) is provided timely access to view online, download, and transmit his or her health information; and
• The eligible hospital or CAH ensures the patient's health information is available for the patient (or patient-authorized representative) to access using any application of their choice that is configured to meet the technical specifications of the API in the eligible hospital or CAH's CEHRT.
We proposed to change the measure name to emphasize electronic access of patient health information as opposed to use of paper based actions in accordance with the 2015 EHR Incentive Programs final rule policy for Stage 3 to discontinue inclusion of paper based formats and limit the focus to only health IT solutions to encourage adoption and innovation in use of CEHRT (80 FR 62783 through 62784). In addition, we are committed to promoting patient engagement with their health care information and ensuring access in an electronic format upon discharge from the eligible hospital or CAH.
We noted that under the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, measures would not have required thresholds for reporting. Therefore, if the new scoring methodology and measure were finalized, this measure would not have a reporting threshold. We stated that if we did not finalize the proposed scoring methodology, we would maintain the existing Stage 3 requirements finalized in previous rulemaking. Therefore, eligible hospitals and CAHs would be required report on the Stage 3 Provide Patient Access measure under the Patient Electronic Access to Health Information objective codified at § 495.24(c)(5)(ii)(A).
After consideration of the public comments we received, we are finalizing the Provide Patients Electronic Access to Their Health Information measure as proposed and codifying this measure at 42 CFR 495.24(e)(7)(ii).
We are finalizing the measure description in alignment with the scoring methodology in section VIII.D.5. of the preamble of this final rule:
• The patient (or the patient authorized representative) is provided timely access to view online, download, and transmit his or her health information; and
• The eligible hospital or CAH ensures the patient's health information is available for the patient (or patient-authorized representative) to access using any application of their choice that is configured to meet the technical specifications of the API in the eligible hospital or CAH's CEHRT.
In the proposed rule (83 FR 20534), we proposed to remove the Patient Generated Health Data (PGHD) measure at 42 CFR 495.24(c)(6)(ii)(C) at proposed § 495.24(e)(7) to reduce complexity and focus on the goal of using advanced EHR technology and functionalities to advance interoperability and health information exchange.
As finalized in the 2015 EHR Incentive Programs final rule (80 FR 62851), the measure is not fully health IT based as we did not specify the manner in which health care providers would incorporate the data received. Instead, we finalized that health care providers could work with their EHR developers to establish the methods and processes that work best for their practice and needs. We indicated that this could include incorporation of the information using a structured format (such as an existing field in the EHR or maintaining an isolation between the data and the patient record such as incorporation as an attachment, link or text reference which would not require the advanced use of CEHRT. We note that although this measure requires use of the 2015 Edition, it does not require key updates to functions and standards of health IT, therefore, it does not align with the current program goals of improving interoperability, prioritizing actions completed electronically and use of advanced CEHRT functionalities.
After consideration of the public comments we received, we are finalizing the removal of this measure as proposed.
In the proposed rule (83 FR 20534), we proposed to remove the Patient-Specific Education measure at § 495.24(c)(5)(ii)(B) at proposed § 495.24(e)(7) as it has proven burdensome to eligible hospitals and CAHs in ways that were unintended and detract from health care providers' progress on current program priorities.
We believe that the Patient-Specific Education measure does not align with the current emphasis of the Medicare Promoting Interoperability Program to increase interoperability, leverage the most current health IT functions and standards or reduce burden for eligible hospitals and CAHs. For example, the Patient-Specific Education measure's primary focus is on use of CEHRT for patient resources specific to their health care and diagnosis as well as patient centered care. However, the education resources do not need to be maintained within or generated by CEHRT. Therefore, even though the CEHRT identifies the patient educational resources, the process to generate them could take additional time and interrupt health care provider's workflows. In addition, there could be redundancy in providing educational materials based on resources identified by the CEHRT as CEHRT identifies educational resources using the patient's medication list and problem list but can also include other elements as well. If there are no changes to a patient's health status or treatment based on his or her health care information, there would likely be many resources and materials that present the same type of information and could increase burden to the health care provider in seeking additional resources to provide.
After consideration of the public comments we received, we are finalizing the removal of this measure as proposed.
In the proposed rule (83 FR 20534 through 20535), we proposed to remove the Secure Messaging measure at § 495.24(c)(6)(ii)(B) at proposed § 495.24(e)(7) as it has proven burdensome to eligible hospitals and CAHs in ways that were unintended and detract from health care providers' progress on current program priorities.
Secure Messaging was finalized as a Stage 3 measures for eligible hospitals and CAHs in the 2015 EHR Incentive Programs final rule with the intent to build upon the Stage 2 policy goals of using CEHRT for provider-patient communication (80 FR 62841 through 62849). As mentioned above, we believe that Secure Messaging does not align with the current emphasis of the Medicare Promoting Interoperability Program to increase interoperability or reduce burden for eligible hospitals and CAHs.
In addition, we believe there is burden associated with tracking secure messages, including the unintended consequences of workflows designed for the measure rather than for clinical and administrative effectiveness. We believe that because this measure is not required under Modified Stage 2, removal would not negatively impact patient engagement nor care coordination and serve to decrease burden.
In addition, after further review, we believe that this measure may not be practical for eligible hospitals and CAHs as the patient would likely receive follow up care from another health care provider such as the patient's primary care physician, a rehabilitation facility, or home health after discharge. The patient would communicate with those health care providers instead of the hospital for information related to their health post-discharge.
After consideration of the public comments we received, we are finalizing the removal of this measure as proposed.
In the proposed rule (83 FR 20535), we proposed to remove the View, Download or Transmit measure at § 495.24(c)(6)(ii)(A) at proposed § 495.24(e)(7) as it has proven burdensome to eligible hospitals and CAHs in ways that were unintended and detract from eligible hospitals and CAHs progress on current program priorities.
We received health care provider and stakeholder feedback through correspondence, public forums, and listening sessions indicating there is ongoing concern with measures which require patient action for successful attestation. We have noted that data analysis on the patient action measures supports stakeholder concerns regarding the barriers that exist, which impact a provider's ability to meet the measure. We note that we have heard from these stakeholders that certain demographics of their patient populations which may include low-income, patients in rural areas, and an aging population, all contribute to the barriers of not having access to computers, internet and/or email. These barriers have resulted in certain patient actions measures being outside of the purview and control of the health care provider. They have also noted that this particular population is concerned with having their health information online. After additional review, we note that successful attestation predicated solely on a patient's action has inadvertently created burdens to health care providers and detracts from progress on the Promoting Interoperability Program's measure goals of focusing on patient care, interoperability and leveraging advanced used of health IT. Therefore, we proposed to remove the View, Download or Transmit measure.
After consideration of the public comments we received, we are finalizing the removal of this measure as proposed.
In connection with the new scoring methodology we proposed in section VIII.D.5. of the preamble of proposed rule (83 FR 20535 through 20536), we proposed changes to the Public Health and Clinical Data Registry Reporting objective and six associated measures under 42 CFR 495.24(c)(8)(ii)(A) through (F) in proposed 42 CFR 495.24(e)(8) (in the proposed rule (83 FR 20535), we inadvertently referred to 42 CFR 495.24(e)(7)). We believe that public health reporting through EHRs will extend the use of electronic reporting solutions to additional events and care processes, increase timeliness and efficiency of reporting and replace manual data entry.
We proposed to change the name of the objective to Public Health and Clinical Data Exchange. Under the new scoring methodology proposed in section VIII.D.5. of the preamble of the proposed rule, in aligning with our goal to increase flexibility, improve value, and focus on burden reduction, we proposed that eligible hospitals and CAHs would be required to attest to the Syndromic Surveillance Reporting measure and at least one additional measure from the following options: Immunization Registry Reporting; Clinical Data Registry Reporting; Electronic Case Reporting; Public Health Registry Reporting; and Electronic Reportable Laboratory Result Reporting.
We proposed to require the Syndromic Surveillance Reporting measure under the Public Health and Clinical Data Exchange objective because the CDC indicates the primary source of data for syndromic surveillance comes from EHRs in emergency care settings. Typically, EHR data transmitted from health care facilities to public health agencies for syndromic surveillance are not filtered or categorized. As a result, public health agencies can use the same data that support delivery of care for an all-hazards surveillance approach.
In addition, syndromic surveillance reporting via CEHRT leverages the wealth and depth of clinical information that has not been captured before to study emerging health conditions like the rising opioid overdose epidemic. The data will also provide a unique opportunity to examine rare conditions and new procedures.
While we believe that it is important to leverage health IT through advanced use of CEHRT, for public health and clinical data registries reporting, we also want to reduce burden. Through stakeholder feedback, we understand that some of the existing active engagement requirements are complicated and confusing, and contributed to unintended burden due to issues related to readiness or onboarding for electronic exchange with registries. Therefore, under the new scoring methodology proposed in section VIII.D.5. of the preamble of the proposed rule, we proposed to require attestation to only two measures under the Public Health and Clinical Data Exchange objective instead of three, which is currently required under Stage 3.
In addition, we stated that we intend to propose in future rulemaking to remove the Public Health and Clinical Data Exchange objective and measures no later than CY 2022, and sought public comment on whether hospitals will continue to share such data with public health entities once the Public Health and Clinical Data Exchange objective and measures are removed, as well as other policy levers outside of the Promoting Interoperability Program that could be adopted for continued reporting to public health and clinical data registries, if necessary. Therefore, we are also interested in identifying other appropriate venues in which reporting to public health and clinical data registries could be reported. We sought public comment on the role that
Lastly, we sought public comment on whether the Promoting Interoperability Programs are the best means for promoting the sharing of clinical data with public health entities.
In the proposed rule, we stated that if we did not finalize the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule, we would maintain the existing Stage 3 requirements finalized in previous rulemaking and outlined in the table in that section which describes Stage 3 objectives and measures. Therefore, we would retain the existing Public Health and Clinical Data Registry Reporting objective and associated measures and exclusions under § 495.24(c)(8).
One commenter requested CMS limit the Public Health and Clinical Data Exchange measure reporting requirements to one measure to further reduce reporting burden.
We decline to reduce the required number of measures for reporting to one Public Health and Clinical Data Exchange measure. While we are focusing on increasing flexibility, improving value and reducing burden to providers, we also want to balance those goals with maintaining communication and value in public health registry and bidirectional data exchange between providers and public health agencies and clinical data registries.
After consideration of the public comments we received, we are finalizing the Public Health and Clinical Data Exchange objective proposals as proposed with the following modification, as discussed above.
We are finalizing the objective name change from Public Health and Clinical Data Registry Reporting to Public Health and Clinical Data Exchange and to codify this change at 42 CFR 495.24(c)(8)(ii)(A) through (F).
We are modifying our proposed policy and finalizing that eligible hospitals and CAHs must report on any two Public Health and Clinical Data Exchange measures of their choice.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20536 through 20537), we sought public comment on a potential concept for two additional measure options for the Health Information Exchange objective for eligible hospitals and CAHs who refer or transition care of patients to health care providers in long-term care and postacute care settings, skilled nursing facilities, and behavioral health settings. Many current Promoting Interoperability Program participants are now engaged in bi-directional exchange of patient health information with these health care providers and settings of care and many more sought to incorporate these workflows as part of efforts to improve care team coordination or to support alternative payment models.
For these reasons, we sought public comment on two potential new measures for inclusion in the program to enable eligible hospitals and CAHs to exchange health information through health IT supported care coordination across a wide range of settings.
We sought public comment on whether these two measures should be combined into one measure so that an eligible hospital or CAH that is engaged in exchanging health information across the care continuum may include any such exchange in a single measure. We sought public comment on whether the denominators should be combined to a single measure including both transitions of care from a hospital and transitions of care to a hospital. We also sought public comment on whether the numerators should be combined to a single measure including both the sending and receiving of electronic patient health information. We sought public comment on whether the potential new measures should be considered for inclusion in a future program year or whether stakeholders believe there is sufficient readiness and interest in these measures to adopt them as early as 2019. For the purposes of focusing the denominator, we sought public comment regarding whether the potential new measures should be limited to transitions of care and referrals specific to long-term and postacute care, skilled nursing care, and behavioral health care settings. We also sought public comment on whether additional settings of care should be considered for inclusion in the denominators and if a provider should
In addition, commenters asked specific follow up questions regarding what providers of care would be included, and how CMS would develop the care setting elements into the measure.
As indicated in sections VIII.D.5. and VIII.D.6. of the preamble of the proposed rule (83 FR 20518 through 20537), we did not propose to require States to adopt the new scoring methodology and measures that we proposed. Instead, we proposed to give States the option to adopt the new scoring methodology we proposed in section VIII.D.5. of the preamble of the proposed rule together with the measures proposals included in section VIII.D.6. of the preamble of the proposed rule for their Medicaid Promoting Interoperability Programs. Any State that wishes to exercise this option must submit a change to its State Medicaid HIT Plan (SMHP) for CMS' approval, as specified in § 495.332. If a State chooses not to submit such a change, or if the change is not approved, the objectives, measures, and scoring would remain the same as currently specified under § 495.24. We believe that States are unlikely to choose this option due to concerns with burden, time constraints and costs associated with implementing updates to technology and reporting systems, as very few eligible hospitals will be eligible to receive an incentive payment under the Medicaid Promoting Interoperability Program in 2019 and subsequent years. However, our proposal to extend this option to States would allow them flexibility to benefit from the improvements to meaningful use scoring outlined in the proposed rule, if they so choose. Similarly, in the proposed rule, we also requested public comment on whether we should modify the objectives and measures for eligible professionals (EPs) in the Medicaid Promoting Interoperability Program in order to encourage greater interoperability for Medicaid EPs. In the proposed rule, we stated that we are interested in policy options that should be considered, including the benefits of greater alignment with the Merit-Based Incentive Payment System requirements for eligible clinicians. We also invited comments on the burdens and hurdles that such policy changes might create for EPs and States.
In connection with these proposals regarding the scoring methodology and measures, we proposed to require under § 495.40(b)(2)(vii) “dual-eligible” eligible hospitals and CAHs (those that are eligible for an incentive payment under Medicare for meaningful use of CEHRT and/or subject to the Medicare payment reduction for failing to demonstrate meaningful use, and are also eligible to earn a Medicaid incentive payment for meaningful use) to demonstrate meaningful use for the Promoting Interoperability Program to CMS, and not to their respective State Medicaid agency, beginning with the EHR reporting period in CY 2019. This includes all attestation requirements, including the objectives and measures of meaningful use, in addition to reporting clinical quality measures. In the past, we have generally adopted a common definition of meaningful use under Medicare and Medicaid (for example, 77 FR 44324 through 44326). If we adopt the proposals made in the proposed rule, there would not be a common definition of meaningful use, unless a State chooses to exercise the option described above and receives approval from CMS. In light of these changes, we believe it would be more efficient and straightforward in terms of program administration and operations if all dual-eligible eligible hospitals and CAHs demonstrate meaningful use to CMS. If a dual-eligible eligible hospital or CAH instead demonstrates meaningful use to its State Medicaid agency, it would only qualify for an incentive payment under Medicaid (assuming it meets all eligibility and other program requirements), and it would not qualify for an incentive payment under Medicare and/or avoid the Medicare payment reduction. The proposals in the proposed rule would not change the deeming policy under the definition of meaningful EHR user under § 495.4, under which an eligible hospital or CAH that successfully demonstrates meaningful use to CMS would be deemed a meaningful EHR user for purposes of the Medicaid incentive payment.
We also proposed to amend the requirements for State reporting to CMS under the Medicaid Promoting Interoperability Program under § 495.316(g), so that States would not be required to report, for program years after 2018, provider-level attestation data for each eligible hospital that attests to the State to demonstrate meaningful use.
After consideration of the public comments we received, we are finalizing the our proposals as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20537 through 20538), we sought comments on the future direction of the Promoting Interoperability Program. In future years of the Promoting Interoperability Program, we will continue to consider changes which support a variety of HHS goals, including: Reducing administrative burden; supporting alignment with the Quality Payment Program; advancing interoperability and the exchange of health information; and promoting innovative uses of health IT. We believe a focus on interoperability and simplification will reduce health care provider burden while allowing flexibility to pursue innovative applications that improve care delivery. One strategy we are exploring is creating a set of priority health IT activities that would serve as alternatives to the traditional EHR Incentive Program measures.
We specifically sought public comments on the following questions:
• What health IT activities should CMS consider recognizing in lieu of reporting on objectives that would most effectively advance priorities for nationwide interoperability and spur innovation? What principles should CMS employ to identify health IT activities?
• Do stakeholders believe that introducing health IT activities in lieu of reporting on measures would decrease burden associated with the Promoting Interoperability Programs?
• If additional measures were added to the program, what measures would be beneficial to add to promote our goals of care coordination and interoperability?
• How can the Promoting Interoperability Program for eligible hospitals and CAHs further align with the Quality Payment Program (for example, requirements for eligible clinicians under MIPS and Advanced APMs) to reduce burden for health care providers, especially hospital-based MIPS eligible clinicians?
• What other steps can HHS take to further reduce the administrative burden associated with the Promoting Interoperability Program?
Some commenters requested clarification on how interoperability is defined and requested that CMS work with stakeholders on identification of benchmarks and have a reasonable and predictable pathway for changing Health IT policies. Other commenters indicated a single set of standards by the Federal government is needed to ensure all health care providers are exchanging data in a uniform manner.
Some commenters disagreed with introducing health IT activities in lieu of reporting on measures as this approach could create additional burden if its required additional documentation to validate that the provider had performed the activity. Some commenters also recommended that such an approach should be left optional, as many providers may not be able to perform the activities identified. Finally, commenters expressed concerns regarding specific potential activities, for instance, one commenter expressed concern about whether participation in the Trusted Exchange Framework and Common Agreement (TEFCA) would be available by the time this approach was finalized.
Some commenters supported participation in the TEFCA and indicated it should be considered a health IT activity that could count for credit within the Health Information Exchange objective in lieu of reporting on measures for this objective.
Some commenters suggested CMS realign efforts with “Patient Centered” interoperability.
A few commenters indicated CMS should include a measure for data quality based on the USCDI which would set expectations for content, not just exchange of data.
Some commenters indicated the 2015 CEHRT needs to be updated to support integration of SNOMED, LOINC and RxNorm (and other terminology standards) into a single system.
Under sections 1814(l)(3)(A), 1886(n)(3)(A), and 1903(t)(6)(C)(i)(II) of the Act and the definition of “meaningful EHR user” under 42 CFR 495.4, eligible hospitals and CAHs must report on clinical quality measures (referred to as CQMs or eCQMs) selected by CMS using CEHRT, as part of being a meaningful EHR user under the Medicare and Medicaid Promoting Interoperability Programs.
The table below lists the 16 CQMs available for eligible hospitals and CAHs to report under the Medicare and Medicaid Promoting Interoperability Programs beginning in CY 2017 (81 FR 57255).
As we have stated previously in rulemaking (82 FR 38479), we plan to continue to align the CQM reporting requirements for the Promoting Interoperability Programs with the Hospital IQR Program. In order to move the program forward in the least burdensome manner possible, while maintaining a set of the most meaningful quality measures and continuing to incentivize improvement in the quality of care provided to patients, we stated the we believe it is appropriate to propose to remove certain eCQMs at this time to develop an even more streamlined set of the most meaningful eCQMs for hospitals. To align with the Hospital IQR Program, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20539), we proposed to reduce the number of eCQMs in the Medicare and Medicaid Promoting Interoperability Programs eCQM measure set from which eligible hospitals and CAHs report, by proposing to remove eight eCQMs (from the 16 eCQMs currently in the measure set) beginning with the reporting period in CY 2020. The eight eCQMs we proposed to remove are:
• Primary PCI Received Within 90 Minutes of Hospital Arrival (NQF #0163) (AMI-8a);
• Home Management Plan of Care Document Given to Patient/Caregiver (CAC-3);
• Median Time from ED Arrival to ED Departure for Admitted ED Patients (NQF #0495) (ED-1);
• Hearing Screening Prior to Hospital Discharge (NQF #1354) (EHDI-1a);
• Elective Delivery (NQF #0469) (PC-01);
• Stroke Education (STK-08) (adopted at 78 FR 50807;
• Assessed for Rehabilitation (NQF #0441) (STK-10); and
• Median Time from ED Arrival to ED Departure for Discharged ED Patients (NQF 0496) (ED-3).
We note that the first seven eCQMs on this list are currently included in the Hospital IQR Program, and in section VIII.A.5.b.(9) of the preamble of the proposed rule, we proposed to remove them from the Hospital IQR Program beginning in CY 2020. For more information on the first seven eCQMs selected for removal, we refer readers to section VIII.A.5.b.(9) of the preambles of the proposed rule and this final rule.
We believe that a coordinated reduction in the overall number of eCQMs in both the Hospital IQR Program and Medicare and Medicaid EHR Promoting Interoperability will reduce certification burden on hospitals, improve the quality of reported data by enabling eligible hospitals and CAHs to focus on a smaller, more specific subset of CQMs while still allowing eligible hospitals and CAHs some flexibility to select which eCQMs to report that best reflect their patient populations and support internal quality improvement efforts. With respect to the Median Time from ED Arrival to ED Departure for Discharged ED Patients measure (NQF 0496) (ED-3), this is an outpatient measure and is not included as an eCQM in the Hospital IQR Program. We proposed to remove it so the eCQMs would align completely between the two programs in order to reduce burden and enable eligible hospitals and CAHs to easily report electronically through the Hospital IQR Program submission mechanism.
As we stated in section VIII.A.5.b.(9) of the preambles of the proposed rule and this final rule, with regard to the Hospital IQR Program proposal for the CY 2020 reporting period and subsequent years, we also considered proposing to remove these eCQMs one year earlier, beginning with the CY 2019 reporting period/FY 2021 payment determination. In establishing our eCQM policies, we must balance the needs of eligible hospitals and CAHs with variable preferences and capabilities. Overall, across the range of capabilities and resources for eCQM reporting, stakeholders have expressed that they want more time to prepare for eCQM changes.
We recognize that some hospitals and health IT vendors may prefer earlier removal in order to forgo maintenance on those eCQMs proposed for removal. In preparation for the proposed rule, we weighed the relative burdens associated with removing these measures beginning with the CY 2019 reporting period or beginning with the CY 2020 reporting period. In the event we finalize our proposal to remove these eCQMs, we intend to align the timing of the removal for the Medicare and Medicaid Promoting Interoperability Programs with the Hospital IQR Program.
We invited public comment on our proposal, including the specific measures proposed for removal and the timing of removal from the Medicare and Medicaid Promoting Interoperability Programs.
We encourage eligible hospitals and CAHs to submit measures during the Annual Call for measures. This process reinforces our commitment to engaging stakeholders to process reinforces our commitment to engaging with stakeholders to further advance meaningful use of CEHRT by eligible hospitals and CAHs participating in the Promoting Interoperability Programs.
After consideration of the public comments we received, we are adopting our proposal as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20539 through 20540), for CY 2019, we proposed the same CQM reporting periods and criteria as established in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38479 through 38483) for the Medicare and Medicaid EHR Incentive Programs in CY 2018, which would be as follows:
For CY 2019, for eligible hospitals and CAHs that report CQMs electronically, we proposed the reporting period for the Medicare and Medicaid Promoting Interoperability Programs would be one, self-selected calendar quarter of CY 2019 data, and the submission period for the Medicare Promoting Interoperability Program would be the 2 months following the close of the calendar year, ending February 29, 2020. For eligible hospitals and CAHs that report CQMs by attestation under the Medicare Promoting Interoperability Program as a result of electronic reporting not being feasible, and for eligible hospitals and CAHs that report CQMs by attestation under their State's Medicaid Promoting Interoperability Program, we previously established a CQM reporting period of the full CY 2019 (consisting of 4 quarterly data reporting periods) (80 FR 62893). We also established an exception to this full-year reporting period for eligible hospitals and CAHs demonstrating meaningful use for the first time under their State's Medicaid EHR Incentive Program. Under this exception, the CQM reporting period is any continuous 90-day period within CY 2019 (80 FR 62893). We proposed that the submission period for eligible hospitals and CAHs reporting CQMs by attestation under the Medicare EHR Incentive Program would be the 2 months following the close of the CY 2019 CQM reporting period, ending February 29, 2020. In regard to the Medicaid EHR Incentive Program, we provide States with the flexibility to determine the method of reporting CQMs (attestation or electronic reporting) and the submission periods for reporting CQMs, subject to prior approval by CMS.
For the CY 2019 reporting period, we proposed that the reporting criteria under the Medicare and Medicaid Promoting Interoperability Program for eligible hospitals and CAHs reporting CQMs electronically would be as follows: For eligible hospitals and CAHs participating only in the Promoting Interoperability Program, or participating in both the Promoting Interoperability Program and the Hospital IQR Program, report on at least 4 self-selected CQMs from the set of 16 available CQMs listed in the table above.
We proposed the following reporting criteria for eligible hospitals and CAHs that report CQMs by attestation under the Medicare Promoting Interoperability Program as a result of electronic reporting not being feasible, and for eligible hospitals and CAHs that report CQMs by attestation under their State's Medicaid Promoting Interoperability Program, for the reporting period in CY 2019—report on all 16 available CQMs listed in the table in section VIII.D.9.a. of the preamble of the proposed rule.
After consideration of the public comments we received, we are adopting our proposal as proposed.
As we stated in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49759 through 49760), for the reporting periods in 2016 and future years, we are requiring QRDA-I for CQM electronic submissions for the Medicare EHR Incentive (now Promoting Interoperability) Program. As noted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49760), States would continue to have the option, subject to our prior approval, to allow or require QRDA-III for CQM reporting.
The form and method of electronic submission are further explained in sub-regulatory guidance and the certification process. For example, the following documents are updated annually to reflect the most recent CQM electronic specifications: The CMS Implementation Guide for QRDA; program specific performance calculation guidance; and CQM electronic specifications and guidance documents. These documents are located on the eCQI Resource Center web page at:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20540), for the reporting period in CY 2019, we
• Eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program (single program participation)—electronically report CQMs through QualityNet Portal.
• Eligible hospital and CAH options for electronic reporting for multiple programs (that is, Promoting Interoperability Program and Hospital IQR Program participation)—electronically report through QualityNet Portal.
As noted in the 2015 EHR Incentive Programs final rule (80 FR 62894), starting in 2018, eligible hospitals and CAHs participating in the Medicare EHR Incentive Program must electronically report CQMs where feasible; and attestation to CQMs will no longer be an option except in certain circumstances where electronic reporting is not feasible. For the Medicaid Promoting Interoperability Program, States continue to be responsible for determining whether and how electronic reporting of CQMs would occur, or if they wish to allow reporting through attestation. Any changes that States make to their CQM reporting methods must be submitted through the State Medicaid Health IT Plan (SMHP) process for CMS review and approval prior to being implemented.
For CY 2019, we proposed to continue our policy regarding the electronic submission of CQMs, which requires the use of the most recent version of the CQM electronic specification for each CQM to which the EHR is certified. For the CY 2019 electronic reporting of CQMs, this means eligible hospitals and CAHs are required to use the Spring 2017 version of the CQM electronic specifications and any applicable addenda available on the eCQI Resource Center web page at:
We did not receive any comments on these proposals and we are adopting our proposal as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20540 through 20541), we requested comments on a number of issues regarding eCQMs. Specifically, we invited comment on the following:
• What aspects of the use of eCQMs are most burdensome to hospitals and health IT vendors?
• What program and policy changes, such as improved regulatory alignment, would have the greatest impact on addressing eCQM burden?
• What are the most significant barriers to the availability and use of new eCQMs today?
• What specifically would stakeholders like to see us do to reduce burden and maximize the benefits of eCQMs?
• How could we encourage hospitals and health IT vendors to engage in improvements to existing eCQMs?
• How could we encourage hospitals and health IT vendors to engage in testing new eCQMs?
• Would hospitals and health IT vendors be interested in or willing to participate in pilots or models of alternative approaches to quality measurement that would explore less burdensome ways of approaching quality measurement, such as sharing data with third parties that use machine learning and natural language processing to classify quality of care or other approaches?
• What ways could we incentivize or reward innovative uses of health IT that could reduce burden for hospitals?
• What additional resources or tools would hospitals and health IT vendors like to have publicly available to support testing, implementation, and reporting of eCQMs?
We received numerous comments in response to our request for comment.
A few commenters indicated that burdens related to use of eCQMs included exclusions and data availability and many eCQMs are not developed based on data available or created during routine care. A few commenters indicated it is burdensome to test eCQMs due to time, effort and resource requirements. A few commenters requested simplification of the measure development process which would include strict selection criteria and endorsement processes as the current development process was noted to create significant barrier related to availability and use.
A few commenters suggested CMS work with stakeholders to establish research and pilot programs to reduce quality measurement burden and leverage data captured by all members of the care team, other electronic means or by the patients themselves.
In the Stage 1 final rule (77 FR 44448), we noted that subsection (d) Puerto Rico hospitals as defined in section 1886(d)(9)(A) of the Act were not “eligible hospitals” as defined in section 1886(n)(6)(B) of the Act, and therefore were not eligible for the incentive payments for the meaningful use of CEHRT under section 1886(n) of the Act. Section 602(a) of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) subsequently amended section 1886(n)(6)(B) of the Act to include subsection (d) Puerto Rico hospitals in the definition of “eligible hospital,” which made subsection (d) Puerto Rico hospitals eligible for the incentive payments under section 1886(n) of the Act for hospitals that are meaningful EHR users and subject to the payment reductions under section 1886(b)(3)(B)(ix) of the Act for hospitals that are not meaningful EHR users. In order to take into account delays in implementation, section 602(d) of the Consolidated
As authorized under section 602(c) of the Consolidated Appropriations Act, 2016, we have previously elected to implement the amendments made by section 602 as applied to subsection (d) Puerto Rico hospitals through program instruction. In doing so we have sought to align the policies for subsection (d) Puerto Rico hospitals with our existing policies for eligible hospitals under the Medicare Promoting Interoperability Program to the greatest extent possible, while taking into account the unique circumstances applicable to hospitals on Puerto Rico. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20541 through 20542), we proposed to codify the program instructions we have issued to subsection (d) Puerto Rico hospitals and to amend our regulations under Parts 412 and 495 such that the provisions that apply to eligible hospitals would include subsection (d) Puerto Rico hospitals unless otherwise indicated.
We proposed to define a “Puerto Rico eligible hospital” under § 495.100 as a subsection (d) Puerto Rico hospital as defined in section 1886(d)(9)(A) of the Act.
We proposed to amend the definition of “eligible hospital” under § 495.100 to include Puerto Rico eligible hospitals unless otherwise indicated.
We proposed to amend the general provisions under § 412.200 as related to prospective payment rates for inpatient operating costs for subsection (d) Puerto Rico hospitals.
We did not receive any comments on these proposals and are finalizing our proposals as proposed.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the first payment year under section 1886(n)(2)(G)(i) of the Act for which an incentive payment could be made to a hospital that is a meaningful EHR user. The definition of “EHR reporting period” under § 495.4 specifies for eligible hospitals for the FY 2016 payment year an EHR reporting period of any continuous 90-day period in CY 2016, which is consistent with the program instructions we issued to subsection (d) Puerto Rico hospitals, so we do not believe any amendment is necessary. We proposed to amend the definition of “EHR reporting period” under § 495.4 to specify for Puerto Rico eligible hospitals for the FY 2017 payment year an EHR reporting period of a minimum of any continuous 14-day period in CY 2017, which is consistent with the program instructions we issued to subsection (d) Puerto Rico hospitals. We allowed for a 14-day EHR reporting period in CY 2017 to acknowledge and account for the devastation to Puerto Rico caused by Hurricane Maria. We have not issued program instructions to subsection (d) Puerto Rico hospitals concerning the EHR reporting periods for the payment years after FY 2017. For the FY 2018, 2019, and 2020 payment years, we proposed an EHR reporting period of a minimum of any continuous 90-day period in CYs 2018, 2019, and 2020 respectively for Puerto Rico eligible hospitals, and we proposed corresponding amendments to the definition of “EHR reporting period” under § 495.4.
After consideration of the public comment we received, we are finalizing our proposals as proposed.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that the payment reductions under section 1886(b)(3)(B)(ix) of the Act would apply beginning with FY 2022 for subsection (d) Puerto Rico hospitals that are not meaningful EHR users for the applicable EHR reporting period for the payment adjustment year. Because Puerto Rico eligible hospitals would be considered eligible hospitals, the EHR reporting periods for payment adjustment years and related policies, including deadlines and requests for significant hardship exceptions, that we establish for eligible hospitals would also apply to Puerto Rico eligible hospitals beginning with the FY 2022 payment adjustment year.
We did not receive any comments on this topic.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the first payment year under section 1886(n)(2)(G)(i) of the Act for which an incentive payment could be made to a hospital that is a meaningful EHR user. We proposed to amend the definition of “payment year” under § 495.4 to specify for Puerto Rico eligible hospitals, payment year means a Federal FY beginning with 2016.
We did not receive any comments on this proposal and are finalizing our proposal as proposed.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that the payment reductions under section 1886(b)(3)(B)(ix) of the Act will apply beginning with FY 2022 for subsection (d) Puerto Rico hospitals that are not meaningful EHR users for the applicable EHR reporting period for the payment adjustment year. We proposed to amend the definition of “payment adjustment year” under § 495.4 to specify for Puerto Rico eligible hospitals, payment adjustment year means a Federal fiscal year beginning with 2022.
We did not receive any comments on this proposal and are finalizing our proposal as proposed.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides for a phase down under section 1886(n)(2)(E)(ii) of the Act for subsection (d) Puerto Rico hospitals whose first payment year is after 2018. We proposed to amend § 495.104(b) to specify the following years for which Puerto Rico eligible hospitals may receive incentive payments under section 1886(n) of the Act:
• Puerto Rico eligible hospitals whose first payment year is FY 2016 may receive such payments for FYs 2016 through 2019.
• Puerto Rico eligible hospitals whose first payment year is FY 2017 may receive such payments for FYs 2017 through 2020.
• Puerto Rico eligible hospitals whose first payment year is FY 2018 may receive such payments for FYs 2018 through 2021.
• Puerto Rico eligible hospitals whose first payment year is FY 2019 may receive such payments for FY 2019 through 2021.
• Puerto Rico eligible hospitals whose first payment year is FY 2020 may receive such payments for FY 2020 through 2021.
We proposed to amend § 495.104(c)(5) to specify the following transition factors under section 1886(n)(2)(E)(i) of the Act for Puerto Rico eligible hospitals:
We did not receive any comments on these proposals and are finalizing our proposals as proposed.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that the payment reductions under section 1886(b)(3)(B)(ix) of the Act would apply beginning with FY 2022 for subsection (d) Puerto Rico hospitals. We proposed for a subsection (d) Puerto Rico hospital that is not a meaningful EHR user for the EHR reporting period for the FY, three-quarters of the applicable percentage increase otherwise applicable for such FY shall be reduced by 33
We did not receive any comments on these proposals and are finalizing our proposals as proposed.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20542 through 20543), we proposed several modifications to the Medicare Advantage Promoting Interoperability Program.
Section 1853(m) of the Act provides for incentive payments to qualifying Medicare Advantage (MA) organizations for certain affiliated eligible hospitals (as defined in section 1886(n)(6)(B)) that meaningfully use certified EHR technology, and for application of downward payment adjustments to qualifying MA organizations for their affiliated hospitals that are not meaningful users of certified EHR technology, beginning in FY 2015. As noted in section VIII.D.8. of the preamble of the proposed rule, section 602(a) of the Consolidated Appropriations Act, 2016 amended section 1886(n)(6)(B) of the Act to include subsection (d) Puerto Rico hospitals in the definition of “eligible hospital.” We note that the definition of “qualifying MA-affiliated hospital” in § 495.200 means an eligible hospital under section 1866(n)(6) that meets certain other criteria. Therefore, the amendment to section 1866(n)(6) by the Consolidated Appropriations Act to include subsection (d) Puerto Rico hospitals renders such hospitals potentially eligible as qualifying MA-affiliated hospitals for purposes of the Medicare Advantage Promoting Interoperability incentives and payment adjustments. We proposed certain changes to our regulations under 42 CFR part 495 so that the incentive payment and payment adjustment provisions that apply to MA-affiliated eligible hospitals are applicable to MA-affiliated eligible hospitals in Puerto Rico.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the first payment year for which an EHR incentive payment could be made to an eligible hospital that is a meaningful EHR user. We proposed, under section 1871 of the Act and to implement that amendment to the EHR provisions, to amend the definition of “payment year” under § 495.200 to specify that, with respect to MA-affiliated eligible hospitals in Puerto Rico, payment year means a Federal FY beginning with 2016 and ending with FY 2021.
We did not receive any comments on this proposal so we are adopting the amendments to the definition of “payment year” in § 495.200 as proposed to be consistent with the statute.
Section 602(d) of the Consolidated Appropriations Act, 2016 provides for payment reductions to subsection (d) Puerto Rico hospitals that are not meaningful EHR users for the applicable EHR reporting period for the payment adjustment year, beginning with FY 2022. We proposed to amend the definition of “MA payment adjustment year” under § 495.200 to specify that, for qualifying MA organizations that first receive an MA EHR incentive payment for at least 1 payment year for an MA-affiliated eligible hospital in Puerto Rico, payment adjustment year means a calendar year starting with 2022.
We solicited feedback on whether we should amend the definition of “MA payment adjustment year” to specify that the duration of the reporting period for MA-affiliated eligible hospitals for purposes of determining whether a qualifying MA organization is subject to a payment adjustment should be other than the full Federal fiscal year ending in the MA payment adjustment year. We also requested comments on an alternative approach under which we would use the same reporting period that is used for the Medicare Promoting Interoperability Program.
We did not receive any comments on this proposal so we are finalizing the amendment to the definition of “MA payment adjustment year” under § 495.200 as proposed.
Under § 495.211, beginning for MA payment adjustment year 2015, payment adjustments set are made to prospective payments (issued under section 1853(a)(1)(A) of the Act) of qualifying MA organizations that previously received incentive payments under the MA EHR Incentive (now Promoting Interoperability) Program, if all or a portion of the MA-affiliated eligible hospitals that would meet the definition of qualifying MA-affiliated eligible hospitals (but for their demonstration of meaningful use) are not meaningful EHR users. Section 495.211(e) sets forth the formula for calculating payment adjustments for 2015 and subsequent years with respect to MA-affiliated eligible hospitals. We proposed to amend paragraph (e) by adding a new subparagraph (4), which specifies that, prior to payment adjustment year 2022, subsection (d) Puerto Rico hospitals are neither qualifying nor potentially qualifying MA-affiliated eligible hospitals for purposes of applying the payment adjustments under § 495.211.
We solicited comment on whether further regulatory amendments are necessary or appropriate so that the EHR incentive payment and payment adjustment provisions that apply to MA-affiliated eligible hospitals are applicable to MA-affiliated eligible hospitals in Puerto Rico in a manner that is consistent with the Consolidated Appropriations Act, 2016.
After consideration of the public comment we received, we are finalizing the amendment to § 495.211(e) (that is, adding paragraph (e)(4)) as proposed.
In section VIII.E.12. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20543 through 20544), we proposed modifications to the Medicaid Promoting Interoperability Program. The policies proposed in that section would apply only in the Medicaid EHR Incentive (now Promoting Interoperability) Program.
Section 1903(a)(3)(F)(ii) of the Act establishes an enhanced Federal matching rate of 90 percent for State expenditures related to the administration of Medicaid Promoting Interoperability Program payments. On July 28, 2010, in the Stage 1 final rule (75 FR 44313, 44507), we established prior approval requirements for State funding, planning documents, proposed budgets, project schedules, and certain implementation activities that a State may wish to pursue in support of the Medicaid Promoting Interoperability Program, as a condition of receipt of the 90 percent FFP available to States under section 1903(a)(3)(F)(ii) of the Act. To minimize the burden on States, we designed the prior approval conditions and prior approval process to mirror what was at the time used in support of acquiring automated data processing (ADP) equipment and services in conjunction with development and operation of States' Medicaid Management Information Systems (MMIS), which are the States' automated mechanized claims processing and information retrieval systems approved by CMS. Specifically, at § 495.324(b)(2) we established that, as a condition of receiving 90 percent FFP for administration of their Medicaid Promoting Interoperability Programs, States must receive prior approval for requests for proposals and contracts used to complete activities under 42 CFR part 495, subpart D, unless specifically exempted by HHS, before release of the request for proposal or execution of the contract. This was consistent with the requirement then in place for MMIS at 45 CFR 95.611(a)(2). At § 495.324(b)(3) we established that unless specifically exempted by HHS, States must receive prior approval for contract amendments involving contract cost increases exceeding $100,000 or contract time extensions of more than 60 days, prior to execution of the contract amendment. This was consistent with the requirement then in place at 45 CFR 95.611(b)(2)(iv).
Subsequently, in the final rule titled “State Systems Advance Planning Document (APD) Process” (75 FR 66319, October 28, 2010), HHS amended 45 CFR 95.611(b)(2)(iii) to establish a $500,000 threshold for prior HHS approval of acquisition solicitation documents and contracts for ADP equipment or services for which States would seek enhanced Federal matching funds (75 FR 66331). In the same rule, HHS also established at 45 CFR 95.611(b)(2)(iv) a $500,000 prior approval threshold for contract amendments for which States would seek enhanced Federal match (75 FR 66324). In the final rule titled “Medicaid Program; Mechanized Claims Processing and Information Retrieval Systems (90/10)” (80 FR 75817, 75836 through 75837, December 4, 2015), 45 CFR 95.611(a)(2) was amended to establish a $500,000 threshold for prior approval of acquisitions related to ADP equipment and services matched at the enhanced rate for MMIS authorized under 42 CFR part 433, subpart C. There was previously no threshold dollar amount for prior approvals related to such acquisitions in 45 CFR 95.611(a)(2).
In the proposed rule, we proposed to amend 42 CFR 495.324(b)(2) and 495.324(b)(3) to align with current prior approval policy for MMIS and ADP systems at 45 CFR 95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and to minimize burden on States. Specifically, we proposed that the prior approval dollar threshold in § 495.324(b)(3) would be increased to $500,000, and that a prior approval threshold of $500,000 would be added to § 495.324(b)(2). We also proposed minor amendments to the language of 495.324(b)(2) and (3) to better align it with the language of 45 CFR 95.611(b)(2)(iii) and (iv). In addition, in light of these proposed changes, we proposed a conforming amendment to amend the threshold in § 495.324(d) for prior approval of justifications for sole source acquisitions to be the same $500,000 threshold. That threshold is currently aligned with the $100,000 threshold in
We explained in the proposed rule that we believe that this proposal would reduce burden on States by raising the prior approval thresholds and generally aligning them with the thresholds for prior approval of MMIS and ADP acquisitions costs.
We did not receive any comments on this proposal and are finalizing the proposal as proposed.
Under section 1903(a)(3)(F) and (t) of the Act, State Medicaid programs may receive FFP in expenditures for incentive payments to certain Medicaid providers to adopt, implement, upgrade, and meaningfully use CEHRT. In addition, FFP is available to States for reasonable administrative expenses related to administration of those incentive payments as long as the State meets certain conditions. Specifically, section 1903(a)(3)(F)(i) of the Act establishes 100 percent FFP to States for incentive payments to eligible Medicaid providers (described in section 1903(t)(1) and (2) of the Act) to adopt, implement, upgrade, and meaningfully use CEHRT. Section 1903(a)(3)(F)(ii) of the Act establishes 90 percent FFP to States for administrative expenses related to administration of the incentive payments.
In § 495.320 and § 495.322, we provide the general rule that States may receive: (1) 100 percent FFP in State expenditures for EHR incentive payments; and (2) 90 percent FFP in State expenditures for administrative activities in support of implementing incentive payments to Medicaid eligible providers. Section 495.316 establishes State monitoring and reporting requirements regarding activities required to receive an incentive payment. Subject to § 495.332, the State is responsible for tracking and verifying the activities necessary for a Medicaid EP or eligible hospital to receive an incentive payment for each payment year, as described in § 495.314.
To date, we have not established a date beyond which 90 percent FFP is no longer available to States for their expenditures related to administering the Medicaid Promoting Interoperability Program. In the Stage 1 final rule (75 FR 44319), we established that, in accordance with sections 1903(t)(4)(A)(iii) and (5)(D) of the Act, in no case may any Medicaid EP or eligible hospital receive an incentive payment after 2021 (42 CFR 495.310(a)(2)(v) and 495.310(f)).
Because December 31, 2021 is the last date that States could make Medicaid Promoting Interoperability incentive payments to Medicaid EPs and eligible hospitals (other than pursuant to a successful appeal related to 2021 or a prior year), we believe it is reasonable for States to conclude most administrative activities related to the Medicaid Promoting Interoperability Program, including submitting final required reports to CMS, by September 30, 2022. Therefore, we proposed to amend § 495.322 to provide that the 90 percent FFP for Medicaid Promoting Interoperability Program administration would no longer be available for most State expenditures incurred after September 30, 2022.
We proposed a later sunset date for the availability of 90 percent enhanced match for State administrative costs related to Medicaid Promoting Interoperability Program audit and appeals activities, as well as costs related to administering incentive payment disbursements and recoupments that might result from those activities. States have a responsibility to conduct audits of the payments made to Medicaid providers participating in the Medicaid Promoting Interoperability Program, in accordance with § 495.368, in order to combat fraud and abuse, and States also must provide a process for EHR incentive payment appeals in accordance with § 495.370. We expect that these activities will require administration for some time after, but at most a year, beyond September 30, 2022. Because provider incentive payments could be disbursed up until December 31, 2021, we anticipate that States would need additional time to review provider risk factors, select samples, and conduct audits. Once post-payment audits are completed, States would also need time to work with any providers who choose to appeal their audit findings. Collectively, the post-payment audit process and/or appeals process could take several months, and in some cases might take more than one year. Therefore, we proposed that the 90 percent FFP would continue to be available for State administrative expenditures related to Medicaid Promoting Interoperability Program audit and appeals activities until September 30, 2023. States would not be able to claim any Medicaid Promoting Interoperability Program administrative match for expenditures incurred after September 30, 2023.
States should be aware that under this proposal, they would need to incur the expenditures for which they would claim the 90 percent FFP for Medicaid Promoting Interoperability Program administrative activities no later than the sunset dates of September 30, 2022 or September 30, 2023, as applicable. This means that for States to claim the 90 percent FFP for goods and services related to Medicaid Promoting Interoperability Program administrative activities, States would have to ensure that the goods and services are provided no later than close of business September 30, 2022 or close of business September 30, 2023, as applicable. Thus, for example, if an amount that is related to administration of a Medicaid Promoting Interoperability Program audit or appeal has been obligated by September 30, 2023, but the good or service has not yet been furnished by that date, then the expenditure could not be claimed at the enhanced 90 percent FFP.
We invited public comments on this proposal, especially on whether the timelines proposed provide States with a reasonable amount of time to wind down their Medicaid Promoting Interoperability Programs.
For additional information on FFP for State administrative expenses related to pursuing initiatives to encourage the adoption of CEHRT to promote health care quality and the exchange of health care information, we refer readers to State Medicaid Director letters #10-016, 11-004, and #16-003. We understand the ongoing importance of HIE to State Medicaid programs, but again, we are concerned that we do not have the authority to extend the availability of enhanced administrative FFP under section 1903(a)(3)(F)(ii) of the Act for HIE beyond the December 31, 2021 deadline for making incentive payments.
After consideration of the public comments we received, we are finalizing the proposed policies as proposed. We are amending § 495.322 to provide that the 90 percent FFP for Medicaid Promoting Interoperability Program administration would no longer be available for most State expenditures incurred after September 30, 2022.
The availability of 90 percent match for State administrative costs related to Medicaid Promoting Interoperability Program audit and appeals activities, as well as costs related to administering incentive payment disbursements and recoupments that might result from those activities, will continue until September 30, 2023. States would not be able to claim any Medicaid Promoting Interoperability Program administrative match for expenditures incurred after September 30, 2023.
States should be aware that under this final rule, they will need to incur the expenditures for which they would claim the 90 percent FFP for Medicaid Promoting Interoperability Program administrative activities no later than the sunset dates of September 30, 2022 or September 30, 2023, as applicable. This means that for States to claim the 90 percent FFP for goods and services related to Medicaid Promoting Interoperability Program administrative activities, States will have to ensure that the goods and services are provided no later than close of business September 30, 2022 or close of business September 30, 2023, as applicable.
Sections 1815(a) and 1833(e) of the Act provide that no Medicare payments will be made to a provider unless it has furnished the information, as may be requested by the Secretary, to determine the amount of payments due the provider under the Medicare program. In general, providers submit this information through annual cost reports
All providers participating in the Medicare program are required under § 413.20(a) to maintain sufficient
Several provisions in the regulations requiring supporting documentation for the Medicare cost report to be acceptable need to be updated to reflect current practices, to improve the accuracy of these reports, and to facilitate more efficient contractor review of cost reports. The regulations at § 413.24(f)(5)(i) provides that a provider's cost report is rejected if the provider does not complete and submit the Provider Cost Reimbursement Questionnaire (a questionnaire independent of the cost report, OMB No. 0938-0301, also known as Form CMS-339). The Form CMS-339 requires the provider to submit supporting documents, as applicable, for items such as Medicare bad debt, approved educational activities, and cost allocation from a home office or chain organization.
Beginning in 2011, as cost report forms were updated for various provider types, the Form CMS-339 was incorporated as a worksheet in the Medicare cost report (the worksheet title and placement within the cost report vary by provider type), and is no longer submitted as a separate supporting document. The Form CMS-339 has been incorporated into all Medicare cost reports except for the Organ Procurement Organization (OPO) and Histocompatibility Laboratory cost report, Form CMS-216. In section IX.B. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20544 through 20548), we proposed to incorporate the Form CMS-339 into the OPO and Histocompatibility cost report, Form CMS-216.
The cost report worksheet that incorporated the Form CMS-339 continues to require the provider to submit supporting documents for Medicare bad debt, approved educational activities, and certain cost allocation information from a home office or chain organization, as applicable. However, our regulations at § 413.24(f)(5)(i) do not reflect that the Provider Cost Reimbursement Questionnaire, Form CMS-339, has been incorporated into the Medicare cost report as a worksheet because the regulations require the Form CMS-339 to be submitted as a supporting document to the cost report.
Section 413.24(f)(5)(i) also provides that a cost report is rejected for a teaching hospital if a copy of the Intern and Resident Information System (IRIS) diskette is not included as supporting documentation. However, diskettes are no longer used by providers to furnish these data to contractors.
Section 413.20 of the regulations requires providers to maintain sufficient financial records and statistical data for the proper determination of costs payable under the program as well as an adequate ongoing system for furnishing records needed to provide accurate cost data and other information capable of verification by qualified auditors. In accordance with § 413.20(d), the provider must furnish such information to the contractor as may be necessary to assure proper payment. Information from the provider relating to Medicaid days used in the calculation of DSH payments, charity care charges, uninsured discounts, and home office cost allocations are necessary to assure proper payment. While our regulations require that these supporting documents be maintained by the provider and furnished to the contractor to assure proper payment, § 413.24(f)(5) does not require submission of supporting documentation for Medicaid days used in the calculation of DSH payments, charity care charges, uninsured discounts, or home office cost allocations reported on a provider's cost report for the provider to have an acceptable cost report submission. These supporting documents are often subsequently requested by the contractor, and must be submitted by the provider in order to assure proper payment, which can delay payments and prolong audits.
Our specific proposals for revising our regulations that were included in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20544 through 20548) are discussed below, along with the public comments we received and our responses and the policies that we are finalizing in this final rule.
Section 413.24(f)(5)(i) of the regulations provides that a provider's Medicare cost report is rejected for lack of supporting documentation if it does not include the Provider Cost Reimbursement Questionnaire (also known as Form CMS-339). As discussed in section IX.A. of the preamble of the proposed rule and this final rule, beginning in 2011, as cost report forms were updated, the Provider Cost Reimbursement Questionnaire, Form CMS-339, was incorporated into all Medicare cost reports as a worksheet, except the OPO and Histocompatibility Laboratory cost report, Form CMS-216. In the FY 2019 IPPS/LTCH PPS proposed rule, we proposed to incorporate the Provider Cost Reimbursement Questionnaire, Form CMS-339, into the OPO and Histocompatibility Laboratory cost report, Form CMS-216. The incorporation of the Form CMS-339 into the Form CMS-216 will complete our incorporation of the Form CMS-339 into all Medicare cost reports.
In addition, in the proposed rule, we proposed to revise § 413.24(f)(5)(i) by removing the reference to the Provider Cost Reimbursement Questionnaire so that § 413.24(f)(5)(i) no longer states that a cost report will be rejected for lack of supporting documentation if it does not include a Provider Cost Reimbursement Questionnaire (Form CMS-339). Furthermore, we proposed to add language to the first sentence of § 413.24(f)(5)(i) to clarify that a provider must submit all necessary supporting documents for its cost report. We stated in the proposed rule that we believe the proposal is consistent with the recordkeeping requirements in §§ 413.20 and 413.24.
After consideration of the public comments we received, for the reasons discussed above and in the proposed rule, we are finalizing our proposal, without modification, to incorporate the Provider Cost Reimbursement Questionnaire, Form CMS-339 into the OPO and Histocompatibility Laboratory cost report, Form CMS-216, and to revise § 413.24(f)(5)(i) by removing the reference to the Provider Cost Reimbursement Questionnaire so that § 413.24(f)(5)(i) no longer states that a cost report will be rejected for lack of supporting documentation if it does not include a Provider Cost Reimbursement Questionnaire (Form CMS-339). In addition, we are finalizing the addition of language to the first sentence of § 413.24(f)(5)(i) to clarify that a provider must submit all necessary supporting documents for its cost report.
Section 413.24(f)(5)(i) also provides that a Medicare cost report for a teaching hospital is rejected for lack of supporting documentation if the cost report does not include a copy of the Intern and Resident Information System (IRIS) diskette.
Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Public Law 99-272, establishes a methodology for determining payments to hospitals for the GME programs (which is currently implemented in the regulations at 42 CFR 413.75 through 413.83). To account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals, section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the IME adjustment under the IPPS for hospitals that have residents in an approved GME program. The regulation regarding the calculation of this additional payment is located at 42 CFR 412.105. (We refer readers to sections IV.E. and L. of the preamble of this final rule for additional background on IME and direct GME payments.)
In accordance with § 413.78(b) for direct GME and § 412.105(f)(1)(iii)(A) for IME, no individual may be counted as more than one full-time equivalent (FTE). A hospital cannot claim the time spent by residents training at another hospital; if a resident spends time in more than one hospital or in a nonprovider setting, the resident counts as a partial FTE based on the proportion of time worked at the hospital to the total time worked. A part-time resident counts as a partial FTE based on the proportion of allowable time worked compared to the total time necessary to fill a full-time internship or residency slot.
In 1990, we established the IRIS, under the authority of sections 1886(d)(5)(B) and 1886(h) of the Act, in order to facilitate proper counting of FTE residents by hospitals that rotate their FTE residents from one hospital or nonprovider setting to another. Teaching hospitals use the IRIS to collect and report information on residents training in approved residency programs. Section 413.24(f)(5)(i) requires teaching hospitals to submit the IRIS data along with their Medicare cost reports in order to have an acceptable cost report submission. The IRIS can be downloaded from CMS' website at:
After receiving the IRIS data along with each teaching hospital's cost report, the contractors upload the data to a national database housed at CMS, which can be used to identify “duplicates,” that is, FTE residents being claimed by more than one hospital for the same rotation. Identifying duplicates allows the contractors to approach the hospitals that simultaneously claimed the same FTE, and correct the duplicate reporting on the respective hospitals' cost reports for direct GME and IME payment purposes.
Historically, we would collect the IRIS data from hospitals on a diskette, as referenced in § 413.24(f)(5)(i). Because diskettes are no longer used by providers to furnish these data to contractors, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20545 and 20546), we proposed to remove the reference in the regulations to a diskette and instead reference “Intern and Resident Information System data.” Specifically, we proposed to amend § 413.24(f)(5)(i) by adding a new paragraph (A) to include this proposed revised language (83 FR 20546).
In addition, to enhance the contractors' ability to review duplicates and to ensure residents are not being double-counted, we stated that we believe it is necessary and appropriate to require that the total unweighted and weighted FTE counts on the IRIS for direct GME and IME respectively, for all applicable allopathic, osteopathic, dental, and podiatric residents that a hospital may train, must equal the same total unweighted and weighted FTE counts for direct GME and IME reported on Worksheet E-4 and Worksheet E, Part A. The need to verify and maintain the integrity of the IRIS data has been the subject of reviews by the Office of the Inspector General (OIG) over the years. An August 2014 OIG report cited the need for CMS to develop procedures to ensure that no resident is counted as more than one FTE in the calculation of Medicare GME payments (OIG Report No. A-02-13-01014, August 2014). More recently, a July 2017 OIG report recommended that procedures be developed to ensure that no resident is counted as more than one FTE in the calculation of Medicare GME payments (OIG Report No. A-02-15-01027, July 2017).
Therefore, effective for cost reports filed on or after October 1, 2018, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20546), we proposed to add the requirement that IRIS data contain the same total counts of direct GME FTE residents (unweighted and weighted) and of IME FTE residents as the total counts of direct GME and IME FTE residents reported in the cost report. Specifically, we proposed to specify in a new paragraph (A) of § 413.24(f)(5)(i) that, effective for cost reports filed on or after October 1, 2018, the IRIS data must contain the same total counts of direct GME FTE residents (unweighted and weighted) and of IME FTE residents as the total counts of direct GME FTE and IME FTE residents reported in the hospital's cost report, or the cost report will be rejected for lack of supporting documentation (83 FR 20569).
As we noted in the proposed rule, teaching hospitals no longer submit IRIS data on diskettes. Instead, teaching hospitals submit IRIS data with their cost reports in order to have an acceptable cost report. In this final rule, we are finalizing a change to the regulation at § 413.24 to specify that, in order for teaching hospitals to have an acceptable cost report, teaching hospitals must submit their IRIS “data,” given that IRIS diskettes are no longer used by providers to furnish these data to contractors.
After consideration of the public comments we received, for the reasons discussed earlier and in the proposed rule, we are finalizing our proposals with modifications. As proposed, we are removing the reference in the regulations to an IRIS diskette and instead referencing “Intern and Resident Information System data.” Specifically, we are amending § 413.24(f)(5)(i) by adding a new paragraph (A) to provide that a teaching hospital's cost report is rejected for lack of supporting documentation if the cost report does not include the IRIS data. For the reasons discussed above, we are not finalizing our proposal that the IRIS data must contain the same total counts of direct GME FTE residents (unweighted and weighted) and of IME FTE residents as the total counts of direct GME FTE and IME FTE residents reported in the hospital's cost report, or the cost report will be rejected for lack of supporting documentation.
Under section 1861(v)(1) of the Act and the regulations at § 413.89, Medicare may reimburse a portion of the uncollectible deductible and coinsurance amounts to those entities eligible to receive reimbursement for Medicare bad debt. The Medicare Provider Reimbursement Manual (PRM-1, CMS Pub. 15-1), Chapter 3, provides guidance to providers that claim Medicare bad debt reimbursement.
Section 413.24(f)(5)(i) provides that an acceptable cost report submission requires the provider to submit a Provider Cost Reimbursement Questionnaire, Form CMS-339. The Form CMS-339, which has been incorporated into all Medicare cost reports (except the OPO and Histocompatibility Laboratory cost report, Form CMS-216, which we proposed (and are finalizing) to incorporate into the cost report, as discussed in section IX.B.1. of the preamble of the proposed rule and this final rule), requires the provider to submit supporting documentation with the cost report to substantiate its claims for Medicare bad debt reimbursement. For example, the hospital cost report, which incorporated the Form CMS-339, instructs hospitals to submit a “completed Exhibit 2 or internal schedules duplicating the documentation requested on Exhibit 2 to support the bad debts claimed” (Section 4004.2 of CMS Pub. 15-2). This “completed Exhibit 2 or internal schedules duplicating the documentation requested on Exhibit 2 to support the bad debts claimed” is also known as the Medicare bad debt listing and requires information such as the patient's name, dates of service, the beneficiary's Medicaid status, if applicable, the date that collection effort ceased, and the deductible and coinsurance amounts.
Because the Provider Cost Reimbursement Questionnaire is incorporated into the cost report as a worksheet, the bad debt listing continues to be required for an acceptable cost report under § 413.24(f)(5). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20547 and 20548), we proposed to require that the Medicare bad debt listing correspond to the bad debt amount claimed in the provider's cost report, in order for the provider to have an acceptable cost report submission under § 413.24(f)(5). We stated that this proposal is also consistent with a provider's recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, and will facilitate the contractor's review and verification of the cost report. Specifically, we proposed to amend § 413.24(f)(5)(i) by adding a new paragraph (B) to specify that, effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming Medicare bad debt reimbursement, a cost report would be rejected for lack of supporting documentation if it does not include a detailed bad debt listing that corresponds to the bad debt amounts claimed in the provider's cost report.
After consideration of the public comments we received, for the reasons discussed earlier and in the proposed rule, we are finalizing our proposals without modification. Effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming Medicare bad debt reimbursement, a cost report will be rejected for lack of supporting documentation if it does not include a detailed bad debt listing that corresponds to the bad debt amounts claimed in the provider's cost report.
The DSH payment adjustment provision under section 1886(d)(5)(F) of the Act was enacted by section 9105 of COBRA and became effective for discharges occurring on or after May 1, 1986. Under section 1886(d)(5)(F) of the Act, the primary method by which a hospital qualifies for a Medicare DSH payment is based on the hospital's disproportionate patient percentage, which is determined using a statutory formula. This statutory formula incorporates the hospital's number of patient days for patients who are eligible for Medicaid, but were not entitled to benefits under Medicare Part A (“Medicaid eligible days”), which hospitals are required to submit on their cost reports.
Currently, in order for a DSH eligible hospital to have an acceptable cost report submission, there is no requirement for the hospital to also submit a listing of its Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's cost report, as a supporting document. DSH eligible hospitals have always been required to collect and maintain these data for completion of the cost report, and to submit it when requested. However, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20547), we proposed that, in order to have an acceptable cost report submission, DSH eligible hospitals must submit these supporting data with their cost reports. We indicated that, to ensure accurate DSH payments, additional information regarding Medicaid eligible days is required in order to validate the number of Medicaid eligible days the hospital reports in its cost report. Currently, when this information regarding Medicaid eligible days is not submitted by the DSH eligible hospitals with the cost report, contractors must request it. An audit may reveal an overstatement of a hospital's Medicaid eligible days. However, we stated that an audit of these data may not take place for more than a year after the cost report has been submitted, and tentative program reimbursement payments are often issued to a provider upon the submission of the cost report. Because the existing burden estimate for a DSH eligible hospital's cost report already reflects the requirement that these hospitals collect, maintain, and submit these data when requested, we stated in the proposed rule that there is not additional burden.
We explained in the proposed rule (83 FR 20547) that requiring a provider to submit, as a supporting document with its cost report, a listing of the provider's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the DSH eligible hospital's cost report would provide contractors with the DSH eligible hospital's source document listing the Medicaid eligible days claimed on its cost report and would be consistent with the recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, which require a provider to substantiate its costs. A requirement to submit this supporting documentation also would facilitate the contractor's review and verification of the cost report without the need to request additional data from the provider. We stated in the proposed rule that this proposal would not affect a hospital's ability to submit an amended cost report, within 12 months after the hospital's cost report is due, that reflects updated information on Medicaid eligible patient days after the hospital receives updated Medicaid eligibility information from the State (CY 2016 OPPS/ASC final rule with comment period (80 FR 70560)).
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed that, effective for cost reporting periods beginning on or after October 1, 2018, in order for a hospital eligible for a Medicare DSH payment adjustment to have an acceptable cost report submission in accordance with § 413.24(f)(5), the provider must submit a detailed listing of its Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the provider's cost report, as a supporting document with the provider's cost report. In addition, we proposed that if the provider submits an amended cost report that changes its Medicaid eligible days, an amended listing or an addendum to the original listing of the provider's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the provider's amended cost report would also need to be submitted as a supporting document with the amended cost report.
Consistent with this proposal, we proposed to amend § 413.24(f)(5)(i) by adding a new paragraph (C) to specify that, effective for cost reporting periods beginning on or after October 1, 2018, for hospitals claiming a DSH payment adjustment, a cost report will be rejected for lack of supporting documentation if it does not include a detailed listing of the hospital's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's cost report. If the hospital submits an amended cost report that changes its Medicaid eligible days, an amended listing or an addendum to the original listing of the hospital's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's amended cost report would be required.
After consideration of the public comments we received, for the reasons discussed earlier and in the proposed rule, we are finalizing our proposals without modification. Therefore, effective for cost reporting periods beginning on or after October 1, 2018, for hospitals claiming a disproportionate share payment adjustment, a cost report will be rejected for lack of supporting documentation if it does not include a detailed listing of the hospital's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's cost report. In addition, if the hospital submits an amended cost report that changes its Medicaid eligible days, the hospital must submit an amended listing or an addendum to the original listing of the hospital's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's amended cost report. We are finalizing § 413.24(f)(5)(i)(C) as proposed to reflect these policies.
Section 3133 of the Affordable Care Act amended the Medicare DSH payment adjustment provision at section 1886(d)(5)(F) of the Act, and established section 1886(r) of the Act which provides for an additional payment that reflects a hospital's uncompensated care (which includes charity care and discounts given to uninsured patients who qualify under the hospital's charity care policy or financial assistance policy). In accordance with the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201 through 38208), starting in FY 2018, Worksheet S-10 of the cost report is used as a data source for calculating uncompensated care payments.
Currently there is no requirement for a DSH eligible hospital to submit supporting documentation with its cost report, to substantiate its charity care or discounts given to uninsured patients who qualify under the hospital's charity care policy or financial assistance policy, in order for its cost report submission to be acceptable in accordance with § 413.24(f)(5). Uncompensated care data reported on a hospital's cost report did not have an impact on the determination of uncompensated care payments before FY 2018 when the agency first began using Worksheet S-10 data to calculate uncompensated care payments. However, because the Worksheet S-10 data are now utilized to make uncompensated care payments to DSH-eligible hospitals, documentation to substantiate charity care or discounts given to uninsured patients who qualify under the hospital's charity care or financial assistance policy is needed to complete the cost report and to ensure there is no duplication when hospitals report Medicare bad debt, charity care, and uninsured discounts. All hospitals, including DSH eligible hospitals, have always been required to collect and maintain these data for completion of the cost report, and submit it when requested. However, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20547 and 20548), we proposed that, in order to have an acceptable cost report submission, DSH eligible hospitals must submit these supporting data with their cost reports. We stated that, to ensure accurate uncompensated care payments, additional supporting information regarding charity care and uninsured discounts is required in order to validate the amounts reported in the cost report. Currently, when the documentation to support the charity care charges and uninsured discounts is not submitted by DSH eligible hospitals with the cost report, contractors must request it. We stated that because the existing burden estimate for a DSH eligible hospital's cost report already reflects the requirement that these hospitals collect, maintain, and submit these data when requested, there is no additional burden.
We stated in the FY 2019 IPPS/LTCH PPS proposed rule that we believe that requiring a DSH eligible hospital to submit, with its cost report, a detailed listing of its charity care and uninsured discounts that corresponds to the amount claimed in the hospital's cost report would be consistent with the recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, which require a provider to substantiate its costs. We stated that this supporting documentation also would facilitate the contractor's review and verification of the cost report without the need to request additional data from the provider.
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed that, effective for cost reporting periods beginning on or after October 1, 2018, in order for hospitals reporting charity care and/or uninsured discounts to have an acceptable cost report submission under § 413.24(f)(5), the provider must submit a detailed listing of charity care and/or
Consistent with this proposal, we proposed to amend § 413.24(f)(5)(i) by adding a new paragraph (D) to specify that, effective for cost reporting periods beginning on or after October 1, 2018, for hospitals reporting charity care and/or uninsured discounts, a cost report will be rejected for lack of supporting documentation if it does not include a detailed listing of charity care and/or uninsured discounts that corresponds to the amounts claimed in the provider's cost report.
After consideration of the public comments we received, for the reasons discussed earlier and in the proposed rule, we are finalizing our proposed policy, without modification, that, effective for cost reporting periods beginning on or after October 1, 2018, for DSH eligible hospitals reporting charity care and/or uninsured discounts, a cost report will be rejected for lack of supporting documentation if it does not include a detailed listing of charity care and/or uninsured discounts that corresponds to the amounts claimed in the hospital's cost report. We are finalizing § 413.24(f)(5)(i)(D) as proposed to reflect this final policy. In addition, as discussed earlier, until a standard format is adopted, a hospital must submit a listing with its cost report submission that supports the amounts reported in its cost report including information, such as: Patient name, dates of service, insurer (if applicable), and the amount of the charity care and/or uninsured discount given to the patient.
A chain organization consists of a group of two or more health care facilities which are owned, leased, or through any other device, controlled by one organization (Provider Reimbursement Manual 1 (PRM-1), CMS Pub. 15-1, Chapter 21, Section 2150). Chain organizations include, but are not limited to, chains operated by proprietary organizations and chains operated by various religious, charitable, and governmental organizations. A chain organization may also include business organizations which are engaged in other activities not directly related to health care.
When a provider claims costs on its cost report that are allocated from a home office (also known as a chain home office or chain organization), the Home Office Cost Statement constitutes the documentary support required of the provider to be reimbursed for home office costs in the provider's cost report as set forth in Section 2153, Chapter 21, of the PRM-1. Section 2153 states that each contractor servicing a provider in a chain must be furnished with a detailed Home Office Cost Statement as a basis for reimbursing the provider for cost allocations from a home office or chain organization. However, many cost
Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed that, effective for cost reporting periods beginning on or after October 1, 2018, in order for a provider claiming costs on its cost report that are allocated from a home office or chain organization to have an acceptable cost report submission under § 413.24(f)(5), a Home Office Cost Statement completed by the home office or chain organization that corresponds to the amounts allocated from the home office or chain organization to the provider's cost report must be submitted as a supporting document with the provider's cost report. We stated that this proposal would facilitate the contractor's review and verification of the cost report without needing to request additional data from the provider. We stated that with our proposal, we anticipate more providers will submit the Home Office Cost Statement to support the amounts reported in their cost reports, in order to have an acceptable cost report submission. We further stated that because the existing burden estimate for a provider's cost report already reflects the requirement that providers collect, maintain, and submit these data, there is no additional burden.
Consistent with this proposal, we proposed to amend § 413.24(f)(5)(i) by adding a new paragraph (E) to specify that, effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming costs on their cost report that are allocated from a home office or chain organization, a cost report will be rejected for lack of supporting documentation if it does not include a Home Office Cost Statement completed by the home office or chain organization that corresponds to the amounts allocated from the home office or chain organization to the provider's cost report.
After consideration of the public comments we received, for the reasons discussed earlier and in the proposed rule, we are finalizing our proposal with
In the FY 2015 IPPS/LTCH proposed rule and final rule (79 FR 28169 and 79 FR 50146, respectively), we discussed the implementation of section 2718(e) of the Public Health Service Act, which aims to improve the transparency of hospital charges. We noted that section 2718(e) of the Public Health Service Act, which was enacted as part of the Affordable Care Act, requires that each hospital operating within the United States, for each year, establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act. We reminded hospitals of their obligation to comply with the provisions of section 2718(e) of the Public Health Service Act and provided guidelines for its implementation. We stated that hospitals are required to either make public a list of their standard charges (whether that be the chargemaster itself or in another form of their choice) or their policies for allowing the public to view a list of those charges in response to an inquiry.
We encouraged hospitals to undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals. We also stated that we expect that hospitals will update the information at least annually, or more often as appropriate, to reflect current charges. We further noted that we are confident that hospital compliance with this statutory transparency requirement will greatly improve the public accessibility of charge information. Finally, we stated that we would continue to review and post relevant charge data in a consumer-friendly way, as we previously have done by posting hospital and physician charge information on the CMS website.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20548 and 20549), we indicated that we are concerned that challenges continue to exist for patients due to insufficient price transparency. Such challenges include patients being surprised by out-of-network bills for physicians, such as anesthesiologists and radiologists, who provide services at in-network hospitals, and patients being surprised by facility fees and physician fees for emergency department visits. We also are concerned that chargemaster data are not helpful to patients for determining what they are likely to pay for a particular service or hospital stay. In order to promote greater price transparency for patients, we stated that we are considering ways to improve the accessibility and usability of the charge information that hospitals are required to disclose under section 2718(e) of the Public Health Service Act.
Therefore, as one step to further improve the public accessibility of charge information, effective January 1, 2019, we announced the update to our guidelines to require hospitals to make available a list of their current standard charges via the internet in a machine readable format and to update this information at least annually, or more often as appropriate. This could be in the form of the chargemaster itself or another form of the hospital's choice, as long as the information is in machine readable format.
We note that it was sometimes difficult to determine when certain commenters who submitted comments on the FY 2019 IPPS/LTCH PPS proposed rule were responding to the broader price transparency request for information (RFI) and when they were responding specifically to the updated guidelines. To the extent we believed that a comment addressed the updated guidelines, we summarized it below. Comments on the broader price transparency initiative and suggestions for additional future actions that we may take with the guidelines, including enforcement actions, will be addressed in future rulemaking.
We acknowledge that providing patients with more specific information on their potential financial liability is needed and commend the hospitals that already do so. However, we believe that this more specific need does not justify a delay in the provision of chargemaster information to the public. We note that making charge information more easily accessible to patients and the public does not preclude hospitals from taking additional steps or continuing to provide the information they currently provide.
After consideration of the public comments we received, we currently do not believe there is a need to further update our guidelines beyond the updated guidelines that we previously announced would be effective January 1, 2019, which are that hospitals' list of standard charges be made available to the public via the internet in a machine readable format and that hospitals update this information at least annually, or more often as appropriate.
Our Medicare regulations at 42 CFR 424.11, which implement sections 1814(a)(2) and 1835(a)(2) of the Act, specify the requirements for physician statements that certify and periodically recertify as to the medical necessity of certain types of covered services provided to Medicare beneficiaries. The regulation provision under § 424.11(c) specifies that when supporting information for the required physician statement is available elsewhere in the records (for example, in the physician's progress notes), the information need not be repeated in the statement itself. The last sentence of § 424.11(c) further provides that it will suffice for the statement to indicate where the information is to be found.
As we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20550), as part of our ongoing initiative to identify Medicare regulations that are unnecessary, obsolete, or excessively burdensome on health care providers and suppliers—and thereby free up resources that could be used to improve or enhance patient care—we have been made aware that the provisions of § 424.11(c) which state that it will suffice for the statement to indicate where the information is to be found may be resulting in unnecessary denials of Medicare claims. As currently worded, this last sentence of § 424.11(c) can result in a claim being denied merely because the physician statement technically fails to identify a specific location in the file for the supporting information, even when that information nevertheless may be readily apparent to the reviewer. We believe that continuing to require the location to be specified in this situation is unnecessary. Certifications and recertifications continue to be based on the criteria for the service being certified, and the medical record must contain adequate documentation of the relevant criteria for which the physician is providing certification or recertification, even if the precise location of the information within the medical record is not included. Moreover, the need for the precise location is becoming increasingly obsolete with the growing utilization of electronic health records (EHRs)—which, by their nature, are readily searchable. Accordingly, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20550), we proposed to delete the last sentence of § 424.11(c). In addition, we proposed to relocate the second sentence of § 424.11(c) (indicating that supporting information contained elsewhere in the provider's records need not be repeated in the certification or recertification statement itself) to the end of the immediately preceding paragraph (b), which describes similar kinds of flexibility that are currently afforded in terms of completing the required statement.
After consideration of the public comments we received, we are finalizing, without modification, our proposed changes. Specifically, we are deleting the last sentence of § 424.11(c) and relocating the second sentence of § 424.11(c) to the end of the immediately preceding paragraph (b).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20550 through 20553), we included a Request for Information (RFI) related to promoting interoperability and electronic health care information exchange. We received approximately 313 timely pieces of correspondence on this RFI. We appreciate the input provided by commenters.
Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC's recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary's recommendations regarding MedPAC's recommendations. We have reviewed MedPAC's March 2018 “Report to the Congress: Medicare Payment Policy” and have given the recommendations in the report consideration in conjunction with the policies set forth in this final rule. MedPAC recommendations for the IPPS for FY 2019 are addressed in Appendix B to this final rule.
For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, or visit MedPAC's website at:
IPPS-related data are available on the internet for public use. The data can be found on the CMS website at:
Commenters interested in discussing any data files used in construction of this final rule should contact Michael Treitel at (410) 786-4552.
Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20554 through 20564), we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs).
The information collection requirements associated with the preservation of resident cap positions from closed hospitals, addressed in section IV.K.3. of the preamble of the proposed rule (83 FR 20439 through 20440) and this final rule, are not subject to the Paperwork Reduction Act, as stated in section 5506 of the Affordable Care Act.
The Hospital IQR Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment (RHQDAPU) Program) was originally established to implement section 501(b) of the MMA, Public Law 108-173. The collection of information associated with the original starter set of quality measures was previously approved under OMB control number 0938-0918. All of the information collection requirements previously approved under OMB control number 0938-0918 have been combined with the information collection request currently approved under OMB control number 0938-1022. OMB has currently approved 3,637,282 hours of burden and approximately $133 million under OMB control number 0938-1022, accounting for information collection burden experienced by 3,300 IPPS hospitals and 1,100 non-IPPS hospitals for the FY 2020 payment determination.
In section VIII.A. of the preambles of the proposed rule (83 FR 20470 through 20500) and this final rule, we discuss the following finalized policies that we expect to affect our collection of information burden estimates: (1) eCQM reporting and submission requirements for the CY 2019 reporting period/FY 2021 payment determination; (2) removal of three chart-abstracted measures beginning with the CY 2019 reporting period/FY 2021 payment determination; and (3) removal of six chart-abstracted measures beginning with the CY 2020 reporting period/FY 2022 payment determination. Details on these policies, as well as the expected burden changes, are discussed below.
This final rule also includes policies with respect to claims-based and other measures to: (1) Remove 17 claims-based measures beginning with the CY 2018 reporting period/FY 2020 payment determination; (2) remove two claims-based measures beginning with the CY 2019 reporting period/FY 2021 payment determination; (3) remove one claims-based measure beginning with CY 2020 reporting period/FY 2022 payment determination; (4) remove one claims-based measure beginning with the CY 2021 reporting period/FY 2023 payment determination; (5) remove two structural measures beginning with the CY 2018 reporting period/FY 2020 payment determination; and (6) remove seven eCQMs beginning with the CY 2020 reporting period/FY 2022 payment determination. As discussed further below, we do not expect these policies to affect our information collection burden estimates.
In section VIII.A.5.b.(8)(b) of the preamble of this final rule, we discuss our finalized proposals to remove three chart-abstracted clinical process of care measures beginning with the CY 2019 reporting period/FY 2021 payment determination:
• Median Time from ED Arrival to ED Departure for Admitted ED Patients (ED-1) (NQF #0495);
• Influenza Immunization (IMM-2) (NQF #1659); and
• Incidence of Potentially Preventable Venous Thromboembolism (VTE-6).
We anticipate a reduction in information collection burden for all IPPS hospitals of 741,074 hours, or 225 hours per hospital, as a result of our finalized proposals to remove the ED-1 and IMM-2 chart-abstracted measures beginning with the CY 2019 reporting period/FY 2021 payment determination. This estimate was calculated by considering the previously approved information collection burden estimate for reporting the combined global population set (ED-1, ED-2, and IMM-2) of 1,599,074 hours, minus the estimated information collection reporting burden for only the ED-2 measure
We anticipate our finalized proposal to remove the VTE-6 measure will result in an information collection burden reduction of 304,997 hours for all IPPS hospitals, or 92 hours per hospital, for the CY 2019 reporting period/FY 2021 payment determination. We have previously estimated a reporting burden of 92 hours (7 minutes per record × 198 records per hospital per quarter × 4 quarters/60 minutes) per hospital per year, or 304,997 hours (92 hours per hospital × 3,300 hospitals) across all hospitals associated with abstracting and reporting VTE-6. Therefore, we estimate an information collection burden decrease of 304,997 hours for the CY 2019 reporting period/FY 2021 payment determination because we are finalizing our proposal to remove this measure from the Hospital IQR Program.
In summary, as a result of our finalized proposals in section VIII.A.5.b.(8) of the preamble of this final rule to remove IMM-2, ED-1, and VTE-6, we estimate an information collection burden reduction of 1,046,071 hours (−741,074 hours for ED-1 and IMM-2 removal + −304,997 hours for VTE-6 removal) and approximately $38.3 million (1,046,071 hours × $36.58 per hour
In sections VIII.A.5.b.(2)(b) and VIII.A.5.b.(8)(b) of the preamble of this final rule, we are finalizing the removal of five chart-abstracted National Healthcare Safety Network (NHSN) hospital-acquired infection (HAI) measures
• National Healthcare Safety Network Facility-Wide Inpatient Hospital-Onset
• National Healthcare Safety Network Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138);
• National Healthcare Safety Network Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139);
• National Healthcare Safety Network Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
• American College of Surgeons—Centers for Disease Control and Prevention Harmonized Procedure-Specific Surgical Site Infection (SSI) Outcome Measure (Colon and Abdominal Hysterectomy SSI) (NQF #0753); and
• Admit Decision Time to ED Departure Time for Admitted Patients Measure (ED-2) (NQF #0497).
We note that as discussed in section VIII.A.5.b.(2)(b) of the preamble of this final rule, we proposed to remove the NHSN HAI measures beginning with the CY 2019 reporting period/FY 2021 payment determination, but are finalizing a modified version of our proposal which delays their removal until the CY 2020 reporting period/FY 2022 payment determination. Our estimates below have been updated to reflect this change. Because the burden associated with submitting data for the NHSN HAI measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) is captured under separate OMB control number 0920-0666, we do not provide an independent estimate of the information collection burden associated with these measures for the Hospital IQR Program. Because the NHSN HAI measures will be retained in the HAC Reduction and Hospital VBP Programs, we do not anticipate a reduction in data collection and reporting burden associated with the CDC NHSN's OMB control number 0920-0666. We note, however, that we anticipate a reduction in burden associated with the Hospital IQR Program validation activities we conduct for these NHSN HAI measures, as discussed further below.
We further anticipate removing the chart-abstracted ED-2 measure will reduce the reporting burden for all IPPS hospitals by a total of 858,000 hours, or 260 hours per hospital. As discussed above, we estimate reporting the ED-2 measure takes approximately 260 hours (15 minutes per record × 260 records per hospital per quarter × 4 quarters/60 minutes = 260 hours) per hospital per year, or 858,000 hours (260 hours × 3,300 hospitals) across all IPPS hospitals. Therefore, we estimate an 858,000 hour information collection burden decrease for the CY 2020 reporting period/FY 2022 payment determination because we are finalizing our proposal to remove this measure from the Hospital IQR Program.
In summary, because we are finalizing our proposal in section VIII.A.5.b.(8)(b) of the preamble of this final rule to remove ED-2, we estimate an information collection burden reduction of 858,000 hours and approximately $31.4 million (858,000 hours × $36.58 per hour
While we did not propose any changes to our validation requirements related to chart-abstracted measures, because we are finalizing our proposals with modification in section VIII.A.5.b.(2)(b)
As noted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49762 and 49763), we reimburse hospitals directly for expenses associated with submission of charts for clinical process of care measure data validation (we reimburse hospitals at 12 cents per photocopied page; for hospitals providing charts digitally via a rewritable disc, such as encrypted CD-ROMs, DVDs, or flash drives, we reimburse hospitals at a rate of 40 cents per disc); we do not believe any additional information collection burden is associated with submitting this information via web portal or PDF (79 FR 50346). Therefore, because we directly reimburse, we do not anticipate any net change in burden associated with the cost of submission of validation charts as a result of our finalized proposals to remove four clinical process of care measures. Hospitals will no longer be required to submit, or be reimbursed for submitting, these data to CMS.
Because we are finalizing our proposals to remove all of the NHSN HAI measures from the Hospital IQR Program and because hospitals selected for validation currently are required to submit validation templates for the NHSN HAI measures, we anticipate a reduction in information collection burden under the Hospital IQR Program associated with the NHSN HAI data validation effort. We note that the burden associated with data collection for the NHSN HAI measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) is accounted for under the CDC NHSN OMB control number 0920-0666. Because the NHSN HAI measures will be retained in the HAC Reduction and Hospital VBP Programs, we do not anticipate a change in data collection and reporting burden associated with this OMB control number due to our finalized proposals under the Hospital IQR Program.
The data validation activities, however, are conducted by CMS. Since
In sections VIII.A.5.a. and b.(1) of the preamble of this final rule, we are finalizing our proposals to remove two structural measures (Hospital Survey on Patient Safety Culture and Safe Surgery Checklist Use) beginning with the CY 2018 reporting period/FY 2020 payment determination. We anticipate removing these measures will result in a minimal information collection burden reduction for hospitals. Specifically, we do anticipate a very slight reduction in information collection burden associated with the finalized removal of the Safe Surgery Checklist measure because completion of this measure takes hospitals approximately 2 minutes each year (77 FR 53666). Similarly, we anticipate a very slight reduction in information collection burden associated with the finalized removal of the Patient Safety Checklist measure (80 FR 49762 through 49873). Consistent with previous years (80 FR 49762), we estimate a collection of information burden of 15 minutes per hospital to report all four previously finalized structural measures and to complete other forms (such as the Extraordinary Circumstances Exceptions Request Form). Therefore, our information collection burden estimate of 15 minutes per hospital remains unchanged because we believe the reduction in information collection burden associated with removing these two structural measures is sufficiently minimal that it will not substantially impact this estimate, and we want to retain a conservative estimate of the information collection burden associated with the use of our forms.
In section VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the preamble of this final rule, we are finalizing our proposals to remove the following 17 claims-based measures beginning with the CY 2018 reporting period/FY 2020 payment determination:
• Patient Safety and Adverse Events Composite Measure (PSI 90) (NQF #0531);
• Hospital 30-Day All-Cause Risk-Standardized Readmission Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0505) (READM-30-AMI);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1891) (READM-30-COPD);
• Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2515) (READM-30-CABG);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Heart Failure Hospitalization (NQF #0330) (READM-30-HF);
• Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Pneumonia Hospitalization (NQF #0506) (READM-30-PN);
• 30-day Risk-Standardized Readmission Rate Following Stroke Hospitalization (READM-30-STK);
• Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (NQF #1551) (READM-30-THA/TKA);
• Hospital 30-day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization for Patients 18 and Older (NQF #0230) (MORT-30-AMI);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization (NQF #0229) (MORT-30-HF);
• Medicare Spending Per Beneficiary (MSPB)—Hospital (NQF #2158);
• Cellulitis Clinical Episode-Based Payment Measure (Cellulitis Payment);
• Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure (GI Payment);
• Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure (Kidney/UTI Payment);
• Aortic Aneurysm Procedure Clinical Episode-Based Payment Measure (AA Payment);
• Cholecystectomy and Common Duct Exploration Clinical Episode-Based Payment Measure (Chole and CDE Payment); and
• Spinal Fusion Clinical Episode-Based Payment Measure (SFusion Payment).
In addition, we are finalizing our proposals to remove two claims-based measures beginning with the CY 2019 reporting period/FY 2021 payment determination: (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893); and (2)
Because these claims-based measures are calculated using only data already reported to the Medicare program for payment purposes, we do not anticipate that removing these measures will affect information collection burden on hospitals. However, we refer readers to section VIII.A.5.b.(2)(a), (3), (4), (6) and (7) of the preamble of this final rule for a discussion of the reduction in costs associated with these measures unrelated to the information collection burden.
In section VIII.A.5.b.(9) of the preamble of this final rule, we are finalizing our proposals to remove the following seven eCQMs from the eCQM measure set beginning with the CY 2020 reporting period/FY 2022 payment determination:
• Primary PCI Received within 90 Minutes of Hospital Arrival (AMI-8a);
• Home Management and Plan of Care Document Given to Patient/Caregiver (CAC-3);
• Median Time from ED Arrival to ED Departure for Admitted ED Patients (ED-1) (NQF #0495);
• Hearing Screening Prior to Hospital Discharge (EHDI-1a) (NQF #1354);
• Elective Delivery (PC-01) (NQF #0469);
• Stroke Education (STK-08); and
• Assessed for Rehabilitation (STK-10) (NQF #0441).
Because these eCQMs being finalized for removal were among a set of 15 eCQMs available for reporting, we believe that reducing the number of eCQMs from which hospitals choose will enable hospitals to focus on and maintain a smaller subset of measures (8 instead of 15), but this will not have an effect on the burden of submitting information to CMS. Hospitals will still be required to submit 4 eCQMs of their choice from the eCQM measure set. While the information collection burden will not change, we refer readers to section VIII.A.4.b. of the preamble of this final rule where we acknowledge that costs are multi-faceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining Hospital IQR Program requirements.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38355 through 38361), we finalized eCQM reporting requirements, such that hospitals submit one, self-selected calendar quarter of data for 4 eCQMs in the Hospital IQR Program measure set for the CY 2018 reporting period/FY 2020 payment determination. In section VIII.A.10.d.(2) of the preamble of this final rule, we are finalizing our proposal to require that hospitals continue to submit one, self-selected calendar quarter of data for 4 eCQMs in the Hospital IQR Program measure set for the CY 2019 reporting period/FY 2021 payment determination. Therefore, we believe there will be no change to the burden estimate because the previous burden estimate of 40 minutes per hospital per year (10 minutes per record × 4 eCQMs × 1 quarter) associated with eCQM reporting requirements finalized for the CY 2018 reporting period/FY 2020 payment determination will continue to apply to the CY 2019 reporting period/FY 2021 payment determination.
In section VIII.A.10.d.(3) of the preamble of this final rule, we are finalizing our proposal to update the EHR certification requirements by requiring the use of EHR technology certified to the 2015 Edition beginning with the CY 2019 reporting period/FY 2021 payment determination, to align with the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) for eligible hospitals and CAHs. We do not expect this finalized proposal to affect our information collection burden estimates because this policy does not require hospitals to submit new data to CMS. With respect to any costs unrelated to data submission, we refer readers to section I.K. of Appendix A of this final rule.
In summary, under OMB control number 0938-1022, we estimate: (1) A total information collection burden reduction of 1,046,138 hours (−1,046,071 hours due to the removal of ED-1, IMM-2, and VTE-6 measures for the CY 2019 reporting period/FY 2021 payment determination and −67 hours for no longer collecting data for the voluntary Hybrid HWR measure
As discussed in sections VIII.B. of the preambles of the proposed rule (83 FR 20500 through 20510) and this final rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. There is no financial impact to PCH Medicare payment if a PCH does not participate. Below we discuss only changes in burden that will result from the proposals that we are finalizing in this final rule.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20559), we proposed to revise our burden calculation methodology. With all the parameters considered when PCHs submit data on PCHQR Program measures (training of appropriate staff members on National Healthcare Safety Network (NHSN) reporting and the CMS Web Measures Tool for the reporting of the clinical process/oncology care measures; the time required for collection and aggregation of data; and the time required for reporting of the data by the PCH's representative), we strive to achieve continuity in how we calculate and analyze burden data. In prior years, we have based our burden estimates on the notion that all 11 PCHs would report on all measures for all cases (78 FR 50958). These assumptions were made in order to be as comprehensive as possible given a lack of PCH-specific data available at the time. However, we believe it is more appropriate to use estimates developed using data available in other quality reporting programs wherever possible, because we believe these estimates will provide a more accurate estimate of burden associated with data collection and reporting. Our proposal to update the estimate the time required to collect and report data for structural measures and measures that use a web-based tool is discussed below.
We initially adopted five clinical process/cancer specific treatment measures that utilized a web-based tool for the FY 2016 program year in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50841 through 50844). In that rule, we did not specify burden estimates based on the measure type, but instead provided estimates “for submitting all quality measure data” (78 FR 50958). Since then, we have been able to better understand and differentiate the various levels of effort associated with data abstraction and submission for specific types of measures. Moreover, in understanding that certain measure types prove more burdensome than others (that is, chart-abstracted measures), we believe it is necessary to provide burden estimates that better reflect the type of measure being discussed.
Using historical data from its validation contractor, the Hospital IQR Program has previously estimated that it takes 15 minutes per hospital to report on four structural measures (80 FR 49762). We believe this estimate is appropriate for the PCHQR Program because data submission for measures that utilize a web-based tool is similar to the data submission for a structural measure, in that both types of measures use the same reporting mechanism, the QualityNet Secure Portal. In addition, we wish to account for the time associated with data collection and aggregation for individual measures when considering burden, and believe 15 minutes per measure is an appropriately conservative estimate for the measures submitted via a web-based tool in the PCHQR Program. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20559), we proposed to apply this burden estimate to four measures that utilize a web-based tool: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389).
We invited public comment on our proposal to utilize a burden estimate of 15 minutes per measure, per PCH, with respect to the burden estimates we discuss below for the FY 2021 program year and subsequent years.
We did not receive any public comments on this proposal. We are therefore finalizing that we will use a burden estimate of 15 minutes per measure, per PCH, with respect to the burden estimates for web-based and/or structural measures for the FY 2021 program year and subsequent years.
In section VIII.B.3. of the preamble of this final rule, we are finalizing our proposal to remove six measures beginning with the FY 2021 program year—four web-based, structural measures: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389), and two chart-abstracted, NHSN measures: (5) NHSN Catheter-Associated Urinary Tract Infection
We estimate that the removal of four web-based, structural measures will reduce the burden associated with quality reporting on PCHs. We estimate a reduction of 1 hour (or 60 minutes) per PCH (15 minutes per measure × 4 measures = 60 minutes), and a total annual reduction of approximately 11 hours for all 11 PCHs (60 minutes × 11 PCHs/60 minutes per hour), due to the finalized removal of these four measures.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20503), we proposed to remove two NHSN measures, Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138) and (2) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139), from the PCHQR Program. As discussed in section VIII.B.3.b.(2) of the preamble of this final rule, we are deferring finalization of our policies regarding future use of the Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138) and Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) in the PCHQR Program to a future 2018 final rule, most likely in the CY 2019 OPPS/ASC final rule targeted for release no later than November 2018. We will therefore address any change in burden associated with this policy decision, most likely, in the CY 2019 OPPS/ASC final rule.
We note that we have also reconciled the burden estimates associated with the remaining NHSN measures (CLABSI, CAUTI, CDI, HCP, MRSA and Colon and Abdominal Hysterectomy SSI) included in the PCHQR Program measure, which were previously accounted for under OMB Control Number 0938-1175. The burden associated with data collection for these measures is accounted for under the CDC NHSN OMB control number 0920-0666; for this reason, we have removed the duplicative burden estimate from the PCHQR Program's OMB Control Number, 0938-1175.
(3) Adoption of 30-Day Unplanned Readmissions for Cancer Patients Measure (NQF #3188)
We do not anticipate any increase in burden on PCHs related to our finalized proposal to adopt the claims-based 30-Day Unplanned Readmissions for Cancer Patients measure (NQF #3188), beginning with the FY 2021 program year, because this measure is claims-based and does not require PCHs to submit any additional data.
In summary, we estimate a total reduction of 11 hours of burden per year for all 11 PCHs (−1 hours per PCH × 11 PCHs) associated with the removal of the four web-based, structural measures beginning with the FY 2021 program year. Coupled with our estimated salary costs, we estimate that these finalized changes will result in a reduction in annual labor costs of $402 (11 hours × $36.58 hourly labor cost
In section IV.I. of the preambles of the proposed rule (83 FR 20407 through 20426) and this final rule, we discuss requirements for the Hospital VBP Program. Specifically, in this final rule, with respect to quality measures, we are finalizing our proposals to remove three claims-based measures (AMI Payment, HF Payment, and PN Payment) effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule. Because these claims-based measures are calculated using only data already reported to the Medicare program for payment purposes, we do not anticipate that removing these measures will increase or decrease the reporting burden on hospitals. However, we believe removal of these measures from the Hospital VBP Program will reduce other costs associated with the program, such as: (1) Costs for health care providers and clinicians to track the confidential feedback preview reports and publicly reported information on the measures in more than one program; (2) costs for CMS to analyze and publicly report the measures' data in multiple programs; and (3) confusion for beneficiaries to see public reporting on the same measures in different programs. As discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposal to remove a fourth claims-based measure—Patient Safety and Adverse Events (Composite) (PSI 90) (NQF #0531).
In addition, in this final rule, we are finalizing our proposal to remove one chart-abstracted measure (Elective Delivery (NQF #0469) (PC-01)) beginning with the FY 2021 program year. Because this chart-abstracted measure used data required for and collected under the Hospital IQR Program (OMB control number 0938-1022), there was no additional data collection burden associated with this measure under the Hospital VBP Program. Therefore, we do not anticipate removing this measure will increase or decrease the reporting burden on hospitals. However, we believe removal of this measure from the Hospital VBP Program will reduce other costs associated with the program, such as: (1) Costs for health care providers and clinicians to track the confidential feedback preview reports and publicly reported information on the measures in more than one program; (2) costs for CMS to analyze, and publicly report the measures' data in multiple programs; and (3) confusion for beneficiaries to see public reporting on the same measures in different programs.
As discussed in section IV.I.2.c.(2) of the preamble of this final rule, we are not finalizing our proposal to remove five other chart-abstracted measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI). Because these chart-abstracted measures use data that will continue to be required for and collected under the Hospital IQR Program through the CY 2019 reporting period/FY 2021 payment determination, there is no change to the data collection burden associated with these measures under the Hospital VBP Program.
We note that we are finalizing our proposals to remove eight claims-based measures from the Hospital IQR Program, which have been finalized previously for, and will remain in, the Hospital VBP Program. However, we do not believe retaining these claims-based measures in the Hospital VBP Program will create any change in burden for
In section VIII.C.5. of the preambles of the proposed rule (83 FR 20510 through 20515) and this final rule, we discuss our finalized policies to remove two measures from the LTCH QRP beginning with the FY 2020 LTCH QRP and to remove one measure from the LTCH QRP beginning with the FY 2021 LTCH QRP.
In section VIII.C.5.a. and b. of the preamble of this final rule, we are finalizing our proposals to remove two CDC NHSN measures: National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-Onset Methicillin-Resistant
Based on estimates provided by the CDC, which is based on the frequency of actual reporting on such data, we estimate that the removal of the National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
Applying the same approach on burden reduction estimations, we estimate that the removal of the National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH QRP will result in a 4.4 hour (22 minutes per VAE submission × 12 estimated submissions per LTCH per year) reduction in clinical staff time to report data, which equates to a decrease of 1,848 hours (4.4 hours burden per LTCH per year × 420 total LTCHs) in burden for all LTCHs. Given the registered nurse hourly rate of $69.40 per hour, and medical records or health information technician rate of $39.86 per hour for the submission of VAE data to the NHSN per LTCH per year, we estimate that the total cost of complying with the LTCH QRP will be reduced by $293.54 per LTCH annually, or $123,288.48 for all LTCHs annually.
In addition, in section VIII.C.5.c. of the preamble of this final rule, we are finalizing our proposal to remove the measure, Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680), beginning with the FY 2021 LTCH QRP. LTCHs will no longer be required to submit data on this measure beginning with October 1, 2018 admissions and discharges. As a result, the estimated burden and cost for LTCHs for complying with requirements of the LTCH QRP will be reduced. Specifically, we believe that there will be a 1.8 minute reduction in clinical staff time to report data per patient stay. We estimate 136,476 discharges from 420 LTCHs annually. This equates to a decrease of 4,094 hours in burden for all LTCHs (0.03 hours per assessment × 136,476 discharges). Given 1.8 minutes of registered nurse time at $69.40 per hour completing an average of 325 sets of LTCH CARE Data Set assessments per LTCH per year, we estimate that the total cost will be reduced by $676.53 per LTCH annually, or $284,143.03 for all LTCHs annually. This decrease in burden will be accounted for in the information collection under OMB control number 0938-1163.
Overall, the cost associated with the finalized changes to the LTCH QRP is estimated at a reduction of $1,148.73 per LTCH annually or $482,468.71 for all LTCHs.
In section IV.J. of the preambles of the proposed rule (83 FR 20426 through 20437) and this rule, we discuss requirements for the HAC Reduction Program. In the proposed rule, we did not propose to adopt any new measures into the HAC Reduction Program. In this final rule, the Hospital IQR Program is finalizing its proposal to remove the claims-based Patient Safety and Adverse Events Composite (PSI 90) measure effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule and finalizing with modification, its proposal five NHSN HAI measures (CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI), with the removal of these measures beginning with the CY 2020 reporting period/FY 2022 payment determination. These measures had been previously adopted for, and will remain in, the HAC Reduction Program.
We do not believe that retaining the claims-based PSI 90 measure in the HAC Reduction Program will create or reduce any burden for hospitals because it will continue to be collected using Medicare FFS claims hospitals are already submitting to the Medicare program for payment purposes.
We note the burden associated with collecting and submitting data for the HAI measures (CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI) via the NHSN system is captured under a separate OMB control number, 0920-0666, and therefore will not impact our burden estimates.
We anticipate the finalized discontinuation of the HAI measure validation process under the Hospital IQR Program will result in a net burden decrease to the Hospital IQR Program, but will result in an off-setting net burden increase to the HAC Reduction Program because hospitals selected for validation will continue to be required to submit validation templates for the HAI measures. Therefore, because of our finalized proposals in sections VIII.A.5.b.(2)(b) and IV.J.4.e. of the preamble of this final rule to remove the HAI chart-abstracted measures from the Hospital IQR Program, data validation for the measures will transfer to the HAC Reduction Program, and this is will result in a net neutral shift of 43,200 hours and approximately $1.6 million from the Hospital IQR Program to the HAC Reduction Program, with no overall net change in burden.
Under the Hospital IQR Program, we have previously estimated a reporting burden of 80 hours (1,200 minutes per record × 1 record per hospital per quarter × 4 quarters/60 minutes) per hospital selected for validation per year to submit the CLABSI and CAUTI templates, and 64 hours (960 minutes
In section IV.H. of the preamble of this final rule, we discuss our finalized proposals for the Hospital Readmissions Reduction Program. In this final rule, we did not adopt any new measures into the Hospital Readmissions Reduction Program. However, we are finalizing our proposals to remove six claims-based measures from the Hospital IQR Program, which have been finalized previously for, and will remain in, the Hospital Readmissions Reduction Program. We do not believe that these claims-based measures remaining in the Hospital Readmissions Reduction Program will create any additional burden for hospitals because they will continue to be collected using Medicare FFS claims hospitals are already submitting to the Medicare program for payment purposes.
In section VIII.D. of the preambles of the proposed rule (83 FR 20515 through 20544) and this final rule, we discuss our proposals and newly finalized policies for a new performance-based scoring methodology and changes to the Stage 3 objectives and measures for eligible hospitals and CAHs that attest to CMS for the Medicare Promoting Interoperability Program. We also discuss our proposal and final policy to change the EHR reporting period to a minimum of any continuous 90-day period in CYs 2019 and 2020 for all new and returning participants attesting to CMS or their State Medicaid agency. In addition, we establish the CQM reporting period and criteria for CY 2019 and the removal of eight CQMs beginning in CY 2020. Lastly, we codify the policies for subsection (d) Puerto Rico hospitals who participate in the Medicare Promoting Interoperability Program for eligible hospitals, including policies previously implemented through program instruction. We did not propose to change the requirement for the 2015 Edition of CEHRT to be used beginning in CY 2019. In this final rule, we discuss and finalize our proposals with a few modifications regarding a new performance-based scoring methodology and changes to the Stage 3 objectives and measures for eligible hospitals and CAHs that attest to CMS under the Medicare Promoting Interoperability Program. We are finalizing the new measures Query of PDMP and Support Electronic Referral Loops by Receiving and Incorporating Health Information. We are finalizing the removal of the Coordination of Care Through Patient Engagement objective and its associated measures Secure Messaging, View, Download or Transmit, and Patient Generated Health Data as well as the measures Request/Accept Summary of Care, Clinical Information Reconciliation and Patient-Specific Education. We are renaming measures within the Health Information Exchange objective. These changes include changing the name from Send a Summary of Care, to Support Electronic Referral Loops by Sending Health Information; renaming the Public Health and Clinical Data Registry Reporting objective to Public Health and Clinical Data Exchange with the requirement to report on any two measures options; renaming the name the Patient Electronic Access to Health Information objective to Provider to Patient Exchange objective, and renaming the remaining measure, Provide Patient Access measure to Provide Patients Electronic Access to Their Health Information measure.
In prior rules (81 FR 57260), we have estimated that the electronic reporting of CQM data could be accomplished by staff with a mean hourly wage of $16.42 per hour.
We did not receive any public comments regarding this information collection. For the expected effects relating to the above proposals, we refer readers to section I.N. of Appendix A of this final rule.
In sections VIII.D.5. and 6. of the preamble of this final rule, we discuss our finalized policies for a new scoring methodology for eligible hospitals and CAHs that attest to CMS for the Promoting Interoperability Program, and the addition of one new opioid measure that is optional in 2019 and 2020. This scoring approach requires eligible hospitals and CAHs to report by attestation on only six measures. We consider this scoring methodology to be based more on performance and not solely on whether an eligible hospital or CAH meets the thresholds for measures. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20562 through 20564), we estimated that the new scoring methodology reduces the necessary response time by .25 hours. This is a reduction to the previous burden estimate provided in the 2015 EHR Incentive Programs final rule (80 FR 62928). In the proposed rule, we updated the burden estimate to take into account the reduced burden associated with the proposed new requirements for eligible hospitals and CAHs for Stage 3 of meaningful use.
We believe the burden will be different for eligible hospitals that attest to a State for purposes of receiving a Medicaid incentive payment because the existing Stage 3 requirements will continue to apply to them. We note that under section 101(b)(1) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10), the Medicare EHR Incentive Program was sunset for EPs in 2018, and now many of these EPs are subject to the requirements of the Quality Payment Program (QPP). Currently the burden is estimated at $388,408,189 annually. We estimate the
There are 3,300 eligible hospitals and CAHs that attest to CMS (Medicare-only and dual-eligible) under the Medicare Promoting Interoperability Program. Therefore, the total estimated annual cost burden for all eligible hospitals and CAHs in the Medicare Promoting Interoperability Program to attest to meaningful use will be $,1,593,421.5 (3,300 eligible hospitals and CAHs × 7 hours 18 minutes × $67.25).
In this final rule, we are finalizing our proposal that the new scoring methodology and changes to the Stage 3 objectives and measures for eligible hospitals and CAHs that attest to CMS will be optional for States to implement through changes to their State Medicaid HIT Plans approved by CMS for eligible hospitals participating in their Medicaid Promoting Interoperability Program. If States choose not to align, eligible hospitals in those States will continue to attest to the objectives and measures as currently specified under § 495.24(d). Extending this option to States will allow them flexibility to benefit from the improvements to meaningful use scoring outlined in this final rule, if they so choose. If States choose to take this option, we anticipate the same burden reduction for Medicaid eligible hospitals as discussed above, but a significant burden increase for States that choose to overhaul their systems to collect data. If States do not take the option, they will face no burden increase or decrease.
In section VIII.D.7. of the preamble of this final rule, we are finalizing our proposal that the EHR reporting periods in CYs 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency will be a minimum of any continuous 90-day period within each of the CYs 2019 and 2020. This means that EPs that attest to a State for the State's Medicaid Promoting Interoperability Program and eligible hospitals and CAHs attesting to CMS or the State's Medicaid Promoting Interoperability Program will attest to meaningful use of CEHRT for an EHR reporting period of a minimum of any continuous 90-day period from January 1, 2019 through December 31, 2019 and from January 1, 2020 through December 31, 2020, respectively. The applicable incentive payment year and payment adjustment years for the EHR reporting periods in 2019 and 2020, as well as the deadlines for attestation and other related program requirements, will remain the same as established in prior rulemaking. We finalizing our proposals to make corresponding changes to the definition of “EHR reporting period” and “EHR reporting period for a payment adjustment year” at 42 CFR 495.4. We do not expect these finalized policies to affect our burden estimates because we have never required a different EHR reporting period.
In section VIII.D.9. of the preamble of this final rule, we are finalizing our proposal that the reporting period for Medicare and Medicaid eligible hospitals and CAHs that report CQMs electronically will be one, self-selected calendar quarter of CY 2019 data. We are also finalizing our proposal that eligible hospitals and CAHs participating in only the EHR Program, or participating in both the Promoting Interoperability Programs and the Hospital IQR Program, report on at least 4 self-selected CQMs. We are also finalizing our proposals to remove eight CQMs beginning in 2020. We believe to report on the 4 self-selected CQMs electronically will cost ($39.86 × 40 min) 1,594.4 per hospital times 3,300 hospitals results in a total burden of $5,261,520 for all eligible hospitals and CAHs.
In section VIII.D.10. of the preamble of this final rule, we are finalizing our proposals to incorporate into our regulations program guidance regarding subsection (d) Puerto Rico hospitals. Because we did not propose any new requirements, we not believe that these proposals will affect burden.
In section VIII.D.12.a. of the preamble of this final rule, we are finalizing our proposals to amend 42 CFR 495.324(b)(2) and 495.324(b)(3) to align with current prior approval policy for MMIS and ADP systems at 45 CFR 95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and to minimize burden on States. Specifically, we are finalizing our proposals that the prior approval dollar threshold in § 495.324(b)(3) be increased to $500,000, and that a prior approval threshold of $500,000 be added to § 495.324(b)(2). In addition, in light of these finalized changes, we are finalizing our proposal to make a conforming amendment to amend the threshold in § 495.324(d) for prior approval of justifications for sole source acquisitions to be the same $500,000 threshold. That threshold is currently
In section VIII.D.12.b. of the preamble of this final rule, we are finalizing our proposal that the 90 percent FFP for Medicaid Promoting Interoperability Program administration will no longer be available for most State expenditures incurred after September 30, 2022. We are finalizing a later sunset date, September 30, 2023, for the availability of 90 percent enhanced match for State administrative costs related to Medicaid Promoting Interoperability Program audit and appeals activities, as well as costs related to administering incentive payment disbursements and recoupments that might result from those activities. States will not be able to claim any Medicaid Promoting Interoperability Program administrative match for expenditures incurred after September 30, 2023. We do not believe that these finalized proposals will impose any additional burdens on States, because they only affect the timing of State expenditures.
We did not receive any public comments specific to Medicaid information collection.
In section IX.B.1. of the preambles of the proposed rule (83 FR 20545) and this final rule, we discuss our proposal and finalized policy to incorporate the Provider Cost Reimbursement Questionnaire, Form CMS-339 (OMB No. 0938-0301) into the Organ Procurement Organization (OPO) and Histocompatibility Laboratory cost report, Form CMS-216 (OMB No. 0938-0102), which will complete our incorporation of the Form CMS-339 into all Medicare cost reports. We also discuss our finalized policy to update § 413.24(f)(5)(i) to reflect that an acceptable cost report would no longer require the provider to separately submit a Provider Cost Reimbursement Questionnaire, Form CMS-339, by removing the reference to the questionnaire.
There are 58 OPOs and 47 histocompatibility laboratories. This finalized proposal does not require additional data collection from OPOs or histocompatibility laboratories. This policy will benefit OPOs and histocompatibility laboratories because they will no longer be required to complete and submit the Form CMS-339 as a separate form independent of the Medicare cost report in order to have an acceptable cost report submission under § 413.24(f)(5)(i).
Currently, all OPOs and histocompatibility laboratories are required to complete Form CMS-339. The finalized policy to incorporate the Provider Cost Reimbursement Questionnaire, Form CMS-339, into the OPO and Histocompatibility Laboratory cost report will eliminate the requirement to complete the Form CMS-339. The estimated annual burden associated with Form CMS-339 is 3 hours per respondent. The time required by an OPO or a histocompatibility laboratory to complete the Form CMS-339 is reduced because the form is incorporated into the cost report. The incorporation of the Form CMS-339 into the cost report as a cost report worksheet will decrease burden upon OPOs and histocompatibility laboratories. These entities will no longer be required to review multiple pages of questions not applicable to them. This finalized policy will result in an overall burden reduction to the 58 OPOs and 47 histocompatibility laboratories of a total of 289 hours.
Instead, these entities are required to respond to 5 questions, which we estimate will take 15 minutes per entity. The total estimated burden across all respondents is 26 hours ((105 respondents) × (0.25 hours/response)). By eliminating the requirement to complete the inapplicable parts of the Form CMS-339, each OPO or histocompatibility laboratory will experience a net burden decrease of 2.75 hours.
Based on the most recent Bureau of Labor Statistics (BLS) 2016 Occupational Outlook Handbook, the mean hourly wage for Category 43-3031 (bookkeeping, accounting, and auditing clerk) is $19.34. We added 100 percent of the mean hourly wage to account for fringe benefits and overhead, which calculates to a total hourly wage of $38.68 ($19.34 + $19.34). The overall decrease in costs to the 58 OPOs and 47 histocompatibility laboratories is $11,178.52 ($38.68 × 289 hours).
In section IX.B.6. of the preamble of this final rule, we discuss our final policy (with modifications to the proposal) in § 413.24(f)(5)(i)(E) that, effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming costs on their cost report that are allocated from a home office or chain organization with the same fiscal year end, a cost report will be rejected for lack of supporting documentation if the home office or chain organization has not submitted, to the provider's contractor, a Home Office Cost Statement that corresponds to the amounts it has allocated to the provider's cost report. Effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming costs on their cost report that are allocated from a home office or chain organization with a different fiscal year end, a cost report will be rejected for lack of supporting documentation if the home office or chain organization has not submitted, to the provider's contractor, a Home Office Cost Statement that corresponds to some portion of the amounts it has allocated to the provider's cost report. When the provider and its home office have differing fiscal year ends, the provider's home office costs for a portion of the cost reporting period (as reflected on the Home Office Cost Statement) must correspond to a portion of the amount reported in the provider's cost report. When the provider and its home office have the same fiscal year end, the provider's home office's cost for the same time period (as reflected on the Home Office Cost Statement) must correspond to the costs reported in the provider's cost report.
With our final policy, we anticipate that a home office with costs allocated to providers' cost reports within its chain organization will submit a Home Office Cost Statement to the providers' contractors in order for those providers in the chain organization to have an acceptable cost report submission. Based on the most recent available FY 2016 data in CMS' System for Tracking Audit and Reimbursement, there were approximately 94 providers that claimed costs on their cost reports that were allocated from approximately 13 home offices or chain organizations, but did not submit a Home Office Cost Statement with their cost reports to substantiate these allocated costs. Because the existing burden estimate for a Home Office Cost Statement already reflects the requirement that a home office collect, maintain, and submit a list of the providers' contractors within its chain organization on the Home Office Cost Statement, the contractors to whom the Home Office Cost Statement should be sent is already known to the home office, and thus there is no additional burden placed upon home offices as a result of our finalized policy to require the home office or chain organization to submit to the providers'
Below is a chart reflecting the total burden and associated costs for the provisions included in this final rule.
Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements.
Health facilities, Kidney diseases, Medicare, Puerto Rico, Reporting and recordkeeping requirements.
Emergency medical services, Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements.
Administrative practice and procedure, Electronic health records, Health facilities, Health professions, Health maintenance organizations (HMO), Medicaid, Medicare, Penalties, Privacy, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble of this final rule, the Centers for Medicare and Medicaid Services is amending 42 CFR Chapter IV as set forth below:
Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh); secs. 123 and 124 of subtitle A of Title I of Pub. L. 106-113 (113 Stat. 1501A-332); sec. 307 of Subtitle A of Title III of Pub. L. 106-554; sec. 114 of 110-173; sec. 4302 of Pub. L. 111-5; secs. 3106 and 10312 of Pub. L. 111-148; sec. 1206 of Pub. L. 113-67; sec. 112 of Pub. L. 113-93; sec. 231 of Pub. L. 114-113; secs. 15004, 15006, 15007, 15008, 15009, and 15010 of Pub. L. 114-255; and sec. 51005 of Division E of Title X of Pub. L. 115-123.
(a) For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and §§ 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of this chapter for a critical access hospital. In addition, inpatient rehabilitation facilities also must adhere to the admission requirements specified in § 412.622.
(c) * * *
(4) For discharges occurring on or after October 1, 2018, to hospice care provided by a hospice program.
(h) * * *
(2) * * *
(iii) * * *
(A) * * *
(
(e) * * *
(3)
(vii) For cost reporting periods beginning on or after October 1, 2019, the Medicare inpatient days and discharges that are associated with patients discharged from a unit of the hospital will not be included in the calculation of the Medicare inpatient average length of stay specified under paragraph (e)(2)(i) of this section.
The revisions and addition read as follows:
(a) * * *
(1) * * *
(ii) Prior to October 1, 2019, is not excluded in its entirety from the prospective payment systems; and
(iii) Unless it is a unit in a critical access hospital, the hospital of which an IRF is a unit must have at least 10 staffed and maintained hospital beds that are paid under the applicable payment system under which the hospital is paid, or at least 1 staffed and maintained hospital bed for every 10 certified inpatient rehabilitation facility beds, whichever number is greater. Otherwise, the IRF will be classified as an IRF hospital, rather than an IRF unit. In the case of an inpatient psychiatric facility unit, the hospital must have enough beds that are paid under the applicable payment system under which the hospital is paid to permit the provision of adequate cost information, as required by § 413.24(c) of this chapter.
(d)
(e) * * *
(2) * * *
(iii) * * *
(A) Except as provided in paragraph (e)(2)(iv) of this section, it is not under the control of the governing body or chief executive officer of the hospital in which it is located, and it furnishes inpatient care through the use of medical personnel who are not under the control of the medical staff or chief medical officer of the hospital in which it is located.
(iv) Effective for cost reporting periods beginning on or after October 1, 2019, the requirements of paragraph (e)(2)(iii)(A) of this section do not apply to a satellite facility of a unit that is part of a hospital excluded from the prospective payment systems specified in § 412.1(a)(1) that does not furnish services in a building also used by another hospital that is not excluded from the prospective payment systems specified in § 412.1(a)(1), or in one or more entire buildings located on the same campus as buildings used by another hospital that is not excluded from the prospective payment systems specified in § 412.1(a)(1).
(d) * * *
(1) * * *
(vii) For fiscal years 2017, 2018, and 2019, the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals, subject to the provisions of paragraphs (d)(2) and (3) of this section, less a multifactor productivity adjustment (as determined by CMS) and less 0.75 percentage point.
(3)(i) Beginning fiscal year 2015, in the case of a “subsection (d) hospital,” as defined under section 1886(d)(1)(B) of the Act, that is not a meaningful electronic health record (EHR) user as defined in part 495 of this chapter for the applicable EHR reporting period and does not receive an exception, three-fourths of the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals is reduced—
(A) For fiscal year 2015, by 33
(B) For fiscal year 2016, by 66
(C) For fiscal year 2017 and subsequent fiscal years, by 100 percent.
(ii) Beginning fiscal year 2022, in the case of a “subsection (d) Puerto Rico hospital,” as defined under section 1886(d)(9)(A) of the Act, that is not a meaningful EHR user as defined in part 495 of this chapter for the applicable EHR reporting period and does not receive an exception, three-fourths of the percentage increase in the market basket index (as defined in § 413.40(a)(3) of this chapter) for prospective payment hospitals is reduced—
(A) For fiscal year 2022, by 33
(B) For fiscal year 2023, by 66
(C) For fiscal year 2024 and subsequent fiscal years, by 100 percent.
(j)
The revisions and addition read as follows:
(a) * * *
(4) For a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the inpatient hospital prospective payment system and that meets the provider-based criteria at § 413.65 of this chapter as a main campus and a remote location of a hospital, combined data from the main campus and its remote location(s) are required to demonstrate that the criteria specified in paragraphs (a)(1)(i) and (ii) of this section are met. For the mileage and rural location criteria in paragraph (a) of this section and the mileage, accessibility, and travel time criteria specified in paragraphs (a)(1) through (3) of this section, the hospital must demonstrate that the main campus and its remote location(s) each independently satisfy those requirements.
(b) * * *
(2) * * *
(i) For applications received on or before September 30, 2018, sole community hospital status is effective 30 days after the date of CMS' written notification of approval, except as provided in paragraph (b)(2)(v) of this section. For applications received on or after October 1, 2018, sole community hospital status is effective as of the date the MAC receives the complete application, except as provided in paragraph (b)(2)(v) of this section.
(ii) When a court order or a determination by the Provider Reimbursement Review Board (PRRB) reverses a CMS denial of sole community hospital status and no further appeal is made, the sole community hospital status is effective as follows:
(B) If the hospital's application for sole community hospital status was received on or after October 1, 1983 and on or before September 30, 2018, the effective date is 30 days after the date of CMS' original written notification of denial.
(C) If the hospital's application for sole community hospital status was received on or after October 1, 2018, the effective date is the date the MAC receives the complete application.
(iv) For applications received on or before September 30, 2018, a hospital classified as a sole community hospital receives a payment adjustment, as described in paragraph (d) of this section, effective with discharges occurring on or after 30 days after the date of CMS' approval of the classification. For applications received on or after October 1, 2018, a hospital classified as a sole community hospital receives a payment adjustment, as described in paragraph (d) of this section, effective with discharges occurring on or after the date the MAC receives the complete application.
(d)
The revisions and addition read as follows:
(b) * * *
(2) In order to qualify for this adjustment, a hospital must meet the following criteria, subject to the provisions of paragraph (e) of this section:
(i) For FY 2005 through FY 2010 and FY 2023 and subsequent fiscal years, a hospital must have fewer than 200 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital's most recently submitted cost report, and be located more than 25 road miles (as defined in paragraph (a) of this section) from the nearest “subsection (d)” (section 1886(d) of the Act) hospital.
(ii) For FY 2011 through FY 2018, a hospital must have fewer than 1,600 Medicare discharges, as defined in
(iii) For FY 2019 through FY 2022, a hospital must have fewer than 3,800 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital's most recently submitted cost report, and be located more than 15 road miles (as defined in paragraph (a) of this section) from the nearest “subsection (d)” (section 1886(d) of the Act) hospital.
(c) * * *
(1) For FY 2005 through FY 2010 and FY 2023 and subsequent fiscal years, the adjustment is an additional 25 percent for each Medicare discharge.
(2) For FY 2011 through FY 2018, the adjustment is as follows:
(3) For FY 2019 through FY 2022, the adjustment is as follows:
(i) For low-volume hospitals with 500 or fewer total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital's most recently submitted cost report, the adjustment is an additional 25 percent for each Medicare discharge.
(ii) For low-volume hospitals with more than 500 and fewer than 3,800 total discharges, which includes Medicare and non-Medicare discharges, during the fiscal year, based on the hospital's most recently submitted cost report, the adjustment for each Medicare discharge is an additional percent calculated using the formula [(95/330)−(number of total discharges/13,200)]. “Total discharges” is determined as described in paragraph (b)(2)(iii) of this section.
(d)
(a) * * *
(7) For a hospital with a main campus and one or more remote locations under a single provider agreement where services are provided and billed under the inpatient hospital prospective payment system and that meets the provider-based criteria at § 413.65 of this chapter as a main campus and a remote location of a hospital, the hospital is required to demonstrate that the main campus and its remote location(s) each independently satisfy the location conditions specified in paragraphs (a)(1) and (2) of this section.
(b) * * *
(6)
(g) * * *
(1) * * *
(iii) * * *
(C) * * *
(
The revisions and additions read as follows:
(a) * * *
(1)
(i) It is located in a rural area (as defined in subpart D of this part) or it is located in a State with no rural area and satisfies any of the criteria under § 412.103(a)(1) or (3) or under § 412.103(a)(2) as of January 1, 2018.
(ii) The hospital has 100 or fewer beds as defined in § 412.105(b) during the cost reporting period.
(iii) The hospital is not also classified as a sole community hospital under § 412.92.
(iv) At least 60 percent of the hospital's inpatient days or discharges were attributable to individuals entitled to Medicare Part A benefits during the hospital's cost reporting period or periods as follows, subject to the provisions of paragraph (a)(1)(v) of this section:
(A) The hospital's cost reporting period ending on or after September 30, 1987 and before September 30, 1988.
(B) If the hospital does not have a cost reporting period that meets the criterion set forth in paragraph (a)(1)(iv)(A) of this section, the hospital's cost reporting period beginning on or after October 1, 1986, and before October 1, 1987.
(C) At least two of the last three most recent audited cost reporting periods for which the Secretary has a settled cost report.
(v) If the cost reporting period determined under paragraph (a)(1)(iv) of this section is for less than 12 months, the hospital's most recent 12-month or longer cost reporting period before the short period is used.
(3)
(b) * * *
(4) For applications received on or before September 30, 2018, a determination of MDH status made by the MAC is effective 30 days after the date the MAC provides written notification to the hospital. For applications received on or after October 1, 2018, a determination of MDH status made by the MAC is effective as of the date the MAC receives the complete application. An approved MDH status determination remains in effect unless there is a change in the circumstances under which the status was approved.
(c) * * *
(2) * * *
(iii) For discharges occurring during cost reporting periods (or portions thereof) beginning on or after October 1, 2006, and before October 1, 2022, 75 percent of the amount that the Federal rate determined under paragraph (c)(1) of this section is exceeded by the highest of the following:
(a) CMS will select measures, other than measures of readmissions, for purposes of the Hospital VBP Program. The measures will be selected from the measures specified under section 1886(b)(3)(B)(viii) of the Act (the Hospital Inpatient Quality Reporting Program).
Beginning with discharges occurring on or after October 1, 1987, hospitals located in Puerto Rico are subject to the rules governing the prospective payment system for inpatient operating costs. Except as provided in this subpart, the provisions of subparts A, B, C, F, G, and H of this part apply to hospitals located in Puerto Rico. Except for § 412.60, which deals with DRG classification and weighting factors, or as otherwise specified, the provisions of subparts D and E, which describe the methodology used to determine prospective payment rates for inpatient operating costs for hospitals, do not apply to hospitals located in Puerto Rico. Instead, the methodology for determining prospective payment rates for inpatient operating costs for these hospitals is set forth in §§ 412.204 through 412.212.
(d) * * *
(5)
(a) * * *
(9) Section 51005(a) of Public Law 115-123 which extended the blended payment rate for the site neutral payment rate cases to apply to discharges occurring in cost reporting periods beginning in FYs 2018 and 2019.
(10) Section 51005(b) of Public Law which reduces the IPPS comparable amount for the site neutral payment rate cases by 4.6 percent for FYs 2018 through 2026.
The addition and revision read as follows:
(c) * * *
(1) * * *
(iii) For discharges occurring in fiscal years 2018 through 2026, the amount in paragraph (c)(1)(i) of this section is reduced by 4.6 percent.
(3)
(c) * * *
(3) * * *
(xv)
(d) * * *
(6)
(i) For discharges occurring on or after October 1, 2018 and before October 1, 2019, by a one-time factor so that estimated aggregate payments to LTCH PPS standard Federal rate cases in FY 2019, and the portion of estimated aggregate payments to site neutral cases that are paid based on the LTCH PPS standard Federal rate in FY 2019, are projected to equal estimated aggregate payments that would have been paid for such cases without regard to the elimination of the limitation on long-term care hospital admissions from referring hospitals. This adjustment only applies to the fiscal year involved and will not be taken into account in computing the standard Federal payment rate for a subsequent fiscal year.
(ii) For discharges occurring on or after October 1, 2019 and before October 1, 2020, by a one-time factor so that estimated aggregate payments to LTCH PPS standard Federal rate cases in FY 2020, and the portion of estimated aggregate payments to site neutral payment rate cases that are paid based on the LTCH PPS standard Federal rate in FY 2020, are projected to equal estimated aggregate payments that would have been paid for such cases without regard to the elimination of the limitation on long-term care hospital admissions from referring hospitals. This adjustment only applies to the fiscal year involved and will not be taken into account in computing the standard Federal payment rate for a subsequent fiscal year.
(iii) For discharges occurring on or after October 1, 2020, by a permanent, one-time factor so that estimated aggregate payments to LTCH PPS standard Federal rate cases in FY 2021 are projected to equal estimated aggregate payments that would have been paid for such cases without regard to the elimination of the limitation on long-term care hospital admissions from referring hospitals.
The addition and revisions read as follows:
(b) * * *
(3) CMS may remove a quality measure from the LTCH QRP based on one or more of the following factors:
(i) Measure performance among long-term care hospitals is so high and unvarying that meaningful distinctions in improvements in performance can no longer be made.
(ii) Performance or improvement on a measure does not result in better patient outcomes.
(iii) A measure does not align with current clinical guidelines or practice.
(iv) The availability of a more broadly applicable (across settings, populations, or conditions) measure for the particular topic.
(v) The availability of a measure that is more proximal in time to desired patient outcomes for the particular topic.
(vi) The availability of a measure that is more strongly associated with desired patient outcomes for the particular topic.
(vii) Collection or public reporting of a measure leads to negative unintended consequences other than patient harm.
(viii) The costs associated with a measure outweigh the benefit of its continued use in the program.
(d) * * *
(1)
(3)
Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Public Law 106-113, 113 Stat. 1501A-332; sec. 3201 of Public Law 112-96, 126 Stat. 156; sec. 632 of Public Law 112-240, 126 Stat. 2354; sec. 217 of Public Law 113-93, 129 Stat. 1040; and sec. 204 of Public Law 113-295, 128 Stat. 4010; and sec. 808 of Public Law 114-27, 129 Stat. 362.
(f) * * *
(5) * * *
(i) All providers—The provider must accurately complete and submit the required cost reporting forms, including all necessary signatures and supporting documents. For providers claiming costs on their cost reports that are allocated from a home office or chain organization, the Home Office Cost statement must be submitted by the home office or chain organization as set forth in paragraph (f)(5)(i)(E) of this section. A cost report is rejected for lack of supporting documentation if it does not include the following, except as provided in paragraph (f)(5)(i)(E) of this section:
(A)
(B)
(C)
(D)
(E)
(
(e) * * *
(1) * * *
(iv)(A) Effective for Medicare GME affiliation agreements entered into on or after October 1, 2005, exceptas provided in paragraph (e)(1)(iv)(B) of this section, an urban hospital that qualifies for an adjustment to its FTE cap under paragraph (e)(1) of this section is permitted to be part of a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap only if the adjustment that results from the affiliation is an increase to the urban hospital's FTE cap.
(B) Effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, an urban hospital that qualifies for an adjustment to its FTE cap under paragraph (e)(1) of this section is permitted to be part of a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap and receive an adjustment that is a decrease to the urban hospital's FTE cap, provided the Medicare GME affiliated group meets one of the following conditions:
(
(
Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).
(b)
(c)
Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).
The revisions and additions read as follows:
(1) * * *
(iii) For the CY 2019 payment year under the Medicaid Promoting Interoperability Program:
(A) For the EP first demonstrating he or she is a meaningful EHR user, any continuous 90-day period within CY 2019.
(B) For the EP who has successfully demonstrated he or she is a meaningful
(iv) For the CY 2020 payment year under the Medicaid Promoting Interoperability Program:
(A) For the EP first demonstrating he or she is a meaningful EHR user, any continuous 90-day period within CY 2020.
(B) For the EP who has successfully demonstrated he or she is a meaningful EHR user in any prior year, any continuous 90-day period within CY 2020.
(2) * * *
(ii) * * *
(C) For the FY 2017 payment year as follows:
(
(
(
(
(
(D) For the FY 2018 payment year as follows:
(
(
(
(
(iii) For the FY 2019 payment year as follows:
(A) Under the Medicaid Promoting Interoperability Program:
(
(
(B) Under the Medicare Promoting Interoperability Program, for a Puerto Rico eligible hospital, any continuous 90-day period within CY 2019.
(iv) For the FY 2020 payment year as follows:
(A) Under the Medicaid Promoting Interoperability Program:
(
(
(B) Under the Medicare Promoting Interoperability Program, for a Puerto Rico eligible hospital, any continuous 90-day period within CY 2020.
(2) * * *
(iii) The following are applicable for 2019:
(A) If an eligible hospital has not successfully demonstrated it is a meaningful EHR user in a prior year, the EHR reporting period is any continuous 90-day period within CY 2019 and applies for the FY 2020 and 2021 payment adjustment years. For the FY 2020 payment adjustment year, the EHR reporting period must end before and the eligible hospital must successfully register for and attest to meaningful use no later than October 1, 2019.
(B) If in a prior year an eligible hospital has successfully demonstrated it is a meaningful EHR user, the EHR reporting period is any continuous 90-day period within CY 2019 and applies for the FY 2021 payment adjustment year.
(iv) The following are applicable for 2020:
(A) If an eligible hospital has not successfully demonstrated it is a meaningful EHR user in a prior year, the EHR reporting period is any continuous 90-day period within CY 2020 and applies for the FY 2021 and 2022 payment adjustment years. For the FY 2021 payment adjustment year, the EHR reporting period must end before and the eligible hospital must successfully register for and attest to meaningful use no later than October 1, 2020.
(B) If in a prior year an eligible hospital has successfully demonstrated it is a meaningful EHR user, the EHR reporting period is any continuous 90-day period within CY 2020 and applies for the FY 2022 payment adjustment year.
(3) * * *
(iii) The following are applicable for 2019:
(A) If a CAH has not successfully demonstrated it is a meaningful EHR user in a prior year, the EHR reporting period is any continuous 90-day period within CY 2019 and applies for the FY 2019 payment adjustment year.
(B) If in a prior year a CAH has successfully demonstrated it is a meaningful EHR user, the EHR reporting period is any continuous 90-day period within CY 2019 and applies for the FY 2019 payment adjustment year.
(iv) The following are applicable for 2020:
(A) If a CAH has not successfully demonstrated it is a meaningful EHR user in a prior year, the EHR reporting period is any continuous 90-day period within CY 2020 and applies for the FY 2020 payment adjustment year.
(B) If in a prior year a CAH has successfully demonstrated it is a meaningful EHR user, the EHR reporting period is any continuous 90-day period within CY 2020 and applies for the FY 2020 payment adjustment year.
(1) For an EP, a calendar year beginning with CY 2015.
(2) For a CAH or an eligible hospital, a Federal fiscal year beginning with FY 2015.
(3) For a Puerto Rico eligible hospital, a Federal fiscal year beginning with FY 2022.
(1) For an EP, a calendar year beginning with CY 2011.
(2) For a CAH or an eligible hospital, a Federal fiscal year beginning with FY 2011.
(3) For a Puerto Rico eligible hospital, a Federal fiscal year beginning with FY 2016.
The criteria specified in paragraphs (c) and (d) of this section are optional for 2017 and 2018 for EPs, eligible hospitals, and CAHs that have successfully demonstrated meaningful use in a prior year. The criteria specified in paragraph (d) of this section are applicable for all EPs for 2019 and subsequent years, and for eligible hospitals and CAHs attesting to a State for the Medicaid Promoting
(c)
(d)
(e)
(2)
(A) Meets the criteria in the applicable measure that would permit the exclusion.
(B) Attests to the exclusion.
(ii)
(3)
(ii) If the objective and associated measure does not reference this paragraph (e)(3), the measure must be calculated by reviewing all patient records, not just those maintained using CEHRT.
(4)
(ii)
(iii)
(5)
(ii)
(B) In 2020 and subsequent years, eligible hospitals and CAHs must meet the e-Prescribing measure in paragraph (e)(5)(iii)(A) of this section and the query of PDMP measure in paragraph (e)(5)(iii)(B) of this section. In 2020, eligible hospitals and CAHs have the option to report on the verify opioid treatment agreement measure in paragraph (e)(5)(iii)(C) of this section. In 2020, the electronic prescribing objective in paragraph (e)(5)(i) of this section is worth up to 15 points.
(iii)
(B)
(C)
(iv)
(v)
(B) Beginning with the EHR reporting period in CY 2020, an eligible hospital or CAH that qualifies for the exclusion in paragraph (e)(5)(v)(A) of this section is also excluded from the measure specified in paragraph (e)(5)(iii)(B) of this section.
(C) Beginning with the EHR reporting period in CY 2020, any eligible hospital or CAH that does not have an internal pharmacy that can accept electronic prescriptions for controlled substances
(D) Beginning with the EHR reporting period in CY 2020, any eligible hospital and CAH that is unable to report on the measure specified in paragraph (e)(5)(iii)(B) of this section in accordance with applicable law may be excluded from that measure.
(6)
(ii)
(A)
(
(
(B)
(iii)
(7)
(ii)
(A) The patient (or patient-authorized representative) is provided timely access to view online, download, and transmit his or her health information; and
(B) The eligible hospital or CAH ensures the patient's health information is available for the patient (or patient-authorized representative) to access using any application of their choice that is configured to meet the technical specifications of the API in the eligible hospital or CAH's CEHRT. This measure is worth up to 40 points beginning in CY 2019.
(8)
(ii)
(A)
(B)
(C)
(D)
(E)
(F)
(iii)
(A) Any eligible hospital or CAH meeting one or more of the following criteria may be excluded from the syndromic surveillance reporting measure specified in paragraph (e)(8)(ii)(A) of this section if the eligible hospital or CAH—
(
(
(
(B) Any eligible hospital or CAH meeting one or more of the following criteria may be excluded from to the immunization registry reporting measure specified in paragraph (e)(8)(ii)(B) of this section if the eligible hospital or CAH—
(
(
(
(C) Any eligible hospital or CAH meeting one or more of the following criteria may be excluded from the electronic case reporting measure specified in paragraph (e)(8)(ii)(C) of this section if the eligible hospital or CAH—
(
(
(
(D) Any eligible hospital or CAH meeting at least one of the following criteria may be excluded from the public health registry reporting measure specified in paragraph (e)(8)(ii)(D) of this section if the eligible hospital or CAH—
(
(
(
(E) Any eligible hospital or CAH meeting at least one of the following criteria may be excluded from the clinical data registry reporting measure specified in paragraph (e)(8)(ii)(E) of this section if the eligible hospital or CAH—
(
(
(
(F) Any eligible hospital or CAH meeting one or more of the following criteria may be excluded from the electronic reportable laboratory result reporting measure specified in paragraph (e)(8)(ii)(F) of this section if the eligible hospital or CAH—
(
(
(
(b) * * *
(2) * * *
(vii)
(B) Dual-eligible eligible hospitals and CAHs that demonstrate meaningful use to their state Medicaid agency may only qualify for an incentive payment under Medicaid and will not qualify for an incentive payment under Medicare and/or avoid the Medicare payment reduction.
(b) * * *
(6) Puerto Rico eligible hospitals whose first payment year is FY 2016 may receive such payments for FYs 2016 through 2019.
(7) Puerto Rico eligible hospitals whose first payment year is FY 2017 may receive such payments for FYs 2017 through 2020.
(8) Puerto Rico eligible hospitals whose first payment year is FY 2018 may receive such payments for FYs 2018 through 2021.
(9) Puerto Rico eligible hospitals whose first payment year is FY 2019 may receive such payments for FYs 2019 through 2021.
(10) Puerto Rico eligible hospitals whose first payment year is FY 2020 may receive such payments for FYs 2020 through 2021.
(c) * * *
(5) * * *
(vi) For Puerto Rico eligible hospitals whose first payment year is FY 2016—
(A) 1 for FY 2016;
(B)
(C)
(D)
(vii) For Puerto Rico eligible hospitals whose first payment year is FY 2017—
(A) 1 for FY 2017;
(B)
(C)
(D)
(viii) For Puerto Rico eligible hospitals whose first payment year is FY 2018—
(A) 1 for FY 2018;
(B)
(C)
(D)
(ix) For Puerto Rico eligible hospitals whose first payment year is FY 2019—
(A)
(B)
(C)
(x) For Puerto Rico eligible hospitals whose first payment year is FY 2020—
(A)
(B)
(1) Except as provided in paragraph (2) of this definition, for qualifying MA organizations that receive an MA EHR incentive payment for at least 1 payment year, calendar years beginning with CY 2015.
(2) For qualifying MA organizations that receive an MA EHR incentive payment for a qualifying MA-affiliated eligible hospital in Puerto Rico for at least 1 payment year, and that have not previously received an MA EHR incentive payment for a qualifying MA-affiliated eligible hospital not in Puerto Rico, calendar years beginning with CY 2022.
(3) For MA-affiliated eligible hospitals, the applicable EHR reporting period for purposes of determining whether the MA organization is subject to a payment adjustment is the Federal fiscal year ending in the MA payment adjustment year.
(4) For MA EPs, the applicable EHR reporting period for purposes of determining whether the MA organization is subject to a payment adjustment is the calendar year concurrent with the payment adjustment year.
(1) For a qualifying MA EP, a calendar year beginning with CY 2011 and ending with CY 2016; and
(2) For an eligible hospital, a Federal fiscal year beginning with FY 2011 and ending with FY 2016; and
(3) For an eligible hospital in Puerto Rico, a Federal fiscal year beginning with FY 2016 and ending with FY 2021.
(e) * * *
(4) For MA payment adjustment years prior to 2022, subsection (d) Puerto Rico hospitals are neither potentially qualifying MA-affiliated eligible hospitals nor qualifying MA-affiliated eligible hospitals for purposes of applying the payment adjustments under paragraph (e) of this section.
(g) * * *
(2) Subject to paragraph (h)(2) of this section, provider-level attestation data for each eligible hospital that attests to demonstrating meaningful use for each payment year beginning with 2013 and ending after 2018.
(a) Subject to prior approval conditions at § 495.324, FFP is available at 90 percent in State expenditures for administrative activities in support of implementing incentive payments to Medicaid eligible providers.
(b) FFP available under paragraph (a) of this section is available only for expenditures incurred on or before September 30, 2022, except for expenditures related to audit and appeal activities required under this subpart, which must be incurred on or before September 30, 2023.
(b) * * *
(2) For the acquisition solicitation documents and any contract that a State may utilize to complete activities under this subpart, unless specifically exempted by the Department of Health and Human Services, prior to release of the acquisition solicitation documents or prior to execution of the contract, when the contract is anticipated to or will exceed $500,000.
(3) For contract amendments, unless specifically exempted by the Department of Health and Human Services, prior to execution of the contract amendment, involving contract cost increases exceeding $500,000 or contract time extensions of more than 60 days.
(d) A State must obtain prior written approval from HHS of its justification for a sole source acquisition, when it plans to acquire noncompetitively from a nongovernmental source HIT equipment or services, with proposed FFP under this subpart if the total State and Federal acquisition cost is more than $500,000.
The following Addendum and Appendixes will not appear in the Code of Federal Regulations.
In this Addendum, we are setting forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capital-related costs for FY 2019 for acute care hospitals. We also are setting forth the rate-of-increase percentage for updating the target amounts for certain hospitals excluded from the IPPS for FY 2019. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this final rule, we are setting forth the rate-of-increase percentage for updating the target amounts for certain hospitals excluded from the IPPS that will be effective for cost reporting periods beginning on or after October 1, 2018.
In addition, we are setting forth a description of the methods and data we used to determine the LTCH PPS standard Federal payment rate that will be applicable to Medicare LTCHs for FY 2019.
In general, except for SCHs and MDHs, for FY 2019, each hospital's payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also
SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (including, as discussed in section IV.G. of the preamble of this final rule, uncompensated care payments under section 1886(r)(2) of the Act); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge.
Under section 1886(d)(5)(G) of the Act, MDHs historically were paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 costs per discharge, whichever was higher. However, section 5003(a)(1) of Public Law 109-171 extended and modified the MDH special payment provision that was previously set to expire on October 1, 2006, to include discharges occurring on or after October 1, 2006, but before October 1, 2011. Under section 5003(b) of Public Law 109-171, if the change results in an increase to an MDH's target amount, we must rebase an MDH's hospital specific rates based on its FY 2002 cost report. Section 5003(c) of Public Law 109-171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital specific rate. Further, based on the provisions of section 5003(d) of Public Law 109-171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. Section 50205 of the Bipartisan Budget Act of 2018 extended the MDH program for discharges on or after October 1, 2017 through September 30, 2022.
As discussed in section IV.B. of the preamble of this final rule, in accordance with section 1886(d)(9)(E) of the Act as amended by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), for FY 2019, subsection (d) Puerto Rico hospitals will continue to be paid based on 100 percent of the national standardized amount. Because Puerto Rico hospitals are paid 100 percent of the national standardized amount and are subject to the same national standardized amount as subsection (d) hospitals that receive the full update, our discussion below does not include references to the Puerto Rico standardized amount or the Puerto Rico-specific wage index.
As discussed in section II. of this Addendum, as we proposed, we are making changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2019. In section III. of this Addendum, we discuss our policy changes for determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2019. In section IV. of this Addendum, we are setting forth the rate-of-increase percentage for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2019. In section V. of this Addendum, we discuss policy changes for determining the LTCH PPS standard Federal rate for LTCHs paid under the LTCH PPS for FY 2019. The tables to which we refer in the preamble of this final rule are listed in section VI. of this Addendum and are available via the internet on the CMS website.
The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth under § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth under §§ 412.211 and 412.212. Below we discuss the factors we used for determining the prospective payment rates for FY 2019.
In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the internet on the CMS website) reflect—
• Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act.
• The labor-related share that is applied to the standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2019, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the national standardized amount. We refer readers to section IV.B. of the preamble of this final rule for a complete discussion on the FY 2019 inpatient hospital update. Below is a table with these four options:
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 2019.
• An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act.
• An adjustment to ensure the wage index and labor-related share changes (depending on the fiscal year) are budget neutral, as provided for under section 1886(d)(3)(E)(i) of the Act (as discussed in the FY 2006 IPPS
• An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for under section 1886(d)(8)(D) of the Act, by removing the FY 2018 budget neutrality factor and applying a revised factor.
• A positive adjustment of 0.5 percent in FYs 2019 through 2023 as required under section 414 of the MACRA.
• An adjustment to ensure the effects of the Rural Community Hospital Demonstration program required under section 410A of Public Law 108-173, as amended by sections 3123 and 10313 of Public Law 111-148, which extended the demonstration program for an additional 5 years, as amended by section 15003 of Public Law 114-255 which amended section 410A of Public Law 108-173 to provide for a 10-year extension of the demonstration program (in place of the 5-year extension required by the Affordable Care Act) beginning on the date immediately following the last day of the initial 5-year period under section 410A(a)(5) of Public Law 108-173, are budget neutral as required under section 410A(c)(2) of Public Law 108-173.
• An adjustment to remove the FY 2018 outlier offset and apply an offset for FY 2019, as provided for in section 1886(d)(3)(B) of the Act.
For FY 2019, consistent with current law, as we proposed, we applied the rural floor budget neutrality adjustment to hospital wage indexes. Also, consistent with section 3141 of the Affordable Care Act, instead of applying a State-level rural floor budget neutrality adjustment to the wage index, as we proposed, we applied a uniform, national budget neutrality adjustment to the FY 2019 wage index for the rural floor. We note that, in section III.H.2.b. of the preamble to this final rule, as we proposed, we are not extending the imputed floor policy (neither the original methodology nor the alternative methodology) for FY 2019. Therefore, for FY 2019, in this final rule, we are not including the imputed floor (calculated under the original methodology and alternative methodology) in calculating the uniform, national rural floor budget neutrality adjustment, which is reflected in the FY 2019 wage index.
In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case-mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of low-income patients.
For FY 2019, as we proposed, we are continuing to use the national labor-related and nonlabor-related shares (which are based on the 2014-based hospital market basket) that were used in FY 2018. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to time, the proportion of payments that are labor-related and adjusts the proportion (as estimated by the Secretary from time to time) of hospitals' costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. We refer to the proportion of hospitals' costs that are attributable to wages and wage-related costs as the “labor-related share.” For FY 2019, as discussed in section III. of the preamble of this final rule, as we proposed, we are continuing to use a labor-related share of 68.3 percent for the national standardized amounts for all IPPS hospitals (including hospitals in Puerto Rico) that have a wage index value that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, as we proposed, we applied the wage index to a labor-related share of 62 percent of the national standardized amount for all IPPS hospitals (including hospitals in Puerto Rico) whose wage index values are less than or equal to 1.0000.
The standardized amounts for operating costs appear in Tables 1A, 1B, and 1C that are listed and published in section VI. of the Addendum to this final rule and are available via the internet on the CMS website.
Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Accordingly, as we proposed, we calculated the FY 2019 national average standardized amount irrespective of whether a hospital is located in an urban or rural location.
Section 1886(b)(3)(B) of the Act specifies the applicable percentage increase used to update the standardized amount for payment for inpatient hospital operating costs. We note that, in compliance with section 404 of the MMA, in this final rule, as we proposed, we used the 2014-based IPPS operating and capital market baskets for FY 2019. As discussed in section IV.B. of the preamble of this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, as we proposed, we reduced the FY 2019 applicable percentage increase (which for this final rule is based on IGI's second quarter 2018 forecast of the 2014-based IPPS market basket) by the MFP adjustment (the 10-year moving average of MFP for the period ending FY 2019) of 0.8 percentage point, which for this final rule is also calculated based on IGI's second quarter 2018 forecast.
In addition, in accordance with section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, as we proposed, we further updated the standardized amount for FY 2019 by the estimated market basket percentage increase less 0.75 percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of the Act, as added and amended by sections 3401(a) and 10319(a) of the Affordable Care Act, further state that these adjustments may result in the applicable percentage increase being less than zero. The percentage increase in the market basket reflects the average change in the price of goods and services required as inputs to provide hospital inpatient services.
Based on IGI's 2018 second quarter forecast of the hospital market basket increase (as discussed in Appendix B of this final rule), the forecast of the hospital market basket increase for FY 2019 for this final rule is 2.9 percent. As discussed earlier, for FY 2019, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, there are four possible applicable percentage increases that can be applied to the standardized amount. We refer readers to section IV.B. of the preamble of this final rule for a complete discussion on the FY 2019 inpatient hospital update to the standardized amount. We also refer readers to the table above for the four possible applicable percentage increases that will be applied to update the national standardized amount. The standardized amounts shown in Tables 1A through 1C that are published in section VI. of this Addendum and that are available via the internet on the CMS website reflect these differential amounts.
Although the update factors for FY 2019 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC's recommendations, appropriate update factors for FY 2019 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our recommendations in the
The methodology we used to calculate the FY 2019 standardized amount is as follows:
• To ensure we are only including hospitals paid under the IPPS in the calculation of the standardized amount, we applied the following inclusion and exclusion criteria: Include hospitals whose last four digits fall between 0001 and 0879 (section 2779A1 of Chapter 2 of the State Operations Manual on the CMS website at:
• As in the past, as we proposed, we adjusted the FY 2019 standardized amount to remove the effects of the FY 2018 geographic reclassifications and outlier payments before applying the FY 2019 updates. We then applied budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2019 payment policies.
• We do not remove the prior year's budget neutrality adjustments for reclassification and recalibration of the DRG relative weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year's adjustment, we would not satisfy these conditions.
Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS-DRG classifications, recalibration of the MS-DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters.
• Consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare Advantage payments are made to IPPS hospitals under section 1886(d) of the Act, we believe these payments must be part of these budget neutrality calculations. However, we note that it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation or the outlier offset to the standardized amount because the statute requires that outlier payments be not less than 5 percent nor more than 6 percent of total “operating DRG payments,” which does not include IME and DSH payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments.
• Consistent with the methodology in the FY 2012 IPPS/LTCH PPS final rule, in order to ensure that we capture only fee-for-service claims, we are only including claims with a “Claim Type” of 60 (which is a field on the MedPAR file that indicates a claim is an FFS claim).
• Consistent with our methodology established in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further ensure that we capture only FFS claims, we are excluding claims with a “GHOPAID” indicator of 1 (which is a field on the MedPAR file that indicates a claim is not an FFS claim and is paid by a Group Health Organization).
• Consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examine the MedPAR file and remove pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of “3” for blood clotting with a revenue code of “0636” from the covered charge field for the budget neutrality adjustments. We also remove organ acquisition charges from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS.
• For FY 2019, the Bundled Payments for Care Improvement (BPCI) Initiative will have ended and a new model, the BPCI Advanced model will have begun. The BPCI Advanced model, tested under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of a single payment and risk track, which bundles payments for multiple services beneficiaries receive during a Clinical Episode. Acute care hospitals may participate in the BPCI Advanced model in one of two capacities: As a model Participant or as a downstream Episode Initiator. Regardless of the capacity in which they participate in the BPCI Advanced model, participating acute care hospitals will continue to receive IPPS payments under section 1886(d) of the Act. Acute care hospitals that are Participants also assume financial and quality performance accountability for Clinical Episodes in the form of a reconciliation payment. For additional information on the BPCI Advanced model, we refer readers to the BPCI Advanced web page on the CMS Center for Medicare and Medicaid Innovation's website at:
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 53343), for FY 2013 and subsequent fiscal years, we finalized a methodology to treat hospitals that participate in the BPCI Initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process (which includes recalibration of the MS-DRG relative weights, ratesetting, calculation of the budget neutrality factors, and the impact analysis) without regard to a hospital's participation within these bundled payment models (that is, as if they are not participating in those models under the BPCI initiative). For FY 2019, consistent with how we have treated hospitals that participated in the BPCI Initiative, as we proposed, we are including all applicable data from subsection (d) hospitals participating in the BPCI Advanced model in our IPPS payment modeling and ratesetting calculations. We believe it is appropriate to include all applicable data from the subsection (d) hospitals participating in the BPCI Advanced model in our IPPS payment modeling and ratesetting calculations because these hospitals are still receiving IPPS payments under section 1886(d) of the Act.
• Consistent with our methodology established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that it is appropriate to include adjustments for the Hospital Readmissions Reduction Program and the Hospital VBP Program (established under the Affordable Care Act) within our budget neutrality calculations.
Both the hospital readmissions payment adjustment (reduction) and the hospital VBP payment adjustment (redistribution) are applied on a claim-by-claim basis by adjusting, as applicable, the base-operating DRG payment amount for individual subsection (d) hospitals, which affects the overall sum of aggregate payments on each side of the comparison within the budget neutrality calculations.
In order to properly determine aggregate payments on each side of the comparison, consistent with the approach we have taken in prior years, for FY 2019 and subsequent years, as we proposed, we are continuing to apply a proxy hospital readmissions payment adjustment and a proxy hospital VBP payment adjustment on each side of the comparison, consistent with the methodology that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That is, we applied a proxy readmissions payment adjustment factor and a proxy hospital VBP payment adjustment factor on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum.
For the purpose of calculating the proxy FY 2019 readmissions payment adjustment factors, for both the proposed rule and this final rule, as discussed in section IV.H. of the preamble of this final rule, as we proposed, we used the proportion of dually-eligible Medicare beneficiaries, excess readmission ratios, and aggregate payments for excess readmissions from the prior fiscal year's applicable period because, at the time of the development of the final rule, hospitals have not yet had the opportunity to review and correct the data (program calculations based on the FY 2019 applicable period of July 1, 2014 to June 30, 2017) before the data are made public under our policy regarding the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act. (For additional information on our general policy for the reporting of hospital-specific readmission rates, consistent with section 1886(q)(6) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53400) and section IV.H. of the preamble of this final rule.)
In addition, for FY 2019, for the purpose of modeling aggregate payments when determining all budget neutrality factors, as we proposed, we used proxy hospital VBP payment adjustment factors for FY 2019 that are based on data from a historical period because hospitals have not yet had an opportunity to review and submit corrections for their data from the FY 2019 performance period. (For additional information on our policy regarding the review and correction of hospital-specific measure rates under the Hospital VBP Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 through 53581), the CY 2012 OPPS/ASC final rule with comment
• The Affordable Care Act also established section 1886(r) of the Act, which modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments receive an empirically justified Medicare DSH payment equal to 25 percent of the amount that would previously have been received under the statutory formula set forth under section 1886(d)(5)(F) of the Act governing the Medicare DSH payment adjustment. In accordance with section 1886(r)(2) of the Act, the remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals who are uninsured and an additional statutory adjustment, will be available to make additional payments to Medicare DSH hospitals based on their share of the total amount of uncompensated care reported by Medicare DSH hospitals for a given time period. In order to properly determine aggregate payments on each side of the comparison for budget neutrality, prior to FY 2014, we included estimated Medicare DSH payments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum.
To do this for FY 2019 (as we did for the last 5 fiscal years), as we proposed, we included estimated empirically justified Medicare DSH payments that will be paid in accordance with section 1886(r)(1) of the Act and estimates of the additional uncompensated care payments made to hospitals receiving Medicare DSH payment adjustments as described by section 1886(r)(2) of the Act. That is, we considered estimated empirically justified Medicare DSH payments at 25 percent of what would otherwise have been paid, and also the estimated additional uncompensated care payments for hospitals receiving Medicare DSH payment adjustments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum.
• When calculating total payments for budget neutrality, to determine total payments for SCHs, we model total hospital-specific rate payments and total Federal rate payments and then include whichever one of the total payments is greater. As discussed in section IV.F. of the preamble to this final rule and below, as we proposed, we are continuing to use the FY 2014 finalized methodology under which we take into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we included estimated uncompensated care payments in this comparison.
Similarly, for MDHs, as discussed in section IV.F. of the preamble of this final rule, when computing payments under the Federal national rate plus 75 percent of the difference between the payments under the Federal national rate and the payments under the updated hospital-specific rate, as we proposed, we continued to take into consideration uncompensated care payments in the computation of payments under the Federal rate and the hospital-specific rate for MDHs.
• As we proposed, we include an adjustment to the standardized amount for those hospitals that are not meaningful EHR users in our modeling of aggregate payments for budget neutrality for FY 2019. Similar to FY 2018, we are including this adjustment based on data on the prior year's performance. Payments for hospitals will be estimated based on the applicable standardized amount in Tables 1A and 1B for discharges occurring in FY 2019.
• In our determination of all budget neutrality factors described in section II.A.4. of this Addendum, we used transfer-adjusted discharges. Specifically, we calculated the transfer-adjusted discharges using the statutory expansion of the postacute care transfer policy to include discharges to hospice care by a hospice program as discussed in section IV.A.2.b. of the preamble of this final rule.
Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II.G. of the preamble of this final rule, we normalized the recalibrated MS-DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, equating the average case relative weight after recalibration to the average case relative weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Therefore, as we have done in past years, as we proposed, we are making a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met.
For FY 2019, to comply with the requirement that MS-DRG reclassification and recalibration of the relative weights be budget neutral for the standardized amount and the hospital-specific rates, we used FY 2017 discharge data to simulate payments and compared the following:
• Aggregate payments using the FY 2018 labor-related share percentages, the FY 2018 relative weights, and the FY 2018 pre-reclassified wage data, and applied the FY 2019 hospital readmissions payment adjustments and estimated FY 2019 hospital VBP payment adjustments; and
• Aggregate payments using the FY 2018 labor-related share percentages, the FY 2019 relative weights, and the FY 2018 pre-reclassified wage data, and applied the FY 2019 hospital readmissions payment adjustments and estimated FY 2019 hospital VBP payment adjustments applied above. (We note that these FY 2019 relative weights reflect our temporary measure for FY 2019, as discussed in section II.G. of the preamble of this final rule, to set the FY 2019 relative weight at the FY 2018 final relative weight for MS-DRGs where the FY 2018 relative weight declined by 20 percent from the FY 2017 relative weight and the FY 2019 relative weight would have declined by 20 percent or more from the FY 2018 relative weight.)
Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.997192 and applied this factor to the standardized amount. As discussed in section IV. of this Addendum, as we also proposed, we applied the MS-DRG reclassification and recalibration budget neutrality factor of 0.997192 to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2018.
Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. Section 1886(d)(3)(E)(i) of the Act requires that we implement the wage index adjustment in a budget neutral manner. However, section 1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent for hospitals with a wage index less than or equal to 1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, this section of the statute requires that we implement the updates to the wage index in a budget neutral manner, but that our budget neutrality adjustment should not take into account the requirement that we set the labor-related share for hospitals with wage indexes less than or equal to 1.0000 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage
To compute a budget neutrality adjustment factor for wage index and labor-related share percentage changes, we used FY 2017 discharge data to simulate payments and compared the following:
• Aggregate payments using the FY 2019 relative weights and the FY 2018 pre-reclassified wage indexes, applied the FY 2018 labor-related share of 68.3 percent to all hospitals (regardless of whether the hospital's wage index was above or below 1.0000), and applied the FY 2019 hospital readmissions payment adjustment and the estimated FY 2019 hospital VBP payment adjustment; and
• Aggregate payments using the FY 2019 relative weights and the FY 2019 pre-reclassified wage indexes, applied the labor-related share for FY 2019 of 68.3 percent to all hospitals (regardless of whether the hospital's wage index was above or below 1.0000), and applied the same FY 2019 hospital readmissions payment adjustments and estimated FY 2019 hospital VBP payment adjustments applied above.
In addition, we applied the MS-DRG reclassification and recalibration budget neutrality adjustment factor (derived in the first step) to the payment rates that were used to simulate payments for this comparison of aggregate payments from FY 2018 to FY 2019. By applying this methodology, we determined a budget neutrality adjustment factor of 1.000748 for changes to the wage index.
Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided for under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account in applying any budget neutrality adjustment with respect to such index under section 1886(d)(8)(D) of the Act. To calculate the budget neutrality adjustment factor for FY 2019, we used FY 2017 discharge data to simulate payments and compared the following:
• Aggregate payments using the FY 2019 labor-related share percentages, the FY 2019 relative weights, and the FY 2019 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied the FY 2019 hospital readmissions payment adjustments and the estimated FY 2019 hospital VBP payment adjustments; and
• Aggregate payments using the FY 2019 labor-related share percentages, the FY 2019 relative weights, and the FY 2019 wage data after such reclassifications, and applied the same FY 2019 hospital readmissions payment adjustments and the estimated FY 2019 hospital VBP payment adjustments applied above.
We note that the reclassifications applied under the second simulation and comparison are those listed in Table 2 associated with this final rule, which is available via the internet on the CMS website. This table reflects reclassification crosswalks for FY 2019, and applies the policies explained in section III. of the preamble of this final rule. Based on these simulations, we calculated a budget neutrality adjustment factor of 0.985932 to ensure that the effects of these provisions are budget neutral, consistent with the statute.
The FY 2019 budget neutrality adjustment factor was applied to the standardized amount after removing the effects of the FY 2018 budget neutrality adjustment factor. We note that the FY 2019 budget neutrality adjustment reflects FY 2019 wage index reclassifications approved by the MGCRB or the Administrator at the time of development of this final rule.
Under § 412.64(e)(4), we make an adjustment to the wage index to ensure that aggregate payments after implementation of the rural floor under section 4410 of the BBA (Pub. L. 105-33) is equal to the aggregate prospective payments that would have been made in the absence of this provision. Consistent with section 3141 of the Affordable Care Act and as discussed in section III.G. of the preamble of this final rule and codified at § 412.64(e)(4)(ii), the budget neutrality adjustment for the rural floor is a national adjustment to the wage index.
As noted above and as discussed in section III.G.2. of the preamble of this final rule, the imputed floor is set to expire effective October 1, 2018, and as we proposed, we are not extending the imputed floor policy.
Similar to our calculation in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50369 through 50370), for FY 2019, as we proposed, we are calculating a national rural Puerto Rico wage index. Because there are no rural Puerto Rico hospitals with established wage data, our calculation of the FY 2019 rural Puerto Rico wage index is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we used the unweighted average of the wage indexes from all CBSAs (urban areas) that are contiguous (share a border with) to the rural counties to compute the rural floor (72 FR 47323; 76 FR 51594). Under the OMB labor market area delineations, except for Arecibo, Puerto Rico (CBSA 11640), all other Puerto Rico urban areas are contiguous to a rural area. Therefore, based on our existing policy, the FY 2019 rural Puerto Rico wage index is calculated based on the average of the FY 2019 wage indexes for the following urban areas: Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660); San German, PR (CBSA 41900); and San Juan-Carolina-Caguas, PR (CBSA 41980).
To calculate the national rural floor budget neutrality adjustment factor, we used FY 2017 discharge data to simulate payments and the post-reclassified national wage indexes and compared the following:
• National simulated payments without the national rural floor; and
• National simulated payments with the national rural floor.
Based on this comparison, we determined a national rural floor budget neutrality adjustment factor of 0.993142. The national adjustment was applied to the national wage indexes to produce a national rural floor budget neutral wage index.
In section IV.L. of the preamble of this final rule, we discuss the Rural Community Hospital Demonstration program, which was originally authorized for a 5-year period by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-255), enacted December 13, 2016, amended section 410A of Public Law 108-173 to require a 10-year extension period (in place of the 5-year extension required by the Affordable Care Act, as further discussed below). We make an adjustment to the standardized amount to ensure the effects of the Rural Community Hospital Demonstration program are budget neutral as required under section 410A(c)(2) of Public Law 108-173. We refer the reader to section IV.L. of the preamble of this final rule for complete details regarding the Rural Community Hospital Demonstration.
With regard to budget neutrality, as mentioned earlier, we make an adjustment to the standardized amount to ensure the effects of the Rural Community Hospital Demonstration are budget neutral, as required under section 410A(c)(2) of Public Law 108-173. For FY 2019, the total amount that we are applying to make an adjustment to the standardized amounts to ensure the effects of the Rural Community Hospital Demonstration program are budget neutral is $58,129,609. Accordingly, using the most recent data available to account for the estimated costs of the demonstration program, for FY 2019, we computed a factor of 0.999467 for the Rural Community Hospital Demonstration budget neutrality adjustment that will be applied to the IPPS standard Federal payment rate. We refer readers to section IV.L. of the preamble of this final rule on complete details regarding the calculation of the amount we are applying to make an adjustment to the standardized amount.
We note that, as discussed in section IV.L. of the preamble of this final rule, as we proposed, we used updated data to the extent
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 percent positive adjustment for each of FYs 2018 through 2023. (As noted in the FY 2018 IPPS/LTCH PPS proposed and final rules, section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which was enacted December 13, 2016, reduced the adjustment for FY 2018 from 0.5 percentage points to 0.4588 percentage points.) Therefore, for FY 2019, as we proposed, we are implementing the required +0.5 percent adjustment to the standardized amount. This is a permanent adjustment to the payment rates.
Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the MS-DRG, any IME and DSH payments, uncompensated care payments, any new technology add-on payments, and the “outlier threshold” or “fixed-loss” amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the MS-DRG, any IME and DSH payments, uncompensated care payments, any new technology add-on payments, and the outlier threshold as the outlier “fixed-loss cost threshold.” To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital's CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2019 is 80 percent, or 90 percent for burn MS-DRGs 927, 928, 929, 933, 934 and 935. We have used a marginal cost factor of 90 percent since FY 1989 (54 FR 36479 through 36480) for designated burn DRGs as well as a marginal cost factor of 80 percent for all other DRGs since FY 1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments (which does not include IME and DSH payments) plus outlier payments. When setting the outlier threshold, we compute the 5.1 percent target by dividing the total operating outlier payments by the total operating DRG payments plus outlier payments. We do not include any other payments such as IME and DSH within the outlier target amount. Therefore, it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS website at:
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 50983), in response to public comments on the FY 2013 IPPS/LTCH PPS proposed rule, we made changes to our methodology for projecting the outlier fixed-loss cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of the changes.
As we have done in the past, to calculate the FY 2019 outlier threshold, we simulated payments by applying FY 2019 payment rates and policies using cases from the FY 2017 MedPAR file. As noted in section II.C. of this Addendum, we specify the formula used for actual claim payment which is also used by CMS to project the outlier threshold for the upcoming fiscal year. The difference is the source of some of the variables in the formula. For example, operating and capital CCRs for actual claim payment are from the PSF while CMS uses an adjusted CCR (as described below) to project the threshold for the upcoming fiscal year. In addition, charges for a claim payment are from the bill while charges to project the threshold are from the MedPAR data with an inflation factor applied to the charges (as described earlier).
In order to determine the FY 2019 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2017 to FY 2019. As discussed in the FY 2015 IPPS/LTCH PPS final rule, we believe a methodology that is based on 1-year of charge data will provide a more stable measure to project the average charge per case because our prior methodology used a 6-month measure, which inherently uses fewer claims than a 1-year measure and makes it more susceptible to fluctuations in the average charge per case as a result of any significant charge increases or decreases by hospitals. As finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57282), we are using the following methodology to calculate the charge inflation factor for FY 2019:
• To produce the most stable measure of charge inflation, we applied the following inclusion and exclusion criteria of hospitals claims in our measure of charge inflation: Include hospitals whose last four digits fall between 0001 and 0899 (section 2779A1 of Chapter 2 of the State Operations Manual on the CMS website at
• We excluded Medicare Advantage IME claims for the reasons described in section I.A.4. of this Addendum. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments.
• In order to ensure that we capture only FFS claims, we included claims with a “Claim Type” of 60 (which is a field on the MedPAR file that indicates a claim is an FFS claim).
• In order to further ensure that we capture only FFS claims, we excluded claims with a “GHOPAID” indicator of 1 (which is a field on the MedPAR file that indicates a claim is not an FFS claim and is paid by a Group Health Organization).
• We examined the MedPAR file and removed pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of “3” for blood clotting with a revenue code of “0636” from the covered charge field. We also removed organ acquisition charges from the covered charge field because organ acquisition is a pass-through payment not paid under the IPPS.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49779 through 49780), we stated that commenters were concerned that they were unable to replicate the calculation of the charge inflation factor that CMS used in the proposed rule. In response to those comments, we stated that we continue to believe that it is optimal to use the most recent period of charge data available to measure charge inflation. In response to those comments, similar to FY 2016, FY 2017, and FY 2018, for FY 2019, we grouped claims data by quarter in the table below in order that the public would be able to replicate the claims summary for the claims with discharge dates through September 30, 2017, that are available under the current limited data set (LDS) structure. In order to provide even more information in response to the commenters' request, similar to FY 2016, FY 2017, and FY 2018, for FY 2019, we made available on the CMS website at:
Under this methodology, to compute the 1-year average annualized rate-of-change in charges per case for FY 2019, we compared the average covered charge per case of $56,433 ($546,842,933,353/9,690,074) from the second quarter of FY 2016 through the first quarter of FY 2017 (January 1, 2016, through December 31, 2016) to the average covered charge per case of $58,806.52 ($532,984,507,679/9,063,358) from the second quarter of FY 2017 through the first quarter of FY 2018 (January 1, 2017, through December 31, 2017). This rate-of-change was 4.2 percent (1.04205) or 8.6 percent (1.085868) over 2 years. (We note that in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20581) we inadvertently stated the rate-of-change over 2 years as 9.5 percent instead of 8.6 percent. However, the factor in the parenthetical, 1.085868, was shown correctly.) The billed charges are obtained from the claim from the MedPAR file and inflated by the inflation factor specified above.
Another commenter stated that it was unable to match the figures in the table from the proposed rule with publicly available data sources and that CMS did not disclose the source of the data. The commenter further stated that CMS has not made the necessary data available, or any guidance that describes whether and how CMS edited such data to arrive at the total of quarterly charges and charges per case used to measure charge inflation. Consequently, the commenter stated that the table provided in the proposed rule was not useful in assessing the accuracy of the charge inflation figure that CMS used in the proposed rule to calculate the outlier threshold. The commenter noted that CMS provided a detailed summary table by provider with the monthly charges that were used to compute the charge inflation factor. The commenters appreciated the additional data, but still believed that CMS had not provided enough specific information and data to allow the underlying numbers used in CMS' calculation of the charge inflation factor to be replicated and/or tested for accuracy.
With respect to those comments requesting that CMS add the claims data used to compute the charge inflation factor to the list of LDS files that can be ordered through the usual LDS data request process, we note that the commenters' views were similar to comments received and we responded to in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38524 through 38525) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49779 through 49780), and we refer readers to those rules for additional details our response. As we stated in response to a similar comment in last year's final rule (82 FR 38525), there are limitations on how expeditiously we can add the charge data to the LDS, and we do not anticipate being able to provide the charge data we currently use to calculate the charge inflation factor within the commenters' requested timeframe. We continue to be confronted with the dilemma of either using older data that commenters can access earlier, or using the most up-to-date data which will be more accurate, but will not be available to the public until after publication of the proposed and final rules. We again invite commenters to inform us if they believe their need to have complete access to the data we use in our methodology outweighs the greater accuracy provided by the use of more up-to-date data. We continue to prefer using the latest data available at the time of the proposed and final rules to compute the charge inflation factor because we believe it leads to greater accuracy in the calculation of the fixed-loss cost outlier threshold. However, for the FY 2020 IPPS/LTCH PPS proposed rule, we are continuing to consider using data that commenters can access earlier.
For these reasons, we disagree that CMS has not provided adequate information to allow for meaningful comment, and continue to believe that our current methodology is the most appropriate way to measure charge inflation to result in the most accurate calculation of the outlier threshold based on the best available data.
As we have done in the past, in the FY 2019 IPPS/LTCH PPS proposed rule (8 FR 20581), we proposed to establish the proposed FY 2019 outlier threshold using hospital CCRs from the December 2017 update to the Provider-Specific File (PSF)—the most recent available data at the time of the development of that proposed rule. We proposed to apply the following edits to providers' CCRs in the PSF. We believe these edits are appropriate in order to accurately model the outlier threshold. We first search for Indian Health Service providers and those providers assigned the statewide average CCR from the current fiscal year. We then replace these CCRs with the statewide average CCR for the upcoming fiscal year. We also assign the statewide average CCR (for the upcoming fiscal year) to those providers that have no value in the CCR field in the PSF or whose CCRs exceed the ceilings described later in this section (3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals). We do not apply the adjustment factors described below to hospitals assigned the statewide average CCR. For FY 2019, we also proposed to continue to apply an
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a new methodology to adjust the CCRs. Specifically, we finalized a policy to compare the national average case-weighted operating and capital CCR from the most recent update of the PSF to the national average case-weighted operating and capital CCR from the same period of the prior year.
Therefore, as we have done since FY 2014, we proposed to adjust the CCRs from the December 2017 update of the PSF by comparing the percentage change in the national average case-weighted operating CCR and capital CCR from the December 2016 update of the PSF to the national average case-weighted operating CCR and capital CCR from the December 2017 update of the PSF. We note that, in the proposed rule, we used total transfer-adjusted cases from FY 2017 to determine the national average case-weighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison because this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison.
Using the proposed methodology above, for the proposed rule, we calculated a proposed December 2016 operating national average case-weighted CCR of 0.266065 and a proposed December 2017 operating national average case-weighted CCR of 0.262830. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the December 2016 operating national average case-weighted CCR from the December 2017 operating national average case-weighted CCR and then dividing the result by the December 2016 national operating average case-weighted CCR. This resulted in a proposed national operating CCR adjustment factor of 0.987842.
We used the same methodology proposed above to adjust the capital CCRs. Specifically, we calculated a December 2016 capital national average case-weighted CCR of 0.023104 and a December 2017 capital national average case-weighted CCR of 0.022076. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the December 2016 capital national average case-weighted CCR from the December 2017 capital national average case-weighted CCR and then dividing the result by the December 2016 capital national average case-weighted CCR. This resulted in a proposed national capital CCR adjustment factor of 0.955517.
As discussed in section III.B.3. of the preamble of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.G.3. of the preamble of this final rule, in accordance with section 10324(a) of the Affordable Care Act, we created a wage index floor of 1.0000 for all hospitals located in States determined to be frontier States. We note that the frontier State floor adjustments were applied after rural floor budget neutrality adjustments were applied for all labor market areas, in order to ensure that no hospital in a frontier State would receive a wage index less than 1.0000 due to the rural floor adjustment. In accordance with section 10324(a) of the Affordable Care Act, the frontier State adjustment will not be subject to budget neutrality, and will only be extended to hospitals geographically located within a frontier State. However, for purposes of estimating the outlier threshold for FY 2019, it was necessary to adjust the wage index of those eligible hospitals in a frontier State when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2019. If we did not take the above into account, our estimate of total FY 2019 payments would be too low, and, as a result, our outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments.
As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2019 outlier payments, we proposed not to make any adjustments for the possibility that hospitals' CCRs and outlier payments may be reconciled upon cost report settlement. We continue to believe that, due to the policy implemented in the June 9, 2003 Outlier Final Rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We note that we have instructed MACs to identify for CMS any instances where: (1) A hospital's actual CCR for the cost reporting period fluctuates plus or minus 10 percentage points compared to the interim CCR used to calculate outlier payments when a bill is processed; and (2) the total outlier payments for the hospital exceeded $500,000.00 for that period. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we proposed not to make any assumptions regarding the effects of reconciliation on the outlier threshold calculation.
In addition to the cited resources received in previous iterations of this comment, one commenter referenced and provided an OIG report from September of 2017 (available on the website at:
Outlier cases are, by definition, out of the ordinary, and the occurrence of an individual outlier case is not easily predicted. It is also difficult to predict their occurrence for each hospital in the country. This alone makes incorporating reconciliation into the modeling of the outlier threshold challenging and even more so when combined with the challenges of predicting not only outliers for use at hospital level, but which of those hospitals in the future will be reconciled. We note that the commenter did not specifically address how any projection of the impact of reconciliation would account for these issues, but we welcome recommendations or suggestions from the commenter or other members of the public based on the cost report data on how to account for reconciliation in the calculation of the outlier threshold. We intend to revisit this issue in next year's proposed rule as we continue to consider the feasibility of including outlier reconciliation in the modeling of the outlier threshold.
Lastly, we note that the $664 million estimated figure from the OIG report was an aggregate estimate over an older 10-year period from 2002 to 2012 and was not a single year estimate. We note this to avoid any suggestion that if we were able to feasibly incorporate an estimate of outlier reconciliations in the modelling of the outlier threshold in future years, such an estimate would be of this magnitude.
The commenter stated that this response infers that the findings from the 2013 OIG report (that high-outlier hospitals charge Medicare substantially more for the same MS-DRGs, even though their patients had similar lengths of stay as those in all other hospitals) are no longer an area of concern because the report was based on CCRs from 2008 through 2011. The commenter stated that it conducted an analysis of the MedPAR data which concludes that the findings from the 2013 OIG Report have continued without interruption to present. The commenter also stated that CMS' response that providers may determine their charges overlooks section 2202.4.2 of the Provider Reimbursement Manual, Part I, Chapter 22, that provides that charges should reflect “the regular rates established by the provider for services rendered to both beneficiaries and to other paying patients,” and they “should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient.” The commenter asserted that CMS' failure to reconcile “high-outlier” payments effectively condones charging decisions based on maximizing outlier payments.
The commenter also cited CMS' statement from the FY 2015 IPPS/LTCH PPS final rule (79 FR 50377 and 50378) which stated “that the CCRs will reflect these low costs and high charges that the commenter referred to, and when applied to the charges on the claim will result in less outlier payments for such cases because the costs of the case will be lower when compared to the total MS-DRG payments excluding outlier payments.” The commenter disagreed with this statement and cited the OIG's 2013 report. The commenter stated that the 2103 report revealed that “high-outlier hospitals charged Medicare substantially more for the same MS-DRGs, yet had similar average lengths of stay and CCRs,” which the commenter asserted is directly opposite CMS' statement.
The commenter also asserted that it is neither consistent with the outlier statute nor reasonable for CMS, in modeling outlier payments for the upcoming fiscal year, to include outlier payments that were based on excessively high charges for particular MS-DRGs and not based on truly unusually high costs.
The commenter also asserted that CMS is fully authorized to reconcile the “high-outlier” payments and that according to its position in
We also note we simply indicated that providers determine what they will charge for items, services, and procedures provided to patients, and these charges are the amount that the providers bill for an item, service, or procedure. We never stated that providers should disregard the PRM when setting those charges. Any assertion or suggestion that CMS condones hospitals inappropriately charging to maximize outlier payments is incorrect. In the June 9, 2003 final rule, we implemented the use of tentatively settled CCRs and the reconciliation policy directly in response to inappropriate charging. In addition, the PRM cited above states that charges should reflect “the regular rates established by the provider for services rendered to both beneficiaries and to other paying patients,” and they “should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient.” We expect hospitals to follow these guidelines and the manual when setting their charges.
With respect our statement from the FY 2015 IPPS/LTCH PPS final rule regarding CCRs, it is correct: CCRs will reflect low costs and high charges and, when applied to the charges on the claim, will result in less outlier payments because the costs of the case will be lower when compared to the total MS-DRG payments, excluding outlier payments. There are many factors that influence outlier payments. Consider a simplified example of two hospitals. One higher outlier hospital with average charges of $100,000 and average costs of $33,000 and a resulting CCR of 0.33, and another lower outlier hospital with average charges of $60,000 and average costs of $20,000 which also will result in a CCR of 0.33. As noted above, in the absence of audits and analysis of these hospitals, the commenter is incorrect in concluding from the fact that one hospital has higher charges and costs but the same CCR that the higher outlier hospital must have charges not relative to their costs. The higher outlier hospital may treat more resource intensive patients, which would factor into the aggregate outlier payments the hospital receives. Length of stay is not an exclusive measure of resource intensity.
For similar reasons, the commenter is incorrect that the inclusion of hospitals with higher charges in our estimation of the outlier threshold means that we include “excessively high charges for particular MS-DRGs and not based on truly unusually high costs.”
We agree with the commenter that CMS has broad authority to reconcile outlier payments. However, we disagree that it is necessary to reconcile all outlier payments in order to address any individual circumstances where we believe reconciliation may be appropriate. As discussed in the June 9, 2003 Outlier Final Rule (68 FR 34503), we acknowledged the commenters' concerns about the administrative costs associated with reprocessing and reconciling all inpatient claims and the desirability of limiting which hospitals' outlier payments will be reconciled. Therefore, we agreed that any reconciliation of outlier payments should be done on a limited basis. As described in sections IV.H. and IV.I., respectively, of the preamble of this final rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe that it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the outlier threshold calculation or the outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments will continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we proposed to exclude the hospital VBP payment adjustments and the estimated hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold.
We note that, to the extent section 1886(r) of the Act modifies the DSH payment
Using this methodology, we used the formula described in section I.C.1 of this Addendum to simulate and calculate the Federal payment rate and outlier payments for all claims. We proposed a threshold of $27,545 and calculated total operating Federal payments of $92,908,351,672 and total outlier payments of $4,738,377,622. We then divided total outlier payments by total operating Federal payments plus total outlier payments and determined that this threshold met the 5.1 percent target. As a result, we proposed an outlier fixed-loss cost threshold for FY 2019 equal to the prospective payment rate for the MS-DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any add-on payments for new technology, plus $27,545.
One commenter noted that the final outlier threshold established by CMS is always significantly lower than the threshold set forth in the proposed rule. The commenter believed the decline is most likely due to the use of updated CCRs or other data in calculating the final threshold. The commenter questioned whether CMS used more updated data for the FY 2017 and FY 2018 proposed rules as compared to prior years to calculate the proposed threshold. The commenter stated that, if this was the case, the use of more updated data may account for the decreased variance seen between the proposed and final thresholds in FYs 2017 and 2018 as compared to prior years. The commenter stated that this emphasizes that CMS must use the most recent data available when the Agency calculates the outlier threshold.
One commenter requested CMS to examine the reasons for the continued rise in the outlier threshold and to identify whether interventions can be taken to ensure outlier payments remain equitable for hospitals. Another commenter suggested a reduction to the outlier threshold amount. Another commenter noted that the proposed FY 2019 outlier threshold of $27,545 is a 3.5 percent increase over the FY 2018 outlier threshold. This commenter stated that while CMS has not made any methodological changes to its determination of the outlier threshold, its rise is resulting in hospitals having to experience higher losses in order to receive any payment relief.
One commenter noted that CMS' estimate of FY 2017 outlier payments in the proposed rule was 5.53 percent, which is above the 5.1 percent target but falls within the statutory 5.0 to 6.0 percent outlier payment range. The commenter favored a simplified methodology and believed that, by applying a 2-year charge inflation factor and a 1-year CCR factor, CMS is inadvertently compounding its charge increase with lower costs and overstating the outlier threshold. The commenter suggested that CMS apply the following formula to compute the FY 2019 outlier threshold: FFY 2019 charge inflator Error = (9.5%−8.5868% = 0.9132%)/9.5% = 9.61% Overstatement
After consideration of the public comments we received, we are not making any changes to our methodology in this final rule for FY 2019. Therefore, we are using the same methodology we proposed to calculate the final outlier threshold. We note that, as stated above, we will consider for FY 2020 using data that commenters can access earlier to validate the charge inflation factor.
Similar to the table provided in the proposed rule, for this final rule, we are providing the following table that displays covered charges and cases by quarter in the periods used to calculate the charge inflation factor based on the latest claims data from the MedPAR file.
Under our current methodology, to compute the 1-year average annualized rate-of-change in charges per case for FY 2019, we compared the average covered charge per case of $57,448 ($559,839,156,948/9,745,137) from the third quarter of FY 2016 through the second quarter of FY 2017 (April 1, 2016, through March 31, 2017) to the average covered charge per case of $59,939.96 ($543,885,328,430/9,073,836) from the third quarter of FY 2017 through the second quarter of FY 2018 (April 1, 2017, through March 31, 2018). This rate-of-change was 4.3 percent (1.04338) or 8.9 percent (1.08864) over 2 years. The billed charges are obtained from the claim from the MedPAR file and inflated by the inflation factor specified above.
Similar to the proposed rule, for this final rule, we have made available a more detailed summary table by provider with the monthly charges that were used to compute the charge inflation factor on the CMS website at:
As we have done in the past, we are establishing the FY 2019 outlier threshold using hospital CCRs from the March 2018 update to the Provider-Specific File (PSF)—the most recent available data at the time of the development of the final rule. We applied the following edits to providers' CCRs in the PSF. We believe these edits are appropriate in order to accurately model the outlier threshold. We first search for Indian Health Service providers and those providers assigned the statewide average CCR from the current fiscal year. We then replaced these CCRs with the statewide average CCR for the upcoming fiscal year. We also assigned the statewide average CCR (for the upcoming fiscal year) to those providers that have no value in the CCR field in the PSF or whose CCRs exceed the ceilings described later in this section (3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals). We did not apply the adjustment factors described below to hospitals assigned the statewide average CCR. For FY 2019, we also are continuing to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below).
For this final rule, as we have done since FY 2014, we are adjusting the CCRs from the March 2018 update of the PSF by comparing the percentage change in the national average case-weighted operating CCR and capital CCR from the March 2017 update of the PSF to the national average case-weighted operating CCR and capital CCR from the March 2018 update of the PSF. We note that we used total transfer-adjusted cases from FY 2017 to determine the national average case-weighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison because this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison.
Using the methodology above, for this final rule, we calculated a March 2017 operating national average case-weighted CCR of 0.265819 and a March 2018 operating national average case-weighted CCR of 0.260874. We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the March 2017 operating national average case-weighted CCR from the March 2018 operating national average case-weighted CCR and then dividing the result by the March 2017 national operating average case-weighted CCR. This resulted in a national operating CCR adjustment factor of 0.981397.
We used the same methodology above to adjust the capital CCRs. Specifically, for this final rule, we calculated a March 2017 capital national average case-weighted CCR of 0.022671 and a March 2018 capital national average case-weighted CCR of 0.021554. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the March 2017 capital national average case-weighted CCR from the March 2018 capital national average case-weighted CCR and then dividing the result by the March 2017 capital national average case-weighted CCR. This resulted in a national capital CCR adjustment factor of 0.950739.
As discussed above, similar to the proposed rule, for FY 2019, we applied the following policies (as discussed in more details above):
• In accordance with section 10324(a) of the Affordable Care Act, we created a wage index floor of 1.0000 for all hospitals located in States determined to be frontier States.
• As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2019 outlier payments, we
• We excluded the hospital VBP payment adjustments and the hospital readmissions payment adjustments from the calculation of the outlier fixed-loss cost threshold.
• We used the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the outlier fixed-loss cost threshold methodology.
Using this methodology, we used the formula described in section I.C.1 of this Addendum to simulate and calculate the Federal payment rate and outlier payments for all claims. We used a threshold of $25,769 and calculated total operating Federal payments of $88,484,589,041 and total outlier payments of $4,755,375,555. We then divided total outlier payments by total operating Federal payments plus total outlier payments and determined that this threshold met the 5.1 percent target (($88,484,589,041/$93,239,964,596) × 100 = 5.1 percent). As a result, we are finalizing an outlier fixed-loss cost threshold for FY 2019 equal to the prospective payment rate for the MS-DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, and any add-on payments for new technology, plus $25,769.
As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a lower percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 2019 will result in outlier payments that will equal 5.1 percent of operating DRG payments and 5.06 percent of capital payments based on the Federal rate.
In accordance with section 1886(d)(3)(B) of the Act, as we proposed, we reduced the FY 2019 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers.
The outlier adjustment factors applied to the standardized amount based on the FY 2019 outlier threshold are as follows:
We applied the outlier adjustment factors to the FY 2019 payment rates after removing the effects of the FY 2018 outlier adjustment factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we currently apply hospital-specific CCRs to the total covered charges for the case. Estimated operating and capital costs for the case are calculated separately by applying separate operating and capital CCRs. These costs are then combined and compared with the outlier fixed-loss cost threshold.
Under our current policy at § 412.84, we calculate operating and capital CCR ceilings and assign a statewide average CCR for hospitals whose CCRs exceed 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Based on this calculation, for hospitals for which the MAC computes operating CCRs greater than 1.159 or capital CCRs greater than 0.151, or hospitals for which the MAC is unable to calculate a CCR (as described under § 412.84(i)(3) of our regulations), statewide average CCRs are used to determine whether a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and available only via the internet on the CMS website) contains the statewide average operating CCRs for urban hospitals and for rural hospitals for which the MAC is unable to compute a hospital-specific CCR within the above range. These statewide average ratios will be effective for discharges occurring on or after October 1, 2018 and will replace the statewide average ratios from the prior fiscal year. Table 8B listed in section VI. of this Addendum (and available via the internet on the CMS website) contains the comparable statewide average capital CCRs. As previously stated, the CCRs in Tables 8A and 8B will be used during FY 2019 when hospital-specific CCRs based on the latest settled cost report either are not available or are outside the range noted above. Table 8C listed in section VI. of this Addendum (and available via the internet on the CMS website) contains the statewide average total CCRs used under the LTCH PPS as discussed in section V. of this Addendum.
We finally note that we published a manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update covered an array of topics, including CCRs, reconciliation, and the time value of money. We encourage hospitals that are assigned the statewide average operating and/or capital CCRs to work with their MAC on a possible alternative operating and/or capital CCR as explained in Change Request 3966. Use of an alternative CCR developed by the hospital in conjunction with the MAC can avoid possible overpayments or underpayments at cost report settlement, thereby ensuring better accuracy when making outlier payments and negating the need for outlier reconciliation. We also note that a hospital may request an alternative operating or capital CCR at any time as long as the guidelines of Change Request 3966 are followed. In addition, as mentioned above, we published an additional manual update (Change Request 7192) to our outlier policy on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS website:
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20583), we stated we believe that, in the context of the pending new technology add-on payment applications for KYMRIAH® and YESCARTA®, there may also be merit in the suggestion from the public to allow hospitals to utilize a CCR specific to procedures involving the ICD-10-PCS procedures codes describing CAR T-cell therapy drugs for FY 2019 as part of the determination of the cost of a case for purposes of calculating outlier payments for individual FY 2019 cases, new technology add-on payments, if approved, for individual FY 2019 cases, and payments to IPPS-excluded cancer hospitals beginning in FY 2019.
We invited public comments on this alternative approach for FY 2019. We also invited public comments on how this payment alternative would affect access to care, as well as how it affects incentives to encourage lower drug prices, which is a high priority for this Administration. In addition, we stated that we were considering alternative approaches and authorities to encourage value-based care and lower drug prices. We solicited comments on how the payment methodology alternatives may intersect and affect future participation in any such alternative approaches. A summary of those comments and our responses can be found in section II.F.2.d. of the preamble of this final rule.
As also discussed in section II.F.2.d. of the preamble of this final rule, building on President Trump's
Our current estimate, using available FY 2017 claims data, is that actual outlier payments for FY 2017 were approximately 5.57 percent of actual total MS-DRG payments. Therefore, the data indicate that,
We note that, because the MedPAR claims data for the entire FY 2018 will not be available until after September 30, 2018, we are unable to provide an estimate of actual outlier payments for FY 2018 based on FY 2018 claims data in this final rule. We will provide an estimate of actual FY 2018 outlier payments in the FY 2020 IPPS/LTCH PPS proposed rule.
The adjusted standardized amount is divided into labor-related and nonlabor-related portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the internet on the CMS website) contain the national standardized amounts that we are applying to all hospitals, except hospitals located in Puerto Rico, for FY 2019. The standardized amount for hospitals in Puerto Rico is shown in Table 1C listed and published in section VI. of this Addendum (and available via the internet on the CMS website). The amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is 68.3 percent, and the labor-related share applied to the standardized amounts in Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we will apply a labor-related share of 62 percent for all hospitals whose wage indexes are less than or equal to 1.0000.
In addition, Tables 1A and 1B include the standardized amounts reflecting the applicable percentage increases for FY 2019.
The labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2019 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the internet on the CMS website). Similar to above, section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Public Law 108-173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.
The following table illustrates the changes from the FY 2018 national standardized amount to the FY 2019 national standardized amount. The second through fifth columns display the changes from the FY 2018 standardized amounts for each applicable FY 2019 standardized amount. The first row of the table shows the updated (through FY 2018) average standardized amount after restoring the FY 2018 offsets for outlier payments and the geographic reclassification budget neutrality. The MS-DRG reclassification and recalibration and wage index budget neutrality adjustment factors are cumulative. Therefore, those FY 2018 adjustment factors are not removed from this table.
Tables 1A through 1C, as published in section VI. of this Addendum (and available via the internet on the CMS website), contain the labor-related and nonlabor-related shares that we used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2019. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum.
Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the national prospective payment rate to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. For FY 2019, as discussed in section IV.B.3. of the preamble of this final rule, we are applying a labor-related share of 68.3 percent for the national standardized amounts for all IPPS hospitals (including hospitals in Puerto Rico) that have a wage index value that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are applying the wage index to a labor-related share of 62 percent of the national standardized amount for all IPPS hospitals (including hospitals in Puerto Rico) whose wage index values are less than or equal to 1.0000. In section III. of the preamble of this final rule, we discuss the data and methodology for the FY 2019 wage index.
Section 1886(d)(5)(H) of the Act provides discretionary authority to the Secretary to make adjustments as the Secretary deems appropriate to take into account the unique circumstances of hospitals located in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. To account for higher nonlabor-related costs for these two States, we multiply the nonlabor-related portion of the standardized amount for hospitals in Alaska and Hawaii by an adjustment factor.
In the FY 2013 IPPS/LTCH PPS final rule, we established a methodology to update the COLA factors for Alaska and Hawaii that were published by the U.S. Office of Personnel Management (OPM) every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively).
For FY 2018, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38530 through 38531), we updated the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule.
Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, for FY 2019, as we proposed, we are continuing to use the same COLA factors in FY 2019 that were used in FY 2018 to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii. Below is a table listing the COLA factors for FY 2019.
Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, the next update to the COLA factors for Alaska and Hawaii would occur at the same time as the update to the labor-related share of the IPPS market basket (no later than FY 2022).
General Formula for Calculation of the Prospective Payment Rates for FY 2019
In general, the operating prospective payment rate for all hospitals (including hospitals in Puerto Rico) paid under the IPPS, except SCHs and MDHs, for FY 2019 equals the Federal rate (which includes uncompensated care payments).
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). Section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted February 9, 2018, extended the MDH program for discharges on or after October 1, 2017 through September 30, 2022.
SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal national rate (which, as discussed in section V.G. of the preamble of this final rule, includes uncompensated care payments); the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2019 equals the higher of the applicable
The formula below is used for actual claim payment and is also used by CMS to project the outlier threshold for the upcoming fiscal year. The difference is the source of some of the variables in the formula. For example, operating and capital CCRs for actual claim payment are from the PSF while CMS uses an adjusted CCR (as described above) to project the threshold for the upcoming fiscal year. In addition, charges for a claim payment are from the bill while charges to project the threshold are from the MedPAR data with an inflation factor applied to the charges (as described earlier).
Step 1—Determine the MS-DRG and MS-DRG relative weight for each claim based on the ICD-10-CM procedure and diagnosis codes on the claim.
Step 2—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data and is a meaningful EHR user, as described above.
Step 3—Compute the operating and capital Federal payment rate:
Step 4—Determine operating and capital costs:
Step 5—Compute operating and capital outlier threshold (CMS applies a geographic adjustment to the operating and capital outlier threshold to account for local cost variation):
Step 6—Compute operating and capital outlier payments:
The payment rate may then be further adjusted for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b). The base-operating DRG payment amount may be further adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment as described under sections 1886(q) and 1886(o) of the Act, respectively. Payments also may be reduced by the 1-percent adjustment under the HAC Reduction Program as described in section 1886(p) of the Act. We also make new technology add-on payments in accordance with section 1886(d)(5)(K) and (L) of the Act. Finally, we add the uncompensated care payment to the total claim payment amount. As noted in the formula above, we take uncompensated care payments and new technology add-on payments into consideration when calculating outlier payments.
Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment.
As noted above, as discussed in section IV.G. of the preamble of this FY 2019 IPPS/LTCH PPS 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). Section 50205 of the Bipartisan Budget Act of 2018, enacted February 9, 2018, extended the MDH program for discharges on or after October 1, 2017 through September 30, 2022. For MDHs, the updated hospital-specific rate is based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever yields the greatest aggregate payment.
For a more detailed discussion of the calculation of the hospital-specific rates, we refer readers to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082).
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs and MDHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the applicable percentage increases to the hospital-specific rates applicable to SCHs and MDHs are the following:
For a complete discussion of the applicable percentage increase applied to the hospital-specific rates for SCHs and MDHs, we refer readers to section IV.B. of the preamble of this final rule.
In addition, because SCHs and MDHs use the same MS-DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospital-specific rate is adjusted by a budget neutrality factor to ensure that changes to the MS-DRG classifications and the recalibration of the MS-DRG relative weights are made in a manner so that aggregate IPPS payments are unaffected. Therefore, the hospital-specific rate for an SCH or an MDH is adjusted by the MS-DRG reclassification and recalibration budget neutrality factor of 0.997192, as discussed in section III. of this Addendum. The resulting rate is used in determining the payment rate that an SCH or MDH will receive for its discharges beginning on or after October 1, 2018. We note that, in this final rule, for FY 2019, we are not making a documentation and coding adjustment to the hospital-specific rate. We refer readers to section II.D. of the preamble of this final rule for a complete discussion regarding our policies and previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case-mix.
The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we used to determine the capital Federal rate for FY 2019, which will be effective for discharges occurring on or after October 1, 2018.
All hospitals (except “new” hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. We annually update the capital standard Federal rate, as provided in § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) also provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for exceptions under § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no longer a need for an exceptions payment adjustment factor.) However, in limited circumstances, an additional payment exception for extraordinary circumstances is provided for under § 412.348(f) for qualifying hospitals. Therefore, in accordance with § 412.308(c)(3), an exceptions payment adjustment factor may need to be applied if such payments are made. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral.
Section 412.374 provides for payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs, which currently specifies capital IPPS payments to hospitals located in Puerto Rico are based on 100 percent of the Federal rate.
In the discussion that follows, we explain the factors that we used to determine the capital Federal rate for FY 2019. In particular, we explain why the FY 2019 capital Federal rate will increase approximately 1.27 percent, compared to the FY 2018 capital Federal rate. As discussed in the impact analysis in Appendix A to this final rule, we estimate that capital payments per discharge will increase approximately 2.1 percent during that same period. Because capital payments constitute approximately 10 percent of hospital payments, a 1-percent change in the capital Federal rate yields only approximately a 0.1 percent change in actual payments to hospitals.
Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we adjust the projected CIPI rate of change as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The update factor for FY 2019 under that framework is 1.4 percent based on a projected 1.4 percent increase in the 2014-based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0 percentage point adjustment for case-mix, a 0.0 percentage point adjustment for the DRG reclassification and recalibration, and a forecast error correction of 0.0 percentage point. As discussed in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2019 CIPI projection in that same section of this Addendum. Below we describe the policy adjustments that we are applying in the update framework for FY 2019.
The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments.
The case-mix index can change for any of several reasons:
• The average resource use of Medicare patient changes (“real” case-mix change);
• Changes in hospital documentation and coding of patient records result in higher-weighted DRG assignments (“coding effects”); and
• The annual DRG reclassification and recalibration changes may not be budget neutral (“reclassification effect”).
We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients, as opposed to changes in documentation and coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts, as discussed in section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 47707).)
For FY 2019, we are projecting a 0.5 percent total increase in the case-mix index. We estimated that the real case-mix increase will equal 0.5 percent for FY 2019. The net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, the net adjustment for case-mix change in FY 2019 is 0.0 percentage point.
The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year's changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than those due to patient severity of illness. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we have data available to evaluate the effects of the FY 2017 DRG reclassification and recalibration as part of our update for FY 2019. We assume, for purposes of this adjustment, that the estimate of FY 2017 DRG reclassification and recalibration resulted in no change in the case-mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for reclassification and recalibration in the update framework for FY 2019.
The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input
Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we calculated this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflected how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncost-effective services. Our intensity measure is based on a 5-year average.
We calculate case-mix constant intensity as the change in total cost per discharge, adjusted for price level changes (the CPI for hospital and related services) and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity changes that are due, respectively, to ineffective practice patterns and the combination of quality-enhancing new technologies and complexity within the DRG system, we assume that one-half of the annual change is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of quality-enhancing technology.
In this final rule, as we proposed, we are continuing to use a Medicare-specific intensity measure that is based on a 5-year adjusted average of cost per discharge for FY 2019 (we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50436) for a full description of our Medicare-specific intensity measure). Specifically, for FY 2019, we are using an intensity measure that is based on an average of cost per discharge data from the 5-year period beginning with FY 2012 and extending through FY 2016. Based on these data, we estimated that case-mix constant intensity declined during FYs 2012 through 2016. In the past, when we found intensity to be declining, we believed a zero (rather than a negative) intensity adjustment was appropriate. Consistent with this approach, because we estimated that intensity will decline during that 5-year period, we believe it is appropriate to continue to apply a zero intensity adjustment for FY 2019. Therefore, as we proposed, we are making a 0.0 percentage point adjustment for intensity in the update for FY 2019.
Above we described the basis of the components we used to develop the 1.4 percent capital update factor under the capital update framework for FY 2019, as shown in the following table.
In its March 2018 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments for FY 2019. (We refer readers to MedPAC's Report to the Congress: Medicare Payment Policy, March 2018, Chapter 3, available on the website at:
Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capital-related PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments.
For FY 2018, we estimated that outlier payments for capital would equal 5.17 percent of inpatient capital-related payments based on the capital Federal rate in FY 2018. Based on the thresholds, as set forth in section II.A. of this Addendum, we estimate that outlier payments for capital-related costs will equal 5.06 percent for inpatient capital-related payments based on the capital Federal rate in FY 2019. Therefore, we are applying an outlier adjustment factor of 0.9494 in determining the capital Federal rate for FY 2019. Thus, we estimate that the percentage of capital outlier payments to total capital Federal rate payments for FY 2019 will be lower than the percentage for FY 2018.
The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The FY 2019 outlier adjustment of 0.9494 is a 0.12 percent change from the FY 2018 outlier adjustment of 0.9483. Therefore, the net change in the outlier adjustment to the capital Federal rate for FY 2019 is 1.0012 (0.9494/0.9483) so that the outlier adjustment will increase the FY 2019 capital Federal rate by 0.12 percent compared to the FY 2018 outlier adjustment.
Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate, after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF, are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. The budget neutrality factor for DRG reclassifications and recalibration nationally is applied in determining the capital IPPS Federal rate, and is applicable for all hospitals, including those hospitals located in Puerto Rico.
To determine the factors for FY 2019, we compared estimated aggregate capital Federal rate payments based on the FY 2018 MS-DRG classifications and relative weights and the FY 2018 GAF to estimated aggregate capital Federal rate payments based on the FY 2018 MS-DRG classifications and relative weights and the FY 2019 GAFs. To achieve budget neutrality for the changes in the GAFs, based on calculations using updated data, we are applying an incremental budget neutrality adjustment factor of 0.9986 for FY 2019 to the previous cumulative FY 2018 adjustment factor.
We then compared estimated aggregate capital Federal rate payments based on the FY 2018 MS-DRG relative weights and the FY 2019 GAFs to estimate aggregate capital Federal rate payments based on the cumulative effects of the FY 2019 MS-DRG classifications and relative weights and the FY 2019 GAFs. The incremental adjustment factor for DRG classifications and changes in relative weights is 0.9989. The incremental adjustment factors for MS-DRG classifications and changes in relative weights and for changes in the GAFs through FY 2019 is 0.9975. We note that all the values are calculated with unrounded numbers.
The GAF/DRG budget neutrality adjustment factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement under § 412.308(c)(4)(ii) that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs.
The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the MS-DRG
The incremental adjustment factor of 0.9975 (the product of the incremental national GAF budget neutrality adjustment factor of 0.9986 and the incremental DRG budget neutrality adjustment factor of 0.9989) accounts for the MS-DRG reclassifications and recalibration and for changes in the GAFs. It also incorporates the effects on the GAFs of FY 2019 geographic reclassification decisions made by the MGCRB compared to FY 2018 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors.
For FY 2018, we established a capital Federal rate of $453.95 (82 FR 46144 through 46145). We are establishing an update of 1.4 percent in determining the FY 2019 capital Federal rate for all hospitals. As a result of this update and the budget neutrality factors discussed earlier, we are establishing a national capital Federal rate of $459.72 for FY 2019. The national capital Federal rate for FY 2019 was calculated as follows:
• The FY 2019 update factor is 1.014; that is, the update is 1.4 percent.
• The FY 2019 budget neutrality adjustment factor that is applied to the capital Federal rate for changes in the MS-DRG classifications and relative weights and changes in the GAFs is 0.9975.
• The FY 2019 outlier adjustment factor is 0.9494.
We are providing the following chart that shows how each of the factors and adjustments for FY 2019 affects the computation of the FY 2019 national capital Federal rate in comparison to the FY 2018 national capital Federal rate as presented in the FY 2018 IPPS/LTCH PPS Correction Notice (82 FR 46144 through 46145). The FY 2019 update factor has the effect of increasing the capital Federal rate by 1.4 percent compared to the FY 2018 capital Federal rate. The GAF/DRG budget neutrality adjustment factor has the effect of decreasing the capital Federal rate by 0.25 percent. The FY 2019 outlier adjustment factor has the effect of increasing the capital Federal rate by 0.12 percent compared to the FY 2018 capital Federal rate. The combined effect of all the changes will increase the national capital Federal rate by approximately 1.27 percent, compared to the FY 2018 national capital Federal rate.
In this final rule, we also are providing the following chart that shows how the final FY 2019 capital Federal rate differs from the proposed FY 2019 capital Federal rate as presented in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20587 through 20589).
For purposes of calculating payments for each discharge during FY 2019, the capital Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted capital Federal rate.
Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The outlier thresholds for FY 2019 are in section II.A. of this Addendum. For FY 2019, a case will qualify as a cost outlier if the cost for the case plus the (operating) IME and DSH payments (including both the empirically justified Medicare DSH payment and the estimated uncompensated care payment, as discussed in section II.A.4.g.(1) of this Addendum) is greater than the prospective payment rate for the MS-DRG plus the fixed-loss amount of $25,769.
Currently, as provided under § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation, unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS).
Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect—the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior
We periodically update the base year for the operating and capital input price indexes to reflect the changing composition of inputs for operating and capital expenses. For this FY 2019 IPPS/LTCH PPS final rule, we are using the rebased and revised IPPS operating and capital market baskets that reflect a 2014 base year. For a complete discussion of this rebasing, we refer readers to section IV. of the preamble of the FY 2018 IPPS/LTCH PPS final rule (82 FR 38170).
Based on IHS Global Inc.'s second quarter 2018 forecast, for this final rule, we are forecasting the 2014-based CIPI to increase 1.4 percent in FY 2019. This reflects a projected 1.6 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), and a projected 3.9 percent increase in other capital expense prices in FY 2019, partially offset by a projected 1.2 percent decline in vintage-weighted interest expense prices in FY 2019. The weighted average of these three factors produces the forecasted 1.4 percent increase for the 2014-based CIPI in FY 2019.
Payments for services furnished in children's hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) that are excluded from the IPPS are made on the basis of reasonable costs based on the hospital's own historical cost experience, subject to a rate-of-increase ceiling. A per discharge limit (the target amount, as defined in § 413.40(a) of the regulations) is set for each hospital, based on the hospital's own cost experience in its base year, and updated annually by a rate-of-increase percentage specified in § 413.40(c)(3). In addition, as specified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38536), effective for cost reporting periods beginning during FY 2018, the annual update to the target amount for extended neoplastic disease care hospitals (hospitals described in § 412.22(i) of the regulations) also is the rate-of-increase percentage specified in § 413.40(c)(3). (We note that, in accordance with § 403.752(a), religious nonmedical health care institutions (RNHCIs) are also subject to the rate-of-increase limits established under § 413.40 of the regulations.)
The FY 2019 rate-of-increase percentage for updating the target amounts for the 11 cancer hospitals, children's hospitals, the short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, RNHCIs, and extended neoplastic disease care hospitals is the estimated percentage increase in the IPPS operating market basket for FY 2019, in accordance with applicable regulations at § 413.40. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20449), based on IGI's 2017 fourth quarter forecast, we estimated that the 2014-based IPPS operating market basket update for FY 2019 was 2.8 percent (that is, the estimate of the market basket rate-of-increase). However, we proposed that if more recent data became available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2019. For this final rule, based on IGI's 2018 second quarter forecast (which is the most recent available data), we estimated that the 2014-based IPPS operating market basket update for FY 2019 is 2.9 percent (that is, the estimate of the market basket rate-of-increase). Therefore, for children's hospitals, the 11 cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa), extended neoplastic disease care hospitals, and RNHCIs, the FY 2019 rate-of-increase percentage that will be applied to the FY 2018 target amounts, in order to determine the FY 2019 target amounts is 2.9 percent.
The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section VII. of the preamble of this final rule and section V. of the Addendum to this final rule for the updated changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2019. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate
In section VII. of the preamble of this final rule, we discuss our annual updates to the payment rates, factors, and specific policies under the LTCH PPS for FY 2019.
Under § 412.523(c)(3) of the regulations, for LTCH PPS FYs 2012 through 2017, we updated the standard Federal payment rate by the most recent estimate of the LTCH PPS market basket at that time, including additional statutory adjustments required by sections 1886(m)(3)(A)(i) (citing sections 1886(b)(3)(B)(xi)(II), 1886(m)(3)(A)(ii), and 1886(m)(4) of the Act as set forth in the regulations at § 412.523(c)(3)(viii) through (c)(3)(xiii)). (For a summary of the payment rate development prior to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38310 through 38312).)
Sections 1886(m)(3)(A) and 1886(m)(3)(C) of the Act specify that, for rate year 2010 and each subsequent rate year, except FY 2018, any annual update to the standard Federal payment rate shall be reduced:
• For rate year 2010 through 2019, by the “other adjustment” specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and
• For rate year 2012 and each subsequent year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (which we refer to as “the multifactor productivity (MFP) adjustment”) as discussed in section VII.D.2. of the preamble of this final rule.
This section of the Act further provides that the application of section 1886(m)(3)(B) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. (As noted in section VII.D.2.a. of the preamble of this final rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term “fiscal year” (FY) rather than “rate year” (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use the term “fiscal year” rather than “rate year” for 2011 and subsequent years.)
For LTCHs that fail to submit the required quality reporting data in accordance with the LTCH QRP, the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act.
Consistent with our historical practice, for FY 2019, as we proposed, we are applying the annual update to the LTCH PPS standard Federal payment rate from the previous year. Furthermore, in determining the LTCH PPS standard Federal payment rate for FY 2019, we also are making certain regulatory adjustments, consistent with past practices. Specifically, in determining the FY 2019 LTCH PPS standard Federal payment rate, as we proposed, we are applying a budget neutrality adjustment factor for the changes related to the area wage adjustment (that is, changes to the wage data and labor-related share) in accordance with § 412.523(d)(4) and a temporary budget neutrality adjustment factor to LTCH PPS standard Federal payment rate cases only for the cost of the elimination of the 25-percent threshold policy for FY 2019 (discussed in VII.E. of the preamble of this final rule).
In this FY 2019 IPPS/LTCH PPS final rule, we are establishing an annual update to the LTCH PPS standard Federal payment rate of 1.35 percent. Accordingly, under § 412.523(c)(3)(xv), we are applying a factor of 1.0135 to the FY 2018 LTCH PPS standard Federal payment rate of $41,415.11 to determine the FY 2019 LTCH PPS standard Federal payment rate. Also, under § 412.523(c)(3)(xv), applied in conjunction with the provisions of § 412.523(c)(4), we are establishing an annual update to the LTCH PPS standard Federal payment rate of -0.65 percent (that is, an update factor of 0.9935) for FY 2019 for LTCHs that fail to submit the required quality reporting data for FY 2019 as required under the LTCH QRP. Consistent with § 412.523(d)(4), we also are applying an area wage level budget neutrality factor to the FY 2019 LTCH PPS standard Federal payment rate of 0.999713 based on the best available data at this time, to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS standard
We did not receive any public comments on the proposed development of the FY 2019 LTCH PPS standard Federal payment rate. Therefore, we are finalizing our proposals as described above, without modification.
Under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal payment rate to account for differences in LTCH area wage levels under § 412.525(c). The labor-related share of the LTCH PPS standard Federal payment rate is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
In adjusting for the differences in area wage levels under the LTCH PPS, the labor-related portion of an LTCH's Federal prospective payment is adjusted by using an appropriate area wage index based on the geographic classification (labor market area) in which the LTCH is located. Specifically, the application of the LTCH PPS area wage level adjustment under existing § 412.525(c) is made based on the location of the LTCH—either in an “urban area,” or a “rural area,” as defined in § 412.503. Under § 412.503, an “urban area” is defined as a Metropolitan Statistical Area (MSA) (which includes a Metropolitan division, where applicable), as defined by the Executive OMB and a “rural area” is defined as any area outside of an urban area. (Information on OMB's MSA delineations based on the 2010 standards can be found at:
The CBSA-based geographic classifications (labor market area definitions) currently used under the LTCH PPS, effective for discharges occurring on or after October 1, 2014, are based on the OMB labor market area delineations based on the 2010 Decennial Census data. The current statistical areas (which were implemented beginning with FY 2015) are based on revised OMB delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. We adopted these labor market area delineations because they are based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas. We also believe that these OMB delineations will ensure that the LTCH PPS area wage level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We noted that this policy was consistent with the IPPS policy adopted in FY 2015 under § 412.64(b)(1)(ii)(D) of the regulations (79 FR 49951 through 49963). (For additional information on the CBSA-based labor market area (geographic classification) delineations currently used under the LTCH PPS and the history of the labor market area definitions used under the LTCH PPS, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50180 through 50185).)
In general, it is our historical practice to update the CBSA-based labor market area delineations annually based on the most recent updates issued by OMB. Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provided updates to and superseded OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provided detailed information on the update to statistical areas since February 28, 2013. We adopted the updates contained in OMB Bulletin No. 15-01, as discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913 through 56914). On August 15, 2017, OMB issued OMB Bulletin No. 17-01 that updated and superseded Bulletin No. 15-01. As discussed in the proposed rule and in section III.A.2. of the preamble of this final rule, OMB Bulletin No. 17-01 and its attachments provide detailed information on the update to statistical areas since the July 15, 2015 release of Bulletin No. 15-01 and are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2014, and July 1, 2015. A copy of this bulletin may be obtained on the website at:
OMB Bulletin No. 17-01 made the following change that is relevant to the LTCH PPS CBSA-based labor market area (geographic classification) delineations:
• Twin Falls, ID, with principal city Twin Falls, ID and consisting of counties Jerome County, ID and Twin Falls County, ID, which was a Micropolitan (geographically rural) area, now qualifies as an urban area under new CBSA 46300 entitled Twin Falls, ID.
This change affects all providers located in CBSA 46300, but our database shows no LTCHs located in CBSA 46300.
We believe that this revision to the CBSA-based labor market area delineations will ensure that the LTCH PPS area wage level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas (81 FR 57298). Therefore, as we proposed, we are adopting this revision under the LTCH PPS, effective October 1, 2018. Accordingly, the FY 2019 LTCH PPS wage index values in Tables 12A and 12B listed in section VI. of the Addendum to this final rule (which are available via the internet on the CMS website) reflect the revision to the CBSA-based labor market area delineations described above. We note that, as discussed in section III.A.2. of the preamble of this final rule, the revision to the CBSA-based delineations also is being used under the IPPS.
We did not receive any public comments in response to our proposal.
Under the payment adjustment for the differences in area wage levels under § 412.525(c), the labor-related share of an LTCH's standard Federal payment rate payment is adjusted by the applicable wage index for the labor market area in which the LTCH is located. The LTCH PPS labor-related share currently represents the sum of the labor-related portion of operating costs and a labor-related portion of capital costs using the applicable LTCH PPS market basket. Additional background information on the historical development of the labor-related share under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 and 51808).
For FY 2013, we rebased and revised the market basket used under the LTCH PPS by adopting a 2009-based LTCH-specific market basket. In addition, beginning in FY 2013, we determined the labor-related share annually as the sum of the relative importance of each labor-related cost category of the 2009-based LTCH-specific market basket for the respective fiscal year based on the best available data. (For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 53479).) As noted previously, we rebased and revised the 2009-based LTCH-specific market basket to reflect a 2013 base year. In conjunction with that policy, as discussed in section VII.D. of the preamble of this FY 2019 IPPS/LTCH PPS final rule, as we proposed, we are establishing that the LTCH PPS labor-related share for FY 2019 is the sum of the FY 2019 relative importance of each labor-related cost category in the 2013-based LTCH market basket using the most recent available data.
In the proposed rule, we proposed to establish that the labor-related share for FY 2019 includes the sum of the labor-related
We did not receive any public comments in response to our proposals. Therefore, we are finalizing our proposals, without modification.
In this final rule, we are establishing that the labor-related share for FY 2019 includes the sum of the labor-related portion of operating costs from the 2013-based LTCH market basket (that is, the sum of the FY 2019 relative importance share of Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; All Other: Labor-related Services) and a portion of the Capital-Related cost weight from the 2013-based LTCH PPS market basket. Based on IGI's second quarter 2018 forecast of the 2013-based LTCH market basket, consistent with our proposal, we are establishing a labor-related share under the LTCH PPS for FY 2019 of 66.0 percent. This labor-related share is determined using the same methodology as employed in calculating all previous LTCH PPS labor-related shares.
The labor-related share for FY 2019 is the sum of the FY 2019 relative importance of each labor-related cost category, and reflects the different rates of price change for these cost categories between the base year (2013) and FY 2019. The sum of the relative importance for FY 2019 for operating costs (Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; All Other: Labor-Related Services) is 61.8 percent. The portion of capital-related costs that is influenced by the local labor market is estimated to be 46 percent (the same percentage applied to the 2009-based LTCH-specific market basket). Because the relative importance for capital-related costs under our policies is 9.1 percent of the 2013-based LTCH market basket in FY 2019, as we proposed, we are taking 46 percent of 9.1 percent to determine the labor-related share of capital-related costs for FY 2019 (0.46 × 9.1). The result is 4.2 percent, which we added to 61.8 percent for the operating cost amount to determine the total labor-related share for FY 2019. Therefore, as we proposed, we are establishing that the labor-related share under the LTCH PPS for FY 2019 is 66.0 percent.
Historically, we have established LTCH PPS area wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment established under the LTCH PPS is based on an LTCH's actual location without regard to the “urban” or “rural” designation of any related or affiliated provider.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38538 through 38539), we calculated the FY 2018 LTCH PPS area wage index values using the same data used for the FY 2018 acute care hospital IPPS (that is, data from cost reporting periods beginning during FY 2014), without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent complete data available at that time. In that same final rule, we indicated that we computed the FY 2018 LTCH PPS area wage index values, consistent with the urban and rural geographic classifications (labor market areas) that were in place at that time and consistent with the pre-reclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS). As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus (or campuses) are located. We also continued to use our existing policy for determining area wage index values for areas where there are no IPPS wage data.
Consistent with our historical methodology, as discussed in the FY 2019 IPPS/LTCH PPS proposed rule, to determine the applicable area wage index values for the FY 2019 LTCH PPS standard Federal payment rate, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we proposed to use wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2015, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act because these data were the most recent complete data available. We also note that these are the same data we are using to compute the FY 2019 acute care hospital inpatient wage index, as discussed in section III. of the preamble of this final rule. We proposed to compute the FY 2019 LTCH PPS standard Federal payment rate area wage index values consistent with the “urban” and “rural” geographic classifications (that is, labor market area delineations, including the updates, as previously discussed in section V.B. of this Addendum) and our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS. We also proposed to continue continuing to apportion wage data for multicampus hospitals with campuses located in different labor market areas to each CBSA where the campus or campuses are located, consistent with the IPPS policy. Lastly, consistent with our existing methodology for determining the LTCH PPS wage index values, for FY 2019, we proposed to continue to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. Under our existing methodology, the LTCH PPS wage index value for urban CBSAs with no IPPS wage data will be determined by using an average of all of the urban areas within the State, and the LTCH PPS wage index value for rural areas with no IPPS wage data will be determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State.
We did not receive any public comments in response to our proposals. Therefore, we are finalizing our proposals, without modification.
Based on the FY 2015 IPPS wage data that we used to determine the FY 2019 LTCH PPS standard Federal payment rate area wage index values, there are no IPPS wage data for the urban area of Hinesville, GA (CBSA 25980). Consistent with the methodology discussed above, we calculated the FY 2019 wage index value for CBSA 25980 as the average of the wage index values for all of the other urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown in Table 12A, which is listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website). We note that, as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future.
Based on the FY 2015 IPPS wage data that we used to determine the FY 2019 LTCH PPS standard Federal payment rate area wage index values in this final rule, there are no rural areas without IPPS hospital wage data. Therefore, it is not necessary to use our established methodology to calculate a LTCH PPS standard Federal payment rate wage index value for rural areas with no IPPS wage data for FY 2019. We note that, as IPPS wage data are dynamic, it is possible that the number of rural areas without IPPS wage data will vary in the future. The FY 2019 LTCH PPS standard Federal payment rate wage index values that will be applicable for LTCH PPS standard Federal payment rate discharges occurring on or after October 1, 2018, through September 30, 2019, are presented in Table 12A (for urban areas) and Table 12B (for rural areas), which are listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website.
Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. Under § 412.525(c)(2), any changes to the area wage index values or labor-related share are to be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage-level adjustment budget neutrality factor that will be applied to the standard Federal payment rate to ensure that any changes to the area wage level adjustments are budget neutral such that any changes to the area wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, under § 412.523(d)(4), we apply an area wage level adjustment budget neutrality factor in determining the standard Federal payment rate, and we also established a methodology for calculating an area wage level adjustment budget neutrality factor. (For additional information on the establishment of our budget neutrality policy for changes to the area wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
In the FY 2019 IPS/LTCH PPS proposed rule, we set forth the proposed methodologies we would use to determine an area wage level adjustment budget factor that would be applied to the LTCH PPS standard Federal payment rate for FY 2019. We did not receive any public comments in response to our proposals. Therefore, we are finalizing our proposals, without modification.
In this final rule, for FY 2019 LTCH PPS standard Federal payment rate cases, in accordance with § 412.523(d)(4), we are applying an area wage level adjustment budget neutrality factor to adjust the LTCH PPS standard Federal payment rate to account for the estimated effect of the adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments using a methodology that is consistent with the methodology we established in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). Specifically, we determined an area wage level adjustment budget neutrality factor that will be applied to the LTCH PPS standard Federal payment rate under § 412.523(d)(4) for FY 2019 using the following methodology:
We note that, with the exception of cases subject to the transitional blend payment rate provisions and certain temporary exemptions for certain spinal cord specialty hospitals and certain severe wound cases, under the dual rate LTCH PPS payment structure, only LTCH PPS cases that meet the statutory criteria to be excluded from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) are paid based on the LTCH PPS standard Federal payment rate. Because the area wage level adjustment under § 412.525(c) is an adjustment to the LTCH PPS standard Federal payment rate, we only used data from claims that would have qualified for payment at the LTCH PPS standard Federal payment rate if such rate had been in effect at the time of discharge to calculate the FY 2019 LTCH PPS standard Federal payment rate area wage level adjustment budget neutrality factor described above.
For this final rule, using the steps in the methodology previously described, we determined a FY 2019 LTCH PPS standard Federal payment rate area wage level adjustment budget neutrality factor of 0.999713. Accordingly, in section V.A. of the Addendum to this final rule, to determine the FY 2019 LTCH PPS standard Federal payment rate, we are applying an area wage level adjustment budget neutrality factor of 0.999713, in accordance with § 412.523(d)(4). The FY 2019 LTCH PPS standard Federal payment rate shown in Table 1E of the Addendum to this final rule reflects this adjustment factor.
Under § 412.525(b), a cost-of-living adjustment (COLA) is provided for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are taken into account in the adjustment for area wage levels previously described. The methodology used to determine the COLA factors for Alaska and Hawaii is based on a comparison of the growth in the Consumer Price Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). It also includes a 25-percent cap on the CPI-updated COLA factors. Under our current policy, we update the COLA factors using the methodology described above every 4 years (at the same time as the update to the labor-related share of the IPPS market basket), and we last updated the COLA factors for Alaska and Hawaii published by OPM for 2009 in FY 2018 (82 FR 38539 through 38540).
We continue to believe that determining updated COLA factors using this methodology would appropriately adjust the nonlabor-related portion of the LTCH PPS standard Federal payment rate for LTCHs located in Alaska and Hawaii. Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule, for FY 2019, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of the BIPA, to determine appropriate payment adjustments under the LTCH PPS, we proposed to continue to use the COLA factors based on the 2009 OPM COLA factors updated through 2016 by the comparison of the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for the average U.S. city as established in the FY 2018 IPPS/LTCH PPS final rule. (For additional details on our current methodology for updating the COLA factors for Alaska and Hawaii and for a discussion on the FY 2018 COLA factors, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38539 through 38540).)
We did not receive any public comments on our proposal. Therefore, we are adopting our proposal, without modification. Consistent with our historical practice, we are establishing that the COLA factors shown in the following table will be used to adjust the nonlabor-related portion of the LTCH PPS standard Federal payment rate for LTCHs located in Alaska and Hawaii under § 412.525(b).
From the beginning of the LTCH PPS, we have included an adjustment to account for cases in which there are extraordinarily high costs relative to the costs of most discharges. Under this policy, additional payments are made based on the degree to which the estimated cost of a case (which is calculated by multiplying the Medicare allowable covered charge by the hospital's overall hospital CCR) exceeds a fixed-loss amount. This policy results in greater payment accuracy under the LTCH PPS and the Medicare program, and the LTCH sharing the financial risk for the treatment of extraordinarily high-cost cases.
We retained the basic tenets of our HCO policy in FY 2016 when we implemented the dual rate LTCH PPS payment structure under section 1206 of Public Law 113-67. LTCH discharges that meet the criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) are paid at the LTCH PPS standard Federal payment rate, which includes, as applicable, HCO payments under § 412.523(e). LTCH discharges that do not meet the criteria for exclusion are paid at the site neutral payment rate, which includes, as applicable, HCO payments under § 412.522(c)(2)(i). In the FY 2016 IPPS/LTCH PPS final rule, we established separate fixed-loss amounts and targets for the two different LTCH PPS payment rates. Under this bifurcated policy, the historic 8-percent HCO target was retained for LTCH PPS standard Federal payment rate cases, with the fixed-loss amount calculated using only data from LTCH cases that would have been paid at the LTCH PPS standard Federal payment rate if that rate had been in effect at the time of those discharges. For site neutral payment rate cases, we adopted the operating IPPS HCO target (currently 5.1 percent) and set the fixed-loss amount for site neutral payment rate cases at the value of the IPPS fixed-loss amount. Under the HCO policy for both payment rates, an LTCH receives 80 percent of the difference between the estimated cost of the case and the applicable HCO threshold, which is the sum of the LTCH PPS payment for the case and the applicable fixed-loss amount for such case.
In order to maintain budget neutrality, consistent with the budget neutrality requirement for HCO payments to LTCH PPS standard Federal rate payment cases, we also adopted a budget neutrality requirement for HCO payments to site neutral payment rate cases by applying a budget neutrality factor to the LTCH PPS payment for those site neutral payment rate cases. (We refer readers to § 412.522(c)(2)(i) of the regulations for further details.) We note that, during the 2-year transitional period, the site neutral payment rate HCO budget neutrality factor did not apply to the LTCH PPS standard Federal payment rate portion of the blended payment rate at § 412.522(c)(3) payable to site neutral payment rate cases. (For additional details on the HCO policy adopted for site neutral payment rate cases under the dual rate LTCH PPS payment structure, including the budget neutrality adjustment for HCO payments to site neutral payment rate cases, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49617 through 49623).)
As noted above, CCRs are used to determine payments for HCO adjustments for both payment rates under the LTCH PPS and also are used to determine payments for site neutral payment rate cases. As noted earlier, in determining HCO and the site neutral payment rate payments (regardless of whether the case is also an HCO), we generally calculate the estimated cost of the case by multiplying the LTCH's overall CCR by the Medicare allowable charges for the case. An overall CCR is used because the LTCH PPS uses a single prospective payment per discharge that covers both inpatient operating and capital-related costs. The LTCH's overall CCR is generally computed based on the sum of LTCH operating and capital costs (as described in Section 150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub. 100-4)) as compared to total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges), with those values determined from either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period. However, in certain instances, we use an alternative CCR, such as the statewide average CCR, a CCR that is specified by CMS, or one that is requested by the hospital. (We refer readers to § 412.525(a)(4)(iv) of the regulations for further details regarding HCO adjustments for either LTCH PPS payment rate and § 412.522(c)(1)(ii) for the site neutral payment rate.)
The LTCH's calculated CCR is then compared to the LTCH total CCR ceiling. Under our established policy, an LTCH with a calculated CCR in excess of the applicable maximum CCR threshold (that is, the LTCH total CCR ceiling, which is calculated as 3 standard deviations from the national geometric average CCR) is generally assigned the applicable statewide CCR. This policy is premised on a belief that calculated CCRs above the LTCH total CCR ceiling are most likely due to faulty data reporting or entry, and CCRs based on erroneous data should not be used to identify and make payments for outlier cases.
Consistent with our historical practice, as we proposed, we used the most recent data available to determine the LTCH total CCR ceiling for FY 2019 in this final rule. Specifically, in this final rule, using our established methodology for determining the LTCH total CCR ceiling based on IPPS total CCR data from the March 2018 update of the Provider Specific File (PSF), which is the most recent data available, we are establishing an LTCH total CCR ceiling of 1.27 under the LTCH PPS for FY 2019 in accordance with § 412.525(a)(4)(iv)(C)(
We did not receive any public comments on our proposals. Therefore, we are finalizing our proposals as described above, without modification.
Our general methodology for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling because it is based on “total” IPPS CCR data. (For additional information on our methodology for determining statewide average CCRs under the LTCH PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 through 48120).) Under the LTCH PPS HCO policy for cases paid under either payment rate at § 412.525(a)(4)(iv)(C)(
Consistent with our historical practice of using the best available data, in this final rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS “total CCR” data from the March 2018 update of the PSF, as we proposed, we are establishing LTCH PPS statewide average total CCRs for urban and rural hospitals that will be effective for discharges occurring on or after October 1, 2018, through September 30, 2019, in Table 8C listed in section VI. of the Addendum to this final rule (and available via the internet on the CMS website). Consistent with our historical practice, as we also proposed, we used more recent data to determine the LTCH PPS statewide average total CCRs for FY 2019 in this final rule.
Under the current LTCH PPS labor market areas, all areas in Delaware, the District of Columbia, New Jersey, and Rhode Island are classified as urban. Therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the same as the policy applied under the IPPS. In addition, although Connecticut has areas that are designated as rural, in our calculation of the LTCH statewide average CCRs, there was no data available from short-term, acute care IPPS hospitals to compute a rural statewide average CCR or there were no short-term, acute care IPPS hospitals or LTCHs located in that area as of March 2018. Therefore, consistent with our existing methodology, as we proposed, we used the national average total CCR for rural IPPS hospitals for rural Connecticut in Table 8C. While Massachusetts also has rural areas, the statewide average CCR for rural areas in Massachusetts is based on one IPPS provider whose CCR is an atypical 1.215. Because this is much higher than the statewide urban average and furthermore implies costs exceeded charges, as with Connecticut, as we proposed, we used the national average total CCR for rural hospitals for hospitals located in rural Massachusetts. Furthermore, consistent with our existing methodology, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, as we proposed, we are continuing to use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We are using this proxy because we believe that the CCR data in the PSF for Maryland hospitals may not be entirely accurate (as discussed in greater detail in the FY 2007 IPPS final rule (71 FR 48120)).
We did not receive any public comments on our proposals. Therefore, we are finalizing our proposals as described above, without modification.
Under the HCO policy for cases paid under either payment rate at § 412.525(a)(4)(iv)(D), the payments for HCO cases are subject to reconciliation. Specifically, any such payments are reconciled at settlement based on the CCR that was calculated based on the cost report coinciding with the discharge. For additional information on the reconciliation policy, we refer readers to Sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100-4), as added by Change Request 7192 (Transmittal 2111; December 3, 2010), and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821).
Under the regulations at § 412.525(a)(2)(ii) and as required by section 1886(m)(7) of the Act, the fixed-loss amount for HCO payments is set each year so that the estimated aggregate HCO payments for LTCH PPS standard Federal payment rate cases are 99.6875 percent of 8 percent (that is, 7.975 percent) of estimated aggregate LTCH PPS payments for LTCH PPS standard Federal payment rate cases. (For more details on the requirements for high-cost outlier payments in FY 2018 and subsequent years under section 1886(m)(7) of the Act and additional information regarding high-cost outlier payments prior to FY 2018, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)
When we implemented the LTCH PPS, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS (67 FR 56022 through 56026). When we implemented the dual rate LTCH PPS payment structure beginning in FY 2016, we established that, in general, the historical LTCH PPS HCO policy would continue to apply to LTCH PPS standard Federal payment rate cases. That is, the fixed-loss amount and target for LTCH PPS standard Federal payment rate cases would be determined using the LTCH PPS HCO policy adopted when the LTCH PPS was first implemented, but we limited the data used under that policy to LTCH cases that would have been LTCH PPS standard Federal payment rate cases if the statutory changes had been in effect at the time of those discharges.
To determine the applicable fixed-loss amount for LTCH PPS standard Federal payment rate cases, we estimate outlier payments and total LTCH PPS payments for each LTCH PPS standard Federal payment rate case (or for each case that would have been a LTCH PPS standard Federal payment rate case if the statutory changes had been in effect at the time of the discharge) using claims data from the MedPAR files. In accordance with § 412.525(a)(2)(ii), the applicable fixed-loss amount for LTCH PPS standard Federal payment rate cases results in estimated total outlier payments being projected to be equal to 7.975 percent of projected total LTCH PPS payments for LTCH PPS standard Federal payment rate cases. We use MedPAR claims data and CCRs based on data from the most recent PSF (or from the applicable statewide average CCR if an LTCH's CCR data are faulty or unavailable) to establish an applicable fixed-loss threshold amount for LTCH PPS standard Federal payment rate cases.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20595), we proposed to continue to use our current methodology to calculate an applicable fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2019 using the best available data that would maintain estimated HCO payments at the projected 7.975 percent of total estimated LTCH PPS payments for LTCH PPS standard Federal payment rate cases (based on the payment rates and policies for these cases presented in that proposed rule).
Specifically, based on the most recent complete LTCH data available at that time (that is, LTCH claims data from the December 2017 update of the FY 2017 MedPAR file and CCRs from the December 2017 update of the PSF), we determined a proposed fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2019 of $30,639 that would result in estimated outlier payments projected to be equal to 7.975 percent of estimated FY 2019 payments for such cases. Under this proposal, we would continue to make an additional HCO payment for the cost of an LTCH PPS standard Federal payment rate case that exceeds the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted LTCH PPS standard Federal payment rate payment and the fixed-loss amount for LTCH PPS standard Federal payment rate cases of $30,639).
As described in the FY 2019 IPPS/LTCH PPS proposed rule (82 FR 20595), we used CCRs from the December 2017 update of the PSF as they were the best available data at that time, which included the provider with a CCR of 1.029 as point out by some commenters. We note that while a CCR over 1.0 is generally considered high, and is significantly higher than prior CCRs for that provider, a CCR of 1.029 is within the current CCR ceiling of 1.280 established in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38541). In addition, that provider's CCR was in the PSF with an effective date of July 1, 2016 and, therefore, was the CCR used to determine that provider's LTCH PPS payments (such as outliers and site neutral payment rate payments) until it was updated with an effective date of January 1, 2018, which, as anticipated by some commenters, has resulted in lowering the fixed-loss amount for FY 2019 as compared to the proposed FY 2019 fixed-loss amount of $30,639 (as described in more detail below). For these reasons, we did not believe it was inappropriate to use that provider's CCR for the calculations in the proposed rule.
Consistent with our historical practice of using the best data available, as we proposed, for this final rule we are using the best available data, including CCRs from the March 2018 update of the PSF as described below. We note that the CCR for the provider noted by the commenters has decreased from 1.029 to 0.323, which we used for the calculations in this final rule.
Consistent with our historical practice of using the best data available, as we proposed, when determining the fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2019 in this final rule, we used the most recent available LTCH claims data and CCR data. In this FY 2019 IPPS/LTCH PPS final rule, we are continuing to use our current methodology to calculate an applicable fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2019 using the best available data that will maintain estimated HCO payments at the projected 7.975 percent of total estimated LTCH PPS payments for LTCH PPS standard Federal payment rate cases (based on the payment rates and policies for these cases presented in this final rule). Specifically, based on the most recent complete LTCH data available at this time (that is, LTCH claims data from the March 2018 update of the FY 2017 MedPAR file and CCRs from the March 2018 update of the PSF), we determined a fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2019 of $27,124 that will result in estimated outlier payments projected to be equal to 7.975 percent of estimated FY 2019 payments for such cases. Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are establishing a fixed-loss amount of $27,124 for LTCH PPS standard Federal payment rate cases for FY 2019. Under this policy, we would continue to make an additional HCO payment for the cost of an LTCH PPS standard Federal payment rate case that exceeds the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted LTCH PPS standard Federal payment rate payment and the fixed-loss amount for LTCH PPS standard Federal payment rate cases of $27,124).
We note that the fixed-loss amount for HCO cases paid under the LTCH PPS standard Federal payment rate in FY 2019 of $27,124 is significantly lower than proposed FY 2019 fixed-loss amount of $30,639, and slightly lower than the FY 2018 fixed-loss amount for LTCH PPS standard Federal payment rate cases of $27,381. This decrease is primarily attributable to the updated CCRs used for this final rule, including the provider discussed above whose CCR decreased from 1.029 to 0.323.
Based on the most recent available data at the time of this final rule, we found that the current FY 2018 HCO threshold of $27,381 results in estimated HCO payments for LTCH PPS standard Federal payment rate cases of approximately 7.4 percent of the estimated total LTCH PPS payments in FY 2018, which is below the 7.975 percent target by approximately 0.6 percentage points. We also note the change in our estimate of FY 2018 HCO payments between the proposed and final rule decreased from 8.0 percent to 7.4 percent, and this change is largely attributable to updates to CCRs, from the December 2017 update of the PSF to the March 2018 update of the PSF and includes the provider discussed above whose CCR decreased from 1.029 to 0.323.
Under § 412.525(a), site neutral payment rate cases receive an additional HCO payment for costs that exceed the HCO threshold that is equal to 80 percent of the difference between the estimated cost of the case and the applicable HCO threshold (80 FR 49618 through 49629). In the following discussion, we note that the statutory transitional payment method for cases that are paid the site neutral payment rate for LTCH discharges occurring in cost reporting periods beginning during FY 2016 through FY 2019 uses a blended payment rate, which is determined as 50 percent of the site neutral payment rate amount for the discharge and 50 percent of the LTCH PPS standard Federal payment rate amount for the discharge (§ 412.522(c)(3)). As such, for FY 2019 discharges paid under the transitional payment method, the discussion below pertains only to the site neutral payment rate portion of the blended payment rate under § 412.522(c)(3)(i).
When we implemented the application of the site neutral payment rate in FY 2016, in examining the appropriate fixed-loss amount for site neutral payment rate cases issue, we considered how LTCH discharges based on historical claims data would have been classified under the dual rate LTCH PPS payment structure and the CMS' Office of the Actuary projections regarding how LTCHs will likely respond to our implementation of policies resulting from the statutory payment changes. We again relied on these considerations and actuarial projections in FY 2017 and FY 2018 because the historical claims data available in each of these years were not all subject to the LTCH PPS dual rate payment system. Similarly, for FY 2019, we continue to rely on these considerations and actuarial projections because, due to the transitional blended payment policy for site neutral payment rate cases, FY 2017 claims for these cases were not subject to the full effect of the site neutral payment rate.
For FYs 2016 through 2018, at that time our actuaries projected that the proportion of
As noted earlier, because not all claims in the data used for this final rule were subject to the site neutral payment rate, we continue to rely on the same considerations and actuarial projections used in FYs 2016 through 2018 when developing a fixed-loss amount for site neutral payment rate cases for FY 2019. Because our actuaries continue to project that site neutral payment rate cases in FY 2019 will continue to mirror an IPPS case paid under the same MS-DRG, we continue to believe that it would be inappropriate for comparable LTCH PPS site neutral payment rate cases to receive dramatically different HCO payments from those cases that would be paid under the IPPS. More specifically, as with FYs 2016 through 2018, our actuaries project that the costs and resource use for FY 2019 cases paid at the site neutral payment rate would likely be lower, on average, than the costs and resource use for cases paid at the LTCH PPS standard Federal payment rate and will likely mirror the costs and resource use for IPPS cases assigned to the same MS-DRG, regardless of whether the proportion of site neutral payment rate cases in the future remains similar to what is found based on the historical data. (Based on the most recent FY 2017 LTCH claims data, approximately 64 percent of LTCH cases would have been paid the LTCH PPS standard Federal payment rate and approximately 36 percent of LTCH cases would have been paid the site neutral payment rate for discharges occurring in FY 2017.)
For these reasons, we continue to believe that the most appropriate fixed-loss amount for site neutral payment rate cases for FY 2019 is the IPPS fixed-loss amount for FY 2019. Therefore, consistent with past practice, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20595 and 20596), for FY 2019, we proposed that the applicable HCO threshold for site neutral payment rate cases is the sum of the site neutral payment rate for the case and the IPPS fixed-loss amount. That is, we proposed a fixed-loss amount for site neutral payment rate cases of $27,545, which is the same proposed FY 2019 IPPS fixed-loss amount discussed in section II.A.4.g.(1) of the Addendum to the proposed rule. We continue to believe that this policy would reduce differences between HCO payments for similar cases under the IPPS and site neutral payment rate cases under the LTCH PPS and promote fairness between the two systems. Accordingly, for FY 2019, we proposed to calculate a HCO payment for site neutral payment rate cases with costs that exceed the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the proposed site neutral payment rate payment and the proposed fixed-loss amount for site neutral payment rate cases of $27,545).
We did not receive any public comments on our proposals to use the FY 2019 IPPS fixed-loss amount and 5.1 percent HCO target for LTCH discharges paid at the site neutral payment rate in FY 2019. In this final rule, we are finalizing these proposals without modification.
Therefore, for FY 2019, as we proposed, we are establishing that the applicable HCO threshold for site neutral payment rate cases is the sum of the site neutral payment rate for the case and the IPPS fixed loss amount. That is, we are establishing a fixed-loss amount for site neutral payment rate cases of $25,769, which is the same FY 2019 IPPS fixed-loss amount discussed in section II.A.4.g.(1). of the Addendum to this final rule. We continue to believe that this policy will reduce differences between HCO payments for similar cases under the IPPS and site neutral payment rate cases under the LTCH PPS and promote fairness between the two systems. Accordingly, under this policy, for FY 2019, we will calculate a HCO payment for site neutral payment rate cases with costs that exceed the HCO threshold amount, which is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of site neutral payment rate payment and the fixed loss amount for site neutral payment rate cases of $25,769).
In establishing a HCO policy for site neutral payment rate cases, we established a budget neutrality adjustment under § 412.522(c)(2)(i). We established this requirement because we believed, and continue to believe, that the HCO policy for site neutral payment rate cases should be budget neutral, just as the HCO policy for LTCH PPS standard Federal payment rate cases is budget neutral, meaning that estimated site neutral payment rate HCO payments should not result in any change in estimated aggregate LTCH PPS payments.
To ensure that estimated HCO payments payable to site neutral payment rate cases in FY 2019 would not result in any increase in estimated aggregate FY 2019 LTCH PPS payments, under the budget neutrality requirement at § 412.522(c)(2)(i), it is necessary to reduce site neutral payment rate payments (or the portion of the blended payment rate payment for FY 2018 discharges occurring in LTCH cost reporting periods beginning before October 1, 2017) by 5.1 percent to account for the estimated additional HCO payments payable to those cases in FY 2019. In order to achieve this, for FY 2019, in general, as we proposed, we are continuing to use the policy adopted for FY 2018.
As discussed earlier, consistent with the IPPS HCO payment threshold, we estimate our fixed-loss threshold of $25,769 results in HCO payments for site neutral payment rate cases to equal 5.1 percent of the site neutral payment rate payments that are based on the IPPS comparable per diem amount. As such, to ensure estimated HCO payments payable for site neutral payment rate cases in FY 2019 would not result in any increase in estimated aggregate FY 2019 LTCH PPS payments, under the budget neutrality requirement at § 412.522(c)(2)(i), it is necessary to reduce the site neutral payment rate amount paid under § 412.522(c)(1)(i) by 5.1 percent to account for the estimated additional HCO payments payable for site neutral payment rate cases in FY 2019. In order to achieve this, for FY 2019, we proposed to apply a budget neutrality factor of 0.949 (that is, the decimal equivalent of a 5.1 percent reduction, determined as 1.0−5.1/100 = 0.949) to the site neutral payment rate for those site neutral payment rate cases paid under § 412.522(c)(1)(i). We noted that, consistent with the policy adopted for FY 2018, this proposed HCO budget neutrality adjustment would not be applied to the HCO portion of the site neutral payment rate amount (81 FR 57309).
After consideration of the public comments we received, we are finalizing our proposal to apply a budget neutrality adjustment for HCO payments made to site neutral payment rate cases. Therefore, to ensure that estimated HCO payments payable to site neutral payment rate cases in FY 2019 will not result any increase in estimated aggregate FY 2019 LTCH PPS payments, under the budget neutrality requirement at § 412.522(c)(2)(i), it is necessary to reduce the site neutral payment rate portion of the blended rate payment by 5.1 percent to account for the estimated additional HCO payments payable to those cases in FY 2019. In order to achieve this, for FY 2019, in this final rule, as proposed, we are applying a budget neutrality factor of 0.949 (that is, the decimal equivalent of a 5.1 percent reduction, determined as 1.0−5.1/100 = 0.949) to the site neutral payment rate (without any applicable HCO payment).
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we established a policy to reflect the changes to the Medicare IPPS DSH payment adjustment methodology made by section 3133 of the Affordable Care Act in the calculation of the “IPPS comparable amount” under the SSO policy at § 412.529 and the “IPPS equivalent amount” under the 25-percent threshold payment adjustment policy at § 412.534 and § 412.536. Historically, the determination of both the “IPPS comparable amount” and the “IPPS equivalent amount” includes an amount for inpatient operating costs “for the costs of serving a disproportionate share of low-income patients.” Under the statutory changes to the Medicare DSH payment adjustment methodology that began in FY 2014, in general, eligible IPPS hospitals receive an empirically justified Medicare DSH payment equal to 25 percent of the amount they otherwise would have received under the statutory formula for Medicare DSH payments prior to the amendments made by the Affordable Care Act. The remaining amount, equal to an estimate of 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals who are uninsured, is made available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The additional uncompensated care payments are based on the hospital's amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all IPPS hospitals that receive Medicare DSH payments.
To reflect the statutory changes to the Medicare DSH payment adjustment methodology in the calculation of the “IPPS comparable amount” and the “IPPS equivalent amount” under the LTCH PPS, we stated that we will include a reduced Medicare DSH payment amount that reflects the projected percentage of the payment amount calculated based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act that will be paid to eligible IPPS hospitals as empirically justified Medicare DSH payments and uncompensated care payments in that year (that is, a percentage of the operating Medicare DSH payment amount that has historically been reflected in the LTCH PPS payments that is based on IPPS rates). We also stated that the projected percentage will be updated annually, consistent with the annual determination of the amount of uncompensated care payments that will be made to eligible IPPS hospitals. We believe that this approach results in appropriate payments under the LTCH PPS and is consistent with our intention that the “IPPS comparable amount” and the “IPPS equivalent amount” under the LTCH PPS closely resemble what an IPPS payment would have been for the same episode of care, while recognizing that some features of the IPPS cannot be translated directly into the LTCH PPS (79 FR 50766 through 50767).
For FY 2019, as discussed in greater detail in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20596) as well as in section IV.F.3. of the preamble of this final rule, based on the most recent data available, our estimate of 75 percent of the amount that would otherwise have been paid as Medicare DSH payments (under the methodology outlined in section 1886(r)(2) of the Act) is adjusted to 67.51 percent of that amount to reflect the change in the percentage of individuals who are uninsured. The resulting amount is then used to determine the amount available to make uncompensated care payments to eligible IPPS hospitals in FY 2018. In other words, the amount of the Medicare DSH payments that would have been made prior to the amendments made by the Affordable Care Act will be adjusted to 50.63 percent (the product of 75 percent and 67.51 percent) and the resulting amount will be used to calculate the uncompensated care payments to eligible hospitals. As a result, for FY 2019, we projected that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the payments for uncompensated care under section 1886(r)(2) of the Act, will result in overall Medicare DSH payments of 75.63 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of the amendments made by the Affordable Care Act (that is, 25 percent + 50.63 percent = 75.63 percent).
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20596), for FY 2019, we proposed to establish that the calculation of the “IPPS comparable amount” under § 412.529 would include an applicable operating Medicare DSH payment amount that is equal to 75.63 percent of the operating Medicare DSH payment amount that would have been paid based on the statutory Medicare DSH payment formula absent the amendments made by the Affordable Care Act. Furthermore, consistent with our historical practice, we proposed that if more recent data became available, if appropriate, we would use that data to determine this factor in this final rule.
We did not receive any public comments in response to our proposal. In addition, there are no more recent data available to use that would affect the calculations determined in the proposed rule. Therefore, we are finalizing our proposal that, for FY 2019, the calculation of the “IPPS comparable amount” under § 412.529 includes an applicable operating Medicare DSH payment amount that is equal to 75.63 percent of the operating Medicare DSH payment amount that would have been paid based on the statutory Medicare DSH payment formula absent the amendments made by the Affordable Care Act. (We note that we also proposed that the “IPPS equivalent amount” under § 412.538 would include an applicable operating Medicare DSH payment amount that is equal to 75.63 percent of the operating Medicare DSH payment amount that would have been paid based on the statutory Medicare DSH payment formula absent the amendments made by the Affordable Care Act. However, as discussed in section VII.E. of the preamble of this final rule, we are finalizing our proposal to remove the provisions of § 412.538, and reserving this section.)
Section 412.525 sets forth the adjustments to the LTCH PPS standard Federal payment rate. Under the dual rate LTCH PPS payment structure, only LTCH PPS cases that meet the statutory criteria to be excluded from the site neutral payment rate are paid based on the LTCH PPS standard Federal payment rate. Under § 412.525(c), the LTCH PPS standard Federal payment rate is adjusted to account for differences in area wages by multiplying the labor-related share of the LTCH PPS standard Federal payment rate for a case by the applicable LTCH PPS wage index (the FY 2019 values are shown in Tables 12A through 12B listed in section VI. of the Addendum to this final rule and are available via the internet on the CMS website). The LTCH PPS standard Federal payment rate is also adjusted to account for the higher costs of LTCHs located in Alaska and Hawaii by the applicable COLA factors (the FY 2019 factors are shown in the chart in section V.C. of this Addendum) in accordance with § 412.525(b). In this final rule, as we proposed, we are establishing an LTCH PPS standard Federal payment rate for FY 2019 of $41,579.65, as discussed in section V.A. of the Addendum to this final rule. We illustrate the
During FY 2019, a Medicare discharge that meets the criteria to be excluded from the site neutral payment rate, that is, an LTCH PPS standard Federal payment rate case, is from an LTCH that is located in Chicago, Illinois (CBSA 16974). The FY 2019 LTCH PPS wage index value for CBSA 16974 is 1.0511 (obtained from Table 12A listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website). The Medicare patient case is classified into MS-LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a relative weight for FY 2019 of 0.9583 (obtained from Table 11 listed in section VI. of the Addendum to this final rule and available via the internet on the CMS website). The LTCH submitted quality reporting data for FY 2019 in accordance with the LTCH QRP under section 1886(m)(5) of the Act.
To calculate the LTCH's total adjusted Federal prospective payment for this Medicare patient case in FY 2019, we computed the wage-adjusted Federal prospective payment amount by multiplying the unadjusted FY 2019 LTCH PPS standard Federal payment rate ($41,579.65) by the labor-related share (66.0 percent) and the wage index value (1.0511). This wage-adjusted amount was then added to the nonlabor-related portion of the unadjusted LTCH PPS standard Federal payment rate (34.0 percent; adjusted for cost of living, if applicable) to determine the adjusted LTCH PPS standard Federal payment rate, which is then multiplied by the MS-LTC-DRG relative weight (0.9583) to calculate the total adjusted LTCH PPS standard Federal prospective payment for FY 2019 ($41,189.62). The table below illustrates the components of the calculations in this example.
This section lists the tables referred to throughout the preamble of this final rule and in the Addendum. In the past, a majority of these tables were published in the
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49807), we streamlined and consolidated the wage index tables for FY 2016 and subsequent fiscal years.
As discussed in section III. J. of the preamble to this FY 2019 IPPS/LTCH PPS final rule, we are adding a new Table 4, “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act—FY 2019,” associated with this final rule. This table consists of the following: A list of counties that are eligible for the out-migration adjustment for FY 2019 identified by FIPS county code, the FY 2019 out-migration adjustment, and the number of years the adjustment will be in effect. We believe this new table will make the information more transparent and provide the public with easier access to this information. We intend to make the information available annually, via Table 4 in the IPPS/LTCH PPS proposed and final rules, and are including it among the tables associated with this FY 2019 IPPS/LTCH PPS final rule that are available via the internet on the CMS website.
As discussed in sections II.F.13., II.F.15.b. and d., II.F.16., and II.F.18. of the preamble of this final rule, we have developed the following ICD-10-CM and ICD-10-PCS code tables for FY 2019: 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; Table 6F.—Revised Procedure Code Titles; Table 6G.1.—Secondary Diagnosis Order Additions to the CC Exclusion List; Table 6G.2.—Principal Diagnosis Order Additions to the CC Exclusion List; Table 6H.1.—Secondary Diagnosis Order Deletions to the CC Exclusion List; Table 6H.2.—Principal Diagnosis Order Deletions to the CC Exclusion List; Table 6I.—Complete MCC List; Table 6I.1.—Additions to the MCC List; Table 6I.2.—Deletions to the MCC List; Table 6J.—Complete CC List; Table 6J.1.—Additions to the CC List; Table 6J.2.—Deletions to the CC List; Table 6K.—Complete List of CC Exclusions; and Table 6P.—ICD-10-CM and ICD-10-PCS Codes for MS-DRG Changes. Table 6P contains multiple tables, 6P.1c. through 6P.1f., that include the ICD-10-CM and ICD-10-PCS code lists relating to specific MS-DRG changes.
In addition, under the HAC Reduction Program, established by section 3008 of the Affordable Care Act, a hospital's total payment may be reduced by 1 percent if it is in the lowest HAC performance quartile. However, as discussed in section IV.K. of the preamble of this final rule, we are not providing the hospital-level data as a table associated with this final rule. The hospital-level data for the FY 2019 HAC Reduction Program will be made publicly available once it has undergone the review and corrections process.
As discussed in section II.H.1. of the preamble of this final rule, Table 10 that we have released in prior fiscal years contained the thresholds that we use to evaluate applications for new medical service and technology add-on payments for the fiscal year that follows the fiscal year that is otherwise the subject of the rulemaking. In an effort to clarify for the public that the listed thresholds will be used for new technology add-on payment applications for the next fiscal year (in this case, for FY 2020) rather than the fiscal year that is otherwise the subject of the rulemaking (in this case, for FY 2019), we are providing the thresholds previously included in Table 10 as one of the publicly available data files posted via the internet on the CMS website for the rulemaking for the upcoming fiscal year at:
As discussed in section VII.B of the preamble of this final rule, in previous fiscal years, Table 13A.—Composition of Low-Volume Quintiles for MS-LTC-DRGs (which was listed in section VI. of the Addendum to the proposed and final rules and available via the internet on the CMS website) listed the composition of the low-volume quintiles for MS-LTC-DRGs for the respective year, and Table 13B.—No Volume MS-LTC-DRG Crosswalk (also listed in section VI. of the Addendum to the proposed and final rules and available via the internet on the CMS website) listed the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked MS-LTC-DRGs). The information contained in Tables 13A and 13B is used in the development of Table 11.—MS-LTC-DRGs, Relative Weights, Geometric Average Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS Discharges, which
As discussed in section IV.H. of the preamble of this final rule, the final FY 2019 readmissions payment adjustment factors, which are typically included in Table 15 of the final rule, are not available at this time because hospitals have not yet had the opportunity to review and correct the data (program calculations based on the FY 2019 applicable period of July 1, 2014 to June 30, 2017) before the data are made public under our policy regarding the reporting of hospital-specific data. After hospitals have been given an opportunity to review and correct their calculations for FY 2019, we will post Table 15 (which will be available via the internet on the CMS website) to display the final FY 2019 readmissions payment adjustment factors that will be applicable to discharges occurring on or after October 1, 2018. We expect Table 15 will be posted on the CMS website in the fall of 2018.
In addition, Table 18 associated with this final rule contains the Factor 3 for purposes of determining the FY 2019 uncompensated care payment for all hospitals and identifies whether or not a hospital is projected to receive Medicare DSH payments and, therefore, eligible to receive the additional payment for uncompensated care for FY 2019. A hospital's Factor 3 determines the proportion of the aggregate amount available for uncompensated care payments that a Medicare DSH eligible hospital will receive under section 3133 of the Affordable Care Act.
Readers who experience any problems accessing any of the tables that are posted on the CMS websites identified below should contact Michael Treitel at (410) 786-4552.
The following IPPS tables for this final rule are generally available through the internet on the CMS website at:
The following LTCH PPS tables for this FY 2019 final rule are available through the internet on the CMS website at:
This final rule is necessary in order to make payment and policy changes under the Medicare IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain hospitals and hospital units excluded from the IPPS. This final rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS. Also as we note below, the primary objective of the IPPS and the LTCH PPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs, while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund.
We believe that the changes in this final rule, such as the updates to the IPPS and LTCH PPS rates, are needed to further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable, while avoiding or minimizing unintended adverse consequences.
We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a rule: (1) Having an annual effect on the economy of $100 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.
We have determined that this final rule is a major rule as defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2019 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million to acute care hospitals. The applicable percentage increase to the IPPS rates required by the statute, in conjunction with other payment changes in this final rule, will result in an estimated $4.8 billion increase in FY 2019 payments, primarily
Our operating impact estimate includes the 0.5 percent adjustment required under section 414 of the MACRA applied to the IPPS standardized amount, as discussed in section II.D. of the preamble of this final rule. In addition, our operating payment impact estimate includes the 1.35 percent hospital update to the standardized amount (which includes the estimated 2.9 percent market basket update less 0.8 percentage point for the multifactor productivity adjustment and less 0.75 percentage point required under the Affordable Care Act). The estimates of IPPS operating payments to acute care hospitals do not reflect any changes in hospital admissions or real case-mix intensity, which will also affect overall payment changes.
The analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this final rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. This final rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. Finally, in accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget has reviewed this final rule.
The primary objective of the IPPS and the LTCH PPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs, while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund.
We believe that the changes in this final rule will further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable, while avoiding or minimizing unintended adverse consequences.
Because this final rule contains a range of policies, we refer readers to the section of the final rule where each policy is discussed. These sections include the rationale for our decisions, including the need for the policy.
The following quantitative analysis presents the projected effects of our policy changes, as well as statutory changes effective for FY 2019, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case, while holding all other payment policies constant. We use the best data available, but, generally unless specifically indicated, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, case-mix, changes to the Medicare population, or incentives. In addition, we discuss limitations of our analysis for specific policies in the discussion of those policies as needed.
The prospective payment systems for hospital inpatient operating and capital-related costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 29 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short-term, acute care hospitals, hospitals in Maryland are paid in accordance with the Maryland All-Payer Model, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, 5 short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling.
As of July 2018, there were 3,256 IPPS acute care hospitals included in our analysis. This represents approximately 54 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There also are approximately 1,398 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs, rather than under the IPPS. IPPS-excluded hospitals and units, which are paid under separate payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's hospitals, 11 cancer hospitals, extended neoplastic disease care hospitals, and 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts of changes to the prospective payment systems for these IPPS-excluded hospitals and units are not included in this final rule. The impact of the update and policy changes to the LTCH PPS for FY 2019 is discussed in section I.J. of this Appendix.
As of July 2018, there were 98 children's hospitals, 11 cancer hospitals, 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa, 1 extended neoplastic disease care hospital, and 18 RNHCIs being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. (In accordance with § 403.752(a) of the regulation, RNHCIs are paid under § 413.40.) Among the remaining providers, 280 rehabilitation hospitals and 846 rehabilitation units, and approximately 417 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 538 psychiatric hospitals and 1,084 psychiatric units are paid the Federal per diem amount under the IPF PPS. As stated previously, IRFs and IPFs are not affected by the rate updates discussed in this final rule. The impacts of the changes on LTCHs are discussed in section I.J. of this Appendix.
For children's hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, extended neoplastic disease care hospitals, and RNHCIs, the update of the rate-of-increase limit (or target amount) is the estimated FY 2019 percentage increase in the 2014-based IPPS operating market basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and §§ 403.752(a) and 413.40 of the regulations. Consistent with current law, based on IGI's 2018 second quarter forecast of the 2014-based IPPS market basket increase, we are estimating the FY 2019 update to be 2.9 percent (that is, the estimate of the market basket rate-of-increase). We used the most recent data available for this final rule to calculate the IPPS operating market basket update for FY 2019. However, the Affordable Care Act requires an adjustment for multifactor productivity (0.8 percentage point for FY 2019) and a 0.75 percentage point reduction to the market basket update, resulting in a 1.35 percent applicable percentage increase for IPPS hospitals that submit quality data and are meaningful EHR users, as discussed in section IV.B. of the preamble of this final rule. Children's hospitals, the 11 cancer hospitals, the 5 short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, extended neoplastic disease care hospitals, and RNHCIs that continue to be paid based on reasonable costs subject to rate-of-increase limits under § 413.40 of the regulations are not subject to the reductions in the applicable percentage increase required under the Affordable Care Act. Therefore, for those hospitals paid under § 413.40 of the regulations, the update is the percentage increase in the 2014-based IPPS operating market basket for FY 2019, estimated at 2.9 percent, without the reductions described previously under the Affordable Care Act.
The impact of the update in the rate-of-increase limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded hospitals that have maintained their cost increases at a level below the rate-of-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with cost increases above the cumulative update in their rate-of-increase limits, the major effect is the amount of excess costs that would not be paid.
We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system and whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus the lesser of: (1) 50 percent of its reasonable costs in excess of 110 percent of the limit; or (2) 10 percent of its limit. In addition, under the various provisions set forth in § 413.40, hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit.
In this final rule, we are announcing policy changes and payment rate updates for the IPPS for FY 2019 for operating costs of acute care hospitals. The FY 2019 updates to the capital payments to acute care hospitals are discussed in section I.I. of this Appendix.
Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2019 operating payments will increase by 2.4 percent, compared to FY 2018. In addition to the applicable percentage increase, this amount reflects the 0.5 percent permanent adjustment to the standardized amount required under section 414 of the MACRA. The impacts do not reflect changes in the number of hospital admissions or real case-mix intensity, which will also affect overall payment changes.
We have prepared separate impact analyses of the changes to each system. This section deals with the changes to the operating inpatient prospective payment system for acute care hospitals. Our payment simulation model relies on the most recent available claims data to enable us to estimate the impacts on payments per case of certain changes in this final rule. However, there are other changes for which we do not have data available that would allow us to estimate the payment impacts using this model. For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data.
The data used in developing the quantitative analyses of changes in payments per case presented in this section are taken from the FY 2017 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost reports were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change. Third, we use various data sources to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from the different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible.
Using cases from the FY 2017 MedPAR file, we simulate payments under the operating IPPS given various combinations of payment parameters. As described previously, Indian Health Service hospitals and hospitals in Maryland were excluded from the simulations. The impact of payments under the capital IPPS, and the impact of payments for costs other than inpatient operating costs, are not analyzed in this section. Estimated payment impacts of the capital IPPS for FY 2019 are discussed in section I.I. of this Appendix.
We discuss the following changes:
• The effects of the application of the adjustment required under section 414 of the MACRA and the applicable percentage increase (including the market basket update, the multifactor productivity adjustment, and the applicable percentage reduction in accordance with the Affordable Care Act) to the standardized amount and hospital-specific rates.
• The effects of the changes to the relative weights and MS-DRG GROUPER.
• The effects of the changes in hospitals' wage index values reflecting updated wage data from hospitals' cost reporting periods beginning during FY 2015, compared to the FY 2014 wage data, to calculate the FY 2019 wage index.
• The effects of the geographic reclassifications by the MGCRB (as of publication of this final rule) that will be effective for FY 2019.
• The effects of the rural floor with the application of the national budget neutrality factor to the wage index, and the expiration of the imputed floor.
• The effects of the frontier State wage index adjustment under the statutory provision that requires hospitals located in States that qualify as frontier States to not have a wage index less than 1.0. This provision is not budget neutral.
• The effects of the implementation of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, which provides for an increase in a hospital's wage index if a threshold percentage of residents of the county where the hospital is located commute to work at hospitals in counties with higher wage indexes for FY 2019. This provision is not budget neutral.
• The total estimated change in payments based on the FY 2019 policies relative to payments based on FY 2018 policies that include the applicable percentage increase of 1.35 percent (or 2.9 percent market basket update with a reduction of 0.8 percentage point for the multifactor productivity adjustment, and a 0.75 percentage point reduction, as required under the Affordable Care Act).
To illustrate the impact of the FY 2019 changes, our analysis begins with a FY 2018 baseline simulation model using: The FY 2018 applicable percentage increase of 1.35 percent, the 0.4588 percent adjustment to the Federal standardized amount, and the adjustment factor of (1/1.006) to both the national standardized amount and the hospital-specific rate; the FY 2018 MS-DRG GROUPER (Version 35); the FY 2018 CBSA designations for hospitals based on the OMB definitions from the 2010 Census; the FY 2018 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total operating MS-DRG and outlier payments for modeling purposes.
Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A) of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007 and each subsequent year through FY 2014, the update factor will include a reduction of 2.0 percentage points for any subsection (d) hospital that does not submit data on measures in a form and manner, and at a time specified by the Secretary. Beginning in FY 2015, the reduction is one-quarter of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act, or one-quarter of the market basket update. Therefore, for FY 2019, hospitals that do not submit quality information under rules established by the Secretary and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act will receive an applicable percentage increase of 0.625 percent. At the time this impact was prepared, 49 hospitals are estimated to not receive the full market basket rate-of-increase for FY 2019 because they failed the quality data submission process or did not choose to participate, but are meaningful EHR users. For purposes of the simulations shown later in this section, we modeled the payment changes for FY 2019 using a reduced update for these hospitals.
For FY 2019, in accordance with section 1886(b)(3)(B)(ix) of the Act, a hospital that has been identified as not a meaningful EHR user will be subject to a reduction of three-quarters of such applicable percentage increase determined without regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, for FY 2019, hospitals that are identified as not meaningful EHR users and do submit quality information under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of −0.825 percent. At the time this impact analysis was prepared, 137 hospitals are estimated to not receive the full market basket rate-of-increase for FY 2019 because they are identified as not meaningful EHR users that do submit quality information under section 1886(b)(3)(B)(viii) of the Act. For purposes of the simulations shown in this section, we modeled the payment changes for FY 2019 using a reduced update for these hospitals.
Hospitals that are identified as not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act and also do not submit quality data under section 1886(b)(3)(B)(viii) of the Act will receive an applicable percentage increase of -1.55 percent, which reflects a one-quarter reduction of the market basket update for failure to submit quality data and a three-quarter reduction of the market basket update for being identified as not a meaningful EHR user. At the time this impact was prepared, 40 hospitals are estimated to not receive the full market basket rate-of-increase for FY 2019 because they are identified as not meaningful EHR users that do not submit quality data under section 1886(b)(3)(B)(viii) of the Act.
Each policy change, statutory or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2019 model incorporating all of the changes. This simulation allows us to isolate the effects of each change.
Our comparison illustrates the percent change in payments per case from FY 2018 to FY 2019. Two factors not discussed separately have significant impacts here. The first factor is the update to the standardized amount. In accordance with section 1886(b)(3)(B)(i) of the Act, we are updating the standardized amounts for FY 2019 using an applicable percentage increase of 1.35 percent. This includes our forecasted IPPS operating hospital market basket increase of 2.9 percent with a 0.8 percentage point reduction for the multifactor productivity adjustment and a 0.75 percentage point reduction, as required, under the Affordable Care Act. Hospitals that fail to comply with the quality data submission requirements and are meaningful EHR users will receive an update of 0.625 percent. This update includes a reduction of one-quarter of the market basket update for failure to submit these data. Hospitals that do comply with the quality data submission requirements but are not meaningful EHR users will receive an update of −0.825 percent, which includes a reduction of three-quarters of the market basket update. Furthermore, hospitals that do not comply with the quality data submission requirements and also are not meaningful EHR users will receive an update of −1.55 percent. Under section 1886(b)(3)(B)(iv) of the Act, the update to the hospital-specific amounts for SCHs and MDHs is also equal to the applicable percentage increase, or 1.35 percent, if the hospital submits quality data and is a meaningful EHR user.
A second significant factor that affects the changes in hospitals' payments per case from FY 2018 to FY 2019 is the change in hospitals' geographic reclassification status from one year to the next. That is, payments may be reduced for hospitals reclassified in FY 2018 that are no longer reclassified in FY 2019. Conversely, payments may increase for hospitals not reclassified in FY 2018 that are reclassified in FY 2019.
Table I displays the results of our analysis of the changes for FY 2019. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 3,256 acute care hospitals included in the analysis.
The next four rows of Table I contain hospitals categorized according to their geographic location: All urban, which is further divided into large urban and other urban; and rural. There are 2,483 hospitals located in urban areas included in our analysis. Among these, there are 1,302 hospitals located in large urban areas (populations over 1 million), and 1,181 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 773 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The last groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals.
The second part of Table I shows hospital groups based on hospitals' FY 2019 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,264, 1,317, 947, and 992, respectively.
The next three groupings examine the impacts of the changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive Medicare DSH payments, or some combination of these two adjustments. There are 2,157 nonteaching hospitals in our analysis, 849 teaching hospitals with fewer than 100 residents, and 250 teaching hospitals with 100 or more residents.
In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither.
The next three rows examine the impacts of the changes on rural hospitals by special payment groups (SCHs, MDHs and RRCs). There were 327 RRCs, 312 SCHs, 140 MDHs, 134 hospitals that are both SCHs and RRCs, and 16 hospitals that are both MDHs and RRCs.
The next series of groupings are based on the type of ownership and the hospital's Medicare utilization expressed as a percent of total inpatient days. These data were taken from the FY 2016 or FY 2015 Medicare cost reports.
The next two groupings concern the geographic reclassification status of hospitals. The first grouping displays all urban hospitals that were reclassified by the MGCRB for FY 2019. The second grouping shows the MGCRB rural reclassifications.
As discussed in section IV.B. of the preamble of this final rule, this column includes the hospital update, including the 2.9 percent market basket update, the reduction of 0.8 percentage point for the multifactor productivity adjustment, and the 0.75 percentage point reduction, in accordance with the Affordable Care Act. In addition, as discussed in section II.D. of the preamble of this final rule, this column includes the FY 2019 +0.5 percent adjustment required under section 414 of the MACRA. As a result, we are making a 1.85 percent update to the national standardized amount. This column also includes the update to the hospital-specific rates which includes the 2.9 percent market basket update, the reduction of 0.8 percentage point for the multifactor productivity adjustment, and the 0.75 percentage point reduction in accordance with the Affordable Care Act. As a result, we are making a 1.35 percent update to the hospital-specific rates.
Overall, hospitals will experience a 1.8 percent increase in payments primarily due to the combined effects of the hospital update to the national standardized amount and the hospital update to the hospital-specific rate. Hospitals that are paid under the hospital-specific rate will experience a 1.35 percent increase in payments; therefore, hospital categories containing hospitals paid under the hospital specific rate will experience a lower than average increase in payments.
Column 2 shows the effects of the changes to the MS-DRGs and relative weights with the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of the Act, we calculated a recalibration budget neutrality factor to account for the changes in MS-DRGs and relative weights to ensure that the overall payment impact is budget neutral.
As discussed in section II.E. of the preamble of this final rule, the FY 2019 MS-DRG relative weights will be 100 percent cost-based and 100 percent MS-DRGs. For FY 2019, the MS-DRGs are calculated using the FY 2017 MedPAR data grouped to the Version 36 (FY 2019) MS-DRGs. The methodology to calculate the relative weights and the reclassification changes to the GROUPER are described in more detail in section II.G. of the preamble of this final rule.
The “All Hospitals” line in Column 2 indicates that changes due to the MS-DRGs and relative weights will result in a 0.0 percent change in payments with the application of the recalibration budget neutrality factor of 0.997192 to the standardized amount. Hospital categories that generally treat more medical cases than surgical cases will experience a decrease in their payments under the relative weights. For example, rural hospitals will experience a 0.3 percent decrease in payments in part because rural hospitals tend to treat fewer surgical cases than medical cases. Conversely, teaching hospitals with more than 100 residents will experience an increase in payments of 0.2 percent as those hospitals treat more surgical cases than medical cases.
Column 3 shows the impact of updated wage data using FY 2015 cost report data, with the application of the wage budget neutrality factor. The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on the Core Based Statistical Areas (CBSAs) established by OMB. The current statistical standards used in FY 2019 are based on OMB standards published on February 28, 2013 (75 FR 37246 and 37252), and 2010 Decennial Census data (OMB Bulletin No. 13-01), as updated in OMB Bulletin Nos. 15-01 and 17-01. (We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full discussion on our adoption of the OMB labor market area delineations, based on the 2010 Decennial Census data, effective beginning with the FY 2015 IPPS wage index, to section III.A.2. of the preamble of the FY 2017 IPPS/
Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the wage index for acute care hospitals for FY 2019 is based on data submitted for hospital cost reporting periods, beginning on or after October 1, 2014 and before October 1, 2015. The estimated impact of the updated wage data using the FY 2015 cost report data and the OMB labor market area delineations on hospital payments is isolated in Column 3 by holding the other payment parameters constant in this simulation. That is, Column 3 shows the percentage change in payments when going from a model using the FY 2018 wage index, based on FY 2014 wage data, the labor-related share of 68.3 percent, under the OMB delineations and having a 100-percent occupational mix adjustment applied, to a model using the FY 2019 pre-reclassification wage index based on FY 2015 wage data with the labor-related share of 68.3 percent, under the OMB delineations, also having a 100-percent occupational mix adjustment applied, while holding other payment parameters, such as use of the Version 36 MS-DRG GROUPER constant. The FY 2019 occupational mix adjustment is based on the CY 2016 occupational mix survey.
In addition, the column shows the impact of the application of the wage budget neutrality to the national standardized amount. In FY 2010, we began calculating separate wage budget neutrality and recalibration budget neutrality factors, in accordance with section 1886(d)(3)(E) of the Act, which specifies that budget neutrality to account for wage index changes or updates made under that subparagraph must be made without regard to the 62 percent labor-related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2019, we calculated the wage budget neutrality factor to ensure that payments under updated wage data and the labor-related share of 68.3 percent are budget neutral, without regard to the lower labor-related share of 62 percent applied to hospitals with a wage index less than or equal to 1.0. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the higher labor-related share of the standardized amount. The FY 2019 wage budget neutrality factor is 1.000748, and the overall payment change is 0 percent.
Column 3 shows the impacts of updating the wage data using FY 2015 cost reports. Overall, the new wage data and the labor-related share, combined with the wage budget neutrality adjustment, will lead to no change for all hospitals, as shown in Column 3.
In looking at the wage data itself, the national average hourly wage will increase 1.02 percent compared to FY 2018. Therefore, the only manner in which to maintain or exceed the previous year's wage index was to match or exceed the 1.02 percent increase in the national average hourly wage. Of the 3,252 hospitals with wage data for both FYs 2018 and 2019, 1,475 or 45.4 percent will experience an average hourly wage increase of 1.02 percent or more.
The following chart compares the shifts in wage index values for hospitals due to changes in the average hourly wage data for FY 2019 relative to FY 2018. Among urban hospitals, 10 will experience a decrease of 10 percent or more, and 3 urban hospitals will experience an increase of 10 percent or more. One hundred five urban hospitals will experience an increase or decrease of at least 5 percent or more but less than 10 percent. Among rural hospitals, 3 will experience an increase of 10 percent or more, and 2 will experience a decrease of 10 percent or more. Nine rural hospitals will experience an increase or decrease of at least 5 percent or more but less than 10 percent. However, 726 rural hospitals will experience increases or decreases of less than 5 percent, while 2,360 urban hospitals will experience increases or decreases of less than 5 percent. No urban hospitals and 34 rural hospitals will experience no change to their wage index. These figures reflect changes in the “pre-reclassified, occupational mix-adjusted wage index,” that is, the wage index before the application of geographic reclassification, the rural floor, the out-migration adjustment, and other wage index exceptions and adjustments. (We refer readers to sections III.G. through III.L. of the preamble of this final rule for a complete discussion of the exceptions and adjustments to the wage index.) We note that the “post-reclassified wage index” or “payment wage index,” which is the wage index that includes all such exceptions and adjustments (as reflected in Tables 2 and 3 associated with this final rule, which are available via the internet on the CMS website) is used to adjust the labor-related share of a hospital's standardized amount, either 68.3 percent or 62 percent, depending upon whether a hospital's wage index is greater than 1.0 or less than or equal to 1.0. Therefore, the pre-reclassified wage index figures in the following chart may illustrate a somewhat larger or smaller change than will occur in a hospital's payment wage index and total payment.
The following chart shows the projected impact of changes in the area wage index values for urban and rural hospitals.
Our impact analysis to this point has assumed acute care hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on bases other than where they are geographically located). The changes in Column 4 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2019.
By spring of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital's reclassification request for the purpose of using another area's wage index value. Hospitals may appeal denials of MGCRB decisions to the CMS Administrator. Further, hospitals have 45 days from the date the IPPS proposed rule is issued in the
The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, for purposes of this impact analysis, we are applying an adjustment of 0.985932 to ensure that the effects of the reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are budget neutral (section II.A. of the Addendum to this final rule). Geographic reclassification generally benefits hospitals in rural areas. We estimate that the geographic reclassification will increase payments to rural hospitals by an average of 1.2 percent. By region, with the exception of rural providers in the Mountain region which will experience no change, all the rural hospital categories will experience increases in payments due to MGCRB reclassifications.
Table 2 listed in section VI. of the Addendum to this final rule and available via
As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the FYs 2011 through 2018 IPPS/LTCH PPS final rules, and this FY 2019 IPPS/LTCH PPS final rule, section 4410 of Public Law 105-33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the wage index received by rural hospitals in the same State. We will apply a uniform budget neutrality adjustment to the wage index. As discussed in section III.G. of the preamble of this final rule, we are not extending the imputed floor policy. Therefore, Column 5 shows the effects of the rural floor only.
The Affordable Care Act requires that we apply one rural floor budget neutrality factor to the wage index nationally. We have calculated a FY 2019 rural floor budget neutrality factor to be applied to the wage index of 0.993142, which will reduce wage indexes by 0.69 percent.
Column 5 shows the projected impact of the rural floor with the national rural floor budget neutrality factor applied to the wage index based on the OMB labor market area delineations. The column compares the post-reclassification FY 2019 wage index of providers before the rural floor adjustment and the post-reclassification FY 2019 wage index of providers with the rural floor adjustment based on the OMB labor market area delineations. Only urban hospitals can benefit from the rural floors. Because the provision is budget neutral, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) will experience a decrease in payments due to the budget neutrality adjustment that is applied nationally to their wage index.
We estimate that 263 hospitals will receive the rural floor in FY 2019. All IPPS hospitals in our model will have their wage index reduced by the rural floor budget neutrality adjustment of 0.993142. We project that, in aggregate, rural hospitals will experience a 0.2 percent decrease in payments as a result of the application of the rural floor budget neutrality because the rural hospitals do not benefit from the rural floor, but have their wage indexes downwardly adjusted to ensure that the application of the rural floor is budget neutral overall. We project hospitals located in urban areas will experience no change in payments because increases in payments by hospitals benefitting from the rural floor offset decreases in payments by nonrural floor urban hospitals whose wage index is downwardly adjusted by the rural floor budget neutrality factor. Urban hospitals in the New England region will experience a 2.5 percent increase in payments primarily due to the application of the rural floor in Massachusetts. Twenty nine urban providers in Massachusetts are expected to receive the rural floor wage index value, including the rural floor budget neutrality adjustment, increasing payments overall to hospitals in Massachusetts by an estimated $121 million. We estimate that Massachusetts hospitals will receive approximately a 3.3 percent increase in IPPS payments due to the application of the rural floor in FY 2019. We note that the significant increase in overall payments to hospitals in Massachusetts compared to past years is due primarily to the increase in the Massachusetts rural floor as a result of the recent reclassification of Brigham and Women's Hospital in the city of Boston as a rural hospital under § 412.103. We also note that this table does not reflect all of the additional Medicare payments resulting from the reclassification of Brigham and Women's Hospital in Boston as a rural hospital under § 412.103. Some of this payment impact is reflected in column 4 (Reclassifications) in Table I- Impact Analysis of Changes to the IPPS for Operating Costs for FY 2019.
Urban Puerto Rico hospitals are expected to experience a 0.1 percent increase in payments as a result of the application of the rural floor.
In response to a public comment addressed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51593), we are providing the payment impact of the rural floor with budget neutrality at the State level. Column 1 of the following table displays the number of IPPS hospitals located in each State. Column 2 displays the number of hospitals in each State that will receive the rural floor wage index for FY 2019. Column 3 displays the percentage of total payments each State will receive or contribute to fund the rural floor with national budget neutrality. The column compares the post-reclassification FY 2019 wage index of providers before the rural floor adjustment and the post-reclassification FY 2019 wage index of providers with the rural floor adjustment. Column 4 displays the estimated payment amount that each State will gain or lose due to the application of the rural floor with national budget neutrality.
This column shows the combined effects of the application of section 10324(a) of the Affordable Care Act, which requires that we establish a minimum post-reclassified wage index of 1.00 for all hospitals located in “frontier States,” and the effects of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, which provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. These two wage index provisions are not budget neutral and will increase payments overall by 0.1 percent compared to the provisions not being in effect.
The term “frontier States” is defined in the statute as States in which at least 50 percent of counties have a population density less than 6 persons per square mile. Based on these criteria, 5 States (Montana, Nevada, North Dakota, South Dakota, and Wyoming) are considered frontier States and 49 hospitals located in those States will receive a frontier wage index of 1.0000. Overall, this provision is not budget neutral and is estimated to increase IPPS operating payments by approximately $62 million. Rural and urban hospitals located in the West North Central region will experience an increase in payments by 0.2 and 0.6 percent, respectively, because many of the hospitals located in this region are frontier State hospitals.
In addition, section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. Hospitals located in counties that qualify for the payment adjustment will receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, post-reclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index. There are an estimated 220 providers that will receive the out-migration wage adjustment in FY 2019. Rural hospitals generally will qualify for the adjustment, resulting in a 0.1 percent increase in payments. This provision appears to benefit section 401 hospitals and RRCs in that they will each experience a 0.1 and 0.2 percent increase in payments, respectively. (We note that there has been an increase in the number of RRCs as a result of the decision by the Court of Appeals for the Third Circuit in
Column 7 shows our estimate of the changes in payments per discharge from FY 2018 and FY 2019, resulting from all changes reflected in this final rule for FY 2019. It includes combined effects of the year-to-year change of the previous columns in the table.
The average increase in payments under the IPPS for all hospitals is approximately 2.4 percent for FY 2019 relative to FY 2018 and for this row is primarily driven by the changes reflected in Column 1. Column 7 includes the annual hospital update of 1.35 percent to the national standardized amount. This annual hospital update includes the 2.9 percent market basket update, the 0.8 percentage point reduction for the multifactor productivity adjustment, and the 0.75 percentage point reduction under section 3401 of the Affordable Care Act. As discussed in section II.D. of the preamble of this final rule, this column also includes the +0.5 percent adjustment required under section 414 of the MACRA. Hospitals paid
Overall payments to hospitals paid under the IPPS due to the applicable percentage increase and changes to policies related to MS-DRGs, geographic adjustments, and outliers are estimated to increase by 2.4 percent for FY 2019. Hospitals in urban areas will experience a 2.5 percent increase in payments per discharge in FY 2019 compared to FY 2018. Hospital payments per discharge in rural areas are estimated to increase by 1.2 percent in FY 2019.
Table II presents the projected impact of the changes for FY 2019 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2018 with the estimated average payments per discharge for FY 2019, as calculated under our models. Therefore, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the changes presented in Table I. The estimated percentage changes shown in the last column of Table II equal the estimated percentage changes in average payments per discharge from Column 7 of Table I.
In addition to those policy changes discussed previously that we are able to model using our IPPS payment simulation model, we are making various other changes in this final rule. As noted in section I.G. of this Regulatory Impact Analysis, our payment simulation model uses the most recent available claims data to estimate the impacts on payments per case of certain changes in this final rule. Generally, we have limited or no specific data available with which to estimate the impacts of these changes using that payment simulation model. For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. Our estimates of the likely impacts associated with these other changes are discussed in this section.
In section II.H. of the preamble to this final rule, we discuss 11 technologies for which we received applications for add-on payments for new medical services and technologies for FY 2019. We note that three applicants withdrew their applications prior to the issuance of this final rule, and one applicant did not receive FDA approval for its technology by the July 1 deadline. We also discuss the status of the new technologies that were approved to receive new technology add-on payments in FY 2018. As explained in the preamble to this final rule, add-on payments for new medical services and technologies under section 1886(d)(5)(K) of the Act are not required to be budget neutral.
As discussed in section II.H.5. of the preamble of this final rule, we are approving the following nine applications for new technology add-on payments for FY 2019: KYMRIAH® (Tisagenlecleucel) and YESCARTA® (Axicabtagene Ciloleucel); VYXEOS
We note that new technology add-on payments for each case are limited to the lesser of (1) 50 percent of the costs of the new technology or (2) 50 percent of the amount by which the costs of the case exceed the standard MS-DRG payment for the case. Because it is difficult to predict the actual new technology add-on payment for each case, our estimates below are based on the increase in new technology add-on payments for FY 2019 as if every claim that would qualify for a new technology add-on payment would receive the maximum add-on payment.
The following are estimates for FY 2019 for the three technologies for which we are continuing to make new technology add-on payments in FY 2019:
• Based on the applicant's estimate from FY 2017 and the updated cost information provided by the applicant (discussed in section II.H.4.a. of the preamble of this final rule), we currently estimate that new technology add-on payments for Defitelio® will increase overall FY 2019 payments by $5,474,000 (maximum add-on payment of $80,500 * 68 patients).
• Based on the applicant's estimate from FY 2018, we currently estimate that new technology add-on payments for Ustekinumab (Stelara®) will increase overall FY 2019 payments by $400,800 (maximum add-on payment of $2,400 * 167 patients).
• Based on the applicant's estimate for FY 2018, we currently estimate that new technology add-on payments for Bezlotoxumab (Zinplava
The following are estimates for FY 2019 for the nine technologies that we are approving for new technology add-on payments beginning with FY 2019.
• Based on both applicants' estimates of the average cost for an administered dose for FY 2019, we currently estimate that new technology add-on payments for KYMRIAH® and YESCARTA® will increase overall FY 2019 payments by $71,989,000 (maximum add-on payment of $186,500 * 373 patients).
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for VYXEOS
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for VABOMERE
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for remedē® System will increase overall FY 2019 payments by $1,380,000 (maximum add-on payment of $17,250 * 80 patients).
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for ZEMDRI
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for GIAPREZA
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for Sentinel® Cerebral Protection System will increase overall FY 2019 payments by $9,100,000 (maximum add-on payment of $1,400 * 6,500 patients).
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for the AquaBeam System (Aquablation) will increase overall FY 2019 payments by $521,250 (maximum add-on payment of $1,250 * 417 patients).
• Based on the applicant's estimate for FY 2019, we currently estimate that new technology add-on payments for AndexXa
In section IV.A. of the preamble of this final rule, we discuss our changes to the list of MS-DRGs subject to the postacute care transfer policy and the MS-DRG special payment policy. As reflected in Table 5 listed in section VI. of the Addendum to this final rule (which is available via the internet on the CMS website), using criteria set forth in regulations at 42 CFR 412.4, we evaluated MS-DRG charge, discharge, and transfer data to determine which new or revised MS-DRGs will qualify for the postacute care transfer and MS-DRG special payment policies. As a result of our policies to revise the MS-DRG classifications for FY 2019, which are discussed in section II.F. of the preamble of this final rule, we are including additions to the list of MS-DRGs subject to the MS-DRG special payment policy. Column 2 of Table I in this Appendix A shows the effects of the changes to the MS-DRGs and the relative payment weights and the application of the recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate DRG classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. The analysis and methods for determining the changes due to the MS-DRGs and relative payment weights account for and include changes as a result of the changes to the MS-DRGs subject to the MS-DRG postacute care transfer and MS-DRG special payment policies. We refer readers to section I.G. of this Appendix A for a detailed discussion of payment impacts due to the MS-DRG reclassification policies for FY 2019.
In section IV.A.2.b. of the preamble of this final rule, we discuss our conforming changes to the regulations at § 412.4(c) to reflect the amendments to section 1886(d)(5)(J) of the Act made by section 53109 of the Bipartisan Budget Act of 2018. Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J) of the Act to include discharges to hospice services provided by a hospice program as a “qualified discharge” under the postacute care transfer policy, effective for discharges occurring on or after October 1, 2018. To implement this change, we are establishing that discharges using Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) will be subject to the postacute care transfer policy, effective for discharges occurring on or after October 1, 2018. Our actuaries estimate that this change in the postacute care transfer policy will generate an annual savings of approximately $240 million in Medicare payments in FY 2019, and up to $540 million annually by FY 2028.
In section IV.D. of the preamble of this final rule, we discuss the changes to the low-volume hospital payment policy for FY 2019 to implement the provisions of section 50204 of the Bipartisan Budget Act of 2018. Specifically, for FY 2019, qualifying hospitals must have less than 3,800 combined Medicare and non-Medicare discharges (instead of 1,600 Medicare discharges) and must be located more than 15 road miles from another subsection (d) hospital. Section 50204 of the Bipartisan Budget Act of 2018 also modified the methodology for calculating the payment adjustment for low-volume hospitals for FYs 2019 through 2022. To implement these requirements, we are establishing that the low-volume hospital payment adjustment will be determined as follows:
• For low-volume hospitals with 500 or fewer total discharges during the fiscal year, an additional 25 percent for each Medicare discharge.
• For low-volume hospitals with total discharges during the fiscal year of more than 500 and fewer than 3,800, an additional percent calculated using the formula [(95/330) − (number of total discharges/13,200)] for each Medicare discharge.
Based upon the best available data at this time, we estimate the changes to the low-volume hospital payment adjustment policy that we are implementing in accordance with section 50204 of the Bipartisan Budget Act of 2018 will increase Medicare payments by $75 million in FY 2019 as compared to FY 2018. More specifically, in FY 2019, we estimate that 628 providers will receive approximately $426 million compared to our estimate of 612 providers receiving approximately $350 million in FY 2018. These payment estimates were determined by identifying providers that, based on the best available data, are expected to qualify under the criteria that will apply in FY 2019 (that is, are located at least 15 miles from the nearest subsection (d) hospital and have less than 3,800 total discharges), and were determined from the same data used in developing the quantitative analyses of changes in payments per case discussed previously in section I.G. of this Appendix A.
As discussed in section IV.F. of the preamble of this final rule, under section 3133 of the Affordable Care Act, hospitals that are eligible to receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments under section 1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 percent of what formerly would have been paid as Medicare DSH payments (Factor 1), reduced to reflect changes in the percentage of uninsured individuals and additional statutory adjustments (Factor 2), is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. Each hospital eligible for Medicare DSH payments will receive an additional payment based on its estimated share of the total amount of uncompensated care for all hospitals eligible for Medicare DSH payments. The uncompensated care payment methodology has redistributive effects based on the proportion of a hospital's amount of uncompensated care relative to the aggregate amount of uncompensated care of all hospitals eligible for Medicare DSH payments (Factor 3). The change to Medicare DSH payments under section 3133 of the Affordable Care Act is not budget neutral.
In this final rule, we are establishing the amount to be distributed as uncompensated care payments to DSH eligible hospitals, which for FY 2019 is $8,272,872,447.22. This figure represents 75 percent of the amount that otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 67.51 percent. For FY 2018, the amount available to be distributed for uncompensated care was $6,766,695,163.56, or 75 percent of the amount that otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 58.01 percent. To calculate Factor 3 for FY 2019, we used an average of data computed using Medicaid days from hospitals' 2013 cost reports from the HCRIS database as updated through June 30, 2018, uncompensated care costs from hospitals' 2014 and 2015 cost reports from the same extract of HCRIS, and SSI days from the FY 2016 SSI ratios. For each eligible hospital, with the exception of Puerto Rico hospitals, all-inclusive rate providers, and Indian Health Service and Tribal hospitals, we calculated a Factor 3 using information from cost reports for FYs 2013, 2014, and 2015. To calculate Factor 3 for Puerto Rico hospitals, all-inclusive rate providers, and Indian Health Service and Tribal hospitals, we used data regarding low-income insured days for FY 2013. For a complete discussion of the methodology for calculating Factor 3, we refer readers to section IV.F.4. of the preamble of this final rule.
To estimate the impact of the combined effect of changes in Factors 1 and 2, as well as the changes to the data used in determining Factor 3, on the calculation of Medicare uncompensated care payments (UCP), we compared total UCP estimated in the FY 2018 IPPS/LTCH PPS final rule to total UCP estimated in this FY 2019 IPPS/LTCH PPS final rule. For FY 2018, for each hospital, we calculated 75 percent of the estimated amount that would have been paid as Medicare DSH payments in the absence of section 3133 of the Affordable Care Act, adjusted by a Factor 2 of 58.01 percent and multiplied by a Factor 3 calculated as described in the FY 2018 IPPS/LTCH PPS final rule. For FY 2019, we calculated 75 percent of the estimated amount that would be paid as Medicare DSH payments absent section 3133 of the Affordable Care Act, adjusted by a Factor 2 of 67.51 percent and multiplied by a Factor 3 calculated using the methodology described previously.
Our analysis included 2,448 hospitals that are projected to be eligible for DSH in FY 2019. It did not include hospitals that terminated their participation from the Medicare program as of January 1, 2018, Maryland hospitals, new hospitals, MDHs, and SCHs that are expected to be paid based on their hospital-specific rates. The 29 hospitals participating in the Rural Community Hospital Demonstration Program were excluded in this final rule, as participating hospitals are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments. In addition, low-income insured days and uncompensated care costs from merged or acquired hospitals were combined into the surviving hospital's CMS certification number (CCN), and the nonsurviving CCN was excluded from the analysis. The estimated impact of the changes in Factors 1, 2, and 3 on uncompensated care payments across all hospitals projected to be eligible for DSH payments in FY 2019, by hospital characteristic, is presented in the following table.
Changes in projected FY 2019 uncompensated care payments from payments in FY 2018 are driven by increases in Factor 1 and Factor 2, as well as by an increase in the number of hospitals eligible to receive DSH in FY 2019 relative to FY 2018. Factor 1 has increased from $11.665 billion to $12.254 billion, and the percent change in the percent of individuals who are uninsured (Factor 2) has increased from 58.01 percent to 67.51 percent. Based on the increases in these two factors, the impact analysis found that, across all projected DSH eligible hospitals, FY 2019 uncompensated care payments are estimated at approximately $8.273 billion, or an increase of approximately 22.26 percent from FY 2018 uncompensated care payments (approximately $6.767 billion). While these changes will result in a net increase in the amount available to be distributed in uncompensated care payments, the projected payment increases vary by hospital type. This redistribution of uncompensated care payments is caused by changes in Factor 3.
As seen in the above table, percent increases smaller than 22.26 percent indicate that hospitals within the specified category are projected to experience a smaller increase in uncompensated care payments, on average, compared to the universe of projected FY 2019 DSH hospitals. Conversely, percent increases that are greater than 22.26 percent indicate a hospital type is projected to have a larger increase than the overall average. The variation in the distribution of payments by hospital characteristic is largely dependent on a given hospital's number of Medicaid days and SSI days, as well as its uncompensated care costs as reported in the Worksheet S-10, used in the Factor 3 computation.
Many rural hospitals are projected to experience larger increases in uncompensated care payments than their urban counterparts. Overall, rural hospitals are projected to receive a 36.66 percent increase in uncompensated care payments, while urban hospitals are projected to receive a 21.48 percent increase in uncompensated care payments.
By bed size, smaller hospitals are projected to receive larger increases in uncompensated care payments than larger hospitals, in both rural and urban settings. Rural hospitals with 0-99 beds are projected to receive a 39.52 percent payment increase, rural hospitals with 100-249 beds are projected to see a 36.35 percent increase, and larger rural hospitals with 250+ beds are projected to experience a 24.35 percent payment increase. These increases for rural hospitals are all greater than the overall hospital average. This trend is consistent with urban hospitals, in which the smallest urban hospitals (0-99 beds) are projected to receive an increase in uncompensated care payments of 44.83 percent, and urban hospitals with 100-250 beds are projected to receive an increase of 25.23 percent, both of which are greater than the overall average. Larger urban hospitals with 250+ beds are projected to receive a 19.40 percent increase in uncompensated care payments, which is smaller than the overall average.
By region, rural hospitals are expected to receive a wide range of payment increases. Rural hospitals in the Mountain region are expected to receive a larger than average increase in uncompensated care payments, as are rural hospitals in the West South Central,
Nonteaching hospitals are projected to receive a larger than average payment increase of 28.62 percent. Teaching hospitals with fewer than 100 residents are projected to receive a payment increase of 22.14 percent, which is consistent with the overall average, while those teaching hospitals with 100+ residents have a projected payment increase of 17.23 percent, lower than the overall average. Government and proprietary hospitals are projected to receive larger than average increases (31.26 percent and 24.06 percent, respectively), while voluntary hospitals are expected to receive increases lower than the overall average at 18.30 percent. Hospitals with 0 to 25 percent Medicare utilization are projected to receive increases in uncompensated care payments slightly below the overall average, while hospitals with higher levels of Medicare utilization are projected to receive larger increases.
In section IV.H. of the preamble of the this final rule, we discuss our finalized policies for the FY 2019 Hospital Readmissions Reduction Program. This program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. The table and analysis below illustrate the estimated financial impact of the Hospital Readmissions Reduction Program payment adjustment methodology by hospital characteristic. As outlined in section IV.H. of the preamble of this final rule, hospitals are stratified into quintiles based on the proportion of dual-eligible stays among Medicare fee-for-service (FFS) and managed care stays between July 1, 2014 and June 30, 2017 (that is, the FY 2019 Hospital Readmissions Reduction Program's performance period). Hospitals' excess readmission ratios (ERRs) are assessed relative to their peer group median and a neutrality modifier is applied in the payment adjustment factor calculation to maintain budget neutrality. To analyze the results by hospital characteristic, we used the FY 2019 IPPS/LTCH Proposed Rule Impact File.
These analyses include 3,062 non-Maryland hospitals eligible to receive a penalty during the performance period. Hospitals are eligible to receive a penalty if they have 25 or more eligible discharges for at least one measure between July 1, 2014 and June 30, 2017. The second column in the table indicates the total number of non-Maryland hospitals with available data for each characteristic that have an estimated payment adjustment factor less than 1 (that is, penalized hospitals).
The third column in the table indicates the percentage of penalized hospitals among those eligible to receive a penalty by hospital characteristic. For example, 82.26 percent of eligible hospitals characterized as non-teaching hospitals are expected to be penalized. Among teaching hospitals, 88.60 percent of eligible hospitals with fewer than 100 residents and 93.95 percent of eligible hospitals with 100 or more residents are expected to be penalized.
The fourth column in the table estimates the financial impact on hospitals by hospital characteristics. The table shows the share of penalties as a percentage of all base operating Diagnosis Related-Group (DRG) payments for hospitals with each characteristic. This is calculated as the sum of penalties for all hospitals with that characteristic over the sum of all base operating DRG payments for those hospitals between October 1, 2016 and September 30, 2017 (FY 2017). For example, the penalty as a share of payments for urban hospitals is 0.70 percent. This means that total penalties for all urban hospitals are 0.70 percent of total payments for urban hospitals. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments accounts for differences in the amount of base operating DRG payments for hospitals within the characteristic when comparing the financial impact of the program on different groups of hospitals.
In section IV.I. of the preamble of this final rule, we discuss the Hospital VBP Program under which the Secretary makes value-based incentive payments to hospitals based on their performance on measures during the performance period with respect to a fiscal year. These incentive payments will be funded for FY 2019 through a reduction to the FY 2019 base operating DRG payment amount for the discharge for the hospital for such fiscal year, as required by section 1886(o)(7)(B) of the Act. The applicable percentage for FY 2019 and subsequent years is 2 percent. The total amount available for value-based incentive payments must be equal to the total amount of reduced payments for all hospitals for the fiscal year, as estimated by the Secretary.
In section IV.I.1.b. of the preamble of this final rule, we estimate the available pool of funds for value-based incentive payments in the FY 2019 program year, which, in accordance with section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base operating DRG payments, or a total of approximately $1.9 billion. This estimated available pool for FY 2019 is based on the historical pool of hospitals that were eligible to participate in the FY 2018 program year and the payment information from the March 2018 update to the FY 2017 MedPAR file.
The proposed estimated impacts of the FY 2019 program year by hospital characteristic, found in the table below, are based on historical TPSs. We used the FY 2018 program year's TPSs to calculate the proxy adjustment factors used for this impact analysis. These are the most recently available scores that hospitals were given an opportunity to review and correct. The proxy adjustment factors use estimated annual base operating DRG payment amounts derived from the March 2018 update to the FY 2017 MedPAR file. The proxy adjustment factors can be found in Table 16A associated with this final rule (available via the internet on the CMS website).
The impact analysis shows that, for the FY 2019 program year, the number of hospitals that would receive an increase in their base operating DRG payment amount is higher than the number of hospitals that would receive a decrease. On average, urban hospitals in the West North Central region and rural hospitals in Mountain region would have the highest positive percent
As DSH percent increases, the average percent change in base operating DRG would decrease. With respect to hospitals' Medicare utilization as a percent of inpatient days (MCR), as the MCR percent increases, the percent change in base operating DRG would tend to increase. On average, teaching hospitals would have a negative percent change in base operating DRG, while non-teaching hospitals would have a positive percent change in base operating DRG.
Actual FY 2019 program year's TPSs will not be reviewed and corrected by hospitals until after the FY 2019 IPPS/LTCH PPS final rule has been published. Therefore, the same historical universe of eligible hospitals and corresponding TPSs from the FY 2018 program year were used for the updated impact analysis in this final rule.
In section IV.I.4.b. of the preamble of the proposed rule, we discussed our proposed
In section IV.J. of the preamble of this final rule, we discuss finalized requirements for the HAC Reduction Program. In the proposed rule, we did not propose to adopt any new measures into the HAC Reduction Program, and are therefore not finalizing any changes to the HAC Reduction Program measure set. However, the Hospital IQR Program is finalizing its proposals to remove the claims-based Patient Safety and Adverse Events Composite (PSI-90) beginning with the CY 2018 reporting period/FY 2020 payment determination and five NHSN HAI measures, although the NHSN HAI measures removal is being delayed by one year (until the CY 2020 reporting period/FY 2022 payment determination). These measures had been previously adopted for, and will remain in, the HAC Reduction Program. We are therefore finalizing our proposal to begin validation of these NHSN HAI measures under the HAC Reduction Program, but are delaying implementation to begin with Q3 2020 discharges for FY 2023 in order to align with a corresponding delay in removing these NHSN HAI measures from the Hospital IQR Program.
We note the burden associated with collecting and submitting data via the NHSN system is captured under a separate OMB control number, 0920-0666, and therefore will not impact our burden estimates. We anticipate the removal of the NHSN HAI measures from the Hospital IQR Program will result in a net burden decrease to the Hospital IQR Program, but will result in an off-setting net burden increase to the HAC Reduction Program because hospitals selected for validation will continue to be required to submit validation templates for the HAI measures. Therefore, with the finalized policies discussed in section VIII.A.5.b.(1) and IV.J.4.e. of the preamble of this final rule to remove NHSN HAI chart-abstracted measures from the Hospital IQR Program and adopt validation process for the HAC Reduction Program, we anticipate a shift in burden associated with this data validation effort to the HAC Reduction Program beginning in FY 2021. We discuss the associated burden hours (43,200 hours over 600 hospitals) in section XIV.B.7. of the preamble of this final rule, and note the burden associated with these requirements is captured in an information collection request currently available for review and comment, OMB control number 0938—NEW.
The table and analysis below illustrate the estimated cumulative effect of the measures and scoring methodology for the Hospital-Acquired Condition (HAC) Reduction Program, as outlined in this FY 2019 IPPS/LTCH PPS final rule. We are presenting the estimated impact of the FY 2019 HAC Reduction Program on hospitals by hospital characteristic.
These FY 2019 HAC Reduction Program results were calculated using the Winsorized z-score methodology finalized in the FY 2017 IPPS/LTCH PPS final rule (80 FR 57022 through 57025). Each hospital's Total HAC Score was calculated as the weighted average of the hospital's Domain 1 score (15 percent) and Domain 2 score (85 percent). Non-Maryland hospitals with a Total HAC Score greater than the 75th percentile Total HAC Score were identified as being in the worst-performing quartile. The table below presents the estimated proportion of hospitals in the worst-performing quartile of the Total HAC Scores by hospital characteristic. We are not providing hospital-level data or payment impact in conjunction with this FY 2019 IPPS/LTCH PPS final rule because CMS gives hospitals a 30-day Scoring Calculations Review and Corrections Period to review their scores, which will not conclude until after the publication of this FY 2019 IPPS/LTCH PPS final rule.
Each hospital's Domain 1 score is based on its CMS Patient Safety Indicator (PSI) 90 Composite measure results, which are based on Medicare fee-for-service (FFS) discharges from October 1, 2015 through June 30, 2017 and recalibrated version 8.0 of the CMS PSI software. Each hospital's Domain 2 score is composed of CDC Central Line-Associated Bloodstream Infection (CLABSI), Catheter-Associated Urinary Tract Infection (CAUTI), Colon and Abdominal Hysterectomy Surgical Site Infection (SSI), Methicillin-resistant
To analyze the results by hospital characteristic, we used the FY 2019 Proposed Rule Impact File. This table includes 3,219 non-Maryland hospitals with a FY 2019 Total HAC Score. Of these 3,219 hospitals: 3,201 hospitals had information for geographic location, bed size, Disproportionate Share Hospital (DSH) percent, and teaching status; 3,217 had information on region; 3,173 had information for ownership; and 3,175 had information for Medicare Cost Report percent. The first column has a breakdown of each characteristic.
The second column in the table indicates the total number of non-Maryland hospitals with a FY 2019 Total HAC Score and available data for each characteristic. For example, with regard to teaching status, 2,121 hospitals are characterized as non-teaching hospitals, 832 are characterized as teaching hospitals with fewer than 100 residents, and 248 are characterized as teaching hospitals with at least 100 residents. This only represents a total of 3,201 hospitals because the other 18 hospitals are missing from the FY 2019 Proposed Rule Impact File.
The third column in the table indicates the number of hospitals for each characteristic that would be in the worst-performing quartile of Total HAC Scores. These hospitals would receive a payment reduction under the FY 2019 HAC Reduction Program. For example, with regard to teaching status, 484 hospitals out of 2,121 hospitals characterized as non-teaching hospitals would be subject to a payment reduction. Among teaching hospitals, 196 out of 832 hospitals with fewer than 100 residents and 113 out of 248 hospitals with 100 or more residents would be subject to a payment reduction.
The fourth column in the table indicates the percentage of hospitals for each characteristic that would be in the worst-performing quartile of Total HAC Scores and would receive a payment reduction under the FY 2019 HAC Reduction Program. For example, 22.8 percent of the 2,121 hospitals characterized as non-teaching hospitals, 23.6 percent of the 832 teaching hospitals with fewer than 100 residents, and 45.6 percent of the 248 teaching hospitals with 100 or more residents would be subject to a payment reduction.
In section IV.K.2. of the preamble of this final rule, we discuss our final policy to provide new urban teaching hospitals with greater flexibility under the regulation governing Medicare GME affiliation agreements. Currently, if a new urban teaching hospital participates in a Medicare GME affiliation agreement, § 413.79(e)(1)(iv) provides that the new urban teaching hospital(s) is only permitted to receive in increase in its FTE cap(s). We are finalizing our proposal to revise the regulation to specify that, effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital may enter into a Medicare GME affiliated group for purposes of establishing an aggregate FTE cap and receive an adjustment that is a decrease to the urban hospital's FTE caps if the decrease results from a Medicare GME affiliated group consisting solely of two or more new urban teaching hospitals. In addition, effective for Medicare GME affiliation agreements entered into on or after July 1, 2019, a new urban teaching hospital may participate in a Medicare GME affiliated group with an existing teaching hospital and receive an adjustment that is a decrease to the urban hospital's FTE caps, provided the Medicare GME affiliation agreement is effective with a July 1 date (the residency training year) that is at least 5 years after the start of the new urban teaching hospital's cost reporting period that coincides with or follows the start of the sixth program year of the first new program. Rather than create new FTE cap slots to cross train residents, Medicare GME affiliation agreements use existing cap slots to allow residents to rotate to various hospitals. Because Medicare GME affiliation agreements use existing FTE cap slots, we do not anticipate any significant cost impact associated with this policy.
In section IV.L. of the preamble of this final rule for FY 2019, we discussed our implementation and budget neutrality methodology for section 410A of Public Law 108-173, as amended by sections 3123 and 10313 of Public Law 111-148, and more recently, by section 15003 of Public Law 114-255, which requires the Secretary to conduct a demonstration that would modify payments for inpatient services for up to 30 rural hospitals.
Section 15003 of Public Law 114-255 requires the Secretary to conduct the Rural Community Hospital Demonstration for a 10-year extension period (in place of the 5-year extension period required by the Affordable Care Act), beginning on the date immediately following the last day of the initial 5-year period under section 410A(a)(5) of Public Law 108-173. Specifically, section 15003 of Public Law 114-255 amended section 410A(g)(4) of Public Law 108-173 to require that, for hospitals participating in the demonstration as of the last day of the initial 5-year period, the Secretary shall provide for continued participation of such rural community hospitals in the demonstration during the 10-year extension period, unless the hospital makes an election to discontinue participation. Furthermore, section 15003 of Public Law 114-255 requires that, during the second 5 years of the 10-year extension period, the Secretary shall provide for participation under the demonstration during the second 5 years of the 10 year extension period for hospitals that are not described in subsection 410A(g)(4).
Section 15003 of Public Law 114-255 also requires that no later than 120 days after enactment of Public Law 114-255 that the Secretary issue a solicitation for applications to select additional hospitals to participate in the demonstration program for the second 5 years of the 10-year extension period so long as the maximum number of 30 hospitals stipulated by Public Law 111-148 is not exceeded. Section 410A(c)(2) requires that in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented (budget neutrality).
In the preamble to this IPPS/LTCH PPS final rule, we described the terms of participation for the extension period authorized by Public Law 114-255. In the FY 2018 IPPS/LTCH PPS final rule, we finalized our policy with regard to the effective date for the application of the reasonable cost-based payment methodology under the demonstration for those among the hospitals that had previously participated and were choosing to participate in the second 5-year extension period. According to our finalized policy, each of these previously participating hospitals began the second 5 years of the 10-year extension period on the date immediately after the date the period of performance under the 5-year extension period ended. However, by the time of the FY 2018 IPPS/LTCH PPS final rule, we had not been able to verify which among the previously participating hospitals would be continuing participation, and thus were not able to estimate the costs of the demonstration for that year's final rule. We stated in the final rule that we would instead include the estimated costs of the demonstration for all participating hospitals for FY 2018, along with those for FY 2019, in the budget neutrality offset amount for the FY 2019 proposed and final rules.
Seventeen of the 21 hospitals that completed their periods of participation under the extension period authorized by the Affordable Care Act have elected to continue in the second 5-year extension period, while 13 additional hospitals have been selected to participate. Apart from one hospital, which has withdrawn from the demonstration, each of these newly participating hospitals began its 5-year period of participation effective the start of the first cost reporting period on or after October 1, 2017. Thus, 29 hospitals are participating in the demonstration during FY 2018.
In the FY 2018 IPPS/LTCH PPS final rule, we finalized the budget neutrality methodology in accordance with our policies for implementing the demonstration, adopting the general methodology used in previous years, whereby we estimated the additional payments made by the program for each of the participating hospitals as a result of the demonstration. In order to achieve budget neutrality, we adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In other words, we have applied budget neutrality across the payment system as a whole rather than across the participants of this demonstration. The language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration was not implemented, but does not identify the range across which aggregate payments must be held equal.
Because we were unable to confirm the hospitals that would be participating in the second extension period in time for including the estimates of the cost of the demonstration in FY 2018 in the FY 2018 final rule, we are including this estimate in the FY 2019 IPPS/LTCH PPS final rule. For this final rule, the resulting amounts applicable to FYs 2018 and 2019, respectively, are $31,070,880 and $70,929,313, which we are including in the budget neutrality offset adjustment for FY 2019.
In addition, we will determine the costs of the demonstration for the previously participating hospitals for the period from when their period of performance ended for the first 5-year extension period and the start of the cost report year in FY 2018 when finalized cost reports for this period are available. We will include these costs for the demonstration in future rulemaking.
In previous years, we have incorporated a second component into the budget neutrality offset amounts identified in the final IPPS rules. As finalized cost reports became available, we determined the amount by which the actual costs of the demonstration for an earlier, given year differed from the estimated costs for the demonstration set forth in the final IPPS rule for the corresponding fiscal year, and we incorporated that amount into the budget neutrality offset amount for the upcoming fiscal year. We have calculated this difference for FYs 2005 through 2010 between the actual costs of the demonstration as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years.
With the extension of the demonstration for another 5-year period, as authorized by section 15003 of Public Law 114-255, we will continue this general procedure. The actual costs of the demonstration for FY 2011 as determined from the finalized cost reports fell short of the estimated amount that was finalized in the FY 2011 IPPS/LTCH PPS final rule for FY 2011 by $29,971,829; the actual costs of the demonstration for FY 2012 fell short of the amount that was finalized in the FY 2012 final rule by $8,500,373; in addition, the actual costs of the
We note that, for this final rule, the amounts identified for the actual costs of the demonstration for each of FYs 2011, 2012 and 2013 (determined from current finalized cost reports) are less than the amounts that were identified in the final rule for each of these fiscal years. Therefore, in keeping with previous policy finalized in similar situations when the costs of the demonstration fell short of the amount estimated in the corresponding year's final rule, we are including this component as a negative adjustment to the budget neutrality offset amount for the current fiscal year.
Therefore, for FY 2019, the total amount that we are applying to the national IPPS rates is $58,129,609.
In section IV.M. of the preamble of this final rule, we discuss our policy to revise the admission order documentation requirements. Specifically, we are revising the inpatient admission order policy to no longer require the presence of a written inpatient admission order in the medical record as a specific condition of Medicare Part A payment. Our actuaries estimate that any increase in Medicare payments due to the change will be negligible, given the anticipated low volume of claims that will be payable under this policy that would not have been paid under the current policy.
In section VI.B. of the preamble of this final rule, we discuss the revisions we are making to the regulations applicable to satellite facilities so that the separateness and control requirements will only apply to IPPS-excluded satellite facilities that are co-located with IPPS hospitals beginning in FY 2019. This policy change is premised on the belief that the policy concerns that underlie our existing satellite facility regulations (that is, inappropriate patient shifting and hospitals acting as illegal de facto units) are sufficiently moderated in situations where IPPS-excluded hospitals are co-located with each other but not IPPS hospitals, in large part due to the payment system changes that have occurred over the intervening years for IPPS-excluded hospitals, the requirements in the hospital conditions of participation (CoPs) (which are still present regardless of these changes), and because such changes will be consistent with the revisions to our HwH policy that were finalized in the FY 2018 IPPS/LTCH PPS final rule, which was estimated to have a
In section VI.D.2. of the preamble of this final rule, we discuss that, for FY 2019, section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126 of the Affordable Care Act, authorizes a demonstration project to allow eligible entities to develop and test new models for the delivery of health care services in eligible counties in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries. The demonstration is titled “Demonstration Project on Community Health Integration Models in Certain Rural Counties,” and is commonly known as the Frontier Community Health Integration Project (FCHIP) demonstration.
The authorizing statute limits participation in the demonstration to eligible entities in not more than 4 States, and requires it to be conducted for a 3-year period. In addition, the demonstration is required to be budget neutral. Specifically, this provision states that in conducting the demonstration project, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project under the section were not implemented.
The authorizing statute states that the Secretary may waive such requirements of titles XVIII and XIX of the Act as may be necessary and appropriate for the purpose of carrying out the demonstration project, thus allowing the waiver of Medicare payment rules encompassed in the demonstration. Ten CAHs are participating in the demonstration, which started on August 1, 2016.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065) and FY 2018 IPPS/LTCH PPS final rule (82 FR 38294 through 38296), we finalized a policy to address the budget neutrality requirement for the demonstration. As explained in the FY 2018 IPPS/LTCH PPS final rule, we based our selection of CAHs for participation with the goal of maintaining the budget neutrality of the demonstration on its own terms (that is, the demonstration will produce savings from reduced transfers and admissions to other health care providers, thus offsetting any increase in payments resulting from the demonstration). However, we have also adopted a contingency plan to ensure that the budget neutrality requirement is met. If analysis of claims data for Medicare beneficiaries receiving services at each of the participating CAHs, as well as from other data sources, including cost reports for these CAHs, shows that increases in Medicare payments under the demonstration during the 3-year period are not sufficiently offset by reductions elsewhere, we will recoup the additional expenditures attributable to the demonstration through a reduction in payments to all CAHs nationwide. Therefore, in the event that this demonstration is found to result in aggregate payments in excess of the amount that would have been paid if this demonstration were not implemented, we will comply with the budget neutrality requirement by reducing payments to all CAHs, not just those participating in the demonstration. We believe that the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language merely refers to ensuring that aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project was not implemented, and does not identify the range across which aggregate payments must be held equal.
Based on actuarial analysis using cost report settlements for FYs 2013 and 2014, the demonstration is projected to satisfy the budget neutrality requirement and likely yield a total net savings. As we estimated for the FY 2019 IPPS/LTCH PPS proposed rule, for this FY 2019 IPPS/LTCH PPS final rule, we estimate that the total impact of the payment recoupment will be no greater than 0.03 percent of CAHs' total Medicare payments within one fiscal year (that is, Medicare Part A and Part B). The final budget neutrality estimates for the FCHIP demonstration will be based on the demonstration period, which is August 1, 2016 through July 31, 2019.
The demonstration is projected to impact payments to participating CAHs under both Medicare Part A and Part B. As stated in the FY 2018 IPPS/LTCH PPS final rule, in the event the demonstration is found not to have been budget neutral, any excess costs will be recouped over a period of 3 cost reporting years, beginning in CY 2020. The 3-year period for recoupment will allow for a reasonable timeframe for the payment reduction and to minimize any impact on CAHs' operations. Therefore, because any reduction to CAH payments in order to recoup excess costs under the demonstration will not begin until CY 2020, this policy will have no impact for any national payment system for FY 2019.
In section IX.B.1. of the preamble of this final rule, we are incorporating the Provider Cost Reimbursement Questionnaire, Form CMS-339 (OMB No. 0938-0301), into the Organ Procurement Organization (OPO) and Histocompatibility Laboratory cost report, Form CMS-216 (OMB No. 0938-0102), which will complete our incorporation of the Form CMS-339 into all Medicare cost reports. We also are updating § 413.24(f)(5)(i) to reflect that an acceptable cost report will no longer require the provider to separately submit a Provider Cost Reimbursement Questionnaire, Form CMS-339, by removing the reference to the questionnaire. There are 58 OPOs and 47 histocompatibility laboratories. This policy will not require
In section IX.B.2. of the preamble of this final rule, we also are finalizing a change to the regulation to note that a cost report is rejected for teaching hospitals for lack of supporting documentation if it does not include the IRIS data rather than the IRIS diskette, which is no longer required. We continue to require all teaching hospitals to submit the IRIS data under § 413.24(f)(5) to have an acceptable cost report submission.
In section IX.B.3. of the preamble of this final rule, we are establishing that, effective for cost reporting periods beginning on or after October 1, 2018, for providers claiming Medicare bad debt reimbursement, a cost report is rejected for lack of supporting documentation if it does not include a Medicare bad debt listing that corresponds to the bad debt amounts claimed in the provider's Medicare cost report. This policy will not require providers claiming Medicare bad debt reimbursement to collect additional data. Providers are required under §§ 413.20 and 413.24 to maintain data that substantiates their costs. The cost report worksheet that incorporated Form CMS-339 continues to require providers who claim Medicare bad debt reimbursement to submit a bad debt listing with the cost report in order to have an acceptable cost report submission. Because of the existing requirement, there are no additional burdens or expenses placed upon providers to ensure that the supporting documentation, the bad debt listing, corresponds to the amounts reported in the cost report in order to have an acceptable cost report submission.
In section IX.B.4. of the preamble of this final rule, we are establishing that, effective for cost reporting periods beginning on or after October 1, 2018, for DSH eligible hospitals claiming a disproportionate share hospital payment adjustment, a cost report is rejected for lack of supporting documentation if it does not include a detailed listing of the hospital's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the hospital's cost report. Providers are required under §§ 413.20 and 413.24 to maintain data that substantiates their costs. The provider must furnish such information to the contractor as may be necessary to assure proper payment by the program. Currently, when the supporting documentation regarding Medicaid eligible days is not submitted by DSH eligible hospitals with their cost report, contractors must request it. Tentative program reimbursement payments are often issued to providers upon the submission of the cost report, and a subsequent submission of supporting documentation may reveal an overstatement of a hospital's Medicaid eligible days with a resulting overpayment to the provider.
Requiring a provider to submit, as a supporting document with its cost report, a listing of the provider's Medicaid eligible days that corresponds to the Medicaid eligible days claimed in the DSH eligible hospital's cost report would be consistent with the recordkeeping and cost reporting requirements of §§ 413.20 and 413.24, which require providers to maintain data that substantiates their costs. This policy to require providers to submit the supporting documentation with the cost report will also facilitate accurate provider payment and the contractor's review and verification of the cost report.
This policy will not require hospitals claiming a DSH payment adjustment to collect additional data. Hospitals claiming a DSH payment adjustment are already collecting the data in order to report the hospital's Medicaid eligible days in the hospital's cost report. Because the existing burden estimate for a DSH eligible hospital's cost report already reflects the requirement that these hospitals collect, maintain, and submit this data when requested, there is no additional burden placed upon hospitals as a result of our policy to require them to submit these supporting documents along with their cost report, and to ensure the supporting documentation corresponds to the amounts reported in the cost report in order to have an acceptable cost report submission.
In section IX.B.5. of the preamble of this final rule, we are establishing that, effective for cost reporting periods beginning on or after October 1, 2018, for DSH eligible hospitals reporting charity care and/or uninsured discounts, a cost report is rejected for lack of supporting documentation if it does not include a detailed listing of charity care and/or uninsured discounts that corresponds to the amounts claimed in the provider's cost report. Providers are required under §§ 413.20 and 413.24 to maintain data that substantiates their costs. The provider must furnish such information to the contractor as may be necessary to assure proper payment by the program. Contractors regularly request that hospitals claiming charity care and/or uninsured discounts submit documentation to support their charity care and/or uninsured discounts reported in their cost report. This policy to require providers to submit this supporting documentation with the cost report will facilitate accurate payment to the provider and the contractor's review and verification of the cost report.
This policy will not require DSH eligible hospitals reporting charity care and/or uninsured discounts to collect additional data but will require them to submit the supporting documentation with the cost report rather than at a later time. Because the existing burden estimate for a DSH eligible hospital's cost report already reflects the requirement that these hospitals collect, maintain, and submit this data when requested, there is no additional burden placed upon DSH eligible hospitals as a result of our policy to require them to submit these supporting documents along with their cost report and to ensure the supporting documentation corresponds to the amounts reported in the cost report in order to have an acceptable cost report submission.
In section IX.B.6. of the preamble of this final rule, we are establishing that, effective for cost reporting periods beginning on or after October 1, 2018, for a provider reporting costs on its cost report that are allocated from a home office or chain organization, a cost report is rejected for lack of supporting documentation if the home office or the chain organization has not submitted to the provider's contractor a Home Office Cost Statement that corresponds to either all or any portion of the costs it has allocated to the provider, depending on the fiscal year end dates of the provider and its home office. This policy will not require providers reporting costs on their cost report that are allocated from a home office or chain organization to collect additional data. Likewise, this policy will not require home offices to collect additional data. Instead, this policy codifies our longstanding policy in Section 2153, Chapter 21, of the PRM-1, requiring costs allocated from a home office or chain organization to a provider be substantiated on the provider's cost report and that the Home Office Cost Statement be submitted to the home office's servicing contractor, as well as the servicing contractors of the providers within its chain. Only one copy of the Home Office Cost Statement is required to be submitted to a provider's contractor, regardless of the number of providers in the chain the contractor is servicing. Providers are required under §§ 413.20 and 413.24 to maintain data that substantiates their costs. Home offices are required to complete a Home Office Cost statement that details the allocations of costs to the providers in its chain and submit its Home Office Cost Statement to its contractor. With our policy, we anticipate that home offices will submit the Home Office Cost Statement to support the amounts reported in the cost reports of the providers in its chain, in order for the providers to have an acceptable cost report submission. Because the Home Office Cost Statement already requires the home office to list the providers in the chain and each of the providers' servicing contractors, the contractors to whom the Home Office Cost Statement should be sent is already known to the home office. Thus, there is no additional burden placed on home offices as a result of our policy to require the home office to submit a copy of its Home Office Cost Statement that corresponds to either all or any portion of the costs it has allocated to the provider, to each of its chain providers' servicing contractors, in order for the providers in its chain to have an acceptable cost report submission.
In section XI. of the preamble of this final rule, we discuss our policy to remove from the regulations the requirement that a physician statement of certification or recertification must itself indicate where that supporting information is to be found in the medical record. While moving this provision will have no substantive impact, we have examined the impact of eliminating the provision pertaining to where the supporting
While the elimination of this provision will benefit physicians in terms of reducing the amount of time expended in completing certification and recertification statements, it will also benefit physicians whose claims have been denied either because the physician failed to include this information in the certification and/or recertification statement or failed to accurately account for the information in the statements. In fact, these claims are routinely denied even in situations where the location of the information within a paper medical record is readily apparent to the reviewer. Given the improved capabilities of searchable electronic health records, these types of denials are increasingly unnecessary. We also expect a positive impact for beneficiaries because beneficiaries will no longer receive notices that these claims were denied, which inevitably caused confusion given the nature of these denials.
Moreover, the denial of claims due to the failure to include the location of information within a paper medical record results in appeals. As an example, these denials are significant for skilled nursing facility (SNF) claims. In the SNF setting, a required element of the certification and recertification statement is the required estimated length of need (ELON) element. The table below shows in Row 1 the SNF improper payment rates for claims in error (certification statement does not indicate where in the medical record the required information of ELON is to be found; however the medical record contains the missing information); and in Row 2, the error rate if these claims are no longer considered to be erroneous (due to removal of the provision in the regulations). The data shown in the table are from the 2017 CERT reporting period and includes claims from July 1, 2015 through June 30, 2016.
Overall, there is a 1.4 percentage point reduction in the improper payment rate in the SNF setting alone. This policy, when applied uniformly across all provider settings, could potentially reduce improper payments, lower appeals, and reduce the number of denials sent to beneficiaries. Moreover, by eliminating these denials and subsequent appeals, MACs will have more time to dedicate to other more pertinent appeal issues.
For the impact analysis presented below, we used data from the March 2018 update of the FY 2017 MedPAR file and the March 2018 update of the Provider-Specific File (PSF) that was used for payment purposes. Although the analyses of the changes to the capital prospective payment system do not incorporate cost data, we used the March 2018 update of the most recently available hospital cost report data (FYs 2015 and 2016) to categorize hospitals. Our analysis has several qualifications. We use the best data available and make assumptions about case-mix and beneficiary enrollment, as described later in this section.
Due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each change. In addition, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, it is possible that some individual hospitals are placed in the wrong category.
Using cases from the March 2018 update of the FY 2017 MedPAR file, we simulated payments under the capital IPPS for FY 2018 and the payments for FY 2019 for a comparison of total payments per case. Any short-term, acute care hospitals not paid under the general IPPS (for example, hospitals in Maryland) are excluded from the simulations.
The methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating the capital IPPS payments in FY 2019 is as follows:
In addition to the other adjustments, hospitals may receive outlier payments for those cases that qualify under the threshold established for each fiscal year. We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital's case-mix. We then added estimated payments for indirect medical education, disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions:
• An estimated increase in the Medicare case-mix index of 2.0 percent in FY 2018 and by 0.5 percent in FY 2019 based on preliminary FY 2018 data.
• We estimate that Medicare discharges will be approximately 11.0 million in both FYs 2018 and 2019.
• The capital Federal rate was updated, beginning in FY 1996, by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.1.a. of the Addendum to this final rule, the update is 1.4 percent for FY 2019.
• In addition to the FY 2019 update factor, the FY 2019 capital Federal rate was calculated based on a GAF/DRG budget neutrality adjustment factor of 0.9975 and an outlier adjustment factor of 0.9494.
We used the actuarial model previously described in section I.I. of Appendix A of this final rule to estimate the potential impact of the changes for FY 2019 on total capital payments per case, using a universe of 3,256 hospitals. As previously described, the individual hospital payment parameters are taken from the best available data, including the March 2018 update of the FY 2017 MedPAR file, the March 2018 update to the PSF, and the most recent cost report data from the March 2018 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2018 and estimated total payments per case for FY 2019 based on the FY 2019 payment policies. Column 2 shows estimates of payments per case under our model for FY 2018. Column 3 shows estimates of payments per case under our model for FY 2019. Column 4 shows the total percentage change in payments from FY 2018 to FY 2019. The change represented in Column 4 includes the 1.4 percent update to the capital Federal rate and other changes in the adjustments to the capital Federal rate. The comparisons are provided by: (1) Geographic location; (2) region; and (3) payment classification.
The simulation results show that, on average, capital payments per case in FY 2019 are expected to increase as compared to capital payments per case in FY 2018. This expected increase overall is largely due to the 1.4 percent update to the capital Federal rate for FY 2019. Hospitals within both rural and urban regions may experience an increase or a decrease in capital payments per case due to changes in the GAFs. These regional effects of the changes to the GAFs on capital payments are consistent with the projected changes in payments due to changes in the wage index (and policies affecting the wage index), as shown in Table I in section I.G. of this Appendix A.
The net impact of these changes is an estimated 2.1 percent change in capital
The geographic comparison shows that, on average, hospitals in urban classifications will experience an increase in capital IPPS payments per case in FY 2019 as compared to FY 2018, while those hospitals in rural classifications would experience a decrease in capital IPPS payments. Capital IPPS payments per case would increase by an estimated 2.3 percent for hospitals in large urban areas and by 3.2 percent for hospitals in other urban areas, while payments to hospitals in rural areas would decrease by 0.9 percent, from FY 2018 to FY 2019.
The comparisons by region show that the estimated increases in capital payments per case from FY 2018 to FY 2019 in urban areas range from a 1.4 percent increase for the East North Central urban region to a 3.8 percent increase for the New England region. For rural regions, the Mountain rural region is projected to experience an increase in capital IPPS payments per case of 1.2 percent, while the East South Central rural region is projected to experience a decrease in capital IPPS payments per case of 2.6 percent.
Hospitals of all types of ownership (that is, voluntary hospitals, government hospitals, and proprietary hospitals) are expected to experience an increase in capital payments per case from FY 2018 to FY 2019. The increase in capital payments for voluntary hospitals is estimated to be 1.8 percent. Government hospitals and proprietary hospitals are expected to experience an increase in capital IPPS payments of 3.1 and 2.3 percent, respectively.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2019. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified as of the publication of this final rule for FY 2019, we show the average capital payments per case for reclassified hospitals for FY 2019. Urban reclassified hospitals are expected to experience an increase in capital payments of 1.0 percent; urban nonreclassified hospitals are expected to experience an increase in capital payments of 3.0 percent. The estimated percentage decrease for rural reclassified hospitals is 1.8 percent, and for rural nonreclassified hospitals, the estimated percentage increase in capital payments is 0.2 percent.
In section VII. of the preamble of this final rule and section V. of the Addendum to this final rule, we set forth the annual update to the payment rates for the LTCH PPS for FY 2019. In the preamble of this final rule, we specify the statutory authority for the provisions that are presented, identify the final policies, and present rationales for our decisions as well as alternatives that were considered. In this section of Appendix A to this final rule, we discuss the impact of the changes to the payment rate, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this final rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs.
There are 409 LTCHs included in this impact analysis. We note that, although there are currently approximately 417 LTCHs, for purposes of this impact analysis, we excluded the data of all-inclusive rate providers consistent with the development of the FY 2019 MS-LTC-DRG relative weights (discussed in section VII.B.3.c. of the preamble of this final rule. Moreover, in the claims data used for this final rule, 1 of these 409 LTCHs only have claims for site neutral payment rate cases and, therefore, are not included in our impact analysis for LTCH PPS standard Federal payment rate cases.) In the impact analysis, we used the final payment rate, factors, and policies presented in this final rule, the 1.0135 percent annual update to the LTCH PPS standard Federal payment rate, the update to the MS-LTC-DRG classifications and relative weights, the update to the wage index values and labor-related share, the elimination of the 25-pecent threshold policy and corresponding one-time temporary budget neutrality adjustment for FY 2019 (discussed in VII.E. of the preamble of this final rule), and the best available claims and CCR data to estimate the change in payments for FY 2019.
Under the dual rate LTCH PPS payment structure, payment for LTCH discharges that meet the criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) is based on the LTCH PPS standard Federal payment rate. Consistent with the statute, the site neutral payment rate is the lower of the IPPS comparable per diem amount as determined under § 412.529(d)(4), including any applicable outlier payments as specified in § 412.525(a); or 100 percent of the estimated cost of the case as determined under existing § 412.529(d)(2). In addition, there are two separate HCO targets—one for LTCH PPS standard Federal payment rate cases and one for site neutral payment rate cases. The statute also establishes a transitional payment method for cases that are paid the site neutral payment rate for LTCH discharges occurring in cost reporting periods beginning during FY 2016 through FY 2019. The transitional payment amount for site neutral payment rate cases is a blended payment rate, which is calculated as 50 percent of the applicable site neutral payment rate amount for the discharge as determined under § 412.522(c)(1) and 50 percent of the applicable LTCH PPS standard Federal payment rate for the discharge determined under § 412.523.
Based on the best available data for the 409 LTCHs in our database that were considered in the analyses used for this final rule, we estimate that overall LTCH PPS payments in FY 2019 will increase by approximately 0.9 percent (or approximately $39 million) based on the final rates and factors presented in section VII. of the preamble and section V. of the Addendum to this final rule.
Based on the FY 2017 LTCH cases that were used for the analysis in this final rule, approximately 36 percent of those cases were classified as site neutral payment rate cases (that is, 36 percent of LTCH cases did not meet the patient-level criteria for exclusion from the site neutral payment rate). Our Office of the Actuary currently estimates that the percent of LTCH PPS cases that will be paid at the site neutral payment rate in FY 2018 will not change significantly from the most recent historical data. Taking into account the transitional blended payment rate and other changes that will apply to the site neutral payment rate cases in FY 2019, we estimate that aggregate LTCH PPS payments for these site neutral payment rate cases will increase by approximately 0.4 percent (or approximately $4 million).
Approximately 64 percent of LTCH cases are expected to meet the patient-level criteria for exclusion from the site neutral payment rate in FY 2019, and will be paid based on the LTCH PPS standard Federal payment rate for the full year. We estimate that total LTCH PPS payments for these LTCH PPS standard Federal payment rate cases in FY 2019 will increase approximately 1.0 percent (or approximately $35 million). This estimated increase in LTCH PPS payments for LTCH PPS standard Federal payment rate cases in FY 2019 is primarily due to the 1.35 percent annual update to the LTCH PPS standard Federal payment rate for FY 2019 (discussed in section V.A. of the Addendum to this final rule) in conjunction with the 0.9 percent one-time temporary budget neutrality adjustment factor for FY 2019 under our final policy to eliminate the 25-percent threshold policy, and the estimated 0.6 percent increase in HCO payments discussed in section V.D.3.b.(3). of the Addendum to this final rule.
Based on the 409 LTCHs that were represented in the FY 2017 LTCH cases that were used for the analyses in this final rule presented in this Appendix, we estimate that aggregate FY 2019 LTCH PPS payments will be approximately $4.540 billion, as compared to estimated aggregate FY 2018 LTCH PPS payments of approximately $4.502 billion, resulting in an estimated overall increase in LTCH PPS payments of approximately $39 million. We note that the estimated $39 million increase in LTCH PPS payments in FY 2019 does not reflect changes in LTCH admissions or case-mix intensity, which will also affect the overall payment effects of the final policies in this final rule.
The LTCH PPS standard Federal payment rate for FY 2018 is $41,415.11. For FY 2019, we are establishing an LTCH PPS standard Federal payment rate of $41,579.65 which reflects the 1.35 percent annual update to the LTCH PPS standard Federal payment rate, the area wage budget neutrality factor of 0.999713 to ensure that the changes in the wage indexes and labor-related share do not influence aggregate payments, and the FY 2019 one-time temporary budget neutrality adjustment factor of 0.990884 to ensure that the elimination of the 25-percent threshold policy (discussed in VII.E. of the preamble of this final rule) does not influence aggregate FY 2019 LTCH PPS payments. For LTCHs that fail to submit data for the LTCH QRP, in accordance with section 1886(m)(5)(C) of the Act, we are establishing an LTCH PPS standard Federal payment rate of $40,759.12. This LTCH PPS standard Federal payment rate reflects the updates and factors previously described, as well as the required 2.0 percentage point reduction to the annual update for failure to submit data under the LTCH QRP. We note that the factors previously described to determine the FY 2019 LTCH PPS standard Federal payment rate are applied to the FY 2018 LTCH PPS standard Federal rate set forth under § 412.523(c)(3)(xiv) (that is, $41,415.11).
Table IV shows the estimated impact for LTCH PPS standard Federal payment rate cases. The estimated change attributable solely to the annual update of 1.35 percent to the LTCH PPS standard Federal payment rate is projected to result in an increase of 1.3 percent in payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019, on average, for all LTCHs (Column 6). In addition to the annual update to the LTCH PPS standard Federal payment rate for FY 2019, the estimated increase of 1.3 percent shown in Column 6 of Table IV also includes estimated payments for SSO cases, a portion of which are not affected by the annual update to the LTCH PPS standard Federal payment rate, as well as the reduction that is applied to the annual update of LTCHs that do not submit the required LTCH QRP data. Therefore, for all hospital categories, the projected increase in payments based on the LTCH PPS standard Federal payment rate to LTCH PPS standard Federal payment rate cases is somewhat less than the 1.35 percent annual update for FY 2019.
For FY 2019, we are updating the wage index values based on the most recent available data, and we are continuing to use labor market areas based on the CBSA delineations (as discussed in section V.B. of the Addendum to this final rule). In addition, we are updating the labor-related share at 66.0 percent under the LTCH PPS for FY 2019, based on the most recent available data on the relative importance of the labor-related share of operating and capital costs of the 2013-based LTCH market basket. We also applied an area wage level budget neutrality factor of 0.999713 to ensure that the changes to the wage data and labor-related share do not result in any change in estimated aggregate LTCH PPS payments to LTCH PPS standard Federal payment rate cases.
As we discuss in VII.E. of the preamble of this final rule, as we proposed, we are eliminating the 25-percent threshold policy in a budget neutral manner. Therefore, for FY 2019, we applied a one-time temporary budget neutrality adjustment factor of 0.990884 to ensure the elimination of the 25-percent threshold policy does not result in any change in estimated aggregate LTCH PPS payments.
We currently estimate total HCO payments for LTCH PPS standard Federal payment rate cases will increase from FY 2018 to FY 2019. Based on the FY 2017 LTCH cases that were used for the analyses in this final rule, we estimate that the FY 2018 HCO threshold of $27,381 (as established in the FY 2018 IPPS/LTCH PPS final rule) will result in estimated HCO payments for LTCH PPS standard Federal payment rate cases in FY 2018 that are below the 7.975 percent target. Specifically, we currently estimate that HCO payments for LTCH PPS standard Federal payment rate cases would be approximately 7.41 percent of the estimated total LTCH PPS standard Federal payment rate payments in FY 2018. Combined with our estimate that FY 2019 HCO payments for LTCH PPS standard Federal payment rate cases would be 7.975 percent of estimated total LTCH PPS standard Federal payment rate payments in FY 2019, this will result in an estimated increase in HCO payments of 0.6 percent between FY 2018 and FY 2019. We note that, consistent with past practice, in calculating these estimated HCO payments, we increased estimated costs by the projected market basket percentage increase factor, as discussed in section V.D.3.b.(3). of the Addendum to this final rule.
Table IV shows the estimated impact of the final payment rate and final policy changes on LTCH PPS payments for LTCH PPS standard Federal payment rate cases for FY 2019 by comparing estimated FY 2018 LTCH PPS payments to estimated FY 2019 LTCH PPS payments. (As noted earlier, our analysis does not reflect changes in LTCH admissions or case-mix intensity.) We note that these impacts do not include LTCH PPS site neutral payment rate cases for the reasons discussed in section I.J.4. of this Appendix.
As we discuss in detail throughout this final rule, based on the most recent available data, we believe that the provisions of this final rule relating to the LTCH PPS, which are projected to result in an overall increase in estimated aggregate LTCH PPS payments, and the resulting LTCH PPS payment amounts will result in appropriate Medicare payments that are consistent with the statute.
For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. As shown in Table IV, we are projecting no change in estimated payments for LTCH PPS standard Federal payment rate cases for LTCHs located in a rural area. This estimated impact is based on the FY 2017 data for the 21 rural LTCHs (out of 409 LTCHs) that were used for the impact analyses shown in Table IV.
Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs “maintain budget neutrality.” We believe that the statute's mandate for budget neutrality applies only to the first year of the implementation of the LTCH PPS (that is, FY 2003). Therefore, in calculating the FY 2003 standard Federal payment rate under § 412.523(d)(2), we set total estimated payments for FY 2003 under the LTCH PPS so that estimated aggregate payments under the LTCH PPS were estimated to equal the amount that would have been paid if the LTCH PPS had not been implemented.
Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH PPS payment structure with two distinct payment rates for LTCH discharges beginning in FY 2016. Under this statutory change, LTCH discharges that meet the patient-level criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) are paid based on the LTCH PPS standard Federal payment rate. LTCH discharges paid at the site neutral payment rate are generally paid the lower of the IPPS comparable per diem amount, including any applicable HCO payments, or 100 percent of the estimated cost of the case. The statute also establishes a transitional payment method for cases that are paid at the site neutral payment rate for LTCH discharges occurring in cost reporting periods beginning during FY 2016 through FY 2019, under which the site neutral payment rate cases are paid based on a blended payment rate calculated as 50 percent of the applicable site neutral payment rate amount for the discharge and 50 percent of the applicable LTCH PPS standard Federal payment rate for the discharge.
As discussed in section I.J. of this Appendix, we project an increase in aggregate LTCH PPS payments in FY 2019 of approximately $39 million. This estimated increase in payments reflects the projected increase in payments to LTCH PPS standard Federal payment rate cases of approximately $35 million and the projected increase in payments to site neutral payment rate cases of approximately $4 million under the dual rate LTCH PPS payment rate structure required by the statute beginning in FY 2016.
As discussed in section V.D. of the Addendum to this final rule, our actuaries project cost and resource changes for site neutral payment rate cases due to the site neutral payment rates required under the statute. Specifically, our actuaries project that the costs and resource use for cases paid at the site neutral payment rate will likely be lower, on average, than the costs and resource use for cases paid at the LTCH PPS standard Federal payment rate, and will likely mirror the costs and resource use for IPPS cases assigned to the same MS-DRG. While we are able to incorporate this projection at an aggregate level into our payment modeling, because the historical claims data that we are using in this final rule to project estimated FY 2019 LTCH PPS payments (that is, FY 2017 LTCH claims data) do not reflect this actuarial projection, we are unable to model the impact of the change in LTCH PPS payments for site neutral payment rate cases at the same level of detail with which we are able to model the impacts of the changes to LTCH PPS payments for LTCH PPS standard Federal payment rate cases. Therefore, Table IV only reflects changes in LTCH PPS payments for LTCH PPS standard Federal payment rate cases and, unless otherwise noted, the remaining discussion in section I.J.4. of this Appendix refers only to the impact on LTCH PPS payments for LTCH PPS standard Federal payment rate cases. In the following section, we present our provider impact analysis for the changes that affect LTCH PPS payments for LTCH PPS standard Federal payment rate cases.
The basic methodology for determining a per discharge payment for LTCH PPS standard Federal payment rate cases is currently set forth under §§ 412.515 through 412.538. In addition to adjusting the LTCH PPS standard Federal payment rate by the MS-LTC-DRG relative weight, we make adjustments to account for area wage levels and SSOs. LTCHs located in Alaska and Hawaii also have their payments adjusted by a COLA. Under our application of the dual rate LTCH PPS payment structure, the LTCH PPS standard Federal payment rate is generally only used to determine payments for LTCH PPS standard Federal payment rate cases (that is, those LTCH PPS cases that meet the statutory criteria to be excluded from the site neutral payment rate). LTCH discharges that do not meet the patient-level criteria for exclusion are paid the site neutral payment rate, which we are calculating as the lower of the IPPS comparable per diem amount as determined under § 412.529(d)(4), including any applicable outlier payments, or 100 percent of the estimated cost of the case as determined under existing § 412.529(d)(2). In addition, when certain thresholds are met, LTCHs also receive HCO payments for both LTCH PPS standard Federal payment rate cases and site neutral payment rate cases that are paid at the IPPS comparable per diem amount.
To understand the impact of the changes to the LTCH PPS payments for LTCH PPS standard Federal payment rate cases presented in this final rule on different categories of LTCHs for FY 2019, it is necessary to estimate payments per discharge for FY 2018 using the rates, factors, and the policies established in the FY 2018 IPPS/LTCH PPS final rule and estimate payments per discharge for FY 2019 using the rates, factors, and the policies in this FY 2019 IPPS/LTCH PPS final rule (as discussed in section VII. of the preamble of this final rule and section V. of the Addendum to this final rule). As discussed elsewhere in this final rule, these estimates are based on the best available LTCH claims data and other factors, such as the application of inflation factors to estimate costs for HCO cases in each year. The resulting analyses can then be used to compare how our policies applicable to LTCH PPS standard Federal payment rate cases affect different groups of LTCHs.
For the following analysis, we group hospitals based on characteristics provided in the OSCAR data, cost report data in HCRIS, and PSF data. Hospital groups included the following:
• Location: Large urban/other urban/rural.
• Participation date.
• Ownership control.
• Census region.
• Bed size.
For purposes of this impact analysis, to estimate the per discharge payment effects of our final policies on payments for LTCH PPS standard Federal payment rate cases, we simulated FY 2018 and FY 2019 payments on a case-by-case basis using historical LTCH claims from the FY 2017 MedPAR files that met or would have met the criteria to be paid at the LTCH PPS standard Federal payment rate if the statutory patient-level criteria had been in effect at the time of discharge for all cases in the FY 2017 MedPAR files. For modeling FY 2018 LTCH PPS payments, we
The impacts that follow reflect the estimated “losses” or “gains” among the various classifications of LTCHs from FY 2018 to FY 2019 based on the final payment rates and policy changes applicable to LTCH PPS standard Federal payment rate cases presented in this final rule. Table IV illustrates the estimated aggregate impact of the change in LTCH PPS payments for LTCH PPS standard Federal payment rate cases among various classifications of LTCHs. (As discussed previously, these impacts do not include LTCH PPS site neutral payment rate cases.)
• The first column, LTCH Classification, identifies the type of LTCH.
• The second column lists the number of LTCHs of each classification type.
• The third column identifies the number of LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria.
• The fourth column shows the estimated FY 2018 payment per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria (as described previously).
• The fifth column shows the estimated FY 2019 payment per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria (as described previously).
• The sixth column shows the percentage change in estimated payments per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2018 to FY 2019 due to the annual update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this final rule).
• The seventh column shows the percentage change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019 for changes to the area wage level adjustment (that is, the wage indexes and the labor-related share), including the application of the area wage level budget neutrality factor (as discussed in section V.B. of the Addendum to this final rule).
• The eighth column shows the percentage change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 (Column 4) to FY 2019 (Column 5) for all changes.
Based on the FY 2017 LTCH cases (from 409 LTCHs) that were used for the analyses in this final rule, we have prepared the following summary of the impact (as shown in Table IV) of the LTCH PPS payment rate and policy changes for LTCH PPS standard Federal payment rate cases presented in this final rule. The impact analysis in Table IV shows that estimated payments per discharge for LTCH PPS standard Federal payment rate cases are projected to increase 1.0 percent, on average, for all LTCHs from FY 2018 to FY 2019 as a result of the payment rate and policy changes applicable to LTCH PPS standard Federal payment rate cases presented in this final rule. This estimated 1.0 percent increase in LTCH PPS payments per discharge was determined by comparing estimated FY 2019 LTCH PPS payments (using the payment rates and factors discussed in this final rule) to estimated FY 2018 LTCH PPS payments for LTCH discharges which will be LTCH PPS standard Federal payment rate cases if the dual rate LTCH PPS payment structure was or had been in effect at the time of the discharge (as described in section I.J.4. of this Appendix).
As stated previously, we are updating the LTCH PPS standard Federal payment rate for FY 2019 by 1.35 percent. For LTCHs that fail to submit quality data under the requirements of the LTCH QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point reduction is applied to the annual update to the LTCH PPS standard Federal payment rate. Consistent with § 412.523(d)(4), we also are applying an area wage level budget neutrality factor to the FY 2019 LTCH PPS standard Federal payment rate of 0.999713, based on the best available data at this time, to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) will not result in any change (increase or decrease) in estimated aggregate LTCH PPS standard Federal payment rate payments. Finally, we are making a budget neutrality adjustment of 0.990884 for the elimination of the 25-percent threshold policy (discussed in VII.E. of the preamble of this final rule). As we also explained earlier in this section, for most categories of LTCHs (as shown in Table IV, Column 6), the estimated payment increase due to the 1.35 percent annual update to the LTCH PPS standard Federal payment rate is projected to result in approximately a 1.3 percent increase in estimated payments per discharge for LTCH PPS standard Federal payment rate cases for all LTCHs from FY 2018 to FY 2019. This is because our estimate of the changes in payments due to the update to the LTCH PPS standard Federal payment rate also reflects estimated payments for SSO cases that are paid using a methodology that is not entirely affected by the update to the LTCH PPS standard Federal payment rate. Consequently, for certain hospital categories, we estimate that payments to LTCH PPS standard Federal payment rate cases may increase by less than 1.35 percent due to the annual update to the LTCH PPS standard Federal payment rate for FY 2019.
Based on the most recent available data, the vast majority of LTCHs are located in urban areas. Only approximately 5 percent of the LTCHs are identified as being located in a rural area, and approximately 3 percent of all LTCH PPS standard Federal payment rate cases are expected to be treated in these rural hospitals. The impact analysis presented in Table IV shows that the overall average percent increase in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019 for all hospitals is 1.0 percent. For rural LTCHs, estimated payments for LTCH PPS standard Federal payment rate cases are expected to increase 0.9 percent. For urban LTCHs, we estimate an increase of 1.0 percent from FY 2018 to FY 2019. Among the urban LTCHs, large urban LTCHs are projected to experience an increase of 1.1 percent in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019, and such payments for the remaining urban LTCHs are projected to increase 0.9 percent, as shown in Table IV.
LTCHs are grouped by participation date into four categories: (1) Before October 1983; (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) October 2002 and after. Based on the most recent available data, the categories of LTCHs with the largest expected percentage of LTCH PPS standard Federal payment rate cases (approximately 43 percent) are in LTCHs that began participating in the Medicare program after October 2002, and they are projected to experience a 1.0 percent increase in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019, as shown in Table IV.
Approximately 3 percent of LTCHs began participating in the Medicare program before October 1983, and these LTCHs are projected to experience an average percent increase of 0.4 percent in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019. Approximately 10 percent of LTCHs began participating in the Medicare program between October 1983 and September 1993, and these LTCHs are projected to experience an increase of 1.5 percent in estimated payments for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019. LTCHs that began participating in the Medicare program between October 1993 and October 1, 2002, which treat approximately 42 percent of all LTCH PPS standard Federal payment rate cases, are projected to experience a 0.9 percent increase in estimated payments from FY 2018 to FY 2019.
LTCHs are grouped into four categories based on ownership control type: Voluntary, proprietary, government and unknown.
Estimated payments per discharge for LTCH PPS standard Federal payment rate cases for FY 2019 are projected to increase across all census regions. LTCHs located in the Pacific are projected to experience the largest increase at 1.9 percent. The New England and Mountain regions are projected to experience the smallest increase of 0.3 and 0.4 percent, respectively. These regional variations are largely due to updates in the wage index.
LTCHs are grouped into six categories based on bed size: 0-24 Beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater than 200 beds. We project that LTCHs with 0-24 beds will experience the smallest increase in payments for LTCH PPS standard Federal payment rate cases of 0.6 percent. We expect LTCHs with 200 or more beds to experience the largest increase at 1.5 percent.
As stated previously, we project that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments to LTCH PPS standard Federal payment rate cases in FY 2019 relative to FY 2018 of approximately $35 million (or approximately 1.0 percent) for the 409 LTCHs in our database. Although, as stated previously, the hospital-level impacts do not include LTCH PPS site neutral payment rate cases, we estimate that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments to site neutral payment rate cases in FY 2019 relative to FY 2018 of approximately $4 million (or approximately 0.4 percent) for the 409 LTCHs in our database. Therefore, we project that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments for all LTCH cases in FY 2019 relative to FY 2018 of approximately $39 million (or approximately 0.9 percent) for the 409 LTCHs in our database.
Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries as a result of this final rule, but we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. As discussed above, we do not expect the continued implementation of the site neutral payment system to have a negative impact access to or quality of care, as demonstrated in areas where there is little or no LTCH presence, general short-term acute care hospitals are effectively providing treatment for the same types of patients that are treated in LTCHs.
In section VIII.A. of the preambles of the proposed rule (83 FR 20470 through 20500) and this final rule, we discuss our current and proposed requirements for hospitals to report quality data under the Hospital IQR Program in order to receive the full annual percentage increase for the FY 2021 payment determination.
In this final rule, we are finalizing our policies to: (1) Extend eCQM reporting requirements to the CY 2019 reporting period/FY 2021 payment determination; (2) require the 2015 Edition of CEHRT for eCQMs begiVIIInning with the CY 2019 reporting period/FY 2021 payment determination; (3) remove 17 claims-based measures beginning with the CY 2018 reporting period/FY 2020 payment determination; (4) remove two structural measures beginning with the CY 2018 reporting period/FY 2020 payment determination; (5) remove two claims-based measures beginning with the CY 2019 reporting period/FY 2021 payment determination; (6) remove three chart-abstracted measures beginning with the CY 2019 reporting period/FY 2021 payment determination; (7) remove one claims-based measure beginning with the CY 2020 reporting period/FY 2022 payment determination; (8) remove six chart-abstracted measures beginning with the CY 2020 reporting period/FY 2022 payment determination; (9) remove seven eCQMs beginning with CY 2020 reporting period/FY 2022 payment determination; (10) remove one claims-based measure beginning with the CY 2021 reporting period/FY 2023 payment determination; and (11) adopt a new measure removal factor.
We do not believe our finalized proposal to adopt a new measure removal factor will directly affect burden. However, as further explained in section XIV.B.3. of the preamble of this final rule, we believe that there will be an overall decrease in the estimated information collection burden for hospitals due to the other proposed policies. We refer readers to section XIV.B.3. of the preamble of this final rule for a summary of our information collection burden estimate calculations. The effects of these proposals are discussed in more detail below.
In the FY 2018 IPPS/LTCH PPS final rule, we finalized policies to require hospitals to submit one, self-selected calendar quarter of data for four eCQMs in the Hospital IQR Program measure set for the CY 2018 reporting period/FY 2020 payment determination (82 FR 38355 through 38361). In section VIII.A.11.d.(2) of the preamble of this final rule, we are finalizing our proposal to extend those reporting requirements for the CY 2019 reporting period/FY 2021 payment determination, such that hospitals will be required to submit one, self-selected calendar quarter of data for four eCQMs in the Hospital IQR Program measure set. Therefore, we believe our burden estimate of 40 minutes per hospital per year (10 minutes per record × 4 eCQMs × 1 quarter) associated with eCQM reporting requirements finalized for the CY 2018 reporting period/FY 2020 payment determination will also apply to the CY 2019 reporting period/FY 2021 payment determination.
In section VIII.A.11.d.(3) of the preamble of this final rule, we discuss our finalized proposal to require use of EHR technology certified to the 2015 Edition beginning with the CY 2019 reporting period/FY 2021 payment determination, which aligns with previously established requirements in the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs). As described in section XIV.B.3.g. of the preamble of this final rule, we expect this finalized proposal to have no impact on information collection burden for the Hospital IQR Program because this policy does not require hospitals to submit new data to CMS.
With respect to any costs unrelated to data submission, although this finalized proposal will require some investment in systems updates, the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs) previously finalized a requirement that hospitals use the 2015 Edition of CEHRT beginning with the CY 2019 reporting period/FY 2021 payment determination (80 FR 62761 through 62955). Because all hospitals participating in the Hospital IQR Program are subsection (d) hospitals that also participate in the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs), we do not anticipate any additional costs as a result of this finalized proposal.
In section VIII.A.5.b.(8) of the preamble of this final rule, beginning with the CY 2019 reporting period/FY 2021 payment determination, we are finalizing our proposals to remove three chart-abstracted clinical process of care measures (ED-1, IMM-2, and VTE-6). In sections VIII.A.5.b.(2)(b)
As described in detail in section XIV.B.3. of the preamble of this final rule, we expect our finalized proposals to remove the clinical process of care chart-abstracted measures will reduce the information collection burden by 1,046,071 hours and approximately $38.3 million for the CY 2019 reporting period/FY 2021 payment determination, and an additional 858,000 hours and approximately $31.3 million for the CY 2020 reporting period/FY 2022 payment determination for the Hospital IQR Program. We note that the burden of data collection for the NHSN HAI measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) is accounted for under the Centers for Disease Control and Prevention (CDC) National Health and Safety Network (NHSN) OMB control number 0920-0666. Because burden associated with submitting data for the NHSN HAI measures is captured under a separate OMB control number, we do not provide an independent estimate of the information collection burden associated with these measures for the Hospital IQR Program.
The data validation activities, however, are conducted by CMS. Since the measures were adopted into the Hospital IQR Program, CMS has validated the data for purposes of the Program. Therefore, this burden has been captured under the Hospital IQR Program's OMB control number 0938-1022. While we did not propose any changes directly to the validation process related to chart-abstracted measures, based on our finalized proposals to remove five NHSN HAI and four clinical process of care chart-abstracted measures (in sections VIII.A.5.b.(2)(b) and VIII.A.5.b.(8) of the preamble of this final rule), we believe that hospitals will experience an overall reduction in burden associated with validation of chart-abstracted measures beginning with the FY 2023 payment determination because hospitals selected for validation are currently required to submit validation templates for the NHSN HAI measures for the Hospital IQR Program. In addition, based on our finalized proposals to remove the NHSN HAI measures, the information collection burden associated with submission of these validation templates will be eliminated from the Hospital IQR Program. As described in detail in section XIV.B.3.b.(3) of the preamble of this final rule, we estimate a total decrease of 43,200 hours and approximately $1.6 million as a result of discontinuing submission of NHSN HAI validation templates under the Hospital IQR Program. The finalized removal of NHSN HAI measures from the Hospital IQR Program, the subsequent cessation of validation processes for the NHSN HAI measures, the retention of these measures in the HAC Reduction Program, and the finalized implementation of a validation process for these measures under the HAC Reduction Program, represent no net change in information collection burden for the NHSN HAI measures across CMS hospital quality programs. Therefore, we do not anticipate any change under the CDC NHSN's OMB control number 0920-0666 due to our finalized proposals.
Furthermore, we anticipate that the costs to hospitals participating in the Hospital IQR Program, beyond that associated with information collection, will be reduced because hospitals will no longer need to review feedback reports for the NHSN HAI measures with slightly different measure rates for the same measures (under the Hospital IQR Program, a rolling four quarters of data are used to update the
In section VIII.A.5.a. and VII.A.5.b.(1) of the preamble of this final rule, we are finalizing our proposals to remove two structural measures, Hospital Survey on Patient Safety Culture and Safe Surgery Checklist, beginning with the CY 2018 reporting period/FY 2020 payment determination. We believe these finalized proposals will result in a minimal information collection burden reduction, which is addressed in section XIV.B.3. of the preamble of this final rule. In addition, we refer readers to VIII.A.4.b. of the preamble of this final rule, where we acknowledge that costs are multi-faceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining Program requirements. We believe it may be unnecessarily costly and/or of limited benefit to retain or maintain a measure which our analyses show no longer meaningfully supports program objectives (for example, informing beneficiary choice or payment scoring). As discussed in sections VIII.A.5.a. and VIII.A.5.b.(1) of the preamble of this final rule, we believe these measures are of limited utility for internal hospital quality improvement efforts because they do not provide individual patient level data or any information on patient outcomes. In addition, our analyses show that use of patient safety culture surveys and safe surgery checklists is widely in practice among hospitals. Therefore, we do not believe that these measures support the program objectives of facilitating internal hospital quality improvement efforts or informing beneficiary choice.
In sections VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the preamble of this final rule, we are finalizing our proposals to remove 17 claims-based measures PSI-90 (NQF #0531), READM-30-AMI (NQF #0505), READM-30-CABG (NQF #2515), READM-30-COPD (NQF #1891), READM-30-HF (NQF #0330), READM-30-PN (NQF #0506), READM-30-THA/TKA (NQF #1551), READM-30-STK, MORT-30-AMI (NQF #0230), MORT-30-HF (NQF #0229), MSPB (NQF #2158), Cellulitis Payment, GI Payment, Kidney/UTI Payment, AA Payment, Chole and CDE Payment, and SFusion Payment) beginning with the CY 2018 reporting period/CY 2020 payment determination. In addition, in section VIII.A.5.b.(4) of the preamble of this final rule, we are finalizing our proposals to remove two claims-based measures (MORT-30-COPD (NQF #1893) and MORT-30-PN (NQF #0468)) beginning with the CY 2019 reporting period/FY 2021 payment determination. Furthermore, in sections VIII.A.5.b.(4) and VIII.A.5.b.(5), respectively, of the preamble of this final rule, we are finalizing our proposals to remove one-claims based measure (MORT-30-CABG (NQF #2558)) beginning with the CY 2020 reporting period/FY 2022 payment determination and one claims-based measure (Hip/Knee Complications (NQF #1550)) beginning with the CY 2021 reporting period/FY 2023 payment determination.
These claims-based measures are calculated using only data already reported to the Medicare program for payment purposes, therefore, we do not believe removing these measures will impact the information collection burden on hospitals. Nonetheless, we anticipate that hospitals will experience a general cost reduction associated with these proposals stemming from no longer having to review and track various program requirements or measure information in multiple confidential feedback and preview reports from multiple programs that reflect multiple measure rates due to varying scoring methodologies and reporting periods.
In section VIII.A.5.b.(9) of the preamble of this final rule, we are finalizing our proposals to remove seven eCQMs from the Hospital IQR Program eCQM measure set beginning with the CY 2020 reporting period/FY 2022 payment determination. As described in section XIV.B.3. of this final rule, we do not anticipate that removal of these seven eCQMs will affect the information collection burden for hospitals. However, as discussed in section VIII.A.4.b. of the preamble of this final rule, we believe costs are multifaceted and include not only the burden associated with reporting, but also the costs associated with implementing and maintaining Program requirements, such as maintaining measure specifications in hospitals' EHR systems for all of the eCQMs available for use in the Hospital IQR Program. We further discuss costs unrelated to information collection associated with eCQM removal in section VIII.A.5.b.(9) of the preamble of this final rule.
In summary, we estimate: (1) A total information collection burden reduction of 1,046,138 hours (−1,046,071 hours due to the finalized removal of ED-1, IMM-2, and VTE-6 measures for the CY 2019 reporting period/FY 2021 payment determination and −67 hours for no longer collecting data for the voluntary Hybrid HWR measure
Historically, 100 hospitals, on average, that participate in the Hospital IQR Program do not receive the full annual percentage increase in any fiscal year due to the failure to meet all requirements of this Program. We anticipate that the number of hospitals not receiving the full annual percentage increase will be approximately the same as in past years or slightly decrease. We believe that reducing the number of chart-abstracted measures used in the Hospital IQR Program will, at least in part, help increase hospitals' chances to meet all Program requirements and receive their full annual percentage increase.
We refer readers to section XIV.B.3. of the preamble of this final rule (information collection requirements) for a detailed discussion of the burden of the requirements for submitting data to the Hospital IQR Program.
In section VIII.B. of the preambles of the proposed rule (83 FR 20500 through 20510) and this final rule, we discuss our proposed and finalized policies for the quality data reporting program for PPS-exempt cancer hospitals (PCHs), which we refer to as the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program. The PCHQR Program is authorized under section 1866(k) of the Act, which was added by section 3005 of the Affordable Care Act. There is no financial impact to PCH Medicare reimbursement if a PCH does not submit data.
In section VIII.B.3.b. of the preamble of this final rule, we are finalizing our proposals to remove four web-based, structural measures: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389) beginning with the FY 2021 program year. As discussed in section VIII.B.3.b.(2) of the preamble of this final rule, we are deferring finalization of our policies regarding future use of the Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138) and Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) in the PCHQR Program to a future 2018 final rule, most likely in the CY 2019 OPPS/ASC final rule targeted for release no later than November 2018. We will therefore address any change in burden associated with this policy decision, most likely, in the CY 2019 OPPS/ASC final rule. In addition, in section VIII.B.4. of the preamble of this final rule, we are finalizing our proposal to adopt one claims-based measure for the FY 2021 program year and subsequent years: 30-Day Unplanned Readmissions for Cancer Patients measure (NQF #3188). Based on the finalized measure removals and addition, the PCHQR Program measure set will consist of 13 measures for the FY 2021 program. Further, in section XIV.B.4.b. of the preamble of this final rule, we are finalizing our proposal to adopt a new time burden estimate, to be applied to structural and web-based tool measures for the FY 2021 program year and subsequent years. Specifically, we are finalizing our proposal to adopt the estimate of 15 minutes per measure, per PCH, for reporting these types of measures, which is the time estimate utilized by the Hospital IQR Program (80 FR 49762).
As explained in section XIV.B.4.c. of the preamble of this final rule, we anticipate that these finalized new requirements will reduce the overall burden on participating PCHs. Because we are finalizing our proposal to apply 15 minutes per measure as a burden estimate for structural measures and web-based tool measures and our proposal to remove the following web-based structural measures: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and Radiation—Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF #0389)), we estimate a reduction of 1 hour (or 60 minutes) per PCH (15 minutes per measure × 4 measures = 60 minutes), and a total annual reduction of approximately 11 hours for all 11 PCHs (60 minutes × 11 PCHs/60 minutes per hour), as a result of the finalized removal of these four measures.
As discussed in section VIII.B.3.b.(2) of the preamble of this final rule, we are deferring finalization of our policies regarding future use of the Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138) and Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) in the PCHQR Program to a future 2018 final rule, most likely in the CY 2019 OPPS/ASC final rule targeted for release no later than November 2018. We will therefore address any change in burden associated with this policy decision, most likely, in the CY 2019 OPPS/ASC final rule.
We do not anticipate any change in burden on the PCHs associated with our finalized proposal to adopt a claims-based measure into the PCHQR Program beginning with the FY 2021 program year. This measure is claims-based and does not require facilities to report any additional data beyond that already submitted on Medicare administrative claims for payment purposes. Therefore, we do not believe that there is any associated change in burden resulting from the finalization of this proposal.
In summary, because we are finalizing our proposals to remove 4 web-based, structural measures, we estimate a total burden reduction of 11 hours of burden per year for all 11 PCHs beginning with the FY 2021 program year.
Under the LTCH QRP, the Secretary reduces by 2 percentage points the annual
We believe that the burden and costs associated with the LTCH QRP is the time and effort associated with complying with the requirements of the LTCH QRP. We intend to closely monitor the effects of this quality reporting program on LTCHs and to help facilitate successful reporting outcomes through ongoing stakeholder education, national trainings, and help desks.
We refer readers to section XIV.B.6. of the preamble of this final rule for details discussing information collection requirements for the LTCH QRP.
In section VIII.D. of the preambles of the proposed rule (83 FR 20515 through 20544) and this final rule, we discuss and finalize our proposals with a few modifications regarding a new performance-based scoring methodology and changes to the Stage 3 objectives and measures for eligible hospitals and CAHs that attest to CMS under the Medicare Promoting Interoperability Program. We are finalizing the new measure Query of PDMP and the Support Electronic Referral Loops by Receiving and Incorporating Health Information. We are finalizing the removal of the Coordination of Care Through Patient Engagement objective and its associated measures Secure Messaging, View, Download or Transmit, and Patient Generated Health Data as well as the measures Request/Accept Summary of Care, Clinical Information Reconciliation and Patient-Specific Education. We are renaming measures within the Health Information Exchange objective. These changes include changing the name from Send a Summary of Care, to Support Electronic Referral Loops by Sending Health Information; renaming the Public Health and Clinical Data Registry Reporting objective to Public Health and Clinical Data Exchange with the requirement to report on any two measures options; renaming the name the Patient Electronic Access to Health Information objective to Provider to Patient Exchange objective, and renaming the remaining measure, Provide Patient Access measure to Provide Patients Electronic Access to Their Health Information measure. We also are finalizing an any minimum 90-day EHR reporting period in CYs 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency; the CQM reporting period and criteria for CY 2019; and our proposal to codify the policies for subsection (d) Puerto Rico hospitals to participate in the Medicare Promoting Interoperability Program for eligible hospitals, including policies previously implemented through program instruction.
We believe that, overall, these finalized proposals will reduce burden. We refer readers to section XIV.B.9. of the preamble of this final rule for additional discussion on the information collection effects associated with these finalized proposals.
In section VIII.D.12.a. of the preamble of this final rule, we are finalizing our proposal to amend 42 CFR 495.324(b)(2) and 495.324(b)(3) to align with current prior approval policy for MMIS and ADP systems at 45 CFR 95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and to minimize burden on States. Specifically, we finalizing our proposals that the prior approval dollar threshold in § 495.324(b)(3) will be increased to $500,000, and that a prior approval threshold of $500,000 will be added to § 495.324(b)(2). In addition, in light of these finalized changes, we are finalizing our proposal to make a conforming amendment to the threshold in § 495.324(d) for prior approval of justifications for sole source acquisitions to be the same $500,000 threshold. That threshold is currently aligned with the $100,000 threshold in current 495.324(b)(3). Amending § 495.324(d) to preserve alignment with § 495.324(b)(3) maintains the consistency of our prior approval requirements. We believe that these finalized proposals also will reduce burden on States by raising the prior approval thresholds and generally aligning them with the thresholds for prior approval of MMIS and ADP acquisitions costs.
In section VIII.D.12.b. of the preamble of this final rule, we are finalizing our proposal to amend 42 CFR 495.322 to provide that the 90 percent FFP for Medicaid Promoting Interoperability Program administration will no longer be available for most State expenditures incurred after September 30, 2022. We are finalizing a later sunset date, September 30, 2023, for the availability of 90 percent enhanced match for State administrative costs related to Medicaid Promoting Interoperability Program audit and appeals activities, as well as costs related to administering incentive payment disbursements and recoupments that might result from those activities. States will not be able to claim any Medicaid Promoting Interoperability Program administrative match for expenditures incurred after September 30, 2023. We do not believe that these finalized proposals will impose any additional burdens on States. We refer readers to section XIV.B.9. of the preamble of this final rule for additional discussion on the information collection effects associated with these proposals.
This final rule contains a range of policies. It also provides descriptions of the statutory provisions that are addressed, identifies the proposed policies, and presents rationales for our decisions and, where relevant, alternatives that were considered.
For example, as discussed in section II.F.2.d. of the preamble of this final rule, section II.H.5.a. of the preamble of this final rule, and section II.A.4.g. of the Addendum to this final rule, we considered the comments regarding the creation of a new MS-DRG for the assignment of procedures involving the utilization of CAR T-cell therapy drugs and cases representing patients who receive treatment involving CAR T-cell therapy as an alternative to our proposed MS-DRG assignment to MS-DRG 016 for FY 2019, and we considered comments to allow hospitals to utilize an alternative CCR specific to procedures involving CAR T-cell therapy drugs for purposes of outlier payments, new technology add-on payments, and payments to IPPS excluded cancer hospitals.
As discussed in section II.A.4.g. of the Addendum to the proposed rule, the impact of an alternative CCR specific to procedures involving CAR T-cell therapy drugs is dependent on the relationship between the CCR that would otherwise be used and the alternative CCR used. For illustrative purposes, in the proposed rule, we discussed an example where if a hospital charged $400,000 for a procedure involving the utilization of the CAR T-cell therapy drug described by ICD-10-PCS code XW033C3, the application of a hypothetical CCR of 0.25 results in a cost of $100,000 (= $400,000 * 0.25), while the application of a hypothetical CCR of 1.00 results in a cost of $400,000 (= $400,000 * 1.0).
The impact of the creation of a separate MS-DRG for procedures involving the utilization of CAR T-cell therapy drugs and cases representing patients receiving treatment involving CAR T-cell therapy is dependent on the relative weighting factor determined for the separate MS-DRG. In the proposed rule, we invited public comments on the most appropriate approach for determining the relative weighting factor under this alternative, such as an approach based on taking into account an appropriate portion of the average sales price (ASP) for these drugs, or other approaches.
Comments also suggested other alternative changes under the IPPS for FY 2019, including, but not limited to, the creation of a pass-through payment, and structural changes in new technology add-on payments for the drug therapy. The impacts of these would depend on the basis for the pass-through payment amount (for example, cost or average sales price) or on the revised methodology for the new technology add-on payment (for example, a revision to the percentage of cost paid.)
As described more fully in section II.F.2.d. of the preamble of this final rule, given the potential for a new CMMI model and our request for feedback on this approach, we believe it would be premature to adopt changes to our existing payment mechanisms, either under the IPPS or for IPPS-excluded cancer hospitals, specifically for CAR T-cell therapy. Therefore, we did not adopt the alternatives discussed above that we considered for CAR T-cell therapy for FY 2019, including, but not limited to, the creation of a pass-through payment; structural changes in new technology add-on payments for the drug therapy; changes in the usual cost-to-charge ratios (CCRs) used in ratesetting and payment, including those used in determining new technology add-on payments, outlier payments, and payments to IPPS excluded cancer hospitals; and the creation of a new MS-DRG specifically for CAR T-cell therapy.
As discussed in section VIII.A.5.b.(9) of the preamble of this final rule, in the context of
As discussed in section IV.I.4.b. of the preamble of the proposed rule, in the context of scoring hospitals for purposes of the Hospital VBP Program for the FY 2021 program year and subsequent years, we analyzed two domain weighting options based on our proposals to remove 10 measures and the Safety domain from the Hospital VBP Program. As an alternative to our proposal to weight the three remaining domains as Clinical Outcomes domain (proposed name change)—50 percent; Person and Community Engagement domain—25 percent; and Efficiency and Cost Reduction domain—25 percent, we considered weighting each of the three remaining domains equally, meaning each of the three domains would be weighted as one-third of a hospital's Total Performance Score (TPS), beginning with the FY 2021 program year. As discussed in section IV.I.4.b. of the preamble of the proposed rule, we also considered keeping the current domain weighting (25 percent for each of the four domains—Safety, Clinical Outcomes (proposed name change), Person and Community Engagement, and Efficiency and Cost Reduction—with proportionate reweighting if a hospital has sufficient data on only three domains), which would require keeping at least one or more of the measures in the Safety domain and the Safety domain itself. As discussed in sections IV.I.4.a.(2) and IV.I.4.b. of the preamble of this final rule, we are not finalizing our proposal to remove the Safety domain and are keeping the current domain weighting described above, as previously finalized.
As summarized in section IV.I.4.b. of the preambles of the proposed rule and this final rule, to understand the potential impacts of the proposed domain weighting on hospitals' TPSs, we conducted analyses using FY 2018 program data that estimated the potential impacts of our proposed domain weighting policy to increase the weight of the Clinical Outcomes domain from 25 percent to 50 percent of a hospital's TPS and an alternative weighting policy we considered of equal weights whereby each domain would constitute one-third (
The table below provides a summary of the estimated impacts
We also refer readers to section I.H.6.b. of Appendix A to the proposed rule (83 FR 20620 through 20621) for a detailed discussion regarding the estimated impacts of the proposed domain weighting and equal weighting alternative on hospital percentage payment adjustments. Because the alternatives considered did not impact the collection of information for hospitals, we did not expect these alternatives to affect the reporting burden on hospitals. We considered these alternatives and sought public comment on them.
As discussed in section IV.J.5. of the preamble of this final rule, in the context of scoring hospitals for the purposes of the HAC Reduction Program, we analyzed two alternative scoring options to the current methodology for the FY 2020 program year and subsequent years. The alternative scoring methodologies considered were an Equal Measure Weights methodology, which would remove the domains and assign equal weight to each measure for which a hospital has a score, and a Variable Domain Weighting methodology, which would vary the weighting of Domain 1 and 2 based on the number of measures in each domain. We considered these alternative approaches to allow the HAC Reduction Program to continue to fairly assess all hospitals' performance under the Program.
We simulated results under each scoring approach using FY 2019 HAC Reduction Program data.
As shown in the table above, the Equal Measure Weights approach generally has a larger impact than the Variable Domain Weights approach. Under the Equal Measure Weights approach, as compared to the current methodology using FY 2019 HAC
To understand the potential impacts of these alternatives on hospitals' Total HAC Reduction Program Penalty Amount, we conducted an analysis that estimated the potential impacts of these alternatives using FY 2017 payment data annualized by a factor to estimate in FY 2019 payment dollars. Based on this analysis, we expect that aggregate penalty amounts would slightly increase under both alternative methodologies proposed in the proposed rule. We also expect an increase in the penalty amount under both methodologies because some larger hospitals may move into the worst-performing quartile and smaller hospitals may move out of the worst-performing quartile. Because the 1-percent penalty applies uniformly to hospitals in the worst-performing quartile, we anticipate that overall program penalties would rise slightly if larger hospitals move into the penalty quartile. The alternative weighting approach considered, variable weighting, would have increased estimated total penalties by approximately $11,125,845. The finalized weighting approach will increase estimated total penalties by $20,159,043, over $9 million more than the alternative weighting approach considered. The table below displays the results of our analysis in FY 2019 dollars and as a percentage difference.
In the proposed rule, after consideration of the current policy, Equal Measure Weights and Variable Domain Weighting methodologies, we sought public comment on these approaches. In this final rule, after consideration of the public comments we received, we are adopting the Equal Measure Weights methodology. However, because the alternatives considered do not impact the collection of information for hospitals, we did not expect either of these alternatives to affect the reporting burden on hospitals associated with the HAC Reduction Program. Therefore, we believe that the finalized policy will not affect burden.
Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs, was issued on January 30, 2017. This final rule, is considered an E.O. 13771 deregulatory action. We estimate that this rule generates $72 million in annualized cost savings, discounted at 7 percent relative to fiscal year 2016, over a perpetual time horizon. We discuss the estimated burden and cost reductions for the Hospital IQR Program in section XIV.B.3. of the preamble of this final rule, and estimate that the impact of these changes is a reduction in costs of approximately $21,585 per hospital annually or approximately $71,233,624 for all hospitals annually. We note that in section VIII.A.5.c.(1). of the preamble of this final rule, we are finalizing our proposal to remove the hospital-acquired infection (HAI) measures from the Hospital IQR Program and, therefore, discontinue validation of these measures under the Hospital IQR Program. However, these measures will remain in the HAC Reduction Program and, therefore, we are finalizing our proposal to begin validation of these measures under the HAC Reduction Program using the same processes and information collection requirements previously used under the Hospital IQR Program. As a result, the net costs reflected in the table below for the HAC Reduction Program do not constitute a new information collection requirement on participating hospitals, but a transition of the HAI measure validation process from one program to another based on our efforts to reduce measure duplication across programs. We discuss the estimated burden and cost impacts for the finalized transition of HAI data validation from the Hospital IQR Program to the HAC Reduction Program in section XIV.B.7. of the preamble of this final rule. We discuss the estimated burden and cost reductions for the PCHQR Program in section XIV.B.4. of the preamble of this final rule, and estimate that the impact of these proposed changes is a reduction in costs of approximately $92,145 per PCH annually or approximately $1,013,595 for all participating PCHs annually. We discuss the estimated burden and cost reductions for the proposed LTCH QRP measure removals in section XIV.B.6. of the preamble of this final rule, and estimate that the impact of these proposed changes is a reduction in costs of approximately $1,148 per LTCH annually or approximately $482,469 for all LTCHs annually. Also, as noted in section I.R. of this Appendix, the regulatory review cost for this final rule is $8,809,182.
Acute care hospitals are estimated to experience an increase of approximately $4.8 billion in FY 2019, taking into account operating, capital, new technology, and low volume hospital payments as modeled for this final rule. Approximately $4.4 billion of this estimated increase is due to the changes in operating payments, including $1.5 billion in uncompensated care payments (discussed in sections I.G. and I.H. of this Appendix), approximately $0.2 billion is due to the change in capital payments (discussed in section I.I of this Appendix), approximately $0.2 billion is due to the change in new technology add-on payments (discussed in section I.H of this Appendix), and approximately $0.1 billion is due to the change in low-volume hospital payments (discussed in section I.H of this Appendix). Total differs from the sum of the components due to rounding.
Table I of section I.G. of this Appendix also demonstrates the estimated redistributional impacts of the IPPS budget neutrality requirements for the MS-DRG and wage index changes, and for the wage index reclassifications under the MGCRB.
We estimate that hospitals will experience a 2.3 percent increase in capital payments per case, as shown in Table III of section I.I. of this Appendix. We project that there will be a $193 million increase in capital payments in FY 2019 compared to FY 2018.
The discussions presented in the previous pages, in combination with the remainder of this final rule, constitute a regulatory impact analysis.
Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2019. In the impact analysis, we are using the rates, factors, and policies presented in this final rule based on the best available claims and CCR data to estimate the change in payments under the LTCH PPS for FY 2019. Accordingly, based on the best available data for the 417 LTCHs in our database, we estimate that overall FY 2019 LTCH PPS payments will increase approximately $39 million relative to FY 2018 as a result of the payment rates and factors presented in this final rule.
If regulations impose administrative costs on private entities, such as the time needed to read and interpret a rule, we should estimate the cost associated with regulatory review. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), due to the uncertainty involved with accurately quantifying the number of entities that would review the proposed rule, we assumed that the total number of timely pieces of correspondence on last year's proposed rule would be the number of reviewers of the proposed rule. We acknowledged that this assumption may understate or overstate the costs of reviewing the rule. It is possible that not all commenters reviewed last year's rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For those reasons, and consistent with our approach in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585), we believe that the number of past commenters would be a fair estimate of the number of reviewers of the proposed rule. We welcomed any public comments on the approach in estimating the number of entities that will review this final rule. We did not receive any public comments specific to our solicitation.
We also recognized that different types of entities are in many cases affected by mutually exclusive sections of the proposed rule. Therefore, for the purposes of our estimate, and consistent with our approach in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585), we assumed that each reviewer read approximately 50 percent of the proposed rule. We welcomed public comments on this assumption. We did not receive any public comments specific to our solicitation.
We have used the number of timely pieces of correspondence on the FY 2019 proposed rule as our estimate for the number of reviewers of this final rule. We continue to acknowledge the uncertainty involved with using this number, but we believe it is a fair estimate due to the variety of entities affected and the likelihood that some of them choose to rely (in full or in part) on press releases, newsletters, fact sheets, or other sources rather than the comprehensive review of preamble and regulatory text. Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing the proposed rule is $105.16 per hour, including overhead and fringe benefits (
As required by OMB Circular A-4 (available at
As shown below in Table V., the net costs to the Federal Government associated with the policies in this final rule are estimated at $4.8 billion.
As discussed in section I.J. of this Appendix, the impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS is projected to result in an increase in estimated aggregate LTCH PPS payments in FY 2019 relative to FY 2018 of approximately $39 million based on the data for 417 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A-4 (available at
As shown in Table VI. below, the net cost to the Federal Government associated with the policies for LTCHs in this final rule are estimated at $39 million.
The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the SBA definition of a small business (having revenues of less than $7.5 million to $38.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 36 of the Table of Small Business Size Standards for NAIC 622 found on the SBA website at:
For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this final rule relating to acute care hospitals will have a significant impact on small entities as explained in this Appendix. For example, because all hospitals are considered to be small entities for purposes of the RFA, the hospital impacts described in this final rule are impacts on small entities. For example, we refer readers to “Table I.—Impact Analysis of Changes to the IPPS for Operating Costs for FY 2019.” Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section I.J. of this Appendix. MACs are not considered to be small entities because they do not meet the SBA definition of a small business. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule constitutes our regulatory flexibility analysis. This final rule contains a range of policies. It provides descriptions of the statutory provisions that are addressed, identifies the finalized policies, and presents rationales for our decisions and, where relevant, alternatives that were considered.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), we solicited public comments on our estimates and analysis of the impact of our proposals on those small entities. Any public comments that we received and our responses are presented throughout this final rule.
Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the policy changes under the IPPS for operating costs.)
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold level is approximately $146 million. This final rule would not mandate any requirements for State, local, or tribal governments, nor would it affect private sector costs.
Executive Order 13175 directs agencies to consult with Tribal officials prior to the formal promulgation of regulations having tribal implications. This final rule contains provisions applicable to hospitals and facilities operated by the Indian Health Service or Tribes or Tribal organizations under the Indian Self-Determination and Education Assistance Act and, thus, has tribal implications. Therefore, in accordance with Executive Order 13175 and the CMS Tribal Consultation Policy (December 2015), CMS has consulted with Tribal officials on these Indian-specific provisions of the proposed rule prior to the formal promulgation of this rule.
In accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget reviewed this final rule.
The table below provides a summary of the estimated impacts on average TPSs and payment adjustments for all hospitals,
We also refer readers to section I.H.6.b. of Appendix A to the proposed rule (83 FR 20620 through 20621) for a detailed discussion regarding the estimated impacts of the proposed domain weighting and equal weighting alternative on hospital percentage payment adjustments. Because the alternatives considered did not impact the collection of information for hospitals, we did not expect these alternatives to affect the reporting burden on hospitals. We considered these alternatives and sought public comment on them.
As discussed in section IV.J.5. of the preamble of this final rule, in the context of scoring hospitals for the purposes of the HAC Reduction Program, we analyzed two alternative scoring options to the current methodology for the FY 2020 program year and subsequent years. The alternative scoring methodologies considered were an Equal Measure Weights methodology, which would remove the domains and assign equal weight to each measure for which a hospital has a score, and a Variable Domain Weighting methodology, which would vary the weighting of Domain 1 and 2 based on the number of measures in each domain. We considered these alternative approaches to allow the HAC Reduction Program to continue to fairly assess all hospitals' performance under the Program.
We simulated results under each scoring approach using FY 2019 HAC Reduction Program data.
As shown in the table above, the Equal Measure Weights approach generally has a larger impact than the Variable Domain Weights approach. Under the Equal Measure Weights approach, as compared to the current methodology using FY 2019 HAC Reduction Program data, the percentage of hospitals in the worst-performing quartile decreases by 1.7 percent for small hospitals (that is, fewer than 100 beds), 4.1 percent for hospitals with one Domain 2 measure, 3.8 percent for hospitals with two Domain 2 measures, while it increases by 2.5 percent for large urban hospitals (that is, 400 or more beds) and 3.6 percent for large teaching hospitals (that is, 100 or more residents). The Variable Domain Weights approach decreases the percentage of hospitals in the worst-performing quartile by 1.0 percent for small hospitals, 2.9 percent for hospitals with one Domain 2 measure, and 3.3 for hospitals with two Domain 2 measures, while it increases the percentage of hospitals in the worst-performing quartile by 0.8 percent for large urban hospitals and 1.6 percent for large teaching hospitals.
To understand the potential impacts of these alternatives on hospitals' Total HAC Reduction Program Penalty Amount, we conducted an analysis that estimated the potential impacts of these alternatives using FY 2017 payment data annualized by a factor to estimate in FY 2019 payment dollars. Based on this analysis, we expect that aggregate penalty amounts would slightly increase under both alternative methodologies proposed in the proposed rule. We also expect an increase in the penalty amount under both methodologies because some larger hospitals may move into the worst-performing quartile and smaller hospitals may move out of the worst-performing quartile. Because the 1-percent penalty applies uniformly to hospitals in the worst-performing quartile, we anticipate that overall program penalties would rise slightly if larger hospitals move into the penalty quartile. The alternative weighting approach considered, variable weighting, would have increased estimated total penalties by approximately $11,125,845. The finalized weighting approach will increase estimated total penalties by $20,159,043, over $9 million more than the alternative weighting approach considered. The table below displays the results of our analysis in FY 2019 dollars and as a percentage difference.
In the proposed rule, after consideration of the current policy, Equal Measure Weights and Variable Domain Weighting methodologies, we sought public comment on these approaches. In this final rule, after consideration of the public comments we received, we are adopting the Equal Measure Weights methodology. However, because the alternatives considered do not impact the collection of information for hospitals, we did not expect either of these alternatives to affect the reporting burden on hospitals associated with the HAC Reduction Program. Therefore, we believe that the finalized policy will not affect burden.
Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs, was issued on January 30, 2017. This final rule, is considered an E.O. 13771 deregulatory action. We estimate that this rule generates $72 million in annualized cost savings, discounted at 7 percent relative to fiscal year 2016, over a perpetual time horizon. We discuss the estimated burden and cost reductions for the Hospital IQR Program in section XIV.B.3. of the preamble of this final rule, and estimate that the impact of these changes is a reduction in costs of approximately $21,585 per hospital annually or approximately $71,233,624 for all hospitals annually. We note that in section VIII.A.5.c.(1). of the preamble of this final rule, we are finalizing our proposal to remove the hospital-acquired infection (HAI) measures from the Hospital IQR Program and, therefore, discontinue validation of these measures under the Hospital IQR Program. However, these measures will remain in the HAC Reduction Program and, therefore, we are finalizing our proposal to begin validation of these measures under the HAC Reduction Program using the same processes and information collection requirements previously used under the Hospital IQR Program. As a result, the net costs reflected in the table below for the HAC Reduction Program do not constitute a new information collection requirement on participating hospitals, but a transition of the HAI measure validation process from one program to another based on our efforts to reduce measure duplication across programs. We discuss the estimated burden and cost impacts for the finalized transition of HAI data validation from the Hospital IQR Program to the HAC Reduction Program in section XIV.B.7. of the preamble of this final rule. We discuss the estimated burden and cost reductions for the PCHQR Program in section XIV.B.4. of the preamble of this final rule, and estimate that the impact of these proposed changes is a reduction in costs of approximately $92,145 per PCH annually or approximately $1,013,595 for all participating PCHs annually. We discuss the estimated burden and cost reductions for the proposed LTCH QRP measure removals in section XIV.B.6. of the preamble of this final rule, and estimate that the impact of these proposed changes is a reduction in costs of approximately $1,148 per LTCH annually or approximately $482,469 for all LTCHs annually. Also, as noted in section I.R. of this Appendix, the regulatory review cost for this final rule is $8,809,182.
Acute care hospitals are estimated to experience an increase of approximately $4.8 billion in FY 2019, taking into account operating, capital, new technology, and low volume hospital payments as modeled for this final rule. Approximately $4.4 billion of this estimated increase is due to the changes in operating payments, including $1.5 billion in uncompensated care payments (discussed in sections I.G. and I.H. of this Appendix), approximately $0.2 billion is due to the change in capital payments (discussed in section I.I of this Appendix), approximately $0.2 billion is due to the change in new technology add-on payments (discussed in section I.H of this Appendix), and approximately $0.1 billion is due to the change in low-volume hospital payments (discussed in section I.H of this Appendix). Total differs from the sum of the components due to rounding.
Table I of section I.G. of this Appendix also demonstrates the estimated redistributional impacts of the IPPS budget neutrality requirements for the MS-DRG and wage index changes, and for the wage index reclassifications under the MGCRB.
We estimate that hospitals will experience a 2.3 percent increase in capital payments per case, as shown in Table III of section I.I. of this Appendix. We project that there will be a $193 million increase in capital payments in FY 2019 compared to FY 2018.
The discussions presented in the previous pages, in combination with the remainder of this final rule, constitute a regulatory impact analysis.
Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2019. In the impact analysis, we are using the rates, factors, and policies presented in this final rule based on the best available claims and CCR data to estimate the change in payments under the LTCH PPS for FY 2019. Accordingly, based on the best available data for the 417 LTCHs in our database, we estimate that overall FY 2019 LTCH PPS payments will increase approximately $39 million relative to FY 2018 as a result of the payment rates and factors presented in this final rule.
If regulations impose administrative costs on private entities, such as the time needed to read and interpret a rule, we should estimate the cost associated with regulatory review. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), due to the uncertainty involved with accurately quantifying the number of entities that would review the proposed rule, we assumed that the total number of timely pieces of correspondence on last year's proposed rule would be the number of reviewers of the proposed rule. We acknowledged that this assumption may understate or overstate the costs of reviewing the rule. It is possible that not all commenters reviewed last year's rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For those reasons, and consistent with our approach in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585), we believe that the number of past commenters would be a fair estimate of the number of reviewers of the proposed rule. We welcomed any public comments on the approach in estimating the number of entities that will review this final rule. We did not receive any public comments specific to our solicitation.
We also recognized that different types of entities are in many cases affected by mutually exclusive sections of the proposed rule. Therefore, for the purposes of our estimate, and consistent with our approach in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585), we assumed that each reviewer read approximately 50 percent of the proposed rule. We welcomed public comments on this assumption. We did not receive any public comments specific to our solicitation.
We have used the number of timely pieces of correspondence on the FY 2019 proposed rule as our estimate for the number of reviewers of this final rule. We continue to acknowledge the uncertainty involved with using this number, but we believe it is a fair estimate due to the variety of entities affected and the likelihood that some of them choose to rely (in full or in part) on press releases, newsletters, fact sheets, or other sources rather than the comprehensive review of preamble and regulatory text. Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing the proposed rule is $105.16 per hour, including overhead and fringe benefits (
As required by OMB Circular A-4 (available at
As shown below in Table VII., the net costs to the Federal Government associated with the policies in this final rule are estimated at $4.8 billion.
As discussed in section I.J. of this Appendix, the impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS is projected to result in an increase in estimated aggregate LTCH PPS payments in FY 2019 relative to FY 2018 of approximately $39 million based on the data for 417 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A-4 (available at
As shown in Table VIII. below, the net cost to the Federal Government associated with the policies for LTCHs in this final rule are estimated at $39 million.
The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the SBA definition of a small business (having revenues of less than $7.5 million to $38.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 36 of the Table of Small Business Size Standards for NAIC 622 found on the SBA website at:
For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this final rule relating to acute care hospitals will have a significant impact on small entities as explained in this Appendix. For example, because all hospitals are considered to be small entities for purposes of the RFA, the hospital impacts described in this final rule are impacts on small entities. For example, we refer readers to “Table I—Impact Analysis of Changes to the IPPS for Operating Costs for FY 2019.” Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section I.J. of this Appendix. MACs are not considered to be small entities because they do not meet the SBA definition of a small business. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this final rule constitutes our regulatory flexibility analysis. This final rule contains a range of policies. It provides descriptions of the statutory provisions that are addressed, identifies the finalized policies, and presents rationales for our decisions and, where relevant, alternatives that were considered.
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), we solicited public comments on our estimates and analysis of the impact of our proposals on those small entities. Any public comments that we received and our responses are presented throughout this final rule.
Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the policy changes under the IPPS for operating costs.)
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2019, that threshold level is approximately $146 million. This final rule would not mandate any requirements for State, local, or tribal governments, nor would it affect private sector costs.
Executive Order 13175 directs agencies to consult with Tribal officials prior to the formal promulgation of regulations having tribal implications. This final rule contains provisions applicable to hospitals and facilities operated by the Indian Health Service or Tribes or Tribal organizations under the Indian Self-Determination and Education Assistance Act and, thus, has tribal implications. Therefore, in accordance with Executive Order 13175 and the CMS Tribal Consultation Policy (December 2015), CMS has consulted with Tribal officials on these Indian-specific provisions of the proposed rule prior to the formal promulgation of this rule.
In accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget reviewed this final rule.
Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the hospital-specific rate for SCHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs. In prior years, we made a recommendation in the IPPS proposed rule and final rule for the update factors for the payment rates for IRFs and IPFs. However, for FY 2019, consistent with our approach for FY 2018, we are including the Secretary's recommendation for the update factors for IRFs and IPFs in separate
As discussed in section IV.B. of the preamble to this final rule, for FY 2019, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful electronic health record (EHR) users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and 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 2019 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 final rule (82 FR 38587), we replaced the FY 2010-based IPPS operating and capital market baskets with the rebased and revised 2014-based IPPS operating and capital market baskets effective with FY 2018.
In the FY 2019 IPPS/LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B)
In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), we proposed an MFP adjustment of 0.8 percent for FY 2019 based on IGI's fourth quarter 2017 forecast. We also proposed that if more recent data subsequently became available, we would use such data, if appropriate, to determine the FY 2019 market basket update and MFP adjustment for the final rule. Based on the most recent data available for this FY 2019 IPPS/LTCH PPS final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B. of the preamble of this final rule, we are establishing a MFP adjustment (the 10-year moving average percent change of MFP for the period ending FY 2019) of 0.8 percent.
In the FY 2019 IPPS/LTCH PPS proposed rule, based on IGI's fourth quarter 2017 forecast of the 2014-based IPPS market basket and the MFP adjustment, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), we presented four possible applicable percentage increases that could be applied to the standardized amount.
In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.B. of the preamble of this final rule, we are establishing the applicable percentages increases for the FY 2019 updates based on IGI's second quarter 2018 forecast of the 2014-based IPPS market basket and the MFP adjustment, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, as shown in the table below.
Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2019 applicable percentage increase in the hospital-specific rate for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). As discussed in section IV.G. of the preamble of this final rule, section 205 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) extended the MDH program through FY 2017 (that is, for discharges occurring on or before September 30, 2017). Section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 2018, extended the MDH program for discharges on or after October 1, 2017 through September 30, 2022.
As previously mentioned, the update to the hospital specific rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, depending on whether a hospital submits quality data and is a meaningful EHR user, we are establishing the same four possible applicable percentage increases in the table above for the hospital-specific rate applicable to SCHs and MDHs.
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56939), 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. 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 make an update to the Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the same update to the national standardized amount discussed under section IV.B.1. of the preamble of this final rule. Accordingly, for FY 2019, we are establishing an applicable percentage increase of 1.35 percent to the standardized amount for hospitals located in Puerto Rico.
Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children's hospitals, cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and America Samoa). Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, RNHCIs are paid under the provisions of § 413.40, which also use section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits.
Currently, children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa are among the remaining types of hospitals still paid under the reasonable cost methodology, subject to the rate-of-increase limits. In addition, in accordance with § 412.526(c)(3) of the regulations, extended neoplastic disease care hospitals (described in § 412.22(i) of the regulations) also are subject to the rate-of-increase limits. As discussed in section VI. of the preamble of this final rule,
Section 123 of Public Law 106-113, as amended by section 307(b) of Pub. L. 106-554 (and codified at section 1886(m)(1) of the Act), provides the statutory authority for updating payment rates under the LTCH PPS.
As discussed in section V.A. of the Addendum to this final rule, we are establishing an update to the LTCH PPS standard Federal payment rate of 1.35 percent for FY 2019, consistent with the amendments to section 1886(m)(3) of the Act provided by section 411 of MACRA. In accordance with the LTCHQR Program under section 1886(m)(5) of the Act, we are reducing the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points for failure of a LTCH to submit the required quality data. Accordingly, we are establishing an update factor of 1.0135 in determining the LTCH PPS standard Federal rate for FY 2019. For LTCHs that fail to submit quality data for FY 2019, we are establishing an annual update to the LTCH PPS standard Federal rate of -0.65 percent (that is, the annual update for FY 2019 of 1.35 percent less 2.0 percentage points for failure to submit the required quality data in accordance with section 1886(m)(5)(C) of the Act and our rules) by applying a update factor of 0.9935 in determining the LTCH PPS standard Federal rate for FY 2019. (We note that, as discussed in section VII.D. of the preamble of this final rule, the update to the LTCH PPS standard Federal payment rate of 1.35 percent for FY 2019 does not reflect any budget neutrality factors, such as the offset for the elimination of the LTCH PPS 25-percent threshold policy.)
MedPAC is recommending an inpatient hospital update in the amount specified in current law for FY 2019. MedPAC's rationale for this update recommendation is described in more detail below. As mentioned above, section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Consistent with current law, depending on whether a hospital submits quality data and is a meaningful EHR user, we are recommending the four applicable percentage increases to the standardized amount listed in the table under section II. of this Appendix B. We are recommending that the same applicable percentage increases apply to SCHs and MDHs.
In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for certain other types of hospitals excluded from the IPPS. Consistent with our policies for these facilities, we are recommending an update to the target amounts for children's hospitals, cancer hospitals, RNHCIs, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa and extended neoplastic disease care hospitals of 2.9 percent.
For FY 2019, consistent with policy set forth in section VII. of the preamble of this final rule, for LTCHs that submit quality data, we are recommending an update of 1.35 percent to the LTCH PPS standard Federal rate. For LTCHs that fail to submit quality data for FY 2019, we are recommending an annual update to the LTCH PPS standard Federal rate of -0.65 percent.
In its March 2018 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates in the amount specified in current law. We refer readers to the March 2018 MedPAC report, which is available for download at
We note that, because the operating and capital prospective payment systems remain separate, we are continuing to use separate updates for operating and capital payments. The update to the capital rate is discussed in section III. of the Addendum to this final rule.
Centers for Medicare & Medicaid Services (CMS), HHS.
Proposed rule.
Under the Medicare Shared Savings Program (Shared Savings Program), providers of services and suppliers that participate in an Accountable Care Organization (ACO) continue to receive traditional Medicare fee-for-service (FFS) payments under Parts A and B, but the ACO may be eligible to receive a shared savings payment if it meets specified quality and savings requirements. The policies included in this proposed rule would provide a new direction for the Shared Savings Program by establishing pathways to success through redesigning the participation options available under the program to encourage ACOs to transition to two-sided models (in which they may share in savings and are accountable for repaying shared losses). These proposed policies are designed to increase savings for the Trust Funds and mitigate losses, reduce gaming opportunities, and promote regulatory flexibility and free-market principles. The proposed rule also would provide new tools to support coordination of care across settings and strengthen beneficiary engagement; ensure rigorous benchmarking; promote interoperable electronic health record technology among ACO providers/suppliers; and improve information sharing on opioid use to combat opioid addiction.
To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on October 16, 2018.
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For information on viewing public comments, see the beginning of the
Elizabeth November, (410) 786-8084 or via email at
Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.
Currently, 561 ACOs participate in the Medicare Shared Savings Program (Shared Savings Program). CMS continues to monitor and evaluate program results to look for additional ways to streamline program operations, reduce burden, and facilitate transition to risk that promote a competitive and accountable marketplace, while improving the quality of care for Medicare beneficiaries. This proposed rule would make changes to the regulations for the Shared Savings Program that were promulgated through rulemaking between 2011 and 2017, and are codified in 42 CFR part 425. The changes in this proposed rule are based on the additional program experience we have gained and on lessons learned from testing of Medicare ACO initiatives by the Center for Medicare and Medicaid Innovation (Innovation Center). If these changes are finalized, we will continue to monitor the program's ability to reduce healthcare spending and improve care quality to inform future program developments, including whether the program provides beneficiaries with the value and choice demonstrated by other Medicare options such as Medicare Advantage (MA). We also propose changes to address the new requirements of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) (herein referred to as the Bipartisan Budget Act).
Section 1899 of the Social Security Act (the Act) established the Medicare Shared Savings Program, which promotes accountability for a patient population, fosters coordination of items and services under Medicare Parts A and B, encourages investment in infrastructure and redesigned care processes for high quality and efficient health care service delivery, and promotes higher value care. The Shared Savings Program is a voluntary program that encourages groups of doctors, hospitals, and other health care providers to come together as an ACO to lower growth in expenditures and improve quality. An ACO agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare FFS beneficiary population. ACOs that successfully meet quality and savings requirements share a percentage of the achieved savings with Medicare.
Shared Savings Program ACOs are an important innovation for moving CMS's payment systems away from paying for volume and towards paying for value and outcomes because ACOs are held accountable for spending in relation to a historical benchmark and for quality performance, including performance on outcome and patient experience measures. The program began in 2012, and as of January 2018, 561 ACOs are participating in the program and serving over 10.5 million Medicare FFS beneficiaries. (See the Medicare Shared Savings Program website at
The Shared Savings Program currently includes three financial models that allow ACOs to select an arrangement that makes the most sense for their organization. The vast majority of Shared Savings Program ACOs, 82 percent in 2018,
Recently, the Innovation Center designed an additional option available to eligible Track 1 ACOs, referred to as the Track 1+ Model, to facilitate ACOs' transition to performance-based risk. The Track 1+ Model, a time-limited model, began on January 1, 2018, and is based on Shared Savings Program Track 1, but tests a payment design that incorporates more limited downside risk, as compared to Track 2 and Track 3. Our early experience with the design of the Track 1+ Model demonstrates that the availability of a lower-risk, two-sided model is an effective way to encourage Track 1 ACOs (including ACOs within a current agreement period, initial program entrants, and renewing ACOs) to progress more rapidly to performance-based risk. Fifty-five ACOs entered into Track 1+ Model agreements effective on January 1, 2018, the first time the model was offered. These ACOs represent our largest cohort of performance-based risk ACOs to date.
ACOs in two-sided models have shown significant savings to the Medicare program while advancing the quality of care furnished to FFS beneficiaries; but, the majority of ACOs have yet to assume any performance-based risk although they benefit from waivers of certain federal requirements in connection with their participation in the Shared Savings Program. Even more concerning is the finding that one-sided model ACOs, which are not accountable for sharing in losses, have actually increased Medicare spending relative to their benchmarks. Further, the presence of an “upside-only” track may be encouraging consolidation in the marketplace, reducing competition and choice for Medicare FFS beneficiaries. While we understand that systems need time to adjust, Medicare cannot afford to continue with models that are not producing desired results.
Our results to date have shown that ACOs in two-sided models perform better over time than one-sided model ACOs, low revenue ACOs, which are typically physician-led, perform better than high revenue ACOs, which often include hospitals, and the longer ACOs are in the program the better they do at achieving the program goals of lowering growth in expenditures and improving quality. For example, in performance year 2016, about 68 percent of Shared Savings Program ACOs in two-sided models (15 of 22 ACOs) shared savings compared to 29 percent of Track 1 ACOs; 41 percent of low revenue ACOs shared savings compared to 23 percent of high revenue ACOs; and 42 percent of April and July 2012 starters shared savings, compared to 36 percent of 2013 and 2014 starters, 26 percent of 2015 starters, and 18 percent of 2016 starters.
We believe that additional policy changes to the Shared Savings Program and its financial models are required to support the move to value, achieve savings for the Medicare program, and promote a competitive and accountable healthcare marketplace. Accordingly, we are proposing to redesign the Shared Savings Program to provide pathways to success in the future through a combination of policy changes, informed by the following guiding principles:
• Accountability—Increase savings for the Medicare Trust Funds, mitigate losses by accelerating the move to two-sided risk by ACOs, and ensure rigorous benchmarking.
• Competition—Promote free-market principles by encouraging the development of physician-only and rural ACOs in order to provide a pathway for physicians to stay independent, thereby preserving beneficiary choice.
• Engagement—Promote regulatory flexibility to allow ACOs to innovate and be successful in coordinating care, improving quality, and engaging with and incentivizing beneficiaries to achieve and maintain good health.
• Integrity—Reduce opportunities for gaming.
• Quality—Improve quality of care for patients with an emphasis on promoting interoperability and the sharing of healthcare data between providers, focusing on meaningful quality measures, and combatting opioid addiction.
The need for a new approach or pathway to transition Track 1 ACOs to performance-based risk is particularly relevant at this time, given the current stage of participation for the initial entrants to the Shared Savings Program under the program's current design. The program's initial entrants are nearing the end of the time allowed under Track 1 (a maximum of two, 3-year agreement periods). Among the program's initial entrants (ACOs that first entered the program in 2012 and 2013), there are 82 ACOs that would be required to renew their participation agreements to enter a third agreement period beginning in 2019, and they face transitioning from a one-sided model to a two-sided model with significant levels of risk that some are not prepared to accept. Another 114 ACOs that have renewed for a second agreement period under a one-sided model, including 59 ACOs that started in 2014 and 55 ACOs that started in 2015, will face a similar transition to a two-sided model with significant levels of risk in 2020 and 2021, respectively. The transition to performance-based risk remains a pressing concern for ACOs, as evidenced by a recent survey of the 82 ACOs that would be required to move to a two-sided payment model in their third agreement period beginning in 2019. The survey results, based on a 43 percent response rate, indicate that these Track 1 ACOs are reluctant to move to two-sided risk under the current design of the program. See National Association of ACOs, Press Release (May 2018), available at
We believe the long term success and sustainability of the Shared Savings Program is affected by a combination of key program factors: The savings and losses potential of the program established through the design of the program's tracks; the methodology for setting and resetting the benchmark, which is the basis for determining shared savings and shared losses; the length of the agreement period, which determines the amount of time an ACO remains under a financial model; and the frequency of benchmark rebasing. We believe it is necessary to carefully consider each of these factors to create, on balance, sufficient incentives for participation in a voluntary program,
In order to achieve these program goals and preserve the long term success and sustainability of the program, we believe it is necessary to create a pathway for ACOs to more rapidly transition to performance-based risk. ACOs and other program stakeholders have urged CMS to smooth the transition to risk by providing more time to gain experience with risk and more incremental levels of risk. The goal of the proposed program redesign is to create a pathway for success that facilitates ACOs' transition to performance-based risk more quickly and makes this transition smooth by phasing-in risk more gradually. Through the creation of a new BASIC track, we would allow ACOs to gain experience with more modest levels of performance-based risk on their way to accepting greater levels of performance-based risk over time (as the proposed BASIC track's maximum level of risk is the same as the Track 1+ Model, which is substantially less than the proposed ENHANCED track). As stakeholders have suggested, we would provide flexibility to allow ACOs that are ready to accelerate their move to higher risk within agreement periods, and enable such ACOs to qualify as Advanced APM entities for purposes of the Quality Payment Program. We would streamline the program and simplify the participation options by retiring Track 1 and Track 2. We would retain Track 3, which we would rename as the ENHANCED track, to encourage ACOs that are able to accept higher levels of potential risk and reward to drive the most significant systematic change in providers' and suppliers' behavior. We would further strengthen the program by establishing policies to deter gaming by limiting more experienced ACOs to higher-risk participation options; more rigorously screening for good standing among ACOs seeking to renew their participation in the program or re-enter the program after termination or expiration of their previous agreement; identifying ACOs re-forming under new legal entities as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their ACO participants' experience with the program; and holding ACOs in two-sided models accountable for partial-year losses if either the ACO or CMS terminates the agreement before the end of the performance year.
Under the proposed redesign of the program, our policies would recognize the relationship between the ACO's degree of control over total Medicare Parts A and B FFS expenditures for its assigned beneficiaries and its readiness to accept higher or lower degrees of performance-based risk. Comparisons of ACO participants' total Medicare Parts A and B FFS revenue to a factor based on total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries would be used in determining the maximum amount of losses (loss sharing limit) under the BASIC track, the estimated amount of repayment mechanism arrangements for BASIC track ACOs (required for ACOs entering or continuing their participation in a two-sided model to assure CMS of the ACO's ability to repay shared losses), and in determining participation options for ACOs. Using revenue-based loss sharing limits and repayment mechanism amounts for eligible BASIC track ACOs would help to ensure that low revenue ACOs have a meaningful pathway to participate in a two-sided model that may be more consistent with their capacity to assume risk. By basing participation options on the ACO's degree of control over total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, low revenue ACOs, which tend to be smaller and have less capital, would be able to continue in the program longer under lower levels of risk; whereas high revenue ACOs, which tend to include institutional providers and are typically larger and better capitalized, would be required to move more quickly to higher levels of performance-based risk in the ENHANCED track, because they should be able to exert more influence, direction, and coordination over the full continuum of care. By requiring high revenue ACOs to enter higher levels of performance-based risk under the ENHANCED track after no more than one agreement period under the BASIC track, we aim to drive more meaningful systematic change in these ACOs, which have greater potential to control their assigned beneficiaries' Medicare Parts A and B FFS expenditures by coordinating care across care settings, and thus to achieve significant change in spending. Further, allowing low revenue ACOs a longer period of participation under the lower level of performance-based risk in the BASIC track, while challenging high revenue ACOs to more quickly move to higher levels of performance-based risk, could give rise to more innovative arrangements for lowering growth in expenditures and improving quality, particularly among low revenue ACOs that tend to be composed of independent physician practices.
The program's benchmarking methodology, a complex calculation that incorporates the ACO's risk-adjusted historical expenditures and reflects either national or regional spending trends, is a central feature of the program's financial models. We are proposing to continue to refine the benchmarking approach based on our experience using factors based on regional FFS expenditures in resetting the benchmark in an ACO's second or subsequent agreement period, and to address ACOs' persistent concerns over the risk adjustment methodology. Through the proposed redesign of the program, we would provide for more accurate benchmarks for ACOs that are protective of the Trust Funds by ensuring that ACOs do not unduly benefit from any one aspect of the benchmark calculations, while also helping to ensure the program continues to remain attractive to ACOs, especially those caring for the most complex and highest risk patients who could benefit from high-quality, coordinated care from an ACO.
We would accelerate the use of factors based on regional FFS expenditures in establishing the benchmark by applying this methodology in setting an ACO's benchmark beginning with its first agreement period. This would allow the benchmark to be a more accurate representation of the ACO's costs in relation to its localized market (or regional service area), and could strengthen the incentives of the program to drive meaningful change by ACOs. Further, allowing agreement periods of at least 5 years, as opposed to the current 3-year agreement periods, would provide greater predictability for benchmarks by reducing the frequency of benchmark rebasing, and therefore provide greater opportunity for ACOs to achieve savings against these benchmarks. In combination, these policies would protect the Trust Funds, provide more accurate and predictable benchmarks, and reduce selection costs, while creating incentives for ACOs to transition to performance-based risk.
Currently, the regional adjustment can provide overly inflated benchmarks for ACOs that are relatively low spending compared to their region, while ACOs with higher spending compared to their region may find little value in remaining in the program when faced with a significantly reduced benchmark. To address this dynamic, we would reduce the maximum weight used in calculating the regional adjustment, and cap the adjustment amount for all
We would also seek to provide more sustainable trend factors for ACOs with high penetration in markets with lower spending growth compared to the nation, and less favorable trend factors for ACOs with high penetration in markets with higher spending growth compared to the nation. This approach would have little impact on ACOs with relatively low to medium penetration in counties in their regional service area.
ACOs and other program stakeholders continue to express concerns that the current methodology for risk adjusting the benchmark for each performance year does not adequately account for changes in acuity and health status of patients over time. We would modify the current approach to risk adjustment to allow changes in health status to be more fully recognized during the agreement period, providing further incentives for continued participation by ACOs faced with higher spending due to the changing health status of their population.
ACOs and other program stakeholders have urged CMS to allow additional flexibility of program and payment policies to engage beneficiaries and provide the care for beneficiaries in the most appropriate care setting. It is also critical that patients have the tools to be more engaged with their doctors in order to play a more active role in their care coordination and the quality of care they receive, and that ACOs empower and incentivize beneficiaries to achieve good health. The recent Bipartisan Budget Act allows for certain new flexibilities for Shared Savings Program ACOs to support these aims, including new beneficiary incentive programs, telehealth services furnished in accordance with section 1899(l) of the Act, and a choice of beneficiary assignment methodology. We would establish policies in accordance with the new law in these areas. For example, in accordance with section 1899(m)(1)(A) of the Act (as added by section 50341 of the Bipartisan Budget Act), we would allow certain ACOs under two-sided risk to establish CMS-approved beneficiary incentive programs, through which an ACO would provide incentive payments to assigned beneficiaries who receive qualifying primary care services. We would establish policies to govern telehealth services furnished in accordance with 1899(l) of the Act by physicians and practitioners in eligible two-sided model ACOs. We would also allow broader access to the program's existing SNF 3-day rule waiver for ACOs under performance-based risk.
Other timely modifications to the program's regulations addressed in this proposed rule, include changes to the program's claims-based assignment methodology and the process for allowing beneficiaries to voluntarily align to ACOs in which the physician or other practitioner they have designated as their primary clinician is an ACO professional, and extending the program's recently finalized policy for addressing extreme and uncontrollable circumstances to performance year 2018 and all subsequent performance years. Further, feedback from the public sought in this rule would inform development of the program's quality measure set to support CMS's Meaningful Measures initiative for reducing provider reporting burden and promoting positive outcomes, and help to identify ways to improve existing data sharing and the quality measure set to address the nation's opioid emergency. Changes to the program's requirements regarding the use of certified electronic health record technology would help ensure Shared Savings Program ACOs are held accountable for using technology that promotes more effective population management and sharing of data among providers, and will ultimately lead to value-based and better care for patients. Lastly, through this proposed rule we seek comment on how Medicare ACOs and the sponsors of stand-alone Part D prescription drug plans (PDPs) could be encouraged to collaborate so as to improve the coordination of pharmacy care for Medicare FFS beneficiaries.
This proposed rule would restructure the participation options for ACOs applying to participate in the program in 2019 by discontinuing Track 1 (one-sided shared savings-only model), and Track 2 (two-sided shared savings and shared losses model) while maintaining Track 3 (renamed the ENHANCED track) and offering a new BASIC track. Under the proposed approach, the program's two tracks would be: (i) A BASIC track, offering a path from a one-sided model for eligible ACOs to progressively higher increments of risk and potential reward within a single agreement period, and (ii) an ENHANCED track based on the existing Track 3 (two-sided model), for ACOs that take on the highest level of risk and potential reward. This approach includes proposals for replacing the current 3-year agreement period structure with an agreement period of at least 5 years, allowing eligible BASIC track ACOs greater flexibility to select their level of risk within an agreement period in the glide path, and allowing all BASIC track and ENHANCED track ACOs the flexibility to change their selection of beneficiary assignment methodology prior to the start of each performance year, consistent with the requirement under the Bipartisan Budget Act to provide ACOs with a choice of prospective assignment.
To provide ACOs time to consider the new participation options and prepare for program changes, make investments and other business decisions about participation, obtain buy-in from their governing bodies and executives, and to complete and submit a Shared Savings Program application for a performance year beginning in 2019, we propose to offer a July 1, 2019 start date for the first agreement period under the proposed new participation options. This midyear start in 2019 would also allow both new applicants and ACOs currently participating in the program an opportunity to make any changes to the structure and composition of their ACO as may be necessary to comply with the new program requirements for the ACO's preferred participation option, if changes to the participation options are finalized as proposed. We would forgo the application cycle in 2018 for an agreement start date of January 1, 2019. ACOs entering a new agreement period on July 1, 2019, would have the opportunity to participate in the program under agreement periods spanning 5 years and 6 months, with a 6-month first performance year. Additionally, we would offer ACOs with a participation agreement ending on December 31, 2018 an opportunity to extend their current agreement period for an additional 6-month performance year (January 1, 2019-June 30, 2019). These ACOs would then have the opportunity to apply for a new agreement under the BASIC track or ENHANCED track beginning on July 1, 2019.
We propose modifications to the repayment mechanism arrangement requirements applicable to ACOs in performance-based risk tracks, including changes to update these policies to address new participation options under the BASIC track and, in certain circumstances, allow a renewing
This proposed rule would establish regulations in accordance with the Bipartisan Budget Act on the use of telehealth services furnished on or after January 1, 2020, by physicians and other practitioners participating in an ACO under performance-based risk that has selected prospective assignment. This policy would allow for payment for telehealth services furnished to prospectively assigned beneficiaries receiving telehealth services in non-rural areas, and allow beneficiaries to receive certain telehealth services at their home, to support care coordination across settings. The proposed rule would also provide for limited waivers of the originating site and geographic requirements to allow for payment for otherwise covered telehealth services provided to beneficiaries who are no longer prospectively assigned to an applicable ACO (and therefore no longer eligible for payment for these services under section 1899(l) of the Act) during a 90-day grace period. In addition, ACO participants would be prohibited, under certain circumstances, from charging beneficiaries for telehealth services, where CMS does not pay for those telehealth services under section 1899(l) solely because the beneficiary was never prospectively assigned to the applicable ACO or was prospectively assigned, but the 90-day grace period has lapsed.
We propose to allow eligible ACOs under performance-based risk under either prospective assignment or preliminary prospective assignment with retrospective reconciliation to use the program's existing SNF 3-day rule waiver. We also propose to amend the existing SNF 3-day rule waiver to allow critical access hospitals (CAHs) and other small, rural hospitals operating under a swing bed agreement to be eligible to partner with eligible ACOs as SNF affiliates for purposes of the SNF 3-day rule waiver.
We propose policies to expand the role of choice and incentives in engaging beneficiaries in their health care. First, we propose to establish regulations in accordance with section 1899(m)(1)(A) of the Act, as added by section 50341 of the Bipartisan Budget Act, to permit ACOs under certain two-sided models to operate CMS-approved beneficiary incentive programs. The beneficiary incentive programs would encourage beneficiaries assigned to certain ACOs to obtain medically necessary primary care services while requiring such ACOs to comply with program integrity and other requirements, as the Secretary determines necessary. Any ACO that operates a CMS-approved beneficiary incentive program would be required to ensure that certain information about its beneficiary incentive program is made available to CMS and the public on its public reporting web page. Second, we propose modifications to the program's existing policies on voluntary alignment in order to comply with the Bipartisan Budget Act, by allowing beneficiaries to designate a broader range of ACO professionals as their “primary clinician” responsible for coordinating their overall care, and providing that we will continue to use a beneficiary's designation to align the beneficiary to the ACO in which their primary clinician participates even if the beneficiary does not continue to receive primary care services from an ACO professional in that ACO. We also seek comment on an alternative beneficiary assignment methodology to make the assignment methodology more patient-centered, and strengthen the engagement of beneficiaries in their health care. Under such an approach, a beneficiary would be assigned to an ACO if the beneficiary “opted-in” to the ACO. These selections would be supplemented by voluntary alignment and a modified claims-based assignment methodology. Third, to empower beneficiary choice and further program transparency, we are proposing to revise policies related to beneficiary notifications. Specifically, we propose that ACO participants be required to include information on voluntary alignment in the written notifications they must provide to beneficiaries. ACO participants would be required to provide such notifications during each beneficiary's first primary care visit of each performance year, in addition to having such information posted in the ACO participant's facility and available upon request (as currently required).
We propose new policies for determining participation options for ACOs based on the degree to which ACOs control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries (low revenue ACO versus high revenue ACO), and the experience of the ACO's legal entity and ACO participants with the Shared Savings Program and performance-based risk Medicare ACO initiatives.
We also propose to revise the criteria for evaluating the eligibility of ACOs seeking to renew their participation in the program for a subsequent agreement period and ACOs applying to re-enter the program after termination or expiration of the ACO's previous agreement, based on the ACO's prior participation in the Shared Savings Program. We also propose to identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their participants' experience with the program. We would use the same criteria to review applications from renewing and re-entering ACOs to more consistently consider ACOs' prior experience in the Shared Savings Program. Under this proposal, we would modify existing review criteria, such as the ACO's history of meeting the quality performance standard and the ACO's timely repayment of shared losses that currently apply to particular performance years of a 3-year agreement period, to ensure applicability to ACOs with an agreement period that is not less than 5 years. We also seek to strengthen the program's requirements for monitoring ACOs within an agreement period for poor financial performance and to ensure that ACOs with poor financial performance are not allowed to continue their participation in the program, or to re-enter the program after being terminated, without addressing the deficiencies that resulted in termination.
We propose to update program policies related to termination of ACOs' participation in the program. We propose to reduce the amount of notice an ACO must provide CMS of its decision to voluntarily terminate. We also address the timing of an ACO's re-entry into the program after termination.
Further, we would impose payment consequences for early termination by proposing to hold ACOs in two-sided models liable for pro-rated shared losses. This approach would apply to ACOs that voluntarily terminate their participation more than midway through a 12-month performance year and all ACOs that are involuntarily terminated by CMS. ACOs would be ineligible to share in savings for a performance year if the effective date of their termination from the program is prior to the last calendar day of the performance year, although we would allow an exception for ACOs that are participating in the program as of January 1, 2019, that terminate their agreement with an effective date of June 30, 2019, and enter a new agreement period under the BASIC track or ENHANCED track beginning July 1, 2019. In these cases, we would perform separate reconciliations to determine shared savings and shared losses for the ACO's first 6 months of participation in 2019 and for the ACO's 6-month performance year from July 1, 2019, to December 31, 2019, under the subsequent participation agreement.
To strengthen ACO financial incentives for continued program participation and improve the sustainability of the program, we propose changes to the methodology for establishing, adjusting, updating and resetting benchmarks for agreement periods beginning on July 1, 2019, and in subsequent years, to include the following:
• Application of factors based on regional FFS expenditures to establish, adjust, and update the ACO's benchmark beginning in an ACO's first agreement period, to move benchmarks away from being based solely on the ACO's historical costs and allow them to better reflect costs in the ACO's region.
• Mitigating the effects of excessive positive or negative regional adjustment used to establish and reset the benchmark by—
++ Reducing the maximum weight used in calculating the regional adjustment from 70 percent to 50 percent (within the existing phase-in schedule for applying increased weights in calculating the regional adjustment); and
++ Capping the amount of the adjustment based on a percentage of national FFS expenditures.
• Calculating growth rates used in trending expenditures to establish the benchmark and in updating the benchmark each performance year as a blend of regional and national expenditure growth rates with increasing weight placed on the national component of the blend as the ACO's penetration in its region increases.
• Better accounting for certain health status changes by using full CMS-Hierarchical Condition Category (HCC) risk scores to adjust the benchmark each performance year, although restricting the upward and downward effects of these adjustments to positive or negative 3 percent over the new agreement period.
This rule also includes proposals for updating the program's policies in a variety of subject areas. We propose to expand the definition of primary care services used in beneficiary assignment to add new codes and revise how we determine whether evaluation and management services were furnished in a SNF. We also propose to extend the policies to address quality performance scoring and determination of shared losses owed by ACOs participating under performance-based risk in the event of extreme or uncontrollable circumstances that were adopted for performance year 2017 to apply for performance year 2018 and subsequent years. We also discuss the potential effects of extreme and uncontrollable circumstances on benchmark year expenditures and the determination of the historical benchmark and seek comment on this issue.
We seek comment on approaches to developing the program's quality measure set in response to the agency's Meaningful Measures initiative as well as to support ACOs and their participating providers/suppliers in addressing opioid utilization within the FFS population. We describe existing sources of program data that may be useful for ACOs to monitor trends in opioid utilization, and solicit comment on suggestions for providing additional aggregate data to ACOs. We also seek comment on quality measures that could be used to assess factors related to opioid utilization, including patient reported outcome measures.
We propose to establish a new program requirement related to the adoption of Certified Electronic Health Record Technology (CEHRT) by eligible clinicians participating in the ACO. Specifically, we propose to require ACOs to certify, upon application to the program and annually thereafter, that the percentage of eligible clinicians participating in the ACO who use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds a specified threshold. For ACOs that are participating in a track (or payment model within a track) that meets the financial risk standard to be an Advanced APM, we further propose to align this requirement with the CEHRT use requirement for Advanced APMs under the Quality Payment Program. In conjunction with this proposal, we propose to discontinue the use of the double-weighted quality measure assessing the percentage of eligible clinicians that successfully meet the Promoting Interoperability Performance Category Base Score (Use of CEHRT, ACO-11) in order to reduce burden and align with the requirements of the Quality Payment Program. We also propose conforming revisions to the CEHRT requirement for Shared Savings
Lastly, we seek comment on approaches for encouraging Medicare ACOs to collaborate with the sponsors of stand-alone Part D PDPs (Part D sponsors) to improve the coordination of pharmacy care for Medicare FFS beneficiaries to reduce the risk of adverse events and improve medication adherence. In particular, we seek to understand how Medicare ACOs, and specifically Shared Savings Program ACOs, and Part D sponsors could work together and be encouraged to improve the coordination of pharmacy care for Medicare FFS beneficiaries to achieve better health outcomes, what clinical and pharmacy data may be necessary to support improved coordination of pharmacy care for Medicare FFS beneficiaries, and approaches to structuring financial arrangements to reward ACOs and Part D sponsors for improved health outcomes and lower growth in expenditures for Medicare FFS beneficiaries.
As detailed in section IV of this proposed rule, the proposed faster transition from one-sided model agreements to performance-based risk arrangements, tempered by the option for eligible ACOs of a gentler exposure to downside risk calculated as a percentage of ACO participants' total Medicare Parts A and B FFS revenue and capped at a percentage of the ACO's benchmark, can affect broader participation in performance-based risk in the Shared Savings Program and reduce overall claims costs. A second key driver of estimated net savings is the reduction in shared savings payments from the proposed limitation on the amount of the regional adjustment to the ACO's historical benchmark. Such reduction in overall shared savings payments is projected to result despite the benefit of higher net adjustments expected for a larger number of ACOs from the use of a simpler HCC risk adjustment methodology, the blending of national and regional expenditure growth rates for certain benchmark calculations, and longer (at least 5 years, instead of 3-year) agreement periods that allow ACOs a longer horizon from which to benefit from efficiency gains before benchmark rebasing. Overall, the decreases in claims costs and shared saving payments to ACOs are projected to result in $2.24 billion in federal savings over 10 years.
On March 23, 2010, the Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted, followed by enactment of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) on March 30, 2010, which amended certain provisions of Public Law 111-148.
Section 3022 of the Affordable Care Act amended Title XVIII of the Act (42 U.S.C. 1395
The final rule establishing the Shared Savings Program appeared in the November 2, 2011
Through subsequent rulemaking, we have revisited and amended Shared Savings Program policies in light of the additional experience we gained during the initial years of program implementation as well as from testing through the Pioneer ACO Model, the Next Generation ACO Model and other initiatives conducted by the Center for Medicare and Medicaid Innovation (Innovation Center) under section 1115A of the Act. A major update to the program rules appeared in the June 9, 2015
Policies applicable to Shared Savings Program ACOs have continued to evolve based on changes in the law. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established the Quality Payment Program (Pub. L. 114-10). In the CY 2017 Quality Payment Program final rule with comment period (81 FR 77008), CMS established regulations for the Merit-Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs) and related policies applicable to eligible clinicians who participate in the Shared Savings Program.
The requirements for assignment of Medicare FFS beneficiaries to ACOs participating under the program were amended by the 21st Century Cures Act (Pub. L. 114-255). Accordingly, we revised the program's regulations in the CY 2018 PFS final rule to reflect these new requirements.
On February 9, 2018, the Bipartisan Budget Act of 2018 was enacted (Pub. L. 115-123), amending section 1899 of the Act to provide for the following: expanded use of telehealth services by physicians or practitioners participating in an applicable ACO to a prospectively assigned beneficiary, greater flexibility in the assignment of Medicare FFS beneficiaries to ACOs by allowing ACOs in tracks under retrospective beneficiary assignment a choice of prospective assignment for the agreement period, permitting Medicare FFS beneficiaries to voluntarily identify an ACO professional as their primary care provider and mandating that any such voluntary identification will supersede claims-based assignment, and allowing ACOs under certain two-sided models
In this section, we discuss a series of interrelated proposals around transition to risk, including: (1) Length of time an ACO may remain under a one-sided model, (2) the levels of risk and reward under the program's participation options, (3) the duration of the ACO's agreement period, and (4) the degree of flexibility ACOs have to choose their beneficiary assignment methodology and also to select their level of risk within an agreement period.
In this section we review the statutory and regulatory background for the program's participation options by track and the length of the ACO's agreement period for participation in the program, and also provide an overview of current ACO participation in the program for performance year 2018.
Section 1899(d) of the Act establishes the general requirements for shared savings payments to participating ACOs. Specifically, section 1899(d)(1)(A) of the Act specifies that providers of services and suppliers participating in an ACO will continue to receive payment under the original Medicare FFS program under Parts A and B in the same manner as they would otherwise be made, and that an ACO is eligible to receive payment for a portion of savings generated for Medicare provided that the ACO meets both the quality performance standards established by the Secretary and achieves savings against its historical benchmark based on average per capita Medicare FFS expenditures during the 3 years preceding the start of the agreement period. Additionally, section 1899(i) of the Act authorizes the Secretary to use other payment models rather than the one-sided model described in section 1899(d) of the Act, as long as the Secretary determines that the other payment model will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures.
In the November 2011 final rule establishing the Shared Savings Program (76 FR 67909), we created two tracks from which ACOs could choose to participate: The one-sided model (Track 1) that is based on the statutory payment methodology under section 1899(d) of the Act, and a two-sided model (Track 2) that is also based on the payment methodology under section 1899(d) of the Act, but incorporates performance-based risk using the authority under section 1899(i)(3) of the Act to use other payment models. Under the one-sided model, ACOs can qualify to share in savings but are not responsible for losses. Under a two-sided model, ACOs can qualify to share in savings with an increased sharing rate, but also must take on risk for sharing in losses. ACOs entering the program or renewing their agreement may elect to enter a two-sided model. Once an ACO has elected to participate under a two-sided model, the ACO cannot go into Track 1 for subsequent agreement periods (see § 425.600).
In the initial rulemaking for the program, we considered several approaches to designing the program's participation options, principally: (1) Base the program on a two-sided model, thereby requiring all participants to accept risk from the first program year; (2) allow applicants to choose between program tracks, either a one-sided model or two-sided model, for the duration of the agreement; or (3) allow a choice of tracks, but require ACOs electing the one-sided model to transition to the two-sided model during their initial agreement period (see, for example, 76 FR 19618). We proposed a design for Track 1 whereby ACOs would enter a 3-year agreement period under the one-sided model and would automatically transition to the two-sided model (under Track 2) in the third year of their initial agreement period. Thereafter, those ACOs that wished to continue participating in the Shared Savings Program would only have the option of participating under performance-based risk (see 76 FR 19618). We explained our belief that this approach would have the advantage of providing an entry point for organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transitioning to a risk-based model while also providing an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides the potential for greater reward in exchange for assuming greater potential responsibility. A few commenters favored this proposed approach, indicating the importance of performance-based risk in the health care delivery system transformation necessary to achieve the program's aims and for “good stewardship” of Medicare Trust Fund dollars. However, most commenters expressed concerns about requiring ACOs to quickly accept performance-based risk and we finalized a policy where an ACO could remain under the one-sided model for the duration of its first agreement period (see 76 FR 67904 through 67909).
In earlier rulemaking, we explained that offering multiple tracks with differing degrees of risk across the Shared Savings Program tracks would create an “on-ramp” for the program to attract both providers and suppliers that are new to value-based purchasing, as well as more experienced entities that are ready to share performance-based risk. We stated our belief that a one-sided model would have the potential to attract a large number of participants to the program and introduce value-based purchasing broadly to providers and suppliers, many of whom may never have participated in a value-based purchasing initiative before (see, for example, 76 FR 67904 through 67909).
Another reason we included the option for a one-sided track with no downside risk was that this model would be accessible to and attract small, rural, safety net, and/or physician-only ACOs (see 80 FR 32759). Commenters identified groups that may be especially challenged by the upfront costs of ACO formation and operations, including: private primary care practitioners, small to medium sized physician practices, small ACOs, safety net providers (that is, Rural Health Clinics (RHCs), CAHs, Federally Qualified Health Centers (FQHCs), community-funded safety net clinics), and other rural providers (that is, Method II CAHs, rural prospective payment system hospitals designated as rural referral centers, sole community hospitals, Medicare dependent hospitals, or rural primary care providers) (see 76 FR 67834 through 67835). Further, commenters also indicated that ACOs that are composed of small- and medium-sized physician practices, loosely formed physician networks, safety net providers, and small and/or rural ACOs would be encouraged to participate in the program based on the availability of a one-sided model (see, for example, 76 FR 67906). Commenters also expressed concerns about requiring ACOs that may lack experience with care management or managing performance-based risk to quickly transition to performance-based risk, with some commenters suggesting that small, rural and physician-only
In establishing the program's initial two track approach, we acknowledged that ACOs new to the accountable care model—and particularly small, rural, safety net, and physician-only ACOs—would benefit from additional time under the one-sided model before being required to accept risk (76 FR 67907). However, we also noted that although a one-sided model could provide incentives for participants to improve quality, it might not be sufficient incentive for participants to improve the efficiency and cost of health care delivery (76 FR 67904 and 80 FR 32759). We explained our belief that payment models where ACOs bear a degree of financial risk have the potential to induce more meaningful systematic change in providers' and suppliers' behavior (see, for example, 76 FR 67907). We also explained our belief that performance-based risk options could have the advantage of providing more experienced ACOs an opportunity to enter a sharing arrangement with the potential for greater reward in exchange for assuming greater potential responsibility (see, for example, 76 FR 67907).
We note that in earlier rulemaking we have used several terms to refer to participation options in the Shared Savings Program under which an ACO is potentially liable to share in losses with Medicare. In the initial rulemaking for the program, we defined “two-sided model” to mean a model under which the ACO may share savings with the Medicare program, if it meets the requirements for doing so, and is also liable for sharing any losses incurred (§ 425.20). We have also used the term “performance-based risk” to refer to the type of risk an ACO participating in a two-sided model undertakes. As we explained in the November 2011 final rule (76 FR 67945), in a two-sided model under the Shared Savings Program, the Medicare program retains the insurance risk and responsibility for paying claims for the services furnished to Medicare beneficiaries. It is only shared savings payments (and shared losses in a two-sided model) that will be contingent upon ACO performance. The agreement to share risk against the benchmark would be solely between the Medicare program and the ACO. As a result, we have tended to use the terms “two-sided model” and “performance-based risk” interchangeably, considering them to be synonymous when describing payment models offered under the Shared Savings Program and Medicare ACO initiatives more broadly.
In the June 2015 final rule, we modified the existing policies to allow eligible Track 1 ACOs to renew for a second agreement period under the one-sided model, and to require they enter a performance-based risk track in order to remain in the program for a third or subsequent agreement period. We explained the rationale for these policies in the prior rulemaking and we refer readers to the December 2014 proposed rule and June 2015 final rule for more detailed discussion. (See, for example, 79 FR 72804, and 80 FR 32760 through 32761.) In developing these policies, we considered, but did not finalize, approaches to make Track 1 less attractive for continued participation, in order to support progression to risk, including offering a reduced sharing rate to ACOs remaining under the one-sided model for a second agreement period.
The Innovation Center has tested progressively higher levels of risk for more experienced ACOs through the Pioneer ACO Model (concluded December 31, 2016) and the Next Generation ACO Model (ongoing).
Further, the Innovation Center has tested two models for providing up-front funding to eligible small, rural, or physician-only Shared Savings Program ACOs. Initially, CMS offered the Advance Payment ACO Model, beginning in 2012 and concluding December 31, 2015. See
In the June 2016 final rule, to further encourage ACOs to transition to performance-based risk, we finalized a participation option for eligible Track 1 ACOs to defer by one year their entrance into a second agreement period under a two-sided model (Track 2 or Track 3) by extending their first agreement period under Track 1 for a fourth performance
In prior rulemaking for the Shared Savings Program, we have indicated that we would continue to evaluate the appropriateness and effectiveness of our incentives to encourage ACOs to transition to a performance-based risk track and, as necessary, might revisit alternative participation options through future notice and comment rulemaking (81 FR 37995 through 37996). We believe it is timely to reconsider the participation options available under the program in light of the financial and quality results for the first four performance years under the program, participation trends by ACOs, and feedback from ACOs and other program stakeholders' about factors that encourage transition to risk.
Based on comments submitted by ACOs and other program stakeholders in response to earlier rulemaking and our experience with implementing the Shared Savings Program, we believe a combination of factors affect ACOs' transition to performance-based risk.
(1) Length of time allowed under a one-sided model and availability of options to transition from a one-sided model to a two-sided model within an ACO's agreement period. (Discussed in detail within this section. See also discussion of related background in section II.A.1.a. of this proposed rule.)
(2) An ACO's level of experience with the accountable care model and the Shared Savings Program.
(3) Choice of methodology used to assign beneficiaries to ACOs, which determines the beneficiary population for which the ACO is accountable for both the quality and cost of care. (Background on choice of assignment methodology is discussed within this section; see also section II.A.4 of this proposed rule.) Specifically, the assignment methodology is used to determine the populations that are the basis for determining the ACO's historical benchmark and the population assigned to the ACO each performance year, which is the basis for determining whether the ACO will share in savings or losses for that performance year.
(4) Availability of program and payment flexibilities to ACOs participating under performance-based risk to support beneficiary engagement and the ACO's care coordination activities (see discussion in sections II.B and II.C of this proposed rule).
(5) Financial burden on ACOs in meeting program requirements to enter into two-sided models, specifically the requirement to establish an adequate repayment mechanism (see discussion in section II.A.6.c. of this proposed rule).
(6) Value proposition of the program's financial model under one-sided and two-sided models.
The value proposition of the program's financial models raises a number of key considerations that pertain to an ACO's transition to risk. One consideration is the level of potential reward under the one-sided model in relation to the levels of potential risk and reward under a two-sided model. A second consideration is the availability of asymmetrical levels of risk and reward, such as in the Medicare ACO Track 1+ Model (Track 1+ Model), where, for certain eligible ACOs, the level of risk is determined based on a percentage of ACO participants' total Medicare Parts A and B FFS revenue, not to exceed a percentage of the ACO's benchmark (determined based on historical expenditures for its assigned population). A third consideration is the interactions between the ACO's participation in a two-sided model of the Shared Savings Program and incentives available under other CMS value-based payment initiatives; in particular, eligible clinicians participating in an ACO under a two-sided model of the Shared Savings Program may qualify to receive an APM incentive payment under the Quality Payment Program for sufficient participation in an Advanced APM. Lastly, the value proposition of the program is informed by the methodology for setting and resetting the benchmark, which is the basis for determining shared savings and shared losses, and the length of agreement period, which determines the amount of time an ACO remains under a financial model and the frequency of benchmark rebasing. See discussion in sections II.D. (benchmarking) and II.A.1.c. (length of agreement period) of this proposed rule.
Currently, the design of the program locks in the ACO's choice of financial model, which also determines the applicable beneficiary assignment methodology, for the duration of the ACO's 3-year agreement period. For an ACO's initial or subsequent agreement period in the Shared Savings Program, an ACO applies to participate in a particular financial model (or “track”) of the program as specified under § 425.600(a). If the ACO's application is accepted, the ACO must remain under that financial model for the duration of its 3-year agreement period. Beneficiary assignment and the level of performance-based risk (if applicable) are determined consistently for all ACOs participating in a particular track. Under Track 1 and Track 2, we assign beneficiaries using preliminary prospective assignment with retrospective reconciliation (§ 425.400(a)(2)). Under Track 3, we prospectively assign beneficiaries (§ 425.400(a)(3)).
As described in earlier rulemaking, commenters have urged that we offer greater flexibility for ACOs in their choice of assignment methodology.
We also have considered alternative approaches to allow ACOs greater flexibility in the timing of their transition to performance-based risk, including within an ACO's agreement period. For example, as described in earlier rulemaking, commenters suggested approaches that would allow less than two 3-year agreement periods under Track 1.
Transition to performance-based risk has taken on greater significance with the introduction of the Quality Payment Program. Under the CY 2017 Quality Payment Program final rule with comment period,
ACOs and other program stakeholders continue to express a variety of concerns about the transition to risk under Track 2 and Track 3. For example, as described in the CY 2017 Quality Payment Program final rule with comment period (see, for example, 81 FR 77421 through 77422), commenters suggested a new Shared Savings Program track as a meaningful middle path between Track 1 and Track 2 (“Track 1.5”), that meets the Advanced APM generally applicable nominal amount standard, to create an option for ACOs with relatively low revenue or small numbers of participating eligible clinicians to participate in an Advanced APM without accepting the higher degrees of risk involved in Track 2 and Track 3. Commenters suggested this track would be a viable on-ramp for ACOs to assume greater amounts of risk in the future. Commenters' suggestions for Track 1.5 included prospective beneficiary assignment, asymmetric levels of risk and reward, and payment rule waivers, such as the SNF 3-day rule waiver available to ACOs participating in Shared Savings Program Track 3.
The Track 1+ Model is designed to encourage ACOs, especially those made up of small physician practices, to advance to performance-based risk. ACOs that include hospitals, including small rural hospitals, are also allowed to participate. See CMS Fact Sheet, New Accountable Care Organization Model Opportunity: Medicare ACO Track 1+ Model, Updated July 2017 (herein Track 1+ Model Fact Sheet), available at
Section 1899(b)(2)(B) of the Act requires participating ACOs to enter into an agreement with CMS to participate in the program for not less than a 3-year period referred to as the agreement period. Further, section 1899(d)(1)(B)(ii) of the Act requires us to reset the benchmark at the start of each agreement period. In initial rulemaking for the program, we limited participation agreements to 3-year periods (see 76 FR 19544, and 76 FR 67807). We have considered the length of the ACO's agreement period in the context of the amount of time an ACO may remain in a one-sided model and
There remains a high degree of interest in participation in the Shared Savings Program. Although most ACOs continue to participate in the program's one-sided model (Track 1), ACOs have demonstrated significant interest in the Track 1+ Model. Table 1 summarizes the total number of ACOs that are participating in the Shared Savings Program, including those also participating in the Track 1+ Model, for performance year 2018 with the total number of assigned beneficiaries by track.
Based on the program's existing requirements, ACOs can participate in Track 1 for a maximum of two agreement periods. There are a growing number of ACOs that have entered into their second agreement period, and, starting in 2019, many that will begin a third agreement period and will be required to enter a risk-based track.
The progression by some ACOs to performance-based risk within the Shared Savings Program remains relatively slow, with approximately 82 percent of ACOs participating in Track 1 in 2018, 43 percent (196 of 460) of which are within a second agreement period in Track 1.
However, the recent addition of the Track 1+ Model provided a significant boost in Shared Savings Program ACOs taking on performance-based risk, with over half of the 101 ACOs participating in the Shared Savings Program and taking on performance-based risk opting for the Track 1+ Model in 2018. The lower level of risk offered under the Track 1+ Model has been positively received by the industry and provided a pathway to risk for many ACOs.
In developing the proposed policies described in this section, we considered a number of factors related to the program's current participation options in light of the program's financial results and stakeholders' feedback on program design, including the following.
First, we considered the program's existing policy allowing ACOs up to 6 years of participation in a one-sided model. We have found that the policy has shown limited success in encouraging ACOs to advance to performance-based risk. By the fifth year of implementing the program, only about 18 percent of the program's participating ACOs are under a two-sided model, over half of which are participating in the Track 1+ Model (see Table 1).
As discussed in detail in the Regulatory Impact Analysis (see section IV. of this proposed rule), our experience with the program indicates
The program's current design lacks a sufficiently incremental progression to performance-based risk, the need for which is evidenced by robust participation in the new Track 1+ Model. We believe a significant issue that contributes to some ACOs' reluctance to participate in Track 2 or Track 3 is that the magnitude of potential losses is very high compared to the ACO's degree of control over the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, particularly when its ACO participants have relatively low total Medicare Parts A and B FFS revenue. We are encouraged by the interest in the Track 1+ Model as indicated by the 55 Shared Savings Program ACOs participating in the Model for the performance year beginning on January 1, 2018; the largest group of Shared Savings Program ACOs to enter into performance-based risk for a given performance year to date. Based on the number of ACOs participating in the Track 1+ Model for performance year 2018, a lower risk option appears to be important for Track 1 ACOs with experience in the program seeking to transition to performance-based risk, as well as ACOs seeking to enter an initial agreement period in the program under a lower risk model.
Interest in the Track 1+ Model suggests that the opportunity to participate in an Advanced APM while accepting more moderate levels of risk (compared to Track 2 and Track 3) is an important financial model design for ACOs. Allowing more manageable levels of risk within the Shared Savings Program is an important pathway for helping organizations to gain experience with managing risk as well as participating in Advanced APMs under the Quality Payment Program. The high uptake we have observed with the Track 1+ Model also suggests that the current design of Track 1 may be unnecessarily generous since the Track 1+ Model has the same level of upside as Track 1 but under which ACOs must also assume performance-based risk.
Second, under the program's current design, CMS lacks adequate tools to properly address ACOs with patterns of negative financial performance. Track 1 ACOs are not liable for repaying any portion of their losses to CMS, and therefore may have potentially weaker incentives to improve quality and reduce growth in FFS expenditures within the accountable care model. These ACOs may take advantage of the potential benefits of continued program participation (including the receipt of program data and the opportunity to enter into certain contracting arrangements with ACO participants and ACO providers/suppliers in connection with their participation in the Shared Savings Program), without providing a meaningful benefit to the Medicare program. ACOs under two-sided models may similarly benefit from program participation and seek to continue their participation despite owing shared losses.
Third, differences in performance of ACOs indicate a pattern where low revenue ACOs outperformed high revenue ACOs. As discussed in the Regulatory Impact Analysis (see section IV. of this proposed rule), we have observed a pattern of performance, across tracks and performance years, where low revenue ACOs show better average results compared to high revenue ACOs. We believe high revenue ACOs, which typically include hospitals, have a greater opportunity to control assigned beneficiaries' total Medicare Parts A and B FFS expenditures, as they coordinate a larger portion of the assigned beneficiaries' care across care settings, and have the potential to perform better than what has been demonstrated in performance trends from 2012 through 2016. We conclude that the trends in performance by high revenue ACOs in relation to their expected capacity to control growth in expenditures are indications that these ACOs' performance would improve through greater incentives, principally a requirement to take on higher levels of performance-based risk, and thus drive change in FFS utilization for their Medicare FFS populations. This conclusion is further supported by our initial experience with the Track 1+ Model, for which our preliminary findings support the conclusion that the degree of control an ACO has over expenditures for its assigned beneficiaries is an indication of the level of performance-based risk an ACO is prepared to accept and manage, where control is determined by the relationship between ACO participants' total Medicare Parts A and B FFS revenue and the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. Our experience with the Track 1+ Model has also shown that ACO participants' total Medicare Parts A and B FFS revenue as a percentage of the total Medicare Parts A and B FFS expenditures of the assigned beneficiaries can serve as a proxy for ACO composition (that is, whether the ACO includes one or more institutional providers as an ACO participant, and therefore is likely to control a greater share of Medicare Parts A and B FFS expenditures and to have greater ability to coordinate care across settings for its assigned beneficiaries).
Fourth, permitting choice of level of risk and assignment methodology within an ACO's agreement period would create redundancy in some participation options, and eliminating this redundancy would allow CMS to streamline the number of tracks offered while allowing ACOs greater flexibility to design their participation to meet the needs of their organizations. ACOs and stakeholders have indicated a strong preference for maintaining an option to select preliminary prospective assignment with retrospective reconciliation as an alternative to prospective assignment for ACOs under performance-based risk within the Shared Savings Program. We considered what would occur if we retained Track 2 in addition to the ENHANCED track and offered a choice of prospective assignment and preliminary prospective assignment (see section II.A.4.c. of this proposed rule) for both tracks. We believe that ACOs prepared to accept higher levels of benchmark-based risk would be more likely to enter the ENHANCED track (which allows the greatest risk and potential reward). This
Fifth, longer agreement periods could improve program incentives and support ACOs' transition into performance-based risk when coupled with changes to improve the accuracy of the program's benchmarking methodology. Extending agreement periods for more than 3 years could provide more certainty over benchmarks and in turn give ACOs a greater chance to succeed in the program by allowing them more time to understand their performance, gain experience and implement redesigned care processes before rebasing of the ACO's historical benchmark. Shared Savings Program results show that ACOs tend to perform better the longer they remain in the program. Further, under longer agreement periods, historical benchmarks would become more predictable, since the benchmark would continue to be based on the expenditures for beneficiaries who would have been assigned to the ACO in the 3 most recent years prior to the start of the ACO's agreement period (see §§ 425.602(a) and 425.603(c)) and the benchmark would be risk adjusted and updated each performance year relative to benchmark year 3. However, a number of factors can affect the amount of the benchmark, and therefore its predictability, during the agreement period regardless of whether the agreement period spans 3 or 5 years, including: adjustments to the benchmark during the ACO's agreement period resulting from changes in the ACO's certified ACO participant list and regulatory changes to the assignment methodology; as well as variation in the benchmark value that occurs each performance year as a result of annual risk adjustment to the ACO's benchmark (§§ 425.602(a)(9) and 425.603(c)(10)) and annual benchmark updates (§§ 425.602(b) and 425.603(d)). Further, as discussed in section II.D of this proposed rule, we believe the proposed approach to incorporating factors based on regional FFS expenditures in establishing, adjusting and updating the benchmark beginning with the ACO's first agreement period will result in more accurate benchmarks. This improved accuracy of benchmarks would mitigate the impact of the more generous updated benchmarks that could result in the later years of longer agreement periods.
In summary, taking these factors into consideration, we propose to redesign the program's participation options by discontinuing Track 1, Track 2 and the deferred renewal option, and instead offering two tracks that eligible ACOs would enter into for an agreement period of at least 5 years: (1) BASIC track, which would include an option for eligible ACOs to begin participation under a one-sided model and incrementally phase-in risk (calculated based on ACO participant revenue and capped at a percentage of the ACO's updated benchmark) and potential reward over the course of a single agreement period, an approach referred to as a glide path; and (2) ENHANCED track, based on the program's existing Track 3, for ACOs that take on the highest level of risk and potential reward.
We propose to require ACOs to enter one of two tracks for agreement periods beginning on July 1, 2019, and in subsequent years (as described in section II.A.7 of this proposed rule): either the ENHANCED track, which would be based on Track 3 as currently designed and implemented under § 425.610, or the new BASIC track, which would offer eligible ACOs a glide path from a one-sided model to incrementally higher performance-based risk as described in section II.A.3 of this proposed rule. (Herein, we refer to this participation option for eligible ACOs entering the BASIC track as the BASIC track's glide path, or simply the glide path.)
We propose to add a new provision to the Shared Savings Program regulations at § 425.605 to establish the requirements for this BASIC track. The BASIC track would offer lower levels of risk compared to the levels of risk currently offered in Track 2 and Track 3, and the same maximum level of risk as offered under the Track 1+ Model. Compared to the design of Track 1, we believe this glide path approach, which requires assumption of gently increasing levels of risk and potential reward beginning no later than an ACO's fourth performance year under the BASIC track for agreement periods starting on July 1, 2019 (as discussed in section II.A.7 of this proposed rule) or third performance year under the BASIC track for agreement periods starting in 2020 and all subsequent years, could provide stronger incentives for ACOs to improve their performance.
For agreement periods beginning on July 1, 2019, and in subsequent years, we propose to modify the regulations at §§ 425.600 and 425.610 to designate Track 3 as the ENHANCED track. We propose that all references to the ENHANCED track in the program's regulations would be deemed to include Track 3. Within the preamble of this proposed rule, we intend references to the ENHANCED track to apply to Track 3 ACOs, unless otherwise noted.
As part of the redesign of the program's participation options, we believe it is timely to provide the program's tracks with more descriptive and meaningful names. We believe “enhanced” is indicative of the increased levels of risk and potential reward available to ACOs under the current design of Track 3, the new tools and flexibilities available to performance-based risk ACOs, and the relative incentives for ACOs under this financial model design to improve the quality of care for their assigned beneficiaries (for example, through the availability of the highest sharing rates based on quality performance under the program) and their potential to drive towards reduced costs for Medicare FFS beneficiaries and therefore increased savings for the Medicare Trust Funds. In contrast, “basic” suggests a foundational level, which is reflected in the opportunity under the BASIC track to provide a starting point for ACOs on a pathway to success from a one-sided shared savings model to two-sided risk.
We propose that for agreement periods beginning on July 1, 2019, the length of the agreement would be 5 years and 6 months (as discussed in section II.A.7 of this proposed rule). For agreement periods beginning on January 1, 2020, and in subsequent years, the length of the agreement would be 5 years.
Currently, under § 425.20, we define “agreement period” to mean the term of the participation agreement, which is 3 performance years unless otherwise specified in the participation agreement. We propose to revise this definition to more broadly mean the term of the participation agreement. Additionally, we propose to specify the term of participation agreements beginning on July 1, 2019 and in subsequent years in
We also propose to revise § 425.502(e)(4)(v), specifying calculation of the quality improvement reward as part of determining the ACO's quality score, which includes language based on 3-year agreement periods. Through these revisions, we would specify that the comparison for performance in the first year of the new agreement period would be the last year in the previous agreement period, rather than the third year of the previous agreement period.
The regulation on renewal of participation agreements (§ 425.224(b)) includes criteria regarding an ACO's quality performance and repayment of shared losses that focus on specific years in the ACO's prior 3-year agreement period. In section II.A.5.c of this proposed rule, we discuss proposals to revise these evaluation criteria to be more relevant to assessing prior participation of ACOs under an agreement period of at least 5 years, among other factors.
For ACOs entering agreement periods beginning on July 1, 2019, and in subsequent years, we propose to allow ACOs annually to elect the beneficiary assignment methodology (preliminary prospective assignment with retrospective reconciliation, or prospective assignment) to apply for each remaining performance year within their agreement period. See discussion in section II.A.4.c of this proposed rule.
For ACOs entering agreement periods beginning on July 1, 2019, and in subsequent years, we propose to allow eligible ACOs in the BASIC track's glide path the option to elect entry into a higher level of risk and potential reward under the BASIC track for each performance year within their agreement period. See discussion in section II.A.4.b.
We propose to discontinue Track 1 as a participation option for the reasons described elsewhere in this section. We propose to amend § 425.600 to limit availability of Track 1 to agreement periods beginning before July 1, 2019.
We propose to discontinue Track 2 as a participation option. We propose to amend § 425.600 to limit availability of Track 2 to agreement periods beginning before July 1, 2019. We based these proposals on the following considerations.
For one, the proposal to allow ACOs to select their assignment methodology (section II.A.4.c) and the availability of the proposed BASIC track with relatively low levels of risk compared to the ENHANCED track would ensure the continued availability of a participation option with moderate levels of risk and potential reward in combination with the optional availability of the preliminary prospective beneficiary assignment in the absence of Track 2. We believe that maintaining Track 2 as a participation option between the lower risk of the proposed BASIC track and the higher risk of the ENHANCED track would create redundancy in participation options, while removing Track 2 would offer an opportunity to streamline the tracks offered.
Although Track 2 was the initial two-sided model of the Shared Savings Program, the statistics on Shared Savings Program participation by track (and in the Track 1+ Model) summarized in Table 1 show few ACOs entering and completing their risk bearing agreement period under Track 2 in recent years, and suggest that ACOs prefer either a lower level of risk and potential reward under the Track 1+ Model or a higher level of risk and potential reward under Track 3 than the Track 2 level of risk and potential reward.
Further, under the proposed modifications to the regulations (see section II.A.5.c of this proposed rule), Track 2 ACOs prepared to take on higher risk would have the option to elect to enter the ENHANCED track by completing their agreement period in Track 2 and applying to renew for a subsequent agreement period under the ENHANCED track or by voluntarily terminating their current 3-year agreement and entering a new agreement period under the ENHANCED track, without waiting until the expiration of their current 3-year agreement period. Certain Track 2 ACOs that may not be prepared for the higher level of risk under the ENHANCED track could instead elect to enter the proposed BASIC track at the highest level of risk and potential reward, under the same circumstances.
We propose to discontinue the policy that allows Track 1 ACOs in their first agreement period to defer renewal for a second agreement period in a two-sided model by 1 year, to remain in their current agreement period for a fourth performance year, and to also defer benchmark rebasing. We propose to amend § 425.200(e) to discontinue the deferred renewal option, so that it would be available to only those Track 1 ACOs that began a first agreement period in 2014 and 2015 and have already renewed their participation agreement under the deferred renewal option and therefore this option would not be available to Track 1 ACOs seeking to renew for a second agreement period beginning on July 1, 2019, or in subsequent years. We propose to amend § 425.200(b)(3) to specify that the extension of a first agreement period in Track 1 under the deferred renewal option is available only for ACOs that began a first agreement period in 2014 or 2015 and therefore deferred renewal in 2017 or 2018 (respectively). We considered the following issues in developing this proposal.
For one, continued availability of this option is inconsistent with our proposed redesign of the program, which encourages rapid transition to performance-based risk and requires ACOs on the BASIC track's glide path to enter performance-based risk within their first agreement period under the BASIC track.
Deferral of benchmark rebasing was likely a factor in some ACOs' decisions to defer renewal, particularly for ACOs concerned about the effects of the rebasing methodology on their benchmark. Under the proposal to extend the length of agreement periods from 3 years to not less than 5 years, benchmark rebasing would be delayed by 2 years (relative to a 3-year agreement), rather than 1 year, as provided under the current deferred renewal policy.
Eliminating the deferred renewal option would streamline the program's participation options and operations. Very few ACOs have elected the deferred renewal participation option, with only 8 ACOs that began participating in the program in either 2014 or 2015 renewing their Shared Savings Program agreement under this option to defer entry into a second agreement period under performance-based risk until 2018 or 2019, respectively. We believe the very low uptake of this option demonstrates that it is not effective at facilitating ACOs' transition to performance-based risk. The proposed timing of applicability would prevent ACOs from electing to defer renewal in 2019 for a second agreement period beginning in 2020.
Further, as discussed in section II.A.5.c of this proposed rule, we are proposing to discontinue the “sit-out” period under § 425.222(a), which is cross-referenced in the regulation at § 425.200(e) establishing the deferred renewal option. Under the proposed modifications to § 425.222(a), ACOs that have already been approved to defer renewal until 2019 under this
Modifying the participation options in the Shared Savings Program to offer a new performance-based risk track requires the use of our authority under section 1899(i)(3) of the Act. To add the BASIC track, we must determine that it will improve the quality and efficiency of items and services furnished to Medicare beneficiaries, without additional program expenditures. Consistent with our earlier discussions of the use of this authority to establish the current two-sided models in the Shared Savings Program (see 76 FR 67904 and 80 FR 32771), we believe that the BASIC track would provide an additional opportunity for organizations to enter a risk-sharing arrangement and accept greater responsibility for beneficiary care.
This proposed restructuring of participation options, more generally, would help ACOs transition to performance-based risk more quickly than under the program's current design. This proposed rule would eliminate Track 1 (under which a one-sided model currently is available for up to 6 years), offering instead a glide path with up to 2 performance years under a one-sided model (three, for ACOs that enter the glide path on July 1, 2019), followed by the incremental phase-in of risk and increasing potential for reward over the remaining 3 performance years of the agreement period. As described in section II.A.5.c. of this proposed rule, we propose that ACOs that previously participated in Track 1, or new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, entering the BASIC track's glide path would be eligible for a single performance year under a one-sided model (two, for ACOs that enter the glide path on July 1, 2019). As described in section II.A.7. of this proposed rule, we propose a one-time exception to be specified in revisions to § 425.600, under which the automatic advancement policy would not apply to the second performance year for an ACO entering the BASIC track's glide path for an agreement period beginning on July 1, 2019. For performance year 2020, the ACO may remain in the same level of the BASIC track's glide path that it entered for the performance year beginning on July 1, 2019 (6-month period). The ACO would be automatically advanced to the next level of the BASIC track's glide path at the start of performance year 2021 and all subsequent performance years of the agreement period, unless the ACO elects to advance to a higher level of risk and potential reward under the glide path more quickly, as proposed in section II.A.4.b of this proposed rule. The glide path concludes with the ACO entering a level of potential reward that is the same as is currently available under Track 1, with a level of risk that matches the lesser of either the revenue-based or benchmark-based loss sharing limit under the Track 1+ Model.
Further, we believe a significant incentive for ACOs to transition more quickly to the highest level of risk and reward under the BASIC track is the opportunity to participate in an Advanced APM for purposes of the Quality Payment Program. Under the BASIC track's Level E, an ACO's eligible clinicians would have the opportunity to receive APM Incentive Payments and ultimately higher fee schedule updates starting in 2026, in the payment year corresponding to each performance year in which they attain QP status.
As noted in the Regulatory Impact Analysis (section IV. of this proposed rule), the proposed BASIC track is expected to increase participation in performance-based risk by ACOs that may not otherwise take on the higher exposure to risk required in the ENHANCED track (or in the current Track 2). Such added participation in performance-based risk is expected to include a significant number of low revenue ACOs, including physician-led ACOs. These ACOs have shown stronger performance in the first years of the program despite mainly opting to participate in Track 1. Furthermore, the option for BASIC track ACOs to progress gradually toward risk within a single agreement period or accelerate more quickly to the BASIC track's Level E is expected to further expand eventual participation in performance-based risk by ACOs that would otherwise hesitate to immediately transition to this level of risk because of uncertainty related to benchmark rebasing.
Therefore, we do not believe that adding the BASIC track as a participation option under the Shared Savings Program would result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d) (as discussed in the Regulatory Impact Analysis in section IV. of this proposed rule). Further, we believe that adding the BASIC track would continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries because participating ACOs would have an incentive to perform well on the quality measures in order to maximize the shared savings they may receive and minimize any shared losses they must pay.
This proposed rule includes policy proposals that require that we reassess the policies adopted under the authority of section 1899(i)(3) of the Act to ensure that they comply with the requirements under section 1899(i)(3)(B) of the Act, as discussed in the Regulatory Impact Analysis (see section IV. of this proposed rule). As described in the Regulatory Impact Analysis, the elimination of Track 2 as an on-going participation option, the addition of the BASIC track, the benchmarking changes described in section II.D. of this proposed rule, and the proposal in section II.A.7. of this proposed rule to determine shared savings and shared losses for the 6-month performance years starting on January 1, 2019 and July 1, 2019, using expenditures for the entire calendar year 2019 and then pro-rating these amounts to reflect the shorter performance year, require the use of our authority under section 1899(i) of the Act. These proposed changes to our payment methodology are not expected to result in a situation in which all policies adopted under the authority of section 1899(i) of the Act, when taken together, result in more spending under the program than would have resulted under the statutory payment methodology in section 1899(d) of the Act. We will continue to reexamine this projection in the future to ensure that the requirement under section 1899(i)(3)(B) of the Act that an alternative payment model not result in additional program expenditures continues to be satisfied. In the event that we later determine that the payment model established under section 1899(i)(3) of the Act no longer meets this requirement, we would undertake additional notice and comment rulemaking to make adjustments to the payment model to assure continued compliance with the statutory requirements.
We propose that the BASIC track would be available as a participation option for agreement periods beginning on July 1, 2019 and in subsequent years.
In general, unless otherwise stated, we are proposing to model the BASIC track on the current provisions governing Shared Savings Program ACOs under 42 CFR part 425, including the general eligibility requirements (subpart B), application procedures (subpart C), program requirements and beneficiary protections (subpart D), beneficiary assignment methodology (subpart E), quality performance standards (subpart F), data sharing opportunities and requirements (subpart H), and benchmarking methodology (which as discussed in section II.D of this proposed rule, we propose to specify in a new section of the regulations at § 425.601). Further, we propose that the policies on reopening determinations of shared savings and shared losses to correct financial reconciliation calculations (§ 425.315), the preclusion of administrative and judicial review (§ 425.800), and the reconsideration process (subpart I) would apply to ACOs participating in the BASIC track in the same manner as for all other Shared Savings Program ACOs. Therefore, we propose to amend certain existing regulations to incorporate references to the BASIC track and the proposed new regulation at § 425.605. This includes amendments to §§ 425.100, 425.315, 425.600, and 425.800. As part of the revisions to § 425.800, we propose to clarify that the preclusion of administrative and judicial review with respect to certain financial calculations applies only to the extent that a specific calculation is performed in accordance with section 1899(d) of the Act.
As discussed in section II.A.4.c. of this proposed rule, we are proposing that ACOs in the BASIC track would have an opportunity to annually elect their choice of beneficiary assignment methodology. As discussed in section II.B. of this proposed rule, we propose to make the SNF 3-day rule waiver available to ACOs in the BASIC track under two-sided risk. If these ACOs select prospective beneficiary assignment, their physicians and practitioners billing under ACO participant TINs would also have the opportunity to provide telehealth services under section 1899(l) of the Act, starting in 2020. As described in section II.C. of this proposed rule, BASIC track ACOs under two-sided risk (Levels C, D, or E) would be allowed to apply for and, if approved, establish a CMS-approved beneficiary incentive program to provide incentive payments to eligible beneficiaries for qualifying services.
We propose that, unless otherwise indicated, all current policies that apply to ACOs under a two-sided model would apply also to ACOs participating under risk within the BASIC track. This includes the selection of a Minimum Savings Rate (MSR)/Minimum Loss Rate (MLR) consistent with the options available under the ENHANCED track, as specified in § 425.610(b)(1) (with related proposals discussed in section II.A.6.b. of this proposed rule), and the requirement to establish and maintain an adequate repayment mechanism under § 425.204(f) (with related proposals discussed in section II.A.6.c. of this proposed rule). ACOs participating under the one-sided models of the BASIC track's glide path (Level A and Level B), would be required to select a MSR/MLR and establish an adequate repayment mechanism prior to their first performance year in performance-based risk. Additionally, the same policies regarding notification of savings and losses and the timing of repayment of any shared losses that apply to ACOs in the ENHANCED track (see § 425.610(h)) would apply to ACOs in two-sided risk models under the BASIC track, including the requirement that an ACO must make payment in full to CMS within 90 days of receipt of notification of shared losses.
As described in section II.E.4 of this proposed rule, we are proposing to extend the policies for addressing the impact of extreme and uncontrollable circumstances on ACO quality and financial performance, as established for performance year 2017 to 2018 and subsequent years. We propose that these policies would also apply to BASIC track ACOs. Section 425.502(f) specifies the approach to calculating an ACO's quality performance score for all affected ACOs. Further, we propose that the policies regarding the calculation of shared losses for ACOs under a two-sided risk model that are affected by extreme and uncontrollable circumstances (see § 425.610(i)) would also apply to BASIC track ACOs under performance-based risk. We also propose to specify that policies to adjust shared losses for extreme and uncontrollable circumstances would also apply to BASIC track ACOs that are reconciled for a 6-month performance year under § 425.609 or a partial year of performance under § 425.221(b)(2) as a result of early termination as described in section II.E.4 and II.A.6.d of this proposed rule.
To qualify for shared savings, an ACO must have savings equal to or above its MSR, meet the minimum quality performance standards established under § 425.502, and otherwise maintain its eligibility to participate in the Shared Savings Program (§§ 425.604(a)(7), (b) and (c), 425.606(a)(7), (b) and (c), 425.610(a)(7), (b) and (c)). If an ACO qualifies for savings by meeting or exceeding its MSR, then the final sharing rate (based on quality performance) is applied to the ACO's savings on a first dollar basis, to determine the amount of shared savings up to the performance payment limit (§§ 425.604(d) and (e), 425.606(d) and (e), 425.610(d) and (e)).
Under the current program regulations, an ACO that meets all of the requirements for receiving shared savings under the one-sided model can qualify to receive a shared savings payment of up to 50 percent of all savings under its updated benchmark, as determined on the basis of its quality performance, not to exceed 10 percent of its updated benchmark. A Track 2 ACO can potentially receive a shared savings payment of up to 60 percent of all savings under its updated benchmark, not to exceed 15 percent of its updated benchmark. A Track 3 ACO can potentially receive a shared savings payment of up to 75 percent of all savings under its updated benchmark, not to exceed 20 percent of its updated benchmark. The higher sharing rates and performance payment limits under Track 2 and Track 3 were established as incentives for ACOs to accept greater financial risk for their assigned beneficiaries in exchange for potentially higher financial rewards. (See 76 FR 67929 through 67930, 67934 through 67936; 80 FR 32778 through 32779.)
Under the current two-sided models of the Shared Savings Program, an ACO is responsible for sharing losses with the Medicare program when the ACO's average per capita Medicare expenditures for the performance year are above its updated benchmark costs for the year by at least the MLR established for the ACO (§§ 425.606(b)(3), 425.610(b)(3)). For an ACO that is required to share losses with the Medicare program for expenditures over its updated benchmark, the shared loss rate (also
In earlier rulemaking, we discussed considerations related to establishing the loss sharing rate and loss sharing limit for Track 2 and Track 3. See 76 FR 67937 (discussing shared loss rate and loss sharing limit for Track 2) and 80 FR 32778 through 32779 (including discussion of shared loss rate and loss sharing limit for Track 3). Under Track 2 and Track 3, the loss sharing rate is determined as 1 minus the ACO's final sharing rate based on quality performance, up to a maximum of 60 percent or 75 percent, respectively (except that the loss sharing rate may not be less than 40 percent for Track 3). This creates symmetry between the sharing rates for savings and losses. The 40 percent floor on the loss sharing rate under both Track 2 and Track 3 ensures comparability in the minimum level of performance-based risk that ACOs accept under these tracks. The higher ceiling on the loss sharing rate under Track 3 reflects the greater risk Track 3 ACOs accept in exchange for the possibility of greater reward compared to Track 2.
Under Track 2, the limit on the amount of shared losses phases in over 3 years starting at 5 percent of the ACO's updated historical benchmark in the first performance year of participation in Track 2, 7.5 percent in year 2, and 10 percent in year 3 and any subsequent year. Under Track 3, the loss sharing limit is 15 percent of the ACO's updated historical benchmark, with no phase-in. Losses in excess of the annual limit would not be shared.
The level of risk under both Track 2 and Track 3 exceeds the Advanced APM generally applicable nominal amount standard under § 414.1415(c)(3)(i)(B) (set at 3 percent of the expected expenditures for which an APM Entity is responsible under the APM). CMS has determined that Track 2 and Track 3 meet the Advanced APM criteria under the Quality Payment Program, and are therefore Advanced APMs. Eligible clinicians that sufficiently participate in Advanced APMs such that they are QPs for a performance year receive APM Incentive Payments in the corresponding payment year between 2019 through 2024, and then higher fee schedule updates starting in 2026.
The Track 1+ Model is testing whether combining the upside sharing parameters of the popular Track 1 with limited downside risk sufficient for the model to qualify as an Advanced APM will encourage more ACOs to advance to performance-based risk. The Track 1+ Model has reduced risk in two main ways relative to Track 2 and Track 3. First, losses under the Track 1+ Model are shared at a flat 30 percent loss sharing rate, which is 10 percentage points lower than the minimum quality-adjusted loss sharing rate used in both Track 2 and Track 3. Second, a bifurcated approach is used to set the loss sharing limit for a Track 1+ Model ACO, depending on the ownership and operational interests of the ACO's ACO participants, as identified by TINs and CMS Certification Numbers (CCNs).
The applicable loss sharing limit under the Track 1+ Model is determined based on whether the ACO includes an ACO participant (TIN/CCN) that is an IPPS hospital, cancer center or a rural hospital with more than 100 beds, or that is owned or operated, in whole or in part, by such a hospital or by an organization that owns or operates such a hospital. If at least one of these criteria is met, then a potentially higher level of performance-based risk applies, and the loss sharing limit is set at 4 percent of the ACO's updated historical benchmark (described herein as the benchmark-based loss sharing limit). For the Track 1+ Model, this is a lower level of risk than is required under either Track 2 or Track 3, and greater than the Advanced APM generally applicable nominal amount standard under § 414.1415(c)(3)(i)(B) for 2018, 2019 and 2020. If none of these criteria is met, as may be the case with some ACOs composed of independent physician practices and/or ACOs that include small rural hospitals, then a potentially lower level of performance-based risk applies, and the loss sharing limit is determined as a percentage of the total Medicare Parts A and B FFS revenue of the ACO participants (described herein as the revenue-based loss sharing limit). For Track 1+ Model ACOs under a revenue-based loss sharing limit, in performance years 2018, 2019 and 2020, total liability for shared losses is limited to 8 percent of total Medicare Parts A and B FFS revenue of the ACO participants. If the loss sharing limit, as a percentage of the ACO participants' total Medicare Parts A and B FFS revenue, exceeds the amount that is 4 percent of the ACO's updated historical benchmark, then the loss sharing limit is capped and set at 4 percent of the updated historical benchmark. For performance years 2018 through 2020, this level of performance-based risk qualifies the Track 1+ Model as an Advanced APM under § 414.1415(c)(3)(i)(A). In subsequent years of the Track 1+ Model, if the relevant percentage specified in the Quality Payment Program regulations changes, the Track 1+ Model ACO would be required to take on a level of risk consistent with the percentage required in § 414.1415(c)(3)(i)(A) for an APM to qualify as an Advanced APM.
The loss sharing limit under this bifurcated structure is determined by CMS near the start of an ACO's agreement period under the Track 1+ Model (based on the ACO's application to the Track 1+ Model), and re-determined annually based on an annual certification process prior to the start of each performance year under the Track 1+ Model. The Track 1+ Model ACO's loss sharing limit could be adjusted up or down on this basis. See Track 1+ Model Fact Sheet for more detail.
Since the start of the Shared Savings Program, we have heard a variety of concerns and suggestions from ACOs and other program stakeholders about the transition from a one-sided model to performance-based risk (see discussion in section II.A.1.). Through rulemaking, we developed a one-sided shared savings only model and extended the allowable time in this track to support ACOs' readiness to take on performance-based risk. As a result, the vast majority of Shared Savings Program ACOs have chosen to enter and remain in the one-sided model. We believe that our early experience with the design of the Track 1+ Model demonstrates that the availability of a lower-risk, two-sided model is effective to encourage a large cohort of ACOs to rapidly progress to performance-based risk.
In general, we propose the following participation options within the BASIC track.
First, we propose the BASIC track's glide path as an incremental approach to higher levels of risk and potential reward. The glide path includes 5 levels: a one-sided model available only for the first 2 consecutive performance years of a 5-year agreement period (Level A and B), each year of which is identified as a separate level; and three levels of progressively higher risk and potential reward in performance years 3 through 5 of the agreement period (Level C, D, and E). ACOs would be automatically advanced at the start of each participation year along the
We propose that the participation options in the BASIC track's glide path would depend on an ACO's experience with the Shared Savings Program, as described in section II.A.5.c. of this proposed rule. ACOs eligible for the BASIC track's glide path that are new to the program would have the flexibility to enter the glide path at any one of the five levels. However, ACOs that previously participated in Track 1, or a new ACO identified as a re-entering ACO because more than 50 percent of its ACO participants have recent prior experience in a Track 1 ACO, would be ineligible to enter the glide path at Level A, thereby limiting their opportunity to participate in a one-sided model of the glide path. We also propose ACOs would be automatically transitioned to progressively higher levels of risk and potential reward (if higher levels are available) within the remaining years of the agreement period. We propose to allow ACOs in the BASIC track's glide path to more rapidly transition to higher levels of risk and potential reward within the glide path during the agreement period. As described in section II.A.4.b. of this proposed rule, ACOs in the BASIC track may annually elect to take on higher risk and potential reward within their current agreement period, to more rapidly progress along the glide path.
Second, we propose the BASIC track's highest level of risk and potential reward (Level E) may be elected for any performance year by ACOs that enter the BASIC track's glide path, but it will be required no later than the ACO's fifth performance year of the glide path (sixth performance year for eligible ACOs starting participation in Level A of the BASIC track on July 1, 2019, see section II.A.7.). ACOs in the BASIC track's glide path that previously participated in Track 1, or new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, would be eligible to begin in Level B, and therefore would be required to participate in Level E no later than the ACO's fourth performance year of the glide path (fifth performance year for ACOs starting participation in the BASIC track on July 1, 2019). The level of risk/reward under Level E of the BASIC track is also required for low revenue ACOs eligible to enter an agreement period under the BASIC track that are determined to be experienced with performance-based risk Medicare ACO initiatives (discussed in section II.A.5. of this proposed rule).
We believe that designing a glide path to performance-based risk that concludes with the level of risk and potential reward offered under the Track 1+ Model balances ACOs' interest in remaining under lower-risk options with our goal of more rapidly transitioning ACOs to performance-based risk. The BASIC track's glide path offers a pathway through which ACOs inexperienced with performance-based risk Medicare ACO initiatives can participate under a one-sided model before entering relatively low levels of risk and asymmetrical potential reward for several years, concluding with the lowest level of risk and potential reward available under a current Medicare ACO initiative. We believe the opportunity for eligible ACOs to participate in a one-sided model for up to 2 years (3 performance years, in the case of an ACO entering at Level A of the BASIC track's glide path on July 1, 2019) could offer new ACOs a chance to become experienced with the accountable care model and program requirements before taking on risk. The proposed approach also recognizes that ACOs that gained experience with the program's requirements during prior participation under Track 1, would need less additional time under a one-sided model before making the transition to performance-based risk. However, we also believe the glide path should provide strong incentives for ACOs to quickly move along the progression towards higher performance-based risk, and therefore prefer an approach that significantly limits the amount of potential shared savings in the one-sided model years of the BASIC track's glide path, while offering incrementally higher potential reward in relation to each level of higher risk. Under this approach ACOs would have reduced incentive to enter or remain in the one-sided model of the BASIC track's glide path if they are prepared to take on risk, and we would anticipate that these ACOs would seek to accept greater performance-based risk in exchange for the chance to earn greater reward.
As described in detail in this section, we are proposing a similar asymmetrical two-sided risk design for the BASIC track as is available under the Track 1+ Model, with key distinguishing features based on early lessons learned from the Track 1+ Model. Unless indicated otherwise, we propose that savings would be calculated based on the same methodology used to determine shared savings under the program's existing tracks (see § 425.604). The maximum amount of potential reward under the BASIC track would be the same as the upside of Track 1 and the Track 1+ Model. The methodology for determining shared losses would be a bifurcated approach similar to the approach used under the Track 1+ Model, as discussed in more detail elsewhere in this section. In all years under performance-based risk, we propose to apply asymmetrical levels of risk and reward, where the maximum potential reward would be greater than the maximum level of performance-based risk.
For the BASIC track's glide path, the phase-in schedule of levels of risk/reward by year would be as follows, and are summarized in comparison to the ENHANCED track in Table 2. This progression assumes an ACO enters the BASIC track's glide path under a one-sided model for 2 years and follows the automatic progression of the glide path through each of the 5 years of its agreement period.
• Level A and Level B: Eligible ACOs entering the BASIC track would have the option of being under a one-sided model for up to 2 consecutive performance years (3 consecutive performance years for ACOs that enter the BASIC track's glide path on July 1, 2019). As described elsewhere in this proposed rule, ACOs that previously participated in Track 1, or new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, would be ineligible to enter the glide path under Level A, although they could enter the under Level B. Under this proposed one-sided model, a final sharing rate not to exceed 25 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or
• Level C risk/reward:
++ Shared Savings: a final sharing rate not to exceed 30 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO's updated historical benchmark.
++ Shared Losses: a loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 2 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is 1 percent of the ACO's updated historical benchmark, then the loss sharing limit would be capped and set at 1 percent of the ACO's updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i).
• Level D risk/reward:
++ Shared Savings: A final sharing rate not to exceed 40 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO's updated historical benchmark.
++ Shared Losses: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 4 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is 2 percent of the ACO's updated historical benchmark, then the loss sharing limit would be capped and set at 2 percent of the ACO's updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i).
• Level E risk/reward: The ACO would be under the highest level of risk and potential reward for this track, which is the same level of risk and potential reward being tested in the Track 1+ Model. Further, ACOs that are eligible to enter the BASIC track, but that are ineligible to enter the glide path (as discussed in section II.A.5 of this proposed rule) would enter and remain under Level E risk/reward for the duration of their BASIC track agreement period.
++ Shared Savings: A final sharing rate not to exceed 50 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO's updated historical benchmark. This is the same level of potential reward currently available under Track 1 and Track 1+ Model.
++
This approach initially maintains consistency between the level of risk and potential reward offered under Level E of the BASIC track and the popular Track 1+ Model. We believe this approach to determining the maximum amount of shared losses under Level E of the BASIC track strikes a balance between (1) placing ACOs under a higher level of risk to recognize the greater potential reward under this financial model and the additional tools and flexibilities available to BASIC track ACOs under performance-based risk and (2) establishing an approach to help ensure the maximum level of risk under the BASIC track remains moderate. Specifically, this approach differentiates the level of risk and potential reward under Level E compared to Levels C and D of the BASIC track, by requiring greater risk in exchange for the greatest potential reward under the BASIC track, while still offering more manageable levels of benchmark-based risk than currently offered under Track 2 (in which the loss sharing limit phase-in begins at 5 percent of the ACO's updated benchmark) and Track 3 (15 percent of the ACO's updated benchmark). Further this approach recognizes that eligible ACOs in Level E have the opportunity to earn the greatest share of savings under the BASIC track, and should therefore be accountable for a higher level of losses, particularly in light of their access to tools for care coordination and beneficiary engagement, including furnishing telehealth services in accordance with 1899(l) of the Act, the SNF 3-day rule waiver (as discussed in section II.B of this proposed rule), and the opportunity to implement a CMS-approved beneficiary incentive program (as discussed in section II.C of this proposed rule).
We propose that ACOs entering the BASIC track's glide path would be automatically advanced along the progression of risk/reward levels, at the start of each performance year over the course of the agreement period (except at the start of performance year 2020 for ACOs that start in the BASIC track on July 1, 2019), until they reach the track's maximum level of risk and potential reward. As discussed in section II.A.4.b, BASIC track ACOs in the glide path would also be permitted to elect to advance more quickly to higher levels of
To participate under performance-based risk in the BASIC track, an ACO would be required to establish a repayment mechanism and select a MSR/MLR to be applicable for the years of the agreement period under a two-sided model (as discussed in section II.A.6. of this proposed rule). We propose that an ACO that is unable to meet the program requirements for accepting performance-based risk would not be eligible to enter into a two-sided model under the BASIC track. If an ACO enters the BASIC track's glide path in a one-sided model and is unable to meet the requirements to participate under performance-based risk prior to being automatically transitioned to a performance year under risk, CMS would terminate the ACO's agreement under § 425.218. For example, if an ACO is participating in the glide path in Level B and is unable to establish an adequate repayment mechanism before the start of its performance year under Level C, the ACO would not be permitted to continue its participation in the program.
In section II.A.5.c of this proposed rule, we describe our proposed requirements for determining an ACO's eligibility for participation options in the BASIC track and ENHANCED track based on a combination of factors: ACO participants' Medicare FFS revenue (low revenue ACOs versus high revenue ACOs) and the experience of the ACO legal entity and its ACO participants with performance-based risk Medicare ACO initiatives. Tables 6 and 7 summarize the participation options available to ACOs under the BASIC track and ENHANCED track. As with current program policy, an ACO would apply to enter an agreement period under a specific track. If the ACO's application is accepted, the ACO would remain under that track for the duration of its agreement period.
We propose to codify these policies in a new section of the Shared Savings Program regulations governing the BASIC track, at § 425.605. We seek comment on these proposals.
As we described earlier in this section, under the Track 1+ Model, either a revenue-based or a benchmark-based loss sharing limit is applied based on the Track 1+ Model ACO's self-reported composition of ACO participants as identified by TINs and CCNs, and the ownership of and operational interests in those ACO participants. We have concerns about use of self-reported information for purposes of determining the loss sharing limit in the context of the permanent, national program. The purpose of capturing information on the types of entities that are Track 1+ Model ACO participants and the ownership and operational interests of those ACO participants, as reported by ACOs applying to or participating in the Track 1+ Model, is to differentiate between those ACOs that are eligible for the lower level of risk potentially available under the revenue-based loss sharing limit and those that are subject to the benchmark-based loss sharing limit. For purposes of our proposal to establish the BASIC track in the permanent program, we reconsidered this method of identifying which ACOs are eligible for the revenue-based or benchmark-based loss sharing limits. One concern regarding the Track 1+ Model approach is the burden imposed on ACOs and CMS resulting from reliance on self-reported information. Under the Track 1+ Model, ACOs must collect information about their ACO participant composition and about ownership and operational interests from ACO participants, and potentially others in the TINs' and CCNs' ownership and operational chains, and assess this information to accurately answer questions as required by CMS.
Based on CMS's experience with the initial application cycle for the Track 1+ Model, we believe a simpler approach that achieves similar results to the use of self-reported information would be to consider the total Medicare Parts A and B FFS revenue of ACO participants (TINs and CCNs) based on claims data, without directly considering their ownership and operational interests (or those of related entities). As part of the application cycle for the 2018 performance year under the Track 1+ Model, CMS gained experience with calculating estimates of ACO participant revenue to compare with estimates of ACO benchmark expenditures, for purposes of determining the repayment mechanism amounts for the Track 1+ Model (as described in section II.A.6.c of this proposed rule). The methodology for determining repayment mechanism amounts follows a similar bifurcated approach to the one used to determine the applicable loss sharing limit under the Track 1+ Model. Specifically, for ACOs eligible for a revenue-based loss sharing limit, when the specified percentage of estimated total Medicare Parts A and B FFS revenue for ACO participants exceeds a specified percentage of estimated historical benchmark expenditures, the benchmark-based methodology is applied to determine the ACO's loss sharing limit, which serves to cap the revenue-based amount (see Track 1+ Model Fact Sheet for a brief description of the repayment mechanism estimation methodology). Based on our calculations of repayment mechanism amounts for Track 1+ Model ACOs, we observed a high correlation between the loss sharing limits determined using an ACO's self-reported composition, and its ACO participants' total Medicare Parts A and B FFS revenue. For ACOs that reported including an ACO participant that was an IPPS hospital, cancer center or rural hospital with more than 100 beds, or that was owned or operated by, in whole or in part, such a hospital or by an organization that owns or operates such a hospital, the estimated total Medicare Parts A and B FFS revenue for the ACO participants tended to exceed an estimate of the ACO's historical benchmark expenditures for assigned beneficiaries. For ACOs that reported that they did not include an ACO participant that met these ownership and operational criteria, the estimated total Medicare Parts A and B FFS revenue for the ACO participants tended to be less than an estimate of the ACO's historical benchmark expenditures.
We recognize that this analysis was informed by the definitions for ownership and operational interests, and the definitions for IPPS hospital, cancer center and rural hospital with 100 or more beds, used in the Track 1+ Model. However, we believe these observations from the Track 1+ Model support a more generalizable principle about the extent to which ACOs can control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and therefore their readiness to take on lower or higher levels of performance-based risk.
In this proposed rule, we use the phrases “ACO participants' total Medicare Parts A and B FFS revenue” and “total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries” in the discussion of certain proposed policies. For brevity, we sometimes use shorter phrases instead. For instance, we may refer to ACO participant Medicare FFS revenue, or expenditures for the ACO's assigned beneficiaries.
Based on our experience with the Track 1+ Model, we are proposing an approach under which the loss sharing limit for BASIC track ACOs would be determined as a percentage of ACO participants' total Medicare Parts A and B FFS revenue that is capped at a percentage of the ACO's updated historical benchmark expenditures when the amount that is a certain percentage of ACO participant FFS revenue (depending on the BASIC track risk/reward level) exceeds the specified percentage of the ACO's updated historical benchmark expenditures for the relevant BASIC track risk/reward level. Under our proposed approach, we would not directly consider the types of entities included as ACO participants or ownership and operational interests in ACO participants in determining the loss sharing limit that would apply to ACOs under Levels C, D, and E of the BASIC track. We believe that ACOs whose ACO participants have greater total Medicare Parts A and B FFS revenue relative to the ACO's benchmark are better financially prepared to move to greater levels of risk. Accordingly, this comparison of revenue to benchmark would provide a more accurate method for determining an ACO's preparedness to take on additional risk than an ACO's self-reported information regarding the composition of its ACO participants and any ownership and operational interests in those ACO participants.
We also believe that ACOs that include a hospital billing through an ACO participant TIN are generally more capable of accepting higher risk given their control over a generally larger amount of their assigned beneficiaries' total Medicare Parts A and B FFS expenditures relative to their ACO participants' total Medicare Parts A and B FFS revenue. As a result, we believe that our proposed approach would tend to place ACOs that include hospitals under a benchmark-based loss sharing limit because their ACO participants typically have higher total Medicare Parts A and B FFS revenue compared to the ACO's benchmark. Less often, the ACO participants in an ACO that includes a hospital billing through an ACO participant TIN have low total Medicare Part A and B FFS revenue compared to the ACO's benchmark. Under a claims-based approach to determining the ACO's loss sharing limit, ACOs with hospitals billing through ACO participant TINs and relatively low ACO participant FFS revenue would be under a revenue-based loss sharing limit.
To illustrate, Table 3 compares two approaches to determining loss liability: a claims-based approach (proposed approach) and self-reported composition (approach used for the Track 1+ Model). The table summarizes information regarding ACO participant composition reported by the Track 1+ Model applicants for performance year 2018 and identifies the percentages of applicants whose self-reported composition would have placed the ACO under a revenue-based loss sharing limit or a benchmark-based loss sharing limit. The table then indicates the outcomes of a claims-based analysis applied to this same cohort of applicants. This analysis indicates the proposed claims-based method produces a comparable result to the self-reported composition method. Further, this analysis suggests that under a claims-based method, ACOs that include institutional providers with relatively low Medicare Parts A and B FFS revenue would be placed under a revenue-based loss sharing limit, which may be more consistent with their capacity to assume risk than an approach that considers only the inclusion of certain institutional providers among the ACO participants and their providers/suppliers (TINs and CCNs).
We believe that using ACO participant Medicare FFS revenue to determine the ACO's loss sharing limit balances several concerns. For one, it allows CMS to make a claims-based determination about the ACO's loss limit instead of depending on self-reported information from ACOs. This approach would also alleviate the burden on ACOs of gathering information from ACO participants about their ownership and operational interests and reporting that information to CMS, and would address CMS's concerns about the complexity of auditing the information reported by ACOs.
We are proposing to establish the revenue-based loss sharing limit as the default for ACOs in the BASIC track and to phase-in the percentage of ACO participants' total Medicare Parts A and B FFS revenue as described in section II.A.3.b.2 of this proposed rule. However, if the amount that is the applicable percentage of ACO participants' total Medicare Parts A and B FFS revenue exceeds the amount that is the applicable percentage of the ACO's updated benchmark based on the previously described phase-in schedule, then the ACO's loss sharing limit would be capped and set at this percentage of the ACO's updated historical benchmark. We seek comment on this proposal.
We considered issues related to the generally applicable nominal amount standard for Advanced APMs in our development of the revenue-based loss sharing limit under Level E of the proposed BASIC track. Under § 414.1415(c)(3)(i)(A), the revenue-based nominal amount standard is set at 8 percent of the average estimated total Medicare Parts A and B revenue of all providers and suppliers in a participating APM Entity for QP Performance Periods 2017, 2018, 2019, and 2020. We propose that, for the BASIC track, the percentage of ACO participants' FFS revenue used to determine the revenue-based loss sharing limit for the highest level of risk (Level E) would be set for each performance year consistent with the generally applicable nominal amount standard for an Advanced APM under § 414.1415(c)(3)(i)(A), to allow eligible clinicians participating in a BASIC track ACO subject to the revenue-based loss sharing limit the opportunity to earn the APM incentive payment when the ACO is participating under Level E. For example, for performance years 2019 and 2020, this would be 8 percent. As a result, the proposed BASIC track at Level E risk/reward would meet all of the criteria and be an Advanced APM.
Further, in the CY 2018 Quality Payment Program final rule with comment period, we revised § 414.1415(c)(3)(i)(A) to more clearly indicate that the revenue-based nominal amount standard is determined as a percentage of the revenue of all providers and suppliers in the participating APM Entity (see 82 FR 53836 through 53838). Under the Shared Savings Program, ACOs are composed of one or more ACO participant TINs, which include all providers and suppliers that bill Medicare for items and services that are participating in the ACO. See definitions at § 425.20. In accordance with § 425.116(a)(3), ACO participants must agree to ensure that each provider/supplier that bills through the TIN of the ACO participant agrees to participate in the Shared Savings Program and comply with all applicable requirements. Because all providers/suppliers billing through an ACO participant TIN must agree to participate in the program, for purposes of calculating ACO revenue under the nominal amount standard for Shared Savings Program ACOs, the FFS revenue of the ACO participant TINs is equivalent to the FFS revenue for all providers/suppliers participating in the ACO. Therefore, we intend to perform
We propose to calculate the loss sharing limit for BASIC track ACOs in generally the same manner that is used under the Track 1+ Model. However, as discussed elsewhere in this section, we would not rely on an ACO's self-reported composition as used in the Track 1+ Model to determine if the ACO is subject to a revenue-based or benchmark-based loss sharing limit. Instead, we would calculate a revenue-based loss sharing limit for all BASIC track ACOs, and cap this amount as a percentage of the ACO's updated historical benchmark. Generally, calculation of the loss sharing limit would include the following steps:
• Determine ACO participants' total Medicare FFS revenue, which includes total Parts A and B FFS revenue for all providers and suppliers that bill for items and services through the TIN, or a CCN enrolled in Medicare under the TIN, of each ACO participant in the ACO for the applicable performance year.
• Apply the applicable percentage under the proposed phase-in schedule (described in section II.A.3.b.2. of this proposed rule) to this total Medicare Parts A and B FFS revenue for ACO participants to derive the revenue-based loss sharing limit.
• Use the applicable percentage of the ACO's updated benchmark, instead of the revenue-based loss sharing limit, if the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is the specified percentage of the ACO's updated historical benchmark, based on the phase-in schedule. In that case, the loss sharing limit is capped and set at the applicable percentage of the ACO's updated historical benchmark for the applicable performance year.
To illustrate, Table 4 provides a hypothetical example of the calculation of the loss sharing limit for an ACO participating under Level E of the BASIC track. This example would be relevant, under the proposed policies, for an ACO participating in BASIC track Level E for the performance years beginning on July 1, 2019, and January 1, 2020, based on the percentages of revenue and ACO benchmark expenditures specified in generally applicable nominal amount standards in the Quality Payment Program regulations. In this scenario, the ACO's loss sharing limit would be set at $1,090,479 (8 percent of ACO participant revenue) because this amount is less than 4 percent of the ACO's updated historical benchmark expenditures.
More specifically, ACO participants' total Medicare Parts A and B FFS revenue would be calculated as the sum of Medicare paid amounts on all non-denied claims associated with TINs on the ACO's certified ACO participant list, or the CCNs enrolled under an ACO participant TIN as identified in the Provider Enrollment, Chain, and Ownership System (PECOS), for all claim types used in program expenditure calculations that have dates of service during the performance year, using 3 months of claims run out. ACO participant Medicare FFS revenue would not be limited to claims associated with the ACO's assigned beneficiaries, and would instead be based on the claims for all Medicare FFS beneficiaries furnished services by the ACO participant. Further in calculating ACO participant Medicare FFS revenue, we would not truncate a beneficiary's total annual FFS expenditures or adjust to remove indirect medical education (IME), disproportionate share hospital (DSH), or uncompensated care payments or to add back in reductions made for sequestration. ACO participant Medicare FFS revenue would include any payment adjustments reflected in the claim payment amounts (for example, under MIPS or Hospital Value Based Purchasing Program) and would also include individually identifiable final payments made under a demonstration, pilot, or time-limited program, and would be determined using the same completion factor used for annual expenditure calculations.
This approach to calculating ACO participant Medicare FFS revenue is different from our approach to calculating benchmark and performance year expenditures for assigned beneficiaries, which we truncate at the 99th percentile of national Medicare FFS expenditures for assignable beneficiaries, and from which we exclude IME, DSH and uncompensated care payments (see subpart G of the program's regulations). We truncate expenditures to minimize variation from catastrophically large claims. We note that truncation occurs based on an assigned beneficiary's total annual Parts A and B FFS expenditures, and is not apportioned based on services furnished by ACO participant TINs. See Medicare Shared Savings Program, Shared Savings and Losses and Assignment Methodology Specifications (May 2018, version 6) available at
Currently, for Track 2 and Track 3 ACOs, the loss sharing limit (as a percentage of the ACO's updated benchmark) is determined each performance year, at the time of financial reconciliation. Consistent with this approach, we would determine the loss sharing limit for BASIC track ACOs annually, at the time of financial reconciliation for each performance year. Further, under the existing policies for the Shared Savings Program, we adjust the historical benchmark annually for changes in the ACO's certified ACO participant list. See §§ 425.602(a)(8) and 425.603(b), (c)(8). See also the Shared Savings and Losses and Assignment Methodology Specifications, version 6. Similarly, the annual determination of a BASIC track ACO's loss sharing limit would reflect changes in ACO composition based on changes to the ACO's certified ACO participant list.
We propose to codify these policies in a new section of the Shared Savings Program regulations governing the BASIC track, at § 425.605. We seek comment on these proposals.
Background on our consideration of and stakeholders' interest in allowing ACOs the flexibility to elect different participation options within their current agreement period is described in section II.A.1 of this proposed rule. In this section, we propose policies to allow ACOs in the BASIC track's glide path to annually elect to take on higher risk and to allow ACOs in the BASIC track and ENHANCED track to annually elect their choice of beneficiary assignment methodology (either preliminary prospective assignment with retrospective reconciliation or prospective assignment).
We are proposing to incorporate additional flexibility in participation options by allowing ACOs that enter an agreement period under the BASIC track's glide path an annual opportunity to elect to enter higher levels of performance-based risk within the BASIC track within their agreement period. We believe this flexibility would be important for ACOs entering the glide path under either the one-sided model (Level A or Level B) or the lowest level of risk (Level C) that may seek to transition more quickly to higher levels of risk and potential reward. (We note that an ACO entering the glide path at Level D would be automatically transitioned to Level E in the following year, and an ACO that enters the glide path at Level E must remain at this level for the duration of its agreement period.)
In developing this proposal, we considered that an ACO under performance-based risk has the potential to induce more meaningful systematic change in providers' and suppliers' behavior. We also considered that an ACO's readiness for greater performance-based risk may vary depending on a variety of factors, including the ACO's experience with the program (for example, in relation to its elected beneficiary assignment methodology, composition of ACO participants, and benchmark value) and its ability to coordinate care and carry out other interventions to improve quality and financial performance. Lastly, we considered that an ACO may seek to more quickly take advantage of the features of higher levels of risk and potential reward within the BASIC track's glide path, including: Potential for greater shared savings; increased ability to use telehealth services as provided under section 1899(l) of the Act, use of a SNF 3-day rule waiver, and the opportunity to establish a CMS-approved beneficiary incentive program (described in sections II.B and II.C of this proposed rule); and the opportunity to participate in an Advanced APM under the Quality Payment Program after progressing to Level E of the BASIC track's glide path.
We believe it would be protective of the Trust Funds to restrict ACOs from moving from the BASIC track to the ENHANCED track within their current agreement period. This would guard against selective participation in a financial model with the highest potential level of reward while the ACO remains subject to a benchmark against which it is very confident of its ability to generate shared savings. However, under the proposal to eliminate the sit-out period for re-entry into the program after termination (see discussion in section II.A.5.c of this proposed rule), an ACO (such as a BASIC track ACO) may terminate its participation agreement and quickly enter a new agreement period under a different track (such as the ENHANCED track).
We propose to add a new section of the Shared Savings Program regulations at § 425.226 to govern annual participation elections. Specifically, we propose to allow an ACO in the BASIC track's glide path to annually elect to accept higher levels of performance-based risk, available within the glide path, within its current agreement period. We propose that the annual election for a change in the ACO's level of risk and potential reward must be made in the form and manner, and according to the timeframe, established by CMS. We also propose that an ACO executive who has the authority to legally bind the ACO must certify the election to enter a higher level of risk and potential reward within the agreement period. We propose that the ACO must meet all applicable requirements for the newly selected level of risk, which in the case of ACOs transitioning from a one-sided model to a two-sided model include establishing an adequate repayment mechanism and electing the MSR/MLR that will apply for the remainder of their agreement period under performance-based risk. (See section II.A.6 for a detailed discussion of these requirements.) We propose that the ACO must elect to change its participation option before the start of the performance year in which the ACO wishes to begin participating under a higher level of risk and potential reward. We envision that the timing of an ACO's election would generally follow the timing of the Shared Savings Program's application cycle.
The ACO's participation in the newly selected level of risk and potential reward, if approved, would be effective at the start of the next performance year. In subsequent years, the ACO may again choose to elect a still higher level of risk and potential reward (if a higher risk/reward option is available within the glide path). Otherwise, the automatic transition to higher levels of risk and potential reward in subsequent years would continue to apply to the remaining years of the ACO's agreement period in the glide path. We also propose related changes to § 425.600 to reflect the opportunity for ACOs in the BASIC track's glide path to transition to higher risk and potential reward during an agreement period.
For example, if an eligible ACO enters the glide path in year 1 at Level A (one-sided model) and elects to enter Level D (two-sided model) for year 2, the ACO would automatically transition to Level E (highest level of risk/reward under the BASIC track) for year 3, and would remain in Level E for year 4 and year 5 of the agreement period. We note that ACOs starting in the BASIC track's glide path for an agreement period beginning July 1, 2019 could elect to enter a higher level of risk/reward within the BASIC
In general, we wish to clarify that the proposal to allow ACOs to elect to transition to higher levels risk and potential reward within an agreement period in the BASIC track's glide path does not alter the timing of benchmark rebasing under the proposed new section of the regulations at § 425.601. For example, if an ACO participating in the BASIC track's glide path transitions to a higher level of risk and potential reward during its agreement period, the ACO's historical benchmark would not be rebased as a result of this change. We would continue to assess the ACO's financial performance using the historical benchmark established at the start of the ACO's current agreement period, as adjusted and updated consistent with the benchmarking methodology under the proposed new provision at § 425.601.
Section 1899(c)(1) of the Act, as amended by section 50331 of the Bipartisan Budget Act of 2018, provides that the Secretary shall determine an appropriate method to assign Medicare FFS beneficiaries to an ACO based on utilization of primary care services furnished by physicians in the ACO and, in the case of performance years beginning on or after January 1, 2019, services provided by a FQHC or RHC. The provisions of section 1899(c) govern beneficiary assignment under all tracks of the Shared Savings Program. Although, to date, we have designated which beneficiary assignment methodology will apply for each track of the Shared Savings Program, section 1899(c) of the Act (including as amended by the Bipartisan Budget Act) does not expressly require that the beneficiary assignment methodology be determined by track.
Under the Shared Savings Program regulations, we have established two claims-based beneficiary assignment methods (prospective assignment and preliminary prospective assignment with retrospective reconciliation) that currently apply to different program tracks, as well as a non-claims based process for voluntary alignment (discussed in section II.E.2 of this proposed rule) that applies to all program tracks and is used to supplement claims-based assignment. The regulations governing the assignment methodology under the Shared Savings Program are in 42 CFR part 425, subpart E. In the November 2011 final rule, we adopted a claims-based hybrid approach (called preliminary prospective assignment with retrospective reconciliation) for assigning beneficiaries to an ACO (76 FR 67851 through 67870), which is currently applicable to ACOs participating under Track 1 or Track 2 of the Shared Savings Program (except for Track 1 ACOs that are also participating in the Track 1+ Model for which we use a prospective assignment methodology in accordance with our authority under section 1115A of the Act). Under this approach, beneficiaries are preliminarily assigned to an ACO, based on a two-step assignment methodology, at the beginning of a performance year and quarterly thereafter during the performance year, but final beneficiary assignment is determined after the performance year based on where beneficiaries chose to receive the plurality of their primary care services during the performance year. Subsequently, in the June 2015 final rule, we implemented an option for ACOs to participate in a new performance-based risk track, Track 3 (80 FR 32771 through 32781). Under Track 3, beneficiaries are prospectively assigned to an ACO at the beginning of the performance year using the same two-step methodology used in the preliminary prospective assignment approach, based on where the beneficiaries have chosen to receive the plurality of their primary care services during a 12-month assignment window offset from the calendar year that reflects the most recent 12 months for which data are available prior to the start of the performance year. The ACO is held accountable for beneficiaries who are prospectively assigned to it for the performance year. Under limited circumstances, a beneficiary may be excluded from the prospective assignment list, such as if the beneficiary enrolls in MA during the performance year or no longer lives in the United States or U.S. territories and possessions (as determined based on the most recent available data in our beneficiary records regarding residency at the end of the performance year).
Finally, in the CY 2017 PFS final rule (81 FR 80501 through 80510), we augmented the claims-based beneficiary assignment methodology by finalizing a policy under which beneficiaries, beginning in 2017 for assignment for performance year 2018, may voluntarily align with an ACO by designating a “primary clinician” (referred to as a “main doctor” in the prior rulemaking) they believe is responsible for coordinating their overall care using MyMedicare.gov, a secure, online, patient portal. Notwithstanding the assignment methodology in § 425.402(b), beneficiaries who designate an ACO professional whose services are used in assignment as responsible for their overall care will be prospectively assigned to the ACO in which that ACO professional participates, provided the beneficiary meets the eligibility criteria established at § 425.401(a) and is not excluded from assignment by the criteria in § 425.401(b), and has had at least one primary care service during the assignment window with an ACO professional in the ACO who is a primary care physician or a physician with one of the primary specialty designations included in § 425.402(c). Such beneficiaries will be added prospectively to the ACO's list of assigned beneficiaries for the subsequent performance year. See section II.E.2 of this proposed rule for a discussion of the new provisions regarding voluntary alignment added to section 1899(c) of the Act by section 50331 of the Bipartisan Budget Act, and our related proposed regulatory changes.
Section 50331 of the Bipartisan Budget Act specifies that, for agreement periods entered into or renewed on or after January 1, 2020, ACOs in a track that provides for retrospective beneficiary assignment will have the opportunity to choose a prospective assignment methodology, rather than the retrospective assignment methodology, for the applicable agreement period. The Bipartisan Budget Act incorporates this requirement as a new provision at section 1899(c)(2)(A) of the Act.
In this proposed rule, we are proposing to implement this provision of the Bipartisan Budget Act to provide all ACOs with a choice of prospective assignment for agreement periods beginning July 1, 2019 and in subsequent years. We are also proposing to incorporate additional flexibility into the beneficiary assignment methodology consistent with the Secretary's authority under section 1899(c)(1) of the Act to determine an appropriate beneficiary assignment methodology. We do not believe that section 1899(c) of the Act, as amended by the Bipartisan Budget Act, requires that we must continue to specify the applicable beneficiary assignment methodology for each track of the Shared Savings Program. Although section 1899(c)(2)(A) of the Act now provides that ACOs must be permitted to choose prospective assignment for each agreement period, we do not believe this requirement limits our discretion to allow ACOs the
As an approach to meeting the requirements of the Bipartisan Budget Act while building on them to offer greater flexibility, we propose to offer ACOs entering agreement periods in the BASIC track or ENHANCED track, beginning July 1, 2019 and in subsequent years, the option to choose either prospective assignment or preliminary prospective assignment with retrospective reconciliation, prior to the start of their agreement period (at the time of application). We also propose to provide an opportunity for ACOs to switch their selection of beneficiary assignment methodology on an annual basis. Under this approach, in addition to the requirement under the Bipartisan Budget Act that ACOs be permitted to change from retrospective assignment to prospective assignment, an ACO would have the added flexibility to change from prospective assignment to preliminary prospective assignment with retrospective reconciliation. As an additional flexibility that further builds on the Bipartisan Budget Act, ACOs would be allowed to retain the same beneficiary assignment methodology for an entire agreement period or to change the methodology annually. An individual ACO's preferred choice of beneficiary assignment methodology may vary depending on the ACO's experience with the two assignment methodologies used under the Shared Savings Program. Therefore, we believe this proposed approach implements the requirements of the Bipartisan Budget Act and will also be responsive to stakeholders' suggestions that we allow additional flexibility around choice of beneficiary assignment methodology to facilitate ACOs' transition to performance-based risk (as discussed earlier in this section). Further, allowing this additional flexibility for choice of beneficiary assignment methodology within the proposed BASIC track and ENHANCED track would enable ACOs to select a combination of participation options that would overlap with certain features of Track 2, and thus lessen the need to maintain Track 2 as a separate participation option. Accordingly, as discussed in section II.A.2 of this proposed rule, we are proposing to discontinue Track 2. Finally, we believe it is appropriate and reasonable to start offering the choice of beneficiary assignment to ACOs in the BASIC track or ENHANCED track for agreement periods beginning July 1, 2019, in order to align with the availability of these two tracks under the proposed redesign of the Shared Savings Program.
We propose that, in addition to choosing the track to which it is applying, an ACO would choose the beneficiary assignment methodology at the time of application to enter or re-enter the Shared Savings Program or to renew its participation for another agreement period. If the ACO's application is accepted, the ACO would remain under that beneficiary assignment methodology for the duration of its agreement period, unless the ACO chooses to change the beneficiary assignment methodology through the annual election process. We also propose that the ACO must indicate its desire to change assignment methodology before the start of the performance year in which it wishes to begin participating under the alternative assignment methodology. The ACO's selection of a different assignment methodology would be effective at the start of the next performance year, and for the remaining years of the agreement period, unless the ACO again chooses to change the beneficiary assignment methodology. For example, if an ACO selects preliminary prospective assignment with retrospective reconciliation at the time of its application to the program for an agreement period beginning July 1, 2019, this methodology would apply in the ACO's first performance year (6-month performance year from July 2019-December 2019) and all subsequent performance years of its agreement period, unless the ACO selects prospective assignment in advance of the start of performance year 2020, 2021, 2022, 2023, or 2024. To continue this example, during its first performance year, the ACO would have the option to select prospective assignment to be applicable beginning with performance year 2020. If selected, this assignment methodology would continue to apply unless the ACO again selects a different methodology.
We propose to incorporate the requirements governing the ACO's initial selection of beneficiary assignment methodology and the annual opportunity for an ACO to notify CMS that it wishes to change its beneficiary assignment methodology within its current agreement period, in a new section of the Shared Savings Program regulations at § 425.226 along with the other annual elections described elsewhere in this proposed rule. We propose that the initial selection of, and any annual selection for a change in, beneficiary assignment methodology must be made in the form and manner, and according to the timeframe, established by CMS. We also propose that an ACO executive who has the authority to legally bind the ACO must certify the selection of beneficiary assignment methodology for the ACO. We envision that the timing of this opportunity for an ACO to change assignment methodology would generally follow the Shared Savings Program's application cycle. For consistency, we also propose to make conforming changes to regulations that currently identify assignment methodologies according to program track. Specifically, we propose to revise §§ 425.400 and 425.401 (assignment of beneficiaries), § 425.702 (aggregate reports) and § 425.704 (beneficiary-identifiable claims data) to reference either preliminary prospective assignment with retrospective reconciliation or prospective assignment instead of referencing the track to which a particular assignment methodology applies (currently Track 1 and Track 2, or Track 3, respectively).
We wish to clarify that this proposal would have no effect on the voluntary alignment process under § 425.402(e). Because beneficiaries may voluntarily align with an ACO through their designation of a “primary clinician,” and eligible beneficiaries will be prospectively assigned to that ACO regardless of the ACO's track or claims-based beneficiary assignment methodology, an ACO's choice of claims-based assignment methodology under this proposal would not alter the voluntary alignment process.
As part of the proposed approach to allow ACOs to elect to change their assignment methodology within their
As we explained in earlier rulemaking, we currently use differing assignment windows to determine beneficiary assignment for the benchmark years and performance years, according to the ACO's track and the beneficiary assignment methodology used under that track. The assignment window for ACOs under prospective assignment is a 12-month period off-set from the calendar year, while for ACOs under preliminary prospective assignment with retrospective reconciliation, the assignment window is the 12-month period based on the calendar year (see 80 FR 32699, and 80 FR 32775 through 32776). However, for all ACOs, the claims used to determine the per capita expenditures for a benchmark or performance year are the claims for services furnished to assigned beneficiaries from January 1 through December 31 of the calendar year that corresponds to the applicable benchmark or performance year (see for example, 79 FR 72812 through 72813, see also 80 FR 32776 through 32777). We explained that this approach removes actuarial bias between the benchmarking and performance years for assignment and financial calculations, since the same method would be used to determine assignment and the financial calculations for each benchmark and performance year. Further, basing the financial calculations on the calendar year is necessary to align with actuarial analyses with respect to risk score calculations and other data inputs based on national FFS expenditures used in program financial calculations, which are determined on a calendar year basis (79 FR 72813). We continue to believe it is important to maintain symmetry between the benchmark and performance year calculations, and therefore believe it is necessary to adjust the benchmark for ACOs that change beneficiary assignment methodology within their current agreement period to reflect changes in beneficiary characteristics due to the change in beneficiary assignment methodology, as provided in section 1899(d)(1)(B)(ii) of the Act. For example, if an ACO were to elect to change its applicable beneficiary assignment methodology during its initial agreement period from preliminary prospective assignment with retrospective reconciliation to prospective assignment, we would adjust the ACO's historical benchmark for the current agreement period to reflect the expenditures of beneficiaries that would have been assigned to the ACO during the benchmark period using the prospective assignment methodology, instead of the expenditures of the beneficiaries assigned under the preliminary prospective assignment methodology that were used to establish the benchmark at the start of the agreement period. Therefore, we propose to specify in the proposed new section of the regulations at § 425.601 that would govern establishing, adjusting, and updating the benchmark for all agreement periods beginning July 1, 2019 and in subsequent years that we will adjust an ACO's historical benchmark to reflect a change in the ACO's beneficiary assignment methodology within an agreement period. However, any adjustment to the benchmark to account for a change in the ACO's beneficiary assignment methodology would not alter the timing of benchmark rebasing under § 425.601; the historical benchmark would not be rebased as a result of a change in the ACO's beneficiary assignment methodology.
We seek comment on these proposals.
In this section, we describe considerations related to, and proposed policies for, distinguishing among ACOs based on their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries by identifying low revenue versus high revenue ACOs, experience of the ACO's legal entity and ACO participants with the Shared Savings Program and performance-based risk Medicare ACO initiatives, and prior performance in the Shared Savings Program. Based on operational experience and considerations related to our proposal to extend the length of an agreement period under the program from 3 to not less than 5 years for agreement periods beginning on July 1, 2019 and in subsequent years, we aim to strengthen the following programmatic areas by further policy development.
First, we believe that differentiating between ACOs based on their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries would allow us to transition high revenue ACOs more quickly to higher levels of performance-based risk under the ENHANCED track, rather than remaining in a lower level of risk under the BASIC track. We aim to drive more meaningful systematic change in high revenue ACOs which have greater potential to control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries and in turn the potential to drive significant change in spending and coordination of care for assigned beneficiaries across care settings. We also aim to encourage continued participation by low revenue ACOs, which control a smaller proportion of total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and thus may be encouraged to continue participation in the program by having additional time under the BASIC track's revenue-based loss sharing limits before transitioning to the ENHANCED track.
Second, we believe that differentiating between ACOs that are experienced and inexperienced with performance-based risk Medicare ACO initiatives to determine their eligibility for participation options would allow us to prevent experienced ACOs from taking advantage of options designed for inexperienced ACOs, namely lower levels of performance-based risk.
Third, we believe it is timely to clarify the differences between ACOs applying to renew their participation agreements and ACOs applying to re-enter the program after a break in participation, and to identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACOs accountable for their ACO participants' experience with the program. We aim to provide a more consistent evaluation of these ACOs' prior performance in the Shared Savings Program at the time of re-application. We also aim to update policies to identify the agreement period an ACO is entering into for purposes of benchmark calculations and quality performance requirements that phase-in as the ACO gains experience in the program, as appropriate for renewing ACOs, re-entering ACOs, and new program entrants.
Fourth, and lastly, we believe it is appropriate to modify the evaluation criteria for prior quality performance to be relevant to ACOs' participation in longer agreement periods and introduce a monitoring approach for and evaluation criterion related to financial performance to prevent underperforming ACOs from remaining in the program.
In this section, we propose to differentiate between the participation options available to low revenue ACOs and high revenue ACOs, through the following: (1) Proposals for defining “low revenue ACO” and “high revenue ACO” relative to a threshold of ACO participants' total Medicare Parts A and B FFS revenue compared to total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries for the same 12 month period; (2) proposals for establishing distinct participation options for low revenue ACOs and high revenue ACOs, with the availability of multiple agreement periods under the BASIC track as the primary distinction; and (3) consideration of approaches to allow greater potential for reward for low revenue ACOs, such as by reducing the MSR ACOs must meet to share in savings during one-sided model years of the BASIC track's glide path, or allowing higher sharing rates based on quality performance during the first 4 years in the glide path.
To define low revenue ACOs and high revenue ACOs for purposes of determining ACO participation options, we believe it is important to consider the relationship between an ACO's degree of control over the Medicare Parts A and B FFS expenditures for its assigned beneficiaries and its readiness to accept higher or lower degrees of performance-based risk. Elsewhere in this proposed rule, we explain that an ACO's ability to control the expenditures of its assigned beneficiary population can be gauged by comparing the total Medicare Parts A and B FFS revenue of its ACO participants to total Medicare Parts A and B FFS expenditures of its assigned beneficiary population. Thus, high revenue ACOs, which typically include a hospital billing through an ACO participant TIN, are generally more capable of accepting higher risk, given their control over a generally larger amount of their assigned beneficiaries' total Medicare Parts A and B FFS expenditures. In contrast, lower risk options could be more suitable for low revenue ACOs, which have control over a smaller amount of their assigned beneficiaries' total Medicare Parts A and B FFS expenditures.
In the Regulatory Impact Analysis (section IV. of this proposed rule), we describe an approach for differentiating low revenue versus high revenue ACOs that reflects the amount of control ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries. Under this analysis, an ACO was identified as low revenue if its ACO participants' total Medicare Parts A and B FFS revenue for assigned beneficiaries was less than 10 percent of the ACO's assigned beneficiary population's total Medicare Parts A and B FFS expenditures. In contrast, an ACO was identified as high revenue if its ACO participants' total Medicare Parts A and B FFS revenue for assigned beneficiaries was at least 10 percent of the ACO's assigned beneficiary population's total Medicare Parts A and B FFS expenditures. As further explained in section IV, nationally, evaluation and management spending accounts for about 10 percent of total Parts A and B per capita spending. Because beneficiary assignment principally is based on allowed charges for primary care services, which are highly correlated with evaluation and management spending, we concluded that identifying low revenue ACOs by applying a 10 percent limit on the ACO participants' Medicare FFS revenue for assigned beneficiaries in relation to total Medicare Parts A and B expenditures for these beneficiaries would be likely to capture all ACOs that were solely comprised of ACO providers/suppliers billing for Medicare PFS services, and generally exclude ACOs with ACO providers/suppliers that bill for inpatient or other institutional services for their assigned beneficiaries. We considered this approach as an option for distinguishing between low revenue and high revenue ACOs.
However, we are concerned that this approach does not sufficiently account for ACO participants' total Medicare Parts A and B FFS revenue (as opposed to their revenue for assigned beneficiaries), and therefore could misrepresent the ACO's overall risk bearing potential, which would diverge from other aspects of the proposed design of the BASIC track. We believe it is important to consider ACO participants' total Medicare Parts A and B FFS revenue for all FFS beneficiaries, not just assigned beneficiaries, as a factor in assessing an ACO's readiness to accept performance-based risk. The total Medicare Parts A and B FFS revenue of the ACO participants could be indicative of whether the ACO participants, and therefore potentially the ACO, are more or less capitalized. For example, ACO participants with high levels of total Medicare Parts A and B FFS revenue are presumed to be better capitalized, and may be better positioned to contribute to repayment of any shared losses owed by the ACO. Further, the proposed methodologies for determining the loss sharing limit under the BASIC track (see section II.A.3 of this proposed rule) and the estimated repayment mechanism values for BASIC track ACOs (see section II.A.6.c of this proposed rule), include a comparison of a specified percentage of ACO participants' total Medicare Parts A and B FFS revenue for all Medicare FFS beneficiaries to a percentage of the ACO's updated historical benchmark expenditures for its assigned beneficiary population.
Accordingly, we propose that if ACO participants' total Medicare Parts A and B FFS revenue exceeds a specified threshold of total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, the ACO would be considered high revenue, while ACOs with a percentage less than the threshold amount would be considered low revenue. In determining the appropriate threshold, we considered our claims-based analysis comparing estimated revenue and benchmark values for Track 1+ Model applicants, as described in section II.A.3. of this proposed rule. We believe setting the threshold at 25 percent would tend to categorize ACOs that include institutional providers as ACO participants or as ACO providers/suppliers billing through the TIN of an ACO participant, as high revenue because their ACO participants' total Medicare Parts A and B FFS revenue would likely significantly exceed 25 percent of total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. Among Track 1+ Model ACOs that self-reported as eligible for the Model's benchmark-based loss sharing limit because of the presence of an ownership or operational interest by an IPPS hospital, cancer center or rural hospital with more than 100 beds among their ACO participants, we compared estimated total Medicare Parts A and B FFS revenue for ACO participants to estimated total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. We found that self-reported composition and high-revenue determinations made using the 25 percent threshold were in agreement
We believe small, physician-only and rural ACOs would tend to be categorized as low revenue ACOs because their ACO participants' total Medicare Parts A and B FFS revenue would likely be significantly less than total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. Among Track 1+ Model ACOs that self-reported to be eligible for the Model's revenue-based loss sharing limit because of the absence of an ownership or operational interest by the previously described institutional providers among their ACO participants, we compared estimated total Medicare Parts A and B FFS revenue for ACO participants to estimated total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. We found the self-reported composition and low-revenue determinations made using the 25 percent threshold were in agreement for 88 percent of ACOs. The proposed approach would move ACOs with higher revenue to a higher loss sharing limit, while continuing to categorize low revenue ACOs, which are often composed of small physician practices, rural providers, and those serving underserved areas, as eligible for potentially lower loss sharing limits. Further, based on initial modeling with performance year 2016 program data, ACOs for which the total Medicare Parts A and B FFS revenue of their ACO participants was less than 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries tended to have either no or almost no inpatient revenue and generally showed stronger than average financial results compared to higher revenue ACOs.
We believe these observations are generalizable and suggest our proposal to use ACO participants' total Medicare Parts A and B FFS revenue to classify ACOs would serve as a proxy for ACO participant composition. The proposed approach generally would categorize ACOs that include hospitals, health systems or other providers and suppliers that furnish Part A services as ACO participants or ACO providers/suppliers as high revenue ACOs, while categorizing ACOs with ACO participants and ACO providers/suppliers that mostly furnish Part B services as low revenue ACOs. Accordingly, we propose to use a 25 percent threshold to determine low revenue versus high revenue ACOs by comparing total Medicare Parts A and B FFS revenue of ACO participants to the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. Consistent with this proposal, we also propose to add new definitions at § 425.20 for “low revenue ACO,” and “high revenue ACO.”
We propose to define “high revenue ACO” to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is at least 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available.
We propose to define “low revenue ACO” to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is less than 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available.
We also considered using a lower or higher percentage as the threshold for determining low revenue ACOs and high revenue ACOs. Specifically, we considered instead setting the threshold for ACO participant revenue lower, for example at 15 percent or 20 percent of total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries. However, we are concerned a lower threshold could categorize ACOs with more moderate revenue as high revenue, for example because of the presence of multi-specialty physician practices or certain rural or safety net providers/suppliers (such as CAHs, FQHCs and RHCs). Categorizing these moderate revenue ACOs as high revenue, could require ACOs that have a smaller degree of control over the expenditures of their assigned beneficiaries, and ACOs that are not as adequately capitalized, to participate in a level of performance-based risk that the ACO would not be prepared to manage. We also considered setting the threshold higher, for example at 30 percent. We are concerned a higher threshold could inappropriately categorize ACOs as low revenue when their ACO participants have substantial total Medicare Parts A and B FFS revenue and therefore an increased ability to influence expenditures for their assigned beneficiaries and also greater access to capital to support participation under higher levels of performance-based risk. We seek comment on these alternative thresholds for defining “low revenue ACO” and “high revenue ACO.”
The proposed 12 month comparison period for determining whether an ACO is low revenue or high revenue is consistent with the proposed 12 month period for determining repayment mechanism amounts (as described in section II.A.6.c of this proposed rule). Such an approach could allow us to use the same sources of revenue and expenditure data during the program's annual application cycle to estimate the ACO's repayment mechanism amount and to determine the ACO's participation options according to whether the ACO is categorized as a low revenue or high revenue ACO. Additionally, for ACOs with a participant agreement start date of July 1, 2019, we also propose to determine whether the ACO is low revenue or high revenue using expenditure data from the most recent calendar year for which 12 months of data are available.
We note that under this proposed approach to using claims data to determine participation options, it would be difficult for ACOs to determine at the time of application submission whether they would be identified as a low revenue or high revenue ACO. However, after an ACO's application is submitted and before the ACO would be required to execute a participation agreement, we would determine how the ACO participants' total Medicare Parts A and B FFS revenue for the applicable calendar year compare to total Medicare Parts A and B FFS expenditures for the ACO's assigned Medicare beneficiaries in the same calendar year, provide feedback and then notify the applicant of our determination of its status as a low revenue ACO or high revenue ACO.
We also considered using a longer look back period, for example, using multiple years of revenue and expenditure data to identify low revenue ACOs and high revenue ACOs. For example, instead of using a single year of data, we considered instead using 2 years of data (such as the 2 most recent calendar years for which 12 months of data are available). In evaluating ACOs applying to enter a new agreement period in the Shared Savings Program, the 2 most recent calendar years for which 12 months of data are available would align with the ACOs' first and second benchmark years. While this approach could allow us to take into account changes in the ACO's composition over multiple years, it could also make the policy more
ACO participant list changes during the agreement period could affect the categorization of ACOs, particularly for ACOs close to the threshold percentage. We considered that an ACO may change its composition of ACO participants each performance year, as well as experience changes in the providers/suppliers billing through ACO participants, during the course of its agreement period. Any approach under which we would apply different policies to ACOs based on a determination of ACO participant revenue would need to recognize the potential for an ACO to add or remove ACO participants, and for the providers/suppliers billing through ACO participants to change, which could affect whether an ACO meets the definition of a low revenue ACO or high revenue ACO. We are especially concerned about the possibility that an ACO may be eligible to continue for a second agreement period in the BASIC track because of a determination that it is a low revenue ACO at the time of application, and then quickly thereafter seek to add higher-revenue ACO participants, thereby avoiding the requirement under our proposed participation options to participate under the ENHANCED track.
To protect against these circumstances, we propose to monitor low revenue ACOs experienced with performance-based risk Medicare ACO initiatives participating in the BASIC track, to determine if they continue to meet the definition of low revenue ACO. This is because high revenue ACOs experienced with performance-based risk Medicare ACO initiatives are restricted to participation in the ENHANCED track only. We propose to monitor these low revenue ACOs for changes in the revenue of ACO participants and assigned beneficiary expenditures that would cause an ACO to be considered a high revenue ACO and ineligible for participation in the BASIC track. We are less concerned about the circumstance where an ACO inexperienced with performance-based risk Medicare ACO initiatives enters an agreement period under the BASIC track and becomes a high revenue ACO during the course of its agreement because inexperienced, high revenue ACOs are also eligible for a single agreement period of participation in the BASIC track.
We propose the following approach to ensuring continued compliance of ACOs with the proposed eligibility requirements for participation in the BASIC track, for an ACO that was accepted into the BASIC track's Level E because the ACO was experienced with performance-based risk Medicare ACO initiatives and determined to be low revenue at the time of application. If, during the agreement period, the ACO meets the definition of a high revenue ACO, we propose that the ACO would be permitted to complete the remainder of its current performance year under the BASIC track, but would be ineligible to continue participation in the BASIC track after the end of that performance year unless it takes corrective action, for example by changing its ACO participant list. We propose to take compliance action, up to and including termination of the participation agreement, as specified in §§ 425.216 and 425.218, to ensure the ACO does not continue in the BASIC track for subsequent performance years of the agreement period. For example, we may take pre-termination actions as specified in § 425.216, such as issuing a warning notice or requesting a corrective action plan. To remain in the BASIC track, the ACO would be required to remedy the issue. For example, if the ACO participants' total Medicare Parts A and B FFS revenue has increased in relation to total Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, the ACO could remove an ACO participant from its ACO participant list, so that the ACO can meet the definition of low revenue ACO. If corrective action is not taken, CMS would terminate the ACO's participation under § 425.218. We propose to revise § 425.600 to include these requirements to account for changes in ACO participant revenue during an agreement period.
We also considered two alternatives to the proposed claims-based approach to differentiating low revenue versus high revenue ACOs, which, as discussed, can also serve as a proxy for ACO participant composition. One alternative would be to differentiate ACOs based directly on ACO participant composition using Medicare provider enrollment data and certain other data. Under this option we could define “physician-led ACO” and “hospital-based ACO” based on an ACO's composition of ACO participant TINs, including any CCNs identified as billing through an ACO participant TIN, as determined using Medicare enrollment data and cost report data for rural hospitals. A second alternative to the claims-based approach to distinguishing between ACOs based on their revenue would be to differentiate between ACOs based on the size of their assigned population (that is, small versus large ACOs).
First, we considered differentiating between physician-led and hospital-based ACOs by ACO composition, determined based on the presence or absence of certain institutional providers as ACO participants. This approach deviates from the Track 1+ Model design to determining ACO composition for the purposes of identifying whether the ACO is eligible to participate under a benchmark-based or a revenue-based loss sharing limit (described elsewhere in this proposed rule) by using Medicare enrollment data and certain other data to determine ACO composition rather than relying on ACOs' self-reported information, and by using a different approach to identifying institutional providers than applies under the Track 1+ Model.
Under this alternative approach, we could define a hospital-based ACO as an ACO that includes a hospital or cancer center, but excluding an ACO whose only hospital ACO participants are rural hospitals. As used in this definition, a hospital could be defined according to § 425.20. As defined under § 425.20, “hospital” means a hospital as defined in section 1886(d)(1)(B) of the Act. A cancer center could be defined as a prospective payment system-exempt cancer hospital as defined under section 1886(d)(1)(B)(v) of the Act (see CMS website on PPS-exempt cancer hospitals, available at
Under this alternative approach to differentiating between ACOs we would identify hospitals and cancer centers in our Medicare provider enrollment files based on their Medicare enrolled TINs and/or CCNs. We would include any CCNs identified as billing through an ACO participant TIN, as determined using PECOS enrollment data and claims data. We believe this alternative approach would provide increased transparency to ACOs because ACOs could work with their ACO participants to identify all facilities enrolled under their TINs to tentatively determine the composition of their ACO, and thus, the available participation options under the Shared Savings Program. However, this alternative approach to categorizing ACOs deviates from the proposed claims-based approaches to determining loss sharing limits and the repayment mechanism estimate amounts for ACOs in the BASIC track using ACO participant Medicare FFS revenue and expenditures for the ACO's assigned beneficiaries.
Second, we also considered differentiating between ACOs based on the size of their assigned beneficiary population, as small versus large ACOs. Under this approach, we could determine an ACO's participation options based on the size of its assigned population. We recognize that an approach that distinguishes between ACOs based on population size would require that we set a threshold for determining small versus large ACOs as well as to determine the assignment data to use in making this determination (such as the assignment data used in determining an ACO's eligibility to participate in the program under the requirement that the ACO have at least 5,000 assigned beneficiaries under § 425.110). For instance, we considered whether an ACO with fewer than 10,000 assigned beneficiaries could be defined as a small ACO whereas an ACO with 10,000 or more assigned beneficiaries could be defined as a large ACO. However, we currently have low revenue ACOs participating in the program that have well over 10,000 assigned beneficiaries, as well as high revenue ACOs that have fewer than 10,000 assigned beneficiaries. As described in detail throughout this section of this proposed rule, we believe a revenue-based approach is a more accurate means to measure the degree of control that ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries compared to an approach that only considers the size of the ACO's assigned population.
We seek comment on the proposed definitions of “low revenue ACO” and “high revenue ACO”. We also seek comment on the alternatives considered. Specifically, we seek comment on the alternative of defining hospital-based ACO and physician-led ACO based on an ACO's composition of ACO participant TINs, including any CCNs identified as billing through an ACO participant TIN, as determined using Medicare enrollment data and cost report data for rural hospitals. In addition, we seek comment on the second alternative of differentiating between ACOs based on the size of their assigned population (that is, small versus large ACOs).
As discussed in section II.A.5.c of this proposed rule, we propose to use factors based on ACOs' experience with performance-based risk to determine their eligibility for the BASIC track's glide path, or to limit their participation options to either the highest level of risk and potential reward under the BASIC track (Level E) or the ENHANCED track. We also propose to differentiate between low revenue ACOs and high revenue ACOs with respect to the continued availability of the BASIC track as a participation option. This approach would allow low revenue ACOs, new to performance-based risk arrangements, additional time under the BASIC track's revenue-based loss sharing limits, while requiring high revenue ACOs to more rapidly transition to the ENHANCED track under which they would assume relatively higher, benchmark-based risk. We believe that all ACOs should ultimately transition to the ENHANCED track, the highest level of risk and potential reward under the program, which could drive ACOs to more aggressively pursue the program's goals of improving quality of care and lowering growth in FFS expenditures for their assigned beneficiary populations.
We considered that some low revenue ACOs may need additional time to prepare to take on the higher levels of performance-based risk required under the ENHANCED track. Low revenue ACOs, which could include small, physician-only and rural ACOs, may be encouraged to enter and remain in the program based on the availability of lower-risk options. For example, small, physician-only and rural ACOs may have limited experience submitting quality measures or managing patient care under two-sided risk arrangements, which could deter their participation in higher-risk options. ACOs and other program stakeholders have suggested that the relatively lower levels of risk available under the Track 1+ Model (an equivalent level of risk and potential reward to the payment model available under Level E of the BASIC track) encourages transition to risk by providing a more manageable level of two-sided risk for small, physician-only, and rural ACOs, compared to the levels of risk and potential reward currently available under Track 2 and Track 3, and that would be offered under the proposed ENHANCED track.
We also considered that, without limiting high revenue ACOs to a single agreement period under the BASIC track, they could seek to remain under a relatively low level of performance-based risk for a longer period of time, and thereby curtail their incentive to drive more meaningful and systematic changes to improve quality of care and lower growth in FFS expenditures for their assigned beneficiary populations. Further, high revenue ACOs, whose composition likely includes institutional providers, particularly hospitals and health systems, are expected generally to have greater opportunity to coordinate care for assigned beneficiaries across care settings among their ACO participants than low revenue ACOs. One approach to ensure high revenue ACOs accept a level of risk commensurate with their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and to further encourage these ACOs to more aggressively pursue the program's goals, is to require these ACOs to transition to higher levels of risk and potential reward.
We propose to limit high revenue ACOs to, at most, a single agreement period under the BASIC track prior to transitioning to participation under the ENHANCED track. We believe an approach that allows high revenue ACOs that are inexperienced with the accountable care model the opportunity to become experienced with program participation within the BASIC track's glide path prior to undertaking the higher levels of risk and potential reward in the ENHANCED track offers an appropriate balance between allowing ACOs time to become experienced with performance-based risk and protecting the Medicare Trust Funds. This approach recognizes that high revenue ACOs control a relatively large share of assigned beneficiaries'
In contrast, we propose to limit low revenue ACOs to, at most, two agreement periods under the BASIC track. These agreement periods would not be required to be sequential, which would allow low revenue ACOs that transition to the ENHANCED track after a single agreement period under the BASIC track the opportunity to return to the BASIC track if the ENHANCED track initially proves too high of risk. An experienced ACO may also seek to participate in a lower level of risk if, for example, it makes changes to its composition to include providers/suppliers that are less experienced with the accountable care model and the program's requirements. Once an ACO has participated under the BASIC track's glide path (if eligible), a subsequent agreement period under the BASIC track would be required to be at the highest level of risk and potential reward (Level E), according to the proposed approach to identifying ACOs experienced with performance-based Medicare ACO initiatives as described in section II.A.5.c of this proposed rule.
Therefore, we propose that in order for an ACO to be eligible to participate in the BASIC track for a second agreement period, the ACO must meet the requirements for participation in the BASIC track as described in this proposed rule (as determined based on whether an ACO is low revenue versus high revenue and inexperienced versus experienced with performance-based risk Medicare ACO initiatives) and either of the following: (1) The ACO is the same legal entity as a current or previous ACO that previously entered into a participation agreement for participation in the BASIC track only one time; or (2) for a new ACO identified as a re-entering ACO because at least 50 percent of its ACO participants have recent prior participation in the same ACO, the ACO in which the majority of the new ACO's participants were participating previously entered into a participation agreement for participation in the BASIC track only one time.
Several examples illustrate this proposed approach. First, for an ACO legal entity with previous participation in the program, we would consider the ACO's current and prior participation in the program. For example, if a low revenue ACO enters the program in the BASIC track's glide path, and remains an eligible, low revenue ACO, it would be permitted to renew in Level E of the BASIC track for a second agreement period. Continuing this example, for the ACO to continue its participation in the program for a third or subsequent agreement period, it would need to renew its participation agreement under the ENHANCED track. As another example, a low revenue ACO that enters the program in the BASIC track's glide path could participate for a second agreement under the ENHANCED track, and enter a third agreement period under the Level E of the BASIC track before being required to participate in the ENHANCED track for its fourth and any subsequent agreement period.
Second, for ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO, we would determine the eligibility of the ACO to participate in the BASIC track based on the prior participation of this other entity. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B's prior participation in the BASIC track in determining the eligibility of ACO A to enter a new participation agreement in the program under the BASIC track. For example, if ACO B had previously participated in two different agreement periods under the BASIC track, regardless of whether ACO B completed these agreement periods, ACO A would be ineligible to enter the program for a new agreement period under the BASIC track and would be limited to participating in the ENHANCED track. Changing the circumstances of this example, if ACO B had previously participated under the BASIC track during a single agreement period, ACO A may be eligible to participate in the BASIC track under Level E, the track's highest level of risk and potential reward, but would be ineligible to enter the BASIC track's glide path because ACO A would have been identified as experienced with performance-based risk Medicare ACO initiatives as described in section II.A.5.c of this proposed rule.
We recognize that the difference in the level of risk and potential reward under the BASIC track, Level E compared to the payment model under the ENHANCED track could be substantial for low revenue ACOs. Therefore, we also considered and seek comment on an approach that would allow low revenue ACOs to gradually transition from the BASIC track's Level E up to the level of risk and potential reward under the ENHANCED track. For example, we seek comment on whether it would be helpful to devise a glide path that would be available to low revenue ACOs entering the ENHANCED track. We also considered, and seek comment on, whether such a glide path under the ENHANCED track should be available to all ACOs. As another alternative, we considered allowing low revenue ACOs to continue to participate in the BASIC track under Level E for longer periods of time, such as a third or subsequent agreement period. However, we believe that without a time limitation on participation in the BASIC track, ACOs may not prepare to take on the highest level of risk that could drive the most meaningful change in providers'/suppliers' behavior toward achieving the program's goals.
As an alternative to the proposed approach for allowing low revenue ACOs to participate in the BASIC track in any two agreement periods (non-sequentially), we seek comment on an approach that would require participation in the BASIC track to occur over two consecutive agreement periods before the ACO enters the ENHANCED track. This approach would prevent low revenue ACOs that entered the ENHANCED track from participating in a subsequent agreement period under the BASIC track. That is, it would prevent an ACO from moving from a higher level of risk to a lower level of risk. However, given changes in ACO composition, among other potential factors, we believe it is important to offer low revenue ACOs some flexibility in their choice of level of risk from one agreement period to the next.
We propose to specify these proposed requirements for low revenue ACOs and high revenue ACOs in revisions to § 425.600, along with other requirements for determining participation options based on the experience of the ACO and its ACO participants, as discussed in section II.A.5.c of this proposed rule. We propose to use our determination of whether an ACO is a low revenue ACO or high revenue ACO in combination with our determination of whether the ACO is experienced or inexperienced with performance-based risk (which we propose to determine based on the experience of both the ACO legal entity and the ACO participant TINs with performance-based risk), in determining the participation options available to the ACO. We seek comment on these proposals.
More generally, we note that the proposed approach to redesigning the
In this section, we describe and seek comment on several approaches to allowing for potentially greater access to shared savings for low revenue ACOs compared to high revenue ACOs, but do not make any specific proposals at this time. The approaches to rewarding low revenue ACOs discussed in this section recognize the performance trends of low revenue ACOs based on program results and the potential that low revenue ACOs would need additional capital, as a means of encouraging their continued participation in the program.
Although low revenue ACOs generally have control over a smaller share of the total Medicare Parts A and B FFS expenditures for their assigned beneficiaries compared to high revenue ACOs, they have tended to perform better financially than high revenue ACOs, demonstrating their ability to more quickly meet the program's aim of lowering growth in expenditures. High revenue ACOs, in comparison, despite having the advantage of generally controlling a greater share of total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and having more institutional capacity to affect care processes and better manage care across settings, have demonstrated comparatively poor financial performance.
As previously described in section I of this proposed rule, using the methodology for identifying low revenue and high revenue ACOs described in the Regulatory Impact Analysis (section IV. of this proposed rule), program results for performance year 2016 show that low revenue ACOs outperformed high revenue ACOs, as 41 percent of low revenue ACOs shared savings compared to 23 percent of high revenue ACOs. Among ACOs with four performance years of program results, low revenue ACOs in Track 1 outperformed high revenue ACOs, generating average gross savings of 2.9 percent compared to 0.5 percent for high revenue ACOs. Low revenue ACOs in Track 2 and Track 3 also outperformed high revenue ACOs. The four Track 3 ACOs that owed losses in performance year 2016 were all high revenue. These results suggest high revenue ACOs may be underperforming in containing growth in expenditures, while taking advantage of other aspects of program participation.
We believe low revenue ACOs, identified as proposed previously in this section (that is, using a threshold of 25 percent of Medicare Parts A and B FFS expenditures for assigned beneficiaries), which may tend to be small, physician-only and rural ACOs, are likely less capitalized organizations and may be relatively risk-averse. These ACOs may be encouraged to participate and remain in the program under performance-based risk based on the availability of additional incentives, such as the opportunity to earn a greater share of savings.
We believe that offering increased potential for low revenue ACOs to earn shared savings would support their success in meeting the program's goals by allowing these organizations to maximize their return on investment, which may be needed to support start-up and operational expenses, and to facilitate their participation in performance-based risk. For example, shared savings payments received by low revenue ACOs could be used to support funding of a repayment mechanism required for their participation in performance-based risk, support meeting the program's quality reporting requirements, or support, when eligible, implementation of an approved beneficiary incentive program as discussed in section II.C.2 of this proposed rule. Any additional incentive would complement previously described proposals that would provide low revenue ACOs a longer pathway to participation under the highest level of risk and potential reward in the ENHANCED track.
One approach we considered would be to allow for a lower MSR for low revenue ACOs in the BASIC track. In section II.A.6.b of this proposed rule, we propose that under Level A and Level B of the BASIC track, under a one-sided model, ACOs with at least 5,000 assigned beneficiaries will have a MSR that varies between 2 percent and 3.9 percent based on the size of the ACO's assigned beneficiary population (which is the same MSR methodology currently used in Track 1). In performance years under a two-sided model of either the BASIC track or the ENHANCED track, we propose to apply a symmetrical MSR/MLR, as chosen by the ACO prior to entering into performance-based risk. As an alternative, to provide a greater incentive for low revenue ACOs, we considered applying a lower MSR during the one-sided model years (Level A and B) for low revenue ACOs that have at least 5,000 assigned beneficiaries for the performance year. For example, we considered a policy under which we would apply a MSR that is a fixed 1 percent. We also considered setting the MSR at a fixed 2 percent, or effectively removing the threshold by setting the MSR at zero percent. However, we would apply a variable MSR based on the ACO's number of assigned beneficiaries in the event the ACO's population falls below 5,000 assigned beneficiaries for the performance year, consistent with our proposal in section II.A.6.b of this proposed rule.
A lower MSR (such as a fixed 1 percent) would reduce the threshold level of savings the ACO must generate to be eligible to share in savings. This would give low revenue ACOs greater confidence that they would be eligible to share in savings, once generated. This may be especially important for small ACOs, which would otherwise have MSRs towards the higher end of the range (closer to 3.9 percent, for an ACO with at least 5,000 assigned beneficiaries) for years in which the ACO participates under a one-sided model. However, we do not believe a lower MSR would be needed to encourage participation by high revenue ACOs. For one, high revenue ACOs are likely to have larger numbers of assigned beneficiaries and therefore more likely to have lower MSRs (ranging from 3 percent to 2 percent, for ACOs with 10,000 or more assigned beneficiaries). Further, their control over a significant percentage of the total Medicare Parts A and B FFS expenditures for their assigned beneficiaries may provide a sufficient incentive for participation as they would have an opportunity to generate significant savings.
Another approach we considered is to allow for a relatively higher final sharing rate under the first four levels of the BASIC track's glide path for low revenue ACOs. For example, rather than the proposed approach under which the final sharing rate would phase in from a maximum of 25 percent in Level A to a maximum of 50 percent in Level E, we could allow a maximum 50 percent sharing rate based on quality performance to be available at all levels within the BASIC track's glide path for low revenue ACOs.
For any policies that would apply differing levels of potential reward to ACOs based on factors such as ACO participants' revenue and expenditures for the ACO's assigned beneficiaries, we prefer an approach under which we would annually re-evaluate whether an ACO is low revenue or high revenue, taking into consideration any changes to the ACO's list of ACO participants or to the providers/suppliers billing through the TINs of the ACO participants that are made during the agreement period. This approach would help ensure, for example, that ACOs do not omit certain institutional providers or other high revenue providers/suppliers from their initial ACO participant list for the purpose of securing their participation in a more favorable financial model, only to subsequently add these organizations to their ACO in subsequent years of the same agreement period.
We seek comment on these considerations. We will carefully consider the comments received regarding these options during the development of the final rule, and may consider adopting one or more of these options in the final rule.
In this section of the proposed rule we describe proposed modifications to the regulations to address the following:
• Allowing flexibility for ACOs currently within a 3-year agreement period under the Shared Savings Program to transition quickly to a new agreement period that is not less than 5 years under the BASIC track or ENHANCED track.
• Establishing definitions to more clearly differentiate ACOs applying to renew for a second or subsequent agreement period and ACOs applying to re-enter the program after their previous Shared Savings Program participation agreement expired or was terminated resulting in a break in participation, and to identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their ACO participants' experience with the program.
• Revising the criteria for evaluating an ACO's prior participation in the Shared Savings Program to determine the eligibility of ACOs seeking to renew their participation in the program for a subsequent agreement period, ACOs applying to re-enter the program after termination or expiration, and ACOs that are identified as re-entering ACOs based on their ACO participants' recent experience with the program.
• Establishing criteria for determining the participation options available to an ACO based on its experience with performance-based risk Medicare ACO initiatives and on whether the ACO is low revenue or high revenue.
• Establishing policies that more clearly differentiate the participation options, and the applicability of program requirements that phase-in over time based on the ACO's and ACO participants' prior experience in the Shared Savings Program or with other Medicare ACO initiatives.
The regulatory background for the proposed policies in this section of the proposed rule includes multiple sections of the program's regulations, as developed over several rulemaking cycles.
In the initial rulemaking for the program, we specified criteria for terminated ACOs that are re-entering the program in § 425.222 (see 76 FR 67960 through 67961). In the June 2015 final rule, we revised this section to address eligibility for continued participation in Track 1 by previously terminated ACOs (80 FR 32767 through 32769). Currently, this section prohibits ACOs re-entering the program after termination from participating in the one-sided model beyond a second agreement period and from moving back to the one-sided model after participating in a two-sided model. This section also specifies that terminated ACOs may not re-enter the program until after the date on which their original agreement period would have ended if the ACO had not been terminated (the “sit-out” period). This policy was designed to restrict re-entry into the program by ACOs that voluntarily terminate their participation agreement, or have been terminated for failing to meet program integrity or other requirements (see 76 FR 67960 and 67961). Under the current regulations, we only consider whether an ACO applying to the program is the same legal entity as a previously terminated ACO, as identified by TIN (see definition of ACO under § 425.20), for purposes of determining whether the appropriate “sit-out” period of § 425.222(a) has been observed and the ACO's eligibility to participate under the one-sided model. Section 425.222 also provides criteria to determine the applicable agreement period when a previously terminated ACO re-enters the program. We explained the rationale for these policies in prior rulemaking and refer readers to the November 2011 and June 2015 final rules for more detailed discussions.
Additionally, under § 425.204(b), the ACO must disclose to CMS whether the ACO or any of its ACO participants or ACO providers/suppliers have participated in the Shared Savings Program under the same or a different name, or are related to or have an affiliation with another Shared Savings Program ACO. The ACO must specify whether the related participation agreement is currently active or has been terminated. If it has been terminated, the ACO must specify whether the termination was voluntary or involuntary. If the ACO, ACO participant, or ACO provider/supplier was previously terminated from the Shared Savings Program, the ACO must identify the cause of termination and what safeguards are now in place to enable the ACO, ACO participant, or ACO provider/supplier to participate in the program for the full term of the participation agreement (§ 425.204(b)(3)).
The agreement period in which an ACO is placed upon re-entry into the program has ramifications not only for its risk track participation options, but also for the benchmarking methodology that is applied and the quality performance standard against which the ACO will be assessed. ACOs in a second or subsequent agreement period receive a rebased benchmark as currently specified under § 425.603. For ACOs that renew for a second or subsequent agreement period beginning in 2017 and subsequent years, the rebased benchmark incorporates regional expenditure factors, including a regional adjustment. The weight applied in calculating the regional adjustment depends in part on the agreement period for which the benchmark is being determined (see § 425.603(c)), with relatively higher weights applied over time. Further, for an ACO's first agreement period, the benchmark expenditures are weighted 10 percent in benchmark year 1, 30 percent in benchmark year 2, and 60 percent in benchmark year 3 (see § 425.602(a)(7)). In contrast, for an ACO's second or subsequent agreement period we equally weight each year of the benchmark (§ 425.603). With respect to quality performance, the quality performance standard for ACOs in the first performance year of their first agreement period is set at the level of complete and accurate reporting of all quality measures. Pay-for-performance is phased in over the remaining years of the first agreement period, and
We believe the regulations as currently written create flexibilities that allow more experienced ACOs to take advantage of the opportunity to re-form and re-enter the program under Track 1 or to re-enter the program sooner or in a different agreement period than otherwise permissible. In particular, terminated ACOs may re-form as a different legal entity and apply to enter the program as a new organization to extend their time in Track 1 or enter Track 1 after participating in a two-sided model. These ACOs would effectively circumvent the requisite “sit-out” period (the remainder of the term of an ACO's previous agreement period), benchmark rebasing, including the application of equal weights to the benchmark years and the higher weighted regional adjustment that applies in later agreement periods, or the pay-for-performance quality performance standard that is phased in over an ACO's first agreement period in the program.
In the June 2015 final rule, we established criteria in § 425.224 applicable to ACOs seeking to renew their agreements, including requirements for renewal application procedures and factors CMS uses to determine whether to renew a participation agreement (see 80 FR 32729 through 32730). Under our current policies, we consider a renewing ACO to be an organization that continues its participation in the program for a consecutive agreement period, without interruption resulting from termination of the participation agreement by CMS or by the ACO (see §§ 425.218 and 425.220). Therefore, to be considered for timely renewal, an ACO within its third performance year of an agreement period is required to meet the application requirements, including submission of a renewal application, by the deadline specified by CMS, during the program's typical annual application process. If the ACO's renewal application is approved by CMS, the ACO would have the opportunity to enter into a new participation agreement with CMS for the agreement period beginning on the first day of the next performance year (typically January 1 of the following year), and thereby to continue its participation in the program without interruption.
In evaluating the application of a renewing ACO, CMS considers the ACO's history of compliance with program requirements generally, whether the ACO has established that it is in compliance with the eligibility and other requirements of the Shared Savings Program, including the ability to repay shared losses, if applicable, and whether it has a history of meeting the quality performance standard in its previous agreement period, as well as whether the ACO satisfies the criteria for operating under the selected risk track, including whether the ACO has repaid shared losses generated during the prior agreement period.
Under § 425.600(c), an ACO experiencing a net loss during a previous agreement period may reapply to participate under the conditions in § 425.202(a), except the ACO must also identify in its application the cause(s) for the net loss and specify what safeguards are in place to enable the ACO to potentially achieve savings in its next agreement period. In the initial rulemaking establishing the Shared Savings Program, we proposed, but did not finalize, a requirement that would prevent an ACO from reapplying to participate in the Shared Savings Program if it previously experienced a net loss during its first agreement period. We explained that this proposed policy would ensure that under-performing organizations would not get a second chance (see 76 FR 19562, 19623). However, we were persuaded by commenters' suggestions that barring ACOs that demonstrate a net loss from continuing in the program could serve as a disincentive for ACO formation, given the anticipated high startup and operational costs of ACOs (see 76 FR 67908 and 67909). We finalized the provision at § 425.600(c) that would allow for continued participation by ACOs despite their experience of a net loss.
We seek to modify the requirements for ACOs applying to renew their participation in the program (§ 425.224) and re-enter the program after termination (§ 425.222) or expiration of their participation agreement by both eliminating regulations that would restrict our ability to ensure that ACOs quickly migrate to the redesigned tracks of the program and strengthening our policies for determining the eligibility of ACOs to renew their participation in the program (to promote consecutive and uninterrupted participation in the program) or to re-enter the program after a break in participation. We also seek to establish criteria to identify as re-entering ACOs new ACOs for which greater than 50 percent of ACO participants have recent prior participation in the same ACO, and to hold these ACO accountable for their ACO participants' experience in the program.
We propose to define a renewing ACO and an ACO re-entering after termination or expiration of their participation agreement. Under the program's regulations, there is currently no definition of a renewing ACO, and based on our operational experience, this has caused some confusion among applicants. For example, there is confusion as to whether an ACO that has terminated from the program would be considered a first time applicant into the program or a renewing ACO. The definition of these terms is also important for identifying the agreement period that an ACO is applying to enter, which is relevant to determining the applicability of certain factors used in calculating the ACO's benchmark that phase-in over the span of multiple agreement periods as well as the phase-in of pay-for-performance under the program's quality performance standards. We believe having definitions that clearly distinguish renewing ACOs from ACOs that are applying to re-enter the program after a termination, or other break in participation will help us more easily differentiate between these organizations in our regulations and other programmatic material. We propose to define renewing ACO and re-entering ACO in new definitions in § 425.20.
We propose to define renewing ACO to mean an ACO that continues its participation in the program for a consecutive agreement period, without a break in participation, because it is either: (1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or (2) an ACO that terminated its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program. This proposed definition is consistent with current program policies for ACOs applying to timely renew their agreement under § 425.224 to continue participation following the expiration of their participation agreement. This proposed definition would include a new policy that would consider an ACO to be renewing in the circumstance where the ACO voluntarily terminates its current participation agreement and enters a new agreement period under
We considered two possible scenarios in which an ACO might seek to re-enter the program. In one case, a re-entering ACO would be a previously participating ACO, identified by a TIN (see definition of ACO under § 425.20), that applies to re-enter the program after its prior participation agreement expired without having been renewed, or after the ACO was terminated under § 425.218 or § 425.220 and did not immediately enter a new agreement period (that is, an ACO with prior participation in the program that does not meet the proposed definition of renewing ACO). In this case, it is clear that the ACO is a previous participant in the program. In the other scenario, an entity applies under a TIN that is not previously associated with a Shared Savings Program ACO, but the entity is composed of ACO participants that previously participated together in the same Shared Savings Program ACO in a previous performance year. Under the current regulations, there is no mechanism in place to prevent a terminated ACO from re-forming under a different TIN and applying to re-enter the program, or for a new legal entity to be formed from ACO participants in a currently participating ACO. Doing so could allow an ACO to avoid accountability for the experience and prior participation of its ACO participants, and to avoid the application of policies that phase-in over time (the application of equal weights to the benchmark years and the higher weighted regional adjustment that applies in later agreement periods, or the pay-for-performance quality performance standard that is phased in over an ACO's first agreement period in the program). We are also concerned that, under the current regulations, Track 1 ACOs would be able to re-form to take advantage of the BASIC track's glide path, which allows for 2 years under a one-sided model for new ACOs only. We are therefore interested in adopting an approach to better identify prior participation and to specify participation options and program requirements applicable to re-entering ACOs.
We propose to define “re-entering ACO” to mean an ACO that does not meet the definition of a “renewing ACO” and meets either of the following conditions:
(1) Is the same legal entity as an ACO, identified by TIN according to the definition of ACO in § 425.20, that previously participated in the program and is applying to participate in the program after a break in participation, because it is either: (a) An ACO whose participation agreement expired without having been renewed; or (b) an ACO whose participation agreement was terminated under § 425.218 or § 425.220.
(2) Is a new legal entity that has never participated in the Shared Savings Program and is applying to participate in the program and more than 50 percent of its ACO participants were included on the ACO participant list under § 425.118, of the same ACO in any of the 5 most recent performance years prior to the agreement start date.
We note that a number of proposed policies depend on the prior participation of an ACO or the experience of its ACO participants. As discussed elsewhere in section II.A of this proposed rule, these include: (1) Using the ACO's and its ACO participants' experience or inexperience with performance-based risk Medicare ACO initiatives to determine the participation options available to the ACO (proposed in § 425.600(d)); (2) identifying ACOs experienced with Track 1 to determine the amount of time an ACO may participate under a one-sided model of the BASIC track's glide path (proposed in § 425.600(d)); (3) determining how many agreement periods an ACO has participated under the BASIC track as eligible ACOs are allowed a maximum of two agreement periods under the BASIC track (proposed in § 425.600(d)); (4) assessing the eligibility of the ACO to participate in the program (proposed revisions to § 425.224); and (5) determining the applicability of program requirements that phase-in over multiple agreement periods (proposed in § 425.600(f)). The proposed revisions to the regulations to establish these requirements would apply directly to an ACO that is the same legal entity as a previously participating ACO. We also discuss throughout the preamble how these requirements would apply to new ACOs that are identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO.
Several examples illustrate the application of the proposed definition of re-entering ACO. For example, if ACO A is applying to the program for an agreement period beginning on July 1, 2019, and ACO A is the same legal entity as an ACO whose previous participation agreement expired without having been renewed (that is, ACO A has the same TIN as the previously participating ACO) we would treat ACO A as the previously participating ACO, regardless of what share of ACO A's ACO participants previously participated in the ACO. As another example, if ACO A were a different legal entity (identified by a different TIN) from any ACO that previously participated in the Shared Savings Program, we would also treat ACO A as if it were an ACO that previously participated in the program (ACO B) if more than 50 percent of ACO A's ACO participants participated in ACO B in any of the 5 most recent performance years (that is, performance year 2015, 2016, 2017, 2018, or the 6-month performance year from January 1, 2019 through June 30, 2019), even though ACO A and ACO B are not the same legal entity.
We believe that looking at the experience of the ACO participants, in addition to the ACO legal entity, would be a more robust check on prior participation. It would also help to ensure that ACOs re-entering the program are treated comparably regardless of whether they are returning as the same legal entity or have re-formed as a new entity. With ACOs allowed to make changes to their certified ACO participant list for each performance year, we have observed that many ACOs make changes to their ACO participants over time. For example, among ACOs that participated in the Shared Savings Program as the same legal entity in both PY 2014 and PY 2017, only around 60 percent of PY 2017 ACO participants had also participated in the same ACO in PY 2014, on average. For this reason, we believe that the ACO legal entity alone does not always capture the ACO's experience in the program and therefore it is also important to look at the experience of ACO participants.
We chose to propose a 5 performance year look back period for determining prior participation by ACO participants as it would align with the look back period for determining whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives as discussed elsewhere in this section of this proposed rule. We wish to clarify that the threshold for prior participation by ACO participants is not cumulative when determining whether an ACO is a re-entering ACO. For example, assume 22 percent of applicant ACO A's ACO participants participated in ACO C in the prior 5
We opted to propose a threshold of greater than 50 percent because we believe that it will identify ACOs with significant participant overlap and would allow us to more clearly identify a single, Shared Savings Program ACO in which at least the majority of ACO participants recently participated. We also considered whether to use a higher or lower threshold percentage threshold. A lower threshold, such as 20, 30 or 40 percent, would further complicate the analysis for identifying the ACO or ACOs in which the ACO participants previously participated, and the ACO whose prior performance should be evaluated in determining the eligibility of the applicant ACO. On the other hand, using a higher percentage for the threshold would identify fewer ACOs that significantly resemble ACOs with experience participating in the Shared Savings Program.
We considered alternate approaches to identifying prior participation other than the overall percentage of ACO participants that previously participated in the same ACO, including using the percentage of ACO participants weighted by the paid claim amounts, the percentage of individual practitioners (NPIs) that had reassigned their billing rights to ACO participants, or the percentage of assigned beneficiaries the new legal entity has in common with the assigned beneficiaries of a previously participating ACO. While we believe that these alternative approaches have merit, we concluded that they would be less transparent to ACOs than using a straight percentage of TINs, as well as more operationally complex to compute.
We seek comment on these proposed definitions and on the alternatives considered.
We believe it would be useful to revise our regulations to clearly set forth the eligibility requirements and application procedures for renewing ACOs and re-entering ACOs. Therefore, we propose to revise § 425.222 to address limitations on the ability of re-entering ACOs to participate in the Shared Savings Program for agreement periods beginning before July 1, 2019. In addition, we propose to revise § 425.224 to address general application requirements and procedures for all re-entering ACOs and all renewing ACOs.
In revising § 425.222 (which consists of paragraphs (a) through (c)), we considered that removing the required “sit-out” period for terminated ACOs under § 425.222(a) would facilitate transition of ACOs within current 3-year agreement periods to new agreements under the participation options proposed in this rule. As discussed elsewhere in this section, we propose to retain policies similar to those under § 425.222(b) for evaluating the eligibility of ACOs to participate in the program after termination. Further, instead of the approach used for determining participation options for ACOs that re-enter the program after termination described in § 425.222(c), our proposed approach to making these determinations is described in detail in section II.A.5.c.5 of this proposed rule.
The “sit-out” period policy restricts the ability of ACOs in current agreement periods to transition to the proposed participation options under new agreements. For example, if left unchanged, the “sit-out” period would prevent existing, eligible Track 1 ACOs from quickly entering an agreement period under the proposed BASIC track and existing Track 2 ACOs from quickly entering a new agreement period under either the BASIC track at the highest level of risk (Level E), if available to the ACO, or the ENHANCED track. Participating under Levels C, D, or E of the BASIC track or under the ENHANCED track could allow eligible physicians and practitioners billing under ACO participant TINs in these ACOs to provide telehealth services under section 1899(l) of the Act (discussed in section II.B.2.b. of this proposed rule), the ACO could apply for a SNF 3-day rule waiver (as proposed in section II.B.2.a. of this proposed rule), and the ACO could elect to offer incentive payments to beneficiaries under a CMS-approved beneficiary incentive program (as proposed in section II.C.2. of this proposed rule).
The “sit-out” period also applies to ACOs that deferred renewal in a second agreement period under performance-based risk as specified in § 425.200(e)(2)(ii), a participation option we propose to discontinue (as described in section II.A.2 of this proposed rule). Therefore, by eliminating the “sit-out” period, ACOs that deferred renewal may more quickly transition to the BASIC track (Level E), if available to the ACO, or the ENHANCED track. An ACO that deferred renewal and is currently participating in Track 2 or Track 3 may terminate its current agreement to enter a new agreement period under the BASIC track (Level E), if eligible, or the ENHANCED track. Similarly, an ACO that deferred renewal and is currently participating in Track 1 for a fourth performance year may terminate its current agreement and the participation agreement for its second agreement period under Track 2 or Track 3 that it deferred for 1 year. In either case, the ACO may immediately apply to re-enter the BASIC track (Level E), if eligible, or the ENHANCED track without having to wait until the date on which the term of its second agreement would have expired if the ACO had not terminated.
We note that, to avoid interruption in program participation, an ACO that seeks to terminate its current agreement and enter a new agreement in the BASIC track or ENHANCED track beginning the next performance year should ensure that there is no gap in time between when it concludes its current agreement period and when it begins the new agreement period so that all related program requirements and policies would continue to apply. For an ACO that is completing a 12 month performance year and is applying to enter a new agreement period beginning January 1 of the following year, the effective termination date of its current agreement should be the last calendar day of its current performance year, to avoid an interruption in the ACO's program participation. For instance, for a 2018 starter ACO applying to enter a new agreement beginning on January 1, 2020, the effective termination date of its current agreement should be December 31, 2019. For an ACO that starts a 12-month performance year on January 1, 2019, that is applying to enter a new agreement period beginning on July 1, 2019 (as discussed in section II.A.7 of this proposed rule), the effective termination date of its current agreement should be June 30, 2019.
We propose to amend § 425.224 to make certain policies applicable to both renewing ACOs and re-entering ACOs and to incorporate certain other technical changes, as follows:
(1) Revisions to refer to the ACO's “application” more generally, instead of specifically referring to a “renewal request,” so that the requirements would apply to both renewing ACOs and re-entering ACOs.
(2) Addition of a requirement, consistent with the current provision at § 425.222(c)(3), for ACOs previously in a two-sided model to reapply to participate in a two-sided model. We further propose that a renewing or re-entering ACO that was previously under a one-sided model of the BASIC track's glide path may only reapply for participation in a two-sided model for consistency with our proposal to include the BASIC track within the definition of a performance-based risk Medicare ACO initiative. This includes a new ACO identified as a re-entering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO that was previously under a two-sided model or a one-sided model of the BASIC track's glide path (Level A or Level B).
(3) Revision to § 425.224(b)(1)(iv) (as redesignated from § 425.224(b)(1)(iii)) to cross reference the requirement that an ACO establish an adequate repayment mechanism under § 425.204(f), to clarify our intended meaning with respect to the current requirement that an ACO demonstrate its ability to repay losses.
(4) Modifications to the evaluation criteria specified in § 425.224(b) for determining whether an ACO is eligible for continued participation in the program in order to permit them to be used in evaluating both renewing ACOs and re-entering ACOs, to adapt some of these requirements to longer agreement periods (under the proposed approach allowing for agreement periods of at least 5 years rather than 3-year agreements), and to prevent ACOs with a history of poor performance from participating in the program. As described in detail, as follows, we address: (1) Whether the ACO has a history of compliance with the program's quality performance standard; (2) whether an ACO under a two-sided model repaid shared losses owed to the program; (3) the ACO's history of financial performance; and (4) whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it perform poorly or to be terminated.
First, we propose modifications to the criterion governing our evaluation of whether the ACO has a history of compliance with the program's quality performance standard. We propose to revise the existing provision at § 425.224(b)(1)(iv), which specifies that we evaluate whether the ACO met the quality performance standard during at least 1 of the first 2 years of the previous agreement period, to clarify that this criterion is used in evaluating ACOs that entered into a participation agreement for a 3-year period. We propose to add criteria for evaluating ACOs that entered into a participation agreement for a period longer than 3 years by considering whether the ACO was terminated under § 425.316(c)(2) for failing to meet the quality performance standard or whether the ACO failed to meet the quality performance standard for 2 or more performance years of the previous agreement period, regardless of whether the years were consecutive.
In proposing this approach, we considered that the current policy is specified for ACOs with 3-year agreements. With the proposal to shift to agreement periods of not less than 5 years, additional years of performance data would be available at the time of an ACO's application to renew its agreement, and may also be available for evaluating ACOs re-entering after termination (depending on the timing of their termination) or the expiration of their prior agreement, as well as being available to evaluate new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO.
Further, under the program's monitoring requirements at § 425.316(c), ACOs with 2 consecutive years of failure to meet the program's quality performance standard will be terminated. However, we are concerned about a circumstance where an ACO that fails to meet the quality performance standard for multiple, non-consecutive years may remain in the program by seeking to renew its participation for a subsequent agreement period, seeking to re-enter the program after termination or expiration of its prior agreement, or by re-forming to enter under a new legal entity (identified as a re-entering ACO based on the experience of its ACO participants).
Second, we propose to revise the criterion governing the evaluation of whether an ACO under a two-sided model repaid shared losses owed to the program that were generated during the first 2 years of the previous agreement period (§ 425.224(b)(1)(v)), to instead consider whether the ACO failed to repay shared losses in full within 90 days in accordance with subpart G of the regulations for any performance year of the ACO's previous agreement period. In section II.A.7 we propose a 6-month performance year for ACOs that started a first or second agreement period on January 1, 2016, that elect an extension of their agreement period by 6 months from January 1, 2019 through June 30, 2019, and a 6-month first performance year for ACOs entering agreement periods beginning on July 1, 2019. We have also proposed to reconcile these ACOs, and ACOs that start a 12-month performance year on January 1, 2019, and terminate their participation agreement with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019, separately for the 6-month periods from January 1, 2019, to June 30, 2019, and from July 1, 2019, to December 31, 2019, as described in section II.A.7 of this proposed rule. In evaluating this proposed criterion on repayment of losses, we would consider whether the ACO timely repaid any shared losses for these 6-month performance years, or the 6-month performance period for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, which we propose would be determined according to the methodology specified under a new section of the regulations at § 425.609.
The current policy regarding repayment of shared losses is specified for ACOs with 3-year agreements. With the proposal to shift to agreement periods of at least 5 years, we believe it is appropriate to broaden our evaluation of the ACO's timely repayment of shared losses beyond the first 2 years of the ACO's prior agreement period. For instance, without modification, this criterion could have little relevance when evaluating the eligibility of ACOs in the BASIC track's glide path that elect to participate under a one-sided model for their first 2 performance years (or 3 performance years for ACOs that start an agreement period in the BASIC track's glide path on July 1, 2019).
We note that timely repayment of shared losses is required under subpart G of the regulations (§§ 425.606(h)(3) and 425.610(h)(3)), and non-compliance with this requirement may be the basis for pre-termination actions or termination under §§ 425.216 and 425.218. A provision that permits us to consider more broadly whether an ACO failed to timely repay shared losses for any performance year in the previous agreement period would be relevant to all renewing and re-entering ACOs that may have unpaid shared losses, as well
Third, we propose to add a financial performance review criterion to § 425.224(b) to allow us to evaluate whether the ACO generated losses that were negative outside corridor for 2 performance years of the ACO's previous agreement period. We propose to use this criterion to evaluate the eligibility of ACOs to enter agreement periods beginning on July 1, 2019 and in subsequent years. For purposes of this proposal, an ACO is negative outside corridor when its benchmark minus performance year expenditures are less than or equal to the negative MSR for ACOs in a one-sided model, or the MLR for ACOs in a two-sided model. This proposed approach relates to our proposal to monitor for financial performance as described in section II.A.5.d of this proposed rule.
Lastly, we propose to add a review criterion to § 425.224(b), which would allow us to consider whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it to fail to meet the quality performance standard for 2 or more years, fail to timely repay shared losses, or to generate losses outside its negative corridor for 2 years, or any other factors that may have caused the ACO to be terminated from the Shared Savings Program. We propose to require that the ACO also demonstrate it has processes in place to ensure that it will remain in compliance with the terms of the new participation agreement.
We propose to discontinue use of the requirement at § 425.600(c), under which an ACO with net losses during a previous agreement period must identify in its application the causes for the net loss and specify what safeguards are in place to enable it to potentially achieve savings in its next agreement period. We believe the proposed financial performance review criterion (discussed in this section of this proposed rule) would be more effective in identifying ACOs with a pattern of poor financial performance. An approach that accounts for financial performance year after year allows ACOs to understand if their performance is triggering a compliance concern and take action to remedy their performance during the remainder of their agreement period. Further, an approach that only considers net losses across performance years may not identify as problematic an ACO that generates losses in multiple years which in aggregate are canceled out by a single year with large savings. Although uncommon, such a pattern of performance, where an ACO's results change rapidly and dramatically, is concerning and warrants consideration in evaluating the ACO's suitability to continue its participation in the program.
This proposed requirement is similar to the current provision at § 425.222(b), which specifies that a previously terminated ACO must demonstrate that it has corrected deficiencies that caused it to be terminated from the program and has processes in place to ensure that it will remain in compliance with the terms of its new participation agreement. As we discussed previously, we propose to discontinue use of § 425.222. We believe adding a similar requirement to § 425.224 would allow us to more consistently apply policies to renewing and re-entering ACOs. Further, we believe applying this requirement to both re-entering and renewing ACOs would safeguard the program against organizations that have not met the program's goals or complied with program requirements and that may not be qualified to participate in the program, and therefore we believe this approach would be protective of the program, the Trust Funds, and Medicare FFS beneficiaries.
For ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO, we would determine the eligibility of the ACO to participate in the program based on the past performance of this other entity. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B's financial performance, quality performance, and compliance with other program requirements (as discussed in this section of this proposed rule) in determining the eligibility of ACO A to enter a new participation agreement in the program.
We have a number of concerns about the vulnerability of certain program policies to gaming by ACOs seeking to continue in the program under the BASIC track's glide path, as well as the need to ensure that an ACO's participation options are commensurate with the experience of the organization and its ACO participants with the Shared Savings Program and other performance-based risk Medicare ACO initiatives.
First, as the program matures and ACOs become more prevalent throughout the country, and as an increasing number of ACO participants become experienced in different Medicare ACO initiatives with differing levels of risk, we believe the regulations as currently written create flexibilities that would allow more experienced ACOs to take advantage of the opportunity to participate under the proposed BASIC track's glide path.
There are many Medicare ACO initiatives in which organizations may gain experience, specifically: Shared Savings Program Track 1, Track 2 and Track 3, as well as the proposed BASIC track and ENHANCED track, and the Track 1+ Model, Pioneer ACO Model, Next Generation ACO Model, and the Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) Model. All but Shared Savings Program Track 1 ACOs and non-Large Dialysis Organization (LDO) End-Stage Renal Disease Care Organizations (ESCOs) participating in the one-sided risk track of the CEC Model participate in a degree of performance-based risk within an ACO's agreement period in the applicable program or model.
As discussed elsewhere in this section (II.A.5.c of this proposed rule), we are proposing to discontinue application of the policies in § 425.222(a). As a result of this change, we will allow ACOs currently participating in Track 1, Track 2, Track 3, or the Track 1+ Model, to choose whether to finish their current agreement or to terminate and apply to immediately enter a new agreement period through an early renewal. We are concerned that removing the existing safeguard under § 425.222(a) without putting in place other policies that assess an ACO's experience with performance-based risk would enable ACOs to participate in the BASIC track's glide path in Level A and Level B, under a one-sided model, terminate, and enter a one-sided model of the glide path again.
We are also concerned that existing and former Track 1 ACOs would have
We also considered that currently § 425.202(b) of the program's regulations addresses application requirements for organizations that were previous participants in the Physician Group Practice (PGP) demonstration, which concluded in December 2012 with the completion of the PGP Transition Demonstration, and the Pioneer ACO Model, which concluded in December 2016, as described elsewhere in this section. We believe it is appropriate to propose to eliminate these provisions, while at the same time proposing criteria for identifying ACOs and ACO participants with previous experience in Medicare ACO initiatives as part of a broader approach to determining available participation options for applicants.
Second, we believe that using prior participation by ACO participant TINs in Medicare ACO initiatives along with the prior participation of the ACO legal entity is important when gauging the ACO's experience, given the observed churn in ACO participants over time and our experience with determining eligibility to participate in the Track 1+ Model. ACOs are allowed to make changes to their certified ACO participant list for each performance year, and we have observed that, each year, about 80 percent of ACOs make ACO participant list changes. We also considered CMS's recent experience with determining the eligibility of ACOs to participate in the Track 1+ Model. The Track 1+ Model is designed to encourage more group practices, especially small practices, to advance to performance-based risk. As such, it does not allow participation by current or former Shared Savings Program Track 2 or Track 3 ACOs, Pioneer ACOs, or Next Generation ACOs. As outlined in the Track 1+ Model Fact Sheet, the same legal entity that participated in any of these performance-based risk ACO initiatives cannot participate in the Track 1+ Model. Furthermore, an ACO would not be eligible to participate in the Track 1+ Model if 40 percent or more of its ACO participants had participation agreements with an ACO that was participating in one of these performance-based risk ACO initiatives in the most recent prior performance year.
Third, any approach to determining participation options relative to the experience of ACOs and ACO participants must also factor in our proposals to differentiate between low revenue and high revenue ACOs, as previously discussed in this section.
Fourth, and lastly, we believe the experience of ACOs and their ACO participants in Medicare ACO initiatives should be considered in determining which track (BASIC track or ENHANCED track) the ACO is eligible to enter as well as the applicability of policies that phase-in over time, namely the equal weighting of benchmark year expenditures, the policy of adjusting the benchmark based on regional FFS expenditures (which, for example, applies different weights in calculating the regional adjustment depending upon the ACO's agreement period in the program) and the phase-in of pay-for-performance under the program's quality performance standards.
Although § 425.222(c) specifies whether a former one-sided model ACO can be considered to be entering its first or second agreement period under Track 1 if it is re-entering the program after termination, the current regulations do not otherwise address how we should determine the applicable agreement period for a previously participating ACO after termination or expiration of its previous participation agreement.
We prefer an approach that would help to ensure that ACOs, whether they are initial applicants to the program, renewing ACOs or re-entering ACOs, would be treated comparably. Any approach should also ensure eligibility for participation options reflects the ACO's and ACO participants' experience with the program and other Medicare ACO initiatives and be transparent. Therefore, we propose to identify the available participation options for an ACO (regardless of whether it is applying to enter, re-enter, or renew its participation in the program) by considering all of the following factors: (1) Whether the ACO is a low revenue ACO or a high revenue ACO; and (2) the level of risk with which the ACO or its ACO participants has experience based on participation in Medicare ACO initiatives in recent years.
As a factor in determining an ACO's participation options, we propose to establish requirements for evaluating whether an ACO is inexperienced with performance-based risk Medicare ACO initiatives such that the ACO would be eligible to enter into an agreement period under the BASIC track's glide path or whether the ACO is experienced with performance-based risk Medicare ACO initiatives and therefore limited to participating under the higher-risk tracks of the Shared Savings Program (either an agreement period under the maximum level of risk and potential reward for the BASIC track (Level E), or the ENHANCED track).
To determine whether an ACO is inexperienced with performance-based risk Medicare ACO initiatives, we propose that both of the following requirements would need to be met: (1) The ACO legal entity has not participated in any performance-based risk Medicare ACO initiative (for example, the ACO is a new legal entity identified as an initial applicant or the same legal entity as a current or previously participating Track 1 ACO); and (2) CMS determines that less than 40 percent of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative in each of the 5 most recent performance years prior to the agreement start date.
We propose that CMS would determine that an ACO is experienced with performance-based risk Medicare ACO initiatives if either of the following criteria are met: (1) The ACO is the same legal entity as a current or previous participant in a performance-based risk Medicare ACO initiative; or (2) CMS determines that 40 percent or more of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative in any of the 5 most recent performance years prior to the agreement start date.
We propose to specify these requirements in a new provision at § 425.600(d). This provision would be used to evaluate eligibility for specific participation options for any ACO that is applying to enter the Shared Savings Program for the first time or to re-enter after termination or expiration of its previous participation agreement, or any ACO that is renewing its participation. As specified in the proposed definition of re-entering ACO, we also propose to apply the provisions at § 425.600(d) to new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO. Thus, the proposed provision at § 425.600(d) would also apply in determining eligibility for these ACOs to enter the BASIC track's glide path for agreement periods beginning on July 1, 2019, and in subsequent years. Because the 40 percent threshold that we are proposing to use to identify ACOs as experienced or inexperienced with performance-based risk on the basis of their ACO participants' prior participation in certain Medicare ACO initiatives is lower than the 50 percent threshold that would be used to identify new legal entities as re-entering ACOs based on the prior participation of their ACO participants in the same ACO, this proposed policy would automatically capture new legal entities identified as re-entering ACOs that have experience with performance-based risk based on the experience of their ACO participants.
We also propose to add new definitions at § 425.20 for “Experienced with performance-based risk Medicare ACO initiatives”, “Inexperienced with performance-based risk Medicare ACO initiatives” and “Performance-based risk Medicare ACO initiative”.
We propose to define “performance-based risk Medicare ACO initiative” to mean an initiative implemented by CMS that requires an ACO to participate under a two-sided model during its agreement period. We propose this would include Track 2, Track 3 or the ENHANCED track, and the proposed BASIC track (including Level A through Level E) of the Shared Savings Program. We also propose this would include the following Innovation Center ACO Models involving two-sided risk: The Pioneer ACO Model, Next Generation ACO Model, the performance-based risk tracks of the CEC Model (including the two-sided risk tracks for LDO ESCOs and non-LDO ESCOs), and the Track 1+ Model. The proposed definition also includes such other Medicare ACO initiatives involving two-sided risk as may be specified by CMS.
We propose to define “experienced with performance-based risk Medicare ACO initiatives” to mean an ACO that CMS determines meets either of the following criteria:
(1) The ACO is the same legal entity as a current or previous ACO that is participating in, or has participated in, a performance-based risk Medicare ACO initiative as defined under § 425.20, or that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e).
(2) 40 percent or more of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in any of the 5 most recent performance years prior to the agreement start date.
As we previously discussed, we are proposing to discontinue use of the “sit-out” period under § 425.222(a) as well as the related “sit-out” period for ACOs that deferred renewal under § 425.200(e). Thus, we propose to identify all Track 1 ACOs that deferred renewal as being experienced with performance-based risk Medicare ACO initiatives. This includes ACOs that are within a fourth and final year of their first agreement period under Track 1 because they were approved to defer entry into a second agreement period under Track 2 or Track 3, and ACOs that have already entered their second agreement period under a two-sided model after a one year deferral. Under § 425.200(e)(2), in the event that a Track 1 ACO that has deferred its renewal terminates its participation agreement before the start of the first performance year of its second agreement period under a two-sided model, the ACO is considered to have terminated its participation agreement for its second agreement period under § 425.220. In this case, when the ACO seeks to re-enter the program after termination, it would need to apply for a two-sided model. We believe our proposal to consider ACOs that deferred renewal to be experienced with performance-based risk Medicare ACO initiatives and therefore eligible for either the BASIC track's Level E (if a low revenue ACO and certain other requirements are met) or the ENHANCED track, is necessary to ensure that ACOs that deferred renewal continue to be required to participate under a two-sided model in all future agreement periods under the program consistent with our current policy under § 425.200(e)(2).
We propose to define “inexperienced with performance-based risk Medicare ACO initiatives” to mean an ACO that CMS determines meets all of the following requirements:
(1) The ACO is a legal entity that has not participated in any performance-based risk Medicare ACO initiative as defined under § 425.20, and has not deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e); and
(2) Less than 40 percent of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in each of the 5 most recent performance years prior to the agreement start date.
Under our proposed approach, for an ACO to be eligible to enter an agreement period under the BASIC track's glide path, less than 40 percent of its ACO participants can have participated in a performance-based risk Medicare ACO initiative in each of the five prior performance years. This proposed requirement is modeled after the threshold currently used in the Track 1+ Model (see Track 1+ Model Fact Sheet), although with a longer look back period. Based on experience with the Track 1+ Model during the 2018 application cycle, we do not believe that the proposed parameters are excessively restrictive. We considered the following issues in developing our proposed approach: (1) Whether to consider participation of ACO participants in a particular ACO, or cumulatively across multiple ACOs, during the 5-year look back period; (2) whether to use a shorter or longer look back period; and (3) whether to use a threshold amount lower than 40 percent.
We propose that in applying this threshold, we would not limit our consideration to ACO participants that participated in the same ACO or the same performance-based risk Medicare ACO initiative during the look back
For applicants applying to enter the BASIC track for an agreement period beginning on July 1, 2019, for example, we would consider what percentage of the ACO participants participated in any of the following during 2019 (January—June), 2018, 2017, 2016, and 2015: Track 2 or Track 3 of the Shared Savings Program, the Track 1+ Model, the Pioneer ACO Model, the Next Generation ACO Model, or the performance-based risk tracks of the CEC Model. In future years (in determining eligibility for participation options for agreement periods starting in 2020 and subsequent years), we would also consider prior participation in the BASIC track and ENHANCED track (which are proposed to become available for agreement periods beginning on July 1, 2019 and in subsequent years).
An ACO would be ineligible for the BASIC track's glide path if, for example, in the performance year prior to the start of the agreement period, 20 percent of its ACO participants participated in a Track 3 ACO and 20 percent of its ACO participants participated in a Next Generation ACO, even if the ACO did not meet or exceed the 40 percent threshold in any of the remaining 4 performance years of the 5-year look back period.
We considered a number of alternatives for the length of the look back period for determining an ACO's experience or inexperience with performance-based risk Medicare ACO initiatives. For example, we considered using a single performance year look back period, as used under the Track 1+ Model. We also considered using a longer look back period, for example of greater than 5 performance years, or a shorter look back period that would be greater than 1 performance year, but less than 5 performance years, such as a 3 performance year look back period.
A number of considerations informed our proposal to use a 5 performance year look back period. For one, we believe a longer look back period would help to guard against a circumstance where an ACO enters the BASIC track's glide path, terminates its agreement after one or 2 performance years under a one-sided model and seeks to enter the program under the one-sided model of the glide path. Whether or not the ACO applies to enter the program as the same legal entity or a new legal entity, the proposed eligibility criteria would identify this ACO as experienced with performance-based risk Medicare ACO initiatives if the ACO's ACO participant list remains relatively unchanged. Second, we believe a longer look back period may reduce the incentive for organizations to wait out the period in an effort to re-form as a new legal entity with the same or very similar composition of ACO participants for purposes of gaming program policies. Third, we believe a longer look back period also recognizes that new ACOs composed of ACO participants that were in performance-based risk Medicare ACO initiatives many years ago (for instance more than 5 performance years prior to the ACO's agreement start date) may benefit from gaining experience with the program's current requirements under the glide path (if our proposal is finalized), prior to transitioning to higher levels of risk and reward. Fourth, and lastly, in using the 5 most recent performance years prior to the start date of an ACO's agreement period, for ACOs applying to enter an agreement period beginning on July 1, 2019, we would consider the participation of ACO participants during the first 6 months of 2019. This would allow us to capture the ACO participants' most recent prior participation in considering an ACO's eligibility for participation options for an agreement period beginning July 1, 2019. An alternative approach that bases the look back period on prior calendar years would overlook this partial year of participation in 2019.
We also considered using a threshold amount lower than 40 percent. Based on checks performed during the 2018 application cycle, for the average Track 1+ Model applicant, less than 2 percent of ACO participants had participated under performance-based risk in the prior year. The maximum percentage observed was 30 percent. In light of these findings, we considered whether to propose a lower threshold for eligibility to participate in the BASIC track's glide path. However, our goal is not to be overly restrictive, but rather to ensure that ACOs with significant experience with performance-based risk are appropriately placed. While we favor 40 percent for its consistency with the Track 1+ Model requirement, we also seek comment on other numeric thresholds.
As previously discussed in this section, we believe some restriction is needed to prevent all current and previously participating Track 1 ACOs, and new ACOs identified as re-entering ACOs because of their ACO participants' prior participation in a Track 1 ACO, from taking advantage of additional time under a one-sided model in the BASIC track's glide path. We believe an approach that restricts the amount of time a former Track 1 ACO or a new ACO, identified as a re-entering ACO because of its ACO participants' prior participation in a Track 1 ACO, may participate in the one-sided models of the BASIC track's glide path (Level A and Level B) would balance several concerns. Allowing Track 1 ACOs and eligible re-entering ACOs some opportunity to continue participation in a one-sided model within the BASIC track's glide path could smooth their transition to performance-based risk. For example, it would provide these ACOs a limited time under a one-sided model in a new agreement period under the BASIC track, during which they could gain experience with their rebased historical benchmark, and prepare for the requirements of participation in a two-sided model (such as establishing a repayment mechanism arrangement). Limiting time in the one-sided models of the BASIC track's glide path for former Track 1 ACOs and new ACOs that are identified as re-entering ACOs because of their ACO participants' recent prior participation in the same Track 1 ACO would also allow these ACOs to progress more rapidly to performance-based risk, and therefore further encourage accomplishment of the program's goals.
After weighing these considerations, we propose that ACOs that previously participated in Track 1 of the Shared Savings Program or new ACOs, for which the majority of their ACO participants previously participated in the same Track 1 ACO, that are eligible to enter the BASIC track's glide path, may enter a new agreement period under either Level B, C, D or E. Former Track 1 ACOs and new ACOs identified as re-entering ACOs because of their ACO participants' prior participation in a Track 1 ACO would not be eligible to participate under Level A of the glide path. Therefore, if an ACO enters the glide path at Level B and is automatically transitioned through the levels of the glide path, the ACO would participate in Level E for the final 2 performance years of its agreement period. For a former Track 1 ACO or a new ACO identified as a re-entering ACO because of its ACO participants' prior participation in a Track 1 ACO that enters an agreement period in the
We also considered a more aggressive approach to transitioning ACOs with experience in Track 1 to performance-based risk. Specifically, we considered whether the one-sided models of the BASIC track's glide path should be unavailable to current or previously participating Track 1 ACOs and new ACOs identified as re-entering ACOs because of their ACO participants' prior participation in a Track 1 ACO. Under this alternative, ACOs that are experienced with Track 1, would be required to enter the BASIC track's glide path under performance-based risk at Level C, D or E. This alternative would more aggressively transition ACOs along the glide path. This approach would recognize that some of these ACOs may have already had the opportunity to participate under a one-sided model for 6 performance years (or 7 performance years for ACOs that elect to extend their agreement period for the 6-month performance year from January 1, 2019 through June 30, 2019), and should already have been taking steps to prepare to enter performance-based risk to continue their participation in the program under the current requirements, and therefore should not be allowed to take advantage of additional time under a one-sided model. For ACOs that have participated in a single agreement period in Track 1, an approach that requires transition to performance-based risk at the start of their next agreement period would be more consistent with the proposed redesign of participation options, under which ACOs would be allowed only 2 years, or 2 years and 6 months in the case of July 1, 2019 starters, under the one-sided models of the BASIC track's glide path. We seek comment on this alternative approach.
In summary, in combination with determining an whether ACOs are low revenue versus high revenue, we propose to add a new paragraph (d) under § 425.600, to provide that CMS will identify ACOs as inexperienced or experienced with performance-based risk Medicare ACO initiatives for purposes of determining an ACO's eligibility for certain participation options, as follows:
• If an ACO is identified as high revenue, the following options would apply:
++ If we determine the ACO is inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter the BASIC track's glide path, or the ENHANCED track. With the exception of ACOs that previously participated in Track 1 and new ACOs identified as re-entering ACOs because of their ACO participants' prior participation in a Track 1 ACO, an ACO may enter the BASIC track's glide path at any level (Level A through Level E). Therefore, eligible ACOs that are new to the program, identified as initial applicants and not as re-entering ACOs, would have the flexibility to enter the glide path at any one of the five levels. An ACO that previously participated in Track 1 or a new ACO identified as a re-entering ACO because more than 50 percent of its ACO participants have recent prior experience in the same Track 1 ACO may enter the glide path under either Level B, C, D or E.
++ If we determine the ACO is experienced with performance-based risk Medicare ACO initiatives, the ACO may only enter the ENHANCED track.
• If an ACO is identified as low revenue, the following options would apply:
++ If we determine the ACO is inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter the BASIC track's glide path, or the ENHANCED track. With the exception of ACOs that previously participated in Track 1 and new ACOs identified as re-entering ACOs because of their ACO participants' prior participation in a Track 1 ACO, an ACO may enter the BASIC track's glide path at any level (Level A through Level E). Therefore, eligible ACOs that are new to the program, identified as initial applicants and not re-entering ACOs, would have the flexibility to enter the glide path at any one of the five levels. An ACO that previously participated in Track 1 or a new ACO identified as a re-entering ACO because more than 50 percent of its ACO participants have recent prior experience in the same Track 1 ACO may enter the glide path under either Level B, C, D or E.
++ If we determine the ACO is experienced with performance-based risk Medicare ACO initiatives, the ACO may enter the BASIC track Level E (highest level of risk and potential reward) or the ENHANCED track. As discussed in section II.A.3.b of this proposed rule, low revenue ACOs are limited to two agreement periods of participation under the BASIC track.
We propose to specify these requirements in revisions to the regulations under § 425.600, which would be applicable for determining participation options for agreement periods beginning on July 1, 2019, and in subsequent years. We seek comment on these proposals for determining an ACO's participation options by evaluating the ACO legal entity's and ACO participants' experience or inexperience with performance-based risk Medicare ACO initiatives. In particular, we welcome commenters' input on our proposal to assess ACO participants' experience with performance-based risk Medicare ACOs using a 40 percent threshold, and the alternative of employing a threshold other than 40 percent, for example, 30 percent. We welcome comments on the proposed 5 performance year look back period for determining whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives, and our consideration of a shorter look back period, such as 3 performance years. We also welcome comments on our proposal to limit former Track 1 ACOs and new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO to a single performance year under the one-sided models of the BASIC track's glide path (two performance years, in the case of an ACO starting its agreement period under the BASIC track on July 1, 2019), and the alternative approach that would preclude such ACOs from participating in one-sided models of the BASIC track's glide path.
We also believe it is appropriate to consider an ACO's experience with the program or other performance-based risk Medicare ACO initiatives in determining which agreement period an ACO should be considered to be entering for purposes of applying policies that phase-in over the course of the ACO's first agreement period and subsequent agreement periods: (1) The weights applied to benchmark year expenditures (equal weighting in second or subsequent agreement periods instead of weighting the 3 benchmark years (BYs) at 10 percent (BY1), 30 percent (BY2), and 60 percent (BY3)); (2) the weights used in calculating the regional adjustment to an ACO's historical benchmark, which phase in over multiple agreement periods; and (3) the quality performance standard, which phases in from complete and
We propose to specify under § 425.600(f)(1) that an ACO entering the program for the first time (an initial entrant) would be considered to be entering a first agreement period in the Shared Savings Program for purposes of applying program requirements that phase-in over time, regardless of its experience with performance-based risk Medicare ACO initiatives. Under this approach, in determining the ACO's historical benchmark, we would weight the benchmark year expenditures as follows: 10 percent (BY1), 30 percent (BY2), and 60 percent (BY3). We would apply a weight of either 25 percent or 35 percent in determining the regional adjustment amount (depending on whether the ACO is higher or lower spending compared to its regional service area) under the proposed approach to applying factors based on regional FFS expenditures beginning with the ACO's first agreement period (see section II.D of this proposed rule). Further, under § 425.502, an initial entrant would be required to completely and accurately report all quality measures to meet the quality performance standard (referred to as pay-for-reporting) in the first performance year of its first agreement period, and for subsequent years of the ACO's first agreement period the pay-for-performance quality performance standard would phase-in.
We propose to divide re-entering ACOs into three categories in order to determine which agreement period an ACO will be considered to be entering for purposes of applying program requirements that phase-in over time, and to specify this policy at § 425.600(f)(2). For an ACO whose participation agreement expired without having been renewed, we propose the ACO would re-enter the program under the next consecutive agreement period. For example, if an ACO completed its first agreement period and did not renew, upon re-entering the program, the ACO would participate in its second agreement period.
For an ACO whose participation agreement was terminated under § 425.218 or § 425.220, we propose the ACO re-entering the program would be treated as if it is starting over in the same agreement period in which it was participating at the time of termination, beginning with the first performance year of the new agreement period. For instance, if an ACO terminated at any time during its second agreement period, the ACO would be considered participating in a second agreement period upon re-entering the program, beginning with the first performance year of their new agreement period. Alternatively, we considered determining which performance year a terminated ACO should re-enter within the new agreement period, in relation to the amount of time the ACO participated during its most recent prior agreement period. For example, under this approach, an ACO that terminated its participation in the program in the third performance year of an agreement period would be treated as re-entering the program in performance year three of the new agreement period. However, we believe this alternative approach could be complicated given the proposed transition from 3-year agreements to agreement periods of at least 5 years.
For a new ACO identified as a re-entering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO, we would consider the prior participation of the ACO in which the majority of the ACO participants in the new ACO were participating in order to determine the agreement period in which the new ACO would be considered to be entering the program. That is, we would determine the applicability of program policies to the new ACO based on the number of agreement periods the other entity participated in the program. If the participation agreement of the other ACO was terminated or expired, the previously described rules for re-entering ACOs would also apply. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B's prior participation in the program. For instance, if ACO B terminated during its second agreement period in the program, we would consider ACO A to be entering a second agreement period in the program, beginning with the first performance year of that agreement period. However, if the other ACO is currently participating in the program, the new ACO would be considered to be entering into the same agreement period in which this other ACO is currently participating, beginning with the first performance year of that agreement period. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO C during the relevant look back period, and ACO C is actively participating in its third agreement period in the program, ACO A would be considered to be participating in a third agreement period, beginning with the first performance year of that agreement period.
We propose to specify at § 425.600(f)(3) that renewing ACOs would be considered to be entering the next consecutive agreement period for purposes of applying program requirements that phase-in over time. This proposed approach is consistent with current program policies for ACOs whose participation agreements expire and that immediately enter a new agreement period to continue their participation in the program. For example, an ACO that entered its first participation agreement on January 1, 2017, and concludes this participation agreement on December 31, 2019, would renew to enter its second agreement period beginning on January 1, 2020. Further, under the proposed definition of “Renewing ACO”, an ACO that terminates its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program would also be considered to be entering the next consecutive agreement period. For example, an ACO that entered its first participation agreement on January 1, 2018, and terminates its agreement effective June 30, 2019, to enter a new participation agreement beginning on July 1, 2019, would be considered to be a renewing ACO that is renewing early to enter its second agreement period beginning on July 1, 2019. This approach would ensure that an ACO that terminates from a first agreement period and immediately enters a new agreement period in the program could not take advantage of program flexibilities aimed at ACOs that are completely new to the Shared Savings Program, such as the pay-for-reporting quality performance standard available to ACOs in their first performance year of their first agreement period under the program. We would therefore apply a consistent approach among renewing ACOs by
This proposed approach would replace the current approach to determining which agreement period an ACO is considered to be entering into, for a subset of ACOs, as specified in the provision at § 425.222(c), which we are proposing to discontinue using. We believe this proposed approach ensures that ACOs that are experienced with the program or with performance-based risk Medicare ACO initiatives are not participating under policies designed for ACOs inexperienced with the program's requirements or similar requirements under other Medicare ACO initiatives, and also helps to preserve the intended phase-in of requirements over time by taking into account ACOs' prior participation in the program.
The proposed approach would help to ensure that ACOs that are new to the program are distinguished from renewing ACOs and ACOs that are re-entering the program, and would also ensure that program requirements are applied in a manner that reflects ACOs' prior participation in the program, which we believe would limit the opportunity for more experienced ACOs to seek to take advantage of program policies. These policies protect against ACOs terminating or discontinuing their participation, and potentially re-forming as a new legal entity, simply to be able to apply to re-enter the program in a way that could allow for the applicability of lower weights used in calculating the regional adjustment to the benchmark or to avoid moving to performance-based risk more quickly on the BASIC track's glide path or under the ENHANCED track.
We believe the proposed approach to determining ACO participation options and the proposal to limit access the BASIC track's glide path to ACOs that are inexperienced with performance-based risk, in combination with the rebasing of ACO benchmarks at the start of each new agreement period, mitigate our concerns regarding ACO gaming. We believe that the requirement that ACOs' benchmarks are rebased at the start of each new agreement period, in combination with the proposed new requirements governing ACO participation options, would be sufficiently protective of the Trust Funds to guard against undesirable ACO gaming behavior. Under the policies discussed elsewhere in this section of the proposed rule for identifying ACOs that are experienced with performance-based risk Medicare ACOs initiatives, ACOs that terminate from the BASIC track's glide path (for example) and seek to re-enter the program, and renewing ACOs (including ACOs renewing early for a new agreement period beginning July 1, 2019) that are identified as experienced with performance-based risk Medicare ACO initiatives could only renew under the BASIC track Level E (if an otherwise eligible low revenue ACO) or the ENHANCED track. This mitigates our concerns about ACOs re-forming and re-entering the program, or serially terminating and immediately participating again as a renewing ACO, since there would be consequences for the ACO's ability to continue participation under lower-risk options that may help to deter these practices.
We acknowledge that under our proposals regarding early renewals (that is, our proposal that ACOs that terminate their current agreement period and immediately enter a new agreement period without interruption qualify as renewing ACOs), it is possible for ACOs to serially enter a participation agreement, terminate from it and enter a new agreement period, to be considered entering the next consecutive agreement period in order to more quickly take advantage of the higher weights used in calculating the regional adjustment to the benchmark. However, we note that these ACOs' benchmarks would be rebased, which we believe would help to mitigate this concern. We seek comment on possible approaches that would prevent ACOs from taking advantage of participation options to delay or hasten the phase-in of higher weights used in calculating the regional adjustment to the historical benchmark, while still maintaining the flexibility for existing ACOs to quickly move from a current 3-year agreement period to a new agreement period under either the BASIC track or ENHANCED track.
In the June 2016 final rule, we established the phase-in of the weights used in calculating the regional adjustment to the ACO's historical benchmark, for second or subsequent agreement periods beginning in 2017 and subsequent years. As discussed in section II.D of this proposed rule, we propose to use factors based on regional FFS expenditures in calculating an ACO's historical benchmark beginning with an ACO's first agreement period for agreement periods beginning on July 1, 2019, and in subsequent years. We would maintain the phase-in for the regional adjustment weights for ACOs with start dates in the program before July 1, 2019, according to the structure established in the earlier rulemaking (such as using these factors for the first time in resetting benchmarks for the third agreement period for 2012 and 2013 starters). Table 5 includes examples of the phase-in of the proposed regional adjustment weights based on agreement start date and applicant type (initial entrant, renewing ACO, or re-entering ACO). This table illustrates the weights that would be used in determining the regional adjustment to the ACO's historical benchmark under this proposed approach to differentiating initial entrants, renewing ACOs (including ACOs that renew early), and re-entering ACOs for purposes of policies that phase-in over time.
As part of the development of these proposals, we also revisited our current policy that allows certain organizations with experience in Medicare ACO initiatives to use a condensed application form to apply to the Shared Savings Program. Under § 425.202(b), we allow for use of a condensed Shared Savings Program application form by organizations that participated in the PGP demonstration. Former Pioneer Model ACOs may also use a condensed application form if specified criteria are met (including that the applicant is the same legal entity as the Pioneer ACO and the ACO is not applying to participate in the one-sided model). For the background on this policy, we refer readers to discussions in earlier rulemaking. (See 76 FR 67833 through 67834, and 80 FR 32725 through 32728.)
The PGP demonstration ran for 5 years from April 2005 through March 2010, and the PGP transition demonstration began in January 2011 and concluded in December 2012.
Under the proposed approach described in this section, we would identify these experienced, former Pioneer Model ACOs entering the program for the first time as participating in a first agreement period for purposes of the applicability of the program policies that phase-in over time. On the other hand, if an ACO terminated its participation in the Shared Savings Program, entered the Next Generation ACO Model, and then re-enters the Shared Savings Program, under the proposed approach we would consider the ACO to be entering either: (1) Its next consecutive agreement period in the Shared Savings Program, if the ACO had completed an agreement period in the program before terminating its prior participation; or (2) the same agreement period in which it was participating at the time of program termination. We note that commenters in earlier rulemaking suggested we apply the benchmark rebasing methodology that incorporates factors based on regional FFS expenditures to former Pioneer ACOs and Next Generation ACOs entering their first agreement period under the Shared Savings Program (see 81 FR 37990). We believe that our proposal, as discussed in section II.D of this proposed rule, to apply factors based on regional FFS expenditures to ACOs' benchmarks in their first agreement periods addresses these stakeholder concerns.
However, we also considered an alternative approach that would allow ACOs formerly participating in these Medicare ACO models to be considered to be entering a second agreement period for the purpose of applying policies that phase-in over time. We decline to propose this approach at this time, because ACOs entering the Shared Savings Program after participation in another Medicare ACO initiative may need time to gain experience with program's policies. Therefore, we prefer the proposed approach that would allow ACOs new to the Shared Savings Program to gain experience with the program's requirements, by entering the program in a first agreement period.
Therefore, we propose to amend § 425.202(b) to discontinue the option for certain applicants to use a condensed application when applying to participate in the Shared Savings Program for agreement periods beginning on July 1, 2019 and in subsequent years.
We seek comment on the proposals described in this section and the alternatives considered. The participation options available to ACOs based on the policies proposed in this section are summarized in Table 6 (low revenue ACOs) and Table 7 (high revenue ACOs).
The program regulations at § 425.316 enable us to monitor the performance of ACOs. In particular, § 425.316 authorizes monitoring for performance related to two statutory provisions regarding ACO performance: Avoidance of at-risk beneficiaries (section 1899(d)(3) of the Act) and failure to meet the quality performance standard (section 1899(d)(4) of the Act). If we discover that an ACO has engaged in the avoidance of at-risk beneficiaries or has failed to meet the quality performance standard, we can impose remedial action or terminate the ACO (see § 425.316(b), (c)).
In monitoring the performance of ACOs, we can analyze certain financial data (see § 425.316(a)(2)(i)), but the regulations do not specifically authorize termination or remedial action for poor financial performance. Similarly, there are no provisions that specifically authorize non-renewal of a participation agreement for poor financial performance, although we had proposed issuing such provisions in prior rules.
In the December 2014 proposed rule (79 FR 72802 through 72806), we proposed to allow Track 1 ACOs to renew their participation in the program for a second agreement period in Track 1 if in at least one of the first 2 performance years of the previous agreement period they did not generate losses in excess of their negative MSR, among other criteria. We refer readers to the June 2015 final rule for a detailed discussion of the proposal and related comments (80 FR 32764 through 32767). Ultimately, we did not adopt a financial performance criterion to determine the eligibility of ACOs to continue in Track 1 in the June 2015 final rule. Although some commenters supported an approach for evaluating an ACO's financial performance for determining its eligibility to remain in a one-sided model, many commenters expressed opposition, citing concerns that this approach could be premature and could disadvantage ACOs that need more time to implement their care management strategies, and could discourage participation. At the time of the June 2015 final rule, we were persuaded by commenters' concerns that application of the additional proposed financial performance criterion for continued participation in Track 1 was premature for ACOs that initially struggled to demonstrate cost savings in their first years in the program. Instead, we
Now that we have additional experience with monitoring ACO financial performance, we believe that the current regulations are insufficient to address recurrent poor financial performance, particularly for ACOs that may be otherwise in compliance with program requirements. Consequently, some ACOs may not have sufficient incentive to remain accountable for the expenditures of their assigned beneficiaries. This may leave the program, the Trust Funds, and Medicare FFS beneficiaries vulnerable to organizations that may be participating in the program for reasons other than meeting the program's goals.
We believe that a financial performance requirement is necessary to ensure that the program promotes accountability for the cost of the care furnished to an ACO's assigned patient population, as contemplated by section 1899(b)(2)(A) of the Act. We believe there is an inherent financial performance requirement that is embedded within the third component of the program's three-part aim: (1) Better care for individuals; (2) better health for populations; and (3) lower growth in Medicare Parts A and B expenditures. Therefore, just as poor quality performance can subject an ACO to remedial action or termination, an ACO's failure to lower growth in Medicare FFS expenditures should be the basis for CMS to take pre-termination actions under § 425.216, including a request for corrective action by the ACO, or termination of the ACO's participation agreement under § 425.218.
We propose to modify § 425.316 to add a provision for monitoring ACO financial performance. Specifically, we propose to monitor for whether the expenditures for the ACO's assigned beneficiary population are “negative outside corridor,” meaning that the expenditures for assigned beneficiaries exceed the ACO's updated benchmark by an amount equal to or exceeding either the ACO's negative MSR under a one-sided model, or the ACO's MLR under a two-sided model.
We propose that financial performance monitoring would be applicable for performance years beginning in 2019 and subsequent years. Specifically, we would apply this proposed approach for monitoring financial performance results for performance years beginning on January 1, 2019, and July 1, 2019, and for subsequent performance years. Financial and quality performance results are typically made available to ACOs in the summer following the conclusion of the calendar year performance year. For example, we anticipate that the financial performance results for performance years beginning on January 1, 2019 and July 1, 2019, will be available for CMS review in the summer of 2020 and will be made available to ACOs when that review is complete. The one-sided model monitoring (relative to the ACO's negative MSR) would apply to ACOs in Track 1 or the first 2 years of the BASIC track's glide path, and the two-sided model monitoring (relative to the ACO's MLR) would apply to ACOs under performance-based risk in the BASIC track (including the glide path) and the ENHANCED track, as well as Track 2.
Generally, based on our experience, ACOs in two-sided models tend to terminate their participation after sharing in losses for a single year in Track 2 or Track 3. We have observed that a small, but not insignificant, number of Track 1 ACOs are negative outside corridor in their first 2 performance years in the program. Among 194 Track 1 ACOs that renewed for a second agreement period under Track 1, 19 were negative outside corridor in their first 2 performance years in their first agreement period. This includes 14 of 127 Track 1 ACOs that started their first agreement period in either 2012 or 2013 and renewed for a second agreement period in Track 1 beginning January 1, 2016, as well as 5 of 67 Track 1 ACOs that started their first agreement period in 2014 and renewed for a second agreement period in Track 1 beginning January 1, 2017. Moreover, the majority of these organizations have thus far failed to achieve shared savings in subsequent performance years. For example, of the 14 2012/2013 starters in Track 1 that were negative outside corridor for the first 2 consecutive performance years in their first agreement period, only 2 ACOs achieved shared savings in their third performance year, while 10 were still negative outside corridor and 2 were negative within corridor. All 14 ACOs entered a second agreement period in Track 1 starting on January 1, 2016: In performance year 2016, 5 shared savings, 4 were positive within corridor, 4 were negative within corridor, and 1 was negative outside corridor. While some of these ACOs appeared to show improvement, the 2016 results do not take into account ACO participant list changes for these ACOs or rebasing of the ACOs' historical benchmarks for their second agreement period. Because the benchmark years for the second agreement period correspond to the performance years of the first agreement period, ACOs that had losses in their initial years are likely to receive a higher rebased benchmark than those that shared savings. We observed similar trends following the first 2 performance years for ACOs that started their first agreement period in 2014 and 2015. Therefore, while experience does not suggest that a large share of ACOs would be affected, we believe that the proposed policy, if adopted, will help to ensure that ACOs are not allowed multiple years of losses without being held accountable for their performance.
Alternatively, we considered an approach under which we would monitor ACOs for generating any losses, beginning with first dollar losses, including monitoring for ACOs that are negative inside corridor and negative outside corridor. However, we prefer the proposed approach previously described, because the corridor (MLR threshold above the benchmark) is established to protect ACOs against sharing losses that result from random variation.
As described briefly in section II.A.2 of this proposed rule, ACOs that
We seek comment on these proposals and related considerations.
In this section, we address requirements related to an ACO's participation in performance-based risk. We propose technical changes to the program's policies on election of the MSR/MLR for ACOs in the BASIC track's glide path, and to address the circumstance of ACOs in two-sided models that elected a fixed MSR/MLR that have fewer than 5,000 assigned beneficiaries for a performance year. We propose changes to the repayment mechanism requirement to update these policies to address the new participation options included in this proposed rule, including the BASIC track's glide path under which participating ACOs must transition from a one-sided model to performance-based risk within a single agreement period. We propose to add a provision that could lower the required repayment mechanism amount for BASIC track ACOs in Levels C, D, or E. In addition, we propose to add provisions to permit recalculation of the estimated amount of the repayment mechanism each performance year to account for changes in ACO participant composition, to codify requirements on the duration of repayment mechanism arrangements, to grant a renewing ACO (as defined in proposed § 425.20) the flexibility to maintain a single, existing repayment mechanism arrangement to support its ability to repay shared losses in the new agreement period so long as it is sufficient to cover an increased repayment mechanism amount during the new agreement period (if applicable), and to establish requirements regarding the issuing institutions for a repayment mechanism arrangement. In this section, we also propose new policies to hold ACOs participating in two-sided models accountable for sharing in losses when they terminate, or CMS terminates, their agreement before the end of a performance year, while also reducing the amount of advance notice required for early termination.
As discussed in earlier rulemaking, the MSR and MLR protect against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than an actual change in performance (see 76 FR 67927 through 67929; and 76 FR 67936 through 67937). The MSR and MLR are calculated as a percentage of the ACO's updated historical benchmark (see §§ 425.604(b) and (c), 425.606(b), 425.610(b)).
In the June 2015 final rule, we finalized an approach to offer Track 2 and Track 3 ACOs the opportunity to select the MSR/MLR that will apply for the duration of the ACO's 3-year agreement period from several symmetrical MSR/MLR options (see 80 FR 32769 through 32771, and 80 FR 32779 through 32780; §§ 425.606(b)(1)(ii) and 425.610(b)(1)). We explained our belief that offering ACOs a choice of MSR/MLR will encourage ACOs to move to two-sided risk, and that ACOs are best positioned to determine the level of risk they are prepared to accept. For instance, ACOs that are more hesitant to enter a performance-based risk arrangement may choose a higher MSR/MLR, to have the protection of a higher threshold before the ACO would become liable to repay shared losses, thus mitigating downside risk, although the ACO would in turn have a higher threshold to meet before being eligible to receive shared savings. ACOs that are comfortable with a lower threshold of protection from risk of shared losses may select a lower MSR/MLR to benefit from a corresponding lower threshold for eligibility for shared savings. We also explained our belief that applying the same MSR/MLR methodology in both of the risk-based tracks reduces complexity for CMS's operations and establishes more equal footing between the risk models. ACOs applying to the Track 1+ Model are also allowed the same choice of MSR/MLR to be applied for the duration of the ACO's agreement period under the Model.
ACOs applying to a two-sided model (currently, Track 2, Track 3 or the Track 1+ Model) may select from the following options:
• Zero percent MSR/MLR.
• Symmetrical MSR/MLR in a 0.5 percent increment between 0.5-2.0 percent.
• Symmetrical MSR/MLR that varies based on the ACO's number of assigned beneficiaries according to the methodology established under the one-sided model under § 425.604(b). The MSR is the same as the MSR that would apply in the one-sided model, and the MLR is equal to the negative MSR.
We considered what MSR/MLR options should be available for the BASIC track's glide path, as well as the timing of selection of the MSR/MLR for ACOs entering the glide path under a one-sided model and transitioning to a two-sided model during their agreement period under the BASIC track.
We propose that ACOs under the BASIC track would have the same MSR/MLR options as are currently available to ACOs under one-sided and two-sided models of the Shared Savings Program, as applicable to the model under which the ACO is participating along the BASIC track's glide path. We believe these thresholds continue to have importance to protect against savings and losses resulting from random variation, although we describe in section II.A.5.b of this proposed rule our consideration of an alternate approach
Specifically, we propose that ACOs in a one-sided model of the BASIC track's glide path would have a variable MSR based on the ACO's number of assigned beneficiaries. We propose to apply the same variable MSR methodology as is used under § 425.604(b) for Track 1. We propose to specify this variable MSR methodology in a proposed new section of the regulations at § 425.605(b). We also propose to specify in § 425.605(b) the MSR/MLR options for ACOs under two-sided models of the BASIC track, consistent with previously described symmetrical MSR/MLR options currently available to ACOs in two-sided models of the Shared Savings Program and the Track 1+ Model (for example, as specified in § 425.610(b)).
Because we are proposing to discontinue Track 1, we believe it is necessary to update the provision governing the symmetrical MSR/MLR options for the ENHANCED track at § 425.610(b), which currently references the variable MSR methodology under Track 1. We propose to revise § 425.610(b)(1)(iii) to reference the requirements at § 425.605(b)(1) for a variable MSR under the BASIC track's glide path rather than the variable MSR under Track 1. Because we are also proposing to discontinue Track 2, concurrently with our proposal to discontinue Track 1, we do not believe it is necessary to revise the cross-reference in § 425.606(b)(1)(ii)(C) to the variable MSR methodology under Track 1.
We continue to believe that an ACO should select its MSR/MLR before assuming performance-based risk, and this selection should apply for the duration of its agreement period under risk. We believe that a policy that allows more frequent selection of the MSR/MLR within an agreement period under two-sided risk (such as prior to the start of each performance year) could leave the program vulnerable to gaming. For example, ACOs could revise their MSR/MLR selections once they have experience under performance-based risk in their current agreement period to maximize shared savings or to avoid shared losses.
However, in light of our proposal to require ACOs to move between a one-sided model (Level A or Level B) and a two-sided model (Level C, D, or E) during an agreement period in the BASIC track's glide path, we believe it is appropriate to allow ACOs to make their MSR/MLR selection during the application cycle preceding their first performance year in a two-sided model, generally during the calendar year before entry into risk. ACOs that enter the BASIC track's glide path under a one-sided model would still be inexperienced with performance-based risk, although they will have the opportunity to gain experience with the program, prior to making this selection. This approach would be another means for BASIC ACOs in the glide path to control their level of risk exposure.
Therefore, we propose to include a policy in the proposed new section of the regulations at § 425.605(b)(2) to allow ACOs under the BASIC track's glide path in Level A or Level B to choose the MSR/MLR to be applied before the start of their first performance year in a two-sided model. This selection would occur before the ACO enters Level C, D or E of the BASIC track's glide path, depending on whether the ACO is automatically transitioned to a two-sided model (Level C) or elects to more quickly transition to a two-sided model within the glide path (Level C, D, or E).
As discussed in the introduction to this section, the MSR and MLR protect against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than an actual change in performance. ACOs in two-sided risk models that have opted for a fixed MSR/MLR can choose a MSR/MLR of zero percent or a symmetrical MSR/MLR equal to 0.5 percent, 1.0 percent, 1.5 percent, or 2.0 percent. As discussed elsewhere in this proposed rule, we are proposing that ACOs in a two-sided model of the new BASIC track would have the same options in selecting their MSR/MLR, including the option of a variable MSR/MLR based on the number of beneficiaries assigned to the ACO.
Under the current regulations, for all ACOs in Track 1 and any ACO in a two-sided risk model that has elected a variable MSR/MLR, we determine the MSR and MLR (if applicable) for the performance year based on the number of beneficiaries assigned to the ACO for the performance year. For ACOs with at least 5,000 assigned beneficiaries in the performance year, the variable MSR can range from a high of 3.9 percent (for ACOs with at least 5,000 assigned beneficiaries) to a low of 2.0 percent (for ACOs with approximately 60,000 or more assigned beneficiaries). See § 425.604(b). For two-sided model ACOs under a variable MSR/MLR, the MLR is equal to the negative of the MSR.
Under section 1899(b)(2)(D) of the Act, in order to be eligible to participate in the Shared Savings Program an ACO must have at least 5,000 assigned beneficiaries. In earlier rulemaking, we established the requirements under § 425.110 to address situations in which an ACO met the 5,000 assigned beneficiary requirement at the start of its agreement period, but later falls below 5,000 assigned beneficiaries during a performance year. We refer readers to the November 2011 and June 2015 final rules and the CY 2017 PFS final rule for a discussion of the relevant background and related considerations (see 76 FR 67807 and 67808, 67959; 80 FR 32705 through 32707; 81 FR 80515 and 80516). CMS deems an ACO to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries if 5,000 or more beneficiaries are historically assigned to the ACO participants in each of the 3 benchmark years, as calculated using the program's assignment methodology (§ 425.110(a)). CMS initially makes this assessment at the time of an ACO's application to the program. As specified in § 425.110(b), if at any time during the performance year, an ACO's assigned population falls below 5,000, the ACO may be subject to the pre-termination actions described in § 425.216 and termination of the participation agreement by CMS under § 425.218. As a pre-termination action, CMS may require the ACO to submit a corrective action plan (CAP) to CMS for approval (§ 425.216). While under a CAP for having an assigned population below 5,000 assigned beneficiaries, an ACO remains eligible for shared savings and losses (§ 425.110(b)(1)). If the ACO's assigned population is not at least 5,000 by the end of the performance year specified by CMS in its request for a CAP, CMS terminates the ACO's participation agreement and the ACO is not eligible to share in savings for that performance year (§ 425.110(b)(2)).
As specified in § 425.110(b)(1), if an ACO's performance year assigned beneficiary population falls below 5,000, the ACO remains eligible for shared savings/shared losses, but the following policies apply with respect to the ACO's MSR/MLR: (1) For ACOs subject to a variable MSR and MLR (if applicable), the MSR and MLR (if applicable) will be set at a level consistent with the number of assigned
To implement the requirement for the variable MSR and MLR (if applicable) to be set at a level consistent with the number of assigned beneficiaries, the CMS Office of the Actuary (OACT) calculates the MSR ranges for populations smaller than 5,000 assigned beneficiaries. The following examples are based on our operational experience: If an ACO's assigned beneficiary population drops to 3,000, the MSR would be set at 5 percent; if the population falls to 1,000 or 500, the MSR would correspondingly rise to 8.7 percent or 12.2 percent, respectively. These sharp increases in the MSR reflect the greater random variation that can occur when expenditures are calculated across a small number of assigned beneficiaries.
To date, the number of ACOs that have fallen below the 5,000-beneficiary threshold for a performance year has been relatively small. Among 432 ACOs that were reconciled in PY 2016, there were 12 ACOs with fewer than 5,000 assigned beneficiaries. In PY 2015 there were 15 (out of 392 ACOs) below the threshold and in PY 2014 there were 14 (out of 333 ACOs). While the majority of these ACOs had between 4,000 and 5,000 beneficiaries, we observed the performance year population fall as low as 513 for one ACO. Based on data available from fourth quarter 2017 program reports, which tend to provide a close approximation of final performance year assignment counts, over 4 percent of ACOs participating in PY 2017 are likely to fall below 5,000 assigned beneficiaries for the performance year, with several likely to be under 1,000.
Consistent with overall program participation trends, most ACOs that have fallen below the 5,000-beneficiary threshold in prior performance years, or that are anticipated to do so for PY 2017, have been in Track 1. These ACOs have thus automatically been subject to a variable MSR. With increased participation in performance-based risk models, however, we anticipate an increased likelihood of observing ACOs below the 5,000-beneficiary threshold that have a fixed MSR/MLR of plus or minus 2 percent or less.
Indeed, program data have demonstrated the popularity of the fixed MSR/MLR among ACOs in two-sided models. In PY 2016, the first year that ACOs in two-sided models were allowed to choose their MSR/MLR, 21 of 22 eligible ACOs selected one of the fixed options. Among the 42 Track 2 and Track 3 ACOs participating in PY 2017, 38 selected a MSR/MLR that does not vary with the ACO's number of assigned beneficiaries, including 11 that are subject to a MSR or MLR of zero percent. Among 101 ACOs participating in two-sided models in PY 2018, 80 are subject to one of the fixed options, including 18 with a MSR and MLR of zero percent.
While we continue to believe that ACOs operating under performance-based risk models should have flexibility in determining their exposure to risk through the MSR/MLR selection, we are concerned about the potential for rewarding ACOs with a static MSR/MLR that are unable to maintain a minimum population of 5,000 beneficiaries through the payment of shared savings, for expenditure variation that is likely the result of normal expenditure fluctuations, rather than the performance of the ACO. If the ACO's minimum population falls below 5,000, the ACO is no longer in compliance with program requirements. The reduction in the size of the ACO's assigned beneficiary population would also raise concerns that any shared savings payments made to the ACO would not reward true cost savings, but instead would pay for normal expenditure fluctuations. We note, however, that an ACO under performance-based risk potentially would be at greater risk of being liable for shared losses, also stemming from such normal expenditure variation. If an ACO's assigned population falls below the minimum requirement of 5,000 beneficiaries, a solution to improve the confidence that shared savings and shared losses do not represent normal variation, but meaningful changes in expenditures, would be to apply a symmetrical MSR/MLR that varies based on the number of beneficiaries assigned to the ACO.
The values for the variable MSR are shown in Table 8. As previously described, the MLR is equal to the negative MSR. In this table, the MSR ranges for population sizes varying between from 5,000 to over 60,000 assigned beneficiaries are consistent with the current approach to determining a variable MSR based on the size of the ACO's population (see § 425.604(b)), and the corresponding variable MLR. We have also added new values, calculated by the CMS OACT, for population sizes varying from one to 4,999, as shown in Table 8. For ACOs with populations between 500-4,999 beneficiaries, the MSR would range between 12.2 percent (for ACOs with 500 assigned beneficiaries) and 3.9 percent (for ACOs with 4,999 assigned beneficiaries). For ACOs with populations of 499 assigned beneficiaries or fewer, we would calculate the MSR to be equal to or greater than 12.2 percent, with the MSR value increasing as the ACO's assigned population decreases.
Therefore, we are proposing to modify § 425.110(b) to provide that we will use a variable MSR/MLR when performing shared savings and shared losses calculations if an ACO's assigned beneficiary population falls below 5,000 for the performance year, regardless of whether the ACO selected a fixed or variable MSR/MLR. We propose to use this approach beginning with performance years starting in 2019. The variable MSR/MLR would be determined using the same approach based on number of assigned beneficiaries that is currently used for two-sided model ACOs that have selected the variable option. If the ACO's assigned beneficiary population increases to 5,000 or more for subsequent performance years in the agreement period, the MSR/MLR would revert to the fixed level selected by the ACO at the start of the agreement period (or before moving to risk for ACOs on the BASIC track's glide path), if applicable.
While we believe this proposal would have a fairly limited reach in terms of number of ACOs impacted, we believe it is nonetheless important for protecting the integrity of the Trust Funds and better ensuring that the program is rewarding or penalizing ACOs for actual performance. The policy, if finalized, would make it more difficult for an ACO under performance-based risk that falls below the 5,000-beneficiary threshold to earn shared savings, but would also provide greater protection against owing shared losses.
We also propose to revise the regulations at § 425.110 to reorganize the provisions in paragraph (b), so that all current and proposed policies for determining the MSR and MLR would apply to all ACOs whose population fall below the 5,000-beneficiaries threshold which are reconciled for shared savings or losses, as opposed to being limited to ACOs under a CAP as provided in the existing provision at § 425.110(b)(1). Specifically we propose to move the current provisions on the determination of the MSR/MLR at paragraphs (b)(1)(i) and (ii) to a new provision at paragraph (b)(3) where we will also distinguish between the policies applicable to determining the MSR/MLR for performance years starting before January 1, 2019, and those that we are proposing to apply for performance years starting in 2019 and subsequent years.
We propose to specify the additional ranges for the MSR (when the ACO's population falls below 5,000 assigned beneficiaries) through revisions to the table at § 425.604(b), for use in determining an ACO's eligibility for shared savings for a performance year starting on January 1, 2019, and any remaining years of the current agreement period for ACOs under Track 1. We note these ranges are consistent with the program's current policy for setting the MSR and MLR (in the event a two-sided model ACO elected the variable MSR/MLR) when the population falls below 5,000 assigned beneficiaries, and therefore similar ranges would be applied in determining the MSR/MLR for performance year 2017 and 2018. These ranges in § 425.604(b) are cross-referenced in the regulations for Track 2 at § 425.606(b)(1)(ii)(C) and therefore would also apply to Track 2 ACOs if their population falls below 5,000 assigned beneficiaries. Further, as discussed in section II.A.6.b.2 of this proposed rule, we propose to specify under a new section of the regulations at § 425.605(b)(1) the range of MSR values that apply under the one-sided model of the BASIC track's glide path, which would also be used in determining the variable MSR/MLR for ACOs participating in two-sided models under the BASIC track and ENHANCED track. We seek comment on these proposals and specifically on the proposed MSR ranges for ACOs with fewer than 5,000 assigned beneficiaries, including the application of a MSR/MLR in excess of 12 percent, in the case of ACOs that have failed to meet the requirement to maintain a population of at least 5,000 assigned beneficiaries and have very small population sizes. In particular, we seek commenters' feedback on whether the proposed approach described in this section could improve accountability of ACOs.
We also note that the requirement of section 1899(b)(2)(D) of the Act, for an ACO to have at least 5,000 assigned beneficiaries, continues to apply. The additional consequences for ACOs with fewer than 5,000 assigned beneficiaries, as specified in § 425.110(b)(1) and (2) would also continue to apply. Under § 425.110(b)(2), ACOs are not eligible to share savings for a performance year in which they are terminated for noncompliance with the requirement to maintain a population of at least 5,000 assigned beneficiaries. As discussed in II.A.6.d of this proposed rule, we are proposing to revise our regulations governing the payment consequences of early termination to include policies applicable to involuntarily terminated ACOs. Under this proposed approach, two-sided model ACOs would be liable for a pro-rated share of any shared losses determined for the performance year during which a termination under § 425.110(b)(2) becomes effective.
We discussed in earlier rulemaking the requirement for ACOs applying to enter a two-sided model to demonstrate they have established an adequate repayment mechanism to provide CMS assurance of their ability to repay shared losses for which they may be liable upon reconciliation for each performance year.
Consistent with the requirements set forth in § 425.204(f)(2), in establishing a repayment mechanism for participation in a two-sided model of the Shared Savings Program, ACOs must select from one or more of the following three types of repayment arrangements: Funds placed in escrow; a line of credit as evidenced by a letter of credit that the Medicare program could draw upon; or a surety bond. Currently, our regulations do not specify any requirements regarding the institutions that may administer an escrow account or issue a line of credit or surety bond. Our regulations require an ACO to submit documentation of its repayment mechanism arrangement during the application or participation agreement renewal process and upon request thereafter.
The arrangement must be adequate to repay at least the minimum dollar amount specified by CMS, which is determined based on an estimation methodology that uses historical Medicare Parts A and B FFS expenditures for the ACO's assigned population. For Track 2 and Track 3 ACOs, the repayment mechanism must be equal to at least 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, as determined based on expenditures used to establish the ACO's benchmark for the applicable agreement period, as estimated by CMS at the time of application or participation agreement renewal (see § 425.204(f)(1)(ii), see also Repayment Mechanism Arrangements Guidance). In the Repayment Mechanism Arrangements Guidance, we describe in detail our approach to estimating the repayment mechanism amount for Track 2 and Track 3 ACOs and our experience with the magnitude of the dollar amounts.
More generally, program stakeholders have continued to identify the repayment mechanism requirement as a potential barrier for some ACOs to enter into performance-based risk tracks, particularly small, physician-only and rural ACOs that may lack access to the capital that is needed to establish a repayment mechanism with a large dollar amount. We revised the Track 1+ Model design in July 2017 (See Track 1+ Model Fact Sheet (Updated July 2017)), to allow for potentially lower repayment mechanism amounts for participating ACOs under a revenue-based loss sharing limit (that is, ACOs that do not include an ACO participant that is either (i) an IPPS hospital, cancer center, or rural hospital with more than 100 beds; or (ii) an ACO participant that is owned or operated by such a hospital or by an organization that owns or operates such a hospital). This policy provides greater consistency between the repayment mechanism amount and the level of risk assumed by revenue-based or benchmark-based ACOs and helps alleviate the burden of securing a higher repayment mechanism amount based on the ACO's benchmark expenditures, as required for Track 2 and Track 3 ACOs. We believe this approach is appropriate for this subset of Track 1+ Model ACOs because they are generally at risk for repaying a lower amount of shared losses than other ACOs that are subject to a benchmark-based loss sharing limit (that is, ACOs that include the types of ACO participants previously identified in this proposed rule). Therefore, under the Track 1+ Model, a bifurcated approach is used to determine the estimated amount of an ACO's repayment mechanism for consistency with the bifurcated approach to determining the loss sharing limit under the Track 1+ Model. For Track 1+ Model ACOs, CMS estimates the amount of the ACO's repayment mechanism as follows:
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Under § 425.204(f)(3), an ACO must replenish the amount of funds available through the repayment mechanism within 90 days after the repayment mechanism has been used to repay any portion of shared losses owed to CMS. In addition, our regulations require a repayment mechanism arrangement to remain in effect for a sufficient period of time after the conclusion of the agreement period to permit CMS to calculate and to collect the amount of shared losses owed by the ACO. As noted in our Repayment Mechanism Arrangements Guidance, we believe that this standard would be satisfied by an arrangement that terminates 24 months following the end of the agreement period.
As previously noted, an ACO that is seeking to participate in a two-sided model must submit for CMS approval documentation supporting the adequacy of a mechanism for repaying shared losses, including demonstrating that the value of the arrangement is at least the minimum amount specified by CMS. We propose to modify § 425.204(f) to address concerns regarding the amount of the repayment mechanism, to specify the data used by CMS to determine the repayment mechanism amount, and to permit CMS to specify a new repayment mechanism amount annually based on changes in ACO participants.
In general, we believe that, like other ACOs participating in two-sided risk tracks, ACOs applying to participate in the BASIC track under performance-based risk should be required to provide CMS assurance of their ability to repay shared losses by establishing an adequate repayment mechanism. Consistent with the approach used under the Track 1+ Model, we believe the amount of the repayment mechanism should be potentially lower for BASIC track ACOs compared to the repayment mechanism amounts required for ACOs in Track 2 or the ENHANCED track. We would calculate a revenue-based repayment mechanism amount and a benchmark-based repayment mechanism amount for each BASIC track ACO and require the ACO to obtain a repayment mechanism for the lower of the two amounts described previously. We believe this aligns with our proposed approach for determining the loss sharing limit for ACOs participating in the BASIC track, described in section II.A.3.b. of this proposed rule. In addition, this approach balances concerns about the ability of ACOs to take on performance-based risk and repay any shared losses for which they may be liable with concerns about the burden imposed on ACOs seeking to enter and continue their participation in the BASIC track.
Previously, we have used historical data to calculate repayment mechanism amounts, typically using the same reference year to calculate the estimates consistently for all applicants to a two-sided model. As a basis for the estimate, we have typically used assignment and expenditure data from the most recent prior year for which 12 months of data are available, which tends to be benchmark year 2 for ACOs applying to enter the program or renew their participation agreement (for example, calendar year 2016 data for ACOs applying to enter participation
Therefore, we are proposing to amend § 425.204(f)(4) to specify the methodologies and data used in calculating the repayment mechanism amounts for BASIC track, Track 2, and ENHANCED track ACOs. For an ACO in Track 2 or the ENHANCED track, we propose that the repayment mechanism amount must be equal to at least 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO's assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available. For a BASIC track ACO, the repayment mechanism amount must be equal to the lesser of (i) 1 percent of the total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available; or (ii) 2 percent of the total Medicare Parts A and B FFS revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available. For ACOs with a participant agreement start date of July 1, 2019, we also propose to calculate the repayment mechanism amount using expenditure data from the most recent calendar year for which 12 months of data are available.
Currently, we generally do not revise the estimated repayment mechanism amount for an ACO during its agreement period. For example, we typically do not revise the repayment mechanism amount during an ACO's agreement period to reflect annual changes in the ACO's certified ACO participant list. However, in the Track 1+ Model, CMS may require the ACO to adjust the repayment mechanism amount if changes in an ACO's participant composition occur within the ACO's agreement period that result in the application of relatively higher or lower loss sharing limits. As explained in the Track 1+ Model Fact Sheet, if the estimated repayment mechanism amount increases as a result of the ACO's change in composition, CMS would require the Track 1+ ACO to demonstrate its repayment mechanism is equal to this higher amount. If the estimated amount decreases as a result of its change in composition, CMS may permit the ACO to decrease the amount of its repayment mechanism (for example, if CMS also determines the ACO does not owe shared losses from the prior performance year under the Track 1+ Model).
We believe a similar approach may be appropriate to address changes in the ACO's composition over the course of an agreement period and to ensure the adequacy of an ACO's repayment mechanism as it enters higher levels of risk within the ENHANCED track or the BASIC track's glide path. During an agreement period, an ACO's composition of ACO participant TINs and the providers/suppliers enrolled in the ACO participant TINs may change. The repayment mechanism estimation methodology we previously described in this section uses data based on the ACO participant list, including estimated expenditures for the ACO's assigned population, and in the case of the proposed BASIC track, estimated revenue for ACO participant TINs. See for example, Repayment Mechanism Arrangements Guidance (describing the calculation of the repayment mechanism amount estimate). As a result, over time the initial repayment mechanism amount calculated by CMS may no longer represent the expenditure trends for the ACO's assigned population or ACO participant revenue and therefore may not be sufficient to ensure the ACO's ability to repay losses. For this reason, we believe it would be appropriate to periodically recalculate the amount of the repayment mechanism arrangement.
For agreement periods beginning on or after July 1, 2019, we propose to recalculate the estimated amount of the ACO's repayment mechanism arrangement before the second and each subsequent performance year in which the ACO is under a two-sided model in the BASIC track or ENHANCED track. If we determine the estimated amount of the ACO's repayment mechanism has increased, we may require the ACO to demonstrate the repayment mechanism arrangement covers at least an amount equal to this higher amount.
We propose to make this determination as part of the ACO's annual certification process, in which it finalizes changes to its ACO participant list prior to the start of each performance year. We would recalculate the estimate for the ACO's repayment mechanism based on the certified ACO participant list each year after the ACO begins participation in a two-sided model in the BASIC track or ENHANCED track. If the amount has increased substantially (for example, by at least 10 percent or $100,000, whichever is the lesser value), we would notify the ACO in writing and require the ACO to submit documentation for CMS approval to demonstrate that the funding for its repayment mechanism has been increased to reflect the recalculated repayment mechanism amount. We would require the ACO to make this demonstration within 90 days of being notified by CMS of the required increase.
We recognize that in some cases, the estimated amount may change insignificantly. Requiring an amendment to the ACO's arrangement (such as the case would be with a letter of credit or surety bond) would be overly burdensome and not necessary for reassuring CMS of the adequacy of the arrangement. Therefore, we propose to evaluate the amount of change in the ACO's repayment mechanism, comparing the newly estimated amount and the amount estimated for the most recent prior performance year. If this amount has increased by equal to or greater than either 10 percent or $100,000, whichever is the lesser value, we would require the ACO to demonstrate that it has increased the dollar amount of its arrangement to the recalculated amount. We solicit comments on whether a higher or lower change in the repayment mechanism estimate should trigger the ACO's obligation to increase its repayment mechanism amount.
However, unlike the Track 1+ Model, we propose that if the estimated amount decreases as a result of the ACO's
We believe the requirements for repayment mechanism amounts should account for the special circumstances of renewing ACOs, which would otherwise have to maintain two separate repayment mechanisms for overlapping periods of time. As discussed in section II.A.5.c.4, we propose to define “renewing ACO” to mean an ACO that continues its participation in the program for a consecutive agreement period, without a break in participation, because it is either: (1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or (2) an ACO that terminated its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program. We propose at § 425.204(f)(3)(iv) that a renewing ACO can use its existing repayment mechanism to demonstrate that it has the ability to repay losses that may be incurred for performance years in the next agreement period, as long as the ACO submits documentation that the term of the repayment mechanism has been extended and the amount of the repayment mechanism has been updated, if necessary. However, depending on the circumstances, a renewing ACO may have greater potential liability for shared losses under its existing agreement period compared to its potential liability for shared losses under a new agreement period. Therefore, we propose that if an ACO wishes to use its existing repayment mechanism to demonstrate its ability to repay losses in the next agreement period, the amount of the existing repayment mechanism must be equal to the greater of the following: (1) The amount calculated by CMS in accordance with the benchmark-based methodology or revenue-based methodology, as applicable by track (see proposed § 425.204(f)(4)(iv)); or (2) the repayment mechanism amount that the ACO was required to maintain during the last performance year of its current agreement. This proposal protects the financial integrity of the program by ensuring that a renewing ACO will remain capable of repaying losses incurred under its old agreement period.
We propose to consolidate at § 425.204(f)(4) all of our proposed policies, procedures, and requirements related to the amount of an ACO's repayment mechanism, including provisions regarding the calculation and recalculation of repayment mechanism amounts. We also propose to revise the regulations at § 425.204 to streamline and reorganize the provisions in paragraph (f), which we believe is necessary to incorporate these and other proposed requirements discussed in this proposed rule.
Currently, ACOs applying to enter a performance-based risk track under the Shared Savings Program must meet the eligibility requirements, including demonstrating they have established an adequate repayment mechanism under § 425.204(f). We believe modifications to the existing repayment mechanism requirements are necessary to address circumstances that could arise if our proposed approach to allowing ACOs to enter or change risk tracks during the current agreement period is finalized. Specifically, we believe modifications would be necessary to reflect the possibility that an ACO that initially entered into an agreement period under the one-sided model years of the BASIC track's glide path will transition to performance-based risk within their agreement period, and thereby would become subject to the requirement to establish a repayment mechanism.
The current regulations specify that an ACO participating under a two-sided model must demonstrate the adequacy of its repayment mechanism prior to the start of each agreement period in which it takes risk and upon request thereafter (§ 425.204(f)(3)). We are revisiting this policy in light of our proposal to automatically transition ACOs in the BASIC track's glide path from a one-sided model to a two-sided model beginning in their third performance year, and also under our proposal that would allow BASIC ACOs to elect to transition to performance-based risk beginning in their second performance year of the glide path.
We believe ACOs participating in the BASIC track's glide path should be required to demonstrate they have established an adequate repayment mechanism, consistent with the requirement for ACOs applying to enter an agreement period under performance-based risk. Therefore, we are proposing to amend the regulations to provide that an ACO entering an agreement period in Levels C, D, or E of the BASIC track's glide path must demonstrate the adequacy of its repayment mechanism prior to the start of its agreement period and at such other times as requested by CMS. In addition, we are proposing that an ACO entering an agreement period in Level A or Level B of the BASIC track's glide path must demonstrate the adequacy of its repayment mechanism prior to the start of any performance year in which it either elects to participate in, or is automatically transitioned to a two-sided model (Level C, Level D, or Level E) of the BASIC track's glide path, and at such other times as requested by CMS.
We seek comment on these proposals.
We acknowledge that the proposed change to an agreement period of at least 5 years will affect the term for the repayment mechanism. Under the program's current requirements, the repayment mechanism must be in effect for a sufficient period of time after the conclusion of the agreement period to permit CMS to calculate the amount of shared losses owed and to collect this amount from the ACO (§ 425.204(f)(4)).
We point readers to the June 2015 final rule for a discussion of the requirement for ACOs to demonstrate that they would be able to repay shared losses incurred at any time within the agreement period, and for a reasonable period of time after the end of each agreement period (the “tail period”). We explained that this tail period must be sufficient to permit CMS to calculate the amount of any shared losses that may be owed by the ACO and to collect this amount from the ACO (see 80 FR 32783). This is necessary, in part, because financial reconciliation results are not available until the summer following the conclusion of the performance year. We have interpreted this requirement to be satisfied if the repayment mechanism arrangement will remain in effect for 24 months after the end of the agreement period (see Repayment Mechanism Arrangements Guidance). Once ACOs are notified of shared losses, based on financial reconciliation, they have 90 days to make payment in full (see §§ 425.606(h) and 425.610(h)).
We propose to specify at § 425.204(f)(6) the general rule that a repayment mechanism must be in effect for the duration of the ACO's
We propose some exceptions to this general rule. First, we propose that CMS may require an ACO to extend the duration of its repayment mechanism beyond the 24-month tail period if necessary to ensure that the ACO will repay CMS any shared losses for each of the performance years of the agreement period. We believe this may be necessary in rare circumstances to protect the financial integrity of the program.
Second, we believe the duration requirement should account for the special circumstances of renewing ACOs, which would otherwise have to maintain two separate repayment mechanisms for overlapping periods of time. As previously noted, we propose at § 425.204(f)(3)(iv) that a renewing ACO can choose to use its existing repayment mechanism to demonstrate that it has the ability to repay losses that may be incurred for performance years in the next agreement period, as long as the ACO submits documentation that the term of the repayment mechanism has been extended and the amount of the repayment mechanism has been increased, if necessary. We propose at § 425.204(f)(6) that the term of the existing repayment mechanism must be extended in these cases and that it must periodically be extended thereafter upon notice from CMS.
We are considering the amount of time by which we would require the existing repayment mechanism to be extended. As discussed in section II.A.5 of this proposed rule, renewing ACOs (as we propose to define that term at § 425.20) may have differing numbers of years remaining under their current repayment mechanism arrangements depending on whether the ACO is renewing at the conclusion of its existing agreement period or if the ACO is an early renewal (terminating its current agreement to enter a new agreement period without interruption in participation). We recognize that it may be difficult for ACOs that are completing the term of their current agreement period to extend an existing repayment mechanism by 7 years (that is, for the full 5-year agreement term plus 24 months). Therefore, we are considering whether the program would be adequately protected if we permitted the existing repayment mechanism to be extended long enough to cover the first 2 or 3 performance years of the new agreement period (that is, an extension of 4 or 5 years, respectively, including the 24-month tail period). We solicit comment on whether we should require a longer or shorter extension.
If we permit an ACO to extend its existing repayment mechanism for less than 7 years, we would require the ACO to extend the arrangement periodically upon notice from CMS. Under this approach, the ACO would eventually have a repayment mechanism arrangement that would not expire until at least 24 months after the end of the new agreement period. We seek comment on whether this approach should also apply to an ACO entering two-sided risk for the first time (that is, an ACO that is not renewing its participation agreement). We would continue to permit a renewing ACO to maintain two separate repayment mechanisms (one for the current agreement period and one for the new agreement period).
Under our proposal, if CMS notifies a renewing ACO that its repayment mechanism amount will be higher for the new agreement period, the ACO may either (i) establish a second repayment mechanism arrangement in the higher amount for 7 years (or for a lesser duration that we may specify in the final rule), or (ii) increase the amount of its existing repayment mechanism to the amount specified by CMS and extend the term of the repayment mechanism arrangement for an amount of time specified by CMS (7 years or for a lesser duration that we may specify in the final rule). On the other hand, if CMS notifies a renewing ACO that the repayment mechanism amount for its new agreement period is equal to or lower than its existing repayment mechanism amount, the ACO may similarly choose to extend the duration of its existing repayment mechanism instead of obtaining a second repayment mechanism for the new agreement period. However, in that case, the ACO would be required to maintain the repayment mechanism at the existing higher amount.
Third, we believe that the term of a repayment mechanism may terminate earlier than 24 months after the agreement period if it is no longer needed. Under certain conditions, we permit early termination of a repayment mechanism and release of the arrangement's remaining funds to the ACO. These conditions are specified in the Repayment Mechanism Arrangements Guidance, and we propose to include similar requirements at § 425.204(f)(6). Specifically, we propose that the repayment mechanism may be terminated at the earliest of the following conditions:
• The ACO has fully repaid CMS any shared losses owed for each of the performance years of the agreement period under a two-sided model;
• CMS has exhausted the amount reserved by the ACO's repayment mechanism and the arrangement does not need to be maintained to support the ACO's participation under the Shared Savings Program; or
• CMS determines that the ACO does not owe any shared losses under the Shared Savings Program for any of the performance years of the agreement period. For example, if a renewing ACO opts to establish a second repayment mechanism for its new agreement period, it may request to cancel the first repayment mechanism after reconciliation for the final performance year of its previous agreement period if it owes no shared losses for the final performance year and it has repaid all shared losses, if any, incurred during the previous agreement period.
We solicit comments on whether the provisions proposed at § 425.204(f)(6) are adequate to protect the financial integrity of the Shared Savings Program, to provide greater certainty to ACOs and financial institutions, and to facilitate the establishment of repayment mechanism arrangements.
We are also proposing additional requirements related to the financial institutions through which ACOs establish their repayment mechanism arrangements that would be applicable to all ACOs participating in a performance-based risk track. With the proposed changes to offer only the BASIC track and ENHANCED track for agreement periods beginning on July 1, 2019 and in subsequent years, we anticipate an increase in the number of repayment mechanism arrangements CMS will review with each annual application cycle. We believe the proposed new requirements regarding the financial institutions with which ACOs establish their repayment mechanisms would provide CMS greater certainty about the adequacy of repayment mechanism arrangements and ultimately ease the process for reviewing and approving the ACO's repayment mechanism arrangement documentation.
Currently, as described in the program's Repayment Mechanism Arrangements Guidance, CMS will accept an escrow account arrangement established with a bank that is insured by the Federal Deposit Insurance Corporation (FDIC), a letter of credit established at a FDIC-insured institution, and a surety bond issued by a company included on the U.S. Department of Treasury's list of certified (surety bond) companies (available at
Since the June 2015 final rule, several ACO applicants have requested use of arrangements from entities other than those described in our Repayment Mechanism Arrangements Guidance, such as a letter of credit issued by the parent corporation of an ACO, and funds held in escrow by an attorney's office. In reviewing these requests, we found a similar level of complexity resulting from the suggested arrangements as we did with our earlier experiences reviewing alternative repayment arrangements, which were permitted during the initial years of the Shared Savings Program until the regulations were revised in the June 2015 final rule to remove the option to establish an appropriate alternative repayment mechanism. In proposing to eliminate this option, we explained that a request to use an alternative repayment mechanism increases administrative complexity for both ACOs and CMS during the application process and is more likely to be declined by CMS (see 79 FR 72832). Although our program guidance (as specified in Repayment Mechanism Arrangements Guidance, version 6, July 2017) encourages ACOs to obtain a repayment mechanism from a financial institution, these recent requests for approval of more novel repayment arrangements have alerted CMS to the potential risk that ACOs may seek approval of repayment mechanism arrangements from organizations other than those that CMS has determined are likely to be most financially sound and able to offer products that CMS can readily verify as appropriate repayment mechanisms that ensure the ACO's ability to repay any shared losses.
Therefore, we propose to revise § 425.204(f)(2) to specify the following requirements about the institution issuing the repayment mechanism arrangement: an ACO may demonstrate its ability to repay shared losses by placing funds in escrow with an insured institution, obtaining a surety bond from a company included on the U.S. Department of Treasury's List of Certified Companies, or establishing a line of credit (as evidenced by a letter of credit that the Medicare program can draw upon) at an insured institution. We anticipate updating the Repayment Mechanism Arrangements Guidance to specify the types of institutions that would meet these new requirements. For example, in the case of funds placed in escrow and letters of credit, the repayment mechanism could be issued by an institution insured by either the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund. The proposed revisions would bring clarity to the program's requirements, which will assist ACOs in selecting, and reduce burden on CMS in reviewing and approving, repayment mechanism arrangements. We welcome commenters' suggestions on these proposed requirements for ACOs regarding the issuing institution for repayment mechanism arrangements.
Sections 425.218 and 425.220 of the regulations describe the Shared Savings Program's termination policies. Section 425.221, added by the June 2015 final rule, specifies the close-out procedures and payment consequences of early termination. Under § 425.218, CMS can terminate the participation agreement with an ACO when the ACO fails to comply with any of the requirements of the Shared Savings Program. As described in § 425.220, an ACO may also voluntarily terminate its participation agreement. The ACO must provide at least 60 days advance written notice to CMS and its ACO participants of its decision to terminate the participation agreement and the effective date of its termination.
The November 2011 final rule establishing the Shared Savings Program indicated at § 425.220(b) (although this provision was subsequently revised) that ACOs that voluntarily terminated during a performance year would not be eligible to share in savings for that year (76 FR 67980). The June 2015 final rule revised this policy to specify in § 425.221(b)(1) that if an ACO voluntarily terminates with an effective termination date of December 31st of the performance year, the ACO may share in savings only if it has completed all required close-out procedures by the deadline specified by CMS and has satisfied the criteria for sharing savings for the performance year. ACOs that voluntarily terminate with an effective date of termination prior to December 31st of a performance year and ACOs that are involuntarily terminated under § 425.218 are not eligible to share in savings for the performance year.
The current regulations also do not impose any liability for shared losses on two-sided model ACOs that terminate from the program prior to December 31 of a given performance year. As explained in the June 2015 final rule, the program currently has no methodology for partial year reconciliation (80 FR 32817). As a result, ACOs that voluntarily terminate before the end of the performance year are neither eligible to share in savings nor accountable for any shared losses.
The existing policies on termination and the payment consequences of early termination raise concerns for both stakeholders and CMS. First, stakeholders have raised concerns that the current requirement for 60 days advance notice of a voluntary termination is too long because it does not allow ACOs to make timely, informed decisions about their continued participation in the program. Further, we are concerned that under the current policy, ACOs in two-sided models that are projecting losses have an incentive to leave the program prior
We are sympathetic to stakeholder concerns that the existing requirement for a 60-day notification period may hamper ACOs' ability to make timely and informed decisions about their continued participation in the program. A key factor in the timing of ACOs' participation decisions is the availability of program reports. Financial reconciliation reports (showing CMS's determination of the ACO's eligibility for shared savings or losses) are typically made available in the summer following the conclusion of the calendar year performance year (late July—August of the subsequent calendar year). Due to the timing of the production of quarterly reports (with information on the ACO's assigned beneficiary population, and expenditure and utilization trends), an ACO contemplating a year-end termination typically only has two quarters of feedback for the current performance year to consider in its decision-making process. This is because quarterly reports are typically made available approximately 6 weeks after the end of the applicable calendar year quarter. For example, quarter 3 reports would be made available to ACOs in approximately mid-November of each performance year. These dates for delivery of program reports also interact with the application cycle timeline (with ACOs typically required to notify CMS of their intent to apply in May, typically before quarter 1 reports are available, and submit applications during the month of July, prior to receiving quarter 2 reports), as applicants seek to use financial reconciliation data for the prior performance year and quarterly report data for the current performance year to make participation decisions about their continued participation, particularly ACOs applying to renew their participation for a subsequent agreement period.
We believe that adopting a shorter notice requirement would provide ACOs with more flexibility to consider their options with respect to their continued participation in the program. We are therefore proposing to revise § 425.220 to reduce the minimum notification period from 60 to 30 days. Reducing the notice requirement to 30 days would typically allow ACOs considering a year-end termination to base their decision on three quarters of feedback reports instead of two, given current report production schedules.
In this section, we discuss payment consequences of early termination of an ACO's participation agreement. We reconsidered the program's current policies on payment consequences of termination under § 425.221 in light of our proposal to reduce the amount of advance notice from ACOs of their voluntarily termination of participation under § 425.220. While we believe that the proposal to shorten the notice period for voluntary termination under § 425.220 from 60 to 30 days would be beneficial to ACOs, we recognize that it may increase gaming among risk-bearing ACOs facing losses, as ACOs would have more time and information to predict their financial performance with greater accuracy.
To deter gaming while still providing flexibility for ACOs in two-sided models to make decisions about their continued participation in the program, we considered several policy alternatives to hold these ACOs accountable for some portion of the shared losses generated during the performance year in which they terminate their participation in the program.
We first considered a policy similar to that used in the Next Generation ACO (NGACO) Model whereby ACOs may terminate without penalty if they do so by providing notice to CMS on or before February 28, with an effective date 30 days after the date of the notice (March 30). ACOs that terminate after that date are subject to financial reconciliation. These ACOs are liable for any shared losses determined and are also eligible to share in savings. The NGACO Model adopted March 30 as the deadline for the effective termination date in order to align with timelines for the Quality Payment Program. Specifically, this date ensures that clinicians affiliated with a terminating NGACO will not be included in the March 31 snapshot date for QP determinations. However, while we acknowledge the merit of reducing provider uncertainty around Quality Payment Program eligibility, we also recognize that in the early part of the performance year, ACOs have a limited amount of information on which to base termination decisions. We are especially concerned that holding ACOs accountable for full shared losses may lead many organizations to leave the program early in the performance year, including those that would have ultimately been eligible for shared savings had they continued their participation. Post-termination, Shared Savings Program ACOs no longer have access to the same program resources that can help to facilitate care management, such as beneficiary-identifiable claims data or payment rule waivers, such as the SNF 3-day rule waiver. This could make it more challenging for these entities to reduce costs, possibly offsetting any benefits to the Medicare Trust Funds from reduced gaming.
Given the drawbacks of setting an early deadline for ACOs to withdraw without financial risk, we also considered a policy under which risk-bearing ACOs that voluntarily terminate with an effective date after June 30 of a performance year would be liable for a portion of any shared losses determined for the performance year. We believe that June 30 is a reasonable deadline for the effective date of termination as it allows ACOs time to accumulate more information and make decisions regarding their continued participation in the program. As is the case under current policy, clinicians affiliated with ACOs that terminate with an effective date between March 31 and June 30 would be captured in one or more QP determination snapshots. Clinicians determined to have QP status would lose their status as a result of the termination, and would instead be scored under MIPS using the APM scoring standard.
We propose to conduct financial reconciliation for all ACOs in two-sided models that voluntarily terminate after June 30. We propose to use the full 12 months of performance year expenditure data in performing reconciliation for terminated ACOs with partial year participation. For those ACOs that generate shared losses, we will pro-rate the shared loss amount by the number of months during the year in which the ACO was in the program. To calculate the pro-rated share of losses, CMS will multiply the amount of shared losses calculated for the performance year by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12. We would count any month in which the ACO had at least one day of participation. Therefore, an ACO with an effective date of termination any time in July would be liable for 7/12 of any shared losses determined, while an ACO with an effective date of termination any time in August would be liable for 8/12, and so forth. An ACO with an effective date of
We believe this approach provides an incentive for ACOs to continue to control growth in expenditures and report quality for the relevant performance year even after they leave the program, as both can reduce the amount of shared losses owed. Increasing the proportion of shared losses owed with the number of months in the year that the ACO remains in the program also helps to counteract the potential for gaming, as ACOs that wait to base their termination decision on additional information are liable for a higher portion of any shared losses that are incurred. This approach also reflects the fact that later-terminating ACOs may have enjoyed program flexibilities (for example, the SNF 3-day rule waiver) for a longer period of time.
We also considered the payment consequences of early termination for ACOs that are involuntarily terminated by CMS under § 425.218. Although these ACOs are not choosing to leave the program of their own accord and thus are not using termination as a means of avoiding their responsibility for shared losses, we believe they should not be excused from responsibility for some portion of shared losses simply because they failed to comply with program requirements. Further, we believe it is more appropriate to hold involuntarily terminated ACOs accountable for a portion of shared losses during any portion of the performance year. Since involuntary terminations can occur throughout the performance year, establishing a cut-off date for determining the payment consequences for these ACOs could allow some ACOs to avoid accountability for their losses. Therefore, we propose to pro-rate shared losses for ACOs in two-sided models that are involuntarily terminated by CMS under § 425.218 for any portion of the performance year during which the termination becomes effective. We propose the same methodology as previously described for pro-rating shared losses for voluntarily terminated ACOs would also apply to involuntarily terminated ACOs.
We considered whether to allow ACOs voluntarily terminating after June 30 but before December 31 an opportunity to share in a portion of any shared saving earned. However, we decided to limit the proposed changes to shared losses. While we recognize that this approach may appear to favor CMS, we believe that ACOs expecting to generate savings are less likely to terminate early in the first place. Under the program's current regulations at § 425.221(b)(1), ACOs that voluntarily terminate effective December 31 and that meet the current criteria in § 425.221 may still share in savings.
We propose to amend § 425.221 to provide that ACOs in two-sided models that are terminated by CMS under § 425.218 or certain ACOs that voluntarily terminate under § 425.220 will be liable for a pro-rated amount of any shared losses determined, with the pro-rated amount reflecting the number of months during the performance year that the ACO was in the program. We propose to apply this policy to ACOs in two-sided models for performance years beginning in 2019 and subsequent performance years.
We also propose to specify in the regulations at § 425.221 the payment consequences of termination during calendar year 2019 for ACOs preparing to enter or participating under agreements beginning July 1, 2019 (see section II.A.7 of this proposed rule).
First, as discussed in detail in section II.A.7 of this proposed rule, we would reconcile ACOs based on the respective 6-month performance year methodology for their participation during a 6-month portion of 2019 in which they are either under a current agreement period beginning prior to 2019, or under a new agreement period beginning July 1, 2019. We propose an ACO would be eligible to receive shared savings for a 6-month performance year during 2019, if they complete the term of this performance year, regardless of whether they choose to continue their participation in the program. That is, we would reconcile: ACOs that started a first or second agreement period January 1, 2016 that extend their agreement period for a fourth performance year, and complete this performance year (concluding June 30, 2019); and ACOs that enter an agreement period July 1, 2019 and terminate December 31, 2019, the final calendar day of their first performance year (defined as a 6-month period).
For an ACO that participates for a portion of a 6-month performance year during 2019 (January 1, 2019 through June 30, 2019, July 1, 2019 through December 31, 2019) we propose the following: (1) If the ACO terminates its participation agreement effective before the end of the performance year, we would not reconcile the ACO for shared savings or shared losses (if a two-sided model ACO); (2) if CMS terminates a two-sided model ACO's participation agreement effective before the end of the performance year, the ACO would not be eligible for shared savings and we would reconcile the ACO for shared losses and pro-rate the amount reflecting the number of months during the performance year that the ACO was in the program.
To determine pro-rated shared losses for a portion of the 6-month performance year, we would determine shared losses incurred during calendar year 2019 and multiply this amount by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12. We would count any month in which the ACO had at least one day of participation. Therefore, if an ACO that started a first or second agreement period January 1, 2016 extended its agreement period for a 6-month performance year from January 1, 2019 through June 30, 2019, and was terminated by CMS with an effective date of termination of May 1, 2019 the ACO would be liable for 5/12 of any shared losses determined. If a July 1, 2019 starter was terminated by CMS with an effective date of termination of November 1, 2019, the ACO would also be liable for 5/12 of any shared losses determined. An ACO with an effective date of termination in December would be liable for the entirety of shared losses.
Second, ACOs that are starting a 12-month performance year in 2019 would have the option to participate for the first 6 months of the year prior to terminating their current agreement and enter a new agreement period beginning July 1, 2019. This includes ACOs that would be starting their 2nd or 3rd performance year of an agreement period in 2019, as well as ACOs that deferred renewal under § 425.200(e). We propose that ACOs with an effective date of termination of June 30, 2019 that enter a new agreement period beginning July 1, 2019, are eligible for pro-rated shared savings or shared losses for the 6-month period from January 1, 2019 through June 30, 2019 determined according to § 425.609.
We believe some ACOs may act quickly to enter one of the new participation options made available under the proposed redesign of the program (if finalized). ACOs that complete the 6-month period of participation in 2019 should have the opportunity to share in the savings or be accountable for the losses for this period. However, certain ACOs may ultimately realize they are not yet prepared to participate under a new
We also propose to revise the regulations at § 425.221 to streamline and reorganize the provisions in paragraph (b), which we believe is necessary to incorporate these proposed requirements. We seek comment on these proposals and the alternative policies discussed in this section.
In the November 2011 final rule establishing the Shared Savings Program, we implemented an approach for accepting and reviewing applications from ACOs for participation in the program on an annual basis, with agreement periods beginning January 1 of each calendar year. We also finalized an approach to offer two application periods for the first year of the program, allowing for an April 1, 2012 start date and July 1, 2012 start date. In establishing these alternative start dates for the program's first year, we explained that the statute does not prescribe a particular application period or specify a start date for ACO agreement periods (see 76 FR 67835 through 67837). We considered concerns raised by commenters about a January 1, 2012 start date, which would have closely followed the November 2011 publication of the final rule. Specifically, commenters were concerned about the ability of potential ACOs to organize, complete, and submit an application in time to be accepted into the first cohort as well as our ability to effectively review applications by January 1, 2012. Comments also suggested that larger integrated health care systems would be able to meet the application requirements on short notice while small and rural entities might find this timeline more difficult and could be unable to meet the newly-established application requirements for a January 1 start date (76 FR 67836).
We believe the considerations that informed our decision to establish alternative start dates at the inception of the Shared Savings Program also are relevant in determining the timing for making the proposed new participation options available. We believe postponing the start date for agreement periods under these new participation options until later in 2019 would allow ACOs time to consider the new participation options and prepare for program changes; make investments and other business decisions about participation; obtain buy-in from their governing bodies and executives; complete and submit an application that conforms to the new participation options if our proposals are finalized; and resolve any deficiencies and provider network issues that may be identified, including as a result of program integrity and law enforcement screening. Postponing the start date for new agreement periods would also allow both new applicants and ACOs currently participating in the program an opportunity to make any changes to the structure and composition of their ACO as may be necessary to comply with the new program requirements for the ACO's preferred participation option, if changes to the participation options are finalized as proposed.
Therefore, we propose to offer a July 1, 2019 start date as the initial opportunity for ACOs to enter an agreement period under the BASIC track or the ENHANCED track. We anticipate the application cycle for the July 1, 2019 start date would begin in early 2019. We are forgoing the application cycle that otherwise would take place during calendar year 2018 for a January 1, 2019 start date for new Shared Savings Program participation agreements, initial use of the SNF 3-day rule waiver (as further discussed in section II.A.7.c.1 of this proposed rule), and entry into the Track 1+ Model (as further discussed in section II.F of this proposed rule). Although several ACOs that entered initial agreements beginning in 2015 deferred renewal into a second agreement period by 1 year in accordance with § 425.200(e) and will begin participating in a new 3-year agreement period beginning January 1, 2019 under a performance-based risk track, applications would not be accepted from other ACOs for a new agreement period beginning on January 1, 2019. We propose the July 1, 2019 start date as a one-time opportunity, and thereafter we would resume our typical process of offering an annual application cycle that allows for review and approval of applications in advance of a January 1 agreement start date. We would therefore anticipate also offering an application cycle in 2019 for a January 1, 2020 start date for new, 5-year participation agreements, and continuing to offer an annual start date of January 1 thereafter. We are aware that a delayed application due date for an agreement period beginning in 2019 could affect parties that plan to participate in the Shared Savings Program for performance year 2019 and are relying on the pre-participation waiver. Guidance for affected parties will be posted on the CMS website.
Under the current Shared Savings Program regulations, the policies for determining financial and quality performance are based on an expectation that a performance year will have 12 months that correspond to the calendar year. Beneficiary assignment also depends on use of a 12-month assignment window, with retrospective assignment based on the 12-month calendar year performance year, and prospective assignment based on an offset assignment window before the start of the performance year. Given the calendar year basis for performance years under the current regulations, we considered how to address (1) the possible 6-month lapse in participation that could result for ACOs that entered a first or second 3-year agreement period beginning on January 1, 2016, due to the lack of availability of an application cycle for a January 1, 2019 start date, and (2) the July 1 start date for agreement periods starting in 2019.
To address the implications of a midyear start date on program participation and applicable program requirements, we considered our previous experience with the program's initial entrants, April 1, 2012 starters and July 1, 2012 starters. In particular, we considered our approach for determining these ACOs' first performance year results (see § 425.608). The first performance year for April 1 and July 1 starters was defined as 21 and 18 months respectively (see § 425.200(c)(2)). The methodology we used to determine shared savings and losses for these ACOs' first performance year consisted of an optional interim payment calculation based on the ACO's first 12 months of participation and a final reconciliation occurring at the end of the ACO's first performance year. This final reconciliation took into account the 12 months covered by the interim payment period as well as the remaining 6 or 9 months of the performance year, thereby allowing us to determine the overall savings or losses for the ACO's first performance
This interim payment calculation approach used in the program's first year resulted in relatively few ACOs being eligible for payment based on their first twelve months of program participation. Few Track 1 ACOs established the required repayment mechanism in order to be able to receive an interim payment of shared savings, if earned. Not all Track 2 ACOs, which were required to establish repayment mechanisms as part of their participation in a two-sided model, elected to receive payment for shared savings or to be held accountable for shared losses based on an interim payment calculation. Of the 114 ACOs reconciled for a performance year beginning on April 1 or July 1, 2012, only 16 requested an interim payment calculation in combination with having established the required repayment mechanism. Of these 16 ACOs, 9 were eligible for an interim payment of shared savings, of which one Track 1 ACO was required to return the payment based on final results for the performance year. One Track 2 ACO repaid interim shared losses which were ultimately returned to the ACO based on its final results for the performance year.
This approach to interim and final reconciliation was developed for the first two cohorts of ACOs, beginning in the same year and to which the same program requirements applied. The program has since evolved to include different benchmarking methodologies (depending on whether an ACO is in its first agreement period, or second agreement period beginning in 2016 or in 2017 and subsequent years) and different assignment methodologies (prospective assignment and preliminary prospective assignment with retrospective reconciliation), among other changes. We are concerned about introducing further complexity into program calculations by proposing to follow a similar approach of offering an extended performance year with the option for an interim payment calculation with final reconciliation for ACOs affected by the delayed application cycle for agreement periods starting in 2019.
Instead, we propose to use an approach that would maintain financial reconciliation and quality performance determinations based on a 12-month calendar year period, but would pro-rate shared savings/shared losses for each potential 6-month period of participation during 2019, as described in this section. See section II.A.7.b. of this proposed rule for a detailed discussion of this methodology.
Accordingly, our proposed approach for implementing the proposed July 1, 2019 start date would include the following opportunities for ACOs, based on their agreement period start date:
ACOs entering an agreement period beginning on July 1, 2019, would be in a participation agreement for a term of 5 years and 6 months, of which the first performance year would be defined as 6 months (July 1, 2019 through December 31, 2019), and the 5 remaining performance years of the agreement period would each consist of a 12-month calendar year.
ACOs that entered a first or second agreement period with a start date of January 1, 2016, may elect to extend their agreement period for an optional fourth performance year, defined as the 6-month period from January 1, 2019 through June 30, 2019. This election to extend the agreement period is voluntary and an ACO could choose not to make this election and therefore conclude its participation in the program with the expiration of its current agreement period on December 31, 2018.
We propose that the ACO's voluntary election to extend its agreement period must be made in the form and manner and according to the timeframe established by CMS, and that an ACO executive who has the authority to legally bind the ACO must certify the election. If finalized, we anticipate this election process would begin in 2018 following the publication of the final rule, as part of the annual certification process in advance of 2019 (described in section II.A.7.c.2. of this proposed rule). We note that this optional 6-month agreement period extension is a one-time exception for ACOs with agreements expiring on December 31, 2018 and would not be available to other ACOs that are currently participating in a 3-year agreement in the program, or to future program entrants.
Under the existing provision at § 425.210, the ACO must provide a copy of its participation agreement with CMS to all ACO participants, ACO providers/suppliers, and other individuals and entities involved in ACO governance. Further, all contracts or arrangements between or among the ACO, ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities must require compliance with the requirements and conditions of the program's regulations, including, but not limited to, those specified in the participation agreement with CMS. An ACO that elects to extend its participation agreement by 6 months must notify its ACO participants, ACO providers/suppliers and other individuals or entities performing functions or services related to ACO activities of this continuation of participation and must require their continued compliance with the program's requirements for the 6-month performance year from January 1, 2019 through June 30, 2019.
An existing ACO that wants to quickly move to a new participation agreement under the BASIC track or the ENHANCED track could voluntarily terminate its participation agreement with an effective date of termination of June 30, 2019, and apply to enter a new agreement period with a July 1, 2019 start date to continue its participation in the program. This includes 2017 starters, 2018 starters, and 2015 starters that deferred renewal by 1 year, and entered into a second agreement period under Track 2 or Track 3 beginning on January 1, 2019. If the ACO's application is approved by CMS, the ACO could enter a new agreement period beginning July 1, 2019. (As discussed in section II.A.5. of this proposed rule, we would consider these ACOs to be early renewals.) ACOs currently in an agreement period that includes a 12-month performance year 2019 that choose to terminate their current participation agreement effective June 30, 2019, and enter a new agreement period beginning on July 1, 2019, would be reconciled for their performance during the first 6 months of 2019. As described in section II.A.5 of this proposed rule, an ACO's participation options for the July 1, 2019 start date would depend on whether the ACO is a low revenue or high revenue ACO and the ACO's experience with performance-based risk Medicare ACO initiatives. An early renewal ACO would be considered to be entering its next consecutive agreement period for purposes of the applicability of policies that phase-in over time (the weight used in the regional benchmark adjustment,
As discussed in section II.A.2. of this proposed rule, the proposed modifications to the definition of “agreement period” in § 425.20 are intended to broaden the definition to generally refer to the term of the participation agreement. We propose to add a provision at § 425.200(b)(2) specifying that the term of the participation agreement is 3 years and 6 months for an ACO that entered an agreement period starting on January 1, 2016 that elects to extend its agreement period until June 30, 2019, and this election is made in the form and manner and according to the timeframe established by CMS, and certified by an ACO executive who has the authority to legally bind the ACO. For consistency, we also propose minor formatting changes to the existing provision at § 425.200(b)(2) to italicize the header text. We note that as described in section II.A.2. of this proposed rule, we are proposing modifications to § 425.200(b)(3) as part of discontinuing the deferred renewal participation option. In addition, we propose to add a provision at § 425.200(b)(4) to specify that, for agreement periods beginning in 2019 the start date is—(1) January 1, 2019 and the term of the participation agreement is 3 years for ACOs whose first agreement period began in 2015 and who deferred renewal of their participation agreement under § 425.200(e); or (2) July 1, 2019, and the term of the participation agreement is 5 years and 6 months. We propose to add a provision at § 425.200(b)(5) specifying that, for agreement periods beginning in 2020 and subsequent years, the term of the participation agreement is 5 years.
We also propose to revise the definition of “performance year” in § 425.20 to mean the 12-month period beginning on January 1 of each year during the agreement period, unless otherwise specified in § 425.200(c) or noted in the participation agreement. We therefore also propose revisions to § 425.200(c) to make necessary formatting changes and specify additional exceptions to the definition of performance year as a 12-month period. Specifically, we propose to add a provision specifying that for an ACO that entered a first or second agreement period with a start date of January 1, 2016, and that elects to extend its agreement period by a 6-month period, the ACO's fourth performance year is the 6-month period between January 1, 2019, and June 30, 2019. Similarly, we propose to add a provision specifying that for an ACO that entered an agreement period with a start date of July 1, 2019, the ACO's first performance year of the agreement period is defined as the 6-month period between July 1, 2019, and December 31, 2019.
In light of the proposed modifications to § 425.200(c) to establish two 6-month performance years during calendar year 2019, we believe it is also appropriate to revise the regulation at § 425.200(d), which reiterates an ACO's obligation to submit quality measures in the form and manner required by CMS for each performance year of the agreement period, to address the quality reporting requirements for ACOs participating in a 6-month performance year during calendar year 2019.
As an alternative to the proposal to offer an agreement period of 5 years and 6 months beginning July 1, 2019 (made up of 6 performance years, the first of which is 6 months in duration), we considered whether to offer instead an agreement period of five performance years (including a first performance year of 6 months). Under this alternative the agreement period would be 4 years and 6 months in duration. As previously described, in section II.A.2 of this proposed rule in connection with our proposal to extend the agreement period from 3 years to 5 years, program results have shown that ACOs tend to perform better the longer they are in the program and longer agreement periods provide additional time for ACOs to perform against a benchmark based on historical data from the 3 years prior to their start date. Further, the proposed changes to the benchmarking methodology would result in more accurate benchmarks and mitigate the effects of reliance on increasingly older historical data as the agreement period progresses. We believe these considerations are also relevant to the proposed one-time exception to allow for a longer agreement period of 5 years and 6 months for ACOs that enter a new agreement period on July 1, 2019.
We also considered forgoing an application cycle for a 2019 start date altogether and allowing ACOs to enter agreement periods for the BASIC track and ENHANCED track for the first time beginning in January 1, 2020. This approach would allow ACOs additional time to consider the redesign of the program, make organizational and operational plans, and implement business and investment decisions, and would avoid the complexity of needing to determine performance based on 6-month performance years during calendar year 2019. However, our proposed approach of offering an application cycle during 2019 for an agreement period start date of July 1, 2019, would allow for a more rapid progression of ACOs to the redesigned participation options, starting in mid-2019. Further, under this alternative, we would also want to offer ACOs that started a first or second agreement period on January 1, 2016, a means to continue their participation between the conclusion of their current 3-year agreement (December 31, 2018) and the start of their next agreement period (January 1, 2020), should the ACO wish to continue in the program. Under an alternative that would postpone the start date for the new participation options to January 1, 2020, we would allow ACOs that started a first or second agreement period on January 1, 2016, to elect a 12-month extension of their current agreement period to cover the duration of calendar year 2019.
We seek comment on these proposals and the related considerations, as well as the alternatives considered.
In this section we describe the proposed methodology for determining financial and quality performance for the two 6-month performance years during calendar year 2019: The 6-month performance year from January 1, 2019, to June 30, 2019; and the 6-month performance year from July 1, 2019, to December 31, 2019. We propose to specify the methodologies for reconciling these 6-month performance years during 2019 in a new section of the regulations at § 425.609. Although we propose to use the same overall approach to determining ACO financial and quality performance for these two periods, the specific policies used to calculate factors used in making these determinations would differ based on the ACO's track, its agreement period start date, and the agreement period in which the ACO participates (for factors that phase-in over multiple agreement periods).
We note that ACOs in an agreement period that includes a 12-month performance year 2019 would have the option to terminate their current participation agreements with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019. We propose to reconcile the performance of these ACOs during the first 6 months of 2019 using the same approach that we are proposing to use to determine performance for the 6-month performance year from January 1, 2019,
After the conclusion of calendar year 2019, CMS would reconcile the financial and quality performance of ACOs that participated in the Shared Savings Program during 2019. For ACOs that extended their agreement period for the 6-month performance year from January 1, 2019, through June 30, 2019, or ACOs that terminated their agreement period early on June 30, 2019, and entered a new agreement period beginning on July 1, 2019, CMS would first reconcile the ACO based on its performance during the entire 12-month calendar year, and then as discussed elsewhere in this section, pro-rate the calendar year shared savings or shared losses to reflect the ACO's participation in that 6-month period. In a separate calculation, CMS would reconcile an ACO that participated for a 6-month performance year from July 1, 2019, through December 31, 2019, for the 12-month calendar year in a similar manner, and pro-rate the shared savings or shared losses to reflect the ACO's participation during that 6-month performance year. We discuss these calculations in detail in section II.A.7.b.2. (for the 6-month period from January 1, 2019 through June 30, 2019) and section II.A.7.b.3. (for the 6-month period from July 1, 2019 through December 31, 2019). Further, we note that this proposed approach to reconciling ACO performance for a 6-month performance year (or performance period) during 2019 would not alter the methodology that would be applied to determine financial performance for ACOs that complete a 12 month performance year corresponding to calendar year 2019.
We note that in discussing these 6-month periods, we use two references, “6-month performance year” and “performance period.” According to our proposed revisions to § 425.200(c), we use the term “6-month performance year” to refer to the following: (1) The fourth performance year from January 1, 2019 through June 30, 2019 for ACOs that started a first or second agreement period January 1, 2016 and extend their current agreement period for this 6-month period; and (2) the first performance year from July 1, 2019 through December 31, 2019, for ACOs that enter an agreement period beginning on July 1, 2019. For an ACO starting a 12-month performance year on January 1, 2019, that terminates its participation agreement with an effective date of termination of June 30, 2019, and enters a new agreement period beginning on July 1, 2019, we refer to the 6-month period from January 1, 2019 through June 30, 2019, as a “performance period”.
Under the proposed policies, we would calculate shared savings or shared losses applicable to an ACO, by comparing the expenditures for the ACO's performance year assigned beneficiaries for calendar year 2019 to the ACO's historical benchmark updated to calendar year 2019. If the difference is positive and is greater than or equal to the MSR and the ACO has met the quality performance standard, the ACO would be eligible for shared savings. If the ACO is in a two-sided model and the difference between the updated benchmark and assigned beneficiary expenditures is negative and is greater than or equal to the MLR (in absolute value terms), the ACO would be liable for shared losses. ACOs would share in first dollar savings and losses based on the applicable final sharing rate or loss sharing rate according to their track of participation for the applicable agreement period, and taking into account the ACO's quality performance for 2019. We would adjust the amount of shared savings for sequestration. We would cap the amount of shared savings at the applicable performance payment limit for the ACO's track and cap the amount of shared losses at the applicable loss sharing limit for the ACO's track. We would then pro-rate shared savings or shared losses by multiplying by one-half, which represents the fraction of the calendar year covered by the 6-month performance year (or performance period). This pro-rated amount would be the final amount of shared savings earned or shared losses owed by the ACO for the applicable 6-month performance year (or performance period).
We believe this proposed approach would allow continuity in program operations (including operations that occur on a calendar year basis) for ACOs that have either one or two 6-month performance years (or performance period) within calendar year 2019. Specifically, the proposed approach would allow for payment reconciliation to remain on a calendar year basis, which would be most consistent with the calendar year-based methodology for calculating benchmark expenditures, trend and update factors, risk adjustment, county expenditures and regional adjustments. Deviating from a 12 month reconciliation calculation by using fewer than 12 months of performance year expenditures could interject actuarial biases relative to the benchmark expenditures, which are based on 12 month benchmark years. As a result, we believe this approach to reconciling ACOs based on a 12 month period would protect the actuarial soundness of the financial reconciliation methodology. We also believe the alignment of the proposed approach with the standard methodology used to perform the same calculations for 12 month performance years that correspond to a calendar year will make it easier for ACOs and other program stakeholders to understand the proposed methodology.
As is the case with typical calendar year reconciliations in the Shared Savings Program, we anticipate results with respect to participation during calendar year 2019 would be made available to ACOs in summer 2020. This would allow those ACOs that are eligible to share in savings as a result of their participation in the program during calendar year 2019 to receive payment of shared savings following the conclusion of the calendar year consistent with the standard process and timing for annual payment reconciliation under the program. As discussed in detail in section II.A.7.c.6. of this proposed rule, we propose to provide separate reconciliation reports for each 6-month performance year (or performance period) and would pay shared savings or recoup shared losses separately for each 6-month performance year (or performance period) during 2019 based on these results.
Furthermore, this approach would avoid a more burdensome interim payment process that could accompany an alternative proposal to instead implement, for example, an 18-month performance year from July 1, 2019 to December 31, 2020. Consistent with the 18- and 21-month performance years offered for the first cohorts of Shared Savings Program ACOs, such a policy could require ACOs to establish a repayment mechanism that otherwise might not be required, create uncertainty over whether the ACO may ultimately need to repay CMS based on final results for the extended performance year, and delay ACOs seeing a return on their investment in
We believe the proposals to determine shared savings and shared losses for the 6-month performance years starting on January 1, 2019, and July 1, 2019 (or the 6-month performance period from January 1, 2019, through June 30, 2019, for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019), using expenditures for the entire calendar year 2019 and then pro-rating these amounts to reflect the shorter performance year, require the use of our authority under section 1899(i)(3) of the Act to use other payment models. Section 1899(d)(1)(B)(i) of the Act specifies that, in each year of the agreement period, an ACO is eligible to receive payment for shared savings only if the estimated average per capita Medicare expenditures under the ACO for Medicare FFS beneficiaries for Parts A and B services, adjusted for beneficiary characteristics, is at least the percent specified by the Secretary below the applicable benchmark under section 1899(d)(1)(B)(ii) of the Act. We believe the proposed approach to calculating the expenditures for assigned beneficiaries over the full calendar year, comparing this amount to the updated benchmark for 2019, and then pro-rating any shared savings (or shared losses, which already are implemented using our authority under section 1899(i)(3) of the Act) for the 6-month performance year (or performance period) involves an adjustment to the estimated average per capita Medicare Part A and Part B FFS expenditures determined under section 1899(d)(1)(B)(i) of the Act that is not based on beneficiary characteristics. Such an adjustment is not contemplated under the plain language of section 1899(d)(1)(B)(i) of the Act. As a result, we believe it is necessary to use our authority under section 1899(i)(3) of the Act to calculate performance year expenditures and determine the final amount of any shared savings (or shared losses) for a 6-month performance year (or performance period) during 2019, in the proposed manner.
In order to use our authority under section 1899(i)(3) of the Act to adopt an alternative payment methodology to calculate shared savings and shared losses for the proposed 6-month performance years (or performance period) during 2019, we must determine that the alternative payment methodology will improve the quality and efficiency of items and services furnished to Medicare beneficiaries, without additional program expenditures. We believe the proposed approach of allowing ACOs that started a first or second agreement period on January 1, 2016, to extend their agreement period for a 6-month performance year and of allowing entry into the program's redesigned participation options beginning on July 1, 2019, if finalized, would support continued participation by current ACOs that must renew their agreements, while also resulting in more rapid progression to two-sided risk by ACOs within current agreement periods and ACOs entering the program for an initial agreement period. As discussed in the Regulatory Impact Analysis (section IV. of this proposed rule), we believe this approach would continue to allow for lower growth in Medicare FFS expenditures based on projected participation trends. Therefore, we do not believe that the proposed methodology for determining shared savings or shared losses for ACOs in a 6-month performance year (or performance period) during 2019 would result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d) of the Act. Further, we believe that the proposed approach to measuring ACO quality performance for a 6-month performance year (or performance period) based on quality data reported for calendar year 2019 maintains accountability for the quality of care ACOs provide to their assigned beneficiaries. Participating ACOs would also have an incentive to perform well on the quality measures in order to maximize the shared savings they may receive and minimize any shared losses they must pay in tracks where the loss sharing rate is determined based on the ACO's quality performance. Therefore, we believe this proposed approach to reconciling ACOs for a 6-month performance year (or performance period) during 2019 would continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries.
In this section, we describe our proposed approach to determining an ACO's performance for the 6-month performance year from January 1, 2019, through June 30, 2019. These proposed policies would also apply to ACOs that begin a 12-month performance year on January 1, 2019, but elect to terminate their participation agreement with an effective date of termination of June 30, 2019, in order to enter a new agreement period starting on July 1, 2019 (early renewals). Our proposed policies address the following: (1) The ACO participant list that will be used to determine beneficiary assignment; (2) the approach to assigning beneficiaries; (3) the quality reporting period; (4) the benchmark year assignment methodology and the methodology for calculating, adjusting and updating the ACO's historical benchmark; and (5) the methodology for determining shared savings and shared losses. We propose to specify these policies for reconciling the 6-month period from January 1, 2019, through June 30, 2019 in paragraph (b) of a new section of the regulations at § 425.609.
We propose to use the ACO participant list for the performance year beginning January 1, 2019, to determine beneficiary assignment as specified in §§ 425.402 and 425.404, and according to the ACO's track as specified in § 425.400. As discussed in section II.A.7.c of this proposed rule, we propose to allow all ACOs, including ACOs entering a 6-month performance year, to make changes to their ACO participant list in advance of the performance year beginning January 1, 2019.
To determine beneficiary assignment, we propose to consider the allowed charges for primary care services furnished to the beneficiary during a 12 month assignment window, allowing for a 3 month claims run out. For the 6-month performance year from January 1, 2019 through June 30, 2019, we propose to determine the assigned population using the following assignment windows:
• For ACOs under preliminary prospective assignment with retrospective reconciliation, the assignment window would be calendar year 2019.
• For ACOs under prospective assignment, Medicare FFS beneficiaries would be prospectively assigned to the ACO based on the beneficiary's use of primary care services in the most recent 12 months for which data are available. For example, in determining prospective beneficiary assignment for the January 1, 2019 through June 30, 2019 performance year we could use an assignment window from October 1, 2017, through September 30, 2018, to align with the off-set assignment window typically used to determine prospective assignment prior to the start of a calendar year performance year. Beneficiaries would remain prospectively assigned to the ACO at the end of calendar year 2019 unless they
We note that this is the same approach that is used to determine assignment under the program's current regulations. Therefore, it would also be used to determine assignment for the performance year beginning on January 1, 2019, for ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, for purposes of determining their performance during the performance period from January 1, 2019 through June 30, 2019.
As discussed in section II.A.7.c. of this proposed rule, to determine ACO performance during a 6-month performance year, we propose to use the ACO's quality performance for the 2019 reporting period, and to calculate the ACO's quality performance score as provided in § 425.502. For early renewal ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, we would determine quality performance for the performance period from January 1, 2019, through June 30, 2019, in the same manner as for ACOs with a 6-month performance year from January 1, 2019, through June 30, 2019, that enter a new agreement period beginning on July 1, 2019. As described in section II.A.7.c.4. of this proposed rule, we propose using a different quality measure sampling methodology depending on whether an ACO participates in both a 6-month performance year (or performance period) beginning January 1, 2019 and a 6-month performance year beginning July 1, 2019, or only participates in a 6-month performance year from January 1, 2019 through June 30, 2019.
Consistent with current program policy, we would determine assignment for the benchmark years based on the most recent certified ACO participant list for the ACO effective for the performance year beginning January 1, 2019. This would be the participant list the ACO certified prior to the start of its agreement period unless the ACO has made changes to its ACO participant list during its agreement period as provided in § 425.118(b). If the ACO has made subsequent changes to its ACO participant list, we would recalculate the historical benchmark using the most recent certified ACO participant list. See the Medicare Shared Savings Program, ACO Participant List and Participant Agreement Guidance (July 2018, version 5), available at
For the 6-month performance year from January 1, 2019, through June 30, 2019, we would calculate the benchmark and assigned beneficiary expenditures as though the performance year were the entire calendar year. The ACO's historical benchmark would be determined according to the methodology applicable to the ACO based on its agreement period in the program. We would apply the methodology for establishing, updating and adjusting the ACO's historical benchmark as specified in § 425.602 (for ACOs in a first agreement period) or § 425.603 (for ACOs in a second agreement period), except that data from calendar year 2019 would be used in place of data for the 6-month performance year in certain calculations, as follows:
• The benchmark would be adjusted for changes in severity and case mix between benchmark year 3 and calendar year 2019 using the methodology that accounts separately for newly and continuously assigned beneficiaries using prospective HCC risk scores and demographic factors as described under §§ 425.604(a)(1) through (3), 425.606(a)(1) through (3), and 425.610(a)(1) through (3).
• The benchmark would be updated to calendar year 2019 according to the methodology for using growth in national Medicare FFS expenditures for assignable beneficiaries described under § 425.602(b) (for ACOs in a first agreement period) and § 425.603(b) (for ACOs in a second agreement period beginning January 1, 2016), or the methodology for using growth in regional Medicare FFS expenditures described under § 425.603(d) (for ACOs in a second agreement period beginning January 1 of 2017, 2018, or 2019).
We note this approach is already used to adjust and update the historical benchmark each performance year under the program's current regulations. Therefore we would use this same approach to determine the benchmark for the performance period from January 1, 2019, through June 30, 2019, for ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019.
For determining performance during the 6-month performance year (or performance period) from January 1, 2019 through June 30, 2019, we would apply the methodology for determining shared savings and shared losses according to the approach specified for the ACO's track under the terms of the participation agreement that was in effect on January 1, 2019: § 425.604 (Track 1), § 425.606 (Track 2) or § 425.610 (Track 3) and, as applicable, the terms of the ACO's participation agreement for the Track 1+ Model authorized under section 1115A of the Act. (See discussion in section II.F of this proposed rule concerning applicability of proposed policies to Track 1+ Model ACOs). However, some exceptions to the otherwise applicable methodology are needed because we are proposing to calculate the expenditures for assigned beneficiaries over the full calendar year 2019 for purposes of determining shared savings and shared losses for the 6-month performance year (or performance period) from January 1, 2019, through June 30, 2019. We propose to use the following steps to calculate shared savings and shared losses:
• Average per capita Medicare expenditures for Parts A and B services for calendar year 2019 would be calculated for the ACO's performance year assigned beneficiary population.
• We would compare these expenditures to the ACO's updated benchmark determined for the calendar year as previously described.
• We would apply the MSR and MLR (if applicable).
++ The ACO's assigned beneficiary population for the performance year starting on January 1, 2019, would be used to determine the MSR for Track 1 ACOs and the variable MSR/MLR for ACOs in a two-sided model that selected this option at the start of their agreement period. In the event a two-sided model ACO selected a fixed MSR/MLR at the start of its agreement period, and the ACO's performance year assigned population is below 5,000 beneficiaries, the MSR/MLR would be determined based on the number of assigned beneficiaries as proposed in section II.A.6.b. of this proposed rule.
++ To qualify for shared savings, the ACO's average per capita Medicare expenditures for its performance year assigned beneficiaries during calendar year 2019 must be below its updated benchmark for the year by at least the MSR established for the ACO.
++ To be responsible for sharing losses with the Medicare program, the ACO's average per capita Medicare expenditures for its performance year assigned beneficiaries during calendar year 2019 must be above its updated benchmark for the year by at least the MLR established for the ACO.
• We would determine the shared savings amount if we determine the ACO met or exceeded the MSR, and if the ACO met the minimum quality performance standards established under § 425.502 and as described in this section of this proposed rule, and
++ We would apply the final sharing rate or loss sharing rate to first dollar savings or losses.
++ For ACOs that generated savings that met or exceeded the MSR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable final sharing rate based on the ACO's track and its quality performance under § 425.502.
++ For ACOs that generated losses that met or exceeded the MLR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable shared loss rate based on the ACO's track and its quality performance under § 425.502 (for ACOs in tracks where the loss sharing rate is determined based on the ACO's quality performance).
• We would adjust the shared savings amount for sequestration by reducing by 2 percent and compare the sequestration-adjusted shared savings amount to the applicable performance payment limit based on the ACO's track.
• We would compare the shared losses amount to the applicable loss sharing limit based on the ACO's track.
• We would pro-rate any shared savings amount, as adjusted for sequestration and the performance payment limit, or any shared losses amount, as adjusted for the loss sharing limit, by multiplying by one half, which represents the fraction of the calendar year covered by the 6-month performance year (or performance period). This pro-rated amount would be the final amount of shared savings that would be paid to the ACO for the 6-month performance year (or performance period) or the final amount of shared losses that would be owed by the ACO for the 6-month performance year (or performance period).
We seek comment on these proposals.
In this section, we describe our proposed approach to determining an ACO's performance for the 6-month performance year from July 1, 2019, through December 31, 2019. Our proposed policies address the following: (1) The ACO participant list that will be used to determine beneficiary assignment; (2) the approach to assigning beneficiaries for the 6-month performance year; (3) the quality reporting period for the 6-month performance year; (4) the benchmark year assignment methodology and the methodology for calculating, adjusting and updating the ACO's historical benchmark; and (5) the methodology for determining shared savings and shared losses for the ACO for the performance year. We propose to specify the methodology for reconciling the 6-month performance year from July 1, 2019, through December 31, 2019, in paragraph (c) of a new section of the regulations at § 425.609.
We note that in determining performance for the 6-month performance year from July 1, 2019 through December 31, 2019, we would follow the same general methodological steps for calculating pro-rated shared savings and shared losses as described in section II.A.7.b.2 of this proposed rule for the 6-month performance year from January 1, 2019 through June 30, 2019. However, for example, the applicable benchmarking methodology, which is based on the ACO's agreement period in the program, and financial model, which is based on the track in which the ACO is participating, would be different.
We propose to use the ACO participant list for the performance year beginning July 1, 2019, to determine beneficiary assignment, consistent with the assignment methodology the ACO selected at the start of its agreement period under proposed § 425.400(a)(4)(ii). As discussed in section II.A.7.c of this proposed rule, this would be the ACO participant list that was certified as part of the ACO's application to enter an agreement period beginning on July 1, 2019.
To determine beneficiary assignment, we propose to consider the allowed charges for primary care services furnished to the beneficiary during a 12 month assignment window, allowing for a 3 month claims run out. For the 6-month performance year from July 1, 2019 through December 31, 2019, we propose to determine the assigned population using the following assignment windows:
• For ACOs under preliminary prospective assignment with retrospective reconciliation, the assignment window would be calendar year 2019.
• For ACOs under prospective assignment, Medicare FFS beneficiaries would be prospectively assigned to the ACO based on the beneficiary's use of primary care services in the most recent 12 months for which data are available. We would use an assignment window before the start of the agreement period on July 1, 2019. For example, we could use an assignment window from April 30, 2018, through March 31, 2019. The 3 month gap between the end of the assignment window and the start of the performance year would be consistent with the typical gap for calendar year performance years that begin on January 1. Beneficiaries would remain prospectively assigned to the ACO at the end of calendar year 2019 unless they meet any of the exclusion criteria under § 425.401(b) during the calendar year.
As discussed in section II.A.7.c of this proposed rule, to determine ACO performance during either 6-month performance year, we propose to use the ACO's quality performance for the 2019 reporting period, and to calculate the ACO's quality performance score as provided in § 425.502.
Consistent with current program policy, we would determine assignment for the benchmark years based on the ACO's certified ACO participant list for the agreement period beginning July 1, 2019.
For the 6-month performance year from July 1, 2019, through December 31, 2019, we would calculate the benchmark and assigned beneficiary expenditures as though the performance year were the entire calendar year. The ACO's historical benchmark would be determined according to the methodology applicable to the ACO based on its agreement period in the program. We would apply the methodology for establishing, updating and adjusting the ACO's historical benchmark as specified in proposed § 425.601, except that data from calendar year 2019 would be used in place of data for the 6-month performance year in certain calculations, as follows:
• The benchmark would be adjusted for changes in severity and case mix between benchmark year 3 and calendar year 2019 based on growth in prospective HCC risk scores, subject to a symmetrical cap of positive or negative 3 percent that would apply for the agreement period such that the adjustment between BY3 and any performance year in the agreement period would never be more than 3 percent in either direction. See discussion in section II.D.2 of this proposed rule.
• The benchmark would be updated to calendar year 2019 according to the methodology described under proposed § 425.601(b) using a blend of national and regional growth rates.
For determining performance during the 6-month performance year from July 1, 2019, through December 31, 2019, we would apply the methodology for determining shared savings and shared losses according to the approach specified for the ACO's track under its agreement period beginning on July 1, 2019: The proposed BASIC track (§ 425.605) or ENHANCED track (§ 425.610). However, some exceptions to the otherwise applicable methodology are needed because we are proposing to calculate the expenditures for assigned beneficiaries over the full calendar year 2019 for purposes of determining shared savings and shared losses for the 6-month performance year from July 1, 2019 through December 31, 2019. We propose to use the following steps to calculate shared savings and shared losses:
• Average per capita Medicare expenditures for Parts A and B services for calendar year 2019 would be calculated for the ACO's performance year assigned beneficiary population. Additionally, when calculating calendar year 2019 expenditures to be used in determining performance for the July 1, 2019 through December 31, 2019 performance year, we would include expenditures for all assigned beneficiaries that are alive as of January 1, 2019, including those with a date of death prior to July 1, 2019, except prospectively assigned beneficiaries that are excluded under § 425.401(b). The inclusion of beneficiaries with a date of death before July 1, 2019, is necessary to maintain consistency with benchmark year and regional expenditure adjustments and associated trend and update factor calculations.
• We would compare these expenditures to the ACO's updated benchmark determined for the calendar year as previously described.
• We would apply the MSR and MLR (if applicable).
++ The ACO's assigned beneficiary population for the performance year starting on July 1, 2019, would be used to determine the MSR for one-sided model ACOs (under Level A or Level B of the BASIC track) and the variable MSR/MLR for ACOs in a two-sided model that selected this option at the start of their agreement period. In the event a two-sided model ACO selected a fixed MSR/MLR at the start of its agreement period, and the ACO's performance year assigned population is below 5,000 beneficiaries, the MSR/MLR would be determined based on the number of assigned beneficiaries as proposed in section II.A.6.b. of this proposed rule.
++ To qualify for shared savings, the ACO's average per capita Medicare expenditures for its performance year assigned beneficiaries during calendar year 2019 must be below its updated benchmark for the year by at least the MSR established for the ACO.
++ To be responsible for sharing losses with the Medicare program, the ACO's average per capita Medicare expenditures for its performance year assigned beneficiaries during calendar year 2019 must be above its updated benchmark for the year by at least the MLR established for the ACO.
• We would determine the shared savings amount if we determine the ACO met or exceeded the MSR, and if the ACO met the minimum quality performance standards established under § 425.502 and as described in this section of this proposed rule, and otherwise maintained its eligibility to participate in the Shared Savings Program. We would determine the shared losses amount if we determine the ACO met or exceeded the MLR. To determine these amounts, we would do the following:
++ We would apply the final sharing rate or loss sharing rate to first dollar savings or losses.
++ For ACOs that generated savings that met or exceeded the MSR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable final sharing rate based on the ACO's track and its quality performance under § 425.502.
++ For ACOs that generated losses that met or exceeded the MLR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable shared loss rate based on the ACO's track and its quality performance under § 425.502 (for ACOs in the ENHANCED track where the loss sharing rate is determined based on the ACO's quality performance).
• We would adjust the shared savings amount for sequestration by reducing by 2 percent and compare the sequestration-adjusted shared savings amount to the applicable performance payment limit based on the ACO's track.
• We would compare the shared losses amount to the applicable loss sharing limit based on the ACO's track.
• We would pro-rate any shared savings amount, as adjusted for sequestration and the performance payment limit, or any shared losses amount, as adjusted for the loss sharing limit, by multiplying by one half, which represents the fraction of the calendar year covered by the 6-month performance year. This pro-rated amount would be the final amount of shared savings that would be paid to the ACO for the 6-month performance year or the final amount of shared losses that would be owed by the ACO for the 6-month performance year.
We seek comment on these proposals.
In general, unless otherwise stated, we are proposing that program requirements under 42 CFR part 425 that are applicable to the ACO under the ACO's chosen participation track and based on the ACO's agreement start date would be applicable to an ACO participating in a 6-month performance year. This would allow routine program operations to continue to apply for ACOs participating under these shorter performance years. Further, it would ensure consistency in the applicability and implementation of our requirements across all program participants, including ACOs participating in 6-month performance years. As we described in section II.A.7.b of this proposed rule, limited exceptions to our policies for determining financial and quality performance are necessary to ensure calculations can continue to be performed on a calendar year basis and using the most relevant data.
In this section, we describe our consideration of program participation options affected by our decision to forgo an application cycle in calendar year 2018 for a January 1, 2019 start date, and the proposal to offer instead an application cycle in calendar year 2019 for a July 1, 2019 start date. We discuss program policies that would need to be modified to allow for the proposed 6-month performance years within calendar year 2019, and related proposals to revise the program's regulations to allow for these modifications.
Eligible ACOs may apply for use of a SNF 3-day rule waiver at the time of application for an initial agreement or to renew their participation. Further, ACOs within a current agreement period under Track 3, or the Track 1+ Model as described in sections II.B.2.a and II.F of this proposed rule, may apply for a SNF 3-day rule waiver, which if approved would begin at the start of their next performance year. As discussed in section II.B.2.a of this proposed rule, we propose to allow the
In light of our decision to forgo an application cycle in calendar year 2018 for a January 1, 2019 agreement start date, we also would not offer an opportunity for ACOs to apply for a start date of January 1, 2019, for initial use of a SNF 3-day rule waiver. The application cycle for the July 1, 2019 start date would be the next opportunity for eligible ACOs to begin use of a waiver, if they apply for and are approved to use the waiver as part of the application cycle for the July 1, 2019 start date. This would extend to ACOs within existing agreement periods in Track 3 that would, under 12 month performance years, not otherwise have the opportunity to apply to begin use of the waiver until January 1, 2020. We believe the existing regulation at § 425.612(b), which requires applications for waivers to be submitted to CMS in the form and manner and by a deadline specified by CMS, provides the flexibility to accommodate a July 1, 2019 SNF 3-day rule waiver start date for eligible ACOs in a performance year beginning on January 1, 2019. As a result, we are not proposing any corresponding revisions to this provision at this time.
At the end of each performance year, ACOs complete an annual certification process. At the same time as this annual certification process, CMS also requires ACOs to review, certify and electronically sign official program documents to support the ACO's participation in the upcoming performance year.
Requirements for this annual certification, and other certifications that occur on an annual basis, continue to apply to all currently participating ACOs in advance of the performance year beginning on January 1, 2019. In the case of ACOs that participate for a portion of calendar year 2019 under one agreement and enter a new agreement period starting on July 1, 2019, the certifications made in advance of the performance year starting on January 1, 2019, would have relevance only for the 6-month period from January 1, 2019, to June 30, 2019. These ACOs would need to complete another certification as part of completing the requirements to enter a new agreement period beginning on July 1, 2019, which would be applicable for the duration of their first performance year under the new agreement period, spanning July 1, 2019 to December 31, 2019.
Each ACO certifies its list of ACO participant TINs before the start of its agreement period, before every performance year thereafter, and at such other times as specified by CMS in accordance with § 425.118(a). The addition of ACO participants must occur prior to the start of the performance year in which these additions become effective. ACO participant must be deleted from the ACO participant list within 30 days after termination of the ACO participant agreement, and such deletion is effective as of the termination date of the ACO participant agreement. Absent unusual circumstances, the ACO participant list that was certified prior to the start of the performance year is used for the duration of the performance year. An ACO's certified ACO participant list for a performance year is used, for example, to determine beneficiary assignment for the performance year and therefore also the ACO's quality reporting samples and financial performance. See § 425.118(b)(3) and see also Medicare Shared Savings Program ACO Participant List and Participant Agreement Guidance (July 2018, version 5), available at
ACOs that started a first or second agreement period on January 1, 2016, that extend their agreement period for a 6-month performance year beginning on January 1, 2019, would have the opportunity during 2018 to make changes to their ACO participant list to be effective for the 6-month performance year from January 1, 2019, to June 30, 2019. If these ACOs elect to continue their participation in the program for a new agreement period starting on July 1, 2019, they would have an opportunity to submit a new ACO participant list as part of their renewal application for the July 1, 2019 start date.
An ACO that enters a new agreement period beginning on July 1, 2019, would submit and certify its ACO participant list for the agreement period beginning on July 1, 2019, according to the requirements in § 425.118(a). The ACO's approved ACO participant list would remain in effect for the full performance year from July 1, 2019, to December 31, 2019. These ACOs would have the opportunity to add or delete ACO participants prior to the start of the next performance year. Any additions to the ACO participant list that are approved by CMS would become effective at the start of performance year 2020.
The program's current regulations prevent duplication of shared savings payments. Under § 425.114, ACOs may not participate in the Shared Savings Program if they include an ACO participant that participates in another Medicare initiative that involves shared savings. In addition, under § 425.306(b)(2), each ACO participant that submits claims for services used to determine the ACO's assigned population must be exclusive to one Shared Savings Program ACO. If, during a benchmark or performance year (including the 3-month claims run out for such benchmark or performance year), an ACO participant that participates in more than one ACO submits claims for services used in assignment, then: (i) CMS will not consider any services billed through the TIN of the ACO participant when performing assignment for the benchmark or performance year; and (ii) the ACO may be subject to the pre-termination actions set forth in § 425.216, termination under § 425.218, or both.
We note the following examples, regarding ACO participants that submit claims for services that are used assignment, and that are participating in a Shared Savings Program ACO for a 12-month performance year during 2019 (such as a 2017 starter, 2018 starter, or 2015 starter that deferred renewal until 2019).
If the ACO remains in the program under its current agreement past June 30, 2019, these ACO participants would not be eligible to be included on the ACO participant list of another ACO applying to enter a new agreement period under the program beginning on July 1, 2019. An ACO participant in these circumstances could be added to the ACO participant list of a July 1, 2019 starter effective for the performance year beginning on January 1, 2020, if it is no longer participating in the other Shared Savings Program ACO and is not participating in another initiative identified in § 425.114(a).
If an ACO starting a 12-month performance year on January 1, 2019, terminates its participation agreement with an effective date of termination of June 30, 2019, the effective end date of the ACO participants' participation would also be June 30, 2019. Such ACOs that elect to enter a new agreement period beginning on July 1, 2019, can make ACO participant list
ACOs must demonstrate that they have in place an adequate repayment mechanism prior to entering a two-sided model. The repayment mechanism must be in effect for the duration of an ACO's participation in a two-sided model and for 24 months following the conclusion of the agreement period. (See discussion in section II.A.6.c of this proposed rule.)
We note that ACOs that started a first or second agreement period January 1, 2016 in a two-sided model would have in place under current program policies a repayment mechanism arrangement that would cover the 3 years between January 1, 2016 and December 31, 2018 plus a 24-month tail period until December 31, 2020. In the case of an ACO with an agreement period ending December 31, 2018, that extends its agreement for the 6-month performance year from January 1, 2019 through June 30, 2019, we would require the ACO to extend the term of its repayment mechanism so that it would be in effect for the duration of the ACO's participation in a two-sided model plus 24 months following the conclusion of the agreement period (that is, until June 30, 2021). This will allow us sufficient time to perform financial calculations for the 6-month performance year from January 1, 2019 through June 30, 2019 and to use the arrangement to collect shared losses for that performance year, if necessary. This policy is consistent with the policy proposed in section II.A.6.c and at § 425.204(f)(6)(i), which provides that a repayment mechanism must be in effect for the duration of the ACO's participation in a two-sided model plus 24 months following the conclusion of the agreement period.
Consistent with our proposed policy described in section II.A.6.c and § 425.204(f)(4)(iv), a renewing ACO that is under a two-sided model and entering a new agreement period beginning July 1, 2019 would be permitted to use its existing repayment mechanism to establish its ability to repay shared losses incurred for performance years in its new agreement period. As previously described, we would require the ACO to extend the term of the existing repayment mechanism by an amount of time specified by CMS and, if necessary, to increase the amount of the repayment mechanism to reflect the new repayment mechanism amount.
We are proposing that, for agreement periods beginning on or after July 1, 2019, we would recalculate the amount of the ACO's repayment mechanism before the second and each subsequent performance year in the agreement period, based on the ACO's certified ACO participant list for the relevant performance year. Therefore, for an ACO that enters a new agreement period beginning July 1, 2019, we would calculate the amount of the repayment mechanism for the new agreement period in accordance with our proposed regulation at § 425.204(f)(4). Before the start of performance year 2020, we would recalculate the amount of the ACO's repayment mechanism. Depending on how much the recalculated amount exceeds the existing repayment mechanism amount, we would require the ACO to increase its repayment mechanism amount, consistent with our proposed approach described in section II.A.6.c of this proposed rule and § 425.204(f)(4)(iii).
In order to determine an ACO's quality performance during either 6-month performance year during 2019, we propose to use the ACO's quality performance for the 2019 reporting period as determined under § 425.502. For ACOs that participate in only one of the 6-month performance years (such as ACOs that started a first or second agreement period on January 1, 2016 that extend their agreement period by 6 months and do not continue in the program past June 30, 2019, or ACOs that enter an initial agreement period beginning on July 1, 2019), we would also account for the ACO's quality performance using quality measure data reported for the 12-month calendar year. As we previously described in section II.A.7.b.2 of this proposed rule, ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, would also be required to complete quality reporting for the 2019 reporting period, and we would determine quality performance for the performance period from January 1, 2019, through June 30, 2019, in the same manner as for ACOs with a 6-month performance year from January 1, 2019 through June 30, 2019, that enter a new agreement period beginning on July 1, 2019.
We believe the following considerations support this proposed approach. For one, use of a 12 month period for quality measure assessment maintains alignment with the program's existing quality measurement approach, and aligns with the proposed use of 12 months of expenditure data (for calendar year 2019) in determining the ACO's financial performance. Also, this approach would continue to align the program's quality reporting period with policies under the Quality Payment Program. ACO professionals that are MIPS eligible clinicians (not QPs based on their participation in an Advanced APM or otherwise excluded from MIPS) would continue to be scored under MIPS using the APM scoring standard that covers all of 2019. Second, the measure specifications for the quality measures used under the program require 12 months of data. See for example, the Shared Savings Program ACO 2018 Quality Measures, Narrative Specification Document (January 20, 2018), available at
The ACO participant list is used to determine beneficiary assignment for purposes of generating the quality reporting samples. Beneficiary assignment is performed using the applicable assignment methodology under § 425.400, either preliminary prospective assignment or prospective assignment, with excluded beneficiaries removed under § 425.401(b), as applicable. The samples for claims-based measures are typically determined based on the assignment list for calendar year quarter 4. The sample for quality measures reported through the CMS web interface is typically determined based on the beneficiary assignment list for calendar year quarter 3. The CAHPS for ACOs survey sample is typically determined based on the beneficiary assignment list for calendar year quarter 2.
As described in section II.A.7.c.2. of this proposed rule, ACOs in either 6-
For purposes of determining the quality reporting samples for the 2019 reporting period, we propose to use the ACO's most recent certified ACO participant list available at the time the quality reporting samples are generated, and the assignment methodology most recently applicable to the ACO for a 2019 performance year. We believe the use of the ACO's most recent ACO participant list to assign beneficiaries according to the assignment methodology applicable based on the ACO's most recent participation in the program during 2019 would result in the most relevant beneficiary samples for 2019 quality reporting. For instance, for purposes of measures reported by ACOs through the CMS web interface, ACOs must work together with their ACO participants and ACO providers/suppliers to abstract data from medical records for reporting. In the case of an ACO that started a new agreement period on July 1, 2019, basing assignment for the CMS web interface quality reporting sample on the most recent ACO participant list would allow this coordination to occur between the ACO and its current ACO participant TINs, rather than requiring the ACO to coordinate with ACO participants from a prior performance year that may no longer be included on the ACO participant list for the agreement period beginning on July 1, 2019. Further, basing the sample for the CAHPS for ACOs survey on the most recent ACO participant list could ensure the ACO receives feedback from the ACO's assigned beneficiaries on their experience of care with ACO participants and ACO providers/suppliers based on the ACO's current participant list, rather than based on its prior ACO participant list. This could allow for more meaningful care coordination improvements by the ACO in response to the feedback from the survey. Additionally, we believe this proposed approach to determining the ACO's quality reporting samples is also appropriate for an ACO that participates in only one 6-month performance year during 2019, because the most recent certified ACO participant list applicable for the performance year, would also be the certified ACO participant list that is used to determine financial performance.
We propose to specify the ACO participant lists that would be used in determining the quality reporting samples for measuring quality performance for the 6-month performance years in a new section of the regulations at § 425.609. Specifically we propose to use the following approach to determine the ACO participant list, assignment methodology and assignment window that would be used to generate the quality reporting samples for measuring quality performance of ACOs participating in a 6-month performance year (or performance period) during 2019.
For ACOs that enter an agreement period beginning on July 1, 2019, including new ACOs, ACOs that extended their prior participation agreement for the 6-month performance year from January 1, 2019, to June 30, 2019, and ACOs that start a 12-month performance year on January 1, 2019, and terminate their participation agreement with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019, we propose to use the certified ACO participant list for the performance year starting on July 1, 2019, to determine the quality reporting samples for the 2019 reporting period. This most recent certified ACO participant list would therefore be used to determine the quality reporting samples for the 2019 reporting year, which would be used to determine performance for the 6-month performance year from January 1, 2019, to June 30, 2019 (or performance period for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019) and the 6-month performance year from July 1, 2019, to December 31, 2019.
Beneficiary assignment for purposes of generating the quality reporting samples would be based on the assignment methodology applicable to the ACO during its 6-month performance year from July 1, 2019, through December 31, 2019, under § 425.400, either preliminary prospective assignment or prospective assignment, with excluded beneficiaries removed under § 425.401(b), as applicable. We anticipate the assignment windows for the quality reporting samples would be as follows based on our operational experience: (1) Samples for claims-based measures would be determined based on the assignment list for calendar year quarter 4; (2) the sample for CMS web interface measures would be determined based on the assignment list for calendar year quarter 3, which equates to the ACO's first quarter of it is 6-month performance year beginning on July 1, 2019; and (3) the sample for the CAHPS for ACOs survey would be determined based on the initial prospective or preliminary prospective assignment list for the 6-month performance year beginning on July 1, 2019.
We believe it is necessary to use the initial assignment list for the CAHPS for ACOs survey sample, to make use of the most recent available prospective assignment list data and quarterly preliminary prospective assignment data for ACOs for the 6-month performance year beginning on July 1, 2019. Further, for CMS web interface measures and claims-based measures, the proposed approach would be consistent with the current methodology for determining the samples.
If an ACO extends its participation to the first 6 months of 2019, but does not enter a new agreement period beginning on July 1, 2019, we propose to use the ACO's latest certified participant list (the ACO participant list effective on January 1, 2019) to determine the quality reporting samples for the 2019 reporting period. Beneficiary assignment for purpose of generating the quality reporting samples would be based on the assignment methodology applicable to the ACO during its 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.400, either preliminary prospective assignment or prospective assignment, with excluded beneficiaries removed under § 425.401(b), as applicable. We anticipate the assignment windows for the quality reporting samples would be as follows based on our operational experience: (1) Samples for claims-based measures
We propose in section II.E.4 of this proposed rule to extend the policies for addressing the impact of extreme and uncontrollable circumstances on ACO financial and quality performance results for performance year 2017 to performance year 2018 and subsequent years. As specified in section II.E.4, if this proposal is finalized, these policies would apply to ACOs participating in each of the 6-month performance years during 2019 (or the 6-month performance period for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019). We also propose that for ACOs that are involuntarily terminated during a 6-month performance year, pro-rated shared losses for the 6-month performance year would be determined based on assigned beneficiary expenditures for the full calendar year 2019 and then would be pro-rated to account for the partial year of participation prior to the involuntary termination (according to section II.A.6.d of this proposed rule) and the impact of extreme and uncontrollable circumstances on the ACO (if applicable).
We propose to provide separate reconciliation reports for each 6-month performance year, and we would pay shared savings or recoup shared losses separately for each 6-month performance year. Since we propose to perform financial reconciliation for both 6-month performance years during 2019 after the end of calendar year 2019, we anticipate that financial performance reports for both of these 6-month performance years would be available in Summer 2020, similar to the expected timeframe for issuing financial performance reports for the 12-month 2019 performance year (and for 12-month performance years generally).
We propose to apply the same policies regarding notification of shared savings payment and shared losses, and the timing of repayment of shared losses, to ACOs in 6-month performance years that apply under our current regulations to ACOs in 12-month performance years. We propose to specify in a new regulation at § 425.609 that CMS would notify the ACO of shared savings or shared losses for each reconciliation, consistent with the notification requirements specified in § 425.604(f), proposed § 425.605(e), § 425.606(h), and § 425.610(h). Specifically, we propose that: (1) CMS notifies an ACO in writing regarding whether the ACO qualifies for a shared savings payment, and if so, the amount of the payment due; (2) CMS provides written notification to an ACO of the amount of shared losses, if any, that it must repay to the program; (3) if an ACO has shared losses, the ACO must make payment in full to CMS within 90 days of receipt of notification.
Because we anticipate results for both 6-month performance years would be available at approximately the same time, there is a possibility that an ACO could be eligible for shared savings for one 6-month performance year and liable for shared losses for the other 6-month performance year. Although the same 12-month period would be used to determine performance, the outcome for each partial calendar year performance year could be different because of differences in the ACO's assigned population (for example, resulting from potentially different ACO participant lists and the use of different assignment methodologies), different benchmark amounts resulting from the different benchmarking methodologies applicable to each agreement period, and/or differences in the ACO's track of participation.
In earlier rulemaking, we considered the circumstance where, over the course of its participation in the Shared Savings Program, an ACO may earn shared savings in some years and incur losses in other years. We considered whether the full amount of shared savings payments should be paid in the year in which they accrue, or whether some portion should be withheld to offset potential future losses. However, we did not finalize a withhold from shared savings. See 76 FR 67941 through 67942. Instead, an ACO's repayment mechanism provides a possible source of recoupment for CMS should the ACO fail to timely pay shared losses within the 90 day repayment window.
We revisited these considerations about withholding shared savings payments in light of our proposed approach to determining ACO performance for the two 6-month performance years at approximately the same time following the conclusion of calendar year 2019. We propose to conduct reconciliation for each 6-month performance year at the same time. After reconciliation for both 6-month performance years is complete, we would furnish notice of shared savings or shared losses due for each performance year at the same time, either in a single notice or two separate notices. For ACOs that have mixed results for the two 6-month performance years of 2019, being eligible for a shared savings payment for one performance year and owing shared losses for the other performance year, we propose to reduce the shared savings payment for one 6-month performance year by the amount of any shared losses owed for the other 6-month performance year. This approach would guard against CMS making a payment to an organization that has an unpaid debt to the Medicare program, and therefore would be protective of the Trust Funds. We believe this approach would also be less burdensome for ACOs, for example, in the event that the ACO's shared losses are completely offset by the ACO's shared savings. We note that this approach to offsetting shared losses against any shared savings could result in a balance of either unpaid shared losses that must be repaid, or a remainder of shared savings that the ACO would be eligible to receive.
We propose to specify these policies on payment and recoupment for ACOs in 6-month performance years within calendar year 2019 in a new section of the regulations at § 425.609(e).
Under our proposed design of the BASIC track's glide path, ACOs that enter the glide path at Levels A through D would be automatically advanced to the next level of the glide path at the start of each subsequent performance year of the agreement period. The five levels of the glide path would phase-in over the duration of an ACO's agreement period. The design of the BASIC track's glide path is therefore tied to the duration of the agreement period.
With our proposal to offer agreement periods of 5 years and 6 months to ACOs with July 2019 start dates, we believe it is necessary to address how we would apply the policy for moving
We took into consideration how the proposed July 1, 2019 start date could interact with other Medicare initiatives, particularly the Quality Payment Program timelines relating to participation in APMs. In the CY 2018 Quality Payment Program final rule with comment period, we finalized a policy for APMs that start or end during the QP Performance Period. Specifically, under § 414.1425(c)(7)(i), for Advanced APMs that start during the QP Performance Period and are actively tested for at least 60 continuous days during a QP Performance Period, CMS will make QP determinations and Partial QP determinations for eligible clinicians in the Advanced APM using claims data for services furnished during those dates on which the Advanced APM is actively tested. This means that an APM (such as a two-sided model of the Shared Savings Program) would need to begin operations by July 1 of a given performance year in order to be actively tested for at least 60 continuous days before August 31—the last date on which QP determinations are made during a QP Performance Period (as specified in § 414.1425(b)(1)). We therefore believe that our proposed July 1, 2019 start date for the proposed new participation options under the Shared Savings Program would align with Quality Payment Program rules and requirements for participation in Advanced APMs.
Under the program's current regulations in § 425.702, we share aggregate data with ACOs during the agreement period. This includes providing data at the beginning of each performance year and quarterly during the agreement period. For ACOs that started a first or second agreement period on January 1, 2016, that extend their agreement for an additional 6-month performance year from January 1, 2019, through June 30, 2019, and ACOs that participate in the first 6 months of a 12-month performance year 2019 but then terminate their participation agreement with an effective date of termination of June 30, 2019, and enter a new agreement period beginning July 1, 2019, we propose to continue to deliver aggregate reports for all four quarters of calendar year 2019 based on the ACO participant list in effect for the first 6 months of the year. This would allow ACOs a more complete understanding of the Medicare FFS beneficiary population that is the basis for reconciliation for the first 6 months of the year. This would allow ACOs to receive data including demographic characteristics and expenditure/utilization trends for their assigned population. We believe this proposed approach would allow us to maintain transparency by providing ACOs with data that relates to the entire period for which the expenditures for the beneficiaries who are assigned to the ACO for the 6-month performance year (or performance period) would be compared to the ACO's benchmark (before pro-rating any shared savings or shared losses to reflect the length of the performance year), and maintain consistency with the reports delivered to ACOs that participate in a 12-month performance year 2019. Otherwise, we could be limited to providing ACOs with aggregate reports only for the first and second quarters of 2019, even though the proposed reconciliation would involve consideration of expenditures occurring outside this period during 2019. We propose to specify this policy in revisions to § 425.702.
We propose to make certain technical, conforming changes to the following provisions, including additional changes to provisions discussed elsewhere in this proposed rule, to reflect our proposal to add a new provision at § 425.609 to govern the calculation of the financial results for 6-month performance years within calendar year 2019.
We propose that the policies on reopening determinations of shared savings and shared losses to correct financial reconciliation calculations (§ 425.315) would apply with respect to applicable program determinations for performance years within calendar year 2019. We propose to amend § 425.315 to incorporate references to the methodology for determining performance for 6-month performance years within calendar year 2019, as specified in § 425.609.
We propose to add a reference to § 425.609 in § 425.100 in order to include ACOs that participate in a 6-month performance year during 2019 in the general description of ACOs that are eligible to receive payments for shared savings under the program.
In § 425.204(g), we propose to add a reference to § 425.609 to allow for consideration of claims billed under merged and acquired entities' TINs for purposes of establishing an ACO's benchmark for an agreement period that includes a 6-month performance year.
In § 425.400(a)(1)(ii), describing the step-wise process for determining beneficiary assignment for each performance year, we propose to also specify that this process would apply to ACOs participating in a 6-month performance year within calendar year 2019, and that assignment would be determined based on the beneficiary's utilization of primary care services during the entirety of calendar year 2019, as specified in § 425.609.
In § 425.400(c)(1)(iv), on the use of certain Current Procedural Terminology (CPT) codes and Healthcare Common Procedure Coding System (HCPCS) codes in determining beneficiary assignment, as proposed to be revised in section II.E.3 of this proposed rule, we propose to further revise the provision to specify that it will be used in determining assignment for performance years starting on January 1, 2019, and subsequent years.
In § 425.401(b), describing the exclusion of beneficiaries from an ACO's prospective assignment list at the end of a performance year or benchmark year and quarterly each performance year, we propose to specify that these exclusions would occur at the end of calendar year 2019 for purposes of determining assignment to an ACO in a 6-month performance year in accordance with §§ 425.400(a)(3)(ii) and 425.609.
As part of the proposed revisions to § 425.402(e)(2), which, as described in section II.E.2 of this proposed rule, specifies that beneficiaries who have designated a provider or supplier outside the ACO as responsible for coordinating their overall care will not be added to the ACO's list of assigned beneficiaries for a performance year under the claims-based assignment methodology, we propose to allow the same policy to apply to ACOs participating in a 6-month performance year during calendar year 2019.
In § 425.404(b), on the special assignment conditions for ACOs including FQHCs and RHCs that are used determining beneficiary assignment, we propose to revise the provision to specify its applicability in determining assignment for performance years starting on January 1, 2019, and subsequent performance years.
We also propose to incorporate references to § 425.609 in the regulations that govern establishing, adjusting, and updating the benchmark, including proposed § 425.601, and the existing provisions at § 425.602, and § 425.603, to specify that the annual risk adjustment and update to the ACO's historical benchmark for the 6-month performance years during 2019 would use factors based on the entirety of calendar year 2019. For clarity and simplicity, we propose to add a paragraph to each of these sections to explain the following: (1) Regarding the annual risk adjustment applied to the historical benchmark, when CMS adjusts the benchmark for the 6-month performance years described in § 425.609, the adjustment will reflect the change in severity and case mix between benchmark year 3 and calendar year 2019; (2) Regarding the annual update to the historical benchmark, when CMS updates the benchmark for the 6-month performance years described in § 425.609, the update to the benchmark will be based on growth between benchmark year 3 and calendar year 2019.
We propose to incorporate references to § 425.609 in the following provisions regarding the calculation of shared savings and shared losses, § 425.604, proposed § 425.605, § 425.606, and § 425.610. For clarity and simplicity, we propose to add a paragraph to each of these sections explaining that shared savings or shared losses for the 6-month performance years are calculated as described in § 425.609. That is, all calculations will be performed using calendar year 2019 data in place of performance year data.
As discussed in earlier rulemaking (for example, 80 FR 32759) and previously in this proposed rule, we believe that models where ACOs bear a degree of financial risk have the potential to induce more meaningful systematic change than one-sided models. We believe that two-sided performance-based risk provides stronger incentives for ACOs to achieve savings and, as discussed in detail in the Regulatory Impact Analysis (see section IV. of this proposed rule), our experience with the program indicates that ACOs in two-sided models generally perform better than ACOs that participate under a one-sided model. We believe that ACOs that bear financial risk have a heightened incentive to restrain wasteful spending by their ACO participants and ACO providers/suppliers. This, in turn, may reduce the likelihood of over-utilization of services. We believe that relieving these ACOs of the burden of certain statutory and regulatory requirements may provide ACOs with additional flexibility to innovate further, which could in turn lead to even greater cost savings, without inappropriate risk to program integrity.
In the December 2014 proposed rule (79 FR 72816 through 72826), we discussed in detail a number of specific payment rules and other program requirements for which we believed waivers could be necessary under section 1899(f) of the Act to permit effective implementation of two-sided performance-based risk models in the Shared Savings Program. We invited comments on how these waivers could support ACOs' efforts to increase quality and decrease costs under two-sided risk arrangements. Based on review of these comments, in the June 2015 final rule (80 FR 32800 through 32808), we finalized a waiver of the requirement in section 1861(i) of the Act for a 3-day inpatient hospital stay prior to the provision of Medicare-covered post-hospital extended care services for beneficiaries who are prospectively assigned to ACOs that participate in Track 3 (§ 425.612). We refer to this waiver as the SNF 3-day rule waiver. We established the SNF 3-day rule waiver to provide an additional incentive for ACOs to take on risk by offering greater flexibility for ACOs that have accepted the higher level of performance-based risk under Track 3 to provide necessary care for beneficiaries in the most appropriate care setting.
Section 50324 of the Bipartisan Budget Act added section 1899(l) of the Act (42 U.S.C. 1395jjj(l)) to provide certain Shared Savings Program ACOs the ability to provide telehealth services. Specifically, beginning January 1, 2020, for telehealth services furnished by a physician or practitioner participating in an applicable ACO, the home of a beneficiary is treated as an originating site described in section 1834(m)(4)(C)(ii) and the geographic limitation under section 1834(m)(4)(C)(i) of the Act does not apply with respect to an originating site described in section 1834(m)(4)(C)(ii), including the home of the beneficiary.
In this proposed rule, we propose modifications to the existing SNF 3-day rule waiver and propose to establish regulations to govern telehealth services furnished in accordance with section 1899(l) of the Act to prospectively assigned beneficiaries by physicians and practitioners participating in certain applicable ACOs. We also propose to use our authority under section 1899(f) to waive the requirements of section 1834(m)(4)(C)(i) and (ii) as necessary to provide for a 90-day grace period to allow for payment for telehealth services furnished to a beneficiary who was prospectively assigned to an applicable ACO, but was subsequently excluded from assignment to the ACO. We also propose to require that ACO participants hold beneficiaries financially harmless for telehealth services that are not provided in compliance with section 1899(l) of the Act or during the 90-day grace period, as discussed below.
The SNF 3-day rule waiver under § 425.612 allows for Medicare payment for otherwise covered SNF services when ACO providers/suppliers participating in eligible Track 3 ACOs admit eligible prospectively assigned beneficiaries, or certain excluded beneficiaries during a grace period, to an eligible SNF affiliate without a 3-day prior inpatient hospitalization. All other provisions of the statute and regulations regarding Medicare Part A post-hospital extended care services continue to apply. This waiver became available starting January 1, 2017, and all ACOs participating under Track 3 or applying to participate under Track 3 are eligible to apply for the waiver.
We limited the waiver to ACOs that elect to participate under Track 3 because these ACOs are participating under two-sided risk and, under the prospective assignment methodology
Under preliminary prospective assignment with retrospective reconciliation, ACOs are given up-front information about their preliminarily assigned FFS beneficiary population. This information is updated quarterly to help ACOs refine their care coordination activities. Under the expanded criteria for sharing data with ACOs finalized in the June 2015 final rule, beginning with performance year 2016, we have provided ACOs under preliminary prospective assignment with quarterly and annual assignment lists that identify the beneficiaries who are preliminarily prospectively assigned, as well as beneficiaries who have received at least one primary care service in the most recent 12-month period from an ACO participant that submits claims for services used in the assignment methodology (see § 425.702(c)(1)(ii)(A), and related discussion in 80 FR 32734 through 32737). The specific beneficiaries preliminarily assigned to an ACO during each quarter can vary.
As described in section II.A.4.c. of this proposed rule, we propose to allow ACOs to select the beneficiary assignment methodology to be applied at the start of their agreement period (prospective assignment or preliminary prospective assignment with retrospective reconciliation) and the opportunity to elect to change this selection prior to the start of each performance year. Further, as described in sections II.A.3 and II.A.4.b of this proposed rule, we propose that BASIC track ACOs entering the track's glide path under a one-sided model will be automatically transitioned to a two-sided model during their agreement period and may elect to enter two-sided risk more quickly (prior to the start of their agreement period or as part of an annual election to move to a higher level of risk within the BASIC track).
In light of these proposed flexibilities for program participation, as well as our experience in providing ACOs under preliminary prospective assignment with data on populations of beneficiaries, we now believe it would be appropriate to expand eligibility for the SNF 3-day rule waiver to include ACOs participating in a two-sided model under preliminary prospective assignment. As explained in this section, we originally excluded Track 2 ACOs, which participate under two-sided risk, from eligibility for the SNF 3-day rule waiver because beneficiaries are assigned to Track 2 ACOs using a preliminary prospective assignment methodology with retrospective reconciliation and thus it could be unclear to ACOs which beneficiaries would be eligible to receive services under the waiver. We now believe risk-bearing ACOs selecting preliminary prospective assignment with retrospective reconciliation should be offered the same tools and flexibility to increase quality and decrease costs that are available to ACOs electing prospective assignment, to the maximum extent possible. We believe it would be possible to provide ACOs that select preliminary prospective assignment with retrospective reconciliation with more clarity regarding which beneficiaries may be eligible to receive services under the waiver if we were to establish a cumulative list of beneficiaries preliminarily assigned to the ACO during the performance year. We believe it would be appropriate to establish such a cumulative list because the beneficiaries preliminarily assigned to an ACO may vary during each quarter of a performance year.
Under preliminary prospective assignment with retrospective reconciliation, once a beneficiary receives at least one primary care service furnished by an ACO participant, the ACO has an incentive to coordinate care of the Medicare beneficiary, including SNF services, for the remainder of the performance year because of the potential for the beneficiary to be assigned to the ACO for the performance year. Under our proposed approach, we would not remove preliminarily prospectively assigned beneficiaries from the list of beneficiaries eligible to receive SNF services under the waiver on a quarterly basis. Instead, once a beneficiary is listed as preliminarily prospectively assigned to an eligible ACO for the performance year, according to the assignment lists provided by CMS to an ACO at the beginning of each performance year and for quarters 1, 2, and 3 of each performance year, then the SNF 3-day rule waiver would remain available with respect to otherwise covered SNF services furnished to that beneficiary by a SNF affiliate of the ACO, consistent with the requirements of § 425.612(a), for the remainder of the performance year.
We propose that the waiver would be limited to SNF services provided after the beneficiary first appeared on the preliminary prospective assignment list for the performance year, and that a beneficiary would no longer be eligible to receive covered services under the waiver if he or she subsequently enrolls in a Medicare group (private) health plan or is otherwise no longer enrolled in Part A and Part B. In other words, ACOs participating in a performance-based risk track and under preliminary prospective assignment with retrospective reconciliation would receive an initial performance year assignment list followed by assignment lists for quarters 1, 2, and 3 of each performance year, and the SNF 3-day rule waiver would be available with respect to all beneficiaries who have been identified as preliminarily prospectively assigned to the ACO on one or more of these four assignment lists, unless they enroll in a Medicare group health plan or are no longer enrolled in both Part A and Part B. Providers and suppliers are expected to confirm a beneficiary's health insurance coverage to determine if they are eligible for FFS benefits. In addition, we note that under existing Medicare payment policies, services furnished to Medicare beneficiaries outside the U.S. are not
We note that our proposal to allow preliminarily prospectively assigned beneficiaries to remain eligible for the SNF 3-day rule waiver until the end of the performance year may include beneficiaries who ultimately are excluded from assignment to the ACO based upon their assignment to another Shared Savings Program ACO or their alignment with an entity participating in another shared savings initiative. Thus, a beneficiary may be eligible for admission under a SNF 3-day rule waiver based on being preliminarily prospectively assigned to more than one ACO during a performance year. As previously discussed, we believe ACOs that bear a degree of financial risk have a strong incentive to manage the care for all beneficiaries who appear on any preliminary prospective assignment list during the year and to continue to focus on furnishing appropriate levels of care because they do not know which beneficiaries ultimately will be assigned to the ACO for the performance year. Further, because there remains the possibility that a beneficiary could be preliminarily prospectively assigned to an ACO at the beginning of the year, not preliminarily assigned in a subsequent quarter, but then retrospectively assigned to the ACO at the end of the performance year, we believe it is appropriate that preliminarily prospectively assigned beneficiaries remain eligible to receive services under the SNF 3-day rule waiver for the remainder of the performance year to aid ACOs in coordinating the care of their entire beneficiary population. Because the ACO will ultimately be held responsible for the quality and costs of the care furnished to all beneficiaries who are assigned at the end of the performance year, we believe the ACO should have the flexibility to use the SNF 3-day rule waiver to permit any beneficiary who has been identified as preliminarily prospectively assigned to the ACO during the performance year to receive covered SNF services without a prior 3 day hospital stay when clinically appropriate. For this reason, we do not believe it is necessary to extend the 90-day grace period that applies to beneficiaries assigned to waiver-approved ACOs participating under the prospective assignment methodology to include beneficiaries who are preliminarily prospectively assigned to a waiver-approved ACO. Rather, beneficiaries who are preliminarily prospectively assigned a to waiver-approved ACO will remain eligible to receive services furnished in accordance with the SNF 3-day rule waiver for the remainder of that performance year unless they enroll in a Medicare group health plan or are otherwise no longer enrolled in Part A and Part B. In addition, in order to help protect beneficiaries from incurring significant financial liability for SNF services received without a prior 3-day inpatient stay after an ACO's termination date, we would also like to clarify that an ACO must include, as a part of the notice of termination to ACO participants under § 425.221(a)(1)(i), a statement that its ACO participants, ACO providers/suppliers, and SNF affiliates may no longer use the SNF 3-day rule waiver after the ACO's date of termination. We would also like to clarify that if a beneficiary is admitted to a SNF prior to an ACO's termination date, and all requirements of the SNF 3-day rule waiver are met, the SNF services furnished without a prior 3-day stay would be covered under the SNF 3-day rule waiver.
In summary, we propose to revise the regulations at § 425.612(a)(1) to expand eligibility for the SNF 3-day rule waiver to include ACOs participating in a two-sided model under preliminary prospective assignment with retrospective reconciliation. The SNF 3-day rule waiver would be available for such ACOs with respect to all beneficiaries who have been identified as preliminarily prospectively assigned to the ACO on the initial performance year assignment list or on one or more assignment lists for quarters 1, 2, and 3 of the performance year, for SNF services provided after the beneficiary first appeared on one of the assignment lists for the applicable performance year. The beneficiary would remain eligible to receive SNF services furnished in accordance with the waiver unless he or she is no longer eligible for assignment to the ACO because he or she is no longer enrolled in both Part A and Part B or has enrolled in a Medicare group health plan.
Finally, stakeholders representing rural health providers have pointed out that the SNF 3-day rule waiver is not currently available for SNF services furnished by critical access hospitals and other small, rural hospitals operating under a swing bed agreement. Section 1883 of the Act permits certain small, rural hospitals to enter into a swing bed agreement, under which the hospital can use its beds, as needed, to provide either acute or SNF care. As defined in the regulations at 42 CFR 413.114, a swing bed hospital is a hospital or CAH participating in Medicare that has CMS approval to provide post-hospital SNF care and meets certain requirements. These stakeholders indicate that because there are fewer SNFs in rural areas, there are fewer opportunities for rural ACOs to enter into agreements with SNF affiliates. These stakeholders also believe that the current policy may disadvantage beneficiaries living in rural areas who may not be in close proximity to a SNF and would need to travel longer distances to benefit from the SNF 3-day rule waiver. The stakeholders requested that we revise the regulations to permit providers that furnish SNF services under a swing bed agreement to be eligible to partner with ACOs for purposes of the SNF 3-day rule waiver.
In order to furnish SNF services under a swing bed agreement, hospitals must be substantially in compliance with the SNF participation requirements specified at 42 CFR 482.58(b), whereas CAHs must be substantially in compliance with the SNF participation requirements specified at 42 CFR 485.645(d). However, currently, providers furnishing SNF services under a swing bed agreement are not eligible to partner and enter into written agreements with ACOs for purposes of the SNF 3-day rule waiver because: (1) The SNF 3-day rule waiver under the Shared Savings Program regulations at § 425.612(a)(1) waives the requirement for a 3-day prior inpatient hospitalization only with respect to otherwise covered SNF services furnished by an eligible SNF and does not extend to otherwise covered post-hospital extended care services furnished by a provider under a swing bed agreement; and (2) CAHs and other rural hospitals furnishing SNF services under swing bed agreements are not included in the CMS 5-star Quality Rating System and, therefore, cannot meet the requirement at § 425.612(a)(1)(iii)(A) that, to be eligible to partner with an ACO for purposes of the SNF 3-day rule waiver, the SNF must have and maintain an overall rating of 3 or higher under the CMS 5-star Quality Rating System.
For the reasons described in the June 2015 final rule (80 FR 32804), we believe it is necessary to offer ACOs participating under two-sided risk models additional tools and flexibility to manage and coordinate care for their assigned beneficiaries, including the flexibility to admit a beneficiary for
Additionally, we note the possibility that a beneficiary could be admitted to a hospital or CAH, have an inpatient stay of less than 3 days, and then be admitted to the same hospital or CAH under its swing bed agreement. As previously discussed, we believe ACOs that bear a degree of financial risk have a stronger incentive not to over utilize services and have an incentive to recommend a beneficiary for admission to a SNF only when it is medically appropriate. We also note this scenario could occur when a beneficiary meets the generally applicable 3-day stay requirement. Thus, we do not believe extending the SNF 3-day rule waiver to include services furnished by a hospital or CAH under a swing bed agreement would create a new gaming opportunity.
To reduce burden and confusion for eligible ACOs not currently approved for a SNF 3-day rule waiver, we are proposing that these revisions would be applicable for SNF 3-day rule waivers approved for performance years beginning on July 1, 2019, and in subsequent years. This would allow for one, as opposed to multiple, application deadlines thus reducing the overall burden for ACOs applying for the waiver and prevent confusion over ACO outreach and communication materials related to application deadlines. Because we are forgoing the application cycle for a January 1, 2019 start date, we are proposing to apply the revisions to ACOs approved to use the SNF 3-day rule waiver for performance years beginning on July 1, 2019, and in subsequent years. This includes both ACOs that start a new agreement period under the proposed new participation options on July 1, 2019, and those ACOs that are applying for a waiver during the term of an existing participation agreement. For ACOs currently participating in the Shared Savings Program with an agreement period beginning in 2017 or 2018, that have previously been approved for a SNF 3-day rule waiver, the proposed revisions to the SNF 3-day rule waiver would be applicable starting on July 1, 2019, and for all subsequent performance years. ACOs with an approved SNF 3-day rule waiver would be able to modify their 2019 SNF affiliate list for the performance year beginning on January 1, 2019; however, they would not be able to add a hospital or CAH operating under a swing bed agreement to their SNF affiliate list until the July 1, 2019 change request review cycle. CMS would notify all ACOs, including ACOs with a 12 month performance year 2019, of the schedule for this change request review cycle.
Consistent with these proposed revisions to the SNF 3-day rule waiver, we are proposing to add a new provision at § 425.612(a)(1)(vi) to allow ACOs participating in performance-based risk within the BASIC track or ACOs participating in Track 3 or the ENHANCED track to request to use the SNF 3-day rule waiver. We are not proposing to make the revisions to the SNF 3-day rule waiver applicable for Track 2 ACOs because we are proposing to phase out Track 2, as discussed at section II.A.2 of this proposed rule. ACOs currently participating under Track 2 that choose to terminate their existing participation agreement and reapply to the Shared Savings Program under the ENHANCED track or BASIC track, at the highest level of risk and potential reward, as described under II.A.2 of this proposed rule, would be eligible to apply for the SNF 3-day rule waiver.
For the reasons discussed in this section, we believe that the proposed modifications of the SNF 3-day rule waiver would provide additional incentives for ACOs to participate in the Shared Savings Program under performance-based risk and are necessary to support ACO efforts to increase quality and decrease costs under performance-based risk arrangements. We invite comments on these proposals and related issues.
Under section 1834(m) of the Act, Medicare pays for certain Part B telehealth services furnished by a physician or practitioner under certain conditions, even though the physician or practitioner is not in the same location as the beneficiary. As of 2018, the telehealth services must be furnished to a beneficiary located in one of the types of originating sites specified in section 1834(m)(4)(C)(ii) of the Act and the originating site must satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act. An originating site is the location at which a beneficiary who is eligible to receive a telehealth service is located at the time the service is furnished via a telecommunications system.
Generally, for Medicare payment to be made for telehealth services under the PFS, several conditions must be met (§ 410.78(b)). Specifically, the service must be on the Medicare list of telehealth services and must meet all of the following requirements for payment:
• The telehealth service must be furnished via an interactive telecommunications system, as defined at § 410.78(a)(3). CMS pays for telehealth services provided through asynchronous (that is, store and forward) technologies, defined at § 410.78(a)(1), only for Federal telemedicine demonstration programs conducted in Alaska or Hawaii.
• The service must be furnished to an eligible beneficiary by a physician or other practitioner specified at § 410.78(b)(2) who is licensed to furnish the service under State law as specified at § 410.78(b)(1).
• The eligible beneficiary must be located at an originating site at the time the service being furnished via a telecommunications system occurs. The eligible originating sites are specified in section 1834(m)(4)(C)(ii) of the Act and § 410.78(b)(3) and, for telehealth services furnished during 2018, include the following: the office of a physician or practitioner, a CAH, RHC, FQHC,
• As of 2018, the originating site must be in a location specified in section 1834(m)(4)(C)(i) of the Act and § 410.78(b)(4). The site must be located in a health professional shortage area that is either outside of a Metropolitan Statistical Area (MSA) or within a rural census tract of an MSA, located in a county that is not included in an MSA, or be participating in a Federal telemedicine demonstration project that has been approved by, or receives funding from, the Secretary of Health and Human Services as of December 31, 2000.
When these conditions are met, Medicare pays a facility fee to the originating site and provides separate payment to the distant site practitioner for the service.
Section 1834(m)(4)(F)(i) of the Act defines Medicare telehealth services to include professional consultations, office visits, office psychiatry services, and any additional service specified by the Secretary, when furnished via a telecommunications system. A list of Medicare telehealth services is available through the CMS website (at
Under the Next Generation ACO Model, the Innovation Center has been testing a Telehealth Expansion Benefit Enhancement under which CMS has waived the geographic and originating site requirements for services that are on the list of telehealth services when furnished to aligned beneficiaries by eligible telehealth practitioners (see the CMS website at
Next Generation ACOs encouraged CMS to broaden the telehealth waiver under the Next Generation ACO Model to test the use of asynchronous technologies to increase access to care and further support coordination of care for certain dermatology and ophthalmology services. Therefore, effective for 2018, the Telehealth Expansion Benefit Enhancement under the Next Generation ACO Model has been amended to include a waiver of the requirement under section 1834(m)(1) and § 410.78(b) that telehealth services be furnished via a “interactive telecommunications system” as that term is defined under § 410.78(a)(3) in order to permit coverage of certain teledermatology and teleophthalmology services furnished using asynchronous technologies.
Section 50324 of the Bipartisan Budget Act of 2018 amends section 1899 of the Act to add a new subsection (l) to provide certain ACOs the ability to expand the use of telehealth. The Bipartisan Budget Act provides that, with respect to telehealth services for which payment would otherwise be made that are furnished on or after January 1, 2020 by a physician or practitioner participating in an applicable ACO to a Medicare FFS beneficiary prospectively assigned to the applicable ACO, the following shall apply: (1) The home of a beneficiary shall be treated as an originating site described in section 1834(m)(4)(C)(ii) of the Act, and (2) the geographic limitation under section 1834(m)(4)(C)(i) of the Act shall not apply with respect to an originating site, including the home of a beneficiary, subject to State licensing requirements. The Bipartisan Budget Act defines the home of a beneficiary as the place of residence used as the home of a Medicare FFS beneficiary.
The Bipartisan Budget Act defines an “applicable ACO” as an ACO participating in a two-sided model of the Shared Savings Program (as described in § 425.600(a)) or a two-sided model tested or expanded under section 1115A of the Act, for which FFS beneficiaries are assigned to the ACO using a prospective assignment method.
The Bipartisan Budget Act also provides that, in the case where the home of the beneficiary is the originating site, there shall be no facility fee paid to the originating site. It further provides that no payment may be made for telehealth services furnished in the home of the beneficiary when such services are inappropriate to furnish in the home setting, such as services that are typically furnished in inpatient settings such as a hospital.
Lastly, the Bipartisan Budget Act requires the Secretary to conduct a study on the implementation of section 1899(l) of the Act that includes an analysis of the utilization of, and expenditures for, telehealth services under section 1899(l). No later than January 1, 2026, the Secretary must submit a report to Congress containing the results of the study, together with recommendations for legislation and administrative action as the Secretary determines appropriate.
We propose to add a new section of the Shared Savings Program regulations at § 425.613 to govern the payment for certain telehealth services furnished, in accordance with section 1899(l) of the Act, as added by the Bipartisan Budget Act. As required by section 1899(l) of the Act, we propose to treat the beneficiary's home as an originating site and not to apply the originating site geographic restrictions under section 1834(m)(4)(C)(i) of the Act for telehealth services furnished by a physician or practitioner participating in an applicable ACO. Thus, we propose to make payment to a physician or practitioner billing though the TIN of an ACO participant in an applicable ACO for furnishing otherwise covered telehealth services to beneficiaries prospectively assigned to the applicable ACO, including when the originating site is the beneficiary's home and without regard to the geographic limitations under section 1834(m)(4)(C)(i) of the Act. As we note in section II.A.4 of this proposed rule, the Shared Savings Program offers two similar, but distinct, assignment methodologies, prospective assignment and preliminary prospective assignment with retrospective reconciliation. We propose to apply these policies regarding payment for telehealth services to ACOs under a two-sided model that participate under the prospective assignment method. We believe that these ACOs meet the definition of applicable ACO under section 1899(l)(2)(A) of the Act. Because final assignment is not performed under the preliminary prospective assignment methodology until after the end of the performance year, we do not believe it is “a prospective assignment method” as required under section 1899(l)(2)(A)(ii). Although we do not believe that ACOs that participate under the preliminary prospective assignment with retrospective reconciliation method meet the definition of an applicable ACO, we welcome comments on our interpretation of this provision.
We propose that the policies governing telehealth services furnished in accordance with section 1899(l) of the Act would be effective for telehealth
As discussed in section II.A.4 of this proposed rule, we propose to allow ACOs in the BASIC and ENHANCED tracks the opportunity to change their beneficiary assignment methodology on an annual basis. As a result, the ability of physicians and other practitioners billing through the TIN of an ACO participant in these ACOs to furnish and be paid for telehealth services in accordance with section 1899(l) of the Act could change from year to year depending on the ACO's choice of assignment methodology. Should an ACO in the BASIC track or ENHANCED track change from the prospective assignment methodology to preliminary prospective assignment methodology with retrospective reconciliation for a performance year, the ACO would no longer satisfy the requirements to be an applicable ACO for that year and physicians and other practitioners billing through the TIN of an ACO participant in that ACO could only furnish and be paid for telehealth services if the services meet all applicable requirements, including the originating site requirements, under section 1834(m)(4)(C) of the Act.
We propose that the beneficiary's home would be a permissible originating site type for telehealth services furnished by a physician or practitioner participating in an applicable ACO. Under this proposal, in addition to being eligible for payment for telehealth services when the originating site is one of the types of originating sites specified in section 1834(m)(4)(C)(ii) of the Act, a physician or other practitioner billing through the TIN of an ACO participant in an applicable ACO could also furnish and be paid for such services when the originating site is the beneficiary's home (assuming all other requirements are met). As discussed earlier, section 1899(l)(1)(A) of the Act, as added by section 50324 of the Bipartisan Budget Act, defines a beneficiary's home to be the place of residence used as the home of the beneficiary. In addition, we propose that Medicare would not pay a facility fee when the originating site for a telehealth service is the beneficiary's home.
Further, we propose that the geographic limitations under section 1834(m)(4)(C)(i) of the Act would not apply to any originating site, including a beneficiary's home, for telehealth services furnished by a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO. This would mean that a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO could furnish and be paid for telehealth services when the beneficiary receives those services while located at an originating site in an urban area that is within an MSA, assuming all other requirements are met. We also propose to require that, consistent with section 1899(l)(1)(B) of the Act, the originating site must comply with State licensing requirements.
We propose that the treatment of the beneficiary's home as an originating site and the non-application of the originating site geographic restrictions would be applicable only to payments for services on the list of Medicare telehealth services. The approved list of telehealth services is maintained on our website and is subject to annual updates (
We are concerned about potential beneficiary financial liability for telehealth services provided to beneficiaries excluded from assignment under the Shared Savings Program. A beneficiary prospectively assigned to an applicable ACO at the beginning of a performance year can subsequently be excluded from assignment if he or she meets the exclusion criteria specified under § 425.401(b). To address delays in communicating beneficiary exclusions from the assignment list, the Telehealth Expansion Benefit Enhancement under the Next Generation ACO Model provides for a 90-day grace period that functionally acts as an extension of beneficiary eligibility to receive services under the Benefit Enhancement and permits some additional time for the ACO to receive quarterly exclusion lists
Based upon the experience in the Next Generation ACO Model, we believe it would be inadvisable not to provide some protection for beneficiaries who are prospectively assigned to an applicable ACO at the start of the year, but are subsequently excluded from assignment. It is not operationally feasible for CMS to notify the ACO and for the ACO, in turn, to notify its ACO participants and ACO providers/suppliers immediately of the beneficiary's exclusion. The lag in communication may then cause a physician or practitioner billing under the TIN of an ACO participant to unknowingly furnish a telehealth service to a beneficiary who no longer qualifies to receive telehealth services under section 1899(l) of the Act. Therefore, we are proposing to use our waiver authority under section 1899(f) of the Act to waive the originating site requirements in section 1834(m)(4)(C) of the Act as necessary to provide for a 90-day grace period for payment of otherwise covered telehealth services, to allow sufficient time for CMS to notify an applicable ACO of any beneficiary exclusions, and for the ACO then to inform its ACO participants and ACO providers/suppliers of those exclusions. We believe it is necessary, to protect beneficiaries from potential financial liability related to use of telehealth services furnished by physicians and other practitioners billing through the TIN of an ACO participant in an applicable ACO, to establish this 90-day grace period in the case of a prospectively assigned beneficiary who is later excluded from assignment to an applicable ACO.
More specifically, we propose to waive the originating site requirements in section 1834(m)(4)(C) of the Act to allow for coverage of telehealth services furnished by a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO to an excluded beneficiary within 90 days following the date that CMS delivers the relevant quarterly exclusion list under § 425.401(b). We propose to amend § 425.612 to add a new paragraph (f) establishing the terms and conditions of this waiver. This waiver would permit us to make payment for otherwise covered telehealth services furnished during a 90 day grace period to beneficiaries who were initially on an applicable ACO's list of prospectively assigned beneficiaries for the performance year, but were subsequently excluded during the performance year. Under the terms of this waiver, CMS would make payments for telehealth services furnished to such a beneficiary as if they were telehealth services authorized under section 1899(l) of the Act if the following conditions are met:
• The beneficiary was prospectively assigned to an applicable ACO at the beginning of the relevant performance year, but was excluded in the most recent quarterly update to the assignment list under § 425.401(b);
• The telehealth services are furnished to the beneficiary by a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO within 90 days following the date that CMS delivers the quarterly exclusion list to the applicable ACO.
• But for the beneficiary's exclusion from the applicable ACO's assignment list, CMS would have made payment to the ACO participant for such services under section 1899(l) of the Act.
In addition, we are concerned that there could be scenarios where a beneficiary could be charged for non-covered telehealth services that were a result of an inappropriate attempt to furnish and be paid for telehealth services under section 1899(l) of the Act by a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO. Specifically, we are concerned that a beneficiary could be charged for non-covered telehealth services if a physician or practitioner billing through the TIN of an ACO participant in an applicable ACO were to attempt to furnish a telehealth service that would be otherwise covered under section 1899(l) of the Act to a FFS beneficiary who is not prospectively assigned to the applicable ACO, and payment for the telehealth service is denied because the beneficiary is not eligible to receive telehealth services furnished under section 1899(l) of the Act. We believe this situation could occur as a result of a breakdown in one or more processes of the applicable ACO and its ACO participants. For example, the ACO participant may not verify that the beneficiary appears on the ACO's prospective assignment list, as required under section 1899(l) of the Act, prior to furnishing a telehealth service. In this scenario, Medicare would deny payment of the telehealth service claim because the beneficiary did not meet the requirement of being prospectively assigned to an applicable ACO. We are concerned that, once the claim is rejected, the beneficiary may not be protected from financial liability, and thus could be charged by the ACO participant for non-covered telehealth services that were a result of an inappropriate attempt to furnish telehealth services under section 1899(l), potentially subjecting the beneficiary to significant financial liability. In this circumstance, we propose to assume that the physician or other practitioner's intent was to rely upon section 1899(l) of the Act. We believe this is a reasonable assumption because, as a physician or practitioner billing under the TIN of an ACO participant in an applicable ACO, the healthcare provider should be well aware of the rules regarding furnishing telehealth services and, by submitting the claim, demonstrated an expectation that CMS would pay for telehealth services that would otherwise have been rejected for lack of meeting the originating site requirements in section 1834(m)(4)(C) of the Act. We believe that in this scenario, the rejection of the claim could easily have been avoided if the ACO and the ACO participant had procedures in place to confirm that the requirements for furnishing such telehealth services were satisfied. Because each of these entities is in a better position than the beneficiary to know the requirements of the Shared Savings Program and to ensure that they are met, we believe that the applicable ACO and/or its ACO participants should be accountable for such denials and the ACO participant should be prevented from charging the beneficiary for the non-covered telehealth service. Therefore, we propose that in the event that CMS makes no payment for telehealth services furnished to a FFS beneficiary and billed through the TIN of an ACO participant in an applicable ACO and the only reason the claim was non-covered is because the beneficiary was not prospectively assigned to the ACO or was not in the 90 day grace period, all of the following beneficiary protections would apply:
• The ACO participant must not charge the beneficiary for the expenses incurred for such services;
• The ACO participant must return to the beneficiary any monies collected for such services; and
• The ACO may be subject to compliance actions, including being required to submit a corrective action plan (CAP) under § 425.216(b) for CMS
We note that we are not proposing at this time to establish any waiver of section 1834(m)(1) to permit payment for telehealth services delivered through asynchronous technologies because we do not have sufficient experience with the waiver that is being tested under the Next Generation ACO Model, to inform whether such a waiver would be necessary for purposes of implementing the Shared Savings Program. We may consider this issue further through future rulemaking after we gain additional experience with the use of asynchronous technologies through the Next Generation ACO Model. We welcome comments on these proposals for implementing the requirements of section 1899(l) of the Act, as added by the Bipartisan Budget Act, and related issues.
Our proposed policies concerning the applicability of the SNF 3-day rule waiver and expanded use of telehealth services in accordance with section 1899(l) of the Act by track are summarized in Table 9.
Section 1899(b)(2)(G) of the Act requires an ACO to “define processes to promote . . . patient engagement.” Strengthening beneficiary engagement is one of the agency's goals to help transform our health care system into one that delivers better care, smarter spending and healthier people, and that puts the beneficiary at the center of care. We stated in the November 2011 final rule that the term “patient engagement” means the active participation of patients and their families in the process of making medical decisions (76 FR 67828). The regulation at § 425.112 details the patient-centeredness criteria for the Shared Savings Program, and requires that ACOs implement processes to promote patient engagement (§ 425.112(b)(2)).
In addition, Congress recently passed section 50341 of the Bipartisan Budget Act of 2018, which amends section 1899 of the Act, to allow certain ACOs to each establish a beneficiary incentive program for assigned beneficiaries who receive qualifying primary-care services in order to encourage Medicare FFS beneficiaries to obtain medically necessary primary care services. In order to implement the amendments to section 1899 of the Act, and consistent with our goal to strengthen beneficiary engagement, we are proposing policies to allow any ACO in Track 2, levels C, D, or E of the BASIC track, or the ENHANCED track to establish a CMS-approved beneficiary incentive program to provide incentive payments to
Furthermore, we are proposing to revise policies related to beneficiary notifications. Specifically, we propose to require additional content for beneficiary notifications and that beneficiaries receive such notices at the first primary care visit of each performance year. Finally, we are seeking comment on whether we should create an alternative beneficiary assignment methodology, in order to promote beneficiary free choice, under which a beneficiary would be assigned to an ACO if the beneficiary has “opted-in” to assignment to the ACO.
We believe that patient engagement is an important part of motivating and encouraging more active participation by beneficiaries in their health care. We believe ACOs that engage beneficiaries in the management of their health care may experience greater success in the Shared Savings Program. In the November 2011 final rule (see 76 FR 67958), we noted that some commenters had suggested that beneficiary engagement and coordination of care could be enhanced by providing additional incentives to beneficiaries that would potentially motivate and encourage beneficiaries to become actively involved in their care. One commenter gave the example of supplying scales to beneficiaries with congestive heart failure to help them better manage this chronic disease. Other commenters were concerned that certain beneficiary incentives such as gifts, cash, or other remuneration could be inappropriate incentives for receiving services or remaining assigned to an ACO or with a particular ACO participant or ACO provider/supplier.
In the November 2011 final rule, we finalized a provision at § 425.304(a)(1) that prohibits ACOs, ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities from providing gifts or other remuneration to beneficiaries as incentives for (i) receiving items and services from or remaining in an ACO or with ACO providers/suppliers in a particular ACO, or (ii) receiving items or services from ACO participants or ACO providers/suppliers. However, in response to comments, we finalized a provision at § 425.304(a)(2) to provide that, subject to compliance with all other applicable laws and regulations, an ACO, ACO participants, and ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities may provide in-kind items or services to beneficiaries if there is a reasonable connection between the items or services and the medical care of the beneficiary, and the items or services are preventive care items or services, or advance a clinical goal of the beneficiary, including adherence to a treatment regime; adherence to a drug regime; adherence to a follow-up care plan; or management of a chronic disease or condition. For example, an ACO provider may give a blood pressure monitor to a beneficiary with hypertension in order to encourage regular blood pressure monitoring and thus educate and engage the beneficiary to be more proactive in his or her disease management. In this instance, such a gift would not be considered an improper incentive to encourage the beneficiary to remain with an ACO, ACO participant, or ACO provider/supplier.
We note that nothing precludes ACOs, ACO participants, or ACO providers/suppliers from offering a beneficiary an incentive to promote his or her clinical care if the incentive does not violate the Federal anti-kickback statute (section 1128B(b) of the Act), the civil monetary penalties law provision relating to beneficiary inducements (section 1128A(a)(5) of the Act, known as the Beneficiary Inducements CMP), or other applicable law. For additional information on beneficiary incentives that may be permissible under the Federal anti-kickback statute and the Beneficiary Inducements CMP, see the final rule published by the Office of Inspector General (OIG) on December 7, 2016 titled “Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements” (81 FR 88368), as well as other resources that can be found on the OIG website at
We believe that the regulation at § 425.304(a)(2) already provides ACOs with a considerable amount of flexibility to offer beneficiary incentives to encourage patient engagement, promote care coordination, and achieve the objectives of the Shared Savings Program. Further, ACOs, ACO participants, and ACO providers/suppliers need not furnish beneficiary incentives under § 425.304(a)(2) to every beneficiary; they have the flexibility to offer incentives on a targeted basis to beneficiaries who, for example, are most likely to achieve the clinical goal that the incentive is intended to advance. Although the appropriateness of any in-kind beneficiary incentives must be determined on a case-by-case basis, we believe a wide variety of incentives could be acceptable under § 425.304, including, for example, the following:
• Vouchers for over-the-counter medications recommended by a health care provider.
• Prepaid, non-transferable vouchers that are redeemable for transportation services solely to and from an appointment with a health care provider.
• Items and services to support management of a chronic disease or condition, such as home air-filtering systems or bedroom air-conditioning for asthmatic patients, and home improvements such as railing installation or other home modifications to prevent re-injury.
• Wellness program memberships, seminars, and classes.
• Electronic systems that alert family caregivers when a family member with dementia wanders away from home.
• Vouchers for those with chronic diseases to access chronic disease self-management, pain management and falls prevention programs.
• Vouchers for those with malnutrition to access meals programs.
• Phone applications, calendars or other methods for reminding patients to take their medications and promote patient adherence to treatment regimes.
As the previously mentioned examples indicate, we consider vouchers, that is, certificates that can be exchanged for particular goods or services (for example, a certificate for one free gym class at a local gym), to be “in-kind items or services” under § 425.304(a)(2). Accordingly, an ACO may offer vouchers as beneficiary incentives under § 425.304(a)(2) so long as the vouchers meet all the other requirements of § 425.304(a)(2).
In addition, for purposes of the Shared Savings Program, we consider gift cards that are in the nature of a voucher, that is, gift cards that can be used only for particular goods or services, to be “in-kind items or services” that can be offered under § 425.304(a)(2), provided that the requirements of § 425.304(a)(2) are satisfied. A gift card that is not in the nature of a voucher, however, such as a gift card to a general store, would not meet the requirements for “in-kind item or service” under § 425.304(a)(2). Furthermore, we consider a gift card that can be used like cash, for example, a VISA or Amazon “gift card,” to be a “cash equivalent” that can be offered only as an incentive payment under an approved beneficiary incentive program,
Although we believe that ACOs, ACO participants, ACO providers/suppliers and other individuals or entities performing functions or services related to ACO activities are already permitted to furnish a broad range of beneficiary incentives under § 425.304(a)(2) (including the previously mentioned examples), stakeholders have advocated that ACOs be permitted to offer a more flexible, expanded range of beneficiary incentives that are not currently allowable under § 425.304. In particular, stakeholders seek to offer monetary incentives that beneficiaries could use to purchase retail items, which would not qualify as in-kind items or services under § 425.304.
As previously noted, in order to encourage Medicare FFS beneficiaries to obtain medically necessary primary care services, the recent amendments to section 1899 of the Act permit certain ACOs to establish beneficiary incentive programs to provide incentive payments to assigned beneficiaries who receive qualifying primary care services. We believe that such amendments will empower individuals and caregivers in care delivery. Specifically, the Bipartisan Budget Act adds section 1899(m)(1)(A) of the Act, which allows ACOs to apply to operate an ACO beneficiary incentive program. The Bipartisan Budget Act also adds a new subsection (m)(2) to section 1899 of the Act, which provides clarification regarding the general features, implementation, duration, and scope of approved ACO beneficiary incentive programs. In addition, the Bipartisan Budget Act adds section 1899(b)(2)(I) of the Act, which requires ACOs that seek to operate a beneficiary incentive program to apply to operate the program at such time, in such manner, and with such information as the Secretary may require.
Section 1899(m)(1)(A) of the Act, as added by the Bipartisan Budget Act, allows ACOs participating in certain payment models described in section 1899(m)(2)(B) of the Act to apply to establish an ACO beneficiary incentive program to provide incentive payments to Medicare FFS beneficiaries who are furnished qualifying services. Section 1899(m)(1)(A) of the Act also specifies that the Secretary shall permit an ACO to establish such a program at the Secretary's discretion and subject to such requirements, including program integrity requirements, as the Secretary determines necessary.
Section 1899(m)(1)(B) of the Act requires the Secretary to implement the ACO beneficiary incentive program provisions under section 1899(m) of the Act on a date determined appropriate by the Secretary, but no earlier than January 1, 2019 and no later than January 1, 2020. In addition, section 1899(m)(2)(A) of the Act, as added by the Bipartisan Budget Act, specifies that an ACO beneficiary incentive program shall be conducted for a period of time (of not less than 1 year) as the Secretary may approve, subject to the termination of the ACO beneficiary incentive program by the Secretary.
Section 1899(m)(2)(H) of the Act provides that the Secretary may terminate an ACO beneficiary incentive program at any time for reasons determined appropriate by the Secretary. In addition, the Bipartisan Budget Act amended section 1899(g)(6) of the Act to provide that there shall be no administrative or judicial review under section 1869 or 1878 of the Act, or otherwise, of the termination of an ACO beneficiary incentive program.
Section 1899(m)(2)(B) of the Act requires that an ACO beneficiary incentive program provide incentive payments to all of the following Medicare FFS beneficiaries who are furnished qualifying services by the ACO: (1) Medicare FFS beneficiaries who are preliminarily prospectively or prospectively assigned (or otherwise assigned, as determined by the Secretary) to an ACO in a Track 2 or Track 3 payment model described in § 425.600(a) (or in any successor regulation) and (2) Medicare FFS beneficiaries who are assigned to an ACO, as determined by the Secretary, in any future payment models involving two-sided risk.
Section 1899(m)(2)(C) of the Act, as added by the Bipartisan Budget Act, defines a qualifying service, for which incentive payments may be made to beneficiaries, as a primary care service, as defined in § 425.20 (or in any successor regulation), with respect to which coinsurance applies under Medicare part B. Section 1899(m)(2)(C) of the Act also provides that a qualifying service is a service furnished through an ACO by: (1) An ACO professional described in section 1899(h)(1)(A) of the Act who has a primary care specialty designation included in the definition of primary care physician under § 425.20 (or any successor regulation) (2) an ACO professional described in section 1899(h)(1)(B) of the Act; or (3) a FQHC or RHC (as such terms are defined in section 1861(aa) of the Act).
As added by the Bipartisan Budget Act, section 1899(m)(2)(D) of the Act provides that an incentive payment made by an ACO under an ACO beneficiary incentive program shall be in an amount up to $20, with the maximum amount updated annually by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year. Section 1899(m)(2)(D) of the Act also requires that an incentive payment be in the same amount for each Medicare FFS beneficiary regardless of the enrollment of the beneficiary in a Medicare supplemental policy (described in section 1882(g)(1) of the Act), in a State Medicaid plan under Title XIX or a waiver of such a plan, or in any other health insurance policy or health benefit plan. Finally, section 1899(m)(2)(D) of the Act requires that an incentive payment be made for each qualifying service furnished to a beneficiary during a period specified by the Secretary and that an incentive payment be made no later than 30 days after a qualifying service is furnished to the beneficiary.
Section 1899(m)(2)(E) of the Act, as added by the Bipartisan Budget Act, provides that no separate payment shall be made to an ACO for the costs, including the costs of incentive payments, of carrying out an ACO beneficiary incentive program. The section further provides that this requirement shall not be construed as prohibiting an ACO from using shared savings received under the Shared Savings Program to carry out an ACO beneficiary incentive program. In addition, section 1899(m)(2)(F) of the Act provides that incentive payments made by an ACO under an ACO beneficiary incentive program shall be disregarded for purposes of calculating benchmarks, estimated average per capita Medicare expenditures, and shared savings for purposes of the Shared Savings Program.
As added by the Bipartisan Budget Act, section 1899(m)(2)(G) of the Act provides that an ACO conducting an ACO beneficiary incentive program shall, at such times and in such format as the Secretary may require, report to the Secretary such information and retain such documentation as the Secretary may require, including the amount and frequency of incentive payments made and the number of Medicare FFS beneficiaries receiving such payments.
Finally, section 1899(m)(3) of the Act excludes payments under an ACO beneficiary incentive program from being considered income or resources or otherwise taken into account for purposes of: (1) Determining eligibility for benefits or assistance under any Federal program or State or local program financed with Federal funds; or (2) any Federal or State laws relating to taxation.
In order to implement the changes set forth in section 1899(b)(2) and (m) of the Act, we are proposing to add regulation text at § 425.304(c) that would allow ACOs participating under certain two-sided models to establish beneficiary incentive programs to provide incentive payments to assigned beneficiaries who receive qualifying services. In developing our proposed policy, we have considered the statutory provisions set forth in section 1899(b)(2) and (m) of the Act, as amended, as well as the following: The application process for establishing a beneficiary incentive program; who can furnish an incentive payment; the amount, timing, and frequency of an incentive payment; how an incentive payment may be financed, and necessary program integrity requirements. We address each of these considerations in this proposed rule.
As previously explained, section 1899(m)(1)(A) of the Act authorizes “an ACO participating under this section under a payment model described in clause (i) or (ii) of paragraph (2)(B)” to establish an ACO beneficiary incentive program. In turn, section 1899(m)(2)(B)(i) of the Act describes ACOs participating in “Track 2 and Track 3 payment models as described in section 425.600(a) . . . (or in any successor regulation).” Section 1899(m)(2)(B)(ii) of the Act describes ACOs participating in “any future payment models involving two-sided risk.” As discussed in section II.A.2 of this proposed rule, we are proposing to (1) discontinue Track 2 as a participation option and limit its availability to agreement periods beginning before July 1, 2019; (2) rename Track 3 the “ENHANCED track”; and (3) require ACOs with agreement periods beginning July 1, 2019 and in subsequent years to enter either the ENHANCED track (which entails two-sided risk) or the new BASIC track (in which Levels A and B have one-sided risk and Levels C, D, and E have two-sided risk). As noted in proposed § 425.600(a)(3), for purposes of the Shared Savings Program, all references to the ENHANCED track would be deemed to include Track 3; the terms are synonymous. Accordingly, Track 2 and ENHANCED track ACOs are described under section 1899(m)(2)(B)(i) of the Act, and ACOs in Levels C, D, or E of the BASIC track are described under section 1899(m)(2)(B)(ii) of the Act. As a result, Track 2 ACOs, ENHANCED track ACOs, and ACOs in Levels, C, D, or E of the BASIC track are authorized to establish beneficiary incentive programs under section 1899(m)(1)(A) of the Act.
Section 1899(m)(1)(B) of the Act states that the “Secretary shall implement this subsection on a date determined appropriate by the Secretary. Such date shall be no earlier than January 1, 2019, and no later than January 1, 2020.” We propose to allow ACOs to establish a beneficiary incentive program beginning no earlier than July 1, 2019. As discussed later in this section, ACOs that are approved to operate a beneficiary incentive program shall conduct the program for at least 1 year as required by section 1899(m)(2)(A) of the Act unless CMS terminates the ACO's beneficiary incentive program. This means, for example, that an ACO currently participating in the Shared Savings Program under Track 2 or Track 3 whose agreement period expires on December 31, 2019 would be ineligible to operate a beneficiary incentive program starting on July 1, 2019 because the ACO would have only 6 months of its agreement remaining as of July 1, 2019. The ACO could, however, start a beneficiary incentive program on January 1, 2020 (assuming it renews its agreement).
We considered the operational impact of having both a midyear beneficiary incentive program cycle (for ACOs that seek to establish a beneficiary incentive program beginning on July 1, 2019) and a calendar year beneficiary incentive program cycle (for ACOs that seek to establish a beneficiary incentive program beginning on January 1, 2020, or a later January 1 start date). We believe it could be confusing for ACOs, and difficult for CMS to monitor approved beneficiary incentive programs, if some ACOs begin their beneficiary incentive programs in July 2019 and other ACOs begin their beneficiary incentive programs in January 2020. For example, under this approach, annual certifications regarding intent to continue a beneficiary incentive program (as further discussed herein) would be provided by ACOs at different times of the year, depending on when each ACO established its beneficiary incentive program. To address this, we believe it is necessary to require ACOs that establish a beneficiary incentive program on July 1, 2019 to commit to an initial beneficiary incentive program term of 18 months (with certifications required near the conclusion of the 18-month period and for each consecutive 12-month period thereafter). However, any ACO that establishes a beneficiary incentive program beginning on January 1 of a performance year would be required to commit to an initial beneficiary incentive program term of 12 months. This would allow the term cycles of all ACO beneficiary incentive programs to later “sync” so that they all operate on a calendar year beginning on January 1, 2021. As an alternative, we considered permitting all ACOs to establish a beneficiary incentive program beginning January 1, 2020. However, we believe that some ACOs may prefer to establish a beneficiary incentive program on July 1, 2019, rather than delay until January 1, 2020.
The statute does not prescribe procedures that ACOs must adhere to in applying to establish a beneficiary incentive program. In addition, beyond the requirement that ACOs participate in Track 2, Track 3 (which, as we previously discussed, will be renamed the “ENHANCED track”) or a “future payment model involving two-sided risk” (sections 1899(m)(2)(B)(i) and (ii) of the Act), the new provisions do not describe what factors we should consider in evaluating whether an ACO should be permitted to establish a beneficiary incentive program. Instead, section 1899(m)(1)(A) of the Act states that the “Secretary shall permit such an ACO to establish such a program at the Secretary's discretion and subject to such requirements . . . as the Secretary determines necessary.” We propose that the application for the beneficiary incentive program be in a form and manner specified by CMS, which may be separate from the application to participate in the Shared Savings Program. We would provide additional information regarding the application on our website.
We propose to permit eligible ACOs to apply to establish a beneficiary incentive program during the July 1, 2019 application cycle or during a future annual application cycle for the Shared Savings Program. In addition, we propose to permit an eligible ACO that is mid-agreement to apply to establish a beneficiary incentive program during the application cycle prior to the performance year in which the ACO chooses to begin implementing its beneficiary incentive program. This would apply to ACOs that enter a two-sided model at the start of an agreement period but that do not apply to establish
An ACO would be required to operate its beneficiary incentive program effective at the beginning of the performance year following CMS's approval of the ACO's application to establish the beneficiary incentive program. The ACO would then be required to operate the approved beneficiary incentive program for the entirety of such 12-month performance year (for ACOs that establish a beneficiary incentive program on January 1, 2020, or a later January 1 start date) or for an initial 18-month period (for ACOs that establish a beneficiary incentive program on July 1, 2019).
An ACO with an approved beneficiary incentive program application would be permitted to operate its beneficiary incentive program for any consecutive performance year if it complies with certain certification requirements. Specifically, an ACO that seeks to continue to offer its beneficiary incentive program beyond the initial 12-month or 18-month term (as previously discussed) would be required to certify, in the form and manner and by a deadline specified by CMS, its intent to continue to operate its beneficiary incentive program for the entirety of the next performance year, and that its beneficiary incentive program continues to meet all applicable requirements. CMS may terminate a beneficiary incentive program, in accordance with § 425.304(c)(7), as proposed, if an ACO fails to provide such certification. We believe this certification requirement is necessary for CMS to monitor beneficiary incentive programs. CMS would provide further information regarding the annual certification process through subregulatory guidance.
In addition to the application and certification requirements previously described, we are considering whether an ACO that offers a beneficiary incentive program should be required to notify CMS of any modification to its beneficiary incentive program prior to implementing such modification. We solicit comments on this issue.
With respect to who may receive an incentive payment, a FFS beneficiary would be eligible to receive an incentive payment if the beneficiary is assigned to an ACO through either preliminary prospective assignment with retrospective reconciliation, as described in § 425.400(a)(2), or prospective assignment, as described in § 425.400(a)(3). We note that Track 2 is under preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2). In addition, as discussed in section II.A.4 of this proposed rule, we propose to permit BASIC track and ENHANCED track ACOs to enter an agreement period under preliminary prospective assignment, as described in § 425.400(a)(2), or under prospective assignment, as described in § 425.400(a)(3). Further, a beneficiary may choose to voluntarily align with an ACO, and, if eligible for assignment, the beneficiary would be prospectively assigned to the ACO (regardless of track) for the performance year under § 425.402(e)(1). Therefore, consistent with our policy regarding which ACOs may establish a beneficiary incentive program, any beneficiary assigned to an ACO that is participating under Track 2; Levels C, D, or E of the BASIC track; or the ENHANCED track may receive an incentive payment under that ACO's CMS-approved beneficiary incentive program.
Section 1899(m)(2)(C) of the Act sets forth the definition of a qualifying service for purposes of the beneficiary incentive program. We mirror the language in the proposed regulation text noting that “a qualifying service is a primary care service,” as defined in § 425.20, “with respect to which coinsurance applies under part B,” furnished through an ACO by “an ACO professional who has a primary care specialty designation included in the definition of primary care physician” under § 425.20; an ACO professional who is a physician assistant, nurse practitioner, or clinical nurse specialist; or a FQHC or RHC. This means that any service furnished by an ACO professional who is a physician but does not have a specialty designation included in the definition of primary care physician would not be considered a qualifying service for which an incentive payment may be furnished.
With respect to the amount of any incentive payment, section 1899(m)(2)(D)(i) of the Act provides that an incentive payment made by an ACO in accordance with a beneficiary incentive program shall be “in an amount up to $20.” Accordingly, we propose to incorporate a $20 incentive payment limit into the regulation. We also propose to adopt the provision at section 1899(m)(2)(D)(i) of the Act, which provides that the $20 maximum amount must be “updated annually by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year.” To avoid minor changes in the updated maximum amount, however, we believe it is necessary to round the updated maximum incentive payment amount to the nearest whole dollar. We have reflected this policy in our proposed regulations text. We would post the updated maximum payment amount on the Shared Savings Program website and/or in a guidance regarding beneficiary incentive programs.
We also propose to adopt the requirement that the incentive payment be “in the same amount for each Medicare fee-for-service beneficiary” without regard to enrollment of such a beneficiary in a Medicare supplemental policy, in a State Medicaid plan, or a waiver of such a plan, or in any other health insurance policy or health plan. (Section 1899(m)(2)(D)(ii) of the Act.) Accordingly, all incentive payments distributed by an ACO under its beneficiary incentive program must be of equal monetary value. In other words, an ACO would not be permitted to offer higher-valued incentive payments for particular qualifying services or to particular beneficiaries. However, an ACO may provide different types of incentive payments (for example, a gift card to some beneficiaries and a check to others) depending on a beneficiary's preference, so long as all incentive payments offered by the ACO under its beneficiary incentive program are of equal monetary value.
Furthermore, as required by section 1899(m)(2)(D)(iii) of the Act, we propose that an ACO furnish an incentive payment to an eligible beneficiary each time the beneficiary receives a qualifying service. In addition, in accordance with section 1899(m)(2)(D)(iv) of the Act, we propose to require that each incentive payment be “made no later than 30 days after a qualifying service is furnished to such a beneficiary.”
We have considered the individuals and entities that should be permitted to offer incentive payments to beneficiaries under a beneficiary incentive program. We note that section 1899(m)(2)(D) of the Act, which addresses incentive
As previously explained, section 1899(m)(1)(A) of the Act allows the Secretary to establish “program integrity requirements, as the Secretary deems necessary.” Given the significant fraud and abuse concerns associated with offering cash incentives, we believe it is necessary to prohibit ACOs from distributing incentive payments to beneficiaries in the form of cash. Cash incentive payments would be inherently difficult to track for reporting and auditing purposes since they would not necessarily be tied to documents providing written evidence that a cash incentive payment was furnished to an eligible beneficiary for a qualifying service. The inability to trace a cash incentive would make it difficult for CMS to ensure that an ACO has uniformly furnished incentive payments to all eligible beneficiaries and has not made excessive payments or otherwise used incentive payments to improperly attract “healthier” beneficiaries while disadvantaging beneficiaries who are less healthy or have a disability. Therefore, we propose to require that incentive payments be in the form of a cash equivalent, which includes instruments convertible to cash or widely accepted on the same basis as cash, such as checks and debit cards.
In addition, we have considered record retention requirements related to beneficiary incentive programs. Section 1899(m)(2)(G) of the Act provides that an ACO “conducting an ACO Beneficiary Incentive Program . . . shall, at such times and in such format as the Secretary may require . . . retain such documentation as the Secretary may require, including the amount and frequency of incentive payments made and the number of Medicare fee-for-service beneficiaries receiving such payments.” We believe it is important for an ACO to be accountable for its beneficiary incentive program and to mitigate any gaming, fraud, or waste that may occur as a result of its beneficiary incentive program. Accordingly, we propose that any ACO that implements a beneficiary incentive program maintain records that include the following information: Identification of each beneficiary that received an incentive payment, including name and HICN or Medicare beneficiary identifier; the type (such as check or debit card) and amount (that is, the value) of each incentive payment made to each beneficiary; the date each beneficiary received a qualifying service and the HCPCS code for the corresponding service; the identification of the ACO provider/supplier that furnished the qualifying service; and the date the ACO provided each incentive payment to each beneficiary. An ACO that establishes a beneficiary incentive program would be required to maintain and make available such records in accordance with § 425.314(b). In addition to these record retention proposals, we expect any ACO that establishes a beneficiary incentive program to update its compliance plan (as required under § 425.300(b)(2)), to address any finalized regulations that address beneficiary incentive programs.
Furthermore, we propose that an ACO be required to fully fund the costs associated with operating a beneficiary incentive program, including the cost of any incentive payments. We further propose to prohibit ACOs from accepting or using funds furnished by an outside entity, including, but not limited to, an insurance company, pharmaceutical company, or any other entity outside of the ACO, to finance its beneficiary incentive program. We believe these requirements are necessary to reduce the likelihood of undue influence resulting in inappropriate steering of beneficiaries to specific products or providers/suppliers. We seek comments on this issue.
We also propose to incorporate language in section 1899(m)(2)(E) of the Act, which provides that “[t]he Secretary shall not make any separate payment to an ACO for the costs, including incentive payments, of carrying out an ACO Beneficiary Incentive Program . . . Nothing in this subparagraph shall be construed as prohibiting an ACO from using shared savings received under this section to carry out an ACO Beneficiary Incentive Program.” Specifically, we propose under § 425.304(a)(2) that the policy regarding use of shared savings apply with regard to both in-kind items and services furnished under § 425.304(b) and incentive payments furnished under § 425.304(c).
Further, we propose to prohibit ACOs from shifting the cost of establishing or operating a beneficiary incentive program to a Federal health care program, as defined at section 1128B(f) of the Act. Essentially, ACOs would not be permitted to bill the cost of an incentive payment to any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government. We believe this requirement is necessary because billing another Federal health care program for the cost of a beneficiary incentive program would potentially violate section 1899(m)(2)(E) of the Act which prohibits the Secretary from making any separate payment to an ACO for the costs of carrying out a beneficiary incentive program, including the costs of incentive payments. We seek comments on all of our proposed program integrity requirements.
In addition, we are proposing to implement the language in section 1899(m)(2)(F) of the Act that “incentive payments made by an ACO . . . shall be disregarded for purposes of calculating benchmarks, estimated average per capita Medicare expenditures, and shared savings under this section.” We are also proposing to disregard incentive payments made by an ACO for purposes of calculating shared losses under this section given that that shared savings would be disregarded.
Furthermore, we propose to implement the language set forth in section 1899(m)(3) of the Act, which provides that “any payment made under an ACO Beneficiary Incentive Program . . . shall not be considered income or resources or otherwise taken into account for the purposes of determining eligibility for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or any State or local program financed in whole or in part with Federal funds; or any Federal or state laws relating to taxation.” We have included this proposal at § 425.304(c)(6).
With regard to termination of a beneficiary incentive program, section 1899(m)(2)(H) of the Act provides that the “Secretary may terminate an ACO Beneficiary Incentive Program . . . at any time for reasons determined appropriate by the Secretary.” We believe it would be appropriate for CMS to terminate an ACO's use of the beneficiary incentive program for failure to comply with the requirements of our finalized proposals at § 425.304, in whole or in part, and for the reasons set forth in § 425.218(b), and we are therefore proposing this policy at § 425.304(c)(7). We solicit comment on whether it would be appropriate for the Secretary to terminate a beneficiary
With regard to evaluation of beneficiary incentive programs, we note that section 50341(c) of the Bipartisan Budget Act requires that, no later than October 1, 2023, the Secretary evaluate and report to Congress an analysis of the impact of implementing beneficiary incentive programs on health expenditures and outcomes. We welcome comments on whether there might be information that we should require ACOs to maintain (in addition to the information that would be maintained as part of record retention requirements set forth at § 425.304(c)(4)(i)) to support such an evaluation of beneficiary incentive programs. We note, however, that we do not want to discourage participation by imposing overly burdensome data management requirements on ACOs. We therefore seek comment on reporting requirements for ACOs that are approved to establish a beneficiary incentive program.
In addition, we note that under the existing regulations for monitoring ACO compliance with program requirements, CMS may employ a range of methods to monitor and assess ACOs, ACO participants and ACO providers/suppliers to ensure that ACOs continue to satisfy Shared Savings Program eligibility and program requirements (§ 425.316). The scope of this provision would include monitoring ACO, ACO participant, and ACO provider/supplier compliance with the requirements for establishing and operating a beneficiary incentive program.
We are considering whether beneficiaries should be notified of the availability of a beneficiary incentive program. Because beneficiary incentives may be subject to abuse, we believe it is necessary, and we have proposed, to prohibit the advertisement of a beneficiary incentive program. We are considering, however, whether ACOs should be required to make beneficiaries aware of the incentive via approved outreach material from CMS. For example, under the program's existing regulations (§ 425.312(a)), including as revised by this proposed rule in section II.C.3.a., all ACO participants are required to notify beneficiaries that their ACO providers/suppliers are participating in the Shared Savings Program. We solicit comment on whether the notifications required under § 425.312(a) should include information regarding the availability of an ACO's beneficiary incentive program, and, if so, whether CMS should supply template language on the topic. We also seek comment on how and when an ACO might otherwise notify its beneficiaries that its beneficiary incentive program is available, without inappropriately steering beneficiaries to voluntarily align with the ACO or to seek care from specific ACO participants, and, whether it would be appropriate to impose restrictions regarding advertising a beneficiary incentive program. We note that we would expect any beneficiary notifications regarding incentive payments to be maintained and made available for inspection in accordance with § 425.314.
To ensure transparency and to meet the requirements of section 1899(m)(2)(G) of the Act requiring that an ACO “conducting an ACO Beneficiary Incentive Program . . . shall, at such times and in such format as the Secretary may require, report to the Secretary such information . . . as the Secretary may require, including the amount and frequency of incentive payments made and the number of Medicare fee-for-service beneficiaries receiving such payments,” we further propose to revise the program's public reporting requirements in § 425.308 to require any ACO that has been approved to implement a beneficiary incentive program to publicly report certain information about incentive payments on its public reporting web page. Specifically, we propose to require ACOs to publicly report, for each performance year, the total number of beneficiaries who receive an incentive payment, the total number of incentive payments furnished, HCPCS codes associated with any qualifying payment for which an incentive payment was furnished, the total value of all incentive payments furnished, and the total type of each incentive payment (for example, check or debit card) furnished. We note that this proposed policy would require reporting for the 6-month performance year that begins on July 1, 2019. We seek comment on whether information about a beneficiary incentive program should be publicly reported by the ACO or simply reported to CMS annually or upon request.
In summary, we are proposing to revise the regulation at § 425.304 to enable an ACO participating in Track 2, levels C, D, or E of the BASIC track, or the ENHANCED track, to establish a beneficiary incentive program to provide incentive payments to beneficiaries for qualifying primary care services in compliance with the requirements outlined in the revised regulations.
Our proposed policies concerning an ACO's ability to establish a beneficiary incentive program are summarized in Table 10.
We are also taking this opportunity to add regulation text at renumbered § 425.304(b)(3) to clarify that the in-kind items or services provided to a Medicare FFS beneficiary under § 425.304 must not include Medicare-covered items or services, meaning those items or services that would be covered under Title XVIII of the Act on the date the in-kind item or service is furnished to the beneficiary. It was always our intention that the in-kind items or services furnished under existing § 425.304(a) be non-Medicare-covered items and services so that CMS can accurately monitor the cost of medically necessary care in the Shared Savings Program and to minimize the potential for fraud and abuse. We also clarify that the provision of in-kind items and services is available to all Medicare FFS beneficiaries and is not limited solely to beneficiaries assigned to an ACO.
Finally, we propose a technical change to the title and structure of § 425.304. Specifically, we are proposing to replace the title of § 425.304 with “Beneficiary incentives” and to add a new section § 425.305, with a title “Other program safeguards”, by redesignating paragraphs § 425.304(b) and (c) as § 425.305(a) and (b), and to make conforming changes to regulations that refer to section § 425.304. Specifically, we propose to make the following conforming changes: Amending § 425.118 in paragraph (b)(1)(iii) by removing “§ 425.304(b)” and adding in its place “§ 425.305(a)”; amending § 425.224 in newly redesignated paragraph (b)(1)(v) by removing “§ 425.304(b)” and adding in its place “§ 425.305(a)”; amending § 425.310 in paragraph (c)(3) by removing “§ 425.304(a)” and adding in its place “§ 425.304”; and amending § 425.402 in paragraph (e)(3)(i) by removing “§ 425.304(a)(2)” and adding in its place “§ 425.304(b)(1).”
To ensure full transparency between providers participating in Shared Savings Program ACOs and the beneficiaries they serve, the November 2011 final rule established requirements for how a Shared Savings Program ACO must notify Medicare FFS beneficiaries receiving primary care services at the point of care that the physician, hospital, or other provider is participating in a Shared Savings Program ACO (76 FR 67945 through 67946). Specifically, the November 2011 final rule established a requirement that ACO participants provide standardized written notices to beneficiaries of both their ACO provider/supplier's participation in the Shared Savings Program and the potential for CMS to share beneficiary identifiable data with the ACO.
We initially established the beneficiary notification requirements for ACOs to protect beneficiaries by ensuring patient engagement and transparency, including requirements related to beneficiary notification, since the statute does not mandate that ACOs provide information to beneficiaries about the Shared Savings Program (76 FR 67945 through 67946). The beneficiary information notices included information on whether a beneficiary was receiving services from an ACO participant or ACO provider/supplier, and whether the beneficiary's expenditure and quality data would be used to determine the ACO's eligibility to receive a shared savings payment.
In the June 2015 final rule, we amended the beneficiary notification requirement and sought comment on simplifying the process of disseminating the beneficiary information notice. We received numerous comments from ACOs that the beneficiary notification requirement was too burdensome and created some confusion amongst beneficiaries about the Shared Savings Program (80 FR 32739). As a result, we revised the rule so that ACO providers/suppliers would be required to provide the notification by simply posting signs in their facilities and by making the notice available to beneficiaries upon request.
We also amended our rule to streamline the beneficiary notification process by which beneficiaries may decline claims data sharing and finalized the requirement that ACO participants use CMS-approved template language to notify beneficiaries regarding participation in an ACO and the opportunity to decline data sharing. In order to streamline operations, reduce burden and cost on ACOs and their providers, and avoid creating beneficiary confusion, we also streamlined the process for beneficiaries to decline data sharing by consolidating the data opt out process through 1-800-MEDICARE in the June 2015 final rule (80 FR 32737 through 32743). Beneficiaries must contact 1-800-MEDICARE to decline sharing their Medicare claims data or to reverse that decision.
As previously discussed, under the program's current requirements, an ACO participant (for example physician practices and hospitals) must notify beneficiaries in writing of its participation in an ACO by posting signs in its facilities and, in settings in which beneficiaries receive primary care services, by making a standardized written notice (the “Beneficiary Information Notice”) available to beneficiaries upon request (§ 425.312). We provide ACOs with templates, in English and Spanish, to share with their ACO participants for display or distribution. To summarize:
• The poster language template indicates the providers' participation in the Shared Savings Program; describes ACOs and what they mean for beneficiary care; highlights that a beneficiary's freedom to choose his or her doctors and hospitals is maintained; and indicates that beneficiaries have the option to decline to have their Medicare Part A, B, and D claims data shared with their ACO or other ACOs. The poster must be in a legible format for display and in a place where beneficiaries can view it.
• The Beneficiary Information Notice template covers the same topics and includes details on how beneficiaries can select their primary clinician via MyMedicare.gov and voluntarily align to the ACO.
In addition to these two templates, there are two other ways that beneficiaries can learn about ACOs and of their option to decline Medicare claims data sharing with ACOs:
• Medicare & You handbook. The language in the ACO section of the handbook (available at
• 1-800-MEDICARE. Customer service representatives are equipped with scripted language about the Shared Savings Program, including background about ACOs. The customer service representatives also can collect information from beneficiaries about declining or reinstating Medicare claims data sharing.
Further, beginning in July 2017, Medicare FFS beneficiaries can login to MyMedicare.gov and select the primary
We have made information about the Shared Savings Program publicly available to educate ACOs, providers, beneficiaries and the general public, and to further program transparency. This includes fact sheets, program guidance and specifications, program announcements and data available through the Shared Savings Program website (see
We are revisiting the program's existing requirements at § 425.312 to ensure beneficiaries have a sufficient opportunity to be informed about the program and how it may affect their care and their data. We have also proposed changes in response to section 50331 of the Bipartisan Budget Act of 2018, which amends section 1899(c) of the Act to require that the Secretary establish a process by which Medicare FFS beneficiaries are (1) “notified of their ability” to identify an ACO professional as their primary care provider (for purposes of assigning the beneficiary to an ACO, as described in § 425.402(e)) and (2) “informed of the process by which they may make and change such identification.”
In addition, in proposing revisions to § 425.312 we considered how to make the notification a comprehensive resource that compiles certain information about the program and what participation in the program means for beneficiary care. While there are many sources of information on the program that are available to beneficiaries, we are concerned that the existing information exists in separate resources, which may be time consuming for beneficiaries to compile, and, as a result, may be underutilized.
We also considered methods of notification that would better ensure that beneficiaries receive the comprehensive notification at the point of care. The current regulations emphasize use of posted signs in facilities and, in settings where beneficiaries receive primary care services, standardized written notices as a means to notify beneficiaries at the point of care that ACO providers/suppliers are participating in the program and of the beneficiary's opportunity to decline data sharing. Although standardized written notices must be made available upon request, we are concerned that few beneficiaries, or others who accompany beneficiaries to their medical appointments, may initiate request for this information. In turn, beneficiaries may not have the information they need to make informed decisions about their health care and their data.
Finally, we considered how to minimize burden on the ACO providers/suppliers that would provide the notification. We seek to balance the requirements of the notification to beneficiaries with the increased burden on health care providers that could draw their attention away from patient care.
With these considerations in mind, and to further facilitate beneficiary access to information on the Shared Savings Program, we are proposing to modify § 425.312(a) to require additional content for beneficiary notices. We propose that, beginning July 1, 2019, the ACO participant must notify beneficiaries at the point of care about voluntary alignment in addition to notifying beneficiaries that its ACO providers/suppliers are participating in the Shared Savings Program and that the beneficiary has the opportunity to decline claims data sharing. Specifically, the ACO participant must notify the beneficiary of his or her ability to, and the process by which, he or she may identify or change identification of a primary care provider for purposes of voluntary alignment.
We propose to modify § 425.312(b) to require that, beginning July 1, 2019, ACO participants must provide the information specified in § 425.312(a) to each Medicare FFS beneficiary at the first primary care visit of each performance year. Under this proposal, an ACO participant would be required to provide this notice during a beneficiary's first primary care visit in the 6-month performance year from July 1, 2019 through December 31, 2019, as well as the first primary care visit in the 12-month performance year that begins on January 1, 2020 (and in all subsequent performance years). We propose that this notice would be in addition to the existing requirement that an ACO participant must post signs in its facilities and make standardized written notices available upon request.
To mitigate the burden of this additional notification, we propose to require ACO participants to use a template notice that we would prepare and make available to ACOs. The template notice would contain all of the information required to be disclosed under § 425.312(a), including information on voluntary alignment. With respect to voluntary alignment, the template notice would provide details regarding how a beneficiary may select his or her primary care provider on
We believe this proposed approach would appropriately balance the factors we described and achieve our desired outcome of more consistently educating beneficiaries about the program while mitigating burden of additional notification on ACO participants. In addition, we believe this approach would provide detailed information on the program to beneficiaries more consistently at a point in time when they may be inclined to review the notice and have an opportunity to ask questions and address their concerns. Furthermore, we believe this approach would pose relatively little additional burden on ACO participants, since they are already required to provide written notices to beneficiaries upon request.
We seek comment as to alternative means of dissemination of the beneficiary notice, including the frequency with which and by whom the notice should be furnished. For example, we seek comment on whether a beneficiary should receive the written notice at the beneficiary's first primary care visit of the performance year, or
In addition, we solicit comment on whether the template notice should include other information outlining ACO activities that may be related to or affect a Medicare FFS beneficiary. Such activities may include: ACO quality reporting and improvement activities, ACO financial incentives to lower growth in expenditures, ACO care redesign processes (such as use of care coordinators), the ACO's use of payment rule waivers (such as the SNF 3-day rule waiver), and the availability of an ACO's beneficiary incentive program.
We also welcome feedback on the format, content, and frequency of this additional notice to beneficiaries about the Shared Savings Program, the benefits and drawbacks to requiring additional notification about the program at the point of care, and the degree of additional burden this notification activity may place on ACO participants. More specifically, we welcome feedback on the timing of providing the proposed annual notice to the beneficiary, particularly what would constitute the appropriate point of care for the beneficiary to receive the notice.
We are also taking this opportunity to add regulation text at renumbered § 425.312(a) to clarify our longstanding requirement that beneficiary notification obligations apply with regard to all Medicare FFS beneficiaries, not only to beneficiaries who have been assigned to an ACO (76 FR 67945 through 67946). We seek comment on whether an ACO that elects prospective assignment should be required to disseminate the beneficiary notice at the point of care only to beneficiaries who are prospectively assigned to the ACO, rather than to all Medicare FFS beneficiaries.
Finally, we are also proposing technical changes to the title and structure of § 425.312. For example, we are proposing to replace the title of § 425.312 with “Beneficiary notifications.”
In the November 2011 final rule establishing the Shared Savings Program (76 FR 67865), we discussed comments that we had received in response to our proposed assignment methodology suggesting alternative beneficiary assignment methodologies in order to promote beneficiary free choice. For example, some commenters suggested that a beneficiary should be assigned to an ACO only if the beneficiary “opted-in” or enrolled in the ACO. We did not adopt an opt-in or enrollment requirement for several reasons, including our belief that such a prospective opt-in approach that allows beneficiaries to voluntarily elect to be assigned to an ACO would completely sever the connection between assignment and actual utilization of primary care services. A patient could choose to be assigned to an ACO from which he or she had received very few or no primary care services at all. However, more recently, some stakeholders have suggested that we reconsider whether it might be feasible to incorporate a beneficiary “opt-in” methodology under the Shared Savings Program. These stakeholders believe that under the current beneficiary assignment methodology, it can be difficult for an ACO to effectively manage a beneficiary's care when there is little or no incentive or requirement for the beneficiary to cooperate with the patient management practices of the ACO, such as making recommended lifestyle changes or taking medications as prescribed. The stakeholders noted that in some cases, an assigned beneficiary may receive relatively few primary care services from ACO professionals in the ACO and the beneficiary may be unaware that he or she has been assigned to the ACO. These stakeholders suggested we consider an alternative assignment methodology under which a beneficiary would be assigned to an ACO if the beneficiary “opted-in” to the ACO in order to reduce the reliance on the existing assignment methodology under subpart E and as a way to make the assignment methodology more patient-centered, and strengthen the engagement of beneficiaries in their health care. These stakeholders believe that using such an approach to assignment could empower beneficiaries to become better engaged and empowered in their health care decisions.
Although arguably beneficiaries “opt-in” to assignment to an ACO under the existing claims-based assignment methodology in the sense that claims-based assignment is based on each beneficiary's exercise of free choice in seeking primary care services from ACO providers/suppliers, we believe that incorporating an opt-in based assignment methodology, and de-emphasizing the claims-based assignment methodology, could have merit as a way to assign beneficiaries to ACOs. Therefore, we are exploring options for developing an opt-in based assignment methodology to further encourage and empower beneficiaries to become better engaged and empowered in their health care decisions. This approach to beneficiary assignment might also allow ACOs to better target their efforts to manage and coordinate care for those beneficiaries for whose care they will ultimately be held accountable. As discussed in section II.E.2, we have recently implemented a voluntary alignment process (which we are proposing to refine based on requirements in the Bipartisan Budget Act), which is an electronic process that allows beneficiaries to designate a primary clinician as responsible for coordinating their overall care. If a beneficiary designates an ACO professional as responsible for their overall care and the requirements for assignment under § 425.402(e) are met, the beneficiary will be prospectively assigned to that ACO. For 2018, the first year in which beneficiaries could be assigned to an ACO based on their designation of a primary clinician in the ACO as responsible for coordinating their care, 4,314 beneficiaries voluntarily aligned to 339 ACOs, and 338 beneficiaries were assigned to an ACO based solely on their voluntary alignment. Ninety-two percent of the beneficiaries who voluntarily aligned were already assigned to the same ACO under the claims-based assignment algorithm.
Voluntary alignment is based upon the relationship between the beneficiary and a single practitioner in the ACO. In contrast, an opt-in based assignment methodology would be based on an affirmative recognition of the relationship between the beneficiary and the ACO, itself. Under an opt-in based assignment methodology, a beneficiary would be assigned to an ACO if the beneficiary opted into assignment to the ACO. Therefore, under an opt-in approach, ACOs might have a stronger economic incentive to compete against other ACOs and healthcare providers not participating in an ACO because to the extent the ACO is able to increase quality and reduce expenditures for duplicative and other unnecessary care, it could attract a greater number of beneficiaries to opt-in to assignment the ACO. We believe there are a number of policy and operational issues, including the issues previously identified in the November 2011 final rule that would need to be addressed in order to implement an opt-in based methodology to assign beneficiaries to ACOs. These issues
We believe under an opt-in based assignment methodology, it would be important for ACOs to manage notifying beneficiaries, collecting beneficiary opt-in data, and reporting the opt-in data to CMS. On an annual basis, ACOs would notify their beneficiary population about their participation in the Shared Savings Program and provide the beneficiaries a window during which time they could notify the ACO of their decision to opt-in and be assigned to the ACO, or to withdraw their opt-in to the ACO. Opting-in to a Shared Savings Program ACO could be similar to enrolling in a MA plan. MA election periods define when an individual may enroll or disenroll from a MA plan. An individual (or his/her legal representative) must complete an enrollment request (using an enrollment form approved by CMS, an online application mechanism, or through a telephone enrollment) to enroll in a MA plan and submit the request to the MA plan during a valid enrollment period. MA plans are required by 42 CFR 422.60 to submit a beneficiary's enrollment information to CMS within the timeframes specified by CMS, using a standard IT transaction system. Subsequently, CMS validates the beneficiary's eligibility, at which point the MA plan must meet the remainder of its enrollment-related processing requirements (for example, sending a notice to the beneficiary of the acceptance or rejection of the enrollment within the timeframes specified by CMS). Procedures have been established for disenrolling from a MA plan during MA election periods. (For additional details about the enrollment process under MA, see the CMS website at
Because opting-in or withdrawing an opt-in to assignment to a Shared Savings Program ACO could be similar to enrolling or disenrolling in a MA plan, we would need to establish the ACO opt-in process and timing in a way to avoid beneficiary confusion as to the differences between the Shared Savings Program and MA, and whether the beneficiary is opting-in to assignment to an ACO or enrolling in a MA plan. We would also need to determine how frequently beneficiaries would be able to opt-in or withdraw an opt-in to an ACO, and whether there should be limits on the ability to change an opt-in after the end of the opt-in window, in order to reduce possible beneficiary assignment “churn”. We note that beneficiaries opting-in to assignment to an ACO would still retain the freedom to choose to receive care from any Medicare-enrolled provider or supplier, including providers and suppliers outside the ACO. The ACO would be responsible for providing the list of beneficiaries who have opted-in to assignment to the ACO, along with each beneficiary's Medicare number, address, and certain other demographic information, to CMS in a form and manner specified by CMS. After we receive this information from the ACO, we would verify that each of the listed beneficiaries meets the beneficiary eligibility criteria set forth in § 425.401(a) before finalizing the ACO's assigned beneficiary population for the applicable performance year. To perform these important opt-in related functions, ACOs might need to acquire new information technology systems, along with additional support staff, to track, monitor and transmit opt-in data to CMS, including effective dates for beneficiaries who opt-in or withdraw an opt-in to the ACO. Furthermore, changes in an ACO's composition of ACO participants and ACO providers/suppliers could affect a beneficiary's interest in maintaining his or her alignment with the ACO through an opt-in approach. As a result, we believe it would also be critical for an ACO participating under opt-in based assignment to inform beneficiaries of their option to withdraw their opt-in to the ACO, generally, and specifically, in the event that an ACO participant or ACO provider/supplier, from which the beneficiary has received primary care services is no longer participating in the ACO.
MA has marketing guidelines and requirements that apply to enrollment activities to prevent selective marketing or discrimination based on health status. (See 42 CFR 422.2260 through 422.2276 and section 30.4 of the Medicare Marketing Guidelines located at
We are also considering how we would implement an opt-in based assignment methodology that addresses stakeholder requests, while conforming to existing program requirements. First, the requirement at section 1899(b)(2)(D) of the Act, that an ACO have at least 5,000 assigned beneficiaries, would continue to apply. Thus, under an opt-in based assignment methodology, an ACO still would be required to have at least 5,000 FFS beneficiaries, who meet our beneficiary eligibility criteria, assigned to the ACO at the time of application and for the entirety of the ACO's agreement period. We are concerned that using an opt-in based assignment methodology as the sole basis for assigning beneficiaries to an ACO could make it difficult for many ACOs to meet the 5,000 assigned beneficiary requirement under section 1899(b)(2)(D) of the Act. In particular, we are considering how an opt-in based assignment methodology would be implemented for new ACOs that have applied to the Shared Savings Program, but have not yet been approved by CMS to participate in the program. We believe it could be difficult for a new ACO to achieve 5,000 beneficiary opt-ins prior to the start of its first performance year under the program, as required by the statute in order to be
Second, under an opt-in assignment approach, we could allow beneficiaries to opt-in before they have received a primary care service from a physician in the ACO, or any service from an ACO provider/supplier. This is similar to the situation that can sometimes occur under MA, where a beneficiary enrolls in a MA plan without having received services from any of the plan's providers. That means a beneficiary could be assigned to an ACO based on his or her opting-in to the ACO, and the ACO would be accountable for the total cost and quality of care provided to the opted-in beneficiary, including care from providers/suppliers that are not participating in the ACO. We note that section 1899(c) of the Act requires that beneficiaries be assigned to an ACO based on their use of primary care services furnished by physicians in the ACO, or beginning January 1, 2019, services provided in FQHCs/RHCs. In order to meet this requirement under an opt-in based assignment methodology, we are considering whether we would need to continue to require that a beneficiary receive at least one primary care service from an ACO professional in the ACO who is a primary care physician or a physician with a specialty used in assignment (similar to our current requirement under § 425.402(b)(1)), in order for the beneficiary to be eligible to opt-in to assignment to the ACO.
Third, we are considering whether any changes would need to be made to our methodology for establishing an ACO's historical benchmark if we were to implement an opt-in based assignment methodology. Under the current assignment methodology used in the Shared Savings Program, we assign beneficiaries to ACOs for a performance year based upon either voluntary alignment or the claims-based assignment methodology. Because the vast majority of beneficiaries are assigned using the claims-based assignment methodology, we are able to use the same claims-based assignment methodology to assign beneficiaries for purposes of either a performance year or a benchmark year. The expenditures of the beneficiaries assigned to the ACO for a benchmark year are then used in the determination of the benchmark. However, the same approach would not be possible under an assignment methodology based solely on a beneficiary opt-in approach. If we were to adopt an entirely opt-in based assignment methodology, we would need to consider if any changes would need to be made to our methodology for establishing an ACO's historical benchmark to address selection bias and/or variation in expenditures because beneficiaries would not have opted-in to assignment to the ACO during the 3 prior years included in the historical benchmark under § 425.602, § 425.603, or proposed new § 425.601. Thus, under an entirely opt-in based assignment methodology there could be a large disconnect between the beneficiaries who have opted-in to assignment to the ACO for a performance year and the beneficiaries who are assigned to the ACO on the basis of claims for the historical benchmark years. An adjustment to the benchmark would be necessary to address these discrepancies. Alternatively, if we were to adopt a methodology under which we use expenditures from the 3 historical benchmark years only for beneficiaries who have opted-in to assignment to the ACO in the applicable performance year, it could create an imbalance because the expenditures for the years that comprise the historical benchmark would not include expenditures for decedents because beneficiaries necessarily would have survived through the baseline period in order to opt-in for the given performance year. A similar approach was initially applied in the Pioneer ACO Model, but it required complex adjustments to ACOs' benchmarks to account for significantly lower spending in historical base years for assigned beneficiaries, who necessarily survived for the one or more years between the given base year and the applicable performance year in which they were assigned to the ACO. It would likely be even more difficult and complex to consistently and accurately adjust the benchmark in the context of the proposed change to 5 year agreement periods (or a 6 year agreement period for agreement periods starting on July 1, 2019) because the historical benchmarks would eventually rely on an even smaller subset of base year claims available for beneficiaries who were enrolled in both Medicare Parts A and B during the base year and have survived long enough to cover the up to 7-year gap between the historical base year and the performance year for which they have opted-in to assignment to the ACO.
In light of these issues, we are considering implementing an opt-in based assignment methodology that would address stakeholder requests that we incorporate such an approach to make the assignment methodology more patient-centered, while also addressing statutory requirements and other Shared Savings Program requirements. Specifically, we believe it may be feasible to incorporate an opt-in based assignment methodology into the Shared Savings Program in the following manner. We would allow, but not require, ACOs to elect an opt-in based assignment methodology. Under this approach, at the time of application to enter or renew participation in the Shared Savings Program, an ACO could elect an opt-in based assignment methodology that would apply for the length of the agreement period. Under this approach, we would use the assignment methodology under subpart E, including the proposed revisions to provisions at §§ 425.400, 425.401, 425.402 and 425.404 as discussed in sections II.E.2 and II.E.3 of this proposed rule (herein referred to as the “existing assignment methodology” which would be comprised of a claims-based assignment methodology and voluntary alignment), to determine whether an ACO applicant meets the initial requirement under section 1899(b)(2)(D) of the Act to be eligible to participate in the program. We would use this approach because the ACO applicant would not be able to actively seek Medicare beneficiary opt-ins until the next opt-in window. That is, we would continue to determine an ACO's eligibility to participate in the program under the requirement that an ACO have at least 5,000 assigned beneficiaries using the program's existing assignment methodology. Therefore, an ACO that elects to participate under opt-in based assignment could be eligible to enter an agreement period under the program if we determine that it has at least 5,000 assigned beneficiaries in each of the 3 years prior to the start of the ACO's
If an ACO chooses not to elect the opt-in based assignment methodology during the application or renewal process, then beneficiaries would continue to be assigned to the ACO based on the existing assignment methodology (claims-based assignment with voluntary alignment). As an alternative to allowing ACOs to voluntarily elect participation in an opt-in based assignment methodology we are also considering discontinuing the existing assignment methodology and applying an opt-in based assignment methodology program-wide (described herein as a hybrid assignment approach which includes beneficiary opt-in, modified claims-based assignment, and voluntary alignment). As described in this section, ACOs could face operational challenges in implementing opt-in based assignment, and this approach to assignment could affect the size and composition of the ACO's assigned population, specifically to narrow the populations served by ACO. In light of these factors, we believe it would be important to gain experience with opt-in based assignment as a voluntary participation option before modifying the program to allow only this participation option.
For ACOs electing to participate under an opt-in based assignment methodology, we would assign beneficiaries to the ACO using a hybrid approach that would be based on beneficiary opt-ins, supplemented by voluntary alignment and a modified claims-based methodology. Notwithstanding the assignment methodology under § 425.402(b), under this hybrid approach, a beneficiary would be prospectively assigned to an ACO that has elected the opt-in based assignment methodology if the beneficiary opted in to assignment to the ACO or voluntarily aligned with the ACO by designating an ACO professional as responsible for their overall care. If a beneficiary was not prospectively assigned to such an ACO based on either beneficiary opt-in or voluntary alignment, then the beneficiary would be assigned to such ACO only if the beneficiary received the plurality of his or her primary care services from the ACO and received at least seven primary care services from one or more ACO professionals in the ACO during the applicable assignment window. If a beneficiary did not receive at least seven primary care services from one or more ACO professionals in the ACO during the applicable assignment window, then the beneficiary would not be assigned to the ACO on the basis of claims even if the beneficiary received the plurality of their primary care services from the ACO. We note that this threshold of seven primary care services is consistent with the threshold established by an integrated healthcare system in a prior demonstration that targeted intervention on chronic care, high risk patients in need of better coordinated care due to their frequent utilization of health care services. A threshold for assignment of seven primary care services would mean that up to 25 percent of an ACO's beneficiaries who would have been assigned to the ACO under the existing assignment methodology under § 425.402(b) could continue to be assigned to the ACO based on claims. We believe it could be appropriate to establish such a minimum threshold of seven primary care services for assigning beneficiaries to ACOs electing an opt-in based assignment methodology because it would enable such ACOs to focus their care coordination activities on beneficiaries who have either opted-in to assignment to the ACO or voluntarily aligned with the ACO, or who are receiving a high number of primary care services from ACO professionals and may have complex conditions requiring care coordination. We seek comment on whether to use a higher or lower minimum threshold for determining beneficiaries assigned to the ACO under a modified claims-based assignment approach.
Under this hybrid approach to assignment, we would allow the ACO a choice of claims-based beneficiary assignment methodology as proposed in section II.A.4.c. of this proposed rule. Therefore, ACOs that elect to participate under opt-in based assignment for their agreement period would also have the opportunity to elect either prospective or preliminary prospective claims-based assignment prior to the start of their agreement period, and to elect to change this choice of assignment methodology annually.
More generally, we believe that the hybrid assignment methodology, which would incorporate claims-based and opt-in based assignment methods, as well as voluntary alignment, could be preferable to an opt-in only approach. A hybrid assignment methodology would increase the number of beneficiaries for whom the ACO would be accountable for quality and cost of care delivery and thereby provide stronger statistical confidence for shared savings or shared losses calculations and provide a stronger incentive for ACOs and their ACO participants and ACO providers/suppliers to improve care delivery for every FFS beneficiary rather than focusing only on beneficiaries who happen to have opted-in to assignment to the ACO.
For ACOs that enter an agreement period in the Shared Savings Program under an opt-in based assignment methodology, we would allow for a special election period during the first calendar year quarter of the ACO's first performance year for beneficiaries to opt-in to assignment to the ACO. For each subsequent performance year of an ACO's agreement period, the opt-in period would span the first three calendar year quarters (January through September) of the prior performance year. Beneficiaries that opt-in, and are determined eligible for assignment to the ACO, would be prospectively assigned to the ACO for the following performance year. Under this approach, there would be no floor or minimum number of opt-in beneficiaries required. Rather, we would consider whether, in total, the ACO's assigned beneficiary population (comprised of beneficiaries who opt-in, beneficiaries assigned under the modified claims-based assignment approach, and beneficiaries that have voluntarily aligned) meets the minimum population size of 5,000 assigned beneficiaries each performance year to comply with the requirements for continued participation in the program. To illustrate this hybrid assignment approach in determining performance year assignment: if an ACO has 2,500 beneficiaries assigned under the modified claims-based assignment approach who have not otherwise opted-in to assignment to the ACO, and 50 voluntarily aligned beneficiaries who have not otherwise opted-in to assignment to the ACO, then the ACO would be required to have at least 2,450 beneficiaries who have opted-in to assignment to remain in compliance with the program eligibility requirement to have at least 5,000 assigned beneficiaries.
Consistent with current program policy, ACOs electing the opt-in based assignment methodology with a performance year assigned population below the 5,000-minimum may be subject to the pre-termination actions in § 425.216 and termination of their participation agreement under § 425.218. Under the proposals for modifying the MSR/MLR to address small population sizes described in section II.A.6.3. of this proposed rule, if an ACO that elects an opt-in based assignment methodology has an assigned population below 5,000 beneficiaries, the ACO's MSR/MLR would be set at a level consistent with
As an alternative approach, we also considered requiring ACOs that have elected an opt-in based assignment methodology to maintain at least a minimum number of opt-in beneficiaries assigned in each performance year of its agreement period. We believe that any minimum population requirement should be proportional to the size of ACO's population, to recognize differences in the population sizes of ACOs across the program. We also considered whether we should require incremental increases in the size of the ACO's opt-in assigned population over the course of the ACO's agreement period, recognizing that it may take time for ACOs to implement the opt-in approach and for beneficiaries to opt-in. Another factor we considered is the possibility that the size of an ACO's population, and therefore the proportion of opt-in beneficiaries, could be affected by ACO participant list changes, and changes in the ACO providers/suppliers billing through ACO participant TINs, which could affect claims-based assignment, and the size of the ACO's voluntarily aligned population. Changes in the size of the ACO's claims-based assigned and voluntarily aligned populations could cause the ACO to fall out of compliance with a required proportion of opt-in assigned beneficiaries, even if there has been no reduction in the number of opt-in assigned beneficiaries.
Under opt-in based assignment, we anticipate that we would not establish restrictions on the geographic locations of the ACOs from which a beneficiary could select. This would be consistent with the program's voluntary alignment process, under which a beneficiary could chose to designate a primary clinician as being responsible for his or her care even if this clinician is geographically distant from the beneficiary's place of residence. Also, currently under the program's existing claims-based assignment methodology, beneficiaries who receive care in different parts of the country during the assignment window can be assigned to an ACO that is geographically distant from the beneficiary's place of residence. This approach also recognizes that a beneficiary could be assigned to a geographically distant ACO as a result of his or her individual circumstances, such as a beneficiary's change in place of residence, beneficiary spends time in and receives care in different parts of the country during the year (sometimes referred to as being a “snowbird”), or the beneficiary receives care from a tertiary care facility that is geographically distant from his or her home. Further, this approach is in line with the expanded telehealth policies discussed in section II.B of this proposed rule under which certain geographic and other restrictions would be removed. We welcome comment on whether to establish geographic limitations on opt-in based assignment such that a beneficiary's choice of ACOs for opt-in would be limited to ACOs located near the beneficiary's place of residence, or where the beneficiary receives his or her care, or a combination of both.
When considering the options for incorporating an opt-in based assignment methodology, we considered if such a change in assignment methodology would also require changes to the proposed benchmarking methodology under § 425.601. A hybrid assignment approach could potentially require modifications to the benchmarking methodology to account for factors such as: Differences in beneficiary characteristics, including health status, between beneficiaries who may be amenable to opting-in to assignment to an ACO, beneficiaries who voluntarily align, and beneficiaries assigned under a modified claims-based assignment methodology who must have received at least seven primary care services from the ACO; differences between the existing claims-based assignment methodology and the alternative claims-based approach under which a minimum of seven primary care services would be required for assignment; and discrepancies caused by the use of the existing claims-based assignment methodology to perform assignment for historical benchmark years and the use of a hybrid assignment methodology for performance years. For simplicity, we prefer an approach that would use, to the greatest extent possible, the program's benchmarking methodology, as proposed to be modified as discussed in section II.D. of this proposed rule. This would allow us to more rapidly implement an opt-in based assignment approach, and may be easier to understand for ACOs and other program stakeholders experienced with the program's benchmarking methodology. We considered the following approach to establishing and adjusting the historical benchmark for ACOs that elect an opt-in based assignment methodology.
In establishing the historical benchmark for ACOs electing an opt-in based beneficiary assignment methodology, we would follow the benchmarking approach described in the provisions of the proposed new regulation at § 425.601. In particular, we would continue to determine benchmark year assignment based on the population of beneficiaries that would have been assigned to the ACO under the program's existing assignment methodology in each of the 3 most recent years prior to the start of the ACO's agreement period. However, we would take a different approach to annually risk adjusting the historical benchmark expenditures than what is proposed in section II.D and in the proposed provisions at §§ 425.605(a)(1) and 425.610(a)(2).
In risk adjusting the historical benchmark for each performance year, we would maintain the current approach of categorizing beneficiaries by Medicare enrollment type; however, we would further stratify the benchmark year 3 and performance year assigned populations into groups that we anticipate would have comparable expenditures and risk score trends. That is, we would further stratify the performance year population into two categories: (1) Beneficiaries who are assigned using the modified claims-based assignment methodology and must have received seven or more primary care services from ACO professionals and who have not also opted-in to assignment to the ACO; and (2) beneficiaries who opt-in and beneficiaries who voluntarily align. A beneficiary who has opted-in to assignment to the ACO would continue to be stratified in the opted in population throughout the agreement period regardless of whether the beneficiary would have been assigned using the modified claims-based assignment methodology because the beneficiary received seven or more primary care services from the ACO.
We would also further stratify the BY3 population, determined using the existing assignment methodology, into two categories: (1) Beneficiaries who received seven or more primary care services from the ACO; and (2) beneficiaries who received six or fewer primary care services from the ACO.
We anticipate that beneficiaries who opt-in would likely be a subset of beneficiaries who would have been assigned under the existing claims-based assignment methodology. As previously described, 92 percent of voluntarily aligned beneficiaries were already assigned to the same ACO using the existing claims-based assignment methodology. Further, based on our experience with the program about 75 percent of ACOs' assigned beneficiaries receive six or fewer primary care service
We would determine ratios of risk scores for the comparable populations of performance year and BY3 assigned beneficiaries. We would calculate these risk ratios by comparing the risk scores for the BY3 population with seven or more primary care services with the risk scores for the performance year population with seven or more primary care services who have not otherwise opted-in or voluntarily aligned. We would also calculate risk ratios for the remaining beneficiary population by comparing risk scores for the BY3 population with six or fewer primary care services with the risk scores for the performance year population of opt-in and voluntarily aligned beneficiaries. We would use these ratios to risk adjust the historical benchmark expenditures not only by Medicare enrollment type, but also by these stratifications. That is, for each Medicare enrollment type, we would apply risk ratios comparing the risk scores of the BY3 population with seven or more primary care services and the risk scores of the performance year population with seven or more primary care services to adjust the historical benchmark expenditures for the population with seven or more primary care services in the benchmark period. Similarly, we would apply risk ratios comparing the risk scores of the BY3 population with six or fewer primary care services and the risk scores of the performance year opt-in or voluntarily aligned population to adjust the historical benchmark expenditures for the population with six or fewer primary care services in the benchmark period. We presume this is a reasonable approach based on our expectation that opt-in beneficiaries will resemble the population of beneficiaries, assigned under the existing claims-based assignment methodology, who have 6 or fewer primary care services with the ACO annually. This is supported by the assumptions that ACOs may selectively market opt-in to lower cost beneficiaries, and beneficiaries that require less intensive and frequent care may be more inclined to opt-in. However, since we lack experience with an opt-in based assignment approach, we would monitor the effects of this policy to determine if it is effective in addressing the differences in characteristics between the population assigned for establishing the ACO's benchmark under the existing assignment methodology and the population assigned for the performance year under the hybrid assignment approach, and if further adjustments may be warranted such as additional adjustments to the historical benchmark to account for such differences.
In rebasing the ACO's benchmark, which occurs at the start of each new agreement period, we would include in the benchmark year assigned population beneficiaries who were opted in to the ACO in a prior performance year that equates to a benchmark year for the ACO's new agreement period. For example if an ACO elected opt-in for a 5-year agreement period beginning January 1, 2020 and concluding December 31, 2024, and a beneficiary opted in and was assigned for 2023 and remained opted in and assigned for 2024, we would include this beneficiary in the benchmark year assigned population for BY2 (2023) and BY3 (2024) when we rebase the ACO for its next agreement period beginning January 1, 2025. We considered that the health status of an opt-in beneficiary may continue to change over time as the beneficiary ages, which would be accounted for in our use of full CMS-HCC risk scores in risk adjusting the rebased historical benchmark. We considered approaches to further adapt the rebasing methodology to account for the characteristics of the ACO's opt-in beneficiaries, and the ACO's experience with participating in an opt-in based assignment methodology.
We considered an approach under which we could determine the assigned population for the ACO's rebased benchmark using the program's existing assignment methodology and incorporate opt-in assigned beneficiaries in the benchmark population. In risk adjusting the ACO's rebased benchmark each performance year, we could use a stratification approach similar to the approach previously described in this discussion. That is we would stratify the BY3 population into two categories: (1) Beneficiaries who received seven or more primary care services from the ACO; and (2) beneficiaries who received six or fewer primary care services from the ACO. We would categorize opt-in beneficiaries, assigned in BY3, into either one of these categories based on the number of primary care services they received from ACO during BY3. We could continue to stratify the performance year population assigned under the hybrid assignment methodology into two categories: (1) Beneficiaries who are assigned using the modified claims-based assignment methodology and must have received seven or more primary care services from ACO professionals and who have not also opted-in to assignment to the ACO; and (2) beneficiaries who opt-in and beneficiaries who voluntarily align. We would apply risk ratios comparing the risk scores of the BY3 population with seven or more primary care services and the risk scores of the performance year population with seven or more primary care services to adjust the historical benchmark expenditures for the population with seven or more primary care services in the benchmark period. Similarly, we would apply risk ratios comparing the risk scores of the BY3 population with six or fewer primary care services and the risk scores of the performance year opt-in or voluntarily aligned population to adjust the historical benchmark expenditures for the population with six or fewer primary care services in the benchmark period.
An alternative approach to rebasing the benchmark for an ACO that elected opt-in assignment in their most recent prior agreement period and continues their participation in an opt-in based assignment methodology in their new agreement period, would be to use the hybrid assignment approach to determine benchmark year assignment. To risk adjust the benchmark each performance year we could then stratify the BY3 and the performance year assigned populations into two categories: (1) Beneficiaries assigned through the modified claims-based assignment methodology who received seven or more primary care services from the ACO; or (2) beneficiaries who opt-in and beneficiaries who voluntarily align. This approach would move ACOs to participation under a purely hybrid assignment approach since we would no longer use the existing assignment methodology in establishing the benchmark. However, this approach could result in smaller benchmark year assigned populations compared to populations determined based on the more inclusive, existing assignment methodology. In turn, this approach could result in ACOs that were successful at opting-in beneficiaries being ineligible to continue their participation in the program under an opt-in assignment methodology because they do not meet the program's eligibility requirement to have at least 5,000 beneficiaries assigned in each benchmark year.
In section II.D. of this proposed rule, we propose that annual adjustments in prospective CMS-HCC risk scores would be subject to a symmetrical cap of positive or negative 3 percent that would apply for the agreement period, such that the adjustment between BY3 and any performance year in the agreement period would never be more than 3 percent in either direction. We are considering whether a modified approach to applying these caps would be necessary for ACOs that elect opt-in based assignment methodology. For example, for the first performance year an opted-in beneficiary is assigned to an ACO, we could allow for full upward or downward CMS-HCC risk adjustment, thereby excluding these beneficiaries from the symmetrical risk score caps. This would allow us to account for newly opted-in beneficiaries' full CMS-HCC scores in risk adjusting the benchmark. In each subsequent performance year, the opted-in beneficiaries remain aligned to the ACO, we could use an asymmetrical approach to capping increases and decreases in risk scores. We would cap increases in the opt-in beneficiaries' CMS-HCC risk scores to guard against changes in coding intensity, but we would apply no cap to decreases in their CMS-HCC risk scores. That is, the risk scores for these opt-in beneficiaries would be subject to the positive 3 percent cap, but not the negative 3 percent cap. We believe this approach would safeguard against ACOs trying to enroll healthy beneficiaries, who would likely be less expensive than their benchmark population, in order to benefit from having a limit on downward risk adjustment. Beneficiaries who have not otherwise opted-in who are assigned to the ACO based on the modified claims-based assignment methodology and those that voluntarily align would be subject to the proposed symmetrical 3 percent cap. We note that we do not apply caps to risk scores when we rebase an ACO's historical benchmark, which allows the historical benchmark to reflect the current health status of the beneficiary populations assigned for the benchmark years.
As indicated in the alternatives considered section of the Regulatory Impact Analysis (see section IV.D of this proposed rule), there is limited information presently available to model the behavioral response to an opt-in based assignment methodology, for example in terms of ACOs' willingness to elect such an approach and beneficiaries' willingness to opt-in. Although for some policies we can draw upon our initial experience with implementing voluntary alignment. We believe the approach to adjusting benchmarks to address an opt-in based assignment methodology, as discussed in this proposed rule, could address our concerns about the comparability of benchmark and performance year populations. If such a policy were finalized we would monitor the impact of these adjustments on ACOs' benchmarks, and we would also monitor to determine ACOs' and beneficiaries' response to the opt-in based assignment participation option, characteristics of opt-in beneficiaries and the ACOs they are assigned to, and the cost and quality trends of opt-in beneficiaries to determine if further development to the program's financial methodology would be necessary to account for this approach.
If we were to establish an opt-in based assignment methodology, we anticipate that we would also need to establish program integrity requirements similar to the program integrity requirements with respect to voluntary alignment at § 425.402(e)(3). The ACO, ACO participants, ACO providers/suppliers, ACO professionals, and other individuals or entities performing functions and services related to ACO activities would be prohibited from providing or offering gifts or other remuneration to Medicare beneficiaries as inducements to influence their decision to opt-in to assignment to the ACO. The ACO, ACO participants, ACO providers/suppliers, ACO professionals, and other individuals or entities performing functions and services related to ACO activities would also be prohibited from directly or indirectly, committing any act or omission, or adopting any policy that coerces or otherwise influences a Medicare beneficiary's decision to opt-in to assignment to an ACO. Offering anything of value to a Medicare beneficiary as an inducement to influence the Medicare beneficiary's decision to opt-in (or not opt-in) to assignment to the ACO would not be considered to have a reasonable connection to the medical care of the beneficiary, as required under the proposed provision at § 425.304(b)(1).
Finally, we would emphasize that, as is the case for all FFS beneficiaries currently assigned to an ACO on the basis of claims or voluntary alignment, under an opt-in based assignment methodology, beneficiaries who opt-in to assignment to an ACO would retain their right to seek care from any Medicare-enrolled provider or supplier of their choosing, including providers and suppliers outside the ACO.
We are soliciting comment on whether we should offer ACOs an opportunity to voluntarily choose an alternative beneficiary assignment methodology under which an ACO could elect to have beneficiaries assigned to the ACO based on a beneficiary opt-in methodology supplemented by voluntary alignment and a modified claims-based assignment methodology. We welcome comments as to whether it would be appropriate to establish a minimum threshold number of primary care services, such as seven primary care services, for purposes of using claims to assign beneficiaries to ACOs electing an opt-in based assignment methodology to enable these ACOs to focus their care coordination efforts on those beneficiaries who have either opted-in to assignment to or voluntarily aligned with the ACO, or who are receiving a high number of primary care services from ACO professionals, and may have complex conditions requiring a significant amount of care coordination. We seek comment on whether this minimum threshold for use in determining modified claims-based assignment should be set at a higher or lower. We also welcome comments on an appropriate methodology for establishing and adjusting an ACO's historical benchmark under an opt-in based assignment methodology. Further, we seek comment on how to treat opt-in beneficiaries when rebasing the historical benchmark for renewing ACOs. Additionally, we welcome comments on any other considerations that might be relevant to adopting a methodology under which beneficiaries may opt-in to assignment to an ACO, including ways to minimize burden on beneficiaries, ACOs, ACO participants, and ACO providers/suppliers and avoid beneficiary confusion.
We have envisioned that if we were to incorporate such an opt-in based assignment methodology, the election by ACOs would be entirely voluntary. ACOs that did not elect this beneficiary assignment option would continue to have their beneficiaries assigned using the existing claims-based assignment methodology with voluntary alignment under § 425.402. However, we also seek comment on whether we should discontinue the existing assignment methodology under subpart E and instead assign beneficiaries to all ACOs using a hybrid assignment methodology, which would incorporate opt-in based assignment and the modified claims-based assignment methodology, as well as voluntary alignment. Under such an approach, the use of a modified
An ACO's historical benchmark is calculated based on expenditures for beneficiaries that would have been assigned to the ACO in each of the 3 calendar years prior to the start of the agreement period (§§ 425.602(a), 425.603(b) and (c)). For ACOs that have continued their participation for a second or subsequent agreement period, the benchmark years for their current agreement period are the 3 calendar years of their previous agreement period.
There are currently differences between the methodology used to establish the ACO's first agreement period historical benchmark (§ 425.602) and the methodology for establishing the ACO's rebased historical benchmark in its second or subsequent agreement period (§ 425.603). We refer readers to discussions of the benchmark calculations in earlier rulemaking for details on the development of the current policies (see November 2011 final rule, 76 FR 67909 through 67927; June 2015 final rule, 80 FR 32785 through 32796; June 2016 final rule, 81 FR 37953 through 37991). For example, in resetting (or rebasing) an ACO's historical benchmark, we replace the national trend factor (used in in the first agreement period methodology) with regional trend factors, and we use a phased approach to adjust the rebased benchmark to reflect a percentage of the difference between the ACO's historical expenditures and FFS expenditures in the ACO's regional service area. This rebasing methodology incorporating factors based on regional FFS expenditures was finalized in the June 2016 final rule and is used to establish the benchmark for ACOs beginning a second or subsequent agreement period in 2017 and later years. An interim approach was established in the June 2015 final rule under which we adjusted the rebased benchmarks for ACOs that entered a second agreement period beginning in 2016 to account for savings generated in their first agreement period (§ 425.603(b)(2)).
In developing the June 2016 final rule, we considered the weight that should be applied in calculating the regional adjustment to an ACO's historical expenditures. We finalized a phased approach to transition to a higher weight in calculating the regional adjustment, where we determine the weight used in the calculation depending on whether the ACO is found to have lower or higher spending compared to its regional service area (§ 425.603(c)(9)). For ACOs that have higher spending compared to their regional service area, the weight placed on the regional adjustment is reduced to 25 percent (compared to 35 percent) in the first agreement period in which the regional adjustment is applied, and 50 percent (compared to 70 percent) in the second agreement period in which the adjustment is applied. Ultimately a weight of 70 percent will be applied in calculating the regional adjustment for all ACOs beginning no later than the third agreement period in which the ACO's benchmark is rebased using this methodology, unless the Secretary determines that a lower weight should be applied.
The annual update to the ACO's historical benchmark also differs for ACOs in their first versus second or subsequent agreement periods. In an ACO's first agreement period, the benchmark is updated each performance year based solely on the absolute amount of projected growth in national FFS spending for assignable beneficiaries (§ 425.602(b)). Although section 1899(d)(1)(B)(ii) of the Act requires us to update the benchmark using the projected absolute amount of growth in national per capita expenditures for Medicare Parts A and B services, we used our authority under section 1899(i)(3) of the Act to adopt an alternate policy under which we calculate the national update based on assignable beneficiaries, a subset of the Medicare FFS population as defined under § 425.20. For ACOs in a second or subsequent agreement period (beginning in 2017 and later years), we update the rebased benchmark annually to account for changes in FFS spending for assignable beneficiaries in the ACO's regional service area (§ 425.603(d)). We also used our authority under section 1899(i)(3) of the Act to adopt this alternate update factor based on regional FFS expenditures.
For all ACOs, at the time of reconciliation for each performance year, we further adjust the benchmark to account for changes in the health status and demographic factors of the ACO's performance year assigned beneficiary population (§§ 425.602(a)(9), 425.603(c)(10)). We use separate methodologies to risk-adjust the benchmark for populations of newly assigned and continuously assigned beneficiaries. For newly assigned beneficiaries, we use CMS-HCC prospective risk scores to adjust for changes in severity and case mix. We use demographic factors to adjust for changes in the health status of beneficiaries continuously assigned to the ACO. However, if the CMS-HCC prospective risk scores for the ACO's continuously assigned population decline, CMS will adjust the benchmark to reflect changes in severity and case mix for this population using the lower CMS-HCC prospective risk score. CMS-HCC prospective risk scores are based on diagnoses from the prior calendar year, as well as demographic factors.
When establishing the historical benchmark, we use the CMS-HCC prospective risk adjustment model to calculate beneficiary risk scores to adjust for changes in the health status of the population assigned to the ACO. The effect of this policy is to apply full CMS-HCC risk adjustment to account for changes in case mix in the assigned beneficiary population between the first and third benchmark years and between the second and third benchmark years. For consistency, this approach is also used in adjusting the historical benchmark to account for changes to the ACO's certified ACO participant list for performance years within an agreement period and when resetting the ACO's historical benchmark for its second or subsequent agreement period. See §§ 425.602(a)(3) and (8), 425.603(c)(3) and (8); see also Medicare Shared Savings Program, Shared Savings and Losses and Assignment Methodology Specifications (May 2018, version 6) available at
To account for changes in beneficiary health status between the historical benchmark period and the performance year, we perform risk adjustment using a methodology that differentiates
As described in the Shared Savings and Losses and Assignment Methodology specifications referenced previously in this section, all CMS-HCC and demographic beneficiary risk scores used in financial calculations for the Shared Savings Program are renormalized to ensure that the mean risk score among assignable beneficiaries in the national FFS population is equal to one. Renormalization helps to ensure consistency in risk scores from year to year, given changes made to the underlying risk score models. All risk adjustment calculations for the Shared Savings Program, including risk score renormalization, are performed separately for each Medicare enrollment type (ESRD, disabled, aged/dual eligible for Medicare and Medicaid, and aged/non-dual eligible for Medicare and Medicaid).
In practice, to risk adjust expenditures from one year to another, we multiply the expenditures that are to be adjusted by the quotient of two renormalized risk scores, known as the risk ratio. For example, to risk adjust the expenditures for an ACO's assigned beneficiary population from the first benchmark year to the third, we multiply benchmark year 1 (BY1) expenditures, by a risk ratio equal to the mean renormalized risk score among the ACO's assigned beneficiaries in benchmark year 3 (BY3) divided by the mean renormalized risk score among the ACO's assigned beneficiaries in BY1. One percent growth in renormalized risk scores between 2 years would be expressed by a risk ratio of 1.010. This ratio reflects growth in risk for the ACO's assigned beneficiary population relative to that of the national assignable population.
ACOs and other program stakeholders have expressed various concerns about the methodology for risk adjusting an ACO's benchmark each performance year, as described in comments on previous rulemaking (see 76 FR 67916 through 67919, 80 FR 32777 through 32778, 81 FR 37962 through 37968). We refer readers to these earlier rules for more detailed discussions of the issues raised by stakeholders. A common concern raised is that the current risk adjustment methodology does not adequately adjust for changes in health status among continuously assigned beneficiaries between the benchmark and performance years. Commenters have argued that the lack of upward CMS-HCC risk adjustment in response to increased patient acuity makes it harder for ACOs to realize savings and serves as a barrier to more ACOs taking on performance-based risk.
Stakeholders have also raised concerns that the current methodology, under which risk adjustment is performed separately for newly and continuously assigned beneficiaries, creates uncertainty around benchmarks. One commenter in prior rulemaking described the policy as rendering the role of risk scores “opaque”, making it difficult for ACOs to anticipate how risk scores may affect their financial performance (81 FR 37968). We have attempted to increase transparency around the program's risk adjustment process by providing beneficiary-level risk score information in quarterly and annual reports, as well as by providing detailed explanations of the risk adjustment calculations to ACOs through webinars. However, despite these efforts, concerns about transparency remain, as evidenced by the many requests for technical assistance from ACOs related to risk adjustment.
We appreciate the concerns regarding our current risk adjustment methodology raised by stakeholders, who have indicated that the current approach may not adequately recognize negative changes in health status that occur at the individual beneficiary level, particularly among continuously assigned beneficiaries who have experienced an acute event, such as a heart attack, stroke, or hip fracture, between the third benchmark year and the applicable performance year. We recognize that such acute events, which almost always require a hospitalization, are likely to have an upward impact on CMS-HCC risk scores that is not attributable to provider coding initiatives.
At the same time, we remain concerned that CMS-HCC risk scores, in general, are susceptible to increased diagnostic coding efforts. As noted previously, we employ full CMS-HCC risk adjustment when establishing an ACO's historical benchmark for its first agreement period, when adjusting the benchmark to account for participant list changes within an agreement period, and when resetting the benchmark for a second or subsequent agreement period, as we believe that doing so improves the accuracy of the benchmark. We have observed evidence of a modest increase in diagnostic coding completeness in the benchmark period for ACOs in their second agreement period (rebased ACOs). Simulation results suggest that rebased ACOs were more likely to benefit from full CMS-HCC risk adjustment in the benchmark period than were ACOs in a first agreement period. For rebased ACOs, the benchmark period coincides with their first agreement period in the Shared Savings Program, a time when these ACOs and their ACO participants and ACO providers/suppliers had an incentive to engage in increased coding so as to maximize their performance year risk scores, as well as their rebased benchmark in the next agreement period. ACOs in a first agreement period would have had less incentive to encourage their ACO participants and ACO providers/suppliers to engage in coding initiatives during the benchmark period as it took place before they entered the program. We recognize, however, that increased coding by ACO participants and ACO providers/suppliers may also reflect efforts to facilitate care coordination, quality improvement, and population management activities which require more complete clinical information at the point of care.
We also acknowledge that our current approach to risk adjustment for the performance year makes it difficult for ACOs to predict how their financial performance may be affected by risk adjustment. The current approach involves multiple steps including identifying newly and continuously assigned beneficiaries for each ACO for both the performance year and BY3, computing mean CMS-HCC risk scores for both populations and mean demographic risk scores for the continuously assigned beneficiary
To balance these competing concerns, we considered policies that would allow for some upward growth in CMS-HCC risk scores between the benchmark period and the performance year, while still limiting the impact of ACO coding initiatives, and also provide greater clarity for ACOs than the current methodology. In contemplating alternative policies, we also considered lessons learned from other CMS initiatives, including models tested by the Innovation Center. Finally, as we wish to encourage ACOs to take on higher levels of risk, we considered the importance of adopting a balanced risk adjustment methodology that provides ACOs with some protection against decreases in risk scores.
Our preferred approach would eliminate the distinction between newly and continuously assigned beneficiaries. We would use full CMS-HCC risk adjustment for all assigned beneficiaries between the benchmark period and the performance year, subject to a symmetrical cap of positive or negative 3 percent for the agreement period, which would apply such that the adjustment between BY3 and any performance year in the agreement period would never be more than 3 percent in either direction. In other words, the risk ratios applied to historical benchmark expenditures to capture changes in health status between BY3 and the performance year would never fall below 0.970 nor be higher than 1.030 for any performance year over the course of the agreement period. As is the case under the current policy, risk adjustment calculations would still be carried out separately for each of the four Medicare enrollment types (ESRD, disabled, aged/dual eligible, aged/non-dual eligible) and CMS-HCC prospective risk scores for each enrollment type would still be renormalized to the national assignable beneficiary population for that enrollment type before the cap is applied. Table 11 provides an illustrative example of how the cap would be applied to the risk ratio used to adjust historical benchmark expenditures to reflect changes in health status between BY3 and the performance year, for any performance year in the agreement period:
In the example, the decrease in the disabled risk score and the increase in the aged/dual risk score would both be subject to the positive or negative 3 percent cap. Changes in the ESRD and aged/non-dual risk scores would not be affected by the cap; the ACO would receive full upward and downward adjustment, respectively, for these enrollment types.
This approach would provide full CMS-HCC risk adjustment for ACOs with changes in CMS-HCC risk below the cap, and a partial adjustment for ACOs with changes in CMS-HCC risk above the cap. Initial modeling suggests that among the 239 ACOs that received demographic risk adjustment for their continuously assigned population under the current policy in PY 2016 (55 percent of the 432 total ACOs reconciled), around 86 percent would have received a larger positive adjustment to their benchmark had this policy been in place. Therefore, we believe this approach would more consistently account for worsening health status of beneficiaries compared to the current policy. This could reduce the incentive for ACOs to avoid complex patients and potentially lead more ACOs to accept higher levels of performance-based risk. However, because of the cap on the increase in CMS-HCC risk, we believe that this policy would continue to provide protection to the Medicare Trust Funds against unwarranted increases in CMS-HCC prospective risk scores that are due to increased coding intensity, by limiting the impact of such increases on ACO benchmarks.
By instituting a symmetrical cap, this preferred approach would also limit large decreases in CMS-HCC prospective risk scores across all assigned beneficiaries. We believe that such a balanced approach would provide ACOs with a greater incentive to assume performance-based risk than under the current methodology, which provides ACOs with no protection from risk score decreases. Among the 193 ACOs that received CMS-HCC risk adjustment under the current policy for their continuously assigned population in PY 2016, 69 percent would have received a smaller negative adjustment with the symmetrical 3 percent cap. We also believe that this approach, which mirrors one of the risk adjustment methodologies tested in the Next Generation ACO Model, has a significant advantage over the current Shared Savings Program policy in that it is more straightforward, making it easier for ACOs to understand and determine the impact of risk adjustment on their benchmark. ACOs would be subject to risk adjustment within a clearly defined range, allowing them to more easily predict their performance.
Our choice of 3 percent as the preferred level for the symmetrical cap is influenced by program experience. A review of CMS-HCC risk score trends among Shared Savings Program ACOs found that a 3 percent cap on changes in aged/non-dual CMS-HCC risk scores (the enrollment category that represents the majority of assigned beneficiaries for most ACOs) would limit positive risk adjustment for less than 30 percent of ACOs, even when there is a 5-year lapse between BY3 and the performance year, which would be the case in the final year of a 5 year agreement period under
After consideration of these alternatives, we are proposing to change the program's risk adjustment methodology to use CMS-HCC prospective risk scores to adjust the historical benchmark for changes in severity and case mix for all assigned beneficiaries, subject to a symmetrical cap of positive or negative 3 percent for the agreement period for agreement periods beginning on July 1, 2019, and in subsequent years. The cap would reflect the maximum change in risk scores allowed in an agreement period between BY3 and any performance year in the agreement period. For ACOs participating in a 5 year and 6-month agreement period beginning on July 1, 2019, as discussed in section II.A.7 of this proposed rule, the cap would represent the maximum change in risk scores for the agreement period between BY3 and calendar year 2019 in the context of determining financial performance for the 6-month performance year from July 1, 2019 through December 31, 2019, as well as the maximum change in risk scores between BY3 and any of the subsequent five performance years of the agreement period. We would apply this approach to ACOs participating under the proposed BASIC track, as reflected in the proposed new section of the regulations at § 425.605, and to ACOs participating under the proposed ENHANCED track, as reflected in the proposed modifications to § 425.610. We seek comment on this proposal, including the level of the cap.
As described in the background for this section, we apply a regional adjustment to the rebased historical benchmark for ACOs entering a second or subsequent agreement period in 2017 or later years. This adjustment reflects a percentage of the difference between the regional FFS expenditures in the ACO's regional service area and the ACO's historical expenditures. The percentage used in calculating the adjustment is phased in over time, ultimately reaching 70 percent, unless the Secretary determines a lower weight should be applied and such lower weight is specified through additional notice and comment rulemaking.
In the June 2016 final rule, we laid out the steps used to calculate and apply the regional adjustment (see 81 FR 37963). These steps are recapped here:
• First, we calculate the ACO's rebased historical benchmark and regional average expenditures for the most recent benchmark year for each Medicare enrollment type (ESRD, disabled, aged/dual eligible, aged/non-dual eligible), resulting in average per capita expenditure values for each of the Medicare enrollment types. The regional average expenditure amounts are adjusted for differences between the health status of the ACO's assigned beneficiary population and that of the assignable population in the ACO's regional service area.
• For each Medicare enrollment type, we then determine the difference between the average per capita regional amount and the average per capita amount of the ACO's rebased historical benchmark. These values may be positive or negative. For example, the difference between these values for a particular Medicare enrollment type will be expressed as a negative number if the value of the ACO's rebased historical benchmark expenditure for that Medicare enrollment type is greater than the regional average amount.
• Next, we multiply the resulting difference for each Medicare enrollment type by the applicable percentage weight used to calculate the amount of the regional adjustment for that agreement period. The products (one for each Medicare enrollment type) resulting from this step are the amounts of the regional adjustments that will be applied to the ACO's historical benchmark.
• We then apply the adjustment to the ACO's rebased historical benchmark by adding the adjustment amount for the Medicare enrollment type to the ACO's rebased historical benchmark expenditure for the same Medicare enrollment type.
• We next multiply the regionally-adjusted value of the ACO's rebased historical benchmark for each Medicare enrollment type by the proportion of the ACO's assigned beneficiary population for that Medicare enrollment type, based on the ACO's assigned beneficiary population for benchmark year 3.
• Finally, we sum expenditures across the four Medicare enrollment types to determine the ACO's regionally-adjusted rebased historical benchmark.
In the June 2016 final rule, we also detailed how the percentage weight used to calculate the regional adjustment will be phased in over time (see 81 FR 37971 through 37974). For the first agreement period in which this methodology applies, ACOs for which the weighted average adjustment across the enrollment types is positive (net positive adjustment) will receive a weight of 35 percent for all enrollment types (including individual enrollment types for which the adjustment is negative) and ACOs for which the weighted average adjustment is negative (net negative adjustment) will receive a weight of 25 percent for all enrollment types (including individual enrollment types for which the adjustment is positive). For the second agreement period in which the methodology applies, ACOs with a net positive adjustment will receive a weight of 70 percent for all enrollment types and ACOs with a net negative adjustment will receive a weight of 50 percent for all enrollment types. By the third agreement period in which the methodology applies, ACOs with either a net positive or a net negative adjustment will receive a weight of 70 percent for all enrollment types, unless the Secretary determines that a lower weight should be applied.
This regional adjustment is one of three ways in which regional expenditures are currently incorporated into the program's methodology for resetting the historical benchmark for an ACO's second or subsequent agreement period. We also use regional, instead of national, trend factors for each enrollment type to restate BY1 and BY2 expenditures in BY3 terms when calculating the rebased benchmark, and we use regional update factors to update the regionally-adjusted rebased
The regional trend factors used to calculate an ACO's rebased benchmark and the regional update factors used to update the benchmark to the performance year represent growth rates in risk-adjusted FFS expenditures among assignable beneficiaries in the ACO's regional service area, including beneficiaries assigned to the ACO. An ACO's regional service area is defined at § 425.20 as all counties in which at least one of the ACO's assigned beneficiaries resides. To calculate expenditures used in determining the regional adjustment and the trend and update factors, we first calculate risk-adjusted FFS expenditures among assignable beneficiaries for each county in the ACO's regional service area and then weight these amounts by the proportion of the ACO's assigned beneficiaries residing in each county, with all calculations performed separately by Medicare enrollment type (ESRD, disabled, aged/dual, aged/non-dual).
In the June 2016 final rule, we discussed the benefits that we believe to be associated with incorporating regional expenditures into ACO benchmarks. We explained, for example, that the incorporation of regional expenditures provides an ACO with a benchmark that is more reflective of FFS spending in the ACO's region than a benchmark based solely on the ACO's own historical expenditures (see 81 FR 37955). We believe that this approach creates stronger financial incentives for ACOs that have been successful in reducing expenditures to remain in the program, thus improving program sustainability. Many commenters expressed support for the approach, citing it as an improvement over the existing rebasing methodology (see 81 FR 37956). In the June 2016 final rule, we also discussed how using regional trend and update factors would allow us to better capture the cost experience in the ACO's region, the health status and socio-economic dynamics of the regional population, and location-specific Medicare payments when compared to using national FFS expenditures (see 81 FR 37976 through 37977). In that rule, we stated our intention to explore the possibility of incorporating regional expenditures, including the regional adjustment and regional trend and update factors, in the benchmark established for an ACO's first agreement period (see 81 FR 37973). In section II.D.3.b of this proposed rule, we discuss our proposals for incorporating regional expenditures into the benchmarks for ACOs in their first agreement period under the program.
We also acknowledged in the June 2016 final rule that the incorporation of regional expenditures into ACO benchmarks can have differential effects depending on an ACO's individual circumstances (see 81 FR 37955). For example, ACOs with low historical expenditures relative to their regional service area will see their rebased historical benchmark increase due to the regional adjustment, whereas the benchmarks for higher spending ACOs will be reduced. One concern is that, as the higher weights for the regional adjustment are phased in over time, the benchmarks for low-spending ACOs may become overly inflated to the point where these organizations need to do little to maintain or change their practices to generate savings. For higher-spending ACOs, there is the concern that a negative regional adjustment will discourage program participation or discourage these ACOs from caring for complex, high-cost patients. There is also concern about the longer-term effects on participation resulting from lower trend and update factors among ACOs that have had past success in reducing expenditures and that serve a high proportion of the beneficiaries within certain counties in their regional service area. In sections II.D.3.c and II.D.3.d of this proposed rule, we discuss proposals designed to mitigate these concerns.
A number of stakeholders offering comments on the February 2016 proposed rule advocated for extending the policies incorporating regional expenditures proposed for determining the rebased benchmarks for ACOs entering a second or subsequent agreement period under the program to the methodology for establishing the benchmarks for ACOs in their first agreement period under the program (see 81 FR 37971). While we declined to modify the methodology used to establish benchmarks for ACOs in a first agreement period to incorporate regional expenditures as part of the June 2016 final rule, we did signal our intention to explore this matter further after gaining experience with the new rebasing methodology (see 81 FR 37973).
Since the publication of the June 2016 final rule we have employed the new methodology to determine rebased benchmarks for ACOs starting second agreement periods in 2017 and 2018. This experience has reinforced our belief that a benchmarking methodology that incorporates regional expenditures, in addition to an ACO's own historical expenditures, is important for the sustainability of the program. For agreement periods starting in 2017, for example, we found that around 80 percent of ACOs receiving a rebased benchmark benefitted from receiving a regional adjustment. Having observed variation across ACO regional service areas, we also maintain that the incorporation of regional expenditure trends can lead to more accurate benchmarks that better reflect experience in ACOs' individual regions than benchmarks computed solely using national factors. We believe that introducing regional expenditures into the benchmarking methodology for ACOs in a first agreement period, as has been recommended by stakeholders, would serve to further strengthen the incentives under the program, improve program sustainability, and increase the accuracy of benchmark calculations for new ACOs by making their benchmarks more reflective of the regional environment in which these organizations operate. We also believe that adopting a more consistent benchmarking methodology would provide greater simplicity and more predictability for ACOs. Under this approach, ACOs entering the program would only be required to familiarize themselves with a single benchmarking methodology that would apply for all agreement periods under the program.
For the above reasons, we are proposing to incorporate regional expenditures into the benchmarking methodology for ACOs in a first agreement period for all ACOs entering the program beginning on July 1, 2019 and in subsequent years. Under this proposal, we would use almost the same methodology for determining the historical benchmarks for ACOs in their first agreement period as will apply for ACOs in their second or subsequent agreement period, including all policies proposed in this proposed rule, should they be finalized, regarding establishing the historical benchmark at the start of the agreement period, adjusting the historical benchmark for each
We propose to add a new provision at § 425.601 to the regulations that will describe how we will establish, adjust, update and reset historical benchmarks using factors based on regional FFS expenditures for all ACOs for agreement periods beginning on July 1, 2019 and in subsequent years. We seek comment on this proposal.
In finalizing the phase-in structure for the original regional adjustment in the June 2016 final rule, we acknowledged that it might be necessary to reevaluate the effects of the regional adjustment on the Shared Savings Program and, if warranted, to modify the adjustment through additional rulemaking. Therefore, we adopted a policy under which the maximum weight to be applied to the adjustment would be 70 percent, unless the Secretary determines that a lower weight should be applied, as specified through future rulemaking (see 81 FR 37969 through 32974). Relevant considerations in determining the appropriate weight to be applied to the adjustment include, but are not limited to, effects on net program costs; the extent of participation in the program; and the efficiency and quality of care received by beneficiaries.
We have revaluated the effects of the regional adjustment as part of the regulatory impact analysis required for this proposed rule (see section IV) and have also taken into consideration our experience in applying the regional adjustment under the policies established in the June 2016 final rule. While we continue to believe that it is necessary to employ a benchmarking methodology that incorporates expenditures in an ACO's regional service area in addition to the ACO's own historical expenditures in order to maintain or improve program sustainability, we are concerned that, if unaltered, the regional adjustment will have unintended consequences and adverse effects on ACO incentives as discussed in the Regulatory Impact Analysis (section IV).
By design, the regional adjustment results in more generous benchmarks for ACOs that spend below their regions. As noted in section II.D.3.b of this proposed rule, our initial experience with the regional adjustment found that 80 percent of ACOs that renewed for a second agreement period starting in 2017 received a positive adjustment. These ACOs saw their benchmarks increase by 1.8 percent, on average, when the adjustment was applied with the 35 percent weight, with several ACOs seeing increases of over 5 percent, and one over 7 percent. Preliminary results for ACOs that renewed for a second agreement period starting in 2018 show a similar share of ACOs receiving a positive adjustment and one ACO seeing an adjustment of over 10 percent. As the weight applied to the regional adjustment increases, we are concerned that the benchmarks for the ACOs with the lowest spending relative to their region will become overly inflated to the point where they will need to do little to change their care practices to generate savings, which could reduce incentives for these ACOs to improve the efficiency of care provided to beneficiaries.
On the other hand, the regional adjustment reduces benchmarks for ACOs with higher spending compared to their region. Among 14 ACOs that received a net negative regional adjustment to their benchmark in 2017, the average reduction was 1.6 percent, with one ACO seeing a reduction of over 7 percent. These adjustments were calculated using only a 25 percent weight. Although preliminary results for ACOs that started a second agreement period in 2018 show slightly smaller negative adjustments, on average, we are concerned that the ACOs with the highest relative costs, some of which have targeted specific beneficiary populations that are inherently more complex and costly than the regional average, will find little value in remaining in the Shared Savings Program when faced with a significantly reduced benchmark as the weight applied to the adjustment increases.
To reduce the likelihood that the regional adjustment will have these undesired effects, we are proposing policies that would limit the magnitude of the adjustment by reducing the weight that is applied to the adjustment and imposing an absolute dollar limit on the adjustment. We believe that moderating the regional adjustment would lower potential windfall gains to lower-cost ACOs and could help to improve the incentive for higher-cost ACOs to continue to participate in the program.
First, we are proposing to amend the schedule of weights used to phase in the regional adjustment. Consistent with our current policy, the first time that an ACO is subject to a regional adjustment, we would apply a weight of 35 percent if the ACO's historical spending was lower than its region and a weight of 25 percent if the ACO's historical spending was higher than its region. The second time that an ACO is subject to a regional adjustment, we would apply a weight of 50 percent if the ACO's historical spending was lower than its region and 35 percent if the ACO's historical spending was higher than its region. The third or subsequent time that an ACO is subject to a regional adjustment we would apply a weight of 50 percent in all cases.
We wish to make two points related to the proposed schedule of weights clear. First, consistent with our current policy under § 425.603(c)(8) for determining the adjusted benchmark for the second or subsequent performance year of an ACO's agreement period, in calculating an adjusted benchmark for an ACO that makes changes to its ACO participant list or assignment methodology, we would use the same set of weights as was used for the first performance year in the agreement period. For example, an ACO that is subject to a weight of 25 percent in its first performance year of an agreement period would continue to be subject to a weight of either 35 or 25 percent,
Second, for renewing or re-entering ACOs (see section II.A.5.c of this proposed rule) that previously received a rebased historical benchmark under the current benchmarking methodology adopted in the June 2016 final rule, we would consider the agreement period the ACO is entering upon renewal or re-entry in combination with the weight previously applied to calculate the regional adjustment to the ACO's benchmark in the ACO's most recent prior agreement period to determine the weight that would apply in the new agreement period. For example, an ACO that was subject to a weight of 35 or 25 percent in its second agreement period in the Shared Savings Program under the current benchmarking methodology that enters its third agreement period upon renewal would be subject to a weight of 50 or 35 percent. By contrast, if the same ACO had terminated during its second agreement period and subsequently re-enters the program, the ACO would continue to face a weight of 35 or 25 percent until the start of its subsequent agreement period. For a new ACO identified as a re-entering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO, we would consider the weight most recently applied to calculate the regional adjustment to the benchmark for the ACO in which the majority of the new ACO's participants were participating previously.
The weights included in the proposed new schedule were chosen in part to maintain consistency with the current schedule which already includes the 25, 35, and 50 percent values. Furthermore, we believe that using 50 percent as the maximum weight is appropriate because it strikes an even balance between rewarding an ACO for attainment (efficiencies already demonstrated at the start of the agreement period) versus improvement during the agreement period over its past historical performance.
We also wish to note that while this proposal would reduce the maximum regional adjustment as compared to current regulations, our proposal to extend the regional adjustment to ACOs in their first agreement period in the program would increase the number of years that an ACO would be subject to the adjustment. Thus, the lower maximum weight in later years would be balanced to some extent by an earlier phase-in.
Based on the magnitude of regional adjustments observed in the first 2 years under the new rebasing methodology, which were calculated using the lowest weights under the current phase-in schedule, we are concerned that reducing the maximum weight on the adjustment may not be sufficient to guard against the undesired effects of large positive or negative regional adjustments on incentives faced by individual ACOs. Therefore, to complement the proposed changes to the schedule of weights used to phase-in the regional adjustment, we also considered options for imposing a cap on the dollar amount of the regional adjustment. We believe that limiting regional adjustments for ACOs that are particularly low- or high-cost relative to their regions, will better align incentives for these ACOs with program goals, while continuing to reward ACOs that have already attained efficiency relative to their regional service areas.
We are thus also proposing to cap the regional adjustment amount using a flat dollar amount equal to 5 percent of national per capita expenditures for Parts A and B services under the original Medicare FFS program in BY3 for assignable beneficiaries identified for the 12-month calendar year corresponding to BY3 using data from the CMS OACT. The cap would be calculated and applied by Medicare enrollment type (ESRD, disabled, aged/dual eligible, aged/non-dual eligible) and would apply for both positive and negative adjustments.
We believe that defining the cap based on national per capita expenditures offers simplicity and transparency in that, for each enrollment type, a single value would be applicable for all ACOs with the same agreement start date. When selecting the level of the proposed cap, we aimed to choose a level that would only constrain the adjustment for the most extreme ACOs. When looking at the distribution of observed final regional adjustments among the 73 ACOs that received a rebased benchmark in 2017, we found that the amount of the regional adjustment calculated for around 95 percent of these ACOs would fall under a symmetrical cap equal to 5 percent of national FFS expenditures. We believe that capping the amount of the regional adjustment at this level would continue to provide a meaningful reward for ACOs that are efficient relative to their region, while reducing windfall gains for the ACOs with the lowest relative costs. Similarly, we believe capping the amount of a negative regional adjustment at this level would continue to impose a penalty on ACOs that are less efficient relative to their region, but by guarding against extremely high negative adjustments, should increase the program's ability to retain ACOs that serve complex patients and that may need some additional time to lower costs.
To implement the cap, we would continue to calculate the difference between the average per capita regional amount and the per capita rebased benchmark amount for each Medicare enrollment type. We would continue to multiply the difference for each enrollment type by the appropriate weight (determined using the schedule described previously) in order to determine the uncapped adjustment for each Medicare enrollment type. For positive adjustments, the final adjustment amount for a particular enrollment type would be set equal to the lesser of the uncapped adjustment or a dollar amount equal to 5 percent of the national per capita FFS expenditures for assignable beneficiaries in that enrollment type for BY3. For negative adjustments, the final adjustment amount for a particular enrollment type would be set equal to the greater (that is, the smaller negative value) of either the uncapped adjustment or the negative of 5 percent of the national per capita FFS expenditures for assignable beneficiaries in that enrollment type for BY3. We would then apply the final adjustment for each enrollment type to the benchmark expenditure for that enrollment type in the same manner that we currently apply the uncapped regional adjustment. Table 12 provides an illustrative example of how the final adjustment would be determined.
In this example, the ACO's positive adjustment for ESRD would be constrained by the cap because the uncapped adjustment amount exceeds 5 percent of the national assignable FFS expenditure for the ESRD population. Likewise, the ACO's negative adjustment for the disabled population would also be reduced by the cap. The adjustments for aged/dual and aged/non-dual eligible populations would not be affected.
We also considered an alternative approach under which the cap would be applied at the aggregate level rather than at the Medicare enrollment type level. Under this approach, we would calculate regional adjustments by Medicare enrollment type as we do currently and then determine the weighted average of these adjustments, using the enrollment distribution in the ACO's BY3 assigned beneficiary population, to arrive at a single aggregate regional adjustment. We would then determine a weighted average of national per capita FFS expenditures for assignable beneficiaries across the four enrollment types, again using the enrollment distribution in the ACO's BY3 assigned beneficiary population, to arrive at a single aggregate national expenditure value. We would calculate a symmetrical aggregate cap equal to positive or negative 5 percent of the aggregate national expenditure value and compare this cap to the uncapped aggregate regional adjustment amount to determine the final aggregate regional adjustment. Specifically, if the uncapped aggregate regional adjustment amount is above the aggregate cap, then the final aggregate regional adjustment would equal the cap. However, if the uncapped aggregate regional adjustment amount is below the aggregate cap, then the final aggregate regional adjustment would equal the uncapped regional adjustment amount. The regional adjustment calculated for each Medicare enrollment type would then be multiplied by the ratio of the final aggregate regional adjustment to the uncapped aggregate regional adjustment. If the uncapped aggregate regional adjustment exceeds the aggregate cap, this ratio will be less than one and the regional adjustment for each Medicare enrollment type would be reduced by the same percentage. If the uncapped aggregate regional adjustment is less than or equal to the aggregate cap, the ratio will equal one and the regional adjustment would not be reduced for any Medicare enrollment type.
For example, if the uncapped aggregate regional adjustment amount was $550 and the aggregate cap was $500, the final aggregate regional adjustment would be $500. The regional adjustment for each Medicare enrollment type would be multiplied by a ratio of $500 to $550 or 0.909. This is equivalent to reducing the adjustment for each enrollment type by 9.1 percent. As another example, if the uncapped aggregate regional adjustment was $450 and the aggregate cap remained at $500, the final aggregate regional adjustment would be $450 because it is less than the aggregate cap. The regional adjustment for each Medicare enrollment type would be multiplied by a ratio equal to 1, and thus would not be reduced.
Initial modeling found the two methods to be comparable for most ACOs but suggested that our proposed approach (capping the regional adjustment at the Medicare enrollment type level) is somewhat more effective at limiting larger upside or downside adjustments. This is likely because the aggregate approach smooths out variation in adjustments across individual enrollment types. For example, for some ACOs, large positive adjustments in one enrollment type may be offset by smaller positive adjustments, or negative adjustments in other enrollment types under the aggregate approach. The proposed approach also aligns with our current benchmark calculations, which are done by Medicare enrollment type, and provides greater accuracy and transparency. Under this approach, the cap will only reduce the magnitude of the adjustment for a particular enrollment type if the original uncapped value of the adjustment is relatively large. This is not necessarily the case under the aggregate approach, where adjustments for all enrollment types, large or small, will be reduced if the aggregate regional adjustment exceeds the aggregate cap.
We believe that imposing a cap on the magnitude of the adjustment, coupled with the proposed changes to the schedule of weights used in applying the regional adjustment, will help to reduce windfall gains to low-spending ACOs and will also help to reduce the incentive for higher spending ACOs to leave the program by limiting the negative adjustments these ACOs will experience. We anticipate that the proposed cap on the regional adjustment will provide stronger incentives for higher spending ACOs to remain in the program (by reducing the magnitude of the benchmark decrease associated with negative regional adjustments) than disincentives for lower spending ACOs. We expect this latter group would still be sufficiently rewarded by the regional adjustment under the proposed approach to encourage their continued participation in the program. However, we also believe that by reducing the windfall gains for these ACOs, the proposed constraints on the regional adjustment would lead to greater incentives for these ACOs to further reduce spending in order to increase their shared savings payments.
In summary, we are proposing both to modify the schedule of weights used to phase in the regional adjustment and to impose a cap on the dollar amount of the adjustment. For the first agreement period that an ACO is subject to the regional adjustment, we are proposing to apply a weight of 35 percent if the ACO's historical spending was lower than its region and a weight of 25 percent if the ACO's historical spending was higher than its region. For the second agreement period, we are proposing to apply weights of 50 percent and 35 percent for lower and
As discussed previously, we believe that using regional expenditures to trend forward BY1 and BY2 to BY3 in the calculation of the historical benchmark and to update the benchmark to the performance year has the advantage of producing more accurate benchmarks. Regional trend and update factors allow us to better capture the cost experience in the ACO's region, the health status and socio-economic dynamics of the regional population, and location-specific Medicare payments when compared to using national FFS expenditures. However, we acknowledge the concern raised by stakeholders that the use of regional trend or update factors may affect ACOs' incentives to reduce spending growth or to continue participation in the program, particularly in circumstances where an ACO serves a high proportion of beneficiaries in select counties making up its regional service area. For such an ACO, a purely regional trend will be more influenced by the ACO's own expenditure patterns, making it more difficult for the ACO to outperform its benchmark and conflicting with our goal to move ACOs away from benchmarks based solely on their own historical costs. We therefore considered options that would continue to incorporate regional expenditures into trend and update factors while still protecting incentives for ACOs that serve a high proportion of the Medicare FFS beneficiaries in their regional service area.
One approach, supported by a number of stakeholders commenting on the 2016 proposed rule, would be to exclude an ACO's own assigned beneficiaries from the population used to compute regional expenditures. However, as we explained in the June 2016 final rule (see 81 FR 37959 through 37960), we believe that such an approach would create potential bias due to the potential for small sample sizes and differences in the spending and utilization patterns between ACO-assigned and non-assigned beneficiaries. The latter could occur, for example, if an ACO tends to focus on a specialized beneficiary population. We are also concerned that excluding an ACO's own assigned beneficiaries from the population could provide ACOs with an incentive to influence the assignment process by seeking to provide more care to healthy beneficiaries and less care to more costly beneficiaries. Given these concerns, we chose to focus on alternative options that would address stakeholder concerns by using a combination of national and regional factors.
The first approach we considered would use a blend of national and regional growth rates to trend forward BY1 and BY2 to BY3 when establishing or resetting an ACO's historical benchmark (referred to as the national-regional blend). By incorporating a national trend factor that is more independent of an ACO's own performance, we believe that the national-regional blend would reduce the influence of the ACO's assigned beneficiaries on the ultimate trend factor applied. It would also lead to greater symmetry between the Shared Savings Program and MA which, among other adjustments, applies a national projected trend to update county-level expenditures
Under this approach, the national-regional blend would be calculated as a weighted average of national FFS and regional trend factors, where the weight assigned to the national component would represent the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO, calculated as described in this section of the proposed rule. The weight assigned to the regional component would be equal to 1 minus the national weight. As an ACO's penetration in its region increases, a higher weight would be placed on the national component of the national-regional blend and a lower weight on the regional component, reducing the extent to which the trend factors reflect the ACO's own expenditure history.
The national component of the national-regional blend would be trend factors computed for each Medicare enrollment type using per capita FFS expenditures for the national assignable beneficiary population. These trend factors would be calculated in the same manner as the national trend factors used to trend benchmark year expenditures for ACOs in a first agreement period under the current regulations. For example, the national trend factor for the aged/non-dual population for BY1 would be equal to BY3 per capita FFS expenditures among the national aged/non-dual assignable population divided by BY1 per capita FFS expenditures among the national aged/non-dual assignable population. Consistent with our current approach, the per capita FFS expenditures used in these calculations would not be explicitly risk-adjusted. By using risk ratios based on risk scores renormalized to the national assignable population, as described in section II.D.2 of this proposed rule, we are already controlling for changes in risk in the national assignable population elsewhere in the benchmark calculations, rendering further risk adjustment of the national trend factors unnecessary.
The regional component of the national-regional blend would be trend factors computed for each Medicare enrollment type based on the weighted average of risk-adjusted county FFS expenditures for assignable beneficiaries, including assigned beneficiaries, in the ACO's regional service area. These trend factors would be computed in the same manner as the regional trend factors used to trend benchmark year expenditures for ACOs that enter a second or subsequent agreement period in 2017 or later years under the current regulations. The regional trend factors reflect changes in expenditures within given counties over time, as well shifts in the geographic distribution of an ACO's assigned beneficiary population. This is because regional expenditures for each year are calculated as the weighted average of county-level expenditures for that year where the weight for a given county is the proportion of the ACO's assigned beneficiaries residing in that county in that year.
The weights used to blend the national and regional components would be calculated separately for each Medicare enrollment type using data for BY3. To calculate the national weights, we would first calculate for each enrollment type the share of assignable
As an example, assume an ACO has 11,000 assigned beneficiaries with aged/non-dual eligible enrollment status and the ACO's regional service area consists of two counties, County A and County B. There were 10,000 assignable aged/non-dual beneficiaries residing in County A in BY3, with 9,000 assigned to the ACO in that year. There were 12,000 assignable aged/non-dual beneficiaries residing in County B with 2,000 assigned to the ACO. The weight for the national component of the blended trend factor for the aged/non-dual enrollment type would be: [(Assigned Beneficiaries in County A/Assignable Beneficiaries in County A) × (Assigned Beneficiaries in County A/Total Assigned Beneficiaries)] + [(Assigned Beneficiaries in County B/Assignable Beneficiaries in County B) × (Assigned Beneficiaries in County B/Total Assigned Beneficiaries)] or [(9,000/10,000) × (9,000/11,000)] + [(2,000/12,000) × (2,000/11,000)], or 76.7 percent. The weight given to the regional component of the blended trend factor for aged/non-dual enrollment type in this example would be 23.3 percent. Because this hypothetical ACO has high penetration in its regional service area, the national component of the blended trend factor would receive a much higher weight than the regional component.
Initial modeling among 73 ACOs that renewed for a second agreement period in 2017 found that the weighted average share of assignable beneficiaries in an ACO's regional service area that are assigned to the ACO ranged from under 1 percent to around 60 percent, when looking at all four enrollment types combined, with a median of 12.3 percent and a mean of 15.1 percent. Among the 73 ACOs, 8 (11 percent) had regional shares above 30 percent. We found similar distributions when looking at the four enrollment types individually. Among ACOs with overall regional shares above 30 percent, the simulated use of blended trend factors caused changes in benchmarks (relative to current policy) of −0.8 percent to 0.3 percent, with half seeing a slight negative impact and the other half seeing a slight positive impact. Based on these statistics, it appears that most ACOs currently do not have significant penetration in their regional service areas. As a result, we would expect that for most ACOs the regional component of the blended trend factor would receive a higher weight than the national component and that the overall impact of the national-regional blend on benchmarks relative to current policy would be small. Should penetration patterns change over time, the blended formula would automatically shift more weight to the national component of the trend factor.
We would also use a national-regional blend when updating the historical benchmark for each performance year. That is, we would multiply historical benchmark expenditures for each Medicare enrollment type by an update factor that blends national and regional expenditure growth rates between BY3 and the performance year. The national component for each update factor would equal performance year per capita FFS expenditures for the national assignable beneficiary population for that enrollment type divided by BY3 per capita FFS expenditures for the national assignable beneficiary population for that enrollment type. As described above, the FFS expenditures for the national population would not be risk-adjusted. The regional component for each update factor would equal the weighted average of risk-adjusted county FFS expenditures among assignable beneficiaries, including the ACO's assigned beneficiaries, in the ACO's regional service area in the performance year divided by the weighted average of risk-adjusted county FFS expenditures among assignable beneficiaries, including the ACO's assigned beneficiaries, in the ACO's regional service area in BY3. This regional component would be computed in the same manner as the regional updates used to update the rebased benchmark for ACOs that enter a second or subsequent agreement period in 2017 or later years under the current regulations. The weights used to blend the national and regional components of the update factor would be calculated in the same manner as the weights that we are proposing to use in calculating the blended trend factors for the historical benchmark, except they would be based on performance year rather than BY3 data. That is, the weight assigned to the national component would represent the share of assignable beneficiaries in ACO's regional service area that are assigned to the ACO (based on a weighted average of county-level shares) in the performance year and the weight assigned to the regional component would be equal to 1 minus that share.
In addition to the national-regional blend, we considered an alternate approach that would incorporate national trends at the county level instead of at the regional service area level (national-county blend). Under this alternative, for each county that is in an ACO's regional service area in BY3, we would calculate trend factors to capture growth in county-level risk-adjusted expenditures for assignable beneficiaries from BY1 to BY3 and from BY2 to BY3. Each county-level trend factor would be blended with the national trend factor. The blended trend factor for each county would be a weighted average of the national and county-level trends where the weight applied to the national component would be the share of assignable beneficiaries in the county that are assigned to the ACO in BY3. The weight applied to the county component of the blend would be 1 minus the national weight.
After computing the blended trend factor for each county, we would determine the weighted average across all counties in the ACO's regional service area in BY3, using the proportion of assigned beneficiaries residing in each county in BY3 as weights to obtain an overall blended trend factor. We would then apply this overall blended trend factor to the expenditures for the ACO's assigned beneficiary population for the relevant benchmark year. All calculations would be done separately for each Medicare enrollment type. A similar approach would be used to compute update factors between BY3 and the performance year, but using weights based on share of assignable beneficiaries in each county that are assigned to the ACO in the performance year.
Returning to the hypothetical ACO from above, under the national-county blend we would calculate separate blended trend factors for County A and County B. For County A, the national component would receive a weight of 90.0 percent (9,000/10,000) and the county component would receive a weight of 1 minus 90.0 percent, or 10.0 percent. For County B, the national component would receive a weight of 16.7 percent (2,000/12,000) and the county component would receive a weight of 1 minus 16.7 percent, or 83.3 percent. After computing the blended trend factor for each county, we would take the weighted average across the two
Our modeling suggests that, for most ACOs, applying the blend at the county-level would yield similar results to the national-regional blend. However, for ACOs that have experienced shifts in the geographic distribution of their assigned beneficiaries over time, we found the two methods to diverge. This is because the national-regional blend reflects not only changes in expenditures within specific counties over time, but also changes in the geographic distribution of the ACO's own assigned beneficiaries. The national-county blend, by contrast, holds the geographic distribution of an ACO's assigned beneficiaries fixed at the BY3 distribution (for trend factors) or at the performance year distribution (for update factors), potentially reducing accuracy.
We are also concerned that calculating trends at the county rather than regional level, in addition to being less accurate, would be less transparent to ACOs. While national and regional trends are both used under our current benchmarking policies, and are thus familiar to ACOs, county-level trends would present a new concept. For these reasons, we favor the approach that incorporates national trends at the regional rather than county level.
Finally, we considered yet another approach that would simply replace regional trend and update factors with national factors for ACOs above a certain threshold of penetration in their regional service area. Specifically, if the share of assignable beneficiaries in an ACO's regional service area that are assigned to that ACO (computed as described above as a weighted average of county-level shares) is above the 90th percentile among all currently active ACOs for a given enrollment type in BY3, we would use national trend factors to trend forward BY1 and BY2 expenditures to BY3. For ACOs that are below the 90th percentile for a given enrollment type, we would continue to use regional factors as we do under the current policy. We would use a similar approach for the update factors, except the threshold would be based on the share of assignable beneficiaries that are assigned to the ACO in the performance year rather than BY3. Among the 73 ACOs that entered a second agreement period in 2017, the 90th percentile for the four enrollment types ranged between 25 and 30 percent of assignable beneficiaries in the ACO's regional service area. One drawback of this approach relative to the blended approaches previously described is that it treats ACOs that are just below the threshold and just above the threshold very differently, even though they may be similarly influencing expenditure trends in their regional service areas.
As we have previously indicated with respect to regional trends (see, for example, 81 FR 37976) and as suggested by our modeling, the national-regional blend, as well as the other options considered, would have mixed effects on ACOs depending on how the expenditure trends in an ACO's regional service area differ from the national trend. ACOs that have high penetration in their regional service area and that have helped to drive lower growth in their region relative to the national trend would benefit from this policy. ACOs that have contributed to higher growth in their regions would likely have lower benchmarks as a result of this policy than under current policy, helping to protect the Medicare Trust Fund and providing increased incentives for these ACOs to lower costs.
Based on the considerations previously discussed, we propose to use a blend of national and regional trend factors (that is, the national-regional blend) to trend forward BY1 and BY2 to BY3 when determining the historical benchmark. We also propose to use a blend of national and regional update factors, computed as described in this section, to update the historical benchmark to the performance year (or to calendar year 2019 in the context of determining the financial performance of ACOs for the 6-month performance year from July 1, 2019 through December 31, 2019, as proposed in section II.A.7 of this proposed rule). The blended trend and update factors would apply to determine the historical benchmark for all agreement periods starting on July 1, 2019 or in subsequent years, regardless of whether it is an ACO's first, second, or subsequent agreement period. We also wish to make clear that in the event an ACO makes changes to its certified ACO participant list for a given performance year or its assignment methodology selection, should our proposal in section II.A.4.c be finalized, the weight that is applied to the national and regional components of the blended trend and update factors would be recomputed to reflect changes in the composition of the ACO's assigned beneficiary population in BY3.
Because the proposed blended update factor would be used in place of an update factor based on the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original FFS program as called for in section 1899(d)(1)(B)(ii) of the Act, this proposal would require us to use our authority under section 1899(i)(3) of the Act. This provision grants the Secretary the authority to use other payment models, including payment models that use alternative benchmarking methodologies, if the Secretary determines that doing so would improve the quality and efficiency of items and services furnished under this title and the alternative methodology would result in program expenditures equal to or lower than those that would result under the statutory payment model.
By combining a national component that is more independent of an ACO's own experience with a regional component that captures location-specific trends, we believe that the proposed blended update factor would mitigate concerns about ACO influence on regional trend factors, improving the accuracy of the benchmark update and potentially protecting incentives for ACOs that may have high penetration in their regional service areas. As such, we believe that this proposed change to the statutory benchmarking methodology would improve the quality and efficiency of the program. As discussed in the Regulatory Impact Analysis (section IV. of this proposed rule), we project that this proposed approach, in combination with other changes to the statutory payment model proposed elsewhere in this proposed rule, as well as current policies established using the authority of section 1899(i)(3) of the Act, would not increase program expenditures relative to those under the statutory payment model.
In summary, we propose to use a blend of national and regional trend factors to trend forward BY1 and BY2 to BY3 when determining the historical benchmark and a blend of national and regional update factors to update the historical benchmark to the performance year (or to calendar year 2019 in the context of determining the financial performance of ACOs for the 6-month performance year from July 1, 2019 through December 31, 2019, as proposed in section II.A.7 of this proposed rule). The national component of the blended trend and update factors would receive a weight equal to the share of assignable beneficiaries in the regional service area that are assigned to the ACO, computed as described in this section by taking a weighted average of county-level shares. The regional component of the blended trend and update factors would receive a weight equal to 1 minus the national weight. The proposed blended trend and update factors would apply to all
We are also proposing to make certain technical, conforming changes to the following provisions to reflect our proposal to add a new section of the regulations at § 425.601 to govern the calculation of the historical benchmark for all agreement periods starting on July 1, 2019, and in subsequent years. We are also proposing to make conforming changes to these provisions to incorporate the policies on resetting, adjusting, and updating the benchmark that were adopted in the June 2016 final rule, and codified in the regulations at § 425.603.
• Under subpart C, which governs application procedures, add references to §§ 425.601 and 425.603 in § 425.204(g);
• Under subpart D, which governs the calculation of shared savings and losses, add references to § 425.603 in §§ 425.604 (Track 1) and 425.606 (Track 2); and add references to §§ 425.601 and 425.603 in § 425.610 (ENHANCED track);
• As part of the modifications to § 425.610, make a wording change to the paragraph currently numerated as (a)(2)(ii) that could not be completed with the June 2016 final rule due to a typographical error. In this paragraph, we would remove the phase “adjusts for changes”, and in its place add the phrase “CMS adjusts the benchmark for changes”; and
• Under subpart I, which governs the reconsideration review process, add references to §§ 425.601 and 425.603 to § 425.800(a)(4). In addition, as previously described, we have used our authority under section 1899(i)(3) of the Act to modify certain aspects of the statutory payment and benchmarking methodology under section 1899(d) of the Act. Accordingly, we also propose to amend § 425.800(a)(4) to clarify that the preclusion of administrative and judicial review applies only to the extent that a specific calculation is performed in accordance with section 1899(d) of the Act.
This section addresses various proposed revisions to the Shared Savings Program designed to update program policies. We propose to revise our regulations governing the assignment process in order to align our voluntary alignment policies with the requirements of section 50331 of the Bipartisan Budget Act of 2018 and to update the definition of primary care services. We also propose to extend the policies that we recently adopted for ACOs impacted by extreme and uncontrollable circumstances during 2017 to 2018 and subsequent performance years. We also solicit comment on considerations related to supporting ACOs' activities to address the national opioid crisis and the agency's meaningful measures initiative. We propose to discontinue use of the quality performance measure that assesses an ACO's eligible clinicians' level of adoption of CEHRT and propose instead that ACOs annually certify that the percentage of eligible clinicians participating in the ACO using CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds certain thresholds. Lastly, we seek comment on how Medicare ACOs and Part D sponsors could be encouraged to collaborate so as to improve the coordination of pharmacy care for Medicare FFS beneficiaries.
Section 50331 of the Bipartisan Budget Act of 2018 amended section 1899(c) of the Act (42 U.S.C. 1395jjj(c)) to add a new paragraph (2)(B) that requires the Secretary, for performance year 2018 and each subsequent performance year, to permit a Medicare FFS beneficiary to voluntarily identify an ACO professional as the primary care provider of the beneficiary for purposes of assigning such beneficiary to an ACO, if a system is available for electronic designation. A voluntary identification by a Medicare FFS beneficiary under this provision supersedes any claims-based assignment otherwise determined by the Secretary. Section 50331 also requires the Secretary to establish a process under which a Medicare FFS beneficiary is notified of his or her ability to designate a primary care provider or subsequently to change this designation. An ACO professional is defined under section 1899(h) of the Act as a physician as defined in section 1861(r)(1) of the Act and a practitioner described in section 1842(b)(18)(C)(i) of the Act.
We believe that section 50331 requires certain revisions to our current beneficiary voluntary alignment policies in § 425.402(e). Prior to enactment of the Bipartisan Budget Act of 2018, section 1899(c) of the Act required that beneficiaries be assigned to an ACO based on their use of primary care services furnished by a physician as defined in section 1861(r)(1) of the Act, and beginning January 1, 2019, services provided in RHCs/FQHCs. In order to satisfy this statutory requirement, we currently require that a beneficiary receive at least one primary care service during the beneficiary assignment window from an ACO professional in the ACO who is a physician with a specialty used in assignment in order to be assigned to the ACO (see § 425.402(b)(1)). As currently provided in § 425.404(b), for performance year 2019 and subsequent performance years, for purposes of the assignment methodology in § 425.402, CMS treats a service reported on an FQHC/RHC claim as a primary care service performed by a primary care physician. After identifying the beneficiaries who have received a primary care service from a physician in the ACO, we use a two-step, claims-based methodology to assign beneficiaries to a particular ACO for a calendar year (see § 425.402(b)(2) through (4)). In the CY 2017 PFS final rule (81 FR 80501 through 80510), we augmented this claims-based beneficiary assignment methodology by finalizing a policy under which beneficiaries, beginning in 2017 for assignment for performance year 2018, may voluntarily align with an ACO by designating a “primary clinician” they believe is responsible for coordinating their overall care using MyMedicare.gov, a secure online patient portal. MyMedicare.gov contains a list of all of the Medicare-enrolled practitioners who appear on the Physician Compare website and beneficiaries may choose any practitioner present on Physician Compare as their primary clinician.
Notwithstanding the assignment methodology in § 425.402(b), beneficiaries who designate an ACO professional whose services are used in assignment as responsible for their overall care will be prospectively assigned to the ACO in which that ACO professional participates, provided the beneficiary meets the eligibility criteria established at § 425.401(a) and is not excluded from assignment by the
Section 1899(c) of the Act, as amended by section 50331 of the Bipartisan Budget Act of 2018, requires the Secretary to permit a Medicare FFS beneficiary to voluntarily identify an ACO professional as their primary care provider for purposes of assignment to an ACO. Under our current methodology, a beneficiary may select any practitioner who has a record on the Physician Compare website as their primary clinician; however, we will only assign the beneficiary to an ACO if they have chosen a practitioner who is a primary care physician (as defined at § 425.20), a physician with one of the primary specialty designations included in § 425.402(c), or a nurse practitioner, physician assistant, or clinical nurse specialist. Therefore, we propose to modify our current voluntary alignment policies at § 425.402(e)(2)(iii) to provide that we will assign a beneficiary to an ACO based upon their selection of any ACO professional, regardless of specialty, as their primary clinician. Under this proposal, a beneficiary may select a practitioner with any specialty designation, for example, a specialty of allergy/immunology or surgery, as their primary care provider and be eligible for assignment to the ACO in which the practitioner is an ACO professional. Specifically, we propose to revise § 425.402(e)(2)(iii) to remove the requirement that the ACO professional designated by the beneficiary be a primary care physician as defined at § 425.20, a physician with a specialty designation included at § 425.402(c), or a nurse practitioner, physician assistant, or clinical nurse specialist. In addition, the provision at § 425.402(e)(2)(iv) addresses beneficiary designations of clinicians outside the ACO as their primary clinician. The current policy at § 425.402(e)(2)(iv) provides that a beneficiary will not be assigned to an ACO for a performance year if the beneficiary has designated a provider or supplier outside the ACO who is a primary care physician as defined at § 425.20, a physician with a specialty designation included at § 425.402(c), or a nurse practitioner, physician assistant, or clinical nurse specialist as their primary clinician responsible for coordinating their overall care. Consistent with the proposed revisions to § 425.402(e)(2)(iii) to incorporate the requirements of section 50331 of the Bipartisan Budget Act, we propose to revise § 425.402(e)(2)(iv) to indicate that if a beneficiary designates any provider or supplier outside the ACO as their primary clinician responsible for coordinating their overall care, the beneficiary will not be added to the ACO's list of assigned beneficiaries for a performance year.
Section 1899(c) of the Act, as amended by section 50331 of the Bipartisan Budget Act of 2018, requires the Secretary to allow a beneficiary to voluntarily align with an ACO, and does not impose any restriction with respect to whether the beneficiary has received any services from an ACO professional (see section 1899(c)(2)(B)(i) of the Act). We also believe the requirement in section 1899(c)(2)(B)(iii) of the Act that a beneficiary's voluntary identification shall supersede any claims-based alignment is consistent with eliminating the requirement that the beneficiary have received a service from an ACO professional in order to be eligible to be assigned an ACO. Therefore, we propose to remove the requirement at § 425.402(e)(2)(i) that a beneficiary must have received at least one primary care service from an ACO professional who is either a primary care physician or a physician with a specialty designation included in § 425.402(c) within the 12 month assignment window in order to be assigned to the ACO. Under this proposal, a beneficiary who selects a primary clinician who is an ACO professional, but who does not receive any services from an ACO participant during the assignment window, will remain eligible for assignment to the ACO. We believe this approach reduces burden on beneficiaries and their practitioners by not requiring practitioners to provide unnecessary care during a specified period of time in order for a beneficiary to remain eligible for assignment to the ACO. Consistent with this proposal, we propose to remove § 425.402(e)(2)(i) in its entirety.
We note that, under this proposal, if a beneficiary does not change their primary clinician designation, the beneficiary will remain assigned to the ACO in which that practitioner participates during the ACO's entire agreement period and any subsequent agreement periods under the Shared Savings Program, even if the beneficiary no longer seeks care from any ACO professionals. Because a beneficiary who has voluntarily identified a Shared Savings Program ACO professional as their primary care provider will remain assigned to the ACO regardless of where they seek care, this proposed change could also impact assignment under certain Innovation Center models in which overlapping beneficiary assignment is not permitted. Although we believe our proposed policy is consistent with the requirement under section 1899(c)(2)(B)(iii) of the Act that a voluntary identification by a beneficiary shall supersede any claims-based assignment, we also believe it could be appropriate, in limited circumstances, to align a beneficiary to an entity participating in certain specialty and disease-specific Innovation Center models, such as the CEC Model. CMS implemented the CEC Model to test a new system of payment and service delivery that CMS believes will lead to better health outcomes for Medicare beneficiaries living with ESRD, while lowering costs to Medicare Parts A and B. Under the model, CMS is working with groups of health care providers, dialysis facilities, and other suppliers involved in the care of ESRD beneficiaries to improve the coordination and quality of care that these individuals receive. We believe that an ESRD beneficiary, who is otherwise eligible for assignment to an entity participating in the CEC Model, could benefit from the focused attention on and increased care coordination for their ESRD available under the CEC Model. Such a beneficiary could be disadvantaged if they were unable to receive the type of specialized care for their ESRD that would be available from an entity participating in the CEC Model. Furthermore, we believe it could be difficult for the Innovation Center to conduct a viable test of a specialty or
As a result, we believe that in some instances it may be necessary for the Innovation Center to use its authority under section 1115A(d)(1) of the Act to waive the requirements of section 1899(c)(2)(B) of the Act solely as necessary for purposes of testing a particular model.
Therefore, we are proposing to create an exception to the general policy that a beneficiary who has voluntarily identified a Shared Savings Program ACO professional as their primary care provider will remain assigned to the ACO regardless of where they seek care. Specifically, we propose that we would not assign such a beneficiary to the ACO when the beneficiary is also eligible for assignment to an entity participating in a model tested or expanded under section 1115A of the Act under which claims-based assignment is based solely on claims for services other than primary care services and for which there has been a determination by Secretary that a waiver under section 1115A(d)(1) of the Act of the requirement in section 1899(c)(2)(B) of the Act is necessary solely for purposes of testing the model. Under this proposal, if a beneficiary selects a primary clinician who is a Shared Savings Program ACO professional and the beneficiary is also eligible for alignment to a specialty care or disease specific model tested or expanded under section 1115A of the Act under which claims-based assignment is based solely on claims for services other than primary care services and for which there has been a determination that a waiver of the requirement in section 1899(c)(2)(B) is necessary solely for purposes of testing the Model, the Innovation Center or its designee would notify the beneficiary of their alignment to an entity participating in the model. Additionally, although such a beneficiary may still voluntarily identify his or her primary clinician and may seek care from any clinician, the beneficiary would not be assigned to a Shared Savings Program ACO even if the designated primary clinician is a Shared Savings Program ACO professional.
We would include a list of any models that meet these criteria on the Shared Savings Program website, to supplement the information already included in the beneficiary assignment reports we currently provide to ACOs (as described under § 425.702(c)), so that ACOs can know why certain beneficiaries, who may have designated an ACO professional as their primary clinician, are not assigned to them. Similar information would also be shared with 1-800-MEDICARE to ensure that Medicare customer service representatives are able to help beneficiaries who may be confused as to why they are not aligned to the ACO in which their primary clinician is participating.
Section 1899(c)(2)(B)(ii) of the Act, as amended by section 50331 of the Bipartisan Budget Act, requires the Secretary to establish a process under the Shared Savings Program through which each Medicare FFS beneficiary is notified of the ability to identify an ACO professional as his or her primary care provider and informed of the process that may be used to make and change such identification. We intend to implement section 1899(c)(2)(B)(ii) of the Act under the beneficiary notification process at § 425.312. In addition, we plan to use the beneficiary notification process under § 425.312 to address the concern that beneficiary designations may become outdated. Specifically, we propose to require ACO participants to use a CMS-developed template notice that encourages beneficiaries to check their designation regularly and to update their designation when they change care providers or move to a new area. We discuss our beneficiary notification processes further in section II.C.3.a of this proposed rule.
We propose to apply these modifications to our policies under the Shared Savings Program regarding voluntary alignment beginning for performance years starting on January 1, 2019, and subsequent performance years. We propose to incorporate these new requirements in the regulations by redesignating § 425.402(e)(2)(i) through (iv) as § 425.402(e)(2)(i)(A) through (D), adding a paragraph heading for newly redesignated § 425.402(e)(2)(i), and including a new § 425.402(e)(2)(ii).
We note that as specified in § 425.402(e)(2)(ii) a beneficiary who has designated an ACO professional as their primary clinician must still be eligible for assignment to an ACO by meeting the criteria specified in § 425.401(a). These criteria establish the minimum requirements for a beneficiary to be eligible to be assigned to an ACO under our existing assignment methodology, and we believe it is appropriate to impose the same basic limitations on the assignment of beneficiaries on the basis of voluntary alignment. We do not believe it would be appropriate, for example, to assign a beneficiary to an ACO if the beneficiary does not reside in the United States, or if the other eligibility requirements are not met.
We request comments on our proposals to implement the new requirements governing voluntary alignment under section 50331 of the Bipartisan Budget Act of 2018. We also seek comment on our proposal to create a limited exception to our proposed policies on voluntary alignment to allow a beneficiary to be assigned to an entity participating in a model tested or expanded under section 1115A of the Act when certain criteria are met. In addition, we welcome comments on how we might increase beneficiary awareness and further improve the electronic process through which a beneficiary may voluntarily identify an ACO professional as their primary care provider through My.Medicare.gov for purposes of assignment to an ACO.
Section 1899(c)(1) of the Act, as amended by the 21st Century Cures Act and the Bipartisan Budget Act of 2018, provides that for performance years beginning on or after January 1, 2019, the Secretary shall assign beneficiaries to an ACO based on their utilization of primary care services provided by a physician and all services furnished by RHCs and FQHCs. However, the statute does not specify which kinds of services may be considered primary care services for purposes of beneficiary assignment. We established the initial list of services that we considered to be primary care services in the November 2011 final rule (76 FR 67853). In that final rule, we indicated that we intended to monitor this issue and would consider making changes to the definition of primary care services to add or delete codes used to identify primary care services, if there were sufficient evidence that revisions were warranted. We have updated the list of primary care service codes in subsequent rulemaking to reflect additions or modifications to the codes that have been recognized for payment under the Medicare PFS, as summarized in the CY 2018 PFS proposed rule (82
Accounting for these recent changes, we define primary care services in § 425.400(c) for purposes of assigning beneficiaries to ACOs under § 425.402 as the set of services identified by the following HCPCS/CPT codes:
(1) 99201 through 99215 (codes for office or other outpatient visit for the evaluation and management of a patient).
(2) 99304 through 99318 (codes for professional services furnished in a Nursing Facility, excluding services furnished in a SNF which are reported on claims with place of service code 31).
(3) 99319 through 99340 (codes for patient domiciliary, rest home, or custodial care visit).
(4) 99341 through 99350 (codes for evaluation and management services furnished in a patients' home).
(5) 99487, 99489 and 99490 (codes for chronic care management).
(6) 99495 and 99496 (codes for transitional care management services).
(1) G0402 (the code for the Welcome to Medicare visit).
(2) G0438 and G0439 (codes for the Annual Wellness Visits).
(3) G0463 (code for services furnished in electing teaching amendment hospitals).
(4) G0506 (code for chronic care management).
(5) G0502, G0503, G0504 and G0507 (codes for behavioral health integration).
As discussed in the CY 2018 PFS final rule, a commenter recommended that CMS consider including the advance care planning codes, CPT codes 99497 and 99498, in the definition of primary care services in future rulemaking (82 FR 53213). We indicated that we would consider whether CPT codes 99497 and 99498 or any additional existing HCPCS/CPT codes should be added to the definition of primary care services in future rulemaking for purposes of assignment of beneficiaries to ACOs under the Shared Savings Program. In addition, effective for CY 2018, the HCPCS codes for behavioral health integration G0502, G0503, G0504 and G0507 have been replaced by CPT codes 99492, 99493, 99494, 99484 (82 FR 53078).
CPT codes 99304 through 99318 are used for reporting evaluation and management services furnished by physicians and other practitioners in a skilled nursing facility (reported on claims with POS code 31) or a nursing facility (reported on claims with POS code 32). Based on stakeholder input, we finalized a policy in the CY 2016 PFS final rule (80 FR 71271 through 71272) effective for performance year 2017 and subsequent performance years, to exclude services identified by CPT codes 99304 through 99318 from the definition of primary care services for purposes of the beneficiary assignment methodology when the claim includes the POS code 31 modifier designating the services as having been furnished in a SNF. We established this policy to recognize that SNF patients are shorter stay patients who are generally receiving continued acute medical care and rehabilitative services. Although their care may be coordinated during their time in the SNF, they are then transitioned back into the community to the primary care professionals who are typically responsible for providing care to meet their true primary care needs. We continue to believe that it is appropriate for SNF patients to be assigned to ACOs based on care received from primary care professionals in the community (including nursing facilities), who are typically responsible for providing care to meet the true primary care needs of these beneficiaries. ACOs serving special needs populations, including beneficiaries receiving long term care services, and other stakeholders have recently suggested that we consider an alternative method for determining operationally whether services identified by CPT codes 99304 through 99318 were furnished in a SNF. Instead of indirectly determining whether a beneficiary was a SNF patient when the services were furnished based on physician claims data, these stakeholders suggest we more directly determine whether a beneficiary was a SNF patient based on SNF facility claims data. These stakeholders have recommended that CMS use contemporaneous SNF Medicare facility claims to determine whether a professional service identified by CPT codes 99304 through 99318 was furnished in a SNF and thus should not be used for purposes of the beneficiary assignment methodology under § 425.402. Specifically, these stakeholders suggest that we determine whether services identified by CPT codes 99304 through 99318 were furnished in a SNF by determining whether the beneficiary also received SNF facility services on the same date of service.
In this rule we propose to make changes to the definition of primary care services in § 425.400(c) to add new codes and to revise how we determine whether services identified by CPT codes 99304 through 99318 were furnished in a SNF.
Based on feedback from ACOs and our further review of the HCPCS and CPT codes currently recognized for payment under the PFS, we believe it would be appropriate to amend the definition of primary care services to include certain additional codes. Specifically, we propose to revise the definition of primary care services in § 425.400(c) to include the following HCPCS and CPT codes: (1) Advance care planning service codes, CPT codes 99497 and 99498, (2) administration of health risk assessment service codes, CPT codes 96160 and 96161, (3) prolonged evaluation and management or psychotherapy service(s) beyond the typical service time of the primary procedure, CPT codes 99354 and 99355, (4) annual depression screening service code, HCPCS code G0444, (5) alcohol misuse screening service code, HCPCS code G0442, and (6) alcohol misuse counseling service code, HCPCS code G0443. In addition, in the recent CY 2019 PFS proposed rule (see 83 FR 35841 through 35844) CMS proposed to create three new HCPCS codes to reflect the additional resources involved in furnishing certain evaluation and management services: (1) GPC1X add-on code, for the visit complexity inherent to evaluation and management associated with certain primary care services, (2) GCG0X add-on code, for visit complexity inherent to evaluation and management associated with endocrinology, rheumatology, hematology/oncology, urology, neurology, obstetrics/gynecology, allergy/immunology, otolaryngology, or interventional pain management-centered care, and (3) GPRO1, an additional add-on code for prolonged evaluation and management or psychotherapy services beyond the typical service time of the primary procedure. We believe it would be appropriate to include these codes in the definition of primary care services under the Shared Savings Program because these codes are used to bill for services that are similar to services that are already included in the list of primary care codes at § 425.400(c). We
The following provides additional information about the HCPCS and CPT codes that we are proposing to add to the definition of primary care services:
In the recent CY 2019 PFS proposed rule (see 83 FR 35841 through 35844)), CMS proposed to create three new HCPCS G-codes as part of a broader proposal to simplify the documentation requirements and to more accurately pay for services represented by CPT codes 99201 through 99215 (codes for office or other outpatient visit for the evaluation and management of a patient). All three of these codes are “add-on codes” that describe additional resource components of a broader service furnished to the patient that are not accounted for in the valuation of the base codes.
HCPCS code GPC1X is intended to capture the additional resource costs, beyond those involved in the base evaluation and management codes, of providing face-to-face primary care services for established patients. HCPCS code GPC1X would be billed in addition to the base evaluation and management code for an established patient when the visit includes primary care services. In contrast, new HCPCS code GCG0X is an add-on code intended to reflect the
Finally, proposed new HCPCS code GPRO1 (prolonged evaluation and management or psychotherapy services beyond the typical service time of the primary procedure, in the office or other outpatient setting requiring direct patient contact beyond the usual service; 30 minutes) is modeled on CPT code 99354, a prolonged services code discussed earlier in this section which we are proposing to add to our list of primary care services. HCPCS code GPRO1 is intended to reflect prolonged evaluation and management or psychotherapy service(s) of 30 minutes duration beyond the typical service time of the primary or base service, whereas existing CPT code 99354 reflects prolonged services of 60 minutes duration. As is the case for code 99354, code GPRO1 would be billed separately in addition to the base office or other outpatient evaluation and management or psychotherapy service. We believe it would be appropriate to include proposed HCPCS code GPRO1 on our list of primary care services for the same reasons we are proposing to add CPT code 99354 to our list of primary care services. Because the proposed definition of HCPCS code GPRO1 also includes prolonged services for certain psychotherapy services, which are not currently included on our list of primary care services, we propose to include the allowed charges for HCPCS code GPRO1, for purposes of assigning beneficiaries to ACOs, only when the base code is also on the list of primary care services.
We propose to include these codes in the definition of primary care services when performing beneficiary assignment under § 425.402, for performance years starting on January 1, 2019, and subsequent years. We note, however, that our proposal to include the three proposed new “add-on codes”, GPC1X, GCG0X, and GPRO1, is contingent on CMS finalizing its proposal to create these new codes for use starting in 2019.
As previously discussed in section II.E.3.a, ACOs and other stakeholders have expressed concerns regarding our current policy of identifying services billed under CPT codes 99304 through 99318 furnished in a SNF by using the POS modifier 31. We continue to believe it is appropriate to exclude from assignment services billed under CPT codes 99304 through 99318 when such services are furnished in a SNF. However, we agree with stakeholders that it might increase the accuracy of beneficiary assignment for these vulnerable and generally high cost beneficiaries if we were to revise our method for determining whether services identified by CPT codes 99304 through 99318 were furnished in a SNF to focus on whether the beneficiary also received SNF facility services on the same day. We believe it would be feasible for us to directly and more precisely determine whether services identified by CPT codes 99304 through 99318 were furnished in a SNF by analyzing our facility claims data files rather than by using the POS modifier 31 in our professional claims data files. Operationally, we would exclude professional services claims billed under CPT codes 99304 through 99318 from use in the assignment methodology when there is a SNF facility claim in our claims files with dates of service that overlap with the date of service for the professional service. Therefore, we propose to revise the regulation at § 425.400(c)(1)(iv)(A)(
Under our current process, if CMS's HCPCS committee or the American Medical Association's CPT Editorial Panel modifies or replaces any of the codes that we designate as primary care service codes in § 425.400(c), we must revise the primary care service codes listed in § 425.400(c) as appropriate through further rulemaking before the revised codes can be used for purposes of assignment. As noted previously, effective for CY 2018, the HCPCS codes for behavioral health integration G0502, G0503, G0504 and G0507 have been replaced by CPT codes 99492, 99493, 99494 and 99484. Therefore, consistent with our current process, we propose to revise the primary care service codes in § 425.400(c)(1)(iv) to replace HCPCS codes G0502, G0503, G0504 and G0507 with CPT codes 99492, 99493, 99494 and 99484 for performance years starting on January 1, 2019, and subsequent performance years.
We note that the regulations text at § 425.400(c)(1)(iv) includes brief descriptions for the HCPCS codes that we have designated as primary care service codes, but does not include such descriptions for the CPT codes that we have designated as primary care service codes. For consistency, we are proposing a technical change to the regulations at § 425.400(c)(1)(iv)(A) to also include descriptions for the CPT codes. We also note that one of the Chronic Care Management (CCM) codes, CPT code 99490, is inadvertently listed in the regulations text at § 425.400(c)(1)(iv)(A)(
We welcome comments on the new codes we are proposing to add to the definition of primary care services used for purposes of assigning beneficiaries to Shared Savings Program ACOs. In addition, we seek comments on our proposal to revise our method for excluding services identified by CPT codes 99304 through 99318 when furnished in a SNF. We also seek comments on the other proposed technical changes to § 425.400(c)(1)(iv). We also welcome comments on any additional existing HCPCS/CPT codes that we should consider adding to the definition of primary care services in future rulemaking.
Following the 2017 California wildfires and Hurricanes Harvey, Irma, Maria and Nate, stakeholders expressed concerns that the effects of these types of disasters on ACO participants, ACO providers/suppliers, and the assigned beneficiary population could undermine an ACO's ability to successfully meet the quality performance standards, and adversely affect financial performance, including, in the case of ACOs under performance-based risk, increasing shared losses. To address these concerns, we published an interim final rule with comment period titled Medicare Program; Medicare Shared Savings Program: Extreme and Uncontrollable Circumstances Policies for Performance Year 2017 (hereinafter referred to as the Shared Savings Program IFC) that appeared in the
The extreme and uncontrollable circumstances policies established in the Shared Savings Program for performance year 2017 align with the policies established under the Quality Payment Program for the 2017 MIPS performance period and subsequent MIPS performance periods (see CY 2018 Quality Payment Program final rule with comment, 82 FR 53780 through 53783 and Quality Payment Program IFC, 82 FR 53895 through 53900). In particular, in the Shared Savings Program IFC (82 FR 60914), we indicated that we would determine whether an ACO has been affected by an extreme and uncontrollable circumstance by determining whether 20 percent or more of the ACO's assigned beneficiaries resided in counties designated as an emergency declared area in performance year 2017 as determined under the Quality Payment Program or the ACO's legal entity is located in such an area. In the Quality Payment Program IFC, we explained that we anticipated that the types of events that could trigger the extreme and uncontrollable circumstances policies would be events designated a Federal Emergency Management Agency (FEMA) major disaster or a public health emergency declared by the Secretary, although we indicated that we would review each situation on a case-by-case basis (82 FR 53897).
Because ACOs may face extreme and uncontrollable circumstances in 2018 and subsequent years, we believe it is appropriate to propose to extend the policies adopted in the Shared Savings Program IFC for addressing ACO quality performance scoring and the determination of the shared losses owed for ACOs affected by extreme or uncontrollable circumstances to performance year 2018 and subsequent performance years. In addition, in the Shared Savings Program IFC, we indicated that we planned to observe the impact of the 2017 hurricanes and wildfires on ACOs' expenditures for their assigned beneficiaries during performance year 2017, and might revisit the need to make adjustments to the methodology for calculating the benchmark in future rulemaking. We consider this issue further in the discussion that follows.
The financial and quality performance of ACOs located in areas subject to extreme and uncontrollable circumstances could be significantly and adversely affected. Disasters may have several possible effects on ACO quality and financial performance. For instance, displacement of beneficiaries may make it difficult for ACOs to access medical record data required for quality reporting, as well as, reduce the beneficiary response rate on survey measures. Further, for practices damaged by a disaster, the medical records needed for quality reporting may be inaccessible. We also believe that disasters may affect the infrastructure of ACO participants, ACO providers/suppliers, and potentially the ACO legal entity itself, thereby disrupting routine operations related to their participation in the Shared Savings Program and achievement of program goals. The effects of a disaster could include challenges in communication between the ACO and its participating providers and suppliers and in implementation of and participation in programmatic activities. Catastrophic events outside the ACO's control can also increase the difficulty of coordinating care for patient populations, and due to the unpredictability of changes in utilization and cost of services furnished to beneficiaries, may have a significant impact on expenditures for the applicable performance year and the ACO's benchmark in the subsequent agreement period. These factors could jeopardize ACOs' ability to succeed in the Shared Savings Program, and ACOs, especially those in performance-based risk tracks, may reconsider whether they are able to continue their participation in the program.
Because widespread disruptions could occur during 2018 or subsequent performance years, we believe it is appropriate to have policies in place to change the way in which we assess the quality and financial performance of Shared Savings Program ACOs in any affected areas. Accordingly, we propose to extend the automatic extreme and uncontrollable circumstances policies under the Shared Savings Program that were established for performance year 2017 to performance year 2018 and subsequent performance years. Specifically, we propose that the Shared Savings Program extreme and uncontrollable circumstances policies for performance year 2018 and subsequent performance years would apply when we determine that an event qualifies as an automatic triggering event under the Quality Payment Program. As we discussed in the Shared Savings Program IFC (82 FR 60914), we believe it is also appropriate to extend these policies to encompass the quality reporting period, unless the reporting period is extended, because if an ACO is unable to submit its quality data as a result of a disaster occurring during the quality data submission window, we would not have the quality data necessary to measure the ACO's quality performance for the performance year. For example, if an extreme and uncontrollable event were to occur in February 2019, which we anticipate would be during the quality data reporting period for performance year 2018, then the extreme and uncontrollable circumstances policies would apply for quality data reporting and quality performance scoring for performance year 2018, if the reporting period is not extended. We do not believe it is appropriate to extend this policy to encompass the quality data reporting period if the reporting period is extended because affected ACOs would have an additional opportunity to submit their quality data, enabling us to measure their quality performance in the applicable performance year. Accordingly, we also propose that the policies regarding quality reporting would apply with respect to the determination of the ACO's quality performance in the event that an extreme and uncontrollable event occurs during the applicable quality data reporting period for a performance year and the reporting period is not extended. However, we note that, because a disaster that occurs after the end of the performance year would have no impact on the determination of an ACO's financial performance for that performance year, we do not believe it would be appropriate to make an adjustment to shared losses in the event an extreme or uncontrollable event occurs during the quality data reporting period.
As we explained in the Shared Savings Program IFC (82 FR 60914 through 60916), ACOs and their ACO
The 20 percent threshold was selected to account for the effect of an extreme or uncontrollable circumstance on an ACO that has the minimum number of assigned beneficiaries to be eligible for the program (5,000 beneficiaries), and in consideration of the average total number of unique beneficiaries for whom quality information is required to be reported in the combined CAHPS survey sample (860 beneficiaries) and the CMS web interface sample (approximately 3,500 beneficiaries). (There may be some overlap between the CAHPS sample and the CMS web interface sample.) Therefore, we estimated that an ACO with an assigned population of 5,000 beneficiaries typically would be required to report quality information on a total of 4,000 beneficiaries. Thus, we indicated that we believe the 20 percent threshold ensures that an ACO with the minimum number of assigned beneficiaries would have an adequate number of beneficiaries across the CAHPS and CMS web interface samples in order to fully report on these measures. However, we also noted that it is possible that some ACOs that have fewer than 20 percent of their assigned beneficiaries residing in affected areas may have a legal entity that is located in an emergency declared area. Consequently, their ability to quality report may be equally impacted because the ACO legal entity may be unable to collect the necessary information from the ACO participants or experience infrastructure issues related to capturing, organizing, and reporting the data to CMS. We stated that if less than 20 percent of the ACO's assigned beneficiaries reside in an affected area and the ACO's legal entity is not located in a county designated as an affected area, then we believe that there is unlikely to be a significant impact upon the ACO's ability to report or on the representativeness of the quality performance score that is determined for the ACO. For performance year 2017, we will determine what percentage of the ACO's performance year assigned population was affected by a disaster based on the final list of beneficiaries assigned to the ACO for the performance year. Although beneficiaries are assigned to ACOs under Track 1 and Track 2 based on preliminary prospective assignment with retrospective reconciliation after the end of the performance year, these ACOs will be able to use their quarterly assignment lists, which include beneficiaries' counties of residence, for early insight into whether they are likely to meet the 20 percent threshold.
In the Shared Savings Program IFC, we modified the quality performance standard specified under § 425.502 by adding a new paragraph (f) to address potential adjustments to the quality performance score for performance year 2017 of ACOs determined to be affected by extreme and uncontrollable circumstances. We also modified § 425.502(e)(4) to specify that an ACO receiving the mean Shared Savings Program ACO quality score for performance year 2017 based on the extreme and uncontrollable circumstances policies is not eligible for bonus points awarded based on quality improvement in that year because quality data will not be available to determine if there was improvement from year to year.
In the Shared Savings Program IFC, we established policies with respect to quality reporting and quality performance scoring for the 2017 performance year. In anticipation of any future extreme and uncontrollable events, we believe it is appropriate to propose to extend these policies, with minor modifications, to subsequent performance years as well. In order to avoid confusion and reduce unnecessary burdens on affected ACOs, we propose to align our policies for 2018 and subsequent years with policies established for the Quality Payment Program in final rule with comment period, entitled CY 2018 Updates to the Quality Payment Program (82 FR 53568). Specifically, we propose to apply determinations made under the Quality Payment Program with respect to whether an extreme and uncontrollable circumstance has occurred and the identification of the affected geographic areas and the applicable time periods. Generally, in line with the approach taken for 2017 in the Quality Payment Program IFC (82 FR 53897), we anticipate that the types of events that would be considered an automatic triggering event would be events designated as a Federal Emergency Management Agency (FEMA) major disaster or a public health emergency declared by the Secretary, but CMS will review each situation on a case-by-case basis. We also propose that CMS would have sole discretion to determine the time period during which an extreme and uncontrollable circumstance occurred, the percentage of the ACO's assigned beneficiaries residing in the affected areas, and the location of the ACO legal entity. Additionally, we propose to determine an ACO's legal entity location based on the address on file for the ACO in CMS's ACO application and management system.
In the Shared Savings Program IFC, we established a policy for performance year 2017 under which we will determine the percentage of the ACO's assigned population that was affected by a disaster based on the final list of beneficiaries assigned to the ACO for the performance year. We begin producing the final list of assigned beneficiaries after allowing for 3 months of claims run out following the end of a performance year. However, the quality reporting period ends before the 3-month claims run out period ends. Therefore, we are concerned that if, for future performance years, we continue to calculate the percentage of affected beneficiaries based on the ACO's final
In the Shared Savings Program IFC (82 FR 60916), we described the policies under the MIPS APM scoring standard that would apply for performance year 2017 for MIPS eligible clinicians in an ACO that did not completely report quality. The existing tracks of the Shared Savings Program (Track 1, Track 2 and Track 3), and the Track 1+ Model are MIPS APMs under the APM scoring standard.
We propose to revise § 425.502(f) to extend the policies established for performance year 2017 to performance year 2018 and subsequent performance years. Specifically, we propose that for performance year 2018 and subsequent performance years, including the applicable quality data reporting period for the performance year if the reporting period is not extended, in the event that we determine that 20 percent or more of an ACO's assigned beneficiaries, as determined using the list of beneficiaries used to generate the Web Interface quality reporting sample, reside in an area that is affected by an extreme and uncontrollable circumstance, as determined under the Quality Payment Program, or that the ACO's legal entity is located in such an area, we would use the following approach to calculate the ACO's quality performance score instead of the methodology specified in § 425.502(a) through (e).
• The ACO's minimum quality score would be set to equal the mean quality performance score for all Shared Savings Program ACOs for the applicable performance year.
• If the ACO is able to completely and accurately report all quality measures, we would use the higher of the ACO's quality performance score or the mean quality performance score for all Shared Savings Program ACOs. If the ACO's quality performance score is used, the ACO would also be eligible for quality improvement points.
• If the ACO receives the mean Shared Savings Program quality performance score, the ACO would not be eligible for bonus points awarded based on quality improvement during the applicable performance year.
• If an ACO receives the mean Shared Savings Program ACO quality performance score for a performance year, in the next performance year for which the ACO reports quality data and receives a quality performance score based on its own performance, we would measure quality improvement based on a comparison between the ACO's performance in that year and in the most recently available prior performance year in which the ACO reported quality. Under this approach, the comparison will continue to be between consecutive years of quality reporting, but these years may not be consecutive calendar years.
Additionally, we propose to address the possibility that ACOs that have a 6-month performance year (or performance period) during 2019 may be affected by extreme and uncontrollable circumstances. As described in section II.A.7 of this proposed rule, we are proposing to use 12 months of data, based on the calendar year, to determine quality performance for the two 6-month performance years during 2019 (from January 2019 through June 2019, and from July 2019 through December 2019). We are also proposing to use this same approach to determine quality performance for ACOs that start a 12-month performance year on January 1, 2019, and then elect to voluntarily terminate their participation agreement with an effective termination date of June 30, 2019, and enter a new agreement period starting on July 1, 2019. Accordingly, we believe it is necessary to account for disasters occurring in any month(s) of calendar year 2019 for ACOs participating in a 6-month performance year (or performance period) during 2019 regardless of whether the ACO is actively participating in the Shared Savings Program at the time of the
We propose to specify the applicability of the alternative scoring methodology in § 425.502(f) to the 6-month performance years (or the 6-month performance period) within calendar year 2019 in the proposed new section of the regulations at § 425.609 that describes the methodology for determining an ACO's financial and quality performance for the two 6-month performance years (or the 6-month performance period) during 2019.
In the Shared Savings Program IFC (82 FR 60916) we modified the payment methodology for performance-based risk tracks for performance year 2017, established under the authority of section 1899(i) of the Act, to mitigate shared losses owed by ACOs affected by extreme and uncontrollable circumstances. Under this approach, we will reduce the ACO's shared losses, if any, determined to be owed for performance year 2017 under the existing methodology for calculating shared losses in the Shared Savings Program regulations at 42 CFR part 425 subpart G by an amount determined by multiplying the shared losses by two factors: (1) The percentage of the total months in the performance year affected by an extreme and uncontrollable circumstance; and (2) the percentage of the ACO's assigned beneficiaries who reside in an area affected by an extreme and uncontrollable circumstance. For performance year 2017, we will determine the percentage of the ACO's performance year assigned beneficiary population that was affected by the disaster based on the final list of beneficiaries assigned to the ACO for the performance year. For example, assume that an ACO is determined to owe shared losses of $100,000 for performance year 2017, a disaster was declared for October through December during the performance year, and 25 percent of the ACO's assigned beneficiaries reside in the disaster area. In this scenario, we would adjust the ACO's losses in the following manner: $100,000 − ($100,000 × 0.25 × 0.25) = $100,000 − $6,250 = $93,750. The policies for performance year 2017 are specified in paragraph (i) in § 425.606 for ACOs under Track 2 and § 425.610 for ACOs under Track 3.
We believe it is appropriate to continue to apply these policies in performance year 2018 and subsequent years to address stakeholders' concerns that ACOs participating under a performance-based risk track could be held responsible for sharing losses with the Medicare program resulting from catastrophic events outside the ACO's control given the increase in utilization, difficulty of coordinating care for patient populations leaving the impacted areas, and the use of natural disaster payment modifiers making it difficult to identify whether a claim would otherwise have been denied under normal Medicare FFS rules. Absent this relief, we believe ACOs that are participating in performance-based risk tracks may reconsider whether they are able to continue their participation in the Shared Savings Program under a performance-based risk track. The approach we adopted for performance year 2017 in the Shared Savings Program IFC, and which we are proposing to continue for performance year 2018 and subsequent years, balances the need to offer relief to affected ACOs with the need to continue to hold those ACOs accountable for losses incurred during the months in which there was no applicable disaster declaration and for the portion of their final assigned beneficiary population that was outside the area affected by the disaster. Consistent with the policy adopted for performance year 2017 in the Shared Savings Program IFC, we believe it is appropriate to continue to use the final assignment list report for the performance year for purposes of this calculation. This final assignment list report will be available at the time we conduct final reconciliation and provides the most complete information regarding the extent to which an ACO's assigned beneficiary population was affected by a disaster.
Additionally, we propose to also address the possibility that ACOs that have a 6-month performance year during 2019 may be affected by extreme and uncontrollable circumstances. As described in section II.A.7 of this proposed rule, we are proposing to use 12 months of expenditure data, based on the calendar year, to perform financial reconciliation for the two 6-month performance years during 2019 (from January 2019 through June 2019, and from July 2019 through December 2019). Accordingly, for ACOs participating in a 6-month performance year during 2019, we believe it is necessary to account for disasters occurring in any month(s) of calendar year 2019, regardless of whether the ACO is actively participating in the Shared Savings Program at the time of the disaster. This proposal applies to ACOs participating under a 6-month performance year during calendar year 2019, that would be reconciled based on their financial performance during the entire 12-month calendar year 2019 (as described in section II.A.7 of this proposed rule and in the proposed provision at § 425.609). This proposal also applies to ACOs that start a 12-month performance year on January 1, 2019, and then elect to voluntarily terminate their participation agreement with an effective termination date of June 30, 2019, and enter a new agreement period starting on July 1, 2019. Consistent with § 425.221(b)(3)(i), we would reconcile these ACOs for the performance period from January 1, 2019, through June 30, 2019, based on their financial performance during the entire 12-month calendar year 2019, according to the methodology in the proposed provision at § 425.609.
For ACOs with a 6-month performance year (or performance period) that are affected by an extreme or uncontrollable circumstance during calendar year 2019, we propose to first determine shared losses for the ACO over the full calendar year, adjust the ACO's losses for extreme and uncontrollable circumstances, and then determine the portion of shared losses for the 6-month performance year (or performance period) according to the methodology proposed under § 425.609. For example, assume that: A disaster was declared for October 2019 through December 2019; an ACO is being reconciled for its participation during the performance year (or performance period) from January 1, 2019, through June 30, 2019; the ACO is determined to have shared losses of $100,000 for calendar year 2019; and 25 percent of
This proposed approach to mitigate shared losses for ACOs that may be affected by extreme and uncontrollable circumstances would also apply to ACOs that are liable for a pro-rated share of losses, determined based on their financial performance during the entire performance year, as a consequence of voluntary termination of a 12-month performance year after June 30 or involuntary termination by CMS (as described in section II.A.6 of this proposed rule and in the proposed revisions to § 425.221(b)(2)). We note that according to the proposed policies in section II.A.6.d of this proposed rule, an ACO under a two-sided model that voluntarily terminates its participation agreement under § 425.220 during a 6-month performance year with an effective date of termination prior to the last calendar day of the performance year is not liable for shared losses incurred during the performance year. For ACOs that are involuntarily terminated from a 6-month performance year, pro-rated shared losses for the 6-month performance year would be determined based on assigned beneficiary expenditures for the full calendar year 2019 (as described in section II.A.7 of this proposed rule) and then pro-rated to account for the partial year of participation prior to involuntary termination.
We acknowledge that it is possible that ACOs that either voluntarily terminate after June 30th of a 12-month performance year or are involuntarily terminated and will be reconciled to determine a pro-rated share of any shared losses may also be affected by extreme and uncontrollable circumstances. In this case, we propose that the amount of shared losses calculated for the calendar year would be adjusted to reflect the number of months and the percentage of the assigned beneficiary population affected by extreme and uncontrollable circumstances, before we calculate the pro-rated amount of shared losses for the portion of the year the ACO participated in the Shared Savings Program. For example, assume that: A disaster was declared for October 2019 through December 2019; an ACO had been involuntarily terminated on March 31, 2019 and will be reconciled for its participation during the portion of the performance year from January 1, 2019 through March 31, 2019. The ACO is determined to have shared losses of $100,000 for calendar year 2019; and 25 percent of the ACO's assigned beneficiaries reside in the disaster area. In this scenario, we would adjust the ACO's losses in the following manner: $100,000−($100,000 × 0.25 × 0.25) = $100,000−$6,250 = $93,750, then we would multiply these losses by the portion of the year the ACO participated = $93,750 × 0.25 = $23,437.50.
Therefore, we propose to amend §§ 425.606(i) and 425.610(i) to extend the policies regarding extreme and uncontrollable circumstances that were established for performance year 2017 to performance year 2018 and subsequent years. In section II.A.3.a of this proposed rule, we discuss our proposal that these policies for addressing the impact of extreme and uncontrollable circumstances on ACO financial performance would also apply to BASIC track ACOs under performance-based risk. These proposals are reflected in the proposed new provision at § 425.605(f). We also propose to specify in revisions to §§ 425.606(i) and 425.610(i), and in the proposed new provision for the BASIC track at § 425.605(f), that the policies regarding extreme and uncontrollable circumstances will also apply to ACOs that are reconciled for a partial year of performance under § 425.221(b)(2) as a result of voluntary or involuntary early termination. The proposed revisions to §§ 425.606(i) and 425.610(i) also address the applicability of these policies to a Track 2 or Track 3 ACO that starts a 12-month performance year on January 1, 2019, and then elects to voluntarily terminate its participation agreement with an effective termination date of June 30, 2019, and enters a new agreement period starting on July 1, 2019; these ACOs would be reconciled for the performance period from January 1, 2019 through June 30, 2019, consistent with the proposed new provision at § 425.221(b)(3)(i). In addition, we are proposing to include a provision at § 425.609(d) to provide that the policies on extreme and uncontrollable circumstances would apply to the determination of shared losses for ACOs participating in a 6-month performance year during 2019.
We note that to the extent that our proposal to extend the policies adopted in the Shared Savings Program IFC to 2018 and subsequent performance years constitutes a proposal to change the payment methodology for 2018 after the start of the performance year, we believe that consistent with section 1871(e)(1)(A)(ii) of the Act, and for the reasons discussed in this section of this proposed rule, it would be contrary to the public interest not to propose to establish a policy under which we would have the authority adjust the shared losses calculated for ACOs in Track 2 and Track 3 for performance year 2018 to reflect the impact of any extreme or uncontrollable circumstances that may occur during the year.
These proposed policies would not change the status of those payment models that meet the criteria to be Advanced APMs under the Quality Payment Program (see § 414.1415). Our proposed policies would reduce the amount of shared losses owed by ACOs affected by a disaster, but the overall financial risk under the payment model would not change and participating ACOs would still remain at risk for an amount of shared losses in excess of the Advanced APM generally applicable nominal amount standard. Additionally, these policies would not prevent an eligible clinician from satisfying the requirements to become a QP for purposes of the APM Incentive Payment (available for payment years through 2024) or higher physician fee schedule updates (for payment years beginning in 2026) under the Quality Payment Program.
We also want to emphasize that all ACOs would continue to be entitled to share in any savings they may achieve for a performance year. ACOs in all tracks of the program will continue to receive shared savings payments, if any, as determined under subpart G of the regulations. The calculation of savings and the determination of shared savings payment amounts for a performance year would not be affected by the proposed policies to address extreme and uncontrollable circumstances, except that the quality performance score for an affected ACO may be adjusted as described in this section of this proposed rule.
In the Shared Savings Program IFC, we sought comment on how to address the impact of extreme and uncontrollable circumstances on the expenditures for an ACO's assigned beneficiary population for purposes of determining the benchmark (82 FR 60917). As we explained in the Shared Savings Program IFC (82 FR 60913), the impact of disasters on an ACO's financial performance could be unpredictable as a result of changes in utilization and cost of services furnished to the Medicare beneficiaries it serves. In some cases, ACO
While considering options for adjusting ACOs' historical benchmarks to account for disasters occurring during a benchmark year, we considered the effect that the proposed regional factors, that are discussed in section II.D.3 might have on the historical benchmarks for ACOs located in a disaster area. After review, we believe that when regional factors are applied to an ACO's historical benchmark, the regional factors would inherently adjust for variations in expenditures from year to year, and thus would also adjust for regional variations in expenditures related to extreme and uncontrollable circumstances. For example, assume that an ACO experienced a reduction in beneficiary expenditures in performance year 2017 because a portion of its assigned beneficiaries resided in counties that were impacted by a disaster. Then, also assume expenditures returned to their previously higher level in 2018 and this ACO subsequently renewed its ACO participation agreement in 2020. In 2020, when the ACO's historical benchmark would be reset (rebased), the expenditures for 2017 (now a historical benchmark year) would be subject to a higher regional trend factor because expenditures increased back to the expected level in 2018, which would increase the 2017 benchmark year expenditures. Additionally, this ACO could also have its historical benchmark increased even further as a result of its performance compared to others in its region, as reflected in the regional adjustment to the ACO's historical benchmark. In contrast, consider an ACO that experienced an increase in beneficiary expenditures in performance year 2017 because a portion of its assigned beneficiaries resided in counties that were impacted by a disaster. Then, assume expenditures returned to their previously lower level in 2018 and this ACO renewed its ACO participation agreement in 2020. In 2020, when the ACO's historical benchmark would be reset, the expenditures for 2017 would be subject to a lower regional trend factor because expenditures decreased back to the expected level in 2018, which would decrease the 2017 benchmark year expenditures. Additionally, this ACO could also have its historical benchmark decreased further as a result of its performance compared to others in its region, as reflected in the regional adjustment to the ACO's historical benchmark.
Our expectation that the proposed regional factors that would be used to establish an ACO's historical benchmark would also adjust for variations in expenditures related to extreme and uncontrollable circumstances is supported by a preliminary analysis of data for areas that were affected by the disasters that occurred in performance year 2017. Our analysis of the data showed that, as a result of the disasters in these areas, expenditure trends for the performance year appeared below projections. For these areas, the expenditures began to increase after the disaster incident period ended, but expenditures were still below expectations for the year. Based on the expenditure trends beginning to return to expected levels after the disaster period, it would be reasonable to expect that expenditures would continue to increase to expected levels in 2018. This difference between the lower than expected levels of expenditures in 2017 and a return to expected expenditures in 2018, would result in a higher regional trend factor being applied to 2017 expenditures when they are used to determine an ACO's historical benchmark.
In considering whether it might be necessary to make an additional adjustment to ACOs' historical benchmarks to account for expenditure variations related to extreme and uncontrollable circumstances, we considered an approach where we would adjust the historical benchmark by reducing the weight of expenditures for beneficiaries who resided in a disaster area during a disaster period and placing a correspondingly larger weight on expenditures for beneficiaries residing outside the disaster area during the disaster period. Such an approach would be expected to proportionally increase the historical benchmark for ACOs that experienced a decrease in expenditures, and conversely proportionally decrease the historical benchmark for ACOs that experienced an increase in expenditures for their assigned beneficiaries who were impacted by a disaster. Under this approach, for each of the historical benchmark years, we would identify each ACO's assigned beneficiaries who had resided in a disaster area during a disaster period. The portion of expenditures for these assigned beneficiaries that was impacted by the disaster would be removed from the applicable historical benchmark year(s). The removal of these expenditures from the historical benchmark year(s) would allow the historical benchmark calculations to include only expenditures that were not impacted by the disaster. We believe this methodology for calculating benchmark expenditures would adjust for expenditure increases or decreases that may occur as a result of impacts related to a disaster.
If we were to implement such an adjustment to the historical benchmark, we believe it would be appropriate to avoid making minor historical benchmark adjustments for an ACO that was not significantly affected by a disaster by establishing a minimum threshold for the percentage of an ACO's beneficiaries located in a disaster area. Based on data from 2017, quarter 3, over 80 percent of ACOs had less than 50 percent of their assigned beneficiaries residing in disaster counties, with over 75 percent having less than 10 percent of their assigned beneficiaries residing in disaster counties. Based on this data, we believe a minimum threshold of 50 percent of assigned beneficiaries residing in disaster counties could be an appropriate threshold for the adjustment to historical benchmarks because historical benchmarks are calculated based on the ACO's entire assigned beneficiary population in each benchmark year, rather than a sample as is used for quality reporting.
However, we are concerned that this methodology for calculating an adjustment might not be as accurate as the inherent adjustment that would result from applying regional factors when resetting the benchmark and may
In summary, we believe the regional factors that we are proposing to apply as part of the methodology for determining an ACO's historical benchmark would reduce the expenditures in a historical benchmark year when they are greater than expected (relative to other historical benchmark years) as a result of a disaster and conversely increase expenditures in a historical benchmark year when they are below the expected amount. For these reasons, we believe that the proposal in section II.D.3 of this proposed rule to apply regional factors when determining ACOs' historical benchmarks, starting with an ACO's first agreement period for agreement periods starting on July 1, 2019, and in subsequent years, would be sufficient to address any changes in expenditures during an ACO's historical benchmark years as a result of extreme and uncontrollable circumstances, and an additional adjustment, such as the method discussed previously in this section would not appear to be necessary. However, we will continue to evaluate the impact of the 2017 disasters on ACOs' assigned beneficiary expenditures, and we intend to continue to consider whether it might be appropriate to make an additional adjustment to the historical benchmark to account for expenditures that may have increased or decreased in a historical benchmark year as a result of an extreme or uncontrollable circumstance.
We welcome comments on these issues, including whether it is necessary to adjust ACOs' historical benchmarks to account for extreme and uncontrollable circumstances that might occur during a benchmark year, and appropriate methods for making such benchmark adjustments. We would also note that the proposal in section II.D.3 of this proposed rule to apply regional factors to determine ACOs' historical benchmarks would apply starting with an ACO's first agreement period for agreement periods starting on July 1, 2019, and in subsequent years and would therefore have no effect on benchmarks for ACOs in a first agreement period starting before July 1, 2019. Accordingly, we welcome comments on whether and how an adjustment should be made for ACOs whose benchmarks do not reflect these regional factors.
We invite comments on the policies being proposed for assessing the financial and quality performance of ACOs affected by an extreme or uncontrollable circumstance during performance year 2018 and subsequent years, including the applicable quality data reporting period for the performance year, unless the reporting period is extended. We believe these policies would reduce burden and financial uncertainty for ACOs, ACO participants, and ACO providers/suppliers affected by future catastrophes, and will also align with existing Medicare policies in the Quality Payment Program. We also invite comments on any additional areas where relief may be helpful or other ways to mitigate unexpected issues that may arise in the event of an extreme and uncontrollable circumstance.
In this section, we solicit comments on possible changes to the quality measure set and modifications to program data shared with ACOs to support CMS's Meaningful Measures initiative and respond to the nation's opioid misuse epidemic. As part of the Meaningful Measures initiative, we are focusing the agency's efforts on updating quality measures, reducing regulatory burden, and promoting innovation (see CMS Press Release, CMS Administrator Verma Announces New Meaningful Measures Initiative and Addresses Regulatory Reform; Promotes Innovation at LAN Summit, October 30, 2017, available at
Since the Shared Savings Program was first established in 2012, we have not only updated the quality measure set to reduce reporting burden, but also to focus on more meaningful outcome-based measures. The most recent updates to the Shared Savings Program quality measure set were made in the CY 2017 PFS Final Rule (81 FR 80484 through 80489) to adopt the ACO measure recommendations made by the Core Quality Measures Collaborative, a multi-stakeholder group with the goal of aligning quality measures for reporting across public and private stakeholders in order to reduce provider reporting burden. Currently, more than half of the 31 Shared Savings Program quality measures are outcome-based, including:
• Patient-reported outcome measures collected through the CAHPS for ACOs Survey that strengthen patient and caregiver experience;
• Outcome measures supporting care coordination and effective communication, such as unplanned admission and readmission measures; and
• Intermediate outcome measures that address the effective treatment of chronic disease, such as hemoglobin A1c control for patients with diabetes and control of high blood pressure.
It is important that the quality reporting requirements under the Shared Savings Program align with the reporting requirements under other Medicare initiatives and those used by other payers in order to minimize the need for Shared Savings Program participants to devote excessive resources to understanding differences in measure specifications or engaging in duplicative reporting. We seek comment, including recommendations and input on meaningful measures, on how we may be able to further advance the quality measure set for ACO reporting, consistent with the requirement under section 1899(b)(3)(C) of the Act that the Secretary seek to improve the quality of care furnished by ACOs by specifying higher standards, new measures, or both.
One particular area of focus by the Department of Health and Human Services is the opioid misuse epidemic. The Centers for Disease Control and Prevention (CDC) reports that the number of people experiencing chronic pain lasting more than 3 months is estimated to include 11 percent of the adult population. According to a 2016
As part of a multifaceted response to address the growing problem of overuse and abuse of opioids in the Part D program, CMS adopted a policy in 2013 requiring Medicare Part D plan sponsors to implement enhanced drug utilization review. Between 2011 through 2014, there was a 26 percent decrease or 7,500 fewer Medicare Part D beneficiaries identified as potential opioid over-utilizers which may be due, at least in part, to these new policies. On January 5, 2017, CMS released its Opioid Misuse Strategy. This document outlines CMS's strategy and the array of actions underway to address the national opioid misuse epidemic and can be found at
We aim to align our policies under the Shared Savings Program with the priorities identified in the Opioid Misuse Strategy and to help ACOs and their participating providers and suppliers in responding to and managing opioid use, and are therefore considering several actions to improve alignment. Specifically, we are considering what information regarding opioid use, including information developed using aggregate Medicare Part D data, could be shared with ACOs. We are also considering the addition of one or more measures specific to opioid use to the ACO quality measures set. The potential benefits of such policies would be to focus ACOs on the appropriate use of opioids for their assigned beneficiaries and support their opioid misuse prevention efforts.
First, we are considering what information, including what aggregated Medicare Part D data, could be useful to ACOs to combat opioid misuse in their assigned beneficiary population. We recognize the importance of available and emerging resources regarding the opioid epidemic at the federal, state, and local level, and intend to work with our federal partners to make relevant resources available in a timely manner to support ACOs' goals and activities. We will also continue to share information with ACOs highlighting Federal opioid initiatives, such as the CDC Guideline for Prescribing Opioids for Chronic Pain (
Although we recognize that not all beneficiaries assigned to Shared Savings Program ACOs have Part D coverage, we believe a sufficient number do have Part D coverage to make aggregate Part D data regarding opioid use helpful for the ACOs. As an example, we have found the following information for performance year 2016:
• Approximately 70 percent of beneficiaries assigned to ACOs participating in the Shared Savings Program had continuous Part D coverage.
• For assigned beneficiaries with continuous Part D enrollment, almost 37 percent had at least one opioid prescription. This percentage ranged from 10.6 percent to 58.3 percent across ACOs.
• The mean number of opioid medications filled per assigned beneficiary (with continuous Part D coverage) varied across ACOs, ranging from 0.3 to 4.5 prescriptions filled, with an average of 2.1 prescriptions filled.
• The number of opioid prescriptions filled for each assigned beneficiary with at least one opioid prescription filled varied across ACOs and ranged from 2.6 to 8.4 prescriptions, with an average of 5.5 opioid prescriptions filled.
ACOs currently receive as part of the monthly claims and claims line feed data Part D prescription drug event (PDE) data on prescribed opioids for their assigned beneficiaries who have not opted out of data sharing. We encourage ACOs to use this beneficiary-level data in their care delivery practices.
We also seek suggestions for other types of aggregate data related to opioid use that could be added for informational purposes to the aggregate quarterly and annual reports CMS provides to ACOs. The aim would be for ACOs to utilize this additional information to improve population health management for assigned beneficiaries, including prevention, identifying anomalies, and coordinating care. The type of aggregate data should be highly relevant for a population-based program at the national level and have demonstrated value in quality improvement initiatives. We are particularly interested in high impact aggregate data that would reflect gaps in quality of care, patient safety, multiple aspects of care, and drivers of cost. We aim to provide aggregate data that have validity for longitudinal analysis to enable both ACOs and the Shared Savings Program to trend performance across time and monitor for changes. Aggregate data on both processes and outcomes are appropriate, provided that the data are readily available. Types of aggregate data that we have begun to consider, based on the information available from prescription drug event records for assigned beneficiaries enrolled in Medicare Part D, include filled prescriptions for opioids (percentage of the ACO's assigned beneficiaries with any opioid prescription, number of opioid prescriptions per opioid user), number of beneficiaries with a concurrent prescription of opioids and benzodiazepines; and number of beneficiaries with opioid prescriptions above a certain daily Morphine Equivalent Dosage threshold. Second, we are seeking comments on measures
• NQF #2940 Use of Opioids at High Dosage in Persons Without Cancer: Analyzes the proportion (XX out of 1,000) of Medicare Part D beneficiaries 18 years or older without cancer or enrolled in hospice receiving prescriptions for opioids with a daily dosage of morphine milligram equivalent (MME) greater than 120 mg for 90 consecutive days or longer.
• NQF #2950 Use of Opioids from Multiple Providers in Persons Without Cancer: Analyzes the proportion (XX out of 1,000) of Medicare Part D beneficiaries 18 years or older without cancer or enrolled in hospice receiving prescriptions for opioids from four (4) or more prescribers AND four (4) or more pharmacies.
• NQF #2951 Use of Opioids from Multiple Providers and at High Dosage in Persons Without Cancer: Analyzes the proportion (XX out of 1,000) of Medicare Part D beneficiaries 18 years or older without cancer or enrolled in hospice with a daily dosage of morphine milligram equivalent (MME) greater than 120 mg for 90 consecutive days or longer, AND who received opioid prescriptions from four (4) or more prescribers AND four (4) or more pharmacies.
In addition, we seek input on potential measures for which data are readily available, such as measures that might be appropriately calculated using Part D data, and that capture performance on outcomes of appropriate opioid management. Comments on measures that are not already NQF endorsed should include descriptions of reliability, validity, benchmarking, the population in which the measure was tested, along with the data source that was used, and information on whether the measure is endorsed and by what organization. We recognize that measures of the various aspects of opioid use may involve concepts related to integrated, coordinated, and collaborative care, including as applicable for co-occurring and/or chronic conditions, as well as measures that reflect the impact of interventions on patient outcomes, including direct and indirect patient outcome measures. We also seek comment on opioid-related measures that would support effective measurement alignment of substance use disorders across programs, settings, and varying interventions.
Consistent with the call in the 21st Century Cures Act for interoperable access, exchange, and use of health information, the final rule entitled, 2015 Edition Health Information Technology (Health IT) Certification Criteria, 2015 Edition Base Electronic Health Record (EHR) Definition, and ONC Health IT Certification Program Modifications (2015 Edition final rule) (80 FR 62601) under 45 CFR part 170
Under the Shared Savings Program, section 1899(b)(2)(G) of the Act requires participating ACOs to define processes to report on quality measures and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies. Consistent with the statute, ACOs participating in the Shared Savings Program are required to coordinate care across and among primary care physicians, specialists, and acute and post-acute providers and suppliers and to have a written plan to encourage and promote the use of enabling technologies for improving care coordination, including the use of electronic health records and electronic exchange of health information (§ 425.112(b)(4)). Additionally, since the inception of the program in 2012, CMS has assessed the level of CEHRT use by certain clinicians in the ACO as a double-weighted quality measure (Use of Certified EHR Technology, ACO-11) as part of the quality reporting requirements for each performance year. For the 2018 performance year, we will use data derived from the Quality Payment Program's Promoting Interoperability performance category to calculate the percentage of eligible clinicians participating in an ACO who successfully meet the Advancing Care Information Performance Category Base Score for purposes of ACO-11. Because the measure is used in determining an ACO's quality score and for determining shared savings or losses under the Shared Savings Program, all eligible clinicians participating in Shared Savings Program ACOs must submit data for the Quality Payment Program's Advancing Care Information performance category, including those eligible clinicians who are participating in Shared Savings Program tracks that have been designated as Advanced APMs and who have met the QP threshold or are otherwise not subject to the MIPS reporting requirements.
In contrast, some alternative payment models tested by the Innovation Center, require all participants to use CEHRT even though certain tracks within those Models do not meet the financial risk standard for designation as Advanced APMs, such as the Oncology Care Model (one-sided risk arrangement track) and the Comprehensive End-Stage Renal Disease Care (CEC) Model (non-LDO one-sided risk arrangement track).
In light of our additional experience with the Shared Savings Program, our desire to continue to promote and encourage CEHRT use by ACOs and their ACO participants and ACO providers/suppliers, and our desire to better align with the goals of the Quality Payment Program and the criteria for participation in certain alternative payment models tested by the Innovation Center, as previously noted, we believe it would be appropriate to amend our regulations related to CEHRT use and the eligibility requirements for ACOs to participate in the Shared Savings Program. Specifically, we propose to add a requirement that all ACOs demonstrate a specified level of CEHRT use in order to be eligible to participate in the Shared Savings Program. Additionally, we propose that, as a condition of participation in a track, or a payment model within a track, that meets the financial risk standard to be an Advanced APM, ACOs must certify that the percentage of eligible clinicians participating in the ACO who use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the threshold required for Advanced APMs as defined under the Quality Payment Program (§ 414.1415(a)(1)(i)). In conjunction with this proposed new eligibility requirement, we propose to retire the EHR quality measure (ACO-11) related to CEHRT use, thereby reducing reporting burden, effective for quality reporting for performance years starting on January 1, 2019, and subsequent performance years. In addition, consistent with our proposal to align with the Advanced APM criterion on use of CEHRT, we propose to apply the definition of CEHRT under the Quality Payment Program (§ 414.1305), including any subsequent updates to this definition, for purposes of the Shared Savings Program.
First, we are proposing that for performance years starting on January 1, 2019, and subsequent performance years ACOs in a track or a payment model within a track that does not meet the financial risk standard to be an Advanced APM must attest and certify upon application to participate in the Shared Savings Program, and subsequently, as part of the annual certification process, that at least 50 percent of the eligible clinicians participating in the ACO use CEHRT to document and communicate clinical care to their patients or other health care providers. ACOs would be required to submit this certification in the form and manner specified by CMS.
This proposed requirement aligns with the requirements regarding CEHRT use in many alternative payment models being tested by the Innovation Center (as previously noted). Additionally, we note that at the time of application, ACOs must have a written plan to use enabling technologies, such as electronic health records and other health IT tools, to coordinate care (§ 425.112(b)(4)(i)(C)). Over the years, successful ACOs have impressed upon us the importance of “hitting the ground running” on the first day of their participation in the Shared Savings Program, rather than spending the first year or two developing their care processes. We believe that requiring ACOs that are entering a track or a payment model within a track that does not meet the financial risk standard to be an Advanced APM to certify that at least 50 percent of the eligible clinicians participating in the ACO use CEHRT aligns with existing requirements under the Shared Saving Program and many Innovation Center alternative payment models and encourages participation by organizations that are more likely to meet the program goals. In addition, we believe such a requirement would also promote greater emphasis on the importance of CEHRT use for care coordination. Finally, we note that in the CY 2019 PFS proposed rule, we proposed to increase the threshold of CEHRT use required for APMs to meet criteria for designation as Advanced APMs under the Quality Payment Program to 75 percent (see 83 FR 35990). Given the proposals for updates and modifications to the Shared Savings Program tracks found elsewhere in this proposed rule, as well as the proposals under the Quality Payment Program, we believe it is important that only those ACOs that are likely to be able to meet or exceed the threshold designated for Advanced APMs should be eligible to enter and continue their participation in the Shared Savings Program. Because of this, and also our desire to align requirements as explained in more detail later in this section, we also considered whether to propose to require all Shared Savings Program ACOs, including ACOs in tracks or payment models within tracks that would not meet financial criteria to be designated as Advanced APMs, to meet the 75 percent threshold proposed under the Quality Payment Program.
We propose changes to the regulations at § 425.204(c) (to establish the new application requirement) and § 425.302(a)(3)(iii) (to establish the new annual certification requirement). We also propose to add a new provision at § 425.506(f)(1) to indicate that for performance years starting on January 1, 2019, and subsequent performance years, all ACOs in a track or a payment model within a track that does not meet the financial risk standard to be an Advanced APM must certify that at least 50 percent of their eligible clinicians use CEHRT to document and communicate clinical care to their patients or other health care providers. We note that this proposal, if finalized, would not affect the previously-finalized provisions for MIPS eligible clinicians reporting on the Promoting Interoperability (PI) performance category under MIPS. In other words, MIPS eligible clinicians who are participating in ACOs would continue to report as usual on the Promoting Interoperability performance category. We welcome comment on these proposed changes. We also seek comment on whether the percentage of CEHRT use should be set at a level higher than 50 percent for ACOs in a track or a payment model within a track that does not meet the financial risk standard to be an Advanced APM given
Further, for ACOs in tracks or models that meet the financial risk standard to be Advanced APMs under the Quality Payment Program, we propose to align the proposed CEHRT use threshold with the criterion on use of CEHRT established for Advanced APMs under the Quality Payment Program. Although we believe it would be ideal for all ACOs to meet the same CEHRT thresholds to be eligible for participation in the Shared Savings Program, we recognize that there may be reasons why it may be desirable for ACOs in tracks or payment models within a track that do not meet the financial risk standard for Advanced APMs to have a different threshold requirement for CEHRT use than more sophisticated ACOs that are participating in tracks or payment models that qualify as Advanced APMs under the Quality Payment Program. For example, we note that in order for an APM to meet the criteria to be an Advanced APM under the Quality Payment Program, it must currently require at least 50 percent of eligible clinicians in each participating APM entity to use CEHRT to document and communicate clinical care to their patients or other health care providers (in addition to certain other criteria). However, we have proposed to increase this threshold level under the Quality Payment Program to 75 percent of eligible clinicians in each participating Advanced APM entity, as part of the CY 2019 PFS proposed rule, as previously noted. Therefore, for performance years starting on January 1, 2019, and subsequent performance years for Shared Savings Program tracks (or payment models within tracks) that meet the financial risk standard to be an Advanced APM, we propose to align the CEHRT requirement with the Quality Payment Program Advanced APM CEHRT use criterion at § 414.1415(a)(1)(i). Specifically, we propose that such ACOs would be required to certify that they meet the higher of the 50 percent threshold proposed for ACOs in a track (or a payment model within a track) that does not meet the financial risk standard to be an Advanced APM or the CEHRT use criterion for Advanced APMs under the Quality Payment Program at § 414.1415(a)(1)(i). We believe that requiring these ACOs to meet the higher of the 50 percent threshold proposed for ACOs in a track (or a payment model within a track) that does not meet the financial risk standard to be an Advanced APM or the CEHRT use criterion for Advanced APMs will ensure alignment of eligibility requirements across all Shared Savings Program ACOs, while also ensuring that if the CEHRT use criterion for Advanced APMs is higher than 50 percent, those Shared Savings Program tracks (or payment models within a track) that meet the financial risk standard to be an Advanced APM would also meet the CEHRT threshold established under the Quality Payment Program. We anticipate that for performance years starting on January 1, 2019, the tracks (or payment models within tracks) that would be required to meet the CEHRT threshold designated at § 414.1415(a)(1)(i) would include Track 2, Track 3, and the Track 1+ Model, and for performance years starting on July 1, 2019, they would include the BASIC track, Level E, and the ENHANCED track. ACOs in these tracks (or a payment model within such a track) would be required to attest and certify that the percentage of the eligible clinicians in the ACO that use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the level of CEHRT use specified under the Quality Payment Program regulation at § 414.1415(a)(1)(i). Although this proposal may cause Shared Savings Program ACOs in different tracks (or different payment models within the same track) to be held to different requirements regarding CEHRT use, we believe it is appropriate to ensure not only that ACOs that are still new to participation in the Shared Savings Program are not excluded from the program due to a requirement that a high percentage of eligible clinicians participating in the ACO use CEHRT, but also that eligible clinicians in ACOs further along the risk continuum have the opportunity to participate in an Advanced APM for purposes of the Quality Payment Program.
We propose to add a new provision to the regulations at § 425.506(f)(2) to establish the CEHRT requirement for performance years starting on January 1, 2019, and subsequent performance years for ACOs in a track or a payment model within a track that meets the financial risk standard to be an Advanced APM under the Quality Payment Program. These ACOs would be required to certify that the percentage of eligible clinicians participating in the ACO that use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the higher of 50 percent or the threshold for CEHRT use by Advanced APMs at § 414.1415(a)(1)(i). We seek comment on this proposal. We also seek comment on whether we should apply the same standard regarding CEHRT use across all Shared Savings Program ACOs, including ACOs participating in tracks or payment models within tracks that do not meet the financial risk standard to be designated as Advanced APMs, specifically Track 1 and the proposed BASIC track, Levels A through D, or maintain the proposed 50 percent requirement for these ACOs as they gain experience on the glide path to performance-based risk.
As a part of these proposals to require ACOs to certify that a specified percentage of their eligible clinicians use CEHRT, CMS reserves the right to monitor, assess, and/or audit an ACO's compliance with respect to its certification of CEHRT use among its participating eligible clinicians, consistent with §§ 425.314 and 425.316, and to take compliance actions (including warning letters, corrective action plans, and termination) as set forth at §§ 425.216 and 425.218 when ACOs fail to meet or exceed the required CEHRT use thresholds. Additionally, we propose to adopt for purposes of the Shared Savings Program the same definition of “CEHRT” as is used under the Quality Payment Program. We propose to amend § 425.20 to incorporate a definition of CEHRT consistent with the definition at § 414.1305, including any subsequent updates or revisions to that definition. Consistent with this proposal and to ensure alignment with the requirements regarding CEHRT use under the Quality Payment Program, we also propose to amend § 425.20 to incorporate the definition of “eligible clinician” at § 414.1305 that applies under the Quality Payment Program.
Additionally, if the proposal to introduce a specified threshold of CEHRT use as an eligibility requirement for participation in the Shared Savings
Finally, as discussed previously in this section, in the CY 2017 Quality Payment Program final rule, CMS finalized a separate Advanced APM CEHRT use criterion that applies for the Shared Savings Program at § 414.1415(a)(1)(ii). To meet the Advanced APM CEHRT use criterion under the Shared Savings Program, a penalty or reward must be applied to an APM Entity based upon the degree of CEHRT use among its eligible clinicians. We believed that this alternative criterion was appropriate to assess the Advanced APM CEHRT use requirement under the Shared Savings Program because at the time a specific level of CEHRT use was not required for participation in the program (81 FR 77412).
We now believe that that our proposal to impose specific CEHRT use requirements on ACOs participating in the Shared Savings Program would eliminate the need for the separate CEHRT use criterion applicable to the Shared Savings Program APMs found at § 414.1415(a)(1)(ii). If the previously described proposals are finalized, ACOs seeking to participate in a Shared Savings Program track (or payment model within a track) that meets the financial risk standard to be an Advanced APM would be required to demonstrate that the percentage of eligible clinicians in the ACO using CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the higher of 50 percent or the percentage specified in the CEHRT use criterion for Advanced APMs at § 414.1415(a)(1)(i). As a result, a separate CEHRT use criterion for APMs under the Shared Savings Program would no longer be necessary.
We therefore propose to revise the separate Shared Savings Program CEHRT use criterion at § 414.1415(a)(1)(ii) so that it applies only for QP Performance Periods under the Quality Payment Program prior to 2019. We seek comment on this proposal.
Medicare ACOs and other stakeholders have indicated an interest in collaborating to enhance the coordination of pharmacy care for Medicare FFS beneficiaries to reduce the risk of adverse events and improve medication adherence. For example, areas where ACOs and the sponsors of stand-alone Part D PDPs might collaborate to enhance pharmacy care coordination include establishing innovative approaches to increase clinician formulary compliance (when clinically appropriate) and medication compliance; providing pharmacy counseling services from pharmacists; and implementing medication therapy management. Part D sponsors may be able to play a greater role in coordinating the care of their enrolled Medicare FFS beneficiaries and having greater accountability for their overall health outcomes, such as for beneficiaries with chronic diseases where treatment and outcome are highly dependent on appropriate medication use and adherence. Increased collaboration between ACOs and Part D sponsors may facilitate better and more affordable drug treatment options for beneficiaries by encouraging the use of generic prescription medications, where clinically appropriate, or reducing medical errors through better coordination between providers and Part D sponsors.
We believe that Medicare ACOs and Part D sponsors may be able to enter into appropriate business arrangements to support improved pharmacy care coordination, provided such arrangements comply with all applicable laws and regulations. However, challenges may exist in forming these arrangements. Under the Pioneer ACO Model, an average of 54 percent of the beneficiaries assigned to Pioneer ACOs in 2012 were also enrolled in a PDP in that year, with the median ACO having at most only 13 percent of its assigned beneficiaries enrolled in a plan offered by the same PDP parent organization. For performance year 2016, we found that approximately 70 percent of the beneficiaries assigned to Shared Savings Program ACOs had continuous Part D coverage.
We believe timely access to data could improve pharmacy care coordination. Although CMS already provides Medicare ACOs with certain Part D prescription drug event data, it may be useful for both Medicare ACOs and Part D sponsors to share certain clinical data and pharmacy data with each other to support coordination of pharmacy care. Any data sharing arrangements between ACOs and Part D sponsors should comply with all applicable legal requirements regarding the privacy and confidentiality of such data, including the Health Insurance Portability and Accountability Act (HIPAA).
We seek comment on how Medicare ACOs, and specifically Shared Savings Program ACOs, and Part D sponsors
The Track 1+ Model was established under the Innovation Center's authority at section 1115A of the Act, to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care for Medicare, Medicaid, and Children's Health Insurance Program beneficiaries. We have previously noted that 55 Shared Savings Program Track 1 ACOs entered into the Track 1+ Model beginning January 1, 2018. This includes 35 ACOs that entered the model within their current agreement period (to complete the remainder of their agreement period under the Model) and 20 ACOs that entered a 3-year agreement in the Model.
To enter the model, ACOs approved to participate are required to agree to the terms and conditions of the model by executing a Track 1+ Model Participation Agreement. See
Unless stated otherwise in the Track 1+ Model Participation Agreement, the requirements of the Shared Savings Program under 42 CFR part 425 continue to apply. Consistent with § 425.212, Track 1+ Model ACOs are subject to all applicable regulatory changes, including but not limited to, changes to the regulatory provisions referenced within the Track 1+ Model Participation Agreement that become effective during the term of the ACO's Shared Savings Program Participation Agreement and Track 1+ Model Participation Agreement, unless otherwise specified through rulemaking or amendment to the Track 1+ Model Participation Agreement. We note that the terms of the Track 1+ Model Participation Agreement permit the parties (CMS and the ACO) to amend the agreement at any time by mutual written agreement.
An ACO's opportunity to join the Track 1+ Model aligns with the Shared Savings Program's application cycle. The original design of the Track 1+ Model included 3 application cycles for ACOs to apply to enter or renew their participation in the Track 1+ Model for an agreement period start date of 2018, 2019, or 2020. The 2018 application cycle is closed, and as discussed elsewhere in this proposed rule, 55 ACOs began participating in the Track 1+ Model on January 1, 2018. As discussed in section II.A.7 of this proposed rule, we are not offering an application cycle for a January 1, 2019 start date for new agreement periods under the Shared Savings Program. Therefore, we would similarly not offer a start date of January 1, 2019, for participation in the Track 1+ Model.
In addition, we have also re-evaluated the need for continuing the Track 1+ Model as a participation option for 2019 and 2020 in light of the proposal to offer the BASIC track (including a glide path for eligible ACOs) as a participation option beginning in 2019. Like the Track 1+ Model, the BASIC track would offer relatively lower levels of risk and potential reward than Track 2 and the ENHANCED track. The BASIC track's glide path would allow the flexibility for eligible ACOs to enter a one-sided model and to automatically progress through levels of risk and reward that end at a comparable level of risk and reward (Level E) as offered in the Track 1+ Model and to also qualify as participating in an Advanced APM. ACOs in the glide path could also elect to more quickly enter higher levels of risk and reward within the BASIC track. If the proposed approach to adding the BASIC track is finalized and made available for agreement periods beginning in 2019 and subsequent years, we would discontinue future application cycles for the Track 1+ Model. In that case, the Track 1+ Model would not accept new model participants for start dates of July 1, 2019, or January 1, 2020, or in subsequent years.
Existing Track 1+ Model ACOs would be able to complete the remainder of their current agreement period in the model, or terminate their current participation agreements (for the Track 1+ Model and the Shared Savings Program) and apply to enter a new Shared Savings Program agreement period under either the BASIC track (Level E) or the ENHANCED track, depending upon whether the ACO is low revenue or high revenue (as described in section II.A.5 of this proposed rule). Additionally, as discussed in section II.A.7.c.1 of this proposed rule, ACOs would not have the opportunity to apply to use a SNF 3-day rule waiver starting on January 1, 2019, under our decision to forgo an annual application cycle for a January 1, 2019 start date in the Shared Savings Program and the proposal that the next available application cycle would occur in advance of a July 1, 2019 start date in the Shared Savings Program. An exception to the January 1 start date for use of a SNF 3-day rule waiver would similarly be made to allow for a July 1, 2019 start date for eligible Track 1+ Model ACOs that apply for and are approved to use a SNF 3-day rule waiver.
In making this decision to discontinue future application cycles for the Track 1+ Model, we considered the high level of participation in the Track 1+ Model in its first performance year. This high level of interest in the model indicates a positive response to its design, and therefore we believe we have met an important goal of testing the Track 1+ Model. As we previously described in section II.A.1 of this proposed rule, the availability of the Track 1+ Model
Further, as discussed in section II.A of this proposed rule, we have incorporated lessons learned from our initial experience with the Track 1+ Model into the design of the proposed BASIC track. This includes offering a payment model within the BASIC track (Level E) that includes the same level of risk and potential reward as available under the Track 1+ Model. We have also proposed a repayment mechanism estimation methodology based on our experience with the Track 1+ Model, to allow for potentially lower, and therefore less burdensome, repayment mechanism amounts for ACOs with relatively lower estimated ACO participant Medicare FFS revenue compared to estimated benchmark expenditures for their assigned Medicare FFS beneficiary population. We believe offering both the BASIC track and the Track 1+ Model would create unnecessary redundancy in participation options within CMS's Medicare ACO initiatives.
We believe a comprehensive discussion of the applicability of the proposed policies to Track 1+ Model ACOs would allow these ACOs to better prepare for their future years of participation in the program and the Track 1+ Model. There are two ways in which the proposed policies would become applicable to Track 1+ Model ACOs: (1) Through revisions to existing regulations that currently apply to Track 1+ Model ACOs, and (2) through revisions to the ACO's Track 1+ Model Participation Agreement.
Unless specified otherwise, the proposed changes to the program's regulations that are applicable to Shared Savings Program ACOs within a current agreement period would apply to ACOs in the Track 1+ Model in the same way that they apply to ACOs in Track 1, so long as the applicable regulation has not been waived under the Track 1+ Model. Similarly, to the extent that certain requirements of the regulations that apply to ACOs under Track 2 or Track 3 have been incorporated for ACOs in the Track 1+ Model under the terms of the Track 1+ Model Participation Agreement, any proposed changes to those regulations would also apply to ACOs in the Track 1+ Model in the same way that they apply to ACOs in Track 2 or Track 3. For example, the following proposed policies would apply to Track 1+ Model ACOs, if finalized:
• Changes to the repayment mechanism requirements (other than the proposed provisions regarding calculation of the repayment mechanism amount at § 425.204(f)(4)), which would be applicable with the effective date of the final rule (section II.A.6.c). We believe these proposed requirements are similar to the requirements under which Track 1+ Model ACOs established their repayment mechanisms, such that no revision to these arrangements would be required, in the event the proposed policies are finalized. Further, consistent with the proposed changes to the repayment mechanism requirements, we note that Track 1+ Model ACOs that seek to renew their Shared Savings Program agreement would be permitted to use their existing repayment mechanism arrangement to support their continued participation in the Shared Savings Program under a two-sided model in their next agreement period, provided that the amount and duration of the repayment mechanism arrangement are updated as specified by CMS.
• The requirement to notify beneficiaries regarding voluntary alignment and to provide a standardized written notice at the first primary care visit of each performance year (section II.C.3.a.2). If finalized, the proposed policy would be applicable for the performance year beginning on July 1, 2019, and subsequent performance years.
• Revisions to voluntary alignment policies (section II.E.2). If finalized, the proposed policies would be applicable for the performance year beginning on January 1, 2019, and subsequent performance years.
• Revisions to the definition of primary care services used in beneficiary assignment (section II.E.3.b). If finalized, the proposed policy would be applicable for the performance year beginning on January 1, 2019, and subsequent performance years.
• Discontinuation of quality measure ACO-11; requirement to attest at the time of application and as part of the annual certification that a specified percentage of the ACO's eligible clinicians use CEHRT (section II.E.6). If finalized, the proposed policy would be applicable for the performance year beginning on January 1, 2019, and subsequent performance years.
We would also seek to apply the following proposed policies to Track 1+ Model ACOs, although to do so would require an amendment to the Track 1+ Model Participation Agreement executed by CMS and the ACO:
• Monitoring for and consequences of poor financial performance (section II.A.5.d).
• Revising the MSR/MLR to address small population sizes (section II.A.6.b.3).
• Payment consequences of early termination for ACOs under performance-based risk (section II.A.6.d).
• Annual certification that the percentage of eligible clinicians participating in the ACO that use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the higher of 50 percent or the threshold established under § 414.1415(a)(1)(i) (section II.E.6). This certification would be required to ensure the Track 1+ Model continues to meet the CEHRT criterion for qualification as an Advanced APM for purposes of the Quality Payment Program.
• For ACOs that started a first or second Shared Savings Program participation agreement on January 1, 2016, and entered the Track 1+ Model on January 1, 2018, and that elect to extend their Shared Savings Program participation agreement for the 6-month performance year from January 1, 2019 through June 30, 2019 (as described in section II.A.7 of this proposed rule):
++ Consistent with the policy proposed in section II.A.7.c.3 and § 425.204(f)(6), the ACO would be required to extend its repayment mechanism so that it ends 24 months after the end of the agreement period (June 30, 2021).
++ We would determine performance for the 6-month performance year from January 1, 2019 through June 30, 2019, according to the approach specified in a proposed new section of the regulations at § 425.609(b), applying the financial methodology for calculating shared losses specified in the ACO's Track 1+ Model Participation Agreement.
++ We would continue to share aggregate report data with the ACO for the entire calendar year 2019, consistent with the proposed approach described in section II.A.7.c.9, and the terms of the
• Extreme and uncontrollable circumstances policies for determining shared losses for performance years 2018 and subsequent years, consistent with the policies specified in §§ 425.610(i) (section II.E.4) and 425.609(d) (section II.A.7.c.5) for ACOs that elect to extend their Shared Savings Program participation agreement for the 6-month performance year from January 1, 2019 through June 30, 2019.
• Certain requirements related to the use of telehealth services beginning on January 1, 2020, as provided under section 1899(l) of the Act (section II.B.2.b.2). As previously described, the Bipartisan Budget Act of 2018 provides for coverage of certain telehealth services furnished by physicians and practitioners in ACOs participating in a model tested or expanded under section 1115A of the Act that operate under a two-sided model and for which beneficiaries are assigned to the ACO using a prospective assignment method. ACOs participating in the Track 1+ Model meet these criteria. We believe it would be appropriate to apply the same requirements under the Track 1+ Model with respect to the use of telehealth services that would apply to other Shared Savings Program ACOs that are applicable ACOs for purposes of section 1899(l) of the Act. This would ensure consistency across program operations, payments, and beneficiary protection requirements for Track 1+ Model ACOs and other Shared Savings Program ACOs with respect to the use of telehealth services.
We seek comment on these considerations, and any other issues that we may not have discussed related to the effect of the proposed policies on ACOs that entered the Track 1+ Model beginning in 2018. We note that these ACOs will complete their participation in the Track 1+ Model by no later than December 31, 2020 (for ACOs that entered the model at the start of a 3-year agreement period), or sooner in the case of ACOs that entered the model at the start of their second or third performance year within their current 3-year agreement period.
Applicability or implementation dates may vary, depending on the policy, and the timing specified in the final rule. Unless otherwise noted, the proposed changes would be effective 60 days after publication of the final rule. Table 13 lists the anticipated applicability date of key changes in this proposed rule. By indicating that a provision is applicable to a performance year (PY) or agreement period, activities related to implementation of the policy may precede the start of the performance year or agreement period.
As stated in section 3022 of the Affordable Care Act, Chapter 35 of title 44, United States Code, shall not apply to the Shared Savings Program. Consequently, the information collection requirements contained in this proposed rule need not be reviewed by the Office of Management and Budget.
This proposed rule is necessary in order to make certain payment and policy changes to the Medicare Shared Savings Program established under section 1899 of the Act. The Shared Savings Program promotes accountability for a patient population, fosters the coordination of items and services under Parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.
The need for the proposed policies is summarized in the statement of the rule's purpose in section I of this proposed rule and described in greater detail throughout the discussion of the proposed policies in section II of this proposed rule. As we have previously explained in this proposed rule, ACOs in two-sided models have shown significant savings to the Medicare program and are advancing quality. However, the majority of ACOs remain under a one-sided model. Some of these ACOs are generating losses (and therefore increasing Medicare spending) while receiving waivers of certain federal requirements in connection with their participation in the program. These ACOs may also be encouraging consolidation in the market place and reducing competition and choice for Medicare FFS beneficiaries. Under the proposed redesign of the Shared Savings Program, ACOs of different compositions, and levels of experience with the accountable care model could continue to participate in the program, but the proposals included in this proposed rule would put the program on a path towards achieving a more measureable move to value and achieve savings for the Medicare program, while promoting a competitive and accountable marketplace.
In summary, this proposed rule would redesign the participation options, including the payment models, available to Shared Savings Program ACOs to encourage their transition to performance-based risk. As part of this approach, CMS proposes to extend the length of ACOs' agreement periods from 3 to 5 years as well as to make changes to the program's benchmarking methodology to allow for benchmarks that better reflect the ACO's regional service area expenditures beginning with its first agreement period, while mitigating the effects of factors based on regional FFS expenditures on ACO benchmarks more generally. These proposed policies are necessary to improve the value proposition of the program for currently participating ACOs considering continuing their participation, as well as for organizations considering entering the program. Further, these changes are timely as large cohorts of the program's early entrants, the vast majority of which are currently participating in the program's one-sided model (Track 1), face a required transition to performance-based risk at the start of their next agreement period under the program's current regulations.
Other key changes to the program's regulations are also necessary, including to implement new requirements established by the Bipartisan Budget Act, which generally allow for additional flexibilities in payment and program policies for ACOs and their participating providers and suppliers. Specifically, we are proposing policies to implement provisions of the Bipartisan Budget Act that allow certain ACOs to establish CMS-approved beneficiary incentive programs to provide incentive payments to assigned beneficiaries who receive qualifying primary care services; permit payment for expanded use of telehealth services furnished by physicians or other practitioners participating in an applicable ACO that is subject to a prospective assignment methodology;
To provide ACOs time to consider the new participation options and prepare for program changes, make investments and other business decisions about participation, obtain buy-in from their governing bodies and executives, and complete and submit a Shared Savings Program application for a performance year beginning in 2019, we intend to forgo the application cycle in 2018 for an agreement start date of January 1, 2019, and instead propose to offer a July 1, 2019 start date. This midyear start in 2019 would also allow both new applicants and ACOs currently participating in the program an opportunity to make any changes to the structure and composition of their ACO as may be necessary to comply with the new program requirements for the ACO's preferred participation option, if changes to the participation options are finalized as proposed. Additionally, ACOs with a participation agreement ending on December 31, 2018, would have an opportunity to extend their current agreement period for an additional 6-month performance year and to apply for a new agreement period under the BASIC track or ENHANCED track beginning on July 1, 2019. ACOs entering a new agreement period on July 1, 2019, would have the opportunity to participate in the program under an agreement period spanning 5 years and 6 months, where the first performance year is the 6-month period between July 1, 2019, and December 31, 2019. This proposed rule includes the proposed methodology for determining ACO financial performance for these two, 6-month performance years during CY 2019.
Further, this proposed rule would make other timely updates to the program's regulations, for consistency with other changes in program policies or Medicare policies more generally, such as: (1) Modifying the definition of primary care services used in beneficiary assignment to add new codes and revising how we determine whether evaluation and management services were furnished in a SNF; (2) extending policies previously adopted for performance year 2017 to performance year 2018 and subsequent years to address quality performance scoring and the determination of shared losses (under two-sided models) in the event of extreme or uncontrollable circumstances; and (3) promoting interoperability in Medicare by establishing a new Shared Savings Program eligibility requirement related to adoption of CEHRT by an ACO's eligible clinicians, while discontinuing use of the existing quality measure on use of CEHRT.
We examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a rule: (1) Having an annual effect on the economy of $100 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Executive Order 13771 directs agencies to categorize all impacts which generate or alleviate costs associated with regulatory burden and to determine the action's net incremental effect.
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimate that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act. Accordingly, we have prepared a RIA, which to the best of our ability presents the costs and benefits of the rulemaking.
In keeping with our standard practice, the main analysis presented in this RIA compares the expected outcomes if the full set of proposals in this rule were finalized to the expected outcomes under current regulations. We provide our analysis of the expected costs of the proposed payment model under section 1899(i)(3) of the Act to the costs that would be incurred under the statutory payment model under section 1899(d) of the Act in section IV.E. of this proposed rule.
The Shared Savings Program is a voluntary program operating since 2012 that provides financial incentives for demonstrating quality of care and efficiency gains within FFS Medicare. In developing the proposed policies, we evaluated the impact of the quality and financial results of the first 4 performance years of the program. We also considered our earlier projections of the program's impacts as described in the November 2011 final rule (see Table 8, 76 FR 67963), the June 2015 final rule (80 FR 32819), and June 2016 final rule (81 FR 38002).
We have four performance years of financial performance results available for the Shared Savings Program.
The same performance year 2016 data also show that ACOs produce a higher level of net savings and more optimal financial performance results the longer they have been in the Shared Savings Program and with additional participation experience. In performance year 2016, 42 percent of ACOs that started participating in the Shared Savings Program in 2012 and remained in the program shared in savings and 36 percent of both 2013 and 2014 starters shared in savings. In contrast, 26 percent of 2015 starters shared in savings and 18 percent of 2016 starters shared in savings in performance year 2016.
Table 15 indicates that when analyzing the performance of ACOs in Track 1, which is the track in which the majority of Shared Savings Program ACOs participated as of performance year 2016, it becomes clear that low revenue ACOs are saving CMS money while high revenue ACOs are resulting in additional spending by CMS before accounting for market-wide and potential spillover effects. Low revenue Track 1 ACOs produced net savings of $182 million relative to their benchmarks or $73 per enrollee, and high revenue Track 1 ACOs produced a net loss of $231 million or $46 per enrollee. For the purpose of this analysis, an ACO whose ACO participants' Medicare FFS revenue for assigned beneficiaries was less than 10 percent of the ACO's assigned beneficiary population's Parts A and B expenditures, was identified as a “low revenue ACO,” while an ACO whose ACO participants' Medicare FFS revenue for assigned beneficiaries was at least 10 percent of the ACO's assigned beneficiary population's Parts A and B expenditures, was identified as a “high revenue ACO”. Nationally, evaluation and management spending accounts for about 10 percent of total Parts A and B per capita spending. Because ACO assignment focuses on evaluation and management spending, applying a 10 percent limit to identify low revenue ACOs would capture all ACOs that participated in the Shared Savings Program in performance year 2016 that were solely comprised of providers and suppliers billing physician fee schedule services and generally exclude ACOs with providers and suppliers that bill inpatient services for their assigned beneficiaries. The use of a threshold of 10 percent of the Parts A and B expenditures for the ACO's assigned beneficiary population to classify ACOs as either “low revenue” or “high revenue” also showed the most significant difference in performance between the two types of ACOs. We note that this approach differs from the proposed definitions for low revenue ACO and high revenue ACO discussed in section II.A.5.b. of this proposed rule. However, our analysis has confirmed that the simpler and more practical proposed policy for identifying low revenue ACOs using a 25-percent threshold in terms of the ratio of ACO participants' total Medicare Parts A and B FFS revenue relative to total Medicare Parts A and B expenditures for the ACO's assigned beneficiary population produces a comparable subgroup of ACOs with similarly-elevated average financial performance and physician-based ACO participant composition.
With respect to ACO quality, the Shared Savings Program's quality measure set includes both process and outcome measures that evaluate preventive care, clinical care for at-risk populations, patient experience of care, and care coordination. ACOs have consistently achieved higher average performance rates compared to group practices reporting similar quality measures. In addition, ACOs that have participated in the program over a
Analysis of wider program claims data indicates Medicare ACOs have considerable market-wide impact, including significant spillover effects not directly measurable by ACO benchmarks. Whereas spending relative to benchmark (Tables 14 and 15) indicates Shared Savings Program ACOs as a group are not producing net savings for the Medicare FFS program, a study of wider claims data indicates significant net savings are likely being produced. Table 16 includes data through performance year 2016 on the cumulative per capita Medicare FFS expenditure trend (on a price-standardized and risk-adjusted basis) in markets that include Medicare ACOs, including ACOs participating in the Shared Savings Program as well as in the Pioneer and Next Generation ACO Models. Table 16 illustrates that, compared to the results in relation to ACOs' historical benchmarks discussed previously (see Table 14), more savings are likely being generated when both the spillover effects on related populations and the feedback effect of growing ACO participation on the national average FFS program spending growth, which in turn has been used to update ACO benchmarks, are factored in. Table 16 expresses combined market average per capita spending growth since 2011 relative to a baseline FFS per capita trend observed for hospital referral regions continuing to have less than 10 percent of total assignable FFS beneficiaries assigned to Medicare ACOs through 2016. Markets that have been “ACO active” longer (defined by the year a market first reached at least 10 percent assignment of assignable FFS beneficiaries to Medicare ACOs) show the greatest relative reduction in average adjusted growth in per capita Medicare FFS spending. Markets that have included Medicare ACOs since 2012, particularly the relatively small subset of 10 hospital referral regions reaching significant ACO participation in risk (defined as at least 30 percent assignment by 2016 to ACOs participating in a Shared Savings Program track or Medicare ACO model with performance-based risk), show the most significant reductions in Medicare FFS spending through 2016.
Based on an analysis of Medicare Shared Savings Program and Pioneer ACO Model performance data, we observe that the sharpest declines in spending are for post-acute facility services (particularly skilled nursing facility services), with smaller rates of savings (but more dollars saved overall) from prevented hospital admissions and reduced spending for outpatient hospital episodes. These findings become apparent when assessing hospital referral regions both with (>10 percent of assignable Medicare FFS beneficiaries assigned to ACOs in 2012) and without (<10 percent through 2016) a significant portion of assignable Medicare FFS beneficiaries assigned to ACOs. Comparing price-standardized per capita changes in spending from 2011 to 2016, regions with significant ACO penetration yielded larger declines in expenditures in the following areas relative to those without significant ACO penetration: Post-acute care facilities (relative decrease of 9.0 percent), inpatient (1.6 percent relative decrease), and outpatient (3.5 percent relative decrease). These relative decreases were accompanied by declines in evaluation and management services (2.5 percent relative decrease), emergency department (ED) utilization (1.6 percent relative decrease), hospital admissions (1.9 percent decrease), and hospital readmissions (3.5 percent decrease). There also appears to be substitution of higher cost services with lower cost services. For example, during the same period, home health expenditures increased by 5.0 percent and ambulatory surgery center expenditures increased by 1.4 percent, indicating that some beneficiaries could be forgoing care in institutional and inpatient settings in favor of lower cost sites of care.
These findings are supported by outside literature and research. For example, a study conducted by J. Michael McWilliams and colleagues (JAMA, 2017) found that Shared Savings Program ACOs that began participating in 2012 reduced post-acute care
Assuming Medicare ACOs were responsible for all relative deviations in trend from non-ACO markets produces an optimistic estimate that total combined Medicare ACO efforts potentially reduced total FFS Medicare Parts A and B spending in 2016 by about 1.2 percent, or $4.2 billion (after accounting for shared savings payments but before accounting for the potential impact on MA plan payment). However, it is likely that ACOs are not the only factor responsible for lower spending growth found in early-ACO-active markets. Health care providers in such markets are likely to be more receptive to other models and/or interventions, potentially including the following, for example: (1) Health Care Innovation Award payment and service delivery models funded by the Innovation Center; (2) advanced primary care functionality promoted by other payers, independent organizations like the National Committee for Quality Assurance, and/or through Innovation Center initiatives including the Multi-Payer Advanced Primary Care Practice Demonstration and Comprehensive Primary Care Initiative; and (3) care coordination funded through other Medicare initiatives, including, for example, the Community-based Care Transitions Program. Furthermore, the markets making up the non-ACO comparison group only cover about 10 percent of the national assignable FFS population in 2016 and may offer an imperfect counterfactual from which to estimate ACO effects on other markets.
An alternative (and likely more precise) estimate for the overall Medicare ACO effect on spending through 2016 involves assuming a spillover multiplier mainly for savings on non-assigned beneficiaries whose spending is not explicitly included in benchmark calculations and combining primary and spillover effects to estimate the degree that ACO benchmarks were reduced by the feedback such efficiency gains would have on national average spending growth. Analysis of claims data indicates an average ACO's providers and suppliers provide services to roughly 40 to 50 percent more beneficiaries than are technically assigned to the ACO in a given year. In addition, savings would potentially extend to spending greater than the large claims truncation amount, IME payments, DSH payments, and other pass-through payments that are excluded from ACO financial calculations. Assuming proportional savings accrue for non-assigned beneficiaries and the excluded spending categories, as previously described, supports a spillover savings assumption of 1.6 (that is, 60 cents of savings on non-benchmark spending for every dollar of savings on benchmark spending). Total implied savings, including the assumed spillover savings, would imply Medicare ACOs were responsible for about 50 percent of the lower spending growth in ACO markets (after becoming ACO active), or roughly 0.5 percent lower total FFS Parts A and B spending in 2016 after accounting for shared savings payments.
There are several other key takeaways from the available evidence and literature regarding the performance of Medicare ACOs, including the following:
The changes to the Shared Savings Program proposed in this rule could result in a range of possible outcomes. We considered a number of uncertainties related to determining future participation and performance by ACOs in the Shared Savings Program.
Changes to the existing benchmark calculations described previously would benefit program cost savings by producing benchmarks with improved accuracy (most notably by limiting the effect of the regional benchmark adjustment to positive or negative 5 percent of the national per capita spending amount). However, such savings would be partly offset by increased shared savings payments to ACOs benefiting from our proposal to apply the methodology incorporating factors based on regional FFS expenditures beginning with the ACO's first agreement period, revising risk adjustment to include up to a 3 percent increase in average HCC risk score over the course of an agreement period, and blending national trend with regional trend when calculating ACO benchmarks. Such trade-offs reflect the intention of our proposal to strengthen the balance between rewarding ACOs for attainment of efficiency in an absolute sense in tandem with incentivizing continual improvement relative to an ACO's recent baseline.
More predictable relationships, that is, an ACO's knowledge of its costs relative to the FFS expenditures in its region used to adjust its benchmark, can allow risk-averse ACOs to successfully manage significant exposure to performance-based risk. However, the proposed policy would limit regional adjustments so that they still incentivize low cost ACOs to take on risk while mitigating excessive windfall payments to ACOs that, for a variety of reasons, may be very low cost at baseline. The proposed policy also increases the possibility that higher cost ACOs would find a reasonable business case to remain in the program and thereby continue to lower their cost over time.
We also considered the possibility that providers and suppliers would have differing responses to changing financial incentives offered by the program, including for example the varying levels of savings sharing rates and/or loss sharing limits proposed for the BASIC and ENHANCED tracks. Participation decisions are expected to continue to be based largely on an ACO's expectation of the effect of rebasing and the regional adjustment on its ability to show spending below an expected future benchmark. We also considered the incentive for ACOs to participate under the highest level of risk and reward in the BASIC track or in the ENHANCED track in order to be considered an Advanced APM Entity for purposes of the Quality Payment Program. Eligible clinicians in an ACO that is an Advanced APM Entity may become Qualifying APM Participants for a year if they receive a sufficient percentage of their payments for Part B covered professional services or a sufficient percentage of Medicare patients through the ACO.
We also gave consideration to the effect on program entry and renewal as a result of discontinuing Track 1 and Track 2, and offering instead the BASIC track (including the glide path for eligible ACOs) and ENHANCED track, including the option for ACOs currently under 3-year agreements for participation in Track 1, Track 2, and Track 3 to terminate their agreement to quickly enter a new agreement period under the BASIC track or the ENHANCED track. For example, if 2014 starters complete a second 3-year agreement period under Track 1 and are eligible to enter the BASIC track's glide path under a one-sided model in 2020, these ACOs could have 7 performance years under a one-sided model. Modeling indicates that while such allowance could slow the transition to risk for some ACOs that might otherwise have enough of a business case to make an immediate transition to performance-based risk, the longer glide path would likely result in greater overall program participation by the end of the projection period and marginally increase overall program savings. We also considered the effect on participation from the proposals to permit ACOs to change their beneficiary assignment method selection prior to the start of each performance year, to allow ACOs in the BASIC track's glide path the option annually to elect to transition to a higher level of risk and reward within the glide path, and to offer a July 1, 2019 start date (including the proposed extension of an existing agreement period through June 30, 2019).
We also considered the potential effects of policies proposed to promote participation by low revenue ACOs as follows. By allowing low revenue ACOs to enter the BASIC track (potentially immediately entering the maximum level of risk and potential reward under such track) and continue their participation in the BASIC track for a subsequent agreement period (under the highest level of risk and potential reward), the proposal would offer low revenue ACOs a longer period under a more acceptable degree of risk given their revenue constraints, before transitioning to more significant risk exposure under the ENHANCED track.
Low revenue ACOs can still choose to enter the ENHANCED track, and take on additional downside risk in exchange for the opportunity to share in a higher percentage of any savings. Such migration is likeliest for low revenue ACOs expecting a favorable regional adjustment to their rebased historical benchmark. The proposal to include the regional adjustment in the methodology for determining an ACO's benchmark for its first agreement period should help provide such ACOs the degree of certainty necessary for earlier election of performance-based risk, while capping the regional adjustment at positive or negative 5 percent of national per capita expenditures for Parts A and B services for assignable beneficiaries helps CMS avoid unnecessarily large windfall payments for ACOs that would have
In addition, we considered related impacts of the proposed changes to the program's benchmarking methodology, as used to establish, adjust, update and reset the ACO's benchmark. For renewing ACOs—especially ACOs that are concerned about competition from operating in a highly-competitive ACO market or ACOs that make up a large portion of their market—several proposed changes are likely to help mitigate concerns about the long term business case of the model. Most notably, the use of a regional/national blend to determine the growth rates for the trend and update factors should reduce the degree to which ACO savings (and/or neighboring ACO savings) affect an ACO's own benchmark updates. Furthermore, the proposal to use full HCC risk ratios (capped at positive or negative 3 percent) regardless of the assignment status of a beneficiary should help to assuage concerns that risk adjustment could adversely affect an ACO that increasingly serves a higher morbidity population inside of its market.
To best reflect these uncertainties, we continue to utilize a stochastic model that incorporates assumed probability distributions for each of the key variables that would impact participation, changes in care delivery, and the overall financial impact of the Shared Savings Program. The model continues to employ historical baseline variation in trends for groups of beneficiaries assigned using the program's claim-based assignment methodology to simulate the effect of benchmark calculations as described in the June 2016 final rule (81 FR 38005 through 38007). We used several unique assumptions and assumption ranges in the updated model.
To estimate the number of ACOs that would participate in the program, we assumed that up to approximately 250 existing 2018 ACOs would be affected by the proposed policies starting with a potential third agreement period beginning on July 1, 2019, or in 2020 or 2021. We also assumed that up to approximately 300 existing 2018 ACOs would be affected by the proposed policies starting with a potential second agreement period beginning on July 1, 2019, in 2020, or 2021. In addition, between 20 and 50 new ACOs were assumed to form annually from 2019 through 2028.
We assumed ACO decision making regarding participation would reflect each ACO's updated circumstances including prior year performance as well as expected difference in spending in relation to future anticipated adjusted benchmark spending. Specific related assumptions are as follows:
For one, the potential that existing ACOs would renew under the policies in the proposed rule would be related to expectations regarding the effect of the proposed changes to the regional adjustment on the ACO's rebased benchmark. ACOs expecting adjusted historical benchmarks from 2 to 10 percent higher than actual per capita cost are assumed to select the highest-risk option (Track 3 in the baseline or the ENHANCED track under the proposed rule); such range is reduced for second or later rebasing under the policies in the proposed rule to 1 to 5 percent higher than actual per capita cost. Otherwise, ACOs expecting adjusted rebased benchmarks from 0 to 3 percent higher than actual per capita cost are assumed to select the Track 1+ Model (baseline) or BASIC track, Level E (proposed). ACOs expecting adjusted rebased historical benchmarks from zero to 5 percent lower than actual per capita cost are expected not to renew unless another agreement in Track 1 is allowed (baseline), or are assumed to have between zero and 50 percent chance of electing the BASIC track (proposed).
Second, all other renewal decisions would follow the same assumptions as the preceding description except for the following cases. For the baseline scenario, a Track 1 ACO eligible for a second Track 1 agreement period during the projection period that does not otherwise select renewal in Track 3 or the Track 1+ Model would only renew in Track 1 if the ACO had earned shared savings in either of the first 2 years of the existing agreement period or if the ACO anticipates an adjusted historical benchmark no lower than 3 percent below actual cost. For the proposed scenario, an ACO not otherwise choosing the ENHANCED track would only renew in the BASIC track if the following conditions were met: (1) The ACO expects an adjusted historical benchmark no lower than 0 to 3 percent below actual cost; (2) the ACO did not experience a loss in the existing agreement period; and (3) the ACO is low revenue (as high revenue ACOs would be precluded from renewing in the BASIC track).
Third, we used the following approach to make assumptions about participation decisions for ACOs encountering a shared loss. An adjusted shared loss (L) was calculated by netting out the total expected incentive payments that would be made under the Quality Payment Program to ACO providers/suppliers who are Qualifying APM Participants during the payment year that is 2 years after the performance year for which the ACO is accountable for shared losses. In each trial a random variable (X) was chosen from a skewed distribution ranging from zero to 3 percent of benchmark (mode 1 percent of benchmark) for determining participation decisions affecting years prior to 2023 (alternatively X was sampled from the range zero to 2 percent of benchmark with mode of 0.5 percent of benchmark for participation decisions for 2023 and subsequent years when the incentive to participate in an Advanced APM as a Qualifying APM Participant is reduced). If L>X then the ACO is assumed to drop out. Otherwise, if L>X/2 then the ACO is assumed to have a 50 to 100 percent chance of leaving the program. Otherwise, the ACO has a relatively smaller loss (L<X/2) and the ACO is assumed to have roughly double the chance of persisting relative to the prior scenario.
Fourth, we used the following approach to make assumptions about the potential that ACOs in the BASIC track would elect early transition to the BASIC track, Level E. An adjusted shared savings (S) was calculated by adding the total potential incentive payments expected under the Quality Payment Program (2 years after the potential transition to Level E) to ACO providers/suppliers who would expect to become Qualifying APM Participants (due to the transition to Level E) to the ACO's most recent shared savings—with such sum expressed as a percentage of benchmark. In each trial a random variable (Y) was chosen from a skewed distribution ranging from 1 to 4 percent of benchmark (mode 2 percent of benchmark). If S>Y, then the ACO is assumed to elect immediate transition to the BASIC track, Level E for the following performance year.
Assumptions for ACO effects on claims costs reflect a combination of factors. First, ACO revenue is assumed to be inversely proportional to historical savings achieved prior to implementation of the new rule. This is because, as noted earlier, low revenue ACOs (that tend to have low ACO participant Medicare FFS revenue relative to the ACO's benchmark spending) have generally shown stronger financial performance over the first 5 years of the program than high revenue ACOs. For existing low revenue ACOs, baseline savings immediately prior to renewal under the proposed rule are estimated to range from 1 to 4 percent of spending accounted for by the program benchmark, with an additional spillover effect on extra-benchmark spending accounting for an
Residual baseline savings are then potentially assumed to gradually diminish if participation ends. Specifically, zero to 100 percent of baseline savings are assumed to erode by the fifth year after an existing ACO drops out of participation as a Medicare ACO.
Alternatively, future savings for each type of ACO are assumed to scale according to the incentive presented by each potential track of participation. Future savings in Track 3 or the ENHANCED track during the projection period for low revenue ACOs are assumed to range from zero to 4 percent of benchmark spending for existing ACOs and 1 to 5 percent of benchmark spending for new ACOs. High revenue ACOs are assumed to have zero to 100 percent of the savings assumed for low revenue ACOs. Ultimate savings are assumed to phase in over 5 to 10 years for all types of ACOs. Savings for the Track 1+ Model or the BASIC track, Level E, are assumed to be 50 to 100 percent of the savings assumed for Track 3/ENHANCED track (as previously described). Savings for the BASIC track, Levels C and D, or Track 1 are assumed to be 30 to 70 percent of the savings assumed for Track 3/ENHANCED track. Lastly, savings for the BASIC track, Levels A and B, are assumed to be 20 to 60 percent of the savings assumed for Track 3/ENHANCED track.
We also assumed that selection effects would implicitly include the renewal decisions of ACOs simulated in the model. Further assumptions included the following: (1) The proposed adoption of full HCC adjustment (capped at positive or negative 3 percent) allows each ACO to increase its benchmark according to a skewed distribution from zero to 3 percent (mode 0.5 percent); and (2) for both the baseline and proposed scenarios, each ACO is assumed to be able to influence its comparable spending to region by zero to 5 percent (skewed with mode 1 percent) for example via changes in ACO participant TIN composition or other methods to direct assignment in a favorable manner given the financial incentive from the regional adjustment to the benchmark.
A simulation model involving the assumptions and assumption ranges described in the previous section was constructed and a total of 1,000 randomized trials were produced. Table 17 summarizes the annual projected mean impact (projected differences under the proposed changes to the program relative to the current baseline program) on ACO participation, federal spending on Parts A and B claims, ACO earnings from shared savings net of shared losses, and the net federal impact (effect on claims net of the change in shared savings/shared losses payments). The overall average projection of the impact of the proposed program changes is approximately $2.24 billion in lower overall federal spending over 10 years from 2019 through 2028. The 10th and 90th percentile from the range of projected 10 year impacts range from −$4.43 billion in lower spending to $0.09 billion in higher spending, respectively. The mean impact is comprised of about $0.51 billion in lower claims spending, $2.17 billion in reduced shared savings payments, net of shared loss receipts, and approximately $0.44 billion in additional incentive payments made under the Quality Payment Program to additional ACO providers/suppliers expected to become Qualifying APM Participants (mainly for performance years prior to 2023 where the Quality Payment Program incentive made during the corresponding payment year is 5 percent of Physician Fee Schedule revenue).
The overall drop in expected participation is mainly due to the expectation that the program will be less likely to attract new ACO formation in future years as the number of risk-free years available to new ACOs would be reduced from 6 years (two, 3-year agreement periods in current Track 1) to 2 years in the BASIC track, which also has reduced attractiveness with a lower 25 percent maximum sharing rate during the 2 risk-free years. However, the changes are expected to increase continued participation from existing ACOs, especially those currently facing mandated transition to risk in a third agreement period starting in 2019, 2020, or 2021 under the existing regulations, as well as certain other higher cost ACOs for which the capped regional adjustment would not reduce their benchmark as significantly as prescribed by current regulation.
Relatively small increases in spending in years 2019 through 2021 are largely driven by expectations for more favorable risk adjustment to ACOs' updated benchmarks and a temporary delay in migration of certain existing ACOs to performance-based risk. Savings grow significantly in the out years as a greater share of existing ACOs eventually transition to higher levels of risk and the savings from capping the regional adjustment to the benchmark grow because ACOs would increasingly have become eligible for higher uncapped adjustments under the baseline in the later years of the projection period.
The mean projection of $2.24 billion reduced overall federal spending is a reasonable point estimate of the impact of the proposed changes to the Shared Savings Program during the period between 2019 through 2028. However, we emphasize the possibility of outcomes differing substantially from the median estimate, as illustrated by the estimate distribution. Accordingly, this RIA presents the costs and benefits of this proposed rule to the best of our ability. To help further develop and potentially improve this analysis, we request comment on the aspects of the rule that may incentivize behavior that could affect participation in the program and potential shared savings payments. As further data emerges and is analyzed, we may improve the precision of future financial impact estimates.
To the extent that proposed changes to the Shared Savings Program will result in net savings or costs to Part B of Medicare, revenues from Part B beneficiary premiums would also be correspondingly lower or higher. In addition, because MA payment rates depend on the level of spending within traditional FFS Medicare, savings or costs arising from the proposed changes to the Shared Savings Program would result in corresponding adjustments to MA payment rates. Neither of these secondary impacts has been included in the analysis shown.
Earlier in this analysis we describe evidence for the Shared Savings Program's positive effects on the efficiency of care delivered by ACO providers/suppliers over the first five years of the program. Reduced unnecessary utilization can lead to financial benefits for beneficiaries by way of lower Part B premiums or reduced out of pocket cost sharing or both. Certain beneficiaries may also benefit from the provision of in-kind items and services by ACOs that are reasonably connected to the beneficiary's medical care and are preventive care items or services or advance a clinical goal for the beneficiary. The value of care delivered to beneficiaries also depends on the quality of that care. Evidence indicates there have been incremental improvements in quality of care reported for ACO providers/suppliers. As previously noted in the Background
As explained in more detail previously, we believe the proposed changes would provide additional incentives for ACOs to improve care management efforts and maintain program participation. In addition, ACOs with low baseline expenditures relative to their region are more likely to transition to and sustain participation in a risk track (either the BASIC track (Level E) or the ENHANCED track) in future agreement periods. Consequently, the changes in this rule would also benefit beneficiaries through greater beneficiary engagement and active participation in their care (via beneficiary incentives) and broader improvements in accountability and care coordination (such as through expanded use of telehealth services and extending eligibility for the waiver of the SNF 3-day rule to all ACOs accepting performance-based risk) than would occur under current regulations. Lastly, we estimate that the net impacts on federal spending, as previously detailed, would correspond to savings to beneficiaries in the form of reductions in Part B premium payments of approximately $310 million over the 10 year projection period through 2028.
We intend to continue to analyze emerging program data to monitor for any potential unintended effect that the use of a regional adjustment (as modified by the proposed rule) to determine the historical benchmarks for additional cohorts of ACOs could potentially have on the incentive for ACOs to serve vulnerable populations (and for ACOs to maintain existing partnerships with providers and suppliers serving such populations).
As noted previously, changes in this proposed rule aim to improve the ability for ACOs to transition to performance-based risk and provide higher value care. We believe the contemporaneous growth of ACO agreements with other payers is sufficiently mature (and invariably heterogeneous in structure) that it would not be materially affected by the proposed changes to specific features of the Shared Savings Program; however, we seek comment if stakeholders disagree with such assumption, as we would want to consider impacts on other payers and patient populations, if evidenced, as part of the development of the policies to be included in the final rule. Although the proposed elimination of Track 1 is expected to ultimately reduce the overall number of ACOs participating in the program, this proposed change might also create opportunities for more effective ACOs to step in and serve the beneficiaries who were previously assigned to other ACOs that leave the program. In addition, other proposed policies (including changes to HCC risk adjustment, longer five year agreement periods, gradual expansion of exposure to risk in the BASIC track, and allowing eligible low revenue ACOs to renew for a second agreement period in the BASIC track under Level E) are expected to increase the number of existing and new ACOs that ultimately make a sustained transition to performance-based risk. Such transition is expected to help ACOs more effectively engage with their ACO participants and ACO providers/suppliers in transforming care delivery.
Proposed changes to the methodology for making regional adjustments to the historical benchmark are expected to affect ACOs differently depending on their circumstances. Similar to observations described in the June 2016 final rule, certain ACOs that joined the program from a high expenditure baseline relative to their region and that showed savings under the first and/or second agreement period benchmark methodology would likely expect lower benchmarks and greater likelihood of shared losses under a methodology that includes a 35 percent weight on the regional expenditure adjustment. Additionally, certain ACOs that joined the program with relatively low expenditures relative to their region might expect significant shared savings payments even if they failed to generate shared savings in their first agreement period prior to the application of the regional adjustment to the benchmark. Limiting the weight of the regional adjustment to the benchmark to 50 percent and capping the adjustment at positive or negative 5 percent of national average per capita FFS spending for assignable beneficiaries would serve to preserve the incentive for low cost ACOs to maintain participation and accept performance-based risk while also improving the business case for high cost ACOs to continue to participate and drive their costs down toward parity with or even below their regional average. Therefore, the proposed changes to the regional adjustment are expected to increase participation by ACOs in risk tracks by broadening the mix of ACOs with
Several other changes are expected to provide certain ACOs with stronger business cases for participating in the program. Transition to full HCC risk adjustment (capped at positive or negative 3 percent) regardless of beneficiary assignment status is expected to increase the resulting adjusted updated benchmark for the average ACO and better reflect actual shifts in assigned patient morbidity. Blending national with regional trend for ACO benchmark calculations is also expected to mitigate some ACOs' concerns regarding the problem of hyper competition against other ACOs in highly-saturated markets, as well as the potential that large ACOs would drive the regional trend they are ultimately measured against. These factors contribute to the expanded participation expected in performance-based risk and the resulting increase in savings on claims through more efficient care delivery.
We have made program data available that can help stakeholders evaluate the impact the proposed changes, as previously described, may have on individual ACOs in various markets. The Center for Medicare (CM) has created standard analytical files incorporating factors based on regional FFS expenditures (currently available for CYs 2014, 2015, and 2016) that specifically tabulate—(1) aggregate expenditure and risk score data for assignable beneficiaries by county; and (2) the number of beneficiaries assigned to ACOs, by county. These public use files can be obtained at the following website
CM has also created standard analytical files that contain ACO-specific metrics as well as summarized beneficiary and provider information for each performance year of the Shared Savings Program. These files include ACO-specific annual data on financial and quality performance, person years and demographic characteristics of assigned beneficiaries, aggregate expenditure and utilization, and participant composition of the ACO. The public use files for 2013 through 2016 can be obtained at the following website
The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most physician practices, hospitals, and other providers are small entities either by virtue of their nonprofit status or by qualifying as a small business under the Small Business Administration's size standards (revenues of less than $7.5 to $38.5 million in any 1 year; NAIC Sector-62 series). States and individuals are not included in the definition of a small entity. For details, see the Small Business Administration's website at
Although the Shared Savings Program is a voluntary program and payments for individual items and services will continue to be made on a FFS basis, we acknowledge that the program can affect many small entities and have developed our rules and regulations accordingly in order to minimize costs and administrative burden on such entities as well as to maximize their opportunity to participate. (For example: Networks of individual practices of ACO professionals are eligible to form an ACO; the use of an MSR under Level A and Level B of the BASIC track, and, if elected by the ACO, under the ENHANCED track and BASIC track, Levels C through E, that varies by the size of the ACO's population and is calculated based on confidence intervals so that smaller ACOs have relatively lower MSRs; and low revenue ACOs may remain under reduced downside risk in a second agreement period under the BASIC track, Level E.)
Small entities are both allowed and encouraged to participate in the Shared Savings Program, provided the ACO has a minimum of 5,000 assigned beneficiaries, thereby potentially realizing the economic benefits of receiving shared savings resulting from the utilization of enhanced and efficient systems of care and care coordination. Therefore, a solo, small physician practice or other small entity may realize economic benefits as a function of participating in this program and the utilization of enhanced clinical systems integration, which otherwise may not have been possible. We believe the policies included in this proposed rule, such as the proposal to allow low revenue ACOs up to 2 agreement periods in in the BASIC track (with the second agreement period at the highest level of risk and potential reward) where downside risk exposure is limited to a percentage of ACO provider/supplier revenue (capped at a percentage of the ACO's benchmark), may further encourage participation by small entities in existing ACOs that may otherwise not find it possible to quickly assume the much higher exposure to downside risk required under the ENHANCED track.
As detailed in this RIA, total expected incentive payments made under the Quality Payment Program to Qualifying APM Participants are expected to increase by $440 million over the 2019 to 2028 period as a result of changes that will increase participation in the Shared Savings Program by certain ACOs and therefore increase the average small entity's earnings from such incentives. We also note that the proposal to extend each agreement period to at least 5 years offers greater certainty to ACOs, including small entities, regarding their benchmark as they approach the higher levels of risk required in the later years of the BASIC track and under the ENHANCED track.
Section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. Although the Shared Savings Program is a voluntary program, this proposed rule would have a significant impact on the operations of a substantial number of small rural hospitals. We have proposed changes to our regulations such that benchmark adjustments for regional spending are limited to at most a 50 percent weight and are capped at positive or negative 5 percent of national average per capita FFS spending for assignable beneficiaries. Additionally we have proposed to blend national and regional trend in benchmark calculations, and have proposed allowing full HCC risk adjustment with a positive or negative 3 percent cap regardless of beneficiary assignment status. Such changes could help provide a stronger business case for ACOs built around rural hospitals that may have otherwise been concerned about serving a higher-risk population in their region or driving the local trends against which they would be compared. We seek comment from small rural hospitals on the proposed changes with special focus on the impact of the proposed changes to the adjustment to the benchmark to reflect regional FFS expenditures. (See the Effects on Providers and Suppliers section for a description of data currently available on the CMS website that may be useful for commenters to estimate the effects of such proposed changes for their particular ACO and/or market.)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2018, that is approximately $150 million. This proposed rule does not include any mandate that would result in spending by state, local or tribal governments, in the aggregate, or by the private sector in the amount of $150 million in any 1 year. Further, participation in this program is voluntary and is not mandated.
We assume all 561 ACOs currently participating in the Medicare Shared Savings Program will review on average half of this proposed rule. For example, it is possible that certain ACOs may limit review to issues related only to the BASIC track and not the ENHANCED track or rely on a partnership with a management company, health plan, trade association or other entity that reviews the proposed rule and advises
Using the wage information from the Bureau of Labor Statistics for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $107.39 per hour, where the assumed hourly wage of $53.69 has been increased by a factor of 2 to account for fringe benefits.
We estimate that extending the agreement period to 5 years may reduce certain administrative costs incurred by ACOs. In its review of the Physician Group Practice demonstration, GAO estimated the average entity spent $107,595 on initial startup for administrative processes. We assume roughly one-tenth of such total startup amount would represent the administrative expenses of renewal for an ACO entering a renewed agreement period ($10,760 per ACO). Therefore, we estimate extending the agreement period to 5 years would reduce ACO administrative burden by approximately $6 million over 10 years ($10,760 × 561 ACOs).
We do not believe that the proposals included in this proposed rule would otherwise materially impact the burden on ACOs for compliance with the requirements of the Shared Savings Program. The annual certification and application process would remain comparable to the existing program (setting aside the change to five year agreement periods as noted in the previous paragraph). However, we seek comment if stakeholders have reason to believe the proposed changes would materially change the burden of participation in the program beyond what we have estimated, as described previously.
A particularly significant element of the proposed changes to the benchmarking methodology included in this proposed rule is the proposal to limit the effect of regional adjustments on rebased ACO historical benchmarks via a cap of positive or negative 5 percent of national average per capita FFS expenditures for assignable beneficiaries. If the proposal were amended to remove this cap then shared savings payments to low cost ACOs and selective participation decisions would increase the cost of the proposed rule by roughly $5 billion such that the estimated $2.24 billion savings relative to current regulation baseline (as estimated for the proposed rule in the previous sections) would instead be projected as a $2.75 billion cost.
Another alternative considered would be to push back the first agreement periods under the proposed new participation options and all other applicable proposed changes to a January 1, 2020 start date. This would avoid the complexity of a July 1, 2019 midyear start date. ACOs otherwise eligible to renew their participation in the program in 2019 would be offered a one year extension under their current agreement periods. This alternative would have differing impacts on federal spending.
Forgoing the proposed July 1, 2019 start date and providing for the next available start date of January 1, 2020, would likely marginally increase spending on claims through a combination of factors. This approach would delay, by 6 months, the transition into performance-based risk for certain ACOs whose current agreement periods will end on December 31, 2018. We also would anticipate a temporary increase in overall shared savings payments to such ACOs during the one year extension in 2019 because of the additional year lag between the historical baseline expenditures and the 2019 performance year expenditures under the extended agreement period. However, this alternative would also have a slightly greater effect in reducing Federal spending in later years through a combination of factors. Under this approach, the third historical benchmark year of the subsequent agreement period for such ACOs would be CY 2019 rather than CY 2018, as would be the case under the proposed July 1, 2019 start date. The use of historical expenditures from 2017 through 2019, rather than 2016 through 2018, to determine the benchmark for these ACOs would marginally reduce the cumulative variation affecting benchmark accuracy in 2024, the final year of these ACOs' first agreement period under the policies in this proposed rule. We would also anticipate a reduction in incentive payments made under the Quality Payment Program in 2021 (which are based on participation by eligible clinicians in Advanced APMs during 2019) by delaying the transition to performance-based risk for certain ACOs to 2020 instead of July 1, 2019.
Overall, it is estimated that the shift to a January 1, 2020 start date for new agreement periods under the proposed changes, combined with a 1-year extension of the existing agreement period for most ACOs otherwise expected to enter a new agreement period in 2019, would reduce overall Federal spending by approximately an additional $100 million relative to the estimated $2.24 billion reduction in spending estimated for the proposal to offer a July 1, 2019 start date for new agreement periods under the proposed changes.
We also considered the potential impact of the alternative of allowing ACOs to elect a beneficiary opt-in based assignment methodology supplemented by a modified claims-based assignment methodology for beneficiaries who have received the plurality of their primary care and at least seven primary care services, from one or more ACO professionals in the ACO during the applicable assignment window and voluntary alignment. However, significant uncertainties potentially impacting the program in offsetting ways make projecting the impact of such proposal difficult. Although it is possible that ACOs electing such methodology could more effectively target care management to more engaged and/or needier subpopulations of patients, it is also possible that such targeting could deter ACOs from deploying more comprehensive care delivery reform across a wider mix of patients served by ACO providers/suppliers. It is also unclear if many ACOs would see value in a more restrictive assignment approach as they may be hesitant to voluntarily reduce their overall number of assigned beneficiaries and consequently lower their total benchmark spending and the magnitude of potential shared savings. Furthermore, it is not currently empirically possible to determine if the potential method for adjusting benchmark expenditures that is described in the proposed rule would provide sufficient accuracy in setting spending targets or if it could be vulnerable to higher claims variation and/or bias because of the selective
Certain policies, including both existing policies and the proposed new policies described in this proposed rule, rely upon the authority granted in section 1899(i)(3) of the Act to use other payment models that the Secretary determines will improve the quality and efficiency of items and services furnished to Medicare FFS beneficiaries. Section 1899(i)(3)(B) of the Act requires that such other payment model must not result in additional program expenditures. Policies falling under the authority of section 1899(i)(3) of the Act include— (1) performance-based risk; (2) refining the calculation of national expenditures used to update the historical benchmark to reflect the assignable subpopulation of total FFS enrollment; (3) updating benchmarks with a blend of regional and national trends as opposed to the national average absolute growth in per capita spending; (4) reconciling the two 6-month performance years during 2019 based on expenditures for all of CY 2019, and pro-rating any resulting shared savings or shared losses; and (5) adjusting performance year expenditures to remove IME, DSH, and uncompensated care payments.
A comparison was constructed between the projected impact of the payment methodology that incorporates all changes and a hypothetical baseline payment methodology that excludes the elements described previously that require section 1899(i)(3) of the Act authority—most importantly performance-based risk in the ENHANCED track and Levels C, D, and E of the BASIC track and updating benchmarks using a blend of regional and national trends. The hypothetical baseline was assumed to include adjustments allowed under section 1899(d)(1)(B)(ii) of the Act including the up to 50 percent weight used in calculating the regional adjustment to the ACO's rebased historical benchmark, as proposed in this rule (depending on the number of rebasings and the direction of the adjustment), capped at positive or negative 5 percent of national average per capita FFS expenditures for assignable beneficiaries. The stochastic model and associated assumptions described previously in this section were adapted to reflect a higher range of potential participation given the perpetually sharing-only incentive structure of the hypothetical baseline model. Such analysis estimated approximately $3 billion greater average net program savings under the alternative payment model that includes all policies that require the authority of section 1899(i)(3) of Act than would be expected under the hypothetical baseline in total over the 2019 to 2028 projection period. The alternative payment model, as proposed in this rule, is projected to result in greater savings on benefit costs and reduced net payments to ACOs. In the final projection year, the alternative payment model is estimated to have 14 percent greater savings on benefit costs, 9 percent lower spending on net shared savings payments to ACOs, with 46 percent reduced overall ACO participation compared to the hypothetical baseline model.
Participation in performance-based risk in the ENHANCED track and the later years of the BASIC track is assumed to improve the incentive for ACOs to increase the efficiency of care for beneficiaries (similar to the assumptions used in the modeling of the impacts, described previously). Such added savings are partly offset by lower participation associated with the requirement to transition to performance-based risk. Despite the higher maximum sharing rate of 75 percent in the ENHANCED track under the alternative payment model under section 1899(i)(3) of the Act relative to the 50 percent maximum sharing rate assumed for the single one-sided risk track under the hypothetical baseline, shared savings payments are expected to be reduced relative to the hypothetical baseline because of lower expected participation resulting from the elimination of Track 1, more accurate benchmarks due to the incorporation of regional factors into the calculation of benchmark updates for all ACOs, and the cap on the regional benchmark adjustment of positive or negative 5 percent of the national average per capita FFS spending amount for assignable beneficiaries.
We will reexamine this projection in the future to ensure that the requirement under section 1899(i)(3)(B) of the Act that an alternative payment model not result in additional program expenditures continues to be satisfied. In the event that we later determine that the payment model established under section 1899(i)(3) of the Act no longer meets this requirement, we would undertake additional notice and comment rulemaking to make adjustments to the payment model to assure continued compliance with the statutory requirements.
As required by OMB Circular A-4 under Executive Order 12866, in Table 18, we have prepared an accounting statement showing the change in—(1) net federal monetary transfers; (2) shared savings payments to ACOs net of shared loss payments from ACOs; and (3) incentive payments made under the Quality Payment Program to additional ACO providers/suppliers expected to become Qualifying APM Participants from 2019 to 2028 who would not have been expected to achieve such status absent the proposed changes.
Executive Order 13771, entitled Reducing Regulation and Controlling Regulatory Costs (82 FR 9339), was issued on January 30, 2017. The proposed modifications in this proposed rule are expected to primarily have effects on transfers via lower claims spending and shared savings outlays as described previously in this regulatory impact analysis. However these modifications are also anticipated to marginally reduce the administrative burden on participating ACOs by roughly $5.67 million over 10 years (as detailed previously in this RIA); therefore this proposed rule, if finalized, would be considered a deregulatory action under Executive Order 13771.
The analysis in this section, together with the remainder of this preamble, provides a regulatory impact analysis. As a result of this proposed rule, the median estimate of the financial impact of the Shared Savings Program for CYs 2019 through 2028 would be net federal savings of $2.24 billion greater than the expected savings if no changes were made. Although this is the best estimate of the financial impact of the Shared Savings Program during CYs 2019 through 2028, a relatively wide range of possible outcomes exists. While roughly 89 percent of the stochastic trials resulted in an overall increase in net program savings over 10 years, the 10th and 90th percentiles of the estimated distribution show a net increase in costs by $0.09 billion and a net decrease in costs by $4.43 billion, respectively.
Overall, our analysis projects that faster transition from one-sided model agreements—tempered by the option for eligible ACOs of a gentler exposure to downside risk calculated as a percentage of ACO participants' total Medicare Parts A and B FFS revenue and capped at a percentage of the ACO's benchmark—can affect broader participation in performance-based risk in the Shared Savings Program and reduce overall claims costs. A second key driver of estimated net savings is the reduction in shared savings payments from the proposed limitation on the amount of the regional adjustment to the ACO's historical benchmark. Such reduction in overall shared savings payments is projected to result despite the benefit of higher net adjustments expected for a larger number of ACOs from the use of a simpler HCC risk adjustment methodology, the blending of national and regional trends for benchmark calculations, and longer 5-year agreement periods that allow ACOs a longer horizon from which to benefit from efficiency gains before benchmark rebasing.
Therefore, the proposed changes are expected to improve the incentive for ACOs to invest in effective care management efforts, increase the number of ACOs participating under performance-based risk by discontinuing Track 1 and Track 2, and offering instead a BASIC track (which includes a glide path from a one-sided model to performance-based risk for eligible ACOs) or the ENHANCED track (based on the current design of Track 3), reduce the number of ACOs with poor financial and quality performance (by eliminating Track 1, requiring faster transition to performance-based risk, limiting high revenue ACOs to one agreement period in the BASIC track and low revenue ACOs to 2 agreement periods in the BASIC track (second agreement period at Level E), and increasing the monitoring of ACO financial performance), and result in greater overall gains in savings on FFS benefit claims costs while decreasing expected shared savings payments to ACOs.
We intend to monitor emerging results for ACO effects on claims costs, changing participation (including risk for cost due to selective changes in participation), and unforeseen bias in benchmark adjustments due to diagnosis coding intensity shifts.
In accordance with the provisions of Executive Order 12866, this rule was reviewed by the Office of Management and Budget.
Because of the large number of public comments we normally receive on
Administrative practice and procedure, Biologics, Drugs, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping requirements.
Administrative practice and procedure, Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR parts 414 and 425 as set forth below:
Secs. 1102, 1871, and 1881(b)(l) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).
(a) * * *
(1) * * *
(ii) For QP Performance Periods prior to 2019, for the Shared Savings Program, apply a penalty or reward to an APM Entity based on the degree of the use of
Secs. 1102, 1106, 1871, and 1899 of the Social Security Act (42 U.S.C. 1302, 1306, 1395hh, and 1395jjj).
The revisions and additions read as follows:
(1) The ACO is the same legal entity as a current or previous ACO that is participating in, or has participated in, a performance-based risk Medicare ACO initiative as defined under this section, or that deferred its entry into a second Shared Savings Program agreement period under a two-sided model under § 425.200(e).
(2) Forty percent or more of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative, as defined under this section, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under a two-sided model under § 425.200(e), in any of the 5 most recent performance years prior to the agreement start date.
(1) The ACO is a legal entity that has not participated in any performance-based risk Medicare ACO initiative as defined under this section, and has not deferred its entry into a second Shared Savings Program agreement period under a two-sided model under § 425.200(e).
(2) Less than 40 percent of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative, as defined under this section, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under a two-sided model under § 425.200(e), in each of the 5 most recent performance years prior to the agreement start date.
(1) Participation options within the Shared Savings Program as follows:
(i) BASIC track (Levels A through E).
(ii) ENHANCED track.
(iii) Track 2.
(2) The Innovation Center ACO models under which an ACO accepts risk for shared losses as follows:
(i) Pioneer ACO Model.
(ii) Next Generation ACO Model.
(iii) Comprehensive ESRD Care Model two-sided risk tracks.
(iv) Track 1+ Model.
(3) Other initiatives involving two-sided risk as may be specified by CMS.
(1) Is the same legal entity as an ACO, as defined in this section, that previously participated in the program and is applying to participate in the program after a break in participation, because it is either—
(i) An ACO whose participation agreement expired without having been renewed; or
(ii) An ACO whose participation agreement was terminated under § 425.218 or § 425.220.
(2) Is a new legal entity that has never participated in the Shared Savings Program and is applying to participate in the program and more than 50 percent of its ACO participants were included on the ACO participant list under § 425.118, of the same ACO in any of the 5 most recent performance years prior to the agreement start date.
(1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or
(2) An ACO that terminated its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program.
(b) If at any time during the performance year, an ACO's assigned population falls below 5,000, the ACO may be subject to the actions described in §§ 425.216 and 425.218.
(1) While under a CAP, the ACO remains eligible for shared savings and losses.
(2) If the ACO's assigned population is not at least 5,000 by the end of the performance year specified by CMS in its request for a CAP, CMS terminates the participation agreement and the ACO is not eligible to share in savings for that performance year.
(3) In determining financial performance for an ACO with fewer than 5,000 assigned beneficiaries, the MSR/MLR is calculated as follows:
(i) For ACOs with a variable MSR and MLR (if applicable), the MSR and MLR (if applicable) are set at a level consistent with the number of assigned beneficiaries.
(ii) For performance years starting before January 1, 2019, for ACOs with a fixed MSR/MLR, the MSR/MLR remains fixed at the level consistent with the choice of MSR and MLR that the ACO made at the start of the agreement period.
(iii) For performance years starting in 2019 and in subsequent years, for ACOs that selected a fixed MSR/MLR at the start of the agreement period or prior to entering a two-sided model during their agreement period, the MSR/MLR is calculated as follows:
(A) The MSR/MLR is set at a level based on the number of beneficiaries assigned to the ACO.
(
(
(B) The MSR and MLR revert to the fixed level previously selected by the ACO for any subsequent performance year in the agreement period in which the ACO's assigned beneficiary population is 5,000 or more.
The revisions and additions read as follows:
(a)
(b)
(2)
(ii) The term of the participation agreement is 3 years unless all of the following conditions are met to extend the participation agreement by 6 months:
(A) The ACO entered an agreement period starting on January 1, 2016.
(B) The ACO elects to extend its agreement period until June 30, 2019.
(
(
(3)
(ii) The term of the participation agreement is 3 years, except for an ACO whose first agreement period in Track 1 began in 2014 or 2015, in which case the term of the ACO's initial agreement period under Track 1 (as described under § 425.604) may be extended, at the ACO's option, for an additional year for a total of 4 performance years if the conditions specified in paragraph (e) of this section are met.
(4)
(ii) The start date is July 1, 2019, and the term of the participation agreement is 5 years and 6 months.
(5)
(ii) The term of the participation agreement is 5 years.
(c)
(1) For an ACO with a start date of April 1, 2012, or July 1, 2012, the ACO's first performance year is defined as 21 months or 18 months, respectively.
(2) For an ACO that entered a first or second agreement period with a start date of January 1, 2016, and that elects to extend its agreement period by a 6-month period under paragraph (b)(2)(ii)(B) of this section, the ACO's fourth performance year is the 6-month period between January 1, 2019, and June 30, 2019.
(3) For an ACO that entered an agreement period with a start date of July 1, 2019, the ACO's first performance year of the agreement period is defined as the 6-month period between July 1, 2019, and December 31, 2019.
(d)
(e) * * *
(1) * * *
(i) The ACO's first agreement period in the Shared Savings Program under Track 1 began in 2014 or 2015.
(b) * * * For determining eligibility for agreement periods beginning before July 1, 2019:
The addition and revision read as follows:
(c) * * *
(7) The ACO must certify, in a form and manner specified by CMS, that the
(f)
(2) An ACO that will participate in a two-sided model must establish one or more of the following repayment mechanisms in an amount and by a deadline specified by CMS in accordance with this section:
(i) An escrow account with an insured institution.
(ii) A surety bond from a company included on the U.S. Department of Treasury's List of Certified Companies.
(iii) A line of credit at an insured institution (as evidenced by a letter of credit that the Medicare program can draw upon).
(3) An ACO that will participate under a two-sided model of the Shared Savings Program must submit for CMS approval documentation that it is capable of repaying shared losses that it may incur during its agreement period, including details supporting the adequacy of the repayment mechanism.
(i) An ACO participating in Track 2 or the ENHANCED track must demonstrate the adequacy of its repayment mechanism prior to the start of each agreement period in which it takes risk and at such other times as requested by CMS.
(ii) An ACO entering an agreement period in Levels C, D, or E of the BASIC track must demonstrate the adequacy of its repayment mechanism prior to the start of its agreement period and at such other times as requested by CMS.
(iii) An ACO entering an agreement period in Level A or Level B of the BASIC track must demonstrate the adequacy of its repayment mechanism prior to the start of any performance year in which it either elects to participate in, or is automatically transitioned to a two-sided model, Level C, Level D, or Level E, of the BASIC track, and at such other times as requested by CMS.
(iv) An ACO that has submitted a request to renew its participation agreement must submit as part of the renewal request documentation demonstrating the adequacy of the repayment mechanism that could be used to repay any shared losses incurred for performance years in the next agreement period. The repayment mechanism applicable to the new agreement period may be the same repayment mechanism currently used by the ACO, provided that the ACO submits documentation establishing that the amount and duration of the existing repayment mechanism have been revised to comply with paragraphs (f)(4)(iv) and (f)(6)(ii) of this section.
(4) CMS calculates the amount of the repayment mechanism as follows:
(i) For a Track 2 or ENHANCED track ACO, the repayment mechanism amount must be equal to at least 1 percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available.
(ii) For a BASIC track ACO, the repayment mechanism amount must be equal to the lesser of the following:
(A) One percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available.
(B) Two percent of the total Medicare Parts A and B fee-for-service revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available.
(iii) For agreement periods beginning on or after July 1, 2019, CMS recalculates the ACO's repayment mechanism amount before the second and each subsequent performance year in the agreement period in accordance with this section based on the certified ACO participant list for the relevant performance year.
(A) If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least 10 percent or $100,000, whichever is the lesser value, CMS notifies the ACO that the amount of its repayment mechanism must be increased to the recalculated repayment mechanism amount.
(B) Within 90 days after receipt of such written notice from CMS, the ACO must submit for CMS approval documentation that the amount of its repayment mechanism has been increased to the amount specified by CMS.
(iv) In the case of an ACO that has submitted a request to renew its participation agreement and wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the amount of the repayment mechanism must be equal to the greater of the following:
(A) The amount calculated by CMS in accordance with either paragraph (f)(4)(i) or (ii) of this section, as applicable.
(B) The repayment mechanism amount that the ACO was required to maintain during the last performance year of the participation agreement it seeks to renew.
(5) After the repayment mechanism has been used to repay any portion of shared losses owed to CMS, the ACO must replenish the amount of funds available through the repayment mechanism within 90 days.
(6) The repayment mechanism must be in effect for the duration of the ACO's participation in a two-sided model plus 24 months following the conclusion of the agreement period, except as follows:
(i) CMS may require the ACO to extend the duration of the repayment mechanism if necessary to ensure that the ACO fully repays CMS any shared losses for each of the performance years of the agreement period.
(ii) In the case of a renewing ACO that wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the duration of the existing repayment mechanism must be extended by an amount of time specified by CMS and must be periodically extended thereafter upon notice from CMS.
(iii) The repayment mechanism may be terminated at the earliest of the following conditions:
(A) The ACO has fully repaid CMS any shared losses owed for each of the performance years of the agreement period under a two-sided model.
(B) CMS has exhausted the amount reserved by the ACO's repayment mechanism and the arrangement does not need to be maintained to support the ACO's participation under the Shared Savings Program.
(C) CMS determines that the ACO does not owe any shared losses under the Shared Savings Program for any of the performance years of the agreement period.
(b)
(A) CMS designates or approves an effective date of termination of one of the following:
(
(
(
(B) The ACO has completed all close-out procedures by the deadline specified by CMS.
(C) The ACO has satisfied the criteria for sharing in savings for the performance year.
(ii) If the participation agreement is terminated at any time by CMS under § 425.218, the ACO is not eligible to receive shared savings for the performance year during which the termination becomes effective.
(2)
(i) An ACO under a two-sided model that terminates its participation agreement under § 425.220 with an effective date of termination after June 30th of a 12-month performance year is liable for a pro-rated share of any shared losses determined for the performance year during which the termination becomes effective.
(ii) An ACO under a two-sided model whose participation agreement is terminated by CMS under § 425.218 is liable for a pro-rated share of any shared losses determined for the performance year during which the termination becomes effective.
(iii) The pro-rated share of losses described in paragraphs (b)(2)(i) and (ii) of this section is calculated as follows:
(A) In the case of a 12-month performance year: The shared losses incurred during the 12 months of the performance year are multiplied by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12.
(B) In the case of a 6-month performance year during 2019: The shared losses incurred during CY 2019 are multiplied by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12.
(3)
(ii) An ACO under a two-sided model that terminates its participation agreement under § 425.220 during a 6-month performance year with an effective date of termination prior to the last calendar day of the performance year is not liable for shared losses incurred during the performance year.
(a) For purposes of determining the eligibility of a re-entering ACO to enter an agreement period beginning before July 1, 2019, the ACO may participate in the Shared Savings Program again only after the date on which the term of its original participation agreement would have expired if the ACO had not been terminated.
(b) For purposes of determining the eligibility of a re-entering ACO to enter an agreement period beginning before July 1, 2019, an ACO whose participation agreement was previously terminated must demonstrate in its application that it has corrected the deficiencies that caused it to be terminated from the Shared Savings Program and has processes in place to ensure that it remains in compliance with the terms of the new participation agreement.
(c) For purposes of determining the eligibility of a re-entering ACO to enter an agreement period beginning before July 1, 2019, an ACO whose participation agreement was previously terminated or expired without having been renewed may re-enter the program for a subsequent agreement period.
The revisions and addition read as follows:
(a)
(1) In order to obtain a determination regarding whether it meets the requirements to participate in the Shared Savings Program, the ACO must submit a complete application in the form and manner and by the deadline specified by CMS.
(2) An ACO executive who has the authority to legally bind the ACO must certify to the best of his or her knowledge, information, and belief that the information contained in the application is accurate, complete, and truthful.
(3) An ACO that seeks to enter a new participation agreement under the Shared Savings Program and was newly formed after March 23, 2010, as defined in the Antitrust Policy Statement, must agree that CMS can share a copy of its application with the Antitrust Agencies.
(4) The ACO must select a participation option in accordance with the requirements specified in § 425.600. Regardless of the date of termination or expiration of the participation agreement, a renewing ACO or re-entering ACO that was previously under a two-sided model, or a one-sided
(b)
(ii) The ACO's history of noncompliance with the requirements of the Shared Savings Program, including, but not limited to, the following factors:
(A)(
(
(
(
(B) For 2 performance years of the ACO's previous agreement period, regardless of whether the years are in consecutive order, whether the average per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiary population exceeded its updated benchmark by an amount equal to or exceeding either of the following:
(
(
(C) Whether the ACO failed to repay shared losses in full within 90 days as required under subpart G of this part for any performance year of the ACO's previous agreement period in a two-sided model.
(D) For an ACO that has participated in a two-sided model authorized under section 1115A of the Act, whether the ACO failed to repay shared losses for any performance year as required under the terms of the ACO's participation agreement for such model.
(iii) Whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused any noncompliance identified in paragraph (b)(1)(ii) of this section to occur, and any other factors that may have caused the ACO to be terminated from the Shared Savings Program, and has processes in place to ensure that it remains in compliance with the terms of the new participation agreement.
(iv) Whether the ACO has established that it is in compliance with the eligibility and other requirements of the Shared Savings Program to enter a new participation agreement, including the ability to repay losses by establishing an adequate repayment mechanism under § 425.204(f), if applicable.
(v) The results of a program integrity screening of the ACO, its ACO participants, and its ACO providers/suppliers (conducted in accordance with § 425.305(a)).
(a)
(1)
(i) Preliminary prospective assignment with retrospective reconciliation, as described in § 425.400(a)(2).
(ii) Prospective assignment, as described in § 425.400(a)(3).
(2)
(i) An ACO participating under the BASIC track's glide path may elect to transition to a higher level of risk and potential reward within the glide path than the level of risk and potential reward that the ACO would be automatically transitioned to in the applicable year as specified in § 425.605(d)(1). The automatic transition to higher levels of risk and potential reward within the BASIC track's glide path continues to apply to all subsequent years of the agreement period in the BASIC track.
(ii) An ACO transitioning to a higher level of risk and potential reward under paragraph (a)(2)(i) of this section must meet all requirements to participate under the selected level of performance-based risk, including both of the following:
(A) Establishing an adequate repayment mechanism as specified under § 425.204(f).
(B) Selecting a MSR/MLR from the options specified under § 425.605(b).
(b)
(2) ACO executive who has the authority to legally bind the ACO must certify the elections described in this section.
The addition reads as follows:
(a) * * *
(3) * * *
(iii) That the percentage of eligible clinicians participating in the ACO that use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the applicable percentage specified by CMS at § 425.506(f).
(a)
(2) Nothing in this section shall be construed as prohibiting an ACO from using shared savings received under this part to cover the cost of an in-kind item or service or incentive payment provided to a beneficiary under paragraph (b) or (c) of this section.
(b)
(1) There is a reasonable connection between the items and services and the medical care of the beneficiary.
(2) The items or services are preventive care items or services or advance a clinical goal for the beneficiary, including adherence to a treatment regime, adherence to a drug regime, adherence to a follow-up care plan, or management of a chronic disease or condition.
(3) The in-kind item or service is not a Medicare-covered item or service for the beneficiary on the date the in-kind item or service is furnished to the beneficiary.
(c)
(2)
(ii) CMS evaluates an ACO's application to determine whether the ACO satisfies the requirements of this section, and approves or denies the application.
(3)
(i)
(B) For each consecutive year that an ACO wishes to operate its beneficiary incentive program after the CMS-approved initial period, it must certify both of the following by a deadline specified by CMS:
(
(
(ii)
(A) Preliminary prospective assignment with retrospective reconciliation, as described in § 425.400(a)(2).
(B) Prospective assignment, as described in § 425.400(a)(3).
(iii)
(A) An ACO professional who has a primary care specialty designation included in the definition of primary care physician under § 425.20.
(B) An ACO professional who is a physician assistant, nurse practitioner, or certified nurse specialist.
(C) A FQHC or RHC.
(iv)
(B) Each incentive payment made by an ACO under a beneficiary incentive program must satisfy all of the following conditions:
(
(
(
(
(C) An ACO must furnish incentive payments in the same amount to each eligible Medicare fee-for-service beneficiary without regard to enrollment of such beneficiary in a Medicare supplemental policy (described in section 1882(g)(1) of the Act), in a State Medicaid plan under title XIX or a waiver of such a plan, or in any other health insurance policy or health benefit plan.
(4)
(A) Identification of each beneficiary that received an incentive payment, including beneficiary name and HICN or Medicare beneficiary identifier.
(B) The type and amount of each incentive payment made to each beneficiary.
(C) The date each beneficiary received a qualifying service, the corresponding HCPCS code for the qualifying service, and identification of the ACO provider/supplier that furnished the qualifying service.
(D) The date the ACO provided each incentive payment to each beneficiary.
(ii)
(B) An ACO must not directly, through insurance, or otherwise, bill or otherwise shift the cost of establishing or operating a beneficiary incentive program to a Federal health care program.
(5)
(6)
(i) Determining eligibility for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.
(ii) Any Federal or State laws relating to taxation.
(7)
(i) Failure to comply with the requirements of this section.
(ii) Any of the grounds for ACO termination set forth in § 425.218(b).
(a)
(2) ACOs, ACO participants, or ACO providers/suppliers whose screening reveals a history of program integrity issues or affiliations with individuals or entities that have a history of program integrity issues may be subject to denial of their Shared Savings Program applications or the imposition of additional safeguards or assurances against program integrity risks.
(b)
(1) Conditioning the participation of ACO participants, ACO providers/suppliers, other individuals or entities performing functions or services related to ACO activities in the ACO on referrals of Federal health care program business that the ACO, its ACO participants, or ACO providers/suppliers or other individuals or entities performing functions or services related to ACO activities know or should know is being (or would be) provided to beneficiaries who are not assigned to the ACO.
(2) Requiring that beneficiaries be referred only to ACO participants or ACO providers/suppliers within the ACO or to any other provider or supplier, except that the prohibition does not apply to referrals made by employees or contractors who are operating within the scope of their employment or contractual arrangement to the employer or contracting entity, provided that the employees and contractors remain free to make referrals without restriction or limitation if the beneficiary expresses a preference for a different provider, practitioner, or supplier; the beneficiary's insurer determines the provider, practitioner, or supplier; or the referral is not in the beneficiary's best medical interests in the judgment of the referring party.
(b) * * *
(6) Use of payment rule waivers under § 425.612, if applicable or telehealth services under § 425.613, if applicable or both.
(7) Information about a beneficiary incentive program established under § 425.304(c), if applicable, including the following, for each performance year:
(i) Total number of beneficiaries who received an incentive payment.
(ii) Total number of incentive payments furnished.
(iii) HCPCS codes associated with any qualifying service for which an incentive payment was furnished.
(iv) Total value of all incentive payments furnished.
(v) Total of each type of incentive payment (for example, check or debit card) furnished.
(c) * * *
(3) Comply with § 425.304 regarding beneficiary incentives.
(a) An ACO participant must notify Medicare fee-for-service beneficiaries at the point of care about all of the following:
(1) Its ACO providers/suppliers are participating in the Shared Savings Program.
(2) The beneficiary's opportunity to decline claims data sharing under § 425.708.
(3) Beginning July 1, 2019, the beneficiary's ability to, and the process by which, he or she may identify or change identification of a primary care provider for purposes of voluntary alignment (as described in § 425.402(e)).
(b) Notification of the information specified in paragraph (a) of this section must be carried out by an ACO participant through all of the following methods:
(1) Posting signs in its facilities and, in settings in which beneficiaries receive primary care services, making standardized written notices available upon request.
(2) Beginning July 1, 2019, providing each beneficiary with a standardized written notice at the first primary care visit of each performance year in the form and manner specified by CMS.
(a) * * *
(4) The ACO's operation of a beneficiary incentive program.
(b) * * *
(1) To maintain and give CMS, DHHS, the Comptroller General, the Federal Government or their designees access to all books, contracts, records, documents, and other evidence (including data related to Medicare utilization and costs, quality performance measures, shared savings distributions, information related to operation of a beneficiary incentive program, and other financial arrangements related to ACO activities) sufficient to enable the audit, evaluation, investigation, and inspection of the ACO's compliance with program requirements, quality of services performed, right to any shared savings payment, or obligation to repay losses, ability to bear the risk of potential losses, and ability to repay any losses to CMS.
(d)
(2) If the Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries for the performance year exceed the ACO's updated benchmark as specified in paragraph (d)(1) of this section, CMS may take any of the pre-termination actions set forth in § 425.216.
(3) If the Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries for the performance year exceed the ACO's updated benchmark as specified in paragraph (d)(1) of this section for another performance year of the agreement period, CMS may immediately or with advance notice terminate the ACO's participation agreement under § 425.218.
The revisions and additions read as follows:
(a) * * *
(2)
(3)
(4)
(A) Preliminary prospective assignment with retrospective reconciliation as described in paragraph (a)(2) of this section applies to Track 1 and Track 2 ACOs.
(B) Prospective assignment as described in paragraph (a)(3) of this section applies to Track 3 ACOs.
(ii) For agreement periods beginning on July 1, 2019 and in subsequent years, an ACO may select the assignment methodology that CMS employs for assignment of beneficiaries under this subpart.
(A) An ACO may select either of the following:
(
(
(B) This selection is made prior to the start of each agreement period, and may be modified prior to the start of each performance year as specified in § 425.226.
(c) * * *
(1) * * *
(iv) For performance years starting on January 1, 2019, and subsequent performance years as follows:
(A) CPT codes:
(
(
(
(
(
(
(
(
(
(
(B) HCPCS codes:
(
(
(
(
(
(
(b) A beneficiary is excluded from the prospective assignment list of an ACO that is participating under prospective assignment under § 425.400(a)(3) at the end of a performance or benchmark year and quarterly during each performance year consistent with § 425.400(a)(3)(ii), or at the end of CY 2019 as specified in § 425.609(b)(1)(ii) and (c)(1)(ii), if the beneficiary meets any of the following criteria during the performance or benchmark year:
(e) * * *
(2) Beneficiaries are added to the ACO's list of assigned beneficiaries if all of the following conditions are satisfied:
(i) For performance year 2018:
(A) The beneficiary must have had at least one primary care service during the assignment window as defined under § 425.20 with a physician who is an ACO professional in the ACO who is a primary care physician as defined under § 425.20 or who has one of the primary specialty designations included in paragraph (c) of this section.
(B) The beneficiary meets the eligibility criteria established at § 425.401(a) and must not be excluded by the criteria at § 425.401(b). The exclusion criteria at § 425.401(b) apply for purposes of determining beneficiary eligibility for alignment to ACOs under all tracks based on the beneficiary's designation of an ACO professional as responsible for coordinating their overall care under paragraph (e) of this section.
(C) The beneficiary must have designated an ACO professional who is a primary care physician as defined at § 425.20, a physician with a specialty designation included at paragraph (c) of this section, or a nurse practitioner, physician assistant, or clinical nurse specialist as responsible for coordinating their overall care.
(D) If a beneficiary has designated a provider or supplier outside the ACO who is a primary care physician as
(ii) For performance years starting on January 1, 2019, and subsequent performance years:
(A) The beneficiary meets the eligibility criteria established at § 425.401(a) and must not be excluded by the criteria at § 425.401(b). The exclusion criteria at § 425.401(b) apply for purposes of determining beneficiary eligibility for alignment to an ACO based on the beneficiary's designation of an ACO professional as responsible for coordinating their overall care under paragraph (e) of this section, regardless of the ACO's assignment methodology selection under § 425.400(a)(4)(ii).
(B) The beneficiary must have designated an ACO professional as responsible for coordinating their overall care.
(C) If a beneficiary has designated a provider or supplier outside the ACO as responsible for coordinating their overall care, the beneficiary is not added under the assignment methodology in paragraph (b) of this section to the ACO's list of assigned beneficiaries for a 12-month performance year or the ACO's list of assigned beneficiaries for a 6-month performance year, which is based on the entire CY 2019 as provided in § 425.609.
(D) The beneficiary is not assigned to an entity participating in a model tested or expanded under section 1115A of the Act under which claims-based assignment is based solely on claims for services other than primary care services and for which there has been a determination by the Secretary that waiver of the requirement in section 1899(c)(2)(B) of the Act is necessary solely for purposes of testing the model.
(3) * * *
(i) Offering anything of value to the Medicare beneficiary as an inducement to influence the Medicare beneficiary's decision to designate or not to designate an ACO professional as responsible for coordinating their overall care under paragraph (e) of this section. Any items or services provided in violation of paragraph (e)(3) of this section are not considered to have a reasonable connection to the medical care of the beneficiary, as required under § 425.304(b)(1).
The revisions and additions read as follows:
(e) * * *
(4) * * *
(vii) For performance year 2017 and subsequent performance years, if an ACO receives the mean Shared Savings Program ACO quality score under paragraph (f) of this section, in the next performance year for which the ACO receives a quality performance score based on its own quality reporting, quality improvement is measured based on a comparison between the performance in that year and the most recently available prior performance year in which the ACO reported quality.
(f)
(1) CMS determines the ACO was affected by an extreme and uncontrollable circumstance based on either of the following:
(i) Twenty percent or more of the ACO's assigned beneficiaries reside in an area identified under the Quality Payment Program as being affected by an extreme and uncontrollable circumstance.
(A) Assignment is determined under subpart E of this part.
(B) In making this determination for performance year 2017, CMS uses the final list of beneficiaries assigned to the ACO for the performance year. For performance year 2018 and subsequent performance years, CMS uses the list of assigned beneficiaries used to generate the Web Interface quality reporting sample.
(ii) The ACO's legal entity is located in an area identified under the Quality Payment Program as being affected by an extreme and uncontrollable circumstance. An ACO's legal entity location is based on the address on file for the ACO in CMS' ACO application and management system.
(2) If CMS determines the ACO meets the requirements of paragraph (f)(1) of this section, CMS calculates the ACO's quality score as follows:
The addition reads as follows:
(f) For performance years starting on January 1, 2019, and subsequent performance years, ACOs in a track or a payment model within a track that—
(1) Does not meet the financial risk standard to be an Advanced APM must certify annually and at the time of application that the percentage of eligible clinicians participating in the
(2) Meets the financial risk standard to be an Advanced APM must certify annually and at the time of application that the percentage of eligible clinicians participating in the ACO that use CEHRT to document and communicate clinical care to their patients or other health care providers meets or exceeds the higher of 50 percent or the threshold established under § 414.1415(a)(1)(i) of this chapter.
The revisions and additions read as follows:
(a) * * *
(1)
(2)
(3)
(4)
(i)(A) Under the BASIC track's glide path, the level of risk and potential reward phases in over the course of the agreement period in the following order:
(
(
(
(
(
(B)(
(
(
(
(
(
(
(
(
(ii) If an ACO enters the BASIC track and is ineligible to participate under the glide path described in paragraph (a)(4)(i) of this section, as determined under paragraph (d) of this section, Level E as described in paragraph (a)(4)(i)(A)(
(b) For agreement periods beginning before July 1, 2019, ACOs may operate under the one-sided model for a maximum of 2 agreement periods. An ACO may not operate under the one-sided model for a second agreement period unless the—
(c) For agreement periods beginning before July 1, 2019, an ACO experiencing a net loss during a previous agreement period may reapply to participate under the conditions in § 425.202(a), except the ACO must also identify in its application the cause(s) for the net loss and specify what safeguards are in place to enable the ACO to potentially achieve savings in its next agreement period.
(d) For agreement periods beginning on July 1, 2019, and in subsequent years, CMS determines an ACO's eligibility for the Shared Savings Program participation options specified in paragraph (a) of this section as follows:
(1) If an ACO is identified as a high revenue ACO, the ACO is eligible for the participation options indicated in paragraph (a) of this section as follows:
(i) If the ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter either the BASIC track's glide path at any of the levels of risk and
(ii) If the ACO is determined to be experienced with performance-based risk Medicare ACO initiatives, the ACO may enter the ENHANCED track under paragraph (a)(3) of this section.
(2) If an ACO is identified as a low revenue ACO, the ACO is eligible for the participation options indicated in paragraph (a) of this section as follows:
(i) If the ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter either the BASIC track's glide path at any of the levels of risk and potential reward available under paragraphs (a)(4)(i)(A)(
(ii) If the ACO is determined to be experienced with performance-based risk Medicare ACO initiatives, the ACO may enter either the BASIC track Level E under paragraph (a)(4)(i)(A)(
(3) Low revenue ACOs may participate under the BASIC track for a maximum of two agreement periods. A low revenue ACO may only participate in the BASIC track for a second agreement period if it satisfies either of the following:
(i) The ACO is the same legal entity as a current or previous ACO that previously entered into a participation agreement for participation in the BASIC track only one time.
(ii) For a new ACO identified as a re-entering ACO, the ACO in which the majority of the new ACO's participants were participating previously entered into a participation agreement for participation in the BASIC track only one time.
(e) CMS monitors low revenue ACOs identified as experienced with performance-based risk Medicare ACO initiatives, during an agreement period in the BASIC track, for changes in the revenue of ACO participants that would cause the ACO to be considered a high revenue ACO and ineligible for participation in the BASIC track. If the ACO meets the definition of a high revenue ACO (as specified in § 425.20)—
(1) The ACO is permitted to complete the remainder of its current performance year under the BASIC track, but is ineligible to continue participation in the BASIC track after the end of that performance year if it continues to meet the definition of a high revenue ACO; and
(2) CMS takes compliance action as specified in §§ 425.216 and 425.218, up to and including termination of the participation agreement, to ensure the ACO does not continue in the BASIC track for subsequent performance years of the agreement period if it continues to meet the definition of a high revenue ACO.
(f) For agreement periods beginning on July 1, 2019, and in subsequent years, CMS determines the agreement period an ACO is entering for purposes of applying program requirements that phase-in over multiple agreement periods, as follows:
(1) An ACO entering an initial agreement period is considered to be entering a first agreement period in the Shared Savings Program.
(2) A re-entering ACO is considered to be entering a new agreement period in the Shared Savings Program as follows—
(i) An ACO whose participation agreement expired without having been renewed re-enters the program under the next consecutive agreement period in the Shared Savings Program;
(ii) An ACO whose participation agreement was terminated under § 425.218 or § 425.220 re-enters the program at the start of the same agreement period in which it was participating at the time of termination from the Shared Savings Program, beginning with the first performance year of that agreement period; or
(iii) A new ACO identified as a re-entering ACO enters the program in an agreement period that is determined based on the prior participation of the ACO in which the majority of the new ACO's participants were participating.
(A) If the participation agreement of the ACO used in this determination expired without having been renewed or was terminated, the agreement period of the re-entering ACO is determined in accordance with paragraph (f)(2)(i) or (ii) of this section, as applicable.
(B) If the ACO used in this determination is currently participating in the program, the new ACO is considered to be entering into the same agreement period as this currently participating ACO, beginning with the first performance year of that agreement period.
(3) A renewing ACO is considered to be entering the next consecutive agreement period in the Shared Savings Program.
(4) For purposes of this paragraph (f), program requirements that phase in over multiple agreement periods are as follows:
(i) The quality performance standard as described in § 425.502(a).
(ii) The weight used in calculating the regional adjustment to the ACO's historical benchmark as described in § 425.601(f).
(iii) The use of equal weights to weight each benchmark year as specified in § 425.601(e).
(a)
(1) Calculates the payment amounts included in Parts A and B fee-for-service claims using a 3-month claims run out with a completion factor.
(i) This calculation excludes indirect medical education (IME) and disproportionate share hospital (DSH) payments.
(ii) This calculation includes individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program.
(2) Makes separate expenditure calculations for each of the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(3) Adjusts expenditures for changes in severity and case mix using prospective HCC risk scores.
(4) Truncates an assigned beneficiary's total annual Parts A and B fee-for-service per capita expenditures
(5) Trends forward expenditures for each benchmark year (BY1 and BY2) to the third benchmark year (BY3) dollars using a blend of national and regional growth rates.
(i) To trend forward the benchmark, CMS makes separate calculations for expenditure categories for each of the following populations of beneficiaries:
(A) ESRD.
(B) Disabled.
(C) Aged/dual eligible Medicare and Medicaid beneficiaries.
(D) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(ii) National growth rates are computed using CMS Office of the Actuary national Medicare expenditure data for each of the years making up the historical benchmark for assignable beneficiaries identified for the 12-month calendar year corresponding to each benchmark year.
(iii) Regional growth rates are computed using expenditures for the ACO's regional service area for each of the years making up the historical benchmark as follows:
(A) Determine the counties included in the ACO's regional service area based on the ACO's assigned beneficiary population for the relevant benchmark year.
(B) Determine the ACO's regional expenditures as specified under paragraphs (c) and (d) of this section.
(iv) The national and regional growth rates are blended together by taking a weighted average of the two. The weight applied to the—
(A) National growth rate is calculated as the share of assignable beneficiaries in the ACO's regional service area for BY3 that are assigned to the ACO in BY3, as calculated in paragraph (a)(5)(v) of this section; and
(B) Regional growth rate is equal to 1 minus the weight applied to the national growth rate.
(v) CMS calculates the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO by doing all of the following:
(A) Calculating the county-level share of assignable beneficiaries that are assigned to the ACO for each county in the ACO's regional service area.
(B) Weighting the county-level shares according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries residing in the county in relation to the ACO's total number of assigned beneficiaries.
(C) Aggregating the weighted county-level shares for all counties in the ACO's regional service area.
(6) Restates BY1 and BY2 trended and risk adjusted expenditures using BY3 proportions of ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(7) Weights each year of the benchmark for an ACO's initial agreement period using the following percentages:
(i) BY3 at 60 percent.
(ii) BY2 at 30 percent.
(iii) BY1 at 10 percent.
(8) Adjusts the historical benchmark based on the ACO's regional service area expenditures, making separate calculations for the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries. CMS does all of the following:
(i) Calculates an average per capita amount of expenditures for the ACO's regional service area as follows:
(A) Determines the counties included in the ACO's regional service area based on the ACO's BY3 assigned beneficiary population.
(B) Determines the ACO's regional expenditures as specified under paragraphs (c) and (d) of this section for BY3.
(C) Adjusts for differences in severity and case mix between the ACO's assigned beneficiary population and the assignable beneficiary population for the ACO's regional service area identified for the 12-month calendar year that corresponds to BY3.
(ii) Calculates the adjustment as follows:
(A) Determines the difference between the average per capita amount of expenditures for the ACO's regional service area as specified under paragraph (a)(8)(i) of this section and the average per capita amount of the ACO's historical benchmark determined under paragraphs (a)(1) through (7) of this section, for each of the following populations of beneficiaries:
(
(
(
(
(B) Applies a percentage, as determined in paragraph (f) of this section.
(C) Caps the per capita dollar amount for each Medicare enrollment type (ESRD, Disabled, Aged/dual eligible Medicare and Medicaid beneficiaries, Aged/non-dual eligible Medicare and Medicaid beneficiaries) calculated under paragraph (a)(8)(ii)(B) of this section at a dollar amount equal to 5 percent of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY3 for assignable beneficiaries in that enrollment type identified for the 12-month calendar year corresponding to BY3 using data from the CMS Office of the Actuary.
(
(
(9) For the second and each subsequent performance year during the term of the agreement period, the ACO's benchmark is adjusted in accordance with § 425.118(b) for the addition and removal of ACO participants or ACO providers/suppliers, for a change to the ACO's beneficiary assignment methodology selection under § 425.226(a)(1), or both. To adjust the benchmark, CMS does the following:
(i) Takes into account the expenditures of beneficiaries who would have been assigned to the ACO under the ACO's most recent beneficiary assignment methodology selection in any of the 3 most recent years prior to the start of the agreement period using the most recent certified ACO participant list for the relevant performance year.
(ii) Redetermines the regional adjustment amount under paragraph (a)(8) of this section, according to the ACO's assigned beneficiaries for BY3 resulting from the ACO's most recent certified ACO participant list, the ACO's beneficiary assignment methodology selection under § 425.226(a)(1) for the relevant performance year, or both.
(10) The historical benchmark is further adjusted at the time of reconciliation for a performance year to account for changes in severity and case mix of the ACO's assigned beneficiary population as described under §§ 425.605(a), 425.609(c), and 425.610(a).
(b)
(1) To update the benchmark, CMS makes separate calculations for expenditure categories for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) National growth rates are computed using CMS Office of the Actuary national Medicare expenditure data for BY3 and the performance year for assignable beneficiaries identified for the 12-month calendar year corresponding to each year.
(3) Regional growth rates are computed using expenditures for the ACO's regional service area for BY3 and the performance year, computed as follows:
(i) Determine the counties included in the ACO's regional service area based on the ACO's assigned beneficiary population for the year.
(ii) Determine the ACO's regional expenditures as specified under paragraphs (c) and (d) of this section.
(4) The national and regional growth rates are blended together by taking a weighted average of the two. The weight applied to the—
(i) National growth rate is calculated as the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO for the applicable performance year as specified in paragraph (a)(5)(v) of this section; and
(ii) Regional growth rate is equal to 1 minus the weight applied to the national growth rate.
(c)
(1)(i) Determines average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area, where assignable beneficiaries are identified for the 12-month calendar year corresponding to the relevant benchmark or performance year.
(ii) Makes separate expenditure calculations for each of the following populations of beneficiaries:
(A) ESRD.
(B) Disabled.
(C) Aged/dual eligible Medicare and Medicaid beneficiaries.
(D) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Calculates assignable beneficiary expenditures using the payment amounts included in Parts A and B fee-for-service claims with dates of service in the 12-month calendar year for the relevant benchmark or performance year, using a 3-month claims run out with a completion factor. The calculation—
(i) Excludes IME and DSH payments; and
(ii) Considers individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program.
(3) Truncates a beneficiary's total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries identified for the 12-month calendar year that corresponds to the relevant benchmark or performance year, in order to minimize variation from catastrophically large claims.
(4) Adjusts fee-for-service expenditures for severity and case mix of assignable beneficiaries in the county using prospective CMS-HCC risk scores. The calculation is made according to the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(d)
(1) Weighting the risk-adjusted county-level fee-for-service expenditures determined under paragraph (c) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries in the applicable population (according to Medicare enrollment type) residing in the county in relation to the ACO's total number of assigned beneficiaries in the applicable population (according to Medicare enrollment type) for the relevant benchmark or performance year for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries;
(2) Aggregating the values determined under paragraph (d)(1) of this section for each population of beneficiaries (according to Medicare enrollment type) across all counties within the ACO's regional service area; and
(3) Weighting the aggregate expenditure values determined for each population of beneficiaries (according to Medicare enrollment type) under paragraph (d)(2) of this section by a weight reflecting the proportion of the ACO's overall beneficiary population in the applicable Medicare enrollment type for the relevant benchmark or performance year.
(e)
(2) For second or subsequent agreements periods beginning on July 1, 2019 and in subsequent years, CMS establishes, adjusts, and updates the rebased historical benchmark in accordance with paragraphs (a) through (d) of this section with the following modifications:
(i) Rather than weighting each year of the benchmark using the percentages provided in paragraph (a)(7) of this section, each benchmark year is weighted equally.
(ii) For a renewing ACO or re-entering ACO whose prior agreement period benchmark was calculated according to § 425.603(c), to determine the weight used in the regional adjustment calculation described in paragraph (f) of this section, CMS considers the agreement period the ACO is entering into according to § 425.600(f) in combination with either of the following—
(A) The weight previously applied to calculate the regional adjustment to the ACO's benchmark under § 425.603(c)(9) in its most recent prior agreement period; or
(B) For a new ACO identified as a re-entering ACO, CMS considers the weight previously applied to calculate the regional adjustment to the benchmark under § 425.603(c)(9) in its most recent prior agreement period of the ACO in which the majority of the new ACO's participants were participating previously.
(f)
(i) Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is
(ii) Using 25 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is determined to have higher spending than the ACO's regional service area.
(2) The second time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:
(i) Using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have lower spending than the ACO's regional service area.
(ii) Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have higher spending than the ACO's regional service area.
(3) The third or subsequent time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment to the historical benchmark using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark.
(4) To determine if an ACO has lower or higher spending compared to the ACO's regional service area, CMS does the following:
(i) Multiplies the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's historical benchmark for each population of beneficiaries (ESRD, Disabled, Aged/dual eligible Medicare and Medicaid beneficiaries, Aged/non-dual eligible Medicare and Medicaid beneficiaries) as calculated under either paragraph (a)(8)(ii)(A) or (e) of this section by the applicable proportion of the ACO's assigned beneficiary population (ESRD, Disabled, Aged/dual eligible Medicare and Medicaid beneficiaries, Aged/non-dual eligible Medicare and Medicaid beneficiaries) for BY 3 of the historical benchmark.
(ii) Sums the amounts determined in paragraph (f)(4)(i) of this section across the populations of beneficiaries (ESRD, Disabled, Aged/dual eligible Medicare and Medicaid beneficiaries, Aged/non-dual eligible Medicare and Medicaid beneficiaries).
(iii) If the resulting sum is a net positive value, the ACO is considered to have lower spending compared to the ACO's regional service area. If the resulting sum is a net negative value, the ACO is considered to have higher spending compared to the ACO's regional service area.
(iv) If CMS adjusts the ACO's benchmark for the addition or removal of ACO participants or ACO providers/suppliers during the term of the agreement period or a change to the ACO's beneficiary assignment methodology selection as specified in paragraph (a)(9) of this section, CMS redetermines whether the ACO is considered to have lower spending or higher spending compared to the ACO's regional service area for purposes of determining the percentage in paragraphs (f)(1) and (2) of this section used in calculating the adjustment under either paragraph (a)(8) or (e) of this section.
(g)
(1) When adjusting the benchmark using the methodology set forth in paragraph (a)(10) of this section and § 425.609(c), CMS adjusts for severity and case mix between BY3 and CY 2019.
(2) When updating the benchmark using the methodology set forth in paragraph (b) of this section and § 425.609(c), CMS updates the benchmark based on growth between BY3 and CY 2019.
The revisions and addition read as follows:
(a)
(c)
(1) When adjusting the benchmark using the methodology set forth in paragraph (a)(9) of this section and § 425.609(b), CMS adjusts for severity and case mix between BY3 and CY 2019.
(2) When updating the benchmark using the methodology set forth in paragraph (b) of this section and § 425.609(b), CMS updates the benchmark based on growth between BY3 and CY 2019.
The revision and addition reads as follows:
(g) In determining performance for the January 1, 2019 through June 30, 2019 performance year described in § 425.609(b) CMS does all of the following:
(1) When adjusting the benchmark using the methodology set forth in paragraph (c)(10) of this section and § 425.609(b), CMS adjusts for severity and case mix between BY3 and CY 2019.
(2) When updating the benchmark using the methodology set forth in paragraph (d) of this section and § 425.609(b), CMS updates the benchmark based on growth between BY3 and CY 2019.
The revision and addition read as follows:
(b) * * *
(g)
(a)
(1) CMS uses an ACO's prospective HCC risk score to adjust the benchmark for changes in severity and case mix in the assigned beneficiary population between BY3 and the performance year.
(i) Positive adjustments in prospective HCC risk scores are subject to a cap of 3 percent.
(ii) Negative adjustments in prospective HCC risk scores are subject to a cap of negative 3 percent.
(iii) These caps are the maximum change in risk scores for each agreement period, such that the adjustment between BY3 and any performance year in the agreement period cannot be larger than 3 percent in either direction.
(2) In risk adjusting the benchmark as described in § 425.601(a)(10), CMS makes separate adjustments for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(3) To minimize variation from catastrophically large claims, CMS truncates an assigned beneficiary's total annual Medicare Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare Parts A and B fee-for-service expenditures as determined for the applicable performance year for assignable beneficiaries identified for the 12-month calendar year corresponding to the performance year.
(4) CMS uses a 3-month claims run out with a completion factor to calculate an ACO's per capita expenditures for each performance year.
(5) Calculations of the ACO's expenditures include the payment amounts included in Medicare Parts A and B fee-for-service claims.
(i) These calculations exclude indirect medical education (IME) and disproportionate share hospital (DSH) payments.
(ii) These calculations take into consideration individually beneficiary
(6) In order to qualify for a shared savings payment, the ACO's average per capita Medicare Parts A and B fee-for-service expenditures for the performance year must be below the applicable updated benchmark by at least the minimum savings rate established for the ACO under paragraph (b) of this section.
(b)
(2) Prior to entering a two-sided model of the BASIC track, the ACO must select the MSR/MLR. For an ACO making this selection as part of an application for, or renewal of, participation in a two-sided model of the BASIC track, the selection applies for the duration of the agreement period under the BASIC track. For an ACO making this selection during an agreement period, as part of the application cycle prior to entering a two-sided model of the BASIC track, the selection applies for the remaining duration of the applicable agreement period under the BASIC track.
(i) The ACO must choose from the following options for establishing the MSR/MLR:
(A) Zero percent MSR/MLR.
(B) Symmetrical MSR/MLR in a 0.5 percent increment between 0.5 and 2.0 percent.
(C) Symmetrical MSR/MLR that varies, based on the number of beneficiaries assigned to the ACO under subpart E of this part. The MSR is the same as the MSR that would apply under paragraph (b)(1) of this section for an ACO under a one-sided model of the BASIC track's glide path, and is based on the number of assigned beneficiaries. The MLR under the BASIC track is equal to the negative MSR.
(ii) The ACO selects its MSR/MLR as part of one the following:
(A) Application for, or renewal of, program participation in a two-sided model of the BASIC track.
(B) Election to participate in a two-sided model of the BASIC track during an agreement period under § 425.226.
(C) Automatic transition from Level B to Level C of the BASIC track's glide path under § 425.600(a)(4)(i).
(3) To qualify for shared savings under the BASIC track, an ACO's average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for the performance year must be below its updated benchmark costs for the year by at least the MSR established for the ACO.
(4) To be responsible for sharing losses with the Medicare program, an ACO's average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for the performance year must be above its updated benchmark costs for the year by at least the MLR established for the ACO.
(c)
(d)
(i)
(B)
(
(ii)
(B)
(
(iii)
(B)
(
(C)
(D)
(
(iv)
(B)
(
(C)
(D)
(
(v)
(B)
(
(C)
(D)
(
(2) Level E risk and reward as specified in paragraph (d)(1)(v) of this section applies to an ACO eligible to enter the BASIC track that is determined to be experienced with performance-based risk Medicare ACO initiatives as specified under § 425.600(d).
(e)
(2) CMS provides written notification to an ACO of the amount of shared losses, if any, that it must repay to the program.
(3) If an ACO has shared losses, the ACO must make payment in full to CMS within 90 days of receipt of notification.
(f)
(1) CMS determines the percentage of the ACO's performance year assigned beneficiary population affected by an extreme and uncontrollable circumstance.
(2) CMS reduces the amount of the ACO's shared losses by an amount determined by multiplying the shared losses by the percentage of the total months in the performance year affected by an extreme and uncontrollable circumstance, and the percentage of the ACO's assigned beneficiaries who reside in an area affected by an extreme and uncontrollable circumstance.
(i) For an ACO that is liable for a pro-rated share of losses under § 425.221(b)(2), the amount of shared losses determined for the performance year during which the termination becomes effective is adjusted according to this paragraph (f)(2).
(ii) [Reserved]
(3) CMS applies determinations made under the Quality Payment Program with respect to—
(i) Whether an extreme and uncontrollable circumstance has occurred; and
(ii) The affected areas.
(4) CMS has sole discretion to determine the time period during which an extreme and uncontrollable circumstance occurred and the percentage of the ACO's assigned beneficiaries residing in the affected areas.
(g)
The additions read as follows:
(i) * * *
(2) * * *
(i) For an ACO that is liable for a pro-rated share of losses under § 425.221(b)(2) or (b)(3)(i), the amount of shared losses determined for the performance year during which the termination becomes effective is adjusted according to this paragraph (i)(2).
(ii) [Reserved]
(j)
(a)
(b)
(1) Uses the ACO participant list in effect for the performance year beginning January 1, 2019, to determine beneficiary assignment, using claims for the entire calendar year, as specified in §§ 425.402 and 425.404, and according to the ACO's track as specified in § 425.400.
(i) For ACOs under preliminary prospective assignment with retrospective reconciliation the assignment window is CY 2019.
(ii) For ACOs under prospective assignment—
(A) Medicare fee-for-service beneficiaries are prospectively assigned to the ACO based on the beneficiary's use of primary care services in the most recent 12 months for which data are available; and
(B) Beneficiaries remain prospectively assigned to the ACO at the end of CY 2019 if they do not meet any of the exclusion criteria under § 425.401(b) during the calendar year.
(2) Uses the ACO's quality performance for the 2019 reporting period to determine the ACO's quality performance score as specified in § 425.502.
(i) The ACO participant list finalized for the first performance year of the ACO's agreement period beginning on July 1, 2019, is used to determine the quality reporting samples for the 2019 reporting year for the following ACOs:
(A) An ACO that extends its participation agreement for a 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.200(b)(2)(ii)(B), and enters a new agreement period beginning on July 1, 2019.
(B) An ACO that participates in the program for the first 6 months of a 12-month performance year during 2019, and is eligible for pro-rated shared savings or shared losses in accordance with § 425.221(b)(3)(i).
(ii) The ACO's latest certified ACO participant list is used to determine the quality reporting samples for the 2019 reporting year for an ACO that extends its participation agreement for the 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.200(b)(2)(ii)(B), and does not enter a new agreement period beginning on July 1, 2019.
(3) Uses the methodology for calculating shared savings or shared losses applicable to the ACO under the terms of the participation agreement that was in effect on January 1, 2019.
(i) The ACO's historical benchmark is determined according to either § 425.602 (first agreement period) or § 425.603 (second agreement period) except as follows:
(A) The benchmark is adjusted for changes in severity and case mix between BY 3 and CY 2019 using the methodology that accounts separately for newly and continuously assigned beneficiaries using prospective HCC risk scores and demographic factors as described under §§ 425.604(a)(1) through (3), 425.606(a)(1) through (3), and 425.610(a)(1) through (3).
(B) The benchmark is updated to CY 2019 according to the methodology described under § 425.602(b), § 425.603(b), or § 425.603(d), based on whether the ACO is in its first or second agreement period, and for an ACO in a second agreement period, the date on which that agreement period began.
(ii) The ACO's financial performance is determined based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.604, § 425.606 or § 425.610), unless otherwise specified. In determining ACO financial performance, CMS does all of the following:
(A) Average per capita Medicare Parts A and B fee-for-service expenditures for CY 2019 are calculated for the ACO's performance year assigned beneficiary population identified in paragraph (b)(1) of this section.
(B) Expenditures calculated in paragraph (b)(3)(ii)(A) of this section are compared to the ACO's updated benchmark determined according to paragraph (b)(3)(i) of this section.
(C)(
(
(
(
(
(
(D) For an ACO that meets all the requirements to receive shared savings payment under paragraph (b)(3)(ii)(C)(
(
(
(E) For an ACO responsible for shared losses under paragraph (b)(3)(ii)(C)(
(
(
(c)
(1) Uses the ACO participant list in effect for the performance year beginning on July 1, 2019, to determine beneficiary assignment, using claims for the entire calendar year, consistent with the methodology the ACO selected at the start of its agreement period under § 425.400(a)(4)(ii).
(i) For ACOs under preliminary prospective assignment with retrospective reconciliation the assignment window is CY 2019.
(ii) For ACOs under prospective assignment—
(A) Medicare fee-for-service beneficiaries are prospectively assigned to the ACO based on the beneficiary's use of primary care services in the most recent 12 months for which data are available; and
(B) Beneficiaries remain prospectively assigned to the ACO at the end of CY 2019 if they do not meet any of the exclusion criteria under § 425.401(b) during the calendar year.
(2) Uses the ACO's quality performance for the 2019 reporting period to determine the ACO's quality performance score as specified in § 425.502. The ACO participant list finalized for the first performance year of the ACO's agreement period beginning on July 1, 2019, is used to determine the quality reporting samples for the 2019 reporting year for all ACOs.
(3) Uses the methodology for calculating shared savings or shared loses applicable to the ACO for its first performance year under its agreement period beginning on July 1, 2019.
(i) The ACO's historical benchmark is determined according to § 425.601 except as follows:
(A) The benchmark is adjusted for changes in severity and case mix between BY 3 and CY 2019 based on growth in prospective HCC risk scores, subject to a symmetrical cap of positive or negative 3 percent as described under § 425.605(a)(1) or § 425.610(a)(2).
(B) The benchmark is updated to CY 2019 according to the methodology described under § 425.601(b).
(ii) The ACO's financial performance is determined based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 (BASIC track) or § 425.610 (ENHANCED track)), unless otherwise specified. In determining ACO financial performance, CMS does all of the following:
(A) Average per capita Medicare Parts A and B fee-for-service expenditures for CY 2019 are calculated for the ACO's performance year assigned beneficiary population identified in paragraph (c)(1) of this section.
(B) Expenditures calculated in paragraph (c)(3)(ii)(A) of this section are compared to the ACO's updated benchmark determined according to paragraph (c)(3)(i) of this section.
(C)(
(
(
(
(
(
(D) For an ACO that meets all the requirements to receive shared savings payment under paragraph (c)(3)(ii)(C)(
(
(
(E) For an ACO responsible for shared losses under paragraph (c)(3)(ii)(C)(
(
(
(d)
(1) In calculating the amount of shared losses owed, CMS makes adjustments to the amount determined in paragraph (b)(3)(ii)(E)(
(2) In determining the ACO's quality performance score for the 2019 quality reporting period, CMS uses the alternative scoring methodology specified in § 425.502(f).
(e)
(1) CMS notifies an ACO in writing regarding whether the ACO qualifies for a shared savings payment, and if so, the amount of the payment due.
(2) CMS provides written notification to an ACO of the amount of shared losses, if any, that it must repay to the program.
(3) If an ACO has shared losses, the ACO must make payment in full to CMS within 90 days of receipt of notification.
(4) If an ACO is reconciled for both the January 1, 2019 through June 30, 2019 performance year (or performance period) and the July 1, 2019 through December 31, 2019 performance year, CMS issues a separate notice of shared savings or shared losses for each performance year (or performance period), and if the ACO has shared savings for one performance year (or performance period) and shared losses for the other performance year (or performance period), CMS reduces the amount of shared savings by the amount of shared losses.
(i) If any amount of shared savings remains after completely repaying the amount of shared losses owed, the ACO is eligible to receive payment for the remainder of the shared savings.
(ii) If the amount of shared losses owed exceeds the amount of shared savings earned, the ACO is accountable for payment of the remaining balance of shared losses in full.
The revisions and additions read as follows:
(a) * * *
(1) Risk adjustment for ACOs in agreement periods beginning on or before January 1, 2019. CMS does the following to adjust the benchmark each performance year:
(i)
(ii)
(B) If the prospective HCC risk score is lower in the performance year for this population, CMS adjusts the benchmark for changes in severity and case mix for this population using this lower prospective HCC risk score.
(2) Risk adjustment for ACOs in agreement periods beginning on July 1,
(i) Positive adjustments in prospective HCC risk scores are subject to a cap of 3 percent.
(ii) Negative adjustments in prospective HCC risk scores are subject to a cap of negative 3 percent.
(iii) These caps are the maximum change in risk scores for each agreement period, such that the adjustment between BY3 and any performance year in the agreement period cannot be larger than 3 percent in either direction.
(3) In risk adjusting the benchmark as described in §§ 425.601(a)(10), 425.602(a)(9) and 425.603(c)(10), CMS makes separate adjustments for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(i) * * *
(2) * * *
(i) For an ACO that is liable for a pro-rated share of losses under § 425.221(b)(2) or (b)(3)(i), the amount of shared losses determined for the performance year during which the termination becomes effective is adjusted according to this paragraph (i)(2).
(ii) [Reserved]
(j)
(k)
The revisions and additions read as follows:
(a) * * *
(1)
(ii) * * *
(A) In the case of a beneficiary who is assigned to an ACO that has selected preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2), the beneficiary must appear on the list of preliminarily prospectively assigned beneficiaries at the beginning of the performance year or on the first, second, or third quarterly preliminary prospective assignment list for the performance year in which they are admitted to the eligible SNF, and the SNF services must be provided after the beneficiary first appeared on the preliminary prospective assignment list for the performance year.
(B) In the case of a beneficiary who is assigned to an ACO that has selected prospective assignment under § 425.400(a)(3), the beneficiary must be prospectively assigned to the ACO for the performance year in which they are admitted to the eligible SNF.
(iii) * * *
(A) Providers eligible to be included in the CMS 5-star Quality Rating System must have and maintain an overall rating of 3 or higher.
(iv) For a beneficiary who was included on the ACO's prospective assignment list or preliminary prospective assignment list at the beginning of the performance year or on the first, second, or third quarterly preliminary prospective assignment list for the performance year, for an ACO for which a waiver of the SNF 3-day rule has been approved under paragraph (a)(1) of this section, but who was subsequently removed from the assignment list for the performance year, CMS makes payment for SNF services furnished to the beneficiary by a SNF affiliate if the following conditions are met:
(A)(
(
(B) But for the beneficiary's removal from the ACO's assignment list, CMS would have made payment to the SNF affiliate for such services under the waiver under paragraph (a)(1) of this section.
(v) The following beneficiary protections apply when a beneficiary receives SNF services without a prior 3-day inpatient hospital stay from a SNF affiliate that intended to provide services under a SNF 3-day rule waiver under paragraph (a)(1) of this section, the SNF affiliate services were non-covered only because the SNF affiliate stay was not preceded by a qualifying hospital stay under section 1861(i) of the Act, and in the case of a beneficiary where the ACO selected one of the following:
(A) Prospective assignment under § 425.400(a)(3), the beneficiary was not prospectively assigned to the ACO for the performance year in which they received the SNF services, or was prospectively assigned but was later excluded and the 90-day grace period, described in paragraph (a)(1)(iv)(A) of this section, has lapsed.
(B) Preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2), the beneficiary was not identified as preliminarily prospectively assigned to the ACO for the performance year in the report provided under § 425.702(c)(1)(ii)(A) at the beginning of the performance year or for the first, second, or third quarter of the performance year before the SNF services were provided to the beneficiary.
(D) CMS makes no payments for SNF services to a SNF affiliate of an ACO for which a waiver of the SNF 3-day rule has been approved when the SNF affiliate admits a FFS beneficiary who was not prospectively or preliminarily prospectively assigned to the ACO prior to the SNF admission or was prospectively assigned but was later excluded and the 90-day grace period under paragraph (a)(1)(iv)(A) of this section has lapsed.
(vi) The following ACOs may request to use the SNF 3-day rule waiver:
(A) An ACO participating in performance-based risk within the BASIC track under § 425.605.
(B) An ACO participating in the ENHANCED track under § 425.610.
(f)
(1) The beneficiary was prospectively assigned to an ACO that is an applicable ACO for purposes of § 425.613 at the beginning of the applicable performance year, but the beneficiary was excluded in the most recent quarterly update to the prospective assignment list under § 425.401(b).
(2) The telehealth services are provided by a physician or practitioner billing under the TIN of an ACO participant in the ACO within 90 days following the date CMS delivers the quarterly exclusion list to the ACO.
(3) But for the beneficiary's exclusion from the ACO's prospective assignment list, CMS would have made payment to the ACO participant for such services under § 425.613.
(a)
(1) For purposes of this section:
(i) An applicable ACO is an ACO that is participating under a two-sided model under § 425.600 and has elected prospective assignment under § 425.400(a)(3) for the performance year.
(ii) The home of the beneficiary is treated as an originating site under section 1834(m)(4)(C)(ii) of the Act.
(2) For payment to be made under this section, the following requirements must be met:
(i) The beneficiary is prospectively assigned to the ACO for the performance year in which the beneficiary received the telehealth service.
(ii) The physician or practitioner who furnishes the telehealth service must bill under the TIN of an ACO participant that is included on the certified ACO participant list under § 425.118 for the performance year in which the service is rendered.
(iii) The originating site must comply with applicable State licensing requirements.
(iv) When the originating site is the beneficiary's home, the telehealth services must not be inappropriate to furnish in the home setting. Services that are typically furnished in an inpatient setting may not be furnished as a telehealth service when the originating site is the beneficiary's home.
(v) CMS does not pay a facility fee when the originating site is the beneficiary's home.
(b)
(2) In the event that CMS makes no payment for a telehealth service furnished by a physician or practitioner billing through the TIN of an ACO participant, and the only reason the claim was non-covered is because the beneficiary is not prospectively assigned to the ACO or in the 90-day grace period under § 425.612(f), all of the following beneficiary protections apply:
(i) The ACO participant must not charge the beneficiary for the expenses incurred for such service.
(ii) The ACO participant must return to the beneficiary any monies collected for such service.
(iii) The ACO may be required to submit a corrective action plan under § 425.216(b) for CMS approval. If the ACO is required to submit a corrective action plan and, after being given an opportunity to act upon the corrective action plan, the ACO fails to implement the corrective action plan or demonstrate improved performance upon completion of the corrective action plan, CMS may terminate the participation agreement as specified under § 425.216(b)(2).
(c)
(2) If CMS terminates the participation agreement under § 425.218, payment for telehealth services under paragraph (a) of this section is not made with respect to telehealth services furnished beginning on the date specified by CMS in the termination notice.
(3) If the ACO terminates the participation agreement, payment for telehealth services under paragraph (a) of this section is not made with respect to telehealth services furnished beginning on the effective date of termination as specified in the written notification required under § 425.220.
(d)
(2) CMS reserves the right to take compliance action, up to and including termination of the participation agreement, as specified in §§ 425.216 and 425.218, with respect to an applicable ACO for non-compliance with program requirements, including inappropriate use of telehealth services.
The revisions and addition read as follows:
(c) * * *
(1) * * *
(ii) * * *
(A) For an ACO participating under preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), the following information is made available regarding preliminarily prospectively assigned beneficiaries and beneficiaries that received a primary care service during the previous 12 months from one of the ACO participants that submits claims for primary care services used to determine the ACO's assigned population under subpart E of this part:
(B) For an ACO participating under preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), information in the following categories, which represents the minimum data necessary for ACOs to conduct health care operations work, is made available regarding preliminarily prospectively assigned beneficiaries:
(C) The information under paragraphs (c)(1)(ii)(A) and (B) of this section is made available to ACOs participating under prospective assignment as specified under § 425.400(a)(3), but is limited to the ACO's prospectively assigned beneficiaries.
(d) For an ACO eligible to be reconciled under § 425.609(b), CMS shares with the ACO quarterly aggregate reports as provided in paragraphs (b) and (c)(1)(ii) of this section for CY 2019.
(d) * * *
(1) For an ACO participating under—
(i) Preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), the beneficiary's name appears on the preliminary prospective assignment list provided to the ACO at the beginning of the performance year, during each quarter (and in conjunction with the annual reconciliation) or the beneficiary has received a primary care service from an ACO participant upon whom assignment is based (under subpart E of this part) during the most recent 12-month period; or
(ii) Prospective assignment as specified under § 425.400(a)(3), the beneficiary's name appears on the prospective assignment list provided to the ACO at the beginning of the performance year.
The addition reads as follows:
(a) * * *
(7) The termination of a beneficiary incentive program established under § 425.304(c).
Internal Revenue Service (IRS), Treasury.
Notice of proposed rulemaking; notice of public hearing; withdrawal and partial withdrawal of notices of proposed rulemaking.
This document contains proposed regulations implementing the centralized partnership audit regime. This document withdraws and reproposes certain portions of proposed regulations implementing the centralized partnership audit regime that have not been finalized to reflect the changes made by the Technical Corrections Act of 2018, contained in Title II of the Consolidated Appropriations Act of 2018 (TTCA). The proposed regulations affect partnerships with respect to partnership taxable years beginning after December 31, 2017, as well as partnerships that make the election under the Bipartisan Budget Act of 2015 (BBA), to apply the centralized partnership audit regime to partnership taxable years beginning on or after November 2, 2015 and before January 1, 2018.
Written or electronic comments must be received by October 1, 2018. Outlines of topics to be discussed at the public hearing scheduled for October 9, 2018, at 10 a.m. must be received by October 1, 2018.
Send submissions to: CC:PA:LPD:PR (REG-136118-15), Room 5207, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-136118-15), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at
Concerning the proposed regulations under sections 6221, 6226, 6235, and 6241, Jennifer M. Black of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6225, 6231, and 6234, Joy E. Gerdy-Zogby of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6222, 6227, 6232, and 6233, Steven L. Karon of the Office of Associate Chief Counsel (Procedure and Administration), (202) 217-6834; concerning the proposed regulations under section 6225 relating to creditable foreign tax expenditures, Larry R. Pounders, Jr. of the Office of Associate Chief Counsel (International), (202) 317-5465; concerning the proposed regulations relating to chapters 3 and 4 of subtitle A of the Internal Revenue Code (other than section 1446), Subin Seth of the Office of Associate Chief Counsel (International), (202) 317-5003; concerning the proposed regulations relating to section 1446, Ronald M. Gootzeit of the Office of Associate Chief Counsel (International), (202) 317-4953; concerning the proposed regulations under sections 704 through 706 and §§ 301.6225-4 and 301.6226-4, Allison R. Carmody or Meghan M. Howard of the Office of Associate Chief Counsel (Passthroughs and Special Industries), (202) 317-5279; concerning the submission of comments, the hearing, or to be placed on the building access list to attend the hearing, Regina Johnson, (202) 317-6901 (not toll-free numbers).
This document contains proposed regulations under sections 704 through 706 to amend the Income Tax Regulations (26 CFR part 1) under Subpart—Partners and Partnerships and proposed regulations under sections 6221 through 6241 to amend the Procedure and Administration Regulations (26 CFR part 301) under Subpart—Tax Treatment of Partnership Items to implement the centralized partnership audit regime enacted by section 1101 of the BBA, Public Law 114-74 (BBA), as amended by the Protecting Americans from Tax Hikes Act of 2015, Public Law 114-113 (PATH Act) and sections 201 through 207 of the TTCA, Public Law 115-141. This document also withdraws portions of proposed regulations under sections 704 through 706 and 6221 through 6241 that were published in the
Section 1101(a) of the BBA removed subchapter C of chapter 63 of the Internal Revenue Code (Code) effective for partnership taxable years beginning after December 31, 2017. Subchapter C of chapter 63 of the Code (subchapter C of chapter 63) contained the unified partnership audit and litigation rules that were commonly referred to as the TEFRA partnership procedures or simply TEFRA. Section 1101(b) of the BBA also removed subchapter D of chapter 63 of the Code and part IV of subchapter K of chapter 1 of the Code, rules applicable to electing large partnerships, effective for partnership taxable years beginning after December 31, 2017. Section 1101(c) of the BBA replaced the TEFRA partnership procedures and the rules applicable to electing large partnerships with a centralized partnership audit regime that, in general, determines, assesses, and collects tax at the partnership level.
On December 18, 2015, section 1101 of the BBA was amended by the PATH Act. The amendments under the PATH Act are effective as if included in section 1101 of the BBA, and therefore, subject to the effective dates in section 1101(g) of the BBA.
On June 14, 2017, the Treasury Department and the IRS published in the
On November 30, 2017, the Treasury Department and the IRS published in the
On December 19, 2017, the Treasury Department and the IRS published in the
On January 2, 2018, the Treasury Department and the IRS published in the
On February 2, 2018, the Treasury Department and the IRS published in the
On March 23, 2018, Congress enacted the TTCA, which made a number of technical corrections to the rules under the centralized partnership audit regime. The amendments under the TTCA are effective as if included in section 1101 of the BBA, and therefore, subject to the effective dates in section 1101(g) of the BBA.
On August 9, 2018, the Treasury Department and the IRS published in the
In light of the technical corrections made by the TTCA, to the extent regulations have not already been finalized, this document withdraws the regulations proposed in the June 2017 NPRM, the November 2017 NPRM, the December 2017 NPRM, and the February 2018 NPRM (collectively, the prior NPRMs) and proposes regulations reflecting the technical corrections made by the TTCA. The regulations proposed in this document also include clarifications, unrelated to the TTCA as discussed in the Explanation of Provisions section of this preamble. In addition, certain regulations have been reordered and renumbered, typographical errors have been corrected, nonsubstantive editorial changes have been made, and the applicability date provisions in the regulations have been revised to replace references to § 301.9100-22T with references to § 301.9100-22. Finally, the assumed highest rate of tax for corporations in the examples for all applicable periods is now 20 percent to more closely reflect the corporate tax rate in effect under section 11 (as amended by section 13001 of “[a]n Act to provide for the reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Public Law 115-97 (the “Act”)).
Although this document withdraws the prior NPRMs, the Explanation of Provisions sections contained in the preambles of the withdrawn NPRMs remain relevant. Therefore, to the extent not inconsistent with the Explanation of Provisions section of this preamble or the preamble to the portions of the proposed regulations that have already been finalized, those Explanation of Provision sections are incorporated by reference in this document.
This document does not address written comments that were submitted in response to the regulations proposed in the prior NPRMs or respond to any statements made during the public hearing held on September 18, 2017. Except to the extent that the written comments relate to the final regulations under section 6221(b) and section 6223, such comments and any comments received in response to this notice of proposed rulemaking will be addressed when the regulations proposed in this document are finalized.
Section 6221(a) provides for the determination of certain adjustments at the partnership level under the centralized partnership audit regime. Prior to amendment by the TTCA, section 6221(a) provided that any adjustment to items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year (and any partner's distributive share thereof) shall be determined, any tax attributable thereto shall be assessed and collected, and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share shall be determined at the partnership level. Prior to amendment by the TTCA, section 6241(a)(2) provided that the term “partnership adjustment” meant any adjustment in the amount of any item of income, gain, loss, deduction, or credit of a partnership, or any partner's distributive share thereof.
Section 201(c)(2) of the TTCA amended section 6221(a) by replacing the phrase “items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year (and any partner's distributive share thereof)” with the phrase “a partnership-related item.” Section 6221(a) now provides that any adjustment to a partnership-related item and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any partnership-related item shall be determined at the partnership level. Additionally, section 6221(a) provides that any tax attributable to an adjustment to a partnership-related item shall be assessed and collected at the partnership level.
Section 201(a) of the TTCA amended section 6241(2) to provide that the term “partnership adjustment” means any adjustment to a partnership-related item, and the term “partnership-related item” means any item or amount with respect to the partnership (without regard to whether or not such item or amount appears on the partnership's return and including an imputed underpayment and any item or amount relating to any transaction with, basis in, or liability of, the partnership) which is relevant (determined without regard to subchapter C of chapter 63) in determining the tax liability of any person under chapter 1 of the Code
By eliminating the reference to items of income, gain, loss, deduction, or credit of a partnership, and instead referring to partnership-related items, which is broadly defined, the amendments by the TTCA clarify that the scope of the centralized partnership audit regime is not narrower than the scope of the partnership audit procedures under TEFRA. Joint Comm. on Taxation, JCX-6-18,
Proposed rules under § 301.6221(a)-1 were previously published in the
Proposed § 301.6221(a)-1(a) now provides the general rule that, except as otherwise provided under the centralized partnership audit regime, any adjustments to partnership-related items and the applicability of any penalty, addition to tax, or additional amount that relates to an adjustment to any such items are determined at the partnership level. In addition, proposed § 301.6221(a)-1(a) provides that any chapter 1 tax attributable to an adjustment to a partnership-related item is assessed and collected at the partnership level. See section 13 of the preamble for a discussion of special enforcement matters pertaining to partnership-related items that may be adjusted outside of the centralized partnership audit regime.
Proposed § 301.6221(a)-1(a) further provides that any consideration necessary to make a determination at the partnership level under the centralized partnership audit regime is made at the partnership level. This would include the period of limitations on making adjustments under section 6235 as well as any facts necessary to calculate any imputed underpayment under section 6225, except as otherwise provided under the centralized partnership audit regime. These determinations previously constituted factors described under former proposed § 301.6221(a)-1(b)(1)(ii)(F) and (I).
Proposed § 301.6241-6 defines the term “partnership-related item.” Proposed § 301.6241-6(a) provides the general rule that a partnership-related item is any item or amount with respect to the partnership which is relevant in determining the tax liability of any person under chapter 1 and any partner's distributive share of any such item or amount.
Proposed § 301.6241-6(b) provides that an item or amount is with respect to a partnership without regard to whether or not such item or amount appears on the partnership return. An item or amount is with respect to a partnership if: The item or amount is shown or reflected, or required to be shown, or reflected, on a return of the partnership; the item or amount is in the partnership's books and records; the item or amount is an imputed underpayment; the item or amount relates to any transaction with, basis in, or liability of the partnership; or the item or amount relates to a transaction under section 707(a)(2), 707(b), or 707(c).
Under proposed § 301.6241-6(b)(4) and (7), an item or amount that relates to any transaction with, or liability of, the partnership, is with respect to a partnership only if the item or amount relates to a transaction or liability between the partnership and a partner acting in its capacity as a partner or an indirect partner (as defined in proposed § 301.6241-1(a)(4)) acting in its capacity as an indirect partner. Accordingly, an item or amount that relates to any transaction with or liability of the partnership is not with respect to the partnership if the item or amount is reported (or reportable) solely by a person other than the partnership, a partner not acting in its capacity as a partner, or an indirect partner not acting in its capacity as an indirect partner (except for transactions under section 707). Proposed § 301.6241-6(b)(8) provides that any determination necessary to make an adjustment to an item or amount described in proposed § 301.6241-6(b)(1) through (b)(7) is also an item or amount with respect to the partnership.
Proposed § 301.6241-6(c) provides that the determination of whether an item or amount is relevant in determining the tax liability of any person under chapter 1 is made without regard to the provisions of the centralized partnership audit regime. Proposed § 301.6241-6(c) also clarifies that an item or amount of a partnership is relevant in determining the liability of any person under chapter 1 without regard to whether such item or amount, or adjustment to such item or amount, has an effect on the tax liability of any particular person under chapter 1. Section 6241(2)(B)(i) does not limit whether an item is relevant in determining tax liability under chapter 1 to whether the item is relevant to determining the tax liability of a partner of the partnership under chapter 1. Rather, the statutory language refers to liability under chapter 1 of “any person.” An item or amount is a partnership-related item if the item or amount is relevant in determining any person's liability under chapter 1 if the item might have any effect on any person's liability under chapter 1 regardless of whether it actually does have such an effect. Consequently, the IRS is not required to determine if an adjustment would have an actual effect on any person's chapter 1 liability under the Code.
Proposed § 301.6241-6(d) provides a list of examples of partnership-related items. These examples are largely the same as the items described in former proposed § 301.6221(a)-1(b)(1) with a few minor revisions. First, the
Proposed § 301.6241-6(e) provides examples that illustrate the rules under proposed § 301.6241-6.
Prior to enactment of the TTCA, section 6222 provided that a partner shall treat on the partner's return “each item of income, gain, loss, deduction, or credit attributable to a partnership” subject to subchapter C of chapter 63 in a manner that is consistent with the treatment of such item on the partnership return. Section 201(c) of the TTCA amended section 6222 to provide that a partner shall treat on the partner's return “any partnership-related item” in a manner which is consistent with the treatment of such item on the partnership return.
Proposed rules under § 301.6222-1 were previously published in the
Former proposed § 301.6222-1(a) provided that a partner's treatment of each item of income, gain, loss, deduction, or credit attributable to a partnership must be consistent with the treatment of those items on the partnership return, including treatment with respect to the amount, timing, and characterization of those items. The reference in former proposed § 301.6222-1(a) to “each item of income, gain, loss, deduction, or credit attributable to a partnership” has been replaced with a reference to “any partnership-related item” to reflect the statutory change to section 6222(a). In addition, references throughout former proposed § 301.6222-1 to the term “item” have been replaced with references to the term “partnership-related item,” as appropriate.
Section 6225 provides rules governing the determination of the imputed underpayment, modification of the imputed underpayment, and the treatment of adjustments that do not result in an imputed underpayment. Section 202(c) of the TTCA amended section 6225(a) to reflect the new term “partnership-related item” and to provide that in the case of adjustments to partnership-related items that result in an imputed underpayment the partnership shall pay an amount equal to the imputed underpayment in the adjustment year as provided in section 6232. In the case of adjustments that do not result in an imputed underpayment, such adjustments shall be taken into account by the partnership in the adjustment year.
Section 202(a) of the TTCA amended section 6225(b)(1) to provide that the Secretary shall determine any imputed underpayment with respect to any reviewed year by appropriately netting all partnership adjustments to such reviewed year and applying the highest rate of tax in effect for that year under section 1 or 11. Section 202(a) of the TTCA also amended section 6225(b)(2) to provide that in the case of any adjustment that reallocates the distributive share of any item from one partner to another, such adjustment shall be taken into account by disregarding so much of such adjustment as results in a decrease in the amount of the imputed underpayment.
Section 202(a) of the TTCA also added paragraphs (b)(3) and (b)(4) to section 6225. Section 6225(b)(3) provides that partnership adjustments for any reviewed year shall first be separately determined (and netted as appropriate) within each category of items that are required to be taken into account separately under section 702(a) or other provision of the Code. Section 6225(b)(4) provides if any adjustment would (but for section 6225(b)(4)) result in a decrease in the amount of the imputed underpayment, and could be subject to any additional limitation under the provisions of the Code (or not allowed, in whole or in part, against ordinary income) if such adjustment were taken into account by any person, such adjustment shall not be taken into account when appropriately netting partnership adjustments under section 6225(b)(1)(A) except to the extent otherwise provided by the Secretary.
Section 202(b) of the TTCA amended several provisions relating to modifications of imputed underpayments. Sections 6225(c)(3), (c)(4)(A), and (c)(5)(A)(i), which previously referred to the “portion of the imputed underpayment,” were amended to refer to the “portion of the adjustment.” This amendment clarifies that modifications under sections 6225(c)(3), (c)(4), and (c)(5) result in disregarding the portion of the partnership adjustment affected by the modification, rather than the portion of the imputed underpayment. Section 202(c) of the TTCA also added section 6225(c)(9), which provides that the Secretary shall establish procedures under which the adjustments described in section 6225(a)(2)—adjustments that do not result in an imputed underpayment—may be modified in such manner as the Secretary determines appropriate.
Section 203 of the TTCA amended section 6225(c)(2) relating to the procedures for partners to take adjustments into account during modification. Section 6225(c)(2)(A) governs the filing of amended returns by partners. Section 6225(c)(2)(B) provides for an alternative procedure to the filing of amended returns. Section 6225(c)(2)(C) provides rules for adjustments that reallocate the distributive share of any item from one partner to another. Section 6225(c)(2)(D) provides that sections 6501 and 6511 shall not apply in certain situations related to amended returns and the alternative procedure to filing amended returns. Section 6225(c)(2)(E) provides that any adjustments to tax attributes that occur as a result of a modification under section 6225(c)(2) are binding on the partners and the partnership. Section 6225(c)(2)(F) provides rules for tiered structures, including defining the term “relevant partner” to mean any partner in the chain of ownership of any partnerships that are partners in the partnership requesting modification.
Proposed rules under §§ 301.6225-1, 301.6225-2, and 301.6225-3 were previously published in the
Proposed § 301.6225-1 has been reorganized to clarify the process for determining an imputed underpayment. This reorganization, when compared to former proposed § 301.6225-1 (1) more clearly describes the steps necessary to determine an imputed underpayment and adjustments that do not result in an imputed underpayment; (2) consolidates rules regarding adjustments that do not result in an imputed underpayment; and (3) relocates rules regarding creditable expenditures to more clearly explain how to account for creditable expenditures in the determination of the imputed underpayment.
Proposed § 301.6225-1(b) addresses the calculation of the imputed underpayment. Due to the number of adjustments that could be made based on the definition of partnership-related item, the IRS will need to address circumstances in which multiple partnership-related items are adjusted to address a single issue or transaction in the administrative proceeding. Adjusting multiple partnership-related items that relate to the same issue or transaction could result in an imputed underpayment that double-counts some of the adjustments even though, if the partnership and partners had properly reported the item, one or more adjustments would have been subsumed by another item. To prevent double-counting the individual adjustments as inputs into the imputed underpayment, proposed § 301.6225-1(b)(4) provides that the IRS may treat adjustments that would otherwise be double-counted as zero for purposes of determining the imputed underpayment.
Proposed § 301.6225-1(c) describes the different groupings in which adjustments are placed for purposes of determining an imputed underpayment. These groupings are the reallocation grouping, the credit grouping, the creditable expenditure grouping, and the residual grouping. Proposed § 301.6225-1(c)(1) provides authority for the IRS to alter the manner in which adjustments are grouped to appropriately reflect the facts and circumstances.
Proposed § 301.6225-1(c)(2) defines the term “reallocation adjustment” and provides that in general reallocation adjustments are placed in the reallocation grouping. Under proposed § 301.6225-1(c)(3), however, reallocation adjustments to credits are placed in the credit grouping, and under § 301.6225-1(c)(4), reallocation adjustments to creditable expenditures are placed in the creditable expenditure grouping, similar to the rule under former proposed § 301.6225-1(d)(2)(iv). Proposed § 301.6225-1(c)(2)(ii) provides that each reallocation adjustment results in two separate adjustments—one positive adjustment and one negative adjustment. Proposed § 301.6225-1(c)(6) provides similar rules for recharacterization adjustments.
Proposed § 301.6225-1(c)(5)(ii) provides rules for how to account for adjustments to partnership-related items that are not allocated by the partnership to its partners under section 704(b). Proposed § 301.6225-1(d)(2)(iii)(B) provides that adjustments to such items, solely for purposes of determining an imputed underpayment, are treated as a positive adjustment to income to the extent appropriate. The Treasury Department and the IRS request comments regarding how to treat recharacterization and reallocation adjustments related to items that are not allocated under section 704(b).
To incorporate the additions of sections 6225(b)(3) and (b)(4), proposed § 301.6225-1(d)(1) provides that when the IRS determines a negative adjustment (as defined in proposed § 301.6225-1(d)(2)(ii)), all partnership adjustments are placed into subgroupings based on whether the adjusted items are required to be taken into account separately under section 702 and other provisions of the Code. Proposed § 301.6225-1(d)(1) provides authority for the IRS to alter the manner in which adjustments are subgrouped to appropriately reflect the facts and circumstances.
Proposed § 301.6225-1(d)(2) provides for the treatment of certain partnership adjustments and defines the terms negative adjustment and positive adjustment. A negative adjustment is defined as an adjustment that is a decrease in an item of income, treated as a decrease in an item of income, or that is an increase in an item of credit. A positive adjustment is an adjustment that is not a negative adjustment. Proposed § 301.6225-1(d)(3) requires that positive and negative adjustments resulting from reallocation adjustments and recharacterization adjustments be placed into separate subgroupings.
Proposed § 301.6225-1(e) provides rules for appropriately netting adjustments within each grouping or subgrouping and provides that adjustments are not netted between groupings or subgroupings. The statutory changes referencing section 702(a) and other provisions of the Code and the general inability to net negative adjustments result in restrictions on netting in these proposed rules that are broader than the restrictions described in former proposed § 301.6225-1. The examples in the proposed rules have been revised to reflect these broader restrictions on netting.
Proposed § 301.6225-1(f) provides rules related to determining whether adjustments are adjustments that do not result in an imputed underpayment. If the adjustments do not result in an imputed underpayment, such adjustments are taken into account in accordance with § 301.6225-3.
Proposed § 301.6225-1(g) provides the IRS may create multiple imputed underpayments for a particular tax year. Proposed § 301.6225-1(g)(2)(iii)(B) allows a particular adjustment that does not result in an imputed underpayment to be associated with a particular imputed underpayment. This rule ensures that adjustments that are appropriately associated with the imputed underpayment will be taken into account along with the other adjustments underlying the imputed underpayment if an election under section 6226 is made with respect to that imputed underpayment. For example, a reallocation or recharacterization adjustment generally results in more than one adjustment. In the case of a reallocation adjustment, there are adjustments that affect at least two partners. In a recharacterization adjustment, there is an adjustment to correct the characterization and an adjustment disallowing the incorrect characterization. As a result, if an adjustment that does not result in an imputed underpayment is due to a reallocation or recharacterization adjustment and one side of the adjustment is used to calculate a specific imputed underpayment, the other side of the adjustment, which is an adjustment that does not result in an imputed underpayment, is associated with that specific imputed underpayment.
The IRS may also determine that other adjustments that do not result in an imputed underpayment should be associated with a specific imputed underpayment. An adjustment that does not result in an imputed underpayment and that is not associated with a particular specific imputed underpayment is associated with the general imputed underpayment.
Proposed § 301.6225-2 provides guidance on procedures to modify the imputed underpayment. Former § 301.6225-2(b) provided that the effect of modification was determined by considering how the modification changed the relevant portion of the adjustment. This approach to modification is consistent with the amendments to section 6225(c). Accordingly, proposed § 301.6225-2(b)
Proposed § 301.6225-2(b)(3)(iv) provides rules on rate modification in the case of special allocations. Those rules generally mirror the statutory rule under section 6225(c)(4)(B)(ii). The rule in the statute is complex compared with other rate modifications in that they require a valuation analysis. The Treasury Department and the IRS request comments on ways to implement these rules efficiently.
Proposed § 301.6225-2(d)(2) provides rules regarding amended returns and the alternative procedure to filing amended returns. Proposed § 301.6225-2(d)(2) provides that a partnership may satisfy the requirements of amended return modification by submitting all the information required for amended return modification and the partners paying any amount that would be due if the partners had filed amended returns. The Treasury Department and the IRS request comments on how best to implement the alternative procedure to filing amended returns.
Former proposed § 301.6225-2(d)(2)(viii) provided that partners could raise a reasonable cause defense under section 6664(c) (or other partner-level defense as described in former proposed § 301.6226-3(i)(3)) with an amended return in modification. Proposed § 301.6225-(d)(2)(viii) now provides that such partner-level defenses should be raised through a claim for refund that is submitted outside of the modification process. This rule is similar to the current rule regarding partner-level defenses related to adjustments that are taken into account by partners under section 6226. See proposed § 301.6226-3(d)(3).
Section 6225(c)(6) grants the Secretary authority to “by regulations or guidance provide for additional procedures to modify imputed underpayment amounts on the basis of such other factors as the Secretary determines are necessary and appropriate to carry out the purposes of this section.” The Treasury Department and the IRS have elected to use this authority in two circumstances that were not included in former proposed § 301.6225-2. First, the Treasury Department and the IRS have concluded that the references to the adjustment year in section 6225(c)(5) make the implementation of section 6225(c)(5) unworkable. No partner would qualify as a specified partner until the adjustment year, but at any time during the administrative proceeding that is relevant to modification, the adjustment year does not yet exist. As a result, the only time this type of modification could be used would be in the case of an AAR because in that case, the adjustment year is the year in which the AAR is filed. In order for modification under section 6225(c)(5) to be administrable, proposed § 301.6225-2(d)(5)(iv) provides that a “qualified relevant partner” is a person that meets the definition of a specified partner but in a year that can be determined at the time modification is requested. The definition of a specified passive activity loss has also been changed to clarify that the years at issue do not have to be the adjustment year.
Second, the Treasury Department and the IRS are also exercising the authority under section 6225(c)(6) to add a modification for partnerships with partners entitled to benefits under an income tax treaty. Proposed § 301.6225-2(d)(9) allows modification if a relevant partner would have qualified for a reduction or exemption from tax with respect to a particular item under an income tax treaty with the United States. The Treasury Department and the IRS request comments on this type of modification.
Proposed § 301.6225-2(e) provides rules for modification of certain types of adjustments that do not result in an imputed underpayment (as defined in proposed § 301.6225-1(f)). Proposed § 301.6225-2(e) limits the ability to modify such adjustments to certain types of modification. The Treasury Department and the IRS request comments on whether the list of allowed modifications under proposed § 301.6225-2(e) is sufficient.
Lastly, proposed § 301.6225-2 adopts the term “relevant partner” to describe any direct or indirect partner in the partnership seeking modification. See section 6225(c)(2)(F) and proposed § 301.6225-2(a).
Proposed § 301.6225-3 provides rules regarding adjustments that do not result in in an imputed underpayment. The changes in the TTCA comport with former proposed § 301.6225-3, which required that the partnership take the adjustments that do not result in an imputed underpayment into account as separately stated or non-separately stated adjustments as appropriate.
Proposed rules under § 301.6225-4 were previously published in the
Proposed § 301.6225-4 sets forth rules under which a partnership and its partners must adjust specified tax attributes to take into account partnership adjustments and the partnership's payment of an imputed underpayment. Changes have been made throughout former proposed § 301.6225-4 to conform to the changes to the definition of “tax attribute” under proposed § 301.6241-1(a)(10). See section 11.A of this preamble regarding the change to the definition of “tax attribute.” In addition, the definition of “specified tax attributes” in proposed § 301.6225-4(a)(2) now includes earnings and profits under section 312 in response to comments received concerning the effect of partnership adjustments on a corporate partner's earnings and profits.
Section 6226 provides an alternative to the general rule under section 6225(a)(1) that the partnership must pay an imputed underpayment. Under section 6226, the partnership may elect to have its reviewed year partners take into account adjustments made by the IRS and pay any tax due as a result of those adjustments. If this election is made, the reviewed year partners must pay any chapter 1 tax resulting from taking into account the adjustments, and the partnership is not required to pay the imputed underpayment.
Section 206(d) of TTCA amended section 6226(a) to clarify that if a partnership makes a valid election under section 6226 with respect to an imputed underpayment, no assessment of such imputed underpayment, levy, or proceeding in any court for the collection of such imputed underpayment shall be made against such partnership.
Section 206(e) of the TTCA amended section 6226(b)(1) to provide that when a partner takes into account the adjustments, the partner's chapter 1 tax is adjusted by the aggregate of the “correction amounts” determined under section 6226(b)(2). After amendment by the TTCA, the correction amounts under section 6226(b)(2) are defined as the amounts by which the partner's chapter 1 tax would increase “or decrease” for the partner's first affected year if the partner's share of the adjustments were taken into account for that year. The correction amounts are also the amount by which the partner's chapter 1 tax would increase “or decrease” by reason of the adjustment to tax attributes for any intervening years. See section 6226(b)(2).
Section 204(a) of the TTCA added to the Code section 6226(b)(4), which provides that a partnership or S corporation that receives a statement under section 6226(a)(2) must file a
Proposed rules under §§ 301.6226-1, 301.6226-2, and 301.6226-3 were previously published in the
Former proposed § 301.6226-1(b)(2) provided that if a partnership makes a valid election in accordance with proposed § 301.6226-1, the partnership is not liable for the imputed underpayment to which the election relates. To reflect the statutory change to section 6226(a), language has been added to proposed § 301.6226-1(b)(2) to clarify that if a partnership makes a valid election under section 6226 with respect to an imputed underpayment, the IRS may not assess such imputed underpayment, levy, or bring a proceeding in any court for the collection of that imputed underpayment against such partnership. A similar change has also been made to proposed § 301.6226-1(c)(2) (regarding invalid elections) to clarify that if a final determination is made that a purported election under section 6226 is invalid, the IRS may assess the imputed underpayment with respect to which the election was made against the partnership without regard to the limitations under section 6232(b).
Former proposed § 301.6226-3 provided that a reviewed year partner that is furnished a statement under section 6226(a)(2) is required to pay any additional chapter 1 tax (additional reporting year tax) that results from taking into account the partnership adjustments on that statement. As mentioned above in this section of the preamble, section 206(e) of the TTCA amended section 6226(b) to provide that decreases, as well as increases, in chapter 1 tax that result from taking into account partnership adjustments are used in computing a partner's additional reporting year tax. Section 206(e) of the TTCA also replaced the term “adjustment amount” with “correction amount.” Accordingly, proposed § 301.6226-3 now refers to “correction amount” instead of “adjustment amount,” as appropriate, and now provides that a reviewed year partner's chapter 1 tax for the reporting year may be increased or decreased by the additional reporting year tax. The additional reporting year tax is the sum of the correction amounts for the first affected year and any correction amounts for the intervening years. Under proposed § 301.6226-3(b)(2) and (3), the correction amounts are the amounts by which the partner's chapter 1 tax for the taxable year would be increased or decreased if the partner's taxable income for that year were recomputed by taking into account, in the case of the first affected year, the partner's share of the partnership adjustments reflected on the statement furnished to the partner or, in the case of any intervening year, any change to tax attributes of the partner resulting from the changes in the first affected year. A correction amount for the first affected year or any intervening year may be less than zero and may be used to offset any correction amounts from any other year in computing the additional reporting year tax. The examples under proposed § 301.6226-3(h) illustrate situations in which a correction amount may be less than zero.
Furthermore, the additional reporting year tax may be less than zero and may offset other taxes owed by the partner on the partner's reporting year return. Accordingly, any references to the additional reporting year tax as a “liability” have been removed from former proposed § 301.6226-3 to account for situations in which the additional reporting year tax is less than zero.
Section 6226(c)(2) provides that interest in the case of a section 6226 election is determined at the partner level, from the due date of the return for the taxable year to which the increase in chapter 1 tax is attributable, and at the underpayment rate under section 6621(a)(2) (substituting 5 percent for 3 percent). As discussed above in this section of the preamble, the TTCA amended section 6226(b) to provide that both increases and decreases in chapter 1 tax are used in computing a partner's additional reporting year tax. However, the TTCA did not similarly amend the reference to “increases” in section 6226(c)(2) with the result that interest only applies to the increases in the chapter 1 tax that would have resulted from taking into account the partnership adjustments under section 6226. No provision under the centralized partnership audit regime provides for interest in the case of a
Proposed § 301.6226-3(c)(1) further provides that for purposes of calculating interest on the correction amounts, any correction amount that is less than zero does not offset any correction amount that is greater than zero. Although those amounts may offset when determining the additional reporting year tax (as described in proposed § 301.6226-3(b)), allowing the same offset for purposes of calculating interest is inconsistent with section 6226(c)(2), which provides that interest is determined with respect to any increase determined under section 6226(b)(2).
Proposed § 301.6226-3(d)(3) has also been clarified to provide that if a partner wants to raise a partner-level defense to any penalty, addition to tax, or additional amount, a partner must first pay the penalty, addition to tax, or additional amount and file a claim for refund for the reporting year in order to raise the defense.
As discussed above in this section of the preamble, section 204(a) of the TTCA amended section 6226(b) to provide that partnerships and S corporations that are direct or indirect partners in an audited partnership and that receive statements under 6226(a)(2) must file partnership adjustment tracking reports with the IRS and furnish statements to their owners under rules similar to section 6226. If no statements are furnished, the partnership or S corporation must
Former proposed § 301.6226-3(e)(1) provided that a pass-through partner (as defined in proposed § 301.6241-1(a)(5)) that was furnished a statement described in proposed § 301.6226-2 (including a statement as described in former proposed § 301.6226-3(e)(3)) must take into account the adjustments reflected on that statement by either furnishing statements to its partners or by paying an amount calculated like an imputed underpayment. Any statements furnished under those provisions were treated as statements described in proposed § 301.6226-2, and any pass-through partner receiving a statement under former proposed § 301.6226-3(e)(3) was required to also take the adjustments reflected on the statement into account by furnishing statements to its own partners or paying an amount calculated like an imputed underpayment. See former proposed § 301.6226-3(e)(3)(i) and (iv).
Although the rules under former proposed § 301.6226-3(e) were largely consistent with the rules under section 6226(b)(4), some changes were needed to conform the two sets of rules. First, proposed § 301.6226-3(a)(1) now provides that the rules under proposed § 301.6226-3(a)(1) apply to a reviewed year partner except to the extent otherwise provided in proposed § 301.6226-3. Second, proposed § 301.6226-3(e) now includes a requirement that the pass-through partner must file a partnership adjustment tracking report. Third, proposed § 301.6226-3(e) provides a default rule that a pass-through partner must furnish statements to its own partners in accordance with proposed § 301.6226-3(e)(3). If a pass-through partner fails to furnish statements in accordance with proposed § 301.6226-3(e)(3), the pass-through partner must compute and pay an imputed underpayment. Additionally, language referring to a pass-through partner “taking into account” the adjustments under former proposed § 301.6226-3(e) was removed to more closely align with the statutory language in section 6226(b)(4). Fourth, proposed § 301.6226-3(e) defines and refers to the term “audited partnership,” which proposed § 301.6226-3(e)(1) defines as the partnership that made the election under § 301.6226-1. See section 6226(b)(4)(D). Lastly, proposed § 301.6226-3(e)(4) provides that the amount a pass-through partner must compute and pay, if it does not furnish statements to its partners, is an “imputed underpayment.” See section 6226(b)(4)(A)(ii)(II).
Because under proposed § 301.6226-3(e), pass-through partners compute and pay an “imputed underpayment,” rather than calculating correction amounts under proposed § 301.6226-3(b), references in former proposed § 301.6226-3(b) to amended returns filed by indirect partners as part of modification have been deleted. Pass-through partners computing an imputed underpayment under proposed § 301.6226-3(e) may account for modifications submitted by their indirect partners, but non-pass-through partners calculating correction amounts under proposed § 301.6226-3(b) cannot. Accordingly, the references in former proposed § 301.6226-3(b) to amended returns filed by indirect partners were removed.
To reflect the change to the definition of “tax attribute” under proposed § 301.6241-1(a)(10) (see section 11.A. of this preamble), proposed §§ 301.6226-2 and 301.6226-3 now only refer to the tax attributes of the partner. For example, proposed §§ 301.6226-2(e) and 301.6226-3(e)(3)(iii) no longer require that the audited partnership report any changes to
Finally, references to “items” or “items of income, gain, loss, deduction, or credit” throughout former §§ 301.6226-1, 6226-2, and 6226-3 have been replaced with references to “partnership-related items.”
In addition to the changes needed to conform to the amendments by the TTCA, some additional changes have been made to former proposed §§ 301.6226-1, 6226-2, and 6226-3. First, proposed § 301.6226-1(b)(2) now provides that only those adjustments that do not result in an imputed underpayment which are associated with an imputed underpayment for which an election under section 6226 is made are included in the reviewed year partner's share of the partnership adjustments reported to the partner. Any adjustments that do not result in an imputed underpayment which are not associated with an imputed underpayment for which an election under section 6226 is made are taken into account under section 6225. This change was necessary to clarify which partnership adjustments are pushed out in the case of multiple imputed underpayments where the push out election is not made with respect to all imputed underpayments. See proposed § 301.6225-1(g) for rules regarding the treatment of adjustments that do not result in an imputed underpayment in the context of specific imputed underpayments.
Second, under proposed § 301.6226-1(c)(1), an election under section 6226 is only valid if all the provisions under proposed § 301.6226-1 (regarding making the election) and § 301.6226-2 (regarding the furnishing of statements) are satisfied, and an election made under section 6226 is valid until the IRS determines that the election is invalid. The rule that an election is valid until the IRS determines it is invalid was moved from former proposed § 301.6226-1(c)(2) to proposed § 301.6226-1(c)(1) to clarify that an election that does not fully satisfy the requirements of proposed §§ 301.6226-1 and 301.6226-2 is valid unless the IRS determines that the purported election is invalid. For example, if a partnership makes an election in accordance with proposed § 301.6226-1 but fails to furnish statements to its partners, that election is valid until the IRS determines otherwise.
In addition, the word “final” was removed from before the word “determination” in proposed § 301.6226-1(c)(2) when referring to a determination made by the IRS that a purported election under section 6226 is invalid. The removal of the word “final” clarifies that the IRS may determine that an election is invalid and assess and collect the imputed underpayment to which the purported election related without first being required to make a proposed or initial determination of invalidity. Although nothing in the regulations precludes the IRS from first notifying the partnership of a potential problem with an election before determining the election is invalid, proposed § 301.6226-1(c)(2) provides that the IRS may determine that an election is invalid even if the partnership has corrected the statements required to be filed and furnished in accordance with proposed § 301.6226-2(d)(3) and also provides that the IRS is not obligated to require the correction of any errors prior to determining an election is invalid.
Third, several changes were made to clarify that the partnership must provide correct information in order to make a valid election under section 6226 and in order for statements to be properly furnished either under proposed § 301.6226-2 or proposed § 301.6226-3(e)(3). Proposed § 301.6226-1(c)(4)(ii) requires the partnership to provide correct information in its election, and proposed § 301.6226-2(e) and proposed § 301.6226-3(e)(3)(iii) require that the statements filed and furnished with the IRS include correct information. Additionally, proposed § 301.6226-2(d)(3) provides that if the IRS cannot determine whether the statements filed and furnished by the partnership are correct because of a failure by the partnership to comply with any requirements (such as filing a partnership adjustment tracking report), the IRS may, but is not obligated to, require the partnership to provide additional information to substantiate the statements. Proposed § 301.6226-2(d)(2) extends the rules governing corrections of errors in statements to statements furnished by pass-through partners under proposed § 301.6226-3(e)(3) and to provide that, if consent of the IRS is required for a correction, that corrected statements may not be furnished until the IRS provides consent.
Fourth, duplicative language regarding the definition of the extended due date for the adjustment year of the audited partnership was removed from former proposed § 301.6226-3(e)(3)(ii) and (e)(4)(ii).
Fifth, in proposed § 301.6226-3(g), the word “grantor” has been added between the words “wholly-owned” and “trusts” to clarify that “wholly-owned trusts” means “wholly-owned grantor trusts.”
Sixth, the phrase “an entity described in § 301.7701-2(c)(2)(i)” in former proposed § 301.6226-3(j) was changed to “a wholly-owned entity disregarded as separate from its owner for Federal tax purposes in the reviewed year” to conform to the definition of disregarded entity under proposed § 301.6241-1(a)(4).
Seventh, proposed § 301.6226-3(c)(2) now provides that interest on any penalties, additions to tax, or additional amounts is calculated from each applicable taxable year until the penalty, addition to tax, or additional amount is paid. Former proposed § 301.6226-3(c)(2) provided that interest was calculated from the first affected year. Under proposed § 301.6226-3(d)(2), partners calculate any penalties, additions to tax, or additional amounts that relate to the partnership adjustments at the partner level. Because the adjustments could create tax effects in more than just the first affected year (for example, as a result of changes to tax attributes in an intervening year), a penalty, addition to tax, or additional amount might likewise result in more than just the first affected year. Accordingly, proposed § 301.6226-3(c)(2) provides that interest on penalties, additions to tax, and additional amounts runs from the applicable taxable year (that is, the particular tax year to which the penalty, addition to tax, or additional amount relates).
Finally, certain errors were corrected in the examples under proposed § 301.6226-3(h). Examples 2 through 4 and 6 through 9 under former proposed § 301.6226-3(h) incorrectly listed the last day to file a petition under section 6234 as the date the adjustments became final, and examples 6 through 9 incorrectly referred to former proposed § 301.6226-1(b) as support for this rule. Under proposed § 301.6226-2(b), partnership adjustments become finally determined on the later of the expiration of the time to file a petition under section 6234 or, if a petition is filed under section 6234, the date when the court's decision becomes final. The examples under proposed § 301.6226-3(h) now reflect that the adjustments become final on the day after the last day to file a petition under section 6234 to be consistent with the rule under § 301.6226-2(b), and incorrect references to § 301.6226-1(b) in Examples 6 through 9 under former proposed § 301.6226-3(h) have been replaced with correct references to § 301.6226-2(b).
Proposed rules under §§ 301.6226-4 were previously published in the
Proposed § 301.6226-4 sets forth rules for adjusting reviewed year partners' tax attributes to take into account partnership adjustments when a partnership makes an election under section 6226. To reflect the addition of section 6226(b)(4), proposed § 301.6226-3(e)(4) now provides that a reviewed year partner that is a pass-through partner must pay an imputed underpayment if the pass-through partner does not furnish statements. In addition, changes have been made throughout former proposed § 301.6226-4 to conform to the change to the definition of “tax attribute” under proposed § 301.6241-1(a)(10). See section 11.A of this preamble. These changes reflect that the adjustments to tax attributes taken into account by a partner should be consistent, regardless of whether the partner files an amended return during modification, participates in the alternative procedure to filing an amended return, or receives a statement under section 6226. Accordingly, the proposed regulations under section 6226 have been revised to refer only to the tax attributes of the partner in the intervening years. Additionally, clarifying changes were made in proposed § 301.6226-4(b) to conform to the terminology used in proposed § 301.6226-3. Lastly, an incorrect cross-reference in former proposed § 301.6226-4(c)(4)(iii) has been replaced with the correct cross-reference.
Section 6227 provides a mechanism for a partnership to file an AAR to correct errors on a partnership return for a prior year. Prior to amendment by the TTCA, section 6227(a) provided that a partnership may file a request for administrative adjustment in the amount of one or more items of income, gain, loss, deduction, or credit of the partnership or any partnership taxable year. Section 201(c) of the TTCA amended section 6227(a) by striking “items of income, gain, loss, deduction, or credit of the partnership” and inserting “partnership-related items.”
Prior to amendment by the TTCA, section 6227(b) provided that any adjustment requested in an AAR is taken into account for the partnership taxable year in which the AAR is made. Section 206(p) of the TTCA amended section 6227(b) by striking “is made” both places it appears and inserting “is filed.”
Prior to amendment by the TTCA, section 6227(b)(1) provided that if an adjustment results in an imputed underpayment, the adjustment may be determined and taken into account by the partnership under rules similar to the rules under section 6225 relating to payment of the imputed underpayment by the partnership, except that the provisions under section 6225 pertaining to modification of the imputed underpayment based on amended returns by partners, the time for submitting information to the Secretary for purposes of modification, and approval by the Secretary of any modification do not apply.
Section 206(p) of the TTCA amended section 6227(b)(1) by striking the reference to “paragraphs (2), (6), and (7)” of section 6225(c) (relating to
Lastly, section 206(f) of the TTCA added section 6227(d) to provide that the Secretary shall issue regulations or other guidance which provide for the proper coordination of section 6227 and section 905(c).
Proposed rules under §§ 301.6227-1, 301.6227-2, and 301.6227-3 were previously published in the
Former proposed § 301.6227-1(a) provided that a partner may not file an AAR except if the partner is doing so on behalf of the partnership in the partner's capacity as the partnership representative or if the partner is a partnership-partner filing an AAR under former proposed § 301.6227-3(c). Proposed § 301.6227-3(c), however, does not provide for the filing of an AAR by a partnership-partner. Rather, under proposed § 301.6227-3(c), a partnership-partner takes into account adjustments requested in an AAR by the partnership in which it is a partner by following the rules under proposed § 301.6226-3(e) (except to the extent otherwise provided). Proposed § 301.6227-1(a) therefore is changed to remove the reference to partnership-partners, and now only refers to partners filing AARs in their capacity as a partnership representative.
Proposed § 301.6227-2(a)(1) provides the rules for determining whether an imputed underpayment results from adjustments requested in an AAR by referring to the rules under proposed § 301.6225-1. Under proposed § 301.6227-2(a)(2), in the case of an AAR, a partnership may reduce an imputed underpayment as a result of certain modifications permitted under proposed § 301.6225-2. Under former proposed § 301.6227-2(a)(2), these modifications included modifications that relate to tax-exempt partners (proposed § 301.6225-2(d)(3)), rate modification (proposed § 301.6225-2(d)(4)), modification related to certain passive losses of publicly traded partnerships (proposed § 301.6225-2(d)(5)), modification applicable to qualified investment entities described in section 860 (proposed § 301.6225-2(d)(7)), and other modifications to the extent permitted under future IRS guidance (proposed § 301.6225-2(d)(10)). Proposed § 301.6227-2(a)(2) adopts this same list of modifications and adds modifications related to the composition of the groupings that factor into the calculation of the imputed underpayment (proposed § 301.6225-2(d)(6)(ii)) and modifications related to tax treaties (proposed § 301.6225-2(d)(9)).
Proposed § 301.6227-2(a)(2) provides that other types of modification, such as modification under proposed § 301.6225-2(d)(2) with respect to amended returns, including the alternative procedure to filing amended returns, and modification under proposed § 301.6225-2(d)(8) with respect to closing agreements, are not available in the case of an AAR. Modifications with respect to adjustments that do not result in an imputed underpayment also are also not available in the case of an AAR.
Former proposed § 301.6227-2(a)(2)(i) provided that a partnership did not need to seek IRS approval prior to modifying an imputed underpayment that results from adjustments requested in an AAR. Section 6227(b)(1) does not explicitly carve out section 6225(c)(8),which states that any modification to the imputed underpayment made under section 6225(c) shall be made only upon approval of such modification by the Secretary. Section 6227(b)(1) does provide, however, that partnerships take into account adjustments requested in an AAR under rules similar to the rules under section 6225. In proposing rules similar to the rules under section 6225 for the purposes of requesting an AAR and taking into account adjustments, the Treasury Department and the IRS have determined it is more efficient and beneficial for both the IRS and for partnerships to be able to apply modifications when filing an AAR without first securing approval of permitted modifications. Accordingly, although any modifications in connection with an AAR are subject to IRS approval, the rules under proposed § 301.6227-2(a)(2)(i) provide that the partnership is not required to obtain the approval from the IRS before applying modifications when calculating the amount of the imputed underpayment the partnership needs to pay when filing the AAR. Proposed § 301.6227-2(a)(2)(ii) also provides, however, that modifications to an imputed underpayment resulting from adjustments requested in an AAR may not be applied by the partnership if the AAR that is filed does not include notification to the IRS of the modification, a description of the effect of the modification on the imputed underpayment, an explanation of the basis for such modification, and all necessary documentation to support the partnership's entitlement to such modification.
Under proposed § 301.6227-3, a reviewed year partner that receives a statement described in proposed § 301.6227-1(d) must treat that statement as if it were provided under section 6226(a)(2). Former proposed § 301.6227-3(b)(1) also provided that the restriction in former proposed § 301.6226-3(b)(1)—that the correction amount for the first affected year and any intervening year cannot be less than zero—does not apply in the case of taking into account adjustments requested by the partnership in an AAR. Proposed § 301.6227-3(b)(1) no longer needs to address that restriction because the restriction in former proposed § 301.6226-3(b)(1) no longer exists. Therefore, the exception in former proposed § 301.6227-3(b)(1) has been eliminated. Additionally, the provision in former proposed § 301.6227-3(b)(2), stating that when the additional reporting tax results in being less than zero the partner may reduce his chapter 1 tax for the reporting year, is moved to proposed § 301.6227-3(b)(1).
Former proposed § 301.6227-1 included a reserved paragraph regarding notice of change to amounts of creditable foreign tax expenditures. Proposed § 301.6227-1 also reserves this same paragraph and does not contain rules to coordinate sections 6227 and 905(c). The Treasury Department and the IRS seek comments regarding the coordination of sections 6227 and 905(c) for consideration in future guidance.
Lastly, the reference to “items of income, gain, loss, deduction, or credit of the partnership” in former proposed § 301.6227-1(a) has been replaced with
Proposed § 301.6227-1(a) now coordinates the rules regarding the filing of an AAR and the revocation of a designation of the partnership representative under § 301.6223-1. Former proposed § 301.6227-1(a) provided that the partnership may not file an AAR solely for the purpose of allowing the partnership to change the designation of a partnership representative. Proposed § 301.6227-1(a) now adds that when the partnership changes the designation of the partnership representative or the appointment of a designated individual in conjunction with the filing of an AAR, the change in designation or appointment is treated as occurring prior to the filing of the AAR.
Former proposed § 301.6227-1(b) provided that an AAR may not be filed after a notice of administrative proceeding (NAP) has been mailed. To account for situations in which the IRS mails a NAP, but then withdraws it, proposed § 301.6227-1(b) now provides that an AAR may not be filed after a NAP has been mailed, except when the NAP has been withdrawn under proposed § 301.6231-1(f).
Additions were also made in proposed § 301.6227-3(c) to clarify the rules for pass-through partners, unrelated to the changes made by the TTCA. First, proposed § 301.6227-3(c)(1) provides that when a pass-through partner takes into account adjustments requested in an AAR in accordance with proposed § 301.6226-3(e), the pass-through partner must provide the information described in proposed § 301.6227-3(c)(3) as opposed to the information in described in proposed § 301.6226-3(e)(3)(iii) when furnishing statements to its partners. Second, under proposed § 301.6227-3(c)(1), a pass-through partner that computes and pays an imputed underpayment in accordance with proposed § 301.6226-3(e)(4) may not take into account any modifications. Third, proposed § 301.6227-3(c)(4) provides that when a pass-through partner furnishes a statement to an affected partner under proposed § 301.6227-3(c), the affected partner must treat that statement as if it were a statement described in proposed § 301.6227-3(a) that was furnished to such affected partner.
Section 6231(a) provides that the Secretary shall mail to the partnership and to the partnership representative a notice of any administrative proceeding initiated at the partnership level, notice of any proposed partnership adjustment resulting from that proceeding (NOPPA), and notice of any final partnership adjustment (FPA). Prior to amendment by the TTCA, section 6231(a) also provided that any FPA shall be mailed no earlier than 270 days after the date on which the NOPPA is mailed. Such notices shall be sufficient if mailed to the last known address of the partnership and the partnership representative, even if the partnership has terminated its existence. See section 6231(a) flush language (prior to amendment by the TTCA).
Prior to amendment by the TTCA, the statute did not limit the period for the IRS to propose adjustments under the centralized partnership audit regime. Section 206(h) of the TTCA amended section 6231 to address this issue. As amended, section 6231(b)(1) provides that any NOPPA shall not be mailed later than the date determined under section 6235(a)(1), which is generally the date that is 3 years after the later of: (1) The date on which the partnership return for the taxable year was filed, (2) the return due date for the taxable year, or (3) the date on which the partnership filed an AAR with respect to the taxable year.
Section 206(h) of the TTCA makes a conforming amendment to section 6231(a) to reflect the addition of the period of limitations to made partnership adjustments. Prior to amendment, section 6231(a) provided that “Such notices shall be sufficient if mailed to the last known address of the partnership representative or the partnership (even if the partnership has terminated its existence).” The amendment replaced the words “Such notices” with “Any notice of final partnership adjustment.”
Section 201(c) of the TTCA also makes a conforming amendment to section 6231(a) by striking the phrase “all items of income, gain, loss, deduction, or credit of the partnership” and inserting “all partnership-related items.”
Proposed rules under § 301.6231-1 were previously published in the
Although not required by statute, former proposed § 301.6231-1(b)(1) provided a period of limitations for making partnership adjustment. That section provided that a NOPPA may not be mailed after the expiration of the period described in section 6235(a)(1), including any extensions of that period and after applying any of the special rules in section 6235(c) (providing additional time for situations where no return is filed, fraud, and other specified reasons).
Former proposed § 301.6231-1(c) provided that NAPs, NOPPAs, and FPAs are sufficient if mailed to the last known address of the partnership and the partnership representative. As discussed above in this section of the preamble, section 6231(a) now provides that any FPA is sufficient if mailed to the last known address of the partnership and the partnership representative. The Treasury Department and the IRS have determined that while the last known address requirement under section 6231(a) only applies to a notice of final partnership adjustment, the IRS will also mail the NAP and the NOPPA to the last known address of the partnership and the partnership representative.
Accordingly, because the rules under former proposed § 301.6231-1(b)(1) and (c) are consistent with the statutory changes to section 6231(a), those rules are unchanged. The only change to former proposed § 301.6231-1 was to replace references to “item of income, gain, loss, deduction, or credit” and to a “partner's distributive share” in former proposed § 301.6231-1(a)(1) with a reference to “partnership-related item”.
Section 6232(a) provides rules for the assessment, collection, and payment of imputed underpayments. Section 206(g) of the TTCA amended section 6232(a) to clarify that the assessment of any imputed underpayment is not subject to the deficiency procedures under subchapter B of chapter 63 of the Code and to clarify that in the case of an AAR, the underpayment may be assessed when the AAR is filed. See JCX-6-18, at 48.
Section 6232(b) provides limitations on the assessment of an imputed underpayment. Section 206(g) of the TTCA amended section 6232(b) to correct a reference to “assessment of a deficiency” to now refer to “assessment of an imputed underpayment.” Section 206(p) of the TTCA also amends section
Section 205 of the TTCA added a new subsection (f) to section 6232 to provide a mechanism for collection of tax due in the case of a failure of a partnership or S corporation to pay an imputed underpayment or specified similar amount. Under section 6232(f)(1), if any amount of any imputed underpayment to which section 6225 applies or any specified similar amount as defined in section 6232(f)(2) has not been paid by the date which is 10 days after the date on which the Secretary provides notice and demand for such payment, the Secretary may assess upon each partner of the partnership a tax equal to such partner's proportionate share of such amount.
Under section 6232(f)(2), the term “specified similar amount” means the amount determined under section 6226(b)(4)(ii)(II) and any amount assessed upon a partner under section 6232(f)(1)(B) that is a partnership or an S corporation. Section 206(g)(2)(B) of the TTCA amended section 6232(b) to provide that the limitations on assessment with respect to an imputed underpayment do not apply in the case of a specified similar amount defined in section 6232(f)(2).
The Treasury Department and the IRS are not proposing rules under section 6232(f) at this time. The Treasury Department and the IRS request comments with respect to section 6232(f), including the determination of a partner's proportionate share of the unpaid amount, for consideration with respect to future guidance.
Proposed rules under § 301.6232-1 were previously published in the
Former proposed § 301.6232-1(a) provided that because the centralized partnership audit regime under subchapter C of chapter 63 applies to an assessment of an imputed underpayment, the deficiency procedures under subchapter B of chapter 63 do not apply. Former proposed § 301.6232-1(b) provided that the IRS may assess an underpayment reflected on an AAR on the date the AAR is filed. Former proposed § 301.6232-1(c) provided limitations on assessment of the imputed underpayment, except as otherwise provided in § 301.6232-1. Because the rules under former proposed § 301.6232-1(a) and (b) are consistent with the statutory changes to section 6232(a), those rules are unchanged.
Proposed § 301.6232-1(c) is generally the same as former proposed § 301.6232-1(c). However, changes were made to take into account section 206(g)(2)(B) of TTCA, providing that the limitations on assessment do not apply to specified similar amounts, and section 206(p) of TTCA, providing that the limitations on assessments under proposed § 301.6232-1(c) apply except as otherwise provided in subtitle F of the Code (other than deficiency procedures under subchapter B of chapter 63).
With respect to former proposed § 301.6232-1(d), the reference to “items of income, gain, loss, deduction, or credit” in former proposed § 301.6232-1(d)(1)(i) was replaced with a reference to “partnership-related items.”
Section 6233 provides rules related to interest and penalties with respect to imputed underpayments. Section 206(i) of the TTCA amended section 6233 by adding a new subsection (c), which provides a cross-reference to section 6603 for rules allowing deposits to suspend the running of interest on potential underpayments.
Proposed rules under §§ 301.6233(a)-1 and 301.6233(b)-1 were previously published in the
Proposed § 301.6233(a)-1 provides rules for determining interest and penalties from the reviewed year, and proposed § 301.6233(b)-1 provides rules for determining interest and penalties from the adjustment year. Neither former proposed § 301.6233(a)-1 nor former proposed § 301.6233(b)-1 provided rules regarding deposits to suspend the running of interest on underpayments. The Treasury Department and the IRS are not proposing rules regarding the interaction of the deposit rules under section 6603 and the interest rules under section 6233. However, the Treasury Department and the IRS request comments for consideration in future guidance regarding the interaction between section 6603 and the interest rules under section 6233.
Former proposed § 301.6233(a)-1(c)(2)(ii)(C) provided a definition of “negative adjustment” and defined that term through reference to “items of income, gain, loss, deduction, or credit.” Proposed § 301.6225-1 now uses the term “negative adjustment” and the phrase “items of income, gain, loss, deduction, or credit” has been removed from subchapter C of chapter 63. To reflect these changes, proposed § 301.6233(a)-1(c)(2)(ii)(C) now provides that a “decreasing adjustment” is “an adjustment to a partnership-related item that resulted in a decrease to the imputed underpayment.” Example 3 under proposed § 301.6233(a)-1(c)(3) also reflects changes to former proposed §§ 301.6225-1 and 301.6225-2.
Former proposed § 301.6233(a)-1(c)(2)(ii), regarding how to calculate the portion of the imputed underpayment to which a penalty applies, referred to “non-credit partnership adjustments” and “credit adjustments.” Under proposed § 301.6225-1(e)(3)(iii) certain adjustments to creditable expenditures are treated as an adjustment to a credit and may impact the calculation of the imputed underpayment. To properly account for such adjustments when determining the portion of an imputed underpayment subject to a penalty, the term “non-credit partnership adjustment” was changed to “a partnership adjustment that is not an adjustment to a credit or treated as an adjustment to a credit,” and the term “credit adjustment” changed to “an adjustment to a credit or treated as an adjustment to a credit.”
Former proposed § 301.6233(a)-1(c)(2)(iii)(B), regarding the application of the substantial understatement penalty under section 6662(d)(1)(A)(i) to imputed underpayments, provided that taxable income meant the net ordinary business income or loss of the partnership. The reference to “ordinary business” failed to account for other sources of income of the partnership that are appropriate to consider for purposes of the substantial understatement penalty. Therefore, proposed § 301.6233(a)-1(c)(2)(iii)(B) now provides that for purposes of determining the amount of tax required to be shown on the return it is the net income or loss of the partnership that is treated as taxable income. See Page 5 of Form 1065, Return of Partnership Income.
Former proposed § 301.6233(a)-1(c)(2)(v), pertaining to reasonable cause and good faith defenses, provided that
Section 6234(a) provides that within 90 days after the date on which an FPA is mailed under section 6231 with respect to any partnership taxable year, the partnership may file a petition for readjustment for such taxable year with the Tax Court, the district court in which the partnership's principal place of business is located, or the Court of Federal Claims. Prior to amendment by the TTCA, section 6234(b)(1) provided that a petition for readjustment under section 6234 may be filed in a district court of the United States or the Court of Federal Claims only if the partnership filing the petition deposits with the Secretary, on or before the date the petition is filed, the amount of the imputed underpayment. Section 206(j) of the TTCA amended section 6234(b)(1) to clarify that the amount of the jurisdictional deposit that the partnership must make in order to file a readjustment petition in a district court or the Court of Federal Claims is the amount of (as of the date of the filing of the petition) the imputed underpayment, penalties, additions to tax, and additional amounts with respect to the imputed underpayment. See JCX-6-18, at 49.
Proposed rules under § 301.6234-1 were previously published in the
Former proposed § 301.6234-1(b) provided that a partnership may file a petition for a readjustment of any partnership adjustment in a district court or the Court of Federal Claims “only if the partnership filing the petition deposits with the [IRS], on or before the date the petition is filed, the amount of any imputed underpayment resulting from the partnership adjustment.”
To reflect the amendment to section 6234(b)(1) made by section 206(j) of the TTCA regarding the amount of the deposit, proposed § 301.6234-1(b) now provides that amount required to be deposited is the amount (as of the date of the filing of the petition) of any imputed underpayment and any penalties, additions to tax, and additional amounts with respect to such imputed underpayment.
To account for the possibility that multiple imputed underpayments may be reflected in an FPA, proposed § 301.6234-1(b) also now provides that the partnership must only deposit the amount of any imputed underpayment to which the petition for readjustment relates and the amount of any penalties, additions to tax, and additional amounts with respect to such imputed underpayment.
Section 6235 provides the period of limitations on making adjustments under the centralized partnership audit regime. Under section 6235(a), the general rule is that no adjustment for any partnership taxable year may be made after the later of three specified dates. Section 206(k) of the TTCA amended section 6235(a) by inserting “or section 905(c)” after “Except as otherwise provided in this section.” The amendment makes clear that the period of limitations on making adjustments under the centralized partnership audit regime does not limit the period for notification of the Secretary and redetermination of tax under section 905(c) with respect to foreign tax redeterminations.
In addition, section 206(k) of the TTCA amended section 6235 by striking paragraph (d), which provided for a suspension of the period on making adjustments when the Secretary mails an FPA. That provision was similar to a provision that existed under TEFRA, but the provision has no effect on making adjustments under the centralized partnership audit regime. See JCX-6-18, at 49-50.
Proposed rules under § 301.6235-1 were previously published in the
Proposed § 301.6235-1(a) now reflects the amendments to section 6235 to provide an exception for section 905(c) and to remove the reference to section 6235(d).
Proposed rules under § 301.6241-1 were previously published in the
Former proposed § 301.6241-1(a)(1) defined the term “adjustment year” to mean the partnership taxable year in which a decision of a court becomes final (if a petition is filed under section 6234), an AAR is made, or, in any other case, when an FPA is mailed (or if the partnership waives its right to an FPA, the year the waiver is executed by the IRS). Section 206(p) of the TTCA amended section 6227 to provide that an AAR is “filed,” as opposed to “made.” To reflect this amendment, proposed § 301.6241-1(a)(1) now provides that an AAR is “filed” and not “made.”
Former proposed § 301.6241-1(a)(3) defined the term “imputed underpayment” as the amount determined under § 301.6225-1. Because an imputed underpayment may also be computed and paid pursuant to proposed § 301.6226-3(e)(4) (relating to pass-through partners) as well as under proposed § 301.6227-2 and § 301.6227-3(c) (relating to AARs), proposed § 301.6241-1(a)(3) now refers to imputed underpayments determined under those provisions. Proposed § 301.6241-1(a)(3) was also clarified to provide that an imputed underpayment calculated under section 6225 is calculated under section 6225 and the regulations thereunder.
Proposed § 301.6241-1(a)(4) now provides that the term “indirect partner” includes a person that holds an interest in the partnership through a wholly owned entity that is disregarded as separate from its owner for Federal income tax purposes, such as a disregarded entity or grantor trust. This change from the language in the former proposed regulations clarifies that a partnership may seek modification under proposed § 301.6225-2 based on indirect partners holding an interest through a disregarded entity or grantor trust.
Proposed § 301.6241-1(a)(6) now provides that the term “partnership adjustment” means any adjustment to a partnership-related item (as defined in
Former proposed § 301.6241-1(a)(10) defined a tax attribute as anything that can affect, with respect to a partnership or partner, the amount or timing of an item of income, gain, loss, deduction, or credit or that can affect the amount of tax due in any taxable year. As discussed in section 4.A. of this preamble, section 203(a) of the TTCA amended section 6225 to provide an alternative procedure to filing amended returns during modification under which a partner agrees to take into account adjustments to the tax attributes “of such partner”. Section 6225(c)(2)(B)(ii). To reflect the amendment to section 6225(c)(2)(B) regarding tax attributes of a partner, the phrase “with respect to a partnership or a partner” was removed from the definition of tax attribute under former proposed § 301.6241-1(a)(10). The reference to “items of income, gain, loss, deduction, or credit” in former proposed § 301.6241-1(a)(10) was also replaced with a reference to “partnership-related item.”
Proposed rules under § 301.6241-2 were previously published in the
Proposed rules under § 301.6241-3 were previously published in the
Former proposed § 301.6241-3(a)(3) provided that the rules requiring former partners to take into account adjustments of a partnership which the IRS determined had ceased to exist did not apply to the former partners of a partnership that had elected out of the centralized partnership audit regime under section 6221(b). Because under section 6226(b)(4) a partnership-partner that has elected out of the centralized partnership audit regime may be liable for an imputed underpayment in the case of a push out election, proposed § 301.6241-3(a)(3) now provides that the rules under proposed § 301.6241-3 apply to a partnership-partner and its former partners, regardless of whether the partnership-partner has elected out of the centralized partnership audit regime. Accordingly, under proposed § 301.6241-3(a)(3), the former partners of any partnership that may be liable for an imputed underpayment, including a partnership-partner that has elected out of the centralized partnership audit regime, will be required to take into account a partnership adjustment if the IRS determines that such partnership ceased to exist before the partnership adjustment had taken effect. Example 2 under proposed § 301.6241-3(f) illustrates this rule.
Former proposed § 301.6241-3(b)(2)(i) provided that the IRS will not determine that a partnership has ceased to exist solely because: (i) A partnership has technically terminated under section 708(b)(1)(B); (ii) the partnership has made a valid election under section 6226 and the regulations thereunder with respect to any imputed underpayment; or (iii) the partnership has not paid any amount the partnership is liable for under subchapter C of chapter 63. To reflect the amendment to section 708 by the Act to eliminate technical terminations, the reference to section 708(b)(1)(B) was removed from former proposed § 301.6241-3(b)(2)(i). In addition, a rule was added to former proposed § 301.6241-3(b)(2)(i) to provide that a partnership also does not cease to exist solely because it furnished statements in accordance with proposed § 301.6226-3(e)(3). This change clarifies that partnership-partners that properly furnish statements in accordance with proposed § 301.6226-3(e)(3) (and therefore are not liable for an imputed underpayment) are treated the same as an audited partnership who made a valid election under section 6226.
Additional clarifications were made to proposed § 301.6241-3. First, the phrase “any amounts” in former proposed § 301.6241-3(a)(2) was replaced with the phrase “any unpaid amounts.” This clarification was made to eliminate the implication that the partnership was not liable for the original amount due and to clarify that if the IRS determines that a partnership has ceased to exist, the partnership is no longer liable for any remaining unpaid amounts due under subchapter C of chapter 63, meaning that if the partnership had made a prior payment, the IRS can retain that payment. Second, former proposed § 301.6241-3(b)(2)(iii) provided that the IRS may not determine that a partnership has ceased to exist after the expiration of the period of limitations on collection. Proposed § 301.6241-3(b)(2)(iii) now provides that the period relevant to this determination is the period of limitations on collection with respect to the imputed underpayment that was assessed against the partnership that ceased to exist. Finally, prior references to section 708(b)(1)(A) in former proposed § 301.6241-3(b)(2), (d)(2), and (f) were changed to refer to section 708(b)(1) to reflect the amendment to section 708 made by the Act.
Proposed rules under § 301.6241-4 were previously published in the
Former proposed § 301.6241-4 provided that payments made by a partnership under the centralized partnership audit regime, including payment of any imputed underpayment and any amount under proposed § 301.6226-3, were not deductible to the partnership. Because the payment amount for a partnership-partner in the case of a push out election is referred to as an imputed underpayment, reference to any amount under § 301.6226-3 in former proposed § 301.6241-4 became superfluous and thus was removed.
Proposed rules under § 301.6241-5 were previously published in the
Former proposed § 301.6241-5 provided rules for extending the centralized partnership audit regime to entities filing partnership returns. References in former proposed § 301.6241-5(a) to “items of income, gain, loss, deduction, or credit” and “partner's distributive share” were replaced with a reference to “partnership-related item.” Proposed § 301.6241-5(c) now also reflects the fact that certain business arrangements, which may not be classified as entities, can file partnership returns to make an election under section 761(a). Under proposed § 301.6241-5(c), the centralized partnership audit regime does not apply in that case notwithstanding the filing of a partnership return.
Section 201(b) of the TTCA added section 6241(9) to the Code regarding the coordination of the centralized partnership audit regime with chapters of the Code other than chapter 1. Section 6241(9)(A) provides that the centralized partnership audit regime shall not apply with respect to any tax imposed (including any amount required to be deducted or withheld) under chapter 2, 2A, 3, or 4 of subtitle A of the Code, except that any partnership adjustment determined under the centralized partnership audit regime for purposes of chapter 1 shall be taken into account for purposes of determining any such tax to the extent that such adjustment is relevant to such determination. Section 6241(9)(B) provides that in the case of any tax imposed (including any amount required to be deducted or withheld) under chapters 3 and 4 of the Code, which is determined with respect to a partnership adjustment, such tax shall be so determined with respect to the reviewed year and shall be so imposed (or so required to be deducted or withheld) with respect to the adjustment year.
Section 201(b) also added section 6501(c)(12) to the Code regarding the statute of limitation on assessment of taxes under chapter 2 or 2A which are attributable to any partnership adjustment. Section 6501(c)(12) provides in the case of any partnership adjustment determined under the centralized partnership audit regime, the period for assessment of any tax imposed under chapter 2 or 2A of the Code which is attributable to such adjustment shall not expire before the date that is one year after one of two events. In the case of an adjustment pursuant to the decision of a court in a proceeding brought under section 6234, the period for assessment shall not expire before the date that is one year after the decision becomes final. In any other case, the period for assessment shall not expire before the date that is one year after 90 days after the date on which the FPA is mailed under section 6231.
Former proposed § 301.6221(a)-1(d) provided that nothing in subchapter C of chapter 63 precluded the IRS from making any adjustment to an item of a partnership (as described in the prior version of § 301.6221(a)-1(b)) outside of the centralized partnership audit regime for purposes of determining tax imposed by provisions of the Code other than chapter 1. Accordingly, under former proposed § 301.6221(a)-1(d), the IRS was not precluded from examining a partnership's compliance with its obligations under chapters 3 and 4 (or any other chapter of the Code other than chapter 1) in a proceeding outside of the centralized partnership audit regime. Former proposed § 301.6221(a)-1(f) provided examples to illustrate this concept.
The rules contained in former proposed § 301.6221(a)-1(d), and the examples in former proposed § 301.6221(a)-1(f), are consistent with section 6241(9)(A). However, given that these concepts are now codified in section 6241, the rules and examples under former proposed § 301.6221(a)-1(d) and (f) are now under proposed § 301.6241-7(a)(1) and (2). References to “items of income, gain, loss, deduction, or credit” were replaced with references to “partnership-related item” as defined under proposed § 301.6241-6. Other editorial changes were made to reflect revisions to former proposed § 301.6221(a)-1.
Proposed § 301.6241-7(a)(1) provides that the centralized partnership audit regime does not apply with respect to any tax imposed (including any amount required to be deducted or withheld) under any chapter of the Code other than chapter 1, including chapter 2, 2A, 3, or 4 of the Code. Accordingly, for purposes of determining taxes under chapters of the Code other than chapter 1, the IRS may make adjustments to partnership-related items in proceedings not subject to the centralized partnership audit regime. However, to the extent an adjustment to a partnership-related item or a determination made under the centralized partnership audit regime is relevant in determining tax outside of chapter 1, such adjustment or determination must be taken into account in determining that non-chapter 1 tax. Proposed § 301.6241-7(a)(2) provides examples to illustrate these concepts.
Proposed § 301.6241-7(b) provides rules for coordinating the centralized partnership audit regime with chapters 3 and 4 of the Code. Proposed § 301.6241-7(b)(1) restates the rule in section 6241(9)(B) regarding the timing of withholding for tax imposed under chapters 3 and 4 that is determined with respect to a partnership adjustment. Proposed § 301.6241-7(b)(2) defines the terms chapter 3, chapter 4, and amount subject to withholding.
Former proposed §§ 301.6225-1(a)(4) and 301.6226-2(h) provided rules to coordinate the collection of tax in the case of partnership adjustments to amounts subject to withholding under chapters 3 and 4, including rules for when the partnership pays an imputed underpayment resulting from such an adjustment and rules for when the partnership makes the election under section 6226 with respect to such an imputed underpayment. These rules now fall within proposed § 301.6241-7(b)(3) and (b)(4). Proposed § 301.6241-7(b)(4) now provides that a partnership required to pay tax under chapter 3 or chapter 4 when it makes an election under section 6226 is required to pay the tax before the due date of the partnership return for the adjustment year (without regard to extension).
Section 206(l) of the TTCA amended section 6241 by adding a new provision, section 6241(11), providing for the treatment of special enforcement matters. Under section 6241(11), in the case of partnership-related items which involve special enforcement matters, the Secretary may prescribe regulations pursuant to which the centralized partnership audit regime (or any portion thereof) does not apply to such items, and that such items are subject to special rules (including rules related to assessment and collection) as the Secretary determines to be necessary for the effective and efficient enforcement of the Code. For purposes of section 6241(11), the term “special enforcement matters” means: (1) Failure to comply with the requirements of section 6226(b)(4)(A)(ii) (regarding the requirement for a pass-through partner to furnish statements or compute and pay an imputed underpayment); (2) assessments under section 6851 (relating to termination assessments of income tax) or section 6861 (relating to jeopardy assessments of income, estate, gift, and certain excise taxes); (3) criminal investigations; (4) indirect methods of proof of income; (5) foreign partners or partnerships; and (6) other matters that the Secretary determines by regulation present special enforcement considerations. Rules under this provision may be provided in future guidance. The Treasury Department and the IRS are considering proposing rules under section 6241(11)(B)(vi) (dealing with other matters that present special enforcement considerations) which allow certain partnership-related items reported solely by persons other than the partnership to be adjusted outside the centralized partnership audit regime. The Treasury Department and the IRS request comments on this provision, including whether there are
Section 206(m) of the TTCA amended section 6241 by adding a new provision, section 6241(12), to clarify that a U.S. shareholder of a controlled foreign corporation (CFC) which is a partner of a partnership shall be treated as a partner of such partnership for purposes of the centralized partnership audit regime. The U.S. shareholder's distributive share of the partnership is the U.S. shareholder's pro rata share of the CFC's Subpart F income determined under rules similar to section 951(a)(2). Similarly, a taxpayer that makes a Qualified Electing Fund (QEF) election with respect to a passive foreign investment company (PFIC) that is a partner in a partnership shall be treated as a partner of such partnership. In this case, a taxpayer's distributive share of the partnership is the taxpayer's pro rata share of the PFIC's ordinary earnings and net capital gain determined under rules similar to section 1293(b). Consequently, in both circumstances, the U.S. shareholder of a CFC and the taxpayer of a PFIC will be treated as the adjustment year partner or reviewed year partner under the centralized partnership audit regime, where applicable. Regulatory authority was also given to issue regulations or other guidance as necessary or appropriate to carry out the purpose of the provision, including regulations which apply the rule in similar circumstances or with respect to similarly situated persons. Consequently, in both circumstances, the U.S. shareholder of a CFC and the taxpayer of a PFIC will be treated as the adjustment year partner or reviewed year partner under proposed §§ 301.6241-1(a)(2) and 301.6241-1(a)(9) where applicable.
This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations.
Because the proposed regulations would not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.
IRS Revenue Procedures, Revenue Rulings, Notices, and other guidance cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at
Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic and written comments that are submitted timely to the IRS as prescribed in this preamble under the
A public hearing has been scheduled for October 9, 2018, beginning at 10 a.m. in the Auditorium of the Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For more information about having your name placed on the building access list to attend the hearing, see the
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by October 1, 2018. Submit a signed paper or electronic copy of the outline as prescribed in this preamble under the
The principal authors of these proposed regulations are Jennifer M. Black, Joy E. Gerdy-Zogby, Steven L. Karon, and Brittany Harrison of the Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department and the IRS participated in their development.
Income taxes, Reporting and recordkeeping requirements.
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.
Accordingly, under the authority of 26 U.S.C. 7805, the notices of proposed rulemaking (REG-119337-17, REG-120232-17, REG-120233-17, and REG-118067-17) that were published in the
Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as follows:
26 U.S.C. 7805 * * *
The additions read as follows:
(b) * * *
(1) * * *
(viii)
(
(
(
(
(2) * * *
(iii) * * *
(
(
(
(
(
(iv) * * *
(
(
(4) * * *
(xi)
(xii)
(xiii)
(xiv)
(xv)
(a) * * *
(10) For rules relating to determining the adjusted basis of a partner's interest in a partnership following a final determination under subchapter C of chapter 63 of the Internal Revenue Code (relating to the centralized partnership audit regime), see §§ 301.6225-4 and 301.6226-4 of this chapter.
(e) * * *
(2) * * *
(viii) Any item arising from a final determination under subchapter C of chapter 63 of the Internal Revenue Code (relating to the centralized partnership audit regime) with respect to a partnership adjustment resulting in an imputed underpayment for which no election is made under § 301.6226-1 of this chapter or for which a pass-through partner (as defined in § 301.6241-1(a)(5)) pays an imputed underpayment under § 301.6226-3(e)(4).
26 U.S.C. 7805 * * *
(a)
(b)
(2)
(a)
(2)
(3)
(4)
(i) The treatment of such item on the partnership's return of partnership income filed with the IRS under section 6031, and any amendment or supplement thereto, including an administrative adjustment request (AAR) filed pursuant to section 6227 and the regulations thereunder; and
(ii) The treatment of such item on any statement, schedule or list, and any amendment or supplement thereto, filed by the partnership with the Internal Revenue Service (IRS), including any statements filed pursuant to section 6226 and the regulations thereunder.
(5)
B is a partner in Partnership during 2018 and 2019. Both B and Partnership are calendar year taxpayers. In December 2018, Partnership receives an advance payment for services to be performed in 2019 and reports this amount as income on its partnership return for 2018. B includes its distributive share of income from the advance payment on B's income tax return for 2019 and not on B's income tax return for 2018. B did not file a notice of inconsistent treatment with respect to the advanced payment. B's treatment of the income attributable to Partnership is inconsistent with the treatment of that item by Partnership on its partnership return.
C is a partner in Partnership during 2018. Partnership incurred start-up costs before it was actively engaged in its business. Partnership capitalized these costs on its 2018 partnership return. C deducted his distributive share of the start-up costs on C's 2018 income tax return. C's treatment of the start-up costs is inconsistent with the treatment of that item by Partnership on its partnership return.
D is a partner in Partnership during 2018. Partnership reports a loss of $100,000 on its partnership return for 2018. On the 2018 Schedule K-1 attached to the partnership return, Partnership reports $5,000 as D's distributive share of that loss. On the 2018 Schedule K-1 furnished to D, however, Partnership reports $15,000 as D's distributive share of the loss. D reports the $15,000 loss on D's 2018 income tax return. D has not satisfied the requirements of paragraph (a) of this section because D reported D's distributive share of the loss in a manner that is inconsistent with how D's distributive share of the loss was reported on the 2018 partnership return actually filed. See, however, paragraph (d) of this section for the election to be treated as having reported the inconsistency where the partner treats an item consistently with an incorrect schedule.
D was a partner in Partnership during 2018. Partnership reports a loss of $100,000 on its partnership return for 2018. In 2020, Partnership files an AAR under section 6227 reporting that the amount of the loss on its 2018 partnership return is $90,000, rather than $100,000 as originally reported. Pursuant to section 6227 and the regulations thereunder, Partnership elects to have its partners take the adjustment into account, and furnishes D a statement showing D's share of the reduced loss for 2018. D fails to take his share of the reduced loss for 2018 into account in accordance with section 6227 and the regulations thereunder. D has not satisfied the requirements of paragraph (a) of this section because D has not taken into account his share of the loss in a manner consistent with how Partnership treated such items on the partnership return actually filed.
E was a partner in Partnership during 2018. In 2021, Partnership receives a notice of final partnership adjustment in an administrative proceeding under subchapter C of chapter 63 with respect to Partnership's 2018 taxable year. Partnership properly elects the application of section 6226 and furnishes to E a statement of E's share of adjustments with respect to Partnership's 2018 taxable year. E fails to take his share of the adjustments into account in accordance with section 6226 and the regulations thereunder. E has not satisfied the requirements of paragraph (a) of this section because E has not taken into account his share of adjustments with respect to Partnership's 2018 taxable year in a manner consistent with how Partnership treated such items on the partnership return actually filed.
In 2018, E is a partner in Partnership. E is a partnership-partner with a 2018 taxable year that ends on the same day as Partnership's 2018 taxable year. E has filed a valid election under section 6221(b) in effect with respect to E's 2018 partnership taxable year. Notwithstanding E's election under section 6221(b) for its 2018 taxable year, E is subject to section 6222 for taxable year 2018. E must treat, on its 2018 partnership return, any items attributable to E's interest in Partnership in a manner that is consistent with the treatment of those items on the 2018 partnership return actually filed by Partnership.
(b)
(2)
(3)
(4)
D, an individual, is a partner in Partnership. D and Partnership are both calendar year taxpayers and Partnership does not have an election under section 6221(b) in effect for its 2018 taxable year. On its partnership return for taxable year 2018,
F was a partner in Partnership during 2018. In 2021, Partnership receives a notice of final partnership adjustment in an administrative proceeding under subchapter C of chapter 63 with respect to Partnership's 2018 taxable year. Partnership properly elects the application of section 6226 and files with the IRS a statement of F's share of adjustments with respect to Partnership's 2018 taxable year. F fails to report one adjustment, F's share of a decrease in the amount of losses for 2018, on F's return as required by section 6226 and the regulations thereunder. The IRS may determine the amount of tax that results from adjusting the decrease in the amount of losses on F's return to be consistent with the amount included on the section 6226 statement filed with the IRS and may assess the resulting underpayment in tax as if it was on account of a mathematical or clerical error appearing on F's return. F may not request an abatement of that assessment under section 6213(b).
(c)
(2)
(3)
(4)
(ii)
(5)
B is a partner in Partnership during 2018. B treats a deduction and a capital gain attributable to Partnership on B's 2018 income tax return in a manner that is inconsistent with the treatment of those items by Partnership on its 2018 partnership return. B reports the inconsistent treatment of the deduction in accordance with paragraph (c)(1) of this section, but not the inconsistent treatment of the gain. Because B did not notify the IRS of the inconsistent treatment of the gain in accordance with paragraph (c)(1) of this section, the IRS may determine the amount of tax that results from adjusting the gain reported on B's 2018 income tax return in order to make the treatment of that gain consistent with how the gain was treated on Partnership's partnership return. Pursuant to paragraph (c)(3) of this section, the IRS may assess and collect the underpayment of tax resulting from the adjustment to the gain as if it was on account of a mathematical or clerical error appearing on B's return.
On its 2018 partnership return, Partnership treats partner E's distributive share of ordinary loss attributable to Partnership as $8,000. E, however, claims an ordinary loss of $9,000 as attributable to Partnership on its 2018 income tax return and notifies the IRS of the inconsistent treatment in accordance with paragraph (c)(1) of this section. As a result of the notice of inconsistent treatment, the IRS conducts a separate proceeding under subchapter B of chapter 63 of the Internal Revenue Code with respect to E's 2018 income tax return, a proceeding to which Partnership is not a party. During the proceeding, the IRS determines that the proper amount of E's distributive share of the ordinary loss from Partnership is $3,000. During the same proceeding, the IRS also determines that E overstated a charitable contribution deduction in the amount of $2,500 on its 2018 income tax return. The determination of the adjustment of E's share of ordinary loss is not binding on Partnership. The charitable contribution deduction is not attributable to Partnership or to another partnership subject to the provisions of subchapter C of chapter 63. The IRS may determine the amount of tax that results from adjusting the $9,000 ordinary loss deduction to $3,000 and from adjusting the charitable contribution deduction. Pursuant to paragraph (c)(4)(ii) of this section, the IRS is not limited to only adjusting the ordinary loss of $9,000, as originally reported on E's partner return, to $8,000, as originally reported by Partnership on its partnership return, nor is the IRS prohibited from adjusting the charitable
(d)
(i) Demonstrates that the treatment of such item on the partner's return is consistent with the treatment of that item on the statement, schedule, or other form prescribed by the IRS and furnished to the partner by the partnership, and
(ii) The partner makes an election in accordance with paragraph (d)(2) of this section.
(2)
(ii)
(A) Clearly identified as an election under section 6222(c)(2)(B);
(B) Signed by the partner making the election;
(C) Accompanied by a copy of the statement, schedule, or other form furnished to the partner by the partnership and a copy of the IRS notice that notified the partner of the inconsistency; and
(D) Include any other information required in forms, instructions, or other guidance prescribed by the IRS.
(iii)
(3)
E is a partner in Partnership for 2018. On its 2018 partnership return, Partnership reports that E's distributive share of ordinary income attributable to Partnership is $1,000. Partnership furnishes to E a Schedule K-1 for 2018 showing $500 as E's distributive share of ordinary income. E reports $500 of ordinary income attributable to Partnership on its 2018 income tax return consistent with the Schedule K-1 furnished to E. The IRS notifies E that E's treatment of the ordinary income attributable to Partnership on its 2018 income tax return is inconsistent with how Partnership treated the ordinary income allocated to E on its 2018 partnership return. Within 60 days of receiving the notice from the IRS of the inconsistency, E files an election with the IRS in accordance with paragraph (d)(2) of this section. Because E made a valid election under section 6222(c)(2)(B) and paragraph (d)(1) of this section, E is treated as having notified the IRS of the inconsistency with respect to the ordinary income attributable to Partnership under paragraph (c)(1) of this section.
(e)
(2)
(a)
(2)
(3)
(b)
(i) Grouping the partnership adjustments in accordance with paragraph (c) of this section and, if appropriate, subgrouping such adjustments in accordance with paragraph (d) of this section;
(ii) Netting the adjustments in accordance with paragraph (e) of this section;
(iii) Calculating the total netted partnership adjustment in accordance with paragraph (b)(2) of this section;
(iv) Multiplying the total netted partnership adjustment by the highest rate of Federal income tax in effect for
(v) Increasing or decreasing the product that results under paragraph (b)(1)(iv) of this section by—
(A) Any amounts treated under paragraph (e)(3)(ii) of this section as net positive adjustments (as defined in paragraph (e)(4)(i) of this section); and
(B) Any net negative adjustments (as defined in paragraph (e)(4)(ii) of this section), except net negative adjustments resulting from reallocation adjustments to credits as described in paragraph (d)(3)(ii) of this section and creditable tax expenditures described in paragraph (e)(3)(iii) of this section.
(2)
(3)
(4)
(c)
(2)
(ii)
(3)
(4)
(ii)
(B)
(5)
(ii)
(6)
(ii)
(iii)
(d)
(2)
(A) An increase in an item of gain is treated as an increase in an item of income;
(B) A decrease in an item of gain is treated as a decrease in an item of income;
(C) An increase in an item of loss or deduction is treated as a decrease in an item of income; and
(D) A decrease in an item of loss or deduction is treated as an increase in an item of income.
(ii)
(iii)
(B)
(3)
(ii)
(B)
(iii)
(B)
(C)
(iv)
(e)
(2)
(3)
(ii)
(iii)
(B)
(4)
(ii)
(f)
(i) After grouping, subgrouping, and netting the adjustments as described in paragraphs (c), (d), and (e) of this section, the result of netting with respect to any grouping or subgrouping that includes a particular partnership adjustment is a net negative adjustment (as described in paragraph (e)(4)(ii) of this section); or
(ii) The calculation under paragraph (b)(1) of this section results in an amount that is zero or less than zero.
(2)
(g)
(2)
(ii)
(iii)
(B)
(h)
Partnership reports on its 2019 partnership return $100 of ordinary income and an ordinary deduction of <$70>. The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year and determines that ordinary income was $105 instead of $100 ($5 adjustment) and that the ordinary deduction was <$80> instead of <$70> (<$10> adjustment). Pursuant to paragraph (c) of this section, the adjustments are both in the residual grouping. The <$10> adjustment to the ordinary deduction would result in a decrease in the imputed underpayment if netted with the $5 adjustment to ordinary income. Because the <$10> adjustment to the ordinary deduction might be limited if taken into account by any person, it is grouped in a separate subgrouping from the $5 adjustment to ordinary income. The total netted partnership adjustment is $5, which results in an imputed underpayment of $2. The <$10> adjustment to the ordinary deduction is a net negative amount and is an adjustment that does not result in an imputed underpayment which is taken into account by Partnership in the adjustment year in accordance with § 301.6225-3.
The facts are the same as
Partnership reports on its 2019 partnership return ordinary income of $300, long-term capital gain of $125, long-term capital loss of <$75>, a depreciation deduction of <$100>, and a tax credit that can be claimed by the partnership of $5. In an administrative proceeding with respect to Partnership's 2019 taxable year, the IRS determines that ordinary income is $500 ($200 adjustment), long-term capital gain is $200 ($75 adjustment), long-term capital loss is <$25> ($50 adjustment), the depreciation deduction is <$70> ($30 adjustment), and the tax credit is $3 ($2 adjustment). Pursuant to paragraph (c) of this section, the tax credit is in the credit grouping under paragraph (c)(3) of this section. The remaining adjustments are part of the residual grouping under paragraph (c)(5) of this section. Pursuant to paragraph (d)(2) of this section, all of the adjustments in the residual grouping are positive adjustments. Because there are no negative adjustments, there is no need for further subgrouping within the residual grouping. Under paragraph (b)(2), the adjustments in the residual grouping are summed for a total netted partnership adjustment of $355. Under paragraph (b)(1)(iv) of this section, the total netted partnership adjustment is multiplied by 40 percent (highest tax rate in effect), which results in $142. Under paragraph (b)(1)(iv) of this section, the $142 is increased by the $2 credit adjustment, resulting in an imputed underpayment of $144.
Partnership reported on its 2019 partnership return long-term capital gain of $125 and long-term capital loss of <$75>. In an administrative proceeding with respect to Partnership's 2019 taxable year, the IRS determines the long-term capital gain should have been reported as ordinary income of $125. There are no other adjustments for the 2019 taxable year. This recharacterization adjustment results in two adjustments in the residual grouping pursuant to paragraph (c)(6) of this section: an increase in ordinary income of $125 ($125 adjustment) as well as a decrease of long-term capital gain of $125 (<$125> adjustment). The decrease in long-term capital gain is a negative adjustment under paragraph (d)(2)(ii) of this section and the increase in ordinary income is a positive adjustment under paragraph (d)(2)(iii) of this section. Under paragraph (d)(3)(i) of this section, the adjustment to long-term capital gain is placed in a subgrouping separate from the adjustment to ordinary income because the reduction of long-term capital gain is required to be taken into account separately pursuant to section 702(a). The $125 decrease in long-term capital gain is a net negative adjustment in the long-term capital subgrouping and as a result is an adjustment that does not result in an imputed underpayment under paragraph (f) of this section. The $125 increase in ordinary income results in a net positive adjustment under paragraph (e)(4)(i) of this section. Because the ordinary subgrouping is the only subgrouping resulting in a net positive adjustment, $125 is the total netted partnership adjustment under paragraph (b)(2) of this section. Under paragraph (b)(1)(iv) of this section, $125 is multiplied by 40 percent resulting in an imputed underpayment of $50.
Partnership reported a $100 deduction for certain expenses on its 2019 partnership return and an additional $100 deduction with respect to the same type of expenses on its 2020 partnership return. The IRS initiates an administrative proceeding with respect to Partnership's 2019 and 2020 taxable years and determines that Partnership improperly accelerated accrual of a portion of the expenses with respect to the deduction in 2019 that should have been taken into account in 2020. Therefore, for taxable year 2019, the IRS determines that Partnership should have reported a deduction of $75 with respect to the expenses ($25 adjustment in the 2019 residual grouping). For 2020, the IRS determines that Partnership should have reported a deduction of $125 with respect to these expenses (<$25> adjustment in the 2020 residual grouping). There are no other adjustments for the 2019 and 2020 partnership taxable years. Pursuant to paragraph (e)(2) of this section, the adjustments for 2019 and 2020 are not netted with each other. The 2019 adjustment of $25 is the only adjustment for that year and a net positive adjustment under paragraph (e)(4)(i) of this section, and therefore the total netted partnership adjustment for 2019 is $25 pursuant to paragraph (b)(2) of this section. The $25 total netted partnership adjustment is multiplied by 40 percent resulting in an imputed underpayment of $10 for
On its partnership return for the 2020 taxable year, Partnership reported ordinary income of $100 and a capital gain of $50. Partnership had four equal partners during the 2020 tax year, all of whom were individuals. On its partnership return for the 2020 tax year, the capital gain was allocated to partner E and the ordinary income was allocated to all partners based on their interests in Partnership. In an administrative proceeding with respect to Partnership's 2020 taxable year, the IRS determines that for 2020 the capital gain allocated to E should have been $75 instead of $50 and that Partnership should have recognized an additional $10 in ordinary income. In the NOPPA mailed by the IRS, the IRS may determine pursuant to paragraph (g) of this section that there is a general imputed underpayment with respect to the increase in ordinary income and a specific imputed underpayment with respect to the increase in capital gain specially allocated to E.
On its partnership return for the 2020 taxable year, Partnership reported a recourse liability of $100. During an administrative proceeding with respect to Partnership's 2020 taxable year, the IRS determines that the $100 recourse liability should have been reported as a $100 nonrecourse liability. Under paragraph (d)(2)(iii)(B), the adjustment to the character of the liability results in a $100 increase in income because such recharacterization of a liability could result in up to $100 in taxable income if taken into account by any person. The $100 increase in income is a positive adjustment in the residual grouping under paragraph (c)(5)(ii) of this section. There are no other adjustments for the 2020 partnership taxable year. The $100 positive adjustment is treated as a net positive adjustment under paragraph (e)(4)(i) of this section, and the total netted partnership adjustment under paragraph (b)(2) of this section is $100. Pursuant to paragraph (b)(1) of this section, the total netted partnership adjustment is multiplied by 40 percent for an imputed underpayment of $40.
Partnership reports on its 2019 partnership return $400 of CFTEs in the general category under section 904(d). The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year and determines that the amount of CFTEs was $300 instead of $400 (<$100> adjustment to CFTEs). No other adjustments are made for the 2019 taxable year. The <$100> adjustment to CFTEs is placed in the creditable expenditure grouping described in paragraph (c)(4) of this section. Pursuant to paragraph (e)(3)(iii) of this section, the decrease to CFTEs in the creditable expenditure grouping is treated as a positive adjustment to (decrease in) credits in the credit grouping under paragraph (c)(3) of this section. Because no other adjustments have been made, the $100 decrease in credits produces an imputed underpayment of $100 under paragraph (b)(1) of this section.
Partnership reports on its 2019 partnership return $400 of CFTEs in the passive category under section 904(d). The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year and determines that the CFTEs reported by Partnership were general category instead of passive category CFTEs. No other adjustments are made. Under the rules in paragraph (c)(6) of this section, an adjustment to the category of a CFTE is treated as two separate adjustments: An increase to general category CFTEs of $400 and a decrease to passive category CFTEs of $400. Both adjustments are included in the creditable expenditure grouping under paragraph (c)(4) of this section, but they are included in separate subgroupings. Therefore, the two amounts do not net. Instead, the $400 increase to CFTEs in the general category subgrouping is treated as a net negative adjustment under paragraph (e)(3)(iii)(A) of this section and is an adjustment that does not result in an imputed underpayment under paragraph (f) of this section. The decrease to CFTEs in the passive category subgrouping of the creditable expenditure grouping results in a decrease in CFTEs. Therefore, pursuant to paragraph (e)(3)(iii)(A) of this section, it is treated as a decrease in credits in the credit grouping under paragraph (c)(3) of this section, which results in an imputed underpayment of $400 under paragraph (b)(1) of this section.
Partnership has two partners, A and B. Under the partnership agreement, $100 of the CFTE is specially allocated to A for the 2019 taxable year. The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year and determines that $100 of CFTE should be reallocated from A to B. Because the adjustment reallocates a creditable expenditure, paragraph (c)(4) of this section provides that it is included in the creditable expenditure grouping rather than the reallocation grouping. The partnership adjustment is a <$100> adjustment to general category CFTE allocable to A and an increase of $100 to general category CFTE allocable to B. Pursuant to paragraph (d)(3)(iii) of this section, the <$100> adjustment to general category CFTE and the increase of $100 to general category CFTE are included in separate subgroupings in the creditable expenditure grouping. The $100 increase in general category CFTEs, B-allocation subgrouping, is a net negative adjustment, which does not result in an imputed underpayment and is therefore taken into account by the partnership in the adjustment year in accordance with § 301.6225-3. The net decrease to CFTEs in the general-category, A-allocation subgrouping, is treated as a decrease to credits in the credit grouping under paragraph (c)(3) of this section, resulting in an imputed underpayment of $100 under paragraph (b)(1) of this section.
Partnership has two partners, A and B. Partnership owns two entities, DE1 and DE2, that are disregarded as separate from their owner for Federal tax purposes and are operating in and paying taxes to foreign jurisdictions. The partnership agreement provides that all items from DE1 and DE2 are allocable to A and B in the following manner. Items related to DE1: To A 75% and to B 25%. Items related to DE2: To A 25% and to B 75%. On Partnership's 2018 return, Partnership reports CFTEs in the general category of $300, $100 with respect to DE1 and $200 with respect to DE2. Partnership allocates the $300 of CFTEs $125 and $175 to A and B respectively. During an administrative proceeding with respect to Partnership's 2018 taxable year, the IRS determines that Partnership understated the amount of creditable foreign tax paid by DE2 by $40 and overstated the amount of creditable foreign tax paid by DE1 by $80. No other adjustments are made. Because the two adjustments each relate to CFTEs that are subject to different allocations, the two adjustments are in different subgroupings under paragraph (d)(3)(iii)(B) of this section. The adjustment reducing the CFTEs related to DE1 results in a decrease in CFTEs within that subgrouping and under paragraph (e)(3)(iii)(A) of this section is treated as a decrease in credits in the credit grouping under paragraph (c)(3) of this section and results in an imputed underpayment of $80 under paragraph (b)(1) of this section. The increase of $40 of general category CFTE related to the DE2 subgrouping results in an increase in CFTEs within that subgrouping and is treated as a net negative adjustment, which does not result in an imputed underpayment and is taken into account in the adjustment year in accordance with § 301.6225-3.
(i)
(2)
(a)
(1) A reviewed year partner (as defined in § 301.6241-1(a)(9)), including any pass-through partner (as defined in § 301.6241-1(a)(5)), except for any reviewed year partner that is a wholly-owned entity disregarded as separate from its owner for Federal tax purposes, or
(2) An indirect partner (as defined in § 301.6241-1(a)(4)) except for any indirect partner that is a wholly-owned entity disregarded as separate from its owner for Federal tax purposes.
(b)
(i) Modifications that affect the extent to which an adjustment factors into the determination of the imputed underpayment under paragraph (b)(2) of this section;
(ii) Modification of the number and composition of imputed underpayments under paragraph (b)(4) of this section;
(iii) Modifications that affect the tax rate under paragraph (b)(3) of this section.
(2)
(i) Paragraph (d)(2) of this section (amended returns and the alternative procedure to filing amended returns);
(ii) Paragraph (d)(3) of this section (tax exempt status);
(iii) Paragraph (d)(5) of this section (specified passive activity losses);
(iv) Paragraph (d)(7) of this section (qualified investment entities);
(v) Paragraph (d)(8) of this section (closing agreements), if applicable;
(vi) Paragraph (d)(9) of this section (tax treaty modifications), if applicable; and
(vii) Paragraph (d)(10) of this section (other modifications), if applicable.
(3)
(A) Paragraph (d)(4) of this section (rate modification);
(B) Paragraph (d)(8) of this section (closing agreements), if applicable;
(C) Paragraph (d)(9) of this section (tax treaty modifications), if applicable; and
(D) Paragraph (d)(10) of this section (other modifications), if applicable.
(ii)
(iii)
(A) Determine each relevant partner's distributive share of the partnership adjustments subject to an approved modification under paragraph (b)(3)(i) of this section based on how each adjustment subject to rate modification would be properly allocated under section 702 to such relevant partner in the reviewed year (as defined in § 301.6241-1(a)(8)).
(B) Multiply each partnership adjustment determined under paragraph (b)(3)(iii)(A) of this section by the tax rate applicable to such adjustment based on the approved modification described under paragraph (b)(3)(i) of this section.
(C) Add all of the amounts calculated under paragraph (b)(3)(iii)(B) of this section with respect to each partnership adjustment subject to an approved modification described under paragraph (b)(3)(i) of this section.
(iv)
(4)
(5)
(c)
(2)
(ii)
(3)
(ii)
(iii)
(4)
(d)
(2)
(ii)
(A)
(B)
(C)
(iii)
(iv)
(v)
(A) Establishes that the pass-through partner is not subject to chapter 1 tax on the adjustments that are properly allocated to such pass-through partner; or
(B) Requests modification with respect to the adjustments resulting in chapter 1 tax for the pass-through partner, including full payment of such chapter 1 tax for the first affected year and all modification years under paragraph (d)(2) of this section or in accordance with forms, instructions, or other guidance prescribed by the IRS.
(vi)
(B)
(vii)
(B)
(viii)
(ix)
(x)
(B)
(3)
(ii)
(iii)
(4)
(5)
(ii)
(A) At the end of the first affected year (affected year loss); or
(B) At the end of either—
(
(
(iii)
(A) The person is a partner of a publicly traded partnership;
(B) The person is an individual, estate, trust, closely held C corporation, or personal service corporation; and
(C) The person has a specified passive activity loss with respect to the publicly traded partnership.
(iv)
(v)
(6)
(ii)
(7)
(ii)
(8)
(9)
(i) Was a foreign person who would have qualified, under an income tax treaty with the United States, for a reduction or exemption from tax with respect to such partnership-related item in the reviewed year;
(ii) Would have derived the item (within the meaning of § 1.894-1(d) of this chapter) had it been taken into account properly in the partnership's reviewed year return; and
(iii) Is not otherwise prevented under the income tax treaty with the United States from claiming such reduction or exemption with respect to the reviewed year at the time the modification under this paragraph (d)(9) is requested.
(10)
(e)
(f)
Partnership has two partners during its 2019 partnership taxable year: P and S. P is a partnership, and S is an S Corporation. P has four partners during its 2019 partnership taxable year: A, C, T and DE. A is an individual, C is a C Corporation, T is a trust, and DE is a wholly-owned entity disregarded as separate from its owner for Federal tax purposes. The owner of DE is B, an individual. T has two beneficiaries during its 2019 taxable year: F and G, both individuals. S has 3 shareholders during its 2019 taxable year: H, I, and J, all individuals. For purposes of this section, if Partnership requests modification with respect to A, B, C, F, G, H, I, and J, those persons are all relevant partners (as defined in paragraph (a) of this section). P, S, and DE are not relevant partners (as defined in paragraph (a) of this section) because DE is a wholly-owned entity disregarded as separate from its owner for Federal tax purposes and modification was not requested with respect to P and S.
The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year. The IRS mails a NOPPA to Partnership for the 2019 partnership taxable year proposing a single partnership adjustment increasing ordinary income by $100, resulting in a $40 imputed underpayment ($100 multiplied by the 40 percent tax rate). Partner A, an individual, held a 20 percent interest in Partnership during 2019. Partnership timely requests modification under paragraph (d)(2) of this section based on A's filing an amended return for the 2019 taxable year taking into account $20 of the partnership adjustment and paying the tax and interest due attributable to A's share of the increased income and the tax rate applicable to A for the 2019 tax year. No tax attribute in any other taxable year of A is affected by A's taking into account A's share of the partnership adjustment for 2019. In accordance with paragraph (d)(2)(iii) of this section, Partnership's partnership representative provides the IRS with documentation demonstrating that A filed the 2019 return and paid all tax and interest due. The IRS approves the modification and, in accordance with paragraph (b)(2) of this section, the $20 increase in ordinary income allocable to A is not included in the calculation of the total netted partnership adjustment (determined in accordance with § 301.6225-1). Partnership's total netted partnership adjustment is reduced to $80 ($100 adjustment less $20 taken into account by A), and the imputed underpayment is reduced to $32 (total netted partnership adjustment of $80 after modification multiplied by 40 percent).
The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year. Partnership has two equal partners during its entire 2019 taxable year: An individual, A, and a partnership-partner, B. During all of 2019, B has two equal partners: A tax-exempt entity, C, and an individual, D. The IRS mails a NOPPA to Partnership for its 2019 taxable year proposing a single partnership adjustment increasing Partnership's ordinary income by $100, resulting in a $40 imputed underpayment ($100 total netted partnership adjustment multiplied by 40 percent). Partnership timely requests modification under paragraph (d)(3) of this section with respect to B's partner, C, a tax-exempt entity. In accordance with paragraph (d)(3)(iii) of this section, Partnership's partnership representative provides the IRS with documentation substantiating to the IRS's satisfaction that C held a 25 percent indirect interest in Partnership through its interest in B during the 2019 taxable year, that C was a tax-exempt entity defined in paragraph (d)(3)(ii) of this section during the 2019 taxable year, and that C was not subject to tax with respect to its entire distributive share of the partnership adjustment allocated to B (which is $25 (50 percent × 50 percent × $100)). The IRS approves the modification and, in accordance with paragraph (b)(2) of this section, the $25 increase in ordinary income allocated to C, through B, is not included in the calculation of the total netted partnership adjustment (determined in accordance with § 301.6225-1). Partnership's total netted partnership adjustment is reduced to $75 ($100 adjustment less C's share of the adjustment, $25), and the imputed underpayment is reduced to $30 (total netted partnership adjustment of $75, after modification, multiplied by 40 percent).
The facts are the same as in
The facts are the same as in
The facts are the same as in
The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year. All of Partnership's partners during its 2019 taxable year are individuals. The IRS mails a NOPPA to Partnership for the 2019 taxable year proposing three partnership adjustments. The first partnership adjustment is an increase to ordinary income of $75 for 2019. The second partnership adjustment is an increase in the depreciation deduction allowed for 2019 of $25, which under § 301.6225-1(d)(2)(i) is treated as a $25 decrease in income. The third adjustment is an increase in long-term capital gain of $10 for 2019. In accordance with § 301.6225-1, the total netted partnership adjustment is $85 ($75 increase in ordinary income + $10 increase in long-term capital gain), resulting in an imputed underpayment of $34 ($85 multiplied by 40 percent). The $25 decrease in income as a result of the increase in depreciation is an adjustment that does not result in an imputed underpayment under § 301.6225-1(f). Under the partnership agreement in effect for Partnership's 2019 taxable year, the long-term capital gain and the increase in depreciation is specially allocated to B and the increase in ordinary income is specially allocated to A. Partnership requests a modification under paragraph (d)(6) of this section to determine a specific imputed underpayment with respect to the $75 adjustment to ordinary income allocated to A. The specific imputed underpayment is with respect to $75 of the increase in income specially allocated to A and the general imputed underpayment is with respect to $10 of the increase in capital gain and the $25 increase in depreciation deduction specially allocated to B. If the modification is approved by the IRS, the specific imputed underpayment is $30 ($75 multiplied by 40 percent), the general imputed underpayment is $4 ($10 multiplied by 40 percent), and the increase in depreciation of $25 remains an adjustment that does not result in an imputed underpayment under § 301.6225-1(f) and is associated with the general imputed underpayment.
Partnership has two reviewed year partners, C1 and C2, both of which are C corporations. The IRS mails to Partnership a NOPPA with two adjustments, both based on rental real estate activity. The first adjustment is an increase of rental real estate income of $100 attributable to Property A. The second adjustment is an increase of rental real estate loss of $30 attributable to Property B. The Partnership did not treat the leasing arrangement with respect to Property A and Property B as an appropriate economic unit for purposes of section 469. If the $100 increase in income attributable to Property A and the $30 increase in loss attributable to Property B were included in the same subgrouping and netted, then taking the $30 increase in loss into account would result in a decrease in the amount of the imputed underpayment. Also, the $30 increased loss might be limited or restricted if taken into account by any person under the passive activity rules under section 469. For instance, under section 469, rental activities of the two properties could be treated as two activities, which could limit a partner's ability to claim the loss. In addition to the potential limitations under section 469, there are other potential limitations that might apply if the $30 loss were taken into account by any person. Therefore, in accordance with § 301.6225-1(d), the two adjustments are placed in separate subgroupings within the residual grouping, the total netted partnership adjustment is $100, the imputed underpayment is $40 ($100 × 40 percent), and the $30 increase in loss is an adjustment that does not result in an imputed underpayment under § 301.6225-1(f). Partnership requests modification under paragraph (d)(6) of this section, substantiating to the satisfaction of the IRS that C1 and C2 are publicly traded C corporations, and therefore, the passive activity loss limitations under section 469 of the Code do not apply. Partnership also substantiates to the satisfaction of the IRS that no other limitation or restriction applies that would prevent the grouping of the $100 with the $30 loss. The IRS approves Partnership's modification request and places the $100 of income and the $30 loss into the subgrouping in the residual grouping under the rules described in § 301.6225-1(c)(5). Under § 301.6225-1(e), because the two adjustments are in one subgrouping, they are netted together, resulting in a total netted partnership adjustment of $70 ($100 plus <$30>) and an imputed underpayment of $28 ($70 × 40 percent). After modification, there are not adjustments treated as an adjustment that does not result in an imputed underpayment under § 301.6225-1(f) because the $30 loss is now netted with the $100 of income.
(g)
(2)
(a)
(b)
(2)
(3)
(4)
(5)
(6)
(c)
(d)
(2)
(a)
(2)
(3)
(4)
(5)
(ii)
(6)
(b)
(2)
(3)
(ii)
(iii)
(iv)
(v)
(vi)
(4)
(ii)
(iii)
(iv)
(5)
(6)
(ii)
(iii)
(B)
(
(
(c)
(d)
(e)
(i) In 2019, A, B, and C are individuals that form Partnership. A contributes Whiteacre, which is unimproved land with an adjusted basis of $400 and a fair market value of $1,000, and B and C each contribute $1,000 in cash. The partnership agreement provides that all income, gain, loss, and deduction will be allocated in equal
(ii) Upon formation, Partnership has the following assets and capital accounts:
(iii) In 2019, Partnership makes a $120 payment for Asset that it treats as a deductible expense on its partnership return.
(iv) Partnership does not file an AAR for 2020. In 2021 (the adjustment year) it is finally determined that Partnership's $120 expenditure was not allowed as a deduction in 2019 (the reviewed year), but rather was the acquisition of an asset for which cost recovery deductions are unavailable. Accordingly, the IRS makes a partnership adjustment that disallows the entire $120 deduction, which results in an imputed underpayment of $48 ($120 × 40 percent). Partnership did not request modification under § 301.6225-2. Partnership pays the $48 imputed underpayment.
(v) Partnership first determines its tax attribute adjustments resulting from the partnership adjustment by applying paragraph (b) of this section. Pursuant to paragraph (b)(2) of this section, Partnership must re-state the basis and book value of Asset to $120. Further, pursuant to paragraph (b)(3)(v) of this section, a $120 notional item of income is created. The $120 item of notional income is allocated in equal shares ($40) to A, B, and C in 2021 under § 1.704-1(b)(4)(xi) of this chapter. Accordingly, in 2021 Partnership increases the capital accounts of A, B, and C by $40 each, and increases A, B, and C's outside bases by $40 each under paragraph (b)(6)(ii) and (iii) of this section, respectively.
(vi) As described in paragraph (c) of this section, Partnership's payment of the $48 imputed underpayment is treated as an expenditure described in section 705(a)(2)(B) under § 301.6241-4. Under § 1.704-1(b)(4)(xii) of this chapter, Partnership determines each partner's properly allocable share of this expenditure in 2021 by allocating the expenditure in proportion to the allocations of the notional item to which the expenditure relates. Accordingly, each of A, B, and C have a properly allocable share of $16 each, which is the same proportion (
(vii) The payment is also reflected by a $48 decrease in partnership cash for book purposes under § 1.704-1(b)(4)(ii) of this chapter. Therefore, in 2021, A's basis in Partnership is $384 and his capital account is $984. B and C each have a basis and capital account of $984.
(i) The facts are the same as in
(ii) As in
(iii) However, the modifications affect how Partnership must allocate the imputed underpayment expenditure among A, B, and C in 2021 (the adjustment year) pursuant to § 1.704-1(b)(2)(iii)(
(iv) The payment is also reflected by a $24 decrease in partnership cash for book purposes. Therefore, in 2021, A's basis in Partnership is $400 and his capital account is $1000, B's basis and capital account are both $984, and C's basis and capital account are both $992.
The facts are the same as in
The facts are the same as in
(i) In 2019, Partnership has two partners, A and B. Both A and B have a $0 basis in their interests in Partnership. Further, Partnership has a $200 liability as defined in § 1.752-1(a)(4) of this chapter. The liability is treated as a nonrecourse liability as defined in § 1.752-1(a)(2) of this chapter so that A and B both are treated as having a $100 share of the liability under § 1.752-3 of this chapter. In 2021 (the adjustment year), the IRS determines that the liability was inappropriately classified as a nonrecourse liability, should have been classified as a recourse liability as defined in § 1.752-1(a)(1) of this chapter, and that A should have no share of the recourse liability under § 1.752-2 of this chapter. The recharacterization of the liability from nonrecourse to recourse and the decrease in A's share of partnership liabilities are adjustments that are not allocated under section 704(b) under § 301.6225-1(c)(5)(ii). As a result of the adjustments, the IRS includes in the residual grouping $100 of increased income to account for the cumulative effects of these adjustments to reflect the $100 decrease in A's share of partnership liabilities under §§ 1.752-1(c) and 1.731-1(a)(1)(i) of this chapter and determines an imputed underpayment of $40 ($100 × 40 percent). Partnership does not request modification under § 301.6225-2. Partnership pays the $40 imputed underpayment.
(ii) Pursuant to paragraph (b)(4)(ii) of this of this section, notional items are not created with respect to this partnership adjustment. Instead, under paragraph (b)(4)(i) of this section, specified tax attributes are adjusted in a manner that is consistent with how the partnership adjustment would have been taken into account under the partnership agreement in effect for the reviewed year taking into account all facts and circumstances. In this case, no specified tax attributes are adjusted.
(iii) However, because A would have borne the economic burden of the partnership adjustment if the partnership and its partners had originally reported in a manner consistent with the partnership adjustment, the $40 imputed underpayment section 705(a)(2)(B) expenditure is allocated to A under § 1.704-1(b)(2)(iii)(
(f)
(2)
(a)
(b)
(2)
(c)
(2)
(3)
(4)
(ii)
(A) The name, address, and taxpayer identification number (TIN) of the partnership,
(B) The taxable year to which the election relates,
(C) A copy of the FPA to which the election relates,
(D) In the case of an FPA that includes more than one imputed underpayment, identification of the imputed underpayment(s) to which the election applies,
(E) Each reviewed year partner's name, address, and TIN, and
(F) Any other information prescribed by the IRS in forms, instructions, and other guidance.
(d)
(e)
(f)
(2)
(a)
(b)
(i) The expiration of the time to file a petition under section 6234, or
(ii) If a petition under section 6234 is filed, the date when the court's decision becomes final.
(2)
(3)
During Partnership's 2020 taxable year, A, an individual, was a partner in Partnership and had an address at 123 Main St. On February 1, 2021, A sells his interest in Partnership and informs Partnership that A moved to 456 Broad St. On March 15, 2021, Partnership mails A's statement under section 6031(b) for the 2020 taxable year to 456 Broad St. On June 1, 2023, A moves again but does not inform Partnership of A's new address. In 2023, the IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year and mails a notice of final partnership adjustment (FPA) to Partnership for that year setting forth a single imputed underpayment. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment and on May 31, 2024, timely mails a statement described in paragraph (a) of this section to A at 456 Broad St. Although the statement was mailed to the last address for A that was known to Partnership, it is returned to Partnership as undeliverable
The facts are the same as in
Partnership is a calendar year taxpayer. The IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year. On January 1, 2024, the IRS mails an FPA with respect to the 2020 taxable year to Partnership setting forth a single imputed underpayment. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment. Partnership timely files a petition for readjustment under section 6234 with the Tax Court. The IRS prevails, and the Tax Court sustains all of the adjustments in the FPA with respect to the 2020 taxable year. The time to appeal the Tax Court decision expires, and the Tax Court decision becomes final on April 10, 2025. Under paragraph (b)(1)(ii) of this section, the adjustments in the FPA are finally determined on April 10, 2025, and Partnership must furnish the statements described in paragraph (a) of this section to its reviewed year partners and electronically file the statements with the IRS no later than June 9, 2025. See paragraph (c) of this section for the rules regarding filing the statements with the IRS.
(c)
(d)
(2)
(ii)
(3)
(4)
(e)
(1) The name and TIN of the reviewed year partner to whom the statement is being furnished;
(2) The current or last address of the reviewed year partner that is known to the partnership;
(3) The reviewed year partner's share of items as originally reported for the reviewed year to the partner on statements furnished to the partner under section 6031(b) and, if applicable, section 6227;
(4) The reviewed year partner's share of partnership adjustments determined under paragraph (f)(1) of this section;
(5) Modifications approved by the IRS with respect to the reviewed year partner (or with respect to any indirect partner (as defined in § 301.6241-1(a)(4)) that holds its interest in the partnership through its interest in the reviewed year partner);
(6) The applicability of any penalty, addition to tax, or additional amount determined at the partnership level that relates to any adjustments allocable to the reviewed year partner and the adjustments to which the penalty, addition to tax, or additional amount relates, the section of the Internal Revenue Code (Code) under which each penalty, addition to tax, or additional amount is imposed, and the applicable rate of each penalty, addition to tax, or additional amount determined at the partnership level;
(7) The date the statement is furnished to the reviewed year partner;
(8) The partnership taxable year to which the adjustments relate; and
(9) Any other information required by forms, instructions, and other guidance prescribed by the IRS.
(f)
(ii)
(iii)
(2)
(g)
(2)
(3)
(h)
(2)
(a)
(b)
(2)
(ii)
(A) The amount of chapter 1 tax shown by the partner on the return for the first affected year (which includes amounts shown on an amended return for such year, including an amended return filed, or alternative to an amended return submitted, under section 6225(c)(2) by the reviewed year partner), plus
(B) Amounts not so shown previously assessed (or collected without assessment) (as defined in § 1.6664-2(d) of this chapter), less
(C) The amount of rebates made (as defined in § 1.6664-2(e) of this chapter).
(iii)
(3)
(ii)
(A) The amount of chapter 1 tax shown by the partner on the return for the intervening year (which includes amounts shown on an amended return for such year, including an amended return filed, or alternative to an amended return submitted, under section 6225(c)(2) by a reviewed year partner), plus
(B) Amounts not so shown previously assessed (or collected without assessment) (as defined in § 1.6664-2(d) of this chapter), less
(C) The amount of rebates made (as defined in § 1.6664-2(e) of this chapter).
(iii)
(4)
(c)
(2)
(3)
(d)
(2)
(3)
(e)
(2)
(ii)
(3)
(ii)
(iii)
(A) The name and taxpayer identification number (TIN) of the audited partnership;
(B) The adjustment year of the audited partnership;
(C) The extended due date for the return for the adjustment year of the audited partnership (as described in paragraph (e)(3)(ii) of this section);
(D) The date on which the audited partnership furnished its statements required under § 301.6226-2(b);
(E) The name and TIN of the partnership that furnished the statement to the pass-through partner if different from the audited partnership;
(F) The name and TIN of the pass-through partner;
(G) The pass-through partner's taxable year to which the adjustments reflected on the statements described in paragraph (e)(3) of this section relates;
(H) The name and TIN of the affected partner to whom the statement is being furnished;
(I) The current or last address of the affected partner that is known to the pass-through partner;
(J) The affected partner's share of items as originally reported to such partner under section 6031(b) and, if applicable, section 6227, for the taxable year to which the adjustments reflected on the statement furnished to the pass-through partner relate;
(K) The affected partner's share of partnership adjustments determined under § 301.6226-2(f)(1) as if the affected partner were the reviewed year partner and the pass-through partner were the partnership;
(L) Modifications approved by the IRS with respect to the affected partner that holds its interest in the audited partnership through the pass-through partner;
(M) The applicability of any penalties, additions to tax, or additional amounts that relate to any adjustments allocable to the affected partner and the adjustments allocated to the affected partner to which such penalties, additions to tax, or additional amounts relate, the section of the Internal Revenue Code under which each penalty, addition to tax, or additional amount is imposed, and the applicable rate of each penalty, addition to tax, or additional amount; and
(N) Any other information required by forms, instructions, and other guidance prescribed by the IRS.
(iv)
(v)
(4)
(ii)
(iii)
(iv)
(B)
(v)
(vi)
(5)
(ii)
(6)
(f)
(g)
(h)
On its partnership return for the 2020 tax year, Partnership reported ordinary income of $1,000 and charitable contributions of $400. On June 1, 2023, the IRS mails a notice of final partnership adjustment (FPA) to Partnership for Partnership's 2020 year disallowing the charitable contribution in its entirety and determining that a 20 percent accuracy-related penalty under section 6662(b) applies to the disallowance of the charitable contribution, and setting forth a single imputed underpayment with respect to such adjustments. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and files a timely petition in the Tax Court challenging the partnership adjustments. The Tax Court determines that Partnership is not entitled to any of the claimed $400 in charitable contributions and upholds the applicability of the penalty. The decision regarding Partnership's 2020 tax year becomes final on December 15, 2025. Pursuant to § 301.6226-2(b), the partnership adjustments are finally determined on December 15, 2025. On February 2, 2026, Partnership files the statements described under § 301.6226-2 with the IRS and furnishes to partner A, an individual who was a partner in Partnership during 2020, a statement described in § 301.6226-2. A had a 25 percent interest in Partnership during all of 2020 and was allocated 25 percent of all items from Partnership for that year. The statement shows A's share of ordinary income reported on Partnership's return for the reviewed year of $250 and A's share of the charitable contribution reported on Partnership's return for the reviewed year of $100. The statement also shows no adjustment to A's share of ordinary income, but does show an adjustment to A's share of the charitable contribution, a reduction of $100 resulting in $0 charitable contribution allocated to A from Partnership for 2020. In addition, the statement reports that a 20 percent accuracy-related penalty under section 6662(b) applies. A must pay the additional reporting year tax as determined in accordance with paragraph (b) of this section, in addition to A's penalties and interest. A computes his additional reporting year tax as follows. First, A determines the correction amount for the first affected year (the 2020 taxable year) by taking into account A's share of the partnership adjustment (<100> reduction in charitable contribution) for the 2020 taxable year. A determines the amount by which his chapter 1 tax for 2020 would have increased or decreased if the $100 adjustment to the charitable contribution from Partnership were taken into account for that year. There is no adjustment to tax attributes in A's intervening years as a result of the adjustment to the charitable contribution for 2020. Therefore, A's aggregate of the correction amounts is the correction amount for 2020, A's first affected year. In addition to the aggregate of the correction amounts being added to the chapter 1 tax that A owes for 2026, the reporting year, A must calculate a 20 percent accuracy-related penalty on A's underpayment attributable to the $100 adjustment to the charitable contribution, as well as interest on the correction amount for the first affected year and the penalty determined in accordance with paragraph (c) of this section. Interest on the correction amount for the first affected tax year runs from April 15, 2021, the due date of A's 2020 return (the first affected tax year) until A pays this amount. In addition, interest runs on the penalty from April 15, 2021, the due date of A's 2020 return for the first affected year until A pays this amount. On his 2026 income tax return, A must report the additional reporting year tax determined in accordance with paragraph (b) of this section, which is the correction amount for 2020, plus the accuracy-related penalty determined in accordance with paragraph (d) of this section, and interest determined in accordance with paragraph (c) of this section on the correction amount for 2020 and the penalty.
On its partnership return for the 2020 tax year, Partnership reported an ordinary loss of $500. On June 1, 2023, the IRS mails an FPA to Partnership for the 2020 taxable year determining that $300 of the $500 in ordinary loss should be recharacterized as a long-term capital loss. Partnership has no long-term capital gain for its 2020 tax year. The FPA for Partnership's 2020 tax year reflects an adjustment of an increase in ordinary income of $300 (as a result of the disallowance of the recharacterization of $300 from ordinary loss to long-term capital loss) and an imputed underpayment related to that adjustment, as well as an adjustment of an additional $300 in long-term capital loss for 2020 which does not result in an imputed underpayment under § 301.6225-1(f). Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA and does not file a petition for readjustment under section 6234. Accordingly, under § 301.6226-1(b)(2) and § 301.6225-3(b)(6), the adjustment year partners (as defined in § 301.6241-1(a)(2)) do not take into account the $300 long-term capital loss that does not result in an imputed underpayment. Rather, the $300 long-term capital loss is taken into account by the reviewed year partners. The time to file a petition expires on August 30, 2023. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on August 31, 2023. On September 30, 2023, Partnership files with the IRS statements described in § 301.6226-2 and furnishes statements to all of its reviewed year partners in accordance with § 301.6226-2. One partner of Partnership in 2020, B (an individual), had a 25 percent interest in Partnership during all of 2020 and was allocated 25 percent of all items from Partnership for that year. The statement filed with the IRS and furnished to B shows B's allocable share of the ordinary loss reported on Partnership's return for the 2020 taxable year as $125. The statement also shows an adjustment to B's allocable share of the ordinary loss in the amount of <$75>, resulting in a corrected ordinary loss allocated to B of $50 for taxable year 2020 ($125 originally allocated to B less $75 which is B's share of the adjustment to the ordinary loss). In addition, the statement shows an increase to B's share of long-term capital loss in the amount of $75 (B's share of the adjustment that did not result in the imputed underpayment with respect to Partnership). B must pay the additional reporting year tax as determined in accordance with paragraph (b) of this section. B computes his additional reporting year tax as follows. First, B determines the correction amount for the first affected year (the 2020 taxable year) by taking into account B's share of the partnership adjustments (a $75 reduction in ordinary loss and an increase of $75 in long-term capital loss) for the 2020 taxable year. B determines the amount by which his chapter 1 tax for 2020 would have increased or decreased if the $75 adjustment to ordinary loss and the $75 adjustment to long-term capital loss from Partnership were taken into account for that year. Second, B determines if there is any increase or decrease in chapter 1 tax for any intervening year as a result of the adjustment to the ordinary and capital losses for 2020. B's aggregate of the correction amounts is the correction amount for 2020, B's first affected year plus any correction amounts for any intervening years. B is also liable for any interest on the correction amount for the first affected year and for any intervening year as determined in accordance with paragraph (c) of this section.
On its partnership return for the 2020 tax year, Partnership, a domestic partnership, reported U.S. source dividend income of $2,000. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's
On its partnership return for the 2020 tax year, Partnership reported ordinary income of $100 and a long-term capital gain of $40. Partnership had four equal partners during the 2020 tax year: E, F, G, and H, all of whom were individuals. On its partnership return for the 2020 tax year, the entire long-term capital gain was allocated to partner E and the ordinary income was allocated to all partners based on their equal (25 percent) interest in Partnership. The IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year and determines that the long-term capital gain should have been allocated equally to all four partners and that Partnership should have recognized an additional $10 in ordinary income. On June 1, 2023, the IRS mails an FPA to Partnership reflecting the reallocation of the $40 long-term capital gain so that F, G, and H each have $10 increase in long-term capital gain and E has a $30 reduction in long-term capital gain for 2020. In addition, the FPA reflects the partnership adjustment increasing ordinary income by $10. The FPA reflects a general imputed underpayment with respect to the increase in ordinary income and a specific imputed underpayment with respect to the increase in long-term capital gain allocated to F, G, and H. In addition, the FPA reflects a $30 partnership adjustment that does not result in an imputed underpayment, that is, the reduction of $30 in long-term capital gain with respect to E that is associated with the specific imputed underpayment in accordance with § 301.6225-1(g)(2)(iii)(B). Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the specific imputed underpayment relating to the reallocation of long-term capital gain. Partnership does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on August 31, 2023. Partnership timely pays and reports the general imputed underpayment relating to the partnership adjustment to ordinary income. On September 30, 2023, Partnership files with the IRS statements described in § 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA that relate to the specific imputed underpayment, that is, the reallocation of long-term capital gain. The statements for F, G, and H each reflect a partnership adjustment of an additional $10 of long-term capital gain for 2020. The statement for E reflects a partnership adjustment of a reduction of $30 of long-term capital gain for 2020. All partners must report the additional reporting year tax as determined in accordance with paragraph (b) of this section in the partners' reporting year, which is 2023. They compute their additional reporting year tax as follows. First, they determine the correction amount for the first affected year (the 2020 taxable year) by taking into account their share of the partnership adjustments for the 2020 taxable year. They each determine the amount by which their chapter 1 tax for 2020 would have increased or decreased if the adjustment to long-term capital gain from Partnership were taken into account for that year. Second, they determine if there is any increase or decrease in chapter 1 tax for any intervening year as a result of the adjustment to the long-term capital gain for 2020. Their aggregate of the correction amounts is the sum of the correction amount for 2020, their first affected year and any correction amounts for any intervening years. They are also liable for any interest on the correction amount for the first affected year and for any intervening year as determined in accordance with paragraph (c) of this section.
On its partnership return for the 2020 taxable year, Partnership reported a long-term capital loss of $500. During an administrative proceeding with respect to Partnership's 2020 taxable year, the IRS mails a notice of proposed partnership adjustment (NOPPA) in which it proposes to disallow $200 of the reported $500 long-term capital loss, the only adjustment. Accordingly, the imputed underpayment reflected in the NOPPA is $80 ($200 × 40 percent). F, a C corporation partner with a 50 percent interest in Partnership, received 50 percent of all long-term capital losses for 2020. As part of the modification process described in § 301.6225-2(d)(2), F files an amended return for 2020 taking into account F's share of the partnership adjustment ($100 reduction in long-term capital loss) and pays the tax owed for 2020, including interest. Also as part of the modification process, F also files amended returns for 2021 and 2022 and pays additional tax (and interest) for these years because the reduction in long-term capital loss for 2020 affected the tax due from F for 2021 and 2022. See § 301.6225-2(d)(2). The reduction of the long-term capital loss in 2020 did not affect any other taxable year of F. This is the only modification requested. The IRS approves the modification with respect to F and on June 1, 2023, mails an FPA to Partnership for Partnership's 2020 year reflecting the partnership adjustment reducing the long-term capital loss in the amount of $200. The FPA also reflects the modification to the imputed underpayment based on the amended returns filed by F taking into account F's share of the reduction in the long-term capital loss. Therefore, the imputed underpayment in the FPA is $40 ($100 × 40 percent). Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and files a timely petition in the Tax Court challenging the partnership adjustments. The Tax Court upholds the determinations in the FPA and the decision regarding Partnership's 2020 tax year becomes final on December 15, 2025. Pursuant to § 301.6226-2(b), the partnership adjustments are finally determined on December 15, 2025. On February 1, 2026, Partnership files the statements described under § 301.6226-2 with the IRS and furnishes to its partners statements reflecting their shares of the partnership adjustment. The statement issued to F reflects F's share of the partnership adjustment for Partnership's 2020 taxable year as finally determined by the Tax Court. The statement shows F's share of the long-term capital loss adjustment for the reviewed year of $100, as well as the $100 long-term capital loss taken into account by F as part of the amended return modification. Accordingly, in accordance with paragraph (b) of this section, when F computes its correction amounts for the first affected year (the 2020 taxable year) and the intervening years (the 2021 through 2026 taxable years), F computes any increase
Partnership has two equal partners for the 2020 tax year: I (an individual) and J (a partnership). For the 2020 tax year, J has two equal partners—K and L—both individuals. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's 2020 year increasing Partnership's ordinary income by $500,000 and asserting an imputed underpayment of $200,000. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on August 31, 2023. Therefore, Partnership's adjustment year is 2023, the due date of the adjustment year return is March 15, 2024 and the extended due date for the adjustment year return is September 16, 2024. On October 12, 2023, Partnership timely files with the IRS statements described in § 301.6226-2 and timely furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to I and J each reflect a partnership adjustment of $250,000 of ordinary income. I takes its share of the adjustments reflected on the statements furnished by Partnership into account on I's return for the 2023 tax year in accordance with paragraph (b) of this section. On April 1, 2024, J files the adjustment tracking report and files and furnishes statements to K and L reflecting each partner's share of the adjustments reflected on the statements Partnership furnished to J. K and L must take their share of adjustments reflected on the statements furnished by J into account on their returns for the 2023 tax year in accordance with paragraph (b) of this section by treating themselves as reviewed year partners for purposes of that paragraph.
On its partnership return for the 2020 tax year, Partnership reported that it placed Asset, which had a depreciable basis of $210,000, into service in 2020 and depreciated Asset over 5 years, using the straight-line method. Accordingly, Partnership claimed depreciation of $42,000 in each year related to Asset. Partnership has two equal partners for the 2020 tax year: M (a partnership) and N (an S corporation). For the 2020 tax year, N has one shareholder, O, who is an individual. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's 2020 year. In the FPA, the IRS determines that Asset should have been depreciated over 7 years instead of 5 years and adjusts the depreciation for the 2020 tax year to $30,000 instead of $42,000 resulting in a $12,000 adjustment. This adjustment results in an imputed underpayment of $4,800 ($12,000 × 40 percent). Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on August 31, 2023. On October 12, 2023, Partnership timely files with the IRS statements described in § 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to M and N reflect a partnership adjustment of $6,000 of ordinary income for the 2020 tax year. On February 1, 2024, N takes the adjustments into account under paragraph (e)(3) of this section by filing an adjustment tracking reporting and issuing a statement to O reflecting her share of the adjustments reported to N on the statement it received from Partnership. M does not furnish statements and instead chooses to calculate and pay an imputed underpayment under paragraph (e)(4) of this section equal to $1,200 ($6,000 × 40 percent) on the adjustments reflected on the statement it received from Partnership plus interest on the amount calculated in accordance with paragraph (e)(4)(iv)(B) of this section. On her 2023 return, O properly takes the adjustments into account under this section. Therefore, O reports and pays the additional reporting year tax determined in accordance with paragraph (b) of this section, which is the correction amount for 2020 plus any correction amounts for 2021 and 2022 (if the adjustments in 2020 resulted in any changes to the tax attributes of O in those years), and pays interest determined in accordance with paragraph (c) of this section on the correction amounts for each of those years.
On its partnership return for the 2020 tax year, Partnership reported $1,000 of ordinary loss. Partnership has two equal partners for the 2020 tax year: P and Q, both S corporations. For the 2020 tax year, P had one shareholder, R, an individual. For the 2020 tax year, Q had two shareholders, S and T, both individuals. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's 2020 year determining $500 of the $1,000 of ordinary loss should be recharacterized as $500 of long-term capital loss and $500 of the ordinary loss should be disallowed. The FPA asserts an imputed underpayment of $400 ($1,000 × 40 percent) with respect to the $1,000 reduction to ordinary loss and reflecting an adjustment that does not result in an imputed underpayment of a $500 capital loss. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on August 31, 2023. On October 12, 2023, Partnership timely files with the IRS statements described in § 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to P and Q each reflect a partnership adjustment of a $500 increase in ordinary income and a $250 increase in capital loss in accordance with § 301.6225-3(b)(6). P takes the adjustments into account under paragraph (e)(3) of this section by timely filing an adjustment tracking reporting and furnishing a statement to R. Q timely filed an adjustment tracking report but chooses not to furnish statements and instead must calculate and pay an imputed underpayment under paragraph (e)(4) of this section as well as interest on the imputed underpayment determined under paragraph (e)(4)(iv)(B) of this section on the imputed underpayment. After applying the rules set forth in § 301.6225-1, Q calculates the imputed underpayment that it is required to pay of $200 ($500 adjustment to ordinary income × 40 percent). Q also has one adjustment that does not result in an imputed underpayment—the $250 increase to capital loss. On its 2023 return, Q reports and allocates the $250 capital loss to its shareholders for its 2023 taxable year as a capital loss as provided in § 301.6225-3. Q must file the adjustment tracking report and pay the amounts due under paragraph (e)(4) of this section no later than September 15, 2024, the extended due date of Partnership's return for the 2023 year, which is the adjustment year.
On its partnership return for the 2020 tax year, Partnership reported a $1,000 long-term capital gain on the sale of Stock. Partnership has two equal partners for the 2020 tax year: U (an individual) and V (a partnership). For the 2020 tax year, V has two equal partners: W (an individual) and X (a partnership). For the 2020 tax year, X has two equal partners: Y and Z, both of which are C corporations. On June 1, 2023, the IRS mails a NOPPA to Partnership for Partnership's 2020 year proposing a $500 increase in the long-term capital gain from the sale of Stock and an imputed underpayment of $200 ($500 × 40 percent). On July 17, 2023, Partnership timely submits a request to modify the rate used in calculating the imputed underpayment under § 301.6225-2(d)(4). Partnership submits sufficient information demonstrating that $375 of the $500 adjustment is allocable to individuals (50 percent of the $500 adjustment allocable to U and 25 percent of the $500 adjustment allocable to W) and the remaining $125 is allocable to C corporations (the indirect partners Y and Z). The IRS approves the modification and the imputed underpayment is reduced to $81.25 (($375 × 15 percent) + ($125 × 20 percent)). See § 301.6225-2(b)(3). No other modifications are requested. On February 28, 2024, the IRS mails an FPA to Partnership for Partnership's 2020 year determining a $500 increase in the long-term capital gain on the sale of Stock and asserting an imputed underpayment of $81.25 after taking into account the approved modifications. Partnership makes a timely election under section 6226 in accordance with § 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on May 28, 2024. Pursuant to § 301.6226-2(b), the partnership adjustments become finally determined on May 29, 2024. On July 26, 2024, Partnership timely files with the IRS
(i)
(2)
(a)
(2)
(3)
(b)
(c)
(i) In 2021, J, K and L form Partnership by each contributing $500 in exchange for partnership interests that share all items of income, gain, loss and deduction in identical shares. Partnership immediately purchases Asset on January 1, 2021 for $1,500, which it depreciates using the straight-line method with a 10-year recovery period beginning in 2021 ($150) so that each partner has a $50 distributive share of the depreciation, resulting in an outside basis of $450 for each partner. Accordingly, at the end of 2022, J, K and L have an outside basis and capital account of $400 each ($500 less $50 of their respective allocable shares of depreciation in 2021 and $50 in 2022).
(ii) The IRS initiates an administrative proceeding with respect to Partnership's 2021 taxable year (reviewed year) and in 2023 (adjustment year) finally determines that Asset should have been depreciated with a 20-year recovery period beginning in 2021, resulting in a $75 partnership adjustment that results in an imputed underpayment. The IRS does not initiate an administrative proceeding with respect to Partnership's 2022 taxable year, and Partnership does not file an administrative adjustment request for that taxable year. Partnership makes an election under § 301.6226-1 with respect to the imputed underpayment. Therefore, J, K and L each are furnished a statement described in § 301.6226-2 by Partnership reflecting the $25 income adjustment for 2021.
(iii) Tax attributes of the partners must be adjusted to reflect the $75 partnership adjustment reflected on the statements described in § 301.6226-2 that is taken into account in equal shares ($25) by J, K, and L with respect to 2021. Specifically, J, K and L's outside bases and capital accounts must be increased $25 each with respect to the 2021 tax year. As a result, J, K and L each have an outside basis and capital account of $425 ($400 plus $25 of income realized with respect to 2021). Asset's basis and book value must also be changed in 2023. Thus, after adjusting tax attributes of the partners to take into account the election under § 301.6226-1 and taking into account other activities of Partnership in 2023, accounts are stated as follows:
(d)
(2)
(a)
(b)
(c)
(2)
(i) The adjustments requested,
(ii) If a reviewed year partner is required to take into account the adjustments requested under § 301.6227-3, statements described in paragraph (e) of this section, including any transmittal with respect to such statements required by forms, instructions, and other guidance prescribed by the IRS, and
(iii) Other information prescribed by the IRS in forms, instructions, or other guidance.
(d)
(e)
(i) The name and TIN of the reviewed year partner to whom the statement is being furnished;
(ii) The current or last address of the partner that is known to the partnership;
(iii) The reviewed year partner's share of items as originally reported on statements furnished to the partner under section 6031(b) and, if applicable, section 6227;
(iv) The reviewed year partner's share of the adjustments as described under paragraph (c)(2) of this section;
(v) The date the statement is furnished to the partner;
(vi) The partnership taxable year to which the adjustments relate; and
(vii) Any other information required by forms, instructions, and other guidance prescribed by the IRS.
(2)
(ii)
(iii)
(f)
(g)
(h)
(i)
(2)
(a)
(2)
(i) The partnership is not required to seek the approval from the Internal Revenue Service (IRS) prior to applying modifications to the amount of any imputed underpayment under paragraph (a)(1) of this section reported on the AAR; and
(ii) As part of the AAR filed with the IRS in accordance with forms, instructions, and other guidance prescribed by the IRS, the partnership must—
(A) Notify the IRS of any modification,
(B) Describe the effect of the modification on the imputed underpayment,
(C) Provide an explanation of the basis for such modification, and
(D) Provide documentation to support the partnership's eligibility for the modification.
(b)
(2)
(3)
(ii)
(c)
(d)
(e)
(2)
(a)
(b)
(2)
In 2022, partner A, an individual, received a statement described in paragraph (a) of this section from Partnership with respect to Partnership's 2020 taxable year. Both A and Partnership are calendar year taxpayers and A is not claiming any refundable tax credit in 2020. The only adjustment shown on the statement is an increase in ordinary loss. Taking into account the adjustment, A determines that his additional reporting year tax for 2022 (the reporting year) is <$100> (that is, a reduction of $100.) A's chapter 1 tax for 2022 (without regard to any additional reporting year tax) is $150. Applying the rules in paragraph (b)(2) of this section, A's chapter 1 tax for 2022 is reduced to $50 ($150 chapter 1 tax without regard to the additional reporting year tax plus <$100> additional reporting year tax).
The facts are the same as in
(c)
(2)
(3)
(i) The name and taxpayer identification number (TIN) of the partnership that filed the AAR with respect to the adjustments reflected on the statements described in paragraph (c)(1) of this section;
(ii) The adjustment year (as defined in § 301.6241-1(a)(1)) of the partnership described in paragraph (c)(3)(i) of this section;
(iii) The extended due date for the return for the adjustment year of the partnership described in paragraph (c)(3)(i) of this section (as described in § 301.6226-3(e)(3)(ii));
(iv) The date on which the partnership described in paragraph (c)(3)(i) of this section furnished its statements required under § 301.6227-2(d);
(v) The name and TIN of the partnership that furnished the statement to the pass-through partner if different from the partnership described in paragraph (c)(3)(i) of this section;
(vi) The name and TIN of the pass-through partner;
(vii) The pass-through partner's taxable year to which the adjustments set forth in the statement described in paragraph (c)(1) of this section relate;
(viii) The name and TIN of the affected partner (as defined in § 301.6226-3(e)(3)(i)) to whom the statement is being furnished;
(ix) The current or last address of the affected partner that is known to the pass-through partner;
(x) The affected partner's share of items as originally reported to such partner under section 6031(b) and, if applicable, section 6227, for the taxable year to which the adjustments reflected on the statement furnished to the pass-through partner relate;
(xi) The affected partner's share of partnership adjustments determined under § 301.6227-1(e)(2) as if the affected partner were the reviewed year partner and the partnership were the pass-through partner;
(xii) Any other information required by forms, instructions, and other guidance prescribed by the IRS.
(4)
(d)
(2)
(a)
(1) Notice of any administrative proceeding initiated at the partnership level with respect to an adjustment of any partnership-related item (as defined in § 301.6241-6) for any partnership taxable year under subchapter C of chapter 63 (notice of administrative proceeding (NAP));
(2) Notice of any proposed partnership adjustment resulting from an administrative proceeding under subchapter C of chapter 63 (notice of proposed partnership adjustment (NOPPA)); and
(3) Notice of any final partnership adjustment resulting from an administrative proceeding under subchapter C of chapter 63 (notice of final partnership adjustment (FPA)).
(b)
(2)
(c)
(d)
(2)
(e)
(f)
(g)
(h)
(2)
(a)
(b)
(c)
(i) The close of the 90th day after the day on which a notice of a final partnership adjustment (FPA) under section 6231(a)(3) was mailed; and
(ii) If a petition for readjustment is filed under section 6234 with respect to such FPA, the decision of the court has become final.
(2)
(d)
(ii)
(B)
(iii)
(2)
(e)
(f)
(2)
(a)
(1) Interest computed in accordance with paragraph (b) of this section; and
(2) Any penalty, addition to tax, or additional amount as provided under paragraph (c) of this section.
(b)
(1) The date prescribed for payment (as described in § 301.6232-1(b));
(2) The due date of the partnership return (without regard to extension) for the adjustment year (as defined in § 301.6241-1(a)(1)); or
(3) The date the imputed underpayment is fully paid.
(c)
(2)
(ii)
(
(
(B)
(
(
(
(
(C)
(D)
(
(
(
(
(
(E)
(F)
(iii)
(B)
(iv)
(v)
(3)
One adjustment with respect to which a penalty is imposed. In an administrative proceeding with respect to Partnership's 2018 partnership return, the IRS determines that Partnership understated ordinary income by $100. The $100 understatement is due to negligence or disregard of rules or regulations under section 6662(c), and a 20-percent accuracy-related penalty applies under section 6662(a). The IRS also determines that Partnership understated long-term capital gain by $300, but no penalty applies with respect to that adjustment. Partnership does not request modification of the imputed underpayment under section 6225 and does not raise any penalty defenses prior to issuance of the notice of final partnership adjustment (FPA). In the FPA, the IRS determines that the imputed underpayment is $160 (($100 + $300) × 40 percent). In determining the penalty, the $100 adjustment (to which the 20-percent penalty relates) is grouped separately from the $300 adjustment (to which no penalty applies). The portion of the imputed underpayment to which the 20-percent penalty applies is $40 ($100 × 40 percent), and the penalty is $8 ($40 × 20 percent).
More than one adjustment with respect to which the same rate of penalty is imposed. The facts are the same as in
Decreasing adjustment. The facts are the same as in
Two adjustments with respect to which penalties of different rates have been imposed. The facts are the same as in
Modification with respect to tax-exempt partner. The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year. Partnership has four equal partners during its 2019 taxable year: two partners are partnerships, A and B; one partner is a tax-exempt entity, C; and the fourth partner is an individual, D. The IRS timely mails a notice of proposed partnership adjustment (NOPPA) to Partnership for its 2019 taxable year proposing a single partnership adjustment increasing Partnership's ordinary income by $400,000. The $400,000 increase in income is due to negligence or disregard of rules or regulations under section 6662(c). A 20-percent accuracy-related penalty under section 6662(a) and (c) applies to the portion of the imputed underpayment attributable to the negligence or disregard of the rules or regulations. In the NOPPA, the IRS determines an imputed underpayment of $160,000 ($400,000 × 40 percent) and that the 20-percent penalty applies to the entire imputed underpayment. The penalty is $32,000 ($160,000 × 20 percent). Partnership requests modification under § 301.6225-2(d)(3) (regarding tax-exempt partners) with respect to the amount of additional income allocated to C, and the IRS approves the request. After modification of the imputed underpayment, the imputed underpayment is $120,000 (($400,000−$100,000) × 40 percent), and the penalty is $24,000 ($120,000 × 20 percent).
Amended return modification. The facts are the same as in
(d)
(2)
(a)
(1) Interest as determined under paragraph (c) of this section; and
(2) Any penalty, addition to tax, or additional amount as determined under paragraph (d) of this section.
(b)
(c)
(d)
(e)
(2)
(a)
(1) The Tax Court;
(2) The district court of the United States for the district in which the partnership's principal place of business is located; or
(3) The Court of Federal Claims.
(b)
(c)
(d)
(e)
(f)
(2)
(a)
(1) Three years after the latest of—
(i) The date on which the partnership return for such taxable year was filed;
(ii) The return due date (as defined in section 6241(3)) for the taxable year; or
(iii) The date on which the partnership filed an administrative adjustment request with respect to such taxable year under section 6227; or
(2) The date described in paragraph (b) of this section with respect to a request for modification; or
(3) The date described in paragraph (c) of this section with respect to a notice of proposed partnership adjustment.
(b)
(2)
(A) The date the period for requesting modification ends (including extensions) as described in § 301.6225-2(c)(3)(i) and (ii); or
(B) The date the period for requesting modification expires as a result of a waiver of the prohibition on mailing a notice of final partnership adjustment (FPA) under § 301.6231-1(b)(2). See § 301.6225-2(c)(3)(iii).
(ii)
(c)
(d)
(e)
Partnership timely files its partnership return for the 2020 taxable year on March 1, 2021. On September 1, 2023, Partnership files an administrative adjustment request (AAR) under section 6227 with respect to its 2020 taxable year. As of September 1, 2023, the IRS has not initiated an administrative proceeding under subchapter C of chapter 63 of the Internal Revenue Code with respect to Partnership's 2020 taxable year. Therefore, as of September 1, 2023, under paragraph (a)(1) of this section, the period for making partnership adjustments with respect to Partnership's 2020 taxable year expires on September 1, 2026.
Partnership timely files its partnership return for the 2020 taxable year on the due date, March 15, 2021. On February 1, 2023, the IRS mails to Partnership and the partnership representative of Partnership (PR) a notice of administrative proceeding under section 6231(a)(1) with respect to Partnership's 2020 taxable year. Assuming no AAR has been filed with respect to Partnership's 2020 taxable year and the IRS has not yet mailed a NOPPA under section 6231(a)(2) with respect to Partnership's 2020 taxable year, the period for making partnership adjustments for Partnership's 2020 taxable year expires on the date determined under paragraph (a)(1) of this section, March 15, 2024.
The facts are the same as in
The facts are the same as in
The facts are the same as in
The facts are the same as in
(f)
(2)
(a)
(1)
(i) In the case of an adjustment pursuant to the decision of a court in a proceeding brought under section 6234, such decision becomes final;
(ii) In the case of an administrative adjustment request (AAR) under section 6227, such AAR is filed; or
(iii) In any other case, a notice of final partnership adjustment is mailed under section 6231 or, if the partnership waives the restrictions under section 6232(b) (regarding limitations on assessment), the waiver is executed by the IRS.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(b)
(2)
(a)
(i) 60 days after the suspension ends, for adjustments or assessments, and
(ii) 6 months after the suspension ends, for collection.
(2)
(3)
(4)
(i) An administrative proceeding with respect to a partnership under subchapter C of chapter 63;
(ii) The mailing of any notice with respect to a proceeding with respect to a partnership under subchapter C of chapter 63, including:
(A) A notice of administrative proceeding,
(B) A notice of proposed partnership adjustment, and
(C) A notice of final partnership adjustment;
(iii) A demand for tax returns;
(iv) The assessment of any tax, including the assessment of any imputed underpayment with respect to a partnership; and
(v) The issuance of notice and demand for payment of an assessment under subchapter C of chapter 63 (but see section 362(b)(9)(D) of Title 11 of the United States Code regarding the timing of when a tax lien takes effect by reason of such assessment).
(b)
(2)
(a)
(2)
(3)
(b)
(2)
(A) A valid election under section 6226 and the regulations thereunder in effect with respect to any imputed underpayment (as defined in § 301.6241-1(a)(3));
(B) Received a statement under section 6226(a)(2) (or § 301.6226-3(e)) and has furnished statements to its partners in accordance with § 301.6226-3(e)(3); or
(C) Not paid any amount required to be paid under subchapter C of chapter 63.
(ii)
(iii)
(c)
(2)
(d)
(ii)
(2)
(e)
(2)
(i) The adjustments are taken into account by the applicable former partner (as described in paragraph (d) of this section), rather than the reviewed year partners (as defined in § 301.6241-1(a)(9)), and
(ii) The partnership must furnish statements to the former partners and file the statements with the IRS no later than 30 days after the date of the notification to the partnership that the IRS has determined that the partnership has ceased to exist.
(3)
(f)
The IRS initiates a proceeding under subchapter C of chapter 63 with respect to the 2020 partnership taxable year of Partnership. During 2023, in accordance with section 6235(b), Partnership extends the period of limitations on adjustments under section 6235(a) until December 31, 2025. On February 1, 2025, the IRS mails Partnership a notice of final partnership adjustment (FPA) that determines partnership adjustments that result in a single imputed underpayment. Partnership does not timely file a petition under section 6234 and does not make a valid election under section 6226. On June 2, 2025, the IRS mails Partnership notice and demand for payment of the amount due resulting from the adjustments determined in the FPA. Partnership fails to make a payment. On September 1, 2029, the IRS determines Partnership ceases to exist for purposes of this section because the IRS has determined that Partnership does not have the ability to pay under paragraph (b)(2)(i) of this section. Under § 301.6241-1(a)(1), the adjustment year is 2025 and A and B, both individuals, are the only adjustment year partners of Partnership during 2025. Accordingly, under paragraph (d)(1) of this section, A and B are former partners. Therefore, A and B are required to take their share of the partnership adjustments determined in the FPA into account under paragraph (e) of this section.
The IRS initiates a proceeding under subchapter C of chapter 63 with respect to the 2020 partnership taxable year of P, a partnership. G, a partnership that has an election under section 6221(b) in effect for the 2020 taxable year, is a partner of P during 2020 and for every year thereafter. On February 3, 2025, the IRS mails P an FPA that determines partnership adjustments that result in a single imputed underpayment. P does not timely file a petition under section 6234 and does not make a timely election under section 6226. On May 6, 2025, the IRS mails P notice and demand for payment of the amount due resulting from the adjustments determined in the FPA. P does not make a payment. On September 1, 2025, the IRS determines P ceases to exist for purposes of this section because the IRS has determined that P does not have the ability to pay under paragraph (b)(2)(i) of this section. G terminated under section 708(b)(1) on December 31, 2024. On September 1, 2025, the IRS determines that G ceased to exist in 2024 for purposes of this section in accordance with paragraph (b)(2)(i) of this section. J and K, individuals, were the only partners of G during 2024. Therefore, under paragraph (d)(1)(ii) of this section, J and K, the partners of G during G's 2024 partnership taxable year, are the former partners of G for purposes of this section. Therefore, J and K are required to take into account their share of the adjustments contained in the statement furnished by P to G in accordance with paragraph (e) of this section.
(g)
(2)
(a)
(b)
(2)
(a)
(b)
(c)
(1) Any taxable year for which an election under section 6221(b) is in effect, treating the return as if it were filed by a partnership for the taxable year to which the election relates, and
(2) Any taxable year for which a partnership return was filed for the sole purpose of making the election described in section 761(a) (regarding election out of subchapter K for certain unincorporated organizations).
(d)
(2)
(a)
(1) Any item or amount with respect to the partnership (as described in paragraph (b) of this section) which is relevant in determining the tax liability of any person under chapter 1 of subtitle A of the Internal Revenue Code (chapter 1) (as described in paragraph (c) of this section), and
(2) Any partner's distributive share of any such item or amount.
(b)
(1) The item or amount is shown or reflected, or required to be shown or reflected, on a return of the partnership under section 6031, the regulations thereunder, or the forms and instructions prescribed by the Internal Revenue Service (IRS) for the partnership's taxable year;
(2) The item or amount is in the partnership's books or records;
(3) The item or amount is an imputed underpayment;
(4) The item or amount relates to a transaction with the partnership by a partner acting in its capacity as a partner or by an indirect partner (as defined in § 301.6241-1(a)(4)) acting its capacity as an indirect partner;
(5) The item or amount relates to a transaction that is described in section 707(a)(2), 707(b), or 707(c);
(6) The item or amount relates to basis in the partnership;
(7) The item or amount relates to a liability of the partnership that is reported or reportable by a partner acting in its capacity as a partner or an indirect partner acting in its capacity as an indirect partner, including such partner or indirect partner's share of the liability; or
(8) Any legal or factual determinations necessary to make an adjustment to an item or amount described in paragraphs (b)(1) through (7) of this section, such as a determination regarding—
(i) The validity of any election made by the partnership,
(ii) The partnership's accounting practices and methods;
(iii) Whether a partnership exists for tax purposes and whether multiple partnerships should be treated as a single partnership;
(iv) Whether any items or transactions of the partnership lack economic substance or should otherwise be disregarded, collapsed, recharacterized, or attributed to other persons;
(v) Whether a partnership terminates under section 708(b)(1) or as a result of a transaction under Rev. Rul. 99-6 (1999-1 C.B. 432) (see § 601.601(d)(2) of this chapter); or
(vi) The type of partnership interest held by any partner.
(c)
(d)
(1) The character, timing, source, and amount of the partnership's income, gain, loss, deductions, and credits;
(2) The character, timing, and source of the partnership's activities;
(3) The character, timing, source, value, and amount of any contributions to, and distributions from, the partnership;
(4) The partnership's basis in its assets, the character and type of the assets, and the value (or revaluation such as under § 1.704-1(b)(2)(iv)(
(5) The amount and character of partnership liabilities and any changes to those liabilities from the preceding tax year;
(6) The category, timing, and amount of the partnership's creditable expenditures;
(7) Any item or amount resulting from a partnership termination;
(8) Any item or amount relating to an election under section 754;
(9) Partnership allocations and any special allocations; and
(10) Whether any person is a partner in the partnership.
(e)
Partnership enters into a transaction with A to purchase widgets for $100 in taxable year 2020. A is not a partner of Partnership or an indirect partner of Partnership. The transaction is not a transaction described in 707(a)(2), 707(b), or 707(c). Partnership pays A $100 for the widgets. Any deduction or expense of the Partnership for the purchase of the widgets is an item or amount that relates to a transaction with Partnership and is relevant to determining the liability of any person under chapter 1 pursuant to paragraph (c) of this section. Therefore, the deduction or expense is a partnership-related item. However, the income to A resulting from the transaction with Partnership is not an item or amount with respect to Partnership under paragraph (b) of this section because although the amount of income relates to a transaction with Partnership, the amount of income is reported or reportable by A, and A is not a partner (direct or indirect) of Partnership. Accordingly, the amount of income reportable by A is not a partnership-related item.
B loans Partnership $100 in Partnership's 2020 taxable year. Partnership makes an interest payment to B in 2020 of $5. B is a partner in Partnership in the 2020 taxable year, but B loaned the $100 to Partnership in a capacity other than B's capacity as a partner. Partnership's liability relating to the loan by B to Partnership and the $5 of interest expense paid by the Partnership are items or amounts that relates to a transaction with or liability of Partnership and are relevant to determining the liability of any person under chapter 1 pursuant to paragraph (c) of this section. However, the treatment of the loan by B and the amount of interest income received by B are not items or amounts with respect to Partnership under paragraph (b) of this section because although they relate to a transaction with or liability of Partnership, the loan and interest income are reportable by B, and B was not acting in his capacity as a partner when he loaned the $100 to Partnership. Accordingly, the loan as treated by B and the amount of interest income to B is not a partnership-related item.
(f)
(2)
(a)
(2)
Partnership, a partnership created or organized in the United States, has two equal partners, A and B. A is a nonresident alien who is a resident of Country A, and B is a U.S. citizen. In 2018, Partnership earned $200 of U.S. source royalty income. Partnership was required to withhold 30 percent of the gross amount of the royalty income allocable to A unless Partnership had documentation that it could rely on to establish that A was entitled to a reduced rate of withholding. See §§ 1.1441-1(b)(1) and 1.1441-5(b)(2)(i)(A) of this chapter. Partnership withheld $15 from the $100 of royalty income allocable to A based on its incorrect belief that A is entitled to a reduced rate of withholding under the U.S.-Country A Income Tax Treaty. In 2020, the IRS determines in an examination of Partnership's Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, that Partnership should have withheld $30 instead of $15 on the $100 of royalty income allocable to A because Partnership failed to obtain documentation from A establishing a valid treaty claim for a reduced rate of withholding. The tax imposed on Partnership for its failure to withhold on that income, however, is not a tax imposed by chapter 1. Rather, it is a tax imposed by chapter 3, which is not a partnership-related item under § 301.6241-6. Therefore, in accordance with section 6221(a), the adjustment to increase Partnership's withholding tax liability by $15 is not determined under subchapter C of chapter 63, and instead must be determined as part of the Form 1042 examination.
Partnership, a partnership created or organized in the United States, has two equal partners, A and B. A is a nonresident alien who is a resident of Country A, and B is a U.S. citizen. In 2018, Partnership earned $100 of U.S. source dividend income. Partnership was required to report the dividend income on its 2018 Form 1065, U.S. Return of Partnership Income, and withhold 30 percent of the gross amount of the dividend income allocable to A unless Partnership had documentation that it could rely on to establish that A was entitled to a reduced rate of withholding. See §§ 1.1441-1(b)(1) and 1.1441-5(b)(2)(i)(A) of this chapter. In 2020, in an examination of Partnership's Form 1042, the IRS determines that Partnership earned but failed to report the $100 of U.S. source dividend income in 2018. The adjustment to increase Partnership's dividend income by $100 is an adjustment to a partnership-related item. The tax imposed on Partnership for its failure to withhold on that income, however, is not a tax imposed by chapter 1; rather, it is a tax imposed by chapter 3. Pursuant to § 301.6221(a)-1(a), only chapter 1 tax attributable to adjustments to partnership-related items is assessed under subchapter C of chapter 63. Therefore, because the tax imposed with respect to the adjustment is a chapter 3 tax, under paragraph (a)(1) of this section, the IRS may determine, assess, and collect chapter 3 tax attributable to an adjustment to a partnership-related item without conducting a proceeding under subchapter C of chapter 63. Accordingly, the IRS may determine the chapter 3 tax in the examination of Partnership's Form 1042 by adjusting Partnership's withholding tax liability by an additional $15 for failing to withhold on the $50 of dividend income allocable to A. However, the IRS must initiate an administrative proceeding under subchapter C of chapter 63 to make any adjustments for purposes of chapter 1 attributable to the income. If the IRS subsequently initiates an administrative proceeding under subchapter C of chapter 63 and makes an adjustment to the same item of income, the portion of the dividend income allocable to A will be disregarded in the calculation of the total netted partnership adjustment to the extent that the chapter 3 tax has been collected with respect to such income. See § 301.6225-1(b)(3).
(b)
(2)
(i)
(ii)
(iii)
(3)
(4)
(ii)
(iii)
(iv)
(c)
(2)
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration |