Medicare: Hospital inpatient prospective payment systems and 2006 FY rates,

 
CONTENT

[Federal Register: August 12, 2005 (Volume 70, Number 155)]

[Rules and Regulations]

[Page 47277-47707]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr12au05-18]

[[Page 47277]]

Part II

Department of Health and Human Services

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 415, et al.

Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates; Final Rule

[[Page 47278]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 415, 419, 422, and 485

[CMS-1500-F]

RIN 0938-AN57

Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates

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

ACTION: Final rule.

SUMMARY: We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital- related costs. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the IPPS that are paid in full or in part on a reasonable cost basis subject to these limits. These changes are applicable to discharges occurring on or after October 1, 2005, with one exception: The changes relating to submittal of hospital wage data by a campus or campuses of a multicampus hospital system (that is, the changes to Sec. 412.230(d)(2) of the regulations) are effective on August 12, 2005.

Among the policy changes that we are making are changes relating to: The classification of cases to the diagnosis-related groups (DRGs); the long-term care (LTC)-DRGs and relative weights; the wage data, including the occupational mix data, used to compute the wage index; rebasing and revision of the hospital market basket; applications for new technologies and medical services add-on payments; policies governing postacute care transfers, payments to hospitals for the direct and indirect costs of graduate medical education, submission of hospital quality data, payment adjustment for low-volume hospitals, changes in the requirements for provider-based facilities; and changes in the requirements for critical access hospitals (CAHs).

DATES: Effective Dates: The provisions of this final rule, except the provisions of Sec. 412.230(d)(2), are effective on October 1, 2005. The provisions of Sec. 412.230(d)(2) are effective on August 12, 2005. This rule is a major rule as defined in 5 U.S.C. 804(2). Pursuant to 5 U.S.C. 801(a)(1)(A), we are submitting a report to Congress on this rule on August 1, 2005.

FOR FURTHER INFORMATION CONTACT:

Marc Hartstein, (410) 786-4548, Operating Prospective Payment, Diagnosis-Related Groups (DRGs), Wage Index, New Medical Services and Technology Add-On Payments, Hospital Geographic Reclassifications, Postacute Care Transfers, and Disproportionate Share Hospital Issues.

Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded Hospitals, Graduate Medical Education, Critical Access Hospitals, and Long-Term Care (LTC)-DRGs, and Provider-Based Facilities Issues.

Steve Heffler, (410) 786-1211, Hospital Market Basket Revision and Rebasing.

Siddhartha Mazumdar, (410) 786-6673, Rural Hospital Community Demonstration Project Issues.

Mary Collins, (410) 786-3189, Critical Access Hospitals (CAHs) Issues.

Debbra Hattery, (410) 786-1855, Quality Data for Annual Payment Update Issues.

Martha Kuespert, (410) 786-4605, Specialty Hospitals Definition Issues.

SUPPLEMENTARY INFORMATION:

Electronic Access

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Acronyms

AAOS American Association of Orthopedic Surgeons ACGME Accreditation Council on Graduate Medical Education AHIMA American Health Information Management Association AHA American Hospital Association AICD Automatic implantable cardioverter defibrillator AMI Acute myocardial infarction AOA American Osteopathic Association ASC Ambulatory Surgical Center ASP Average sales price AWP Average wholesale price BBA Balanced Budget Act of 1997, Pub. L. 105-33 BES Business Expenses Survey BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106-554 BLS Bureau of Labor Statistics CAH Critical access hospital CBSAs Core-Based Statistical Areas CC Complication or comorbidity CIPI Capital Input Price Index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99- 272 CoP Condition of Participation CPI Consumer Price Index CRNA Certified registered nurse anesthetist CRT Cardiac Resynchronization Therapy DRG Diagnosis-related group DSH Disproportionate share hospital ECI Employment Cost Index FDA Food and Drug Administration FIPS Federal Information Processing Standards FQHC Federally qualified health center FTE Full-time equivalent FY Federal fiscal year GAAP Generally accepted accounting principles GAF Geographic adjustment factor HIC Health Insurance Card HIS Health Information System GME Graduate medical education HCRIS Hospital Cost Report Information System HIPC Health Information Policy Council HIPAA Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191 HHA Home health agency HHS Department of Health and Human Services HPSA Health Professions Shortage Area HQA Hospital Quality Alliance ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification ICD-10-PCS International Classification of Diseases, Tenth Edition, Procedure Coding System ICU Intensive Care Unit IHS Indian Health Service IME Indirect medical education IPPS Acute care hospital inpatient prospective payment system IPF Inpatient psychiatric facility IRF Inpatient rehabilitation facility IRP Initial residency period JCAHO Joint Commission on Accreditation of Healthcare Organizations LAMCs Large area metropolitan counties LTC-DRG Long-term care diagnosis-related group LTCH Long-term care hospital MCE Medicare Code Editor MCO Managed care organization MDC Major diagnostic category

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MDH Medicare-dependent small rural hospital MedPAC Medicare Payment Advisory Commission MedPAR Medicare Provider Analysis and Review File MEI Medicare Economic Index MGCRB Medicare Geographic Classification Review Board MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173 MRHFP Medicare Rural Hospital Flexibility Program MSA Metropolitan Statistical Area NAICS North American Industrial Classification System NCD National coverage determination NCHS National Center for Health Statistics NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NICU Neonatal intensive care unit NQF National Quality Forum NTIS National Technical Information Service NVHRI National Voluntary Hospital Reporting Initiative OES Occupational Employment Statistics OIG Office of the Inspector General OMB Executive Office of Management and Budget O.R. Operating room OSCAR Online Survey Certification and Reporting (System) PRM Provider Reimbursement Manual PPI Producer Price Index PMS Performance Measurement System PMSAs Primary Metropolitan Statistical Areas PPS Prospective payment system PRA Per resident amount ProPAC Prospective Payment Assessment Commission PRRB Provider Reimbursement Review Board PS&R Provider Statistical and Reimbursement System QIA Quality Improvement Organizations RHC Rural health clinic RHQDAPU Reporting Hospital Quality Data for Annual Payment Update RNHCI Religious nonmedical health care institution RRC Rural referral center RUCAs Rural-Urban Commuting Area Codes SCH Sole community hospital SDP Single Drug Pricer SIC Standard Industrial Codes SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSA Social Security Administration SSI Supplemental Security Income TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97- 248 UHDDS Uniform Hospital Discharge Data Set

Table of Contents

I. Background

A. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

2. Hospitals and Hospital Units Excluded from the IPPS

a. IRFs

b. LTCH

c. IPFs

3. Critical Access Hospitals (CAHs)

4. Payments for Graduate Medical Education (GME)

B. Summary of Provisions of the FY 2006 IPPS Proposed Rule

1. Changes to the DRG Reclassifications and Recalibrations of Relative Weights

2. Changes to the Hospital Wage Index

3. Revision and Rebasing of the Hospital Market Basket

4. Other Decisions and Changes to the PPS for Inpatient Operating and GME Costs

5. PPS for Capital-Related Costs

6. Changes for Hospitals and Hospital Units Excluded From the IPPS

7. Payment for Blood Clotting Factors for Inpatients With Hemophilia

8. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits

9. Impact Analysis

10. Recommendation of Update Factor for Hospital Inpatient Operating Costs

11. Discussion of Medicare Payment Advisory Commission Recommendations

C. Public Comments Received in Response to the FY 2006 IPPS Proposed Rule II. Changes to DRG Classifications and Relative Weights

A. Background

B. DRG Reclassifications

1. General

2. Yearly Review for Making DRG Changes; Request for Public Comment

3. Pre-MDC: Intestinal Transplantation

4. MDC 1 (Diseases and Disorders of the Nervous System)

a. Strokes

b. Unruptured Cerebral Aneurysms

5. MDC 5 (Diseases and Disorders of the Circulatory System)

a. Severity Adjusted Cardiovascular Procedures

b. Automatic Implantable Cardioverter/Defibrillator

c. Coronary Artery Stents

d. Insertion of Left Atrial Appendage Device

e. External Heart Assist System Implant

f. Carotid Artery Stent

g. Extracorporeal Membrane Oxygenation (ECMO)

6. MDC 6 (Diseases and Disorders of the Digestive System): Artificial Anal Sphincter

7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue)

a. Hip and Knee Replacements

b. Kyphoplasty

c. Multiple Level Spinal Fusion

d. Charite(tm) Spinal Disc Replacement Device

8. MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified Sites)): Severe Sepsis

9. MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders): Drug-Induced Dementia

10. Medicare Code Editor (MCE) Changes

a. Newborn Age Edit

b. Newborn Diagnoses Edit

c. Diagnoses Allowed for ``Males Only'' Edit

d. Tobacco Use Disorder Edit

e. Noncovered Procedure Edit

11. Surgical Hierarchies

12. Refinement of Complications and Comorbidities (CC) List

a. Background

b. Comprehensive Review of the CC List

c. CC Exclusion List for FY 2006

13. Review of Procedure Codes in DRGs 468, 476, and 477

a. Moving Procedure Codes from DRG 468 or DRG 477 to MDCs

b. Reassignment of Procedures among DRGs 468, 476, and 477

c. Adding Diagnosis or Procedure Codes to MDCs

14. Changes to the ICD-9-CM Coding System

15. Other Issues

a. Acute Intermittent Porphyria

b. Prosthetic Cardiac Support Device (Code 37.41)

c. Coronary Intravascular Ultrasound (IVUS) (Procedure Code 00.24)

d. Islet Cell Transplantation

C. Recalibration of DRG Weights

D. LTC-DRG Reclassifications and Relative Weights for LTCHs for FY 2006

1. Background

2. Changes in the LTC-DRG Classifications

a. Background

b. Patient Classifications into DRGs

3. Development of the Proposed FY 2006 LTC-DRG Relative Weights

a. General Overview of Development of the LTC-DRG Relative Weights

b. Data

c. Hospital-Specific Relative Value Methodology

d. Low-Volume LTC-DRGs

4. Steps for Determining the FY 2006 LTC-DRG Relative Weights

5. Other Public Comments Relating to the LTCH PPS Payment Policies

E. Add-On Payments for New Services and Technologies

1. Background

2. FY 2006 Status of Technology Approved for FY 2005 Add-On Payments

3. Reevaluation of FY 2005 Applications That Were Not Approved

4. FY 2006 Applicants for New Technology Add-On Payments III. Changes to the Hospital Wage Index

A. Background

B. Core-Based Statistical Areas for the Hospital Wage Index

C. Occupational Mix Adjustment to FY 2006 Index

1. Development of Data for the Occupational Mix Adjustment

2. Calculation of the Occupational Mix Adjustment Factor and the Occupational Mix Adjusted Wage Index

D. Worksheet S-3 Wage Data for the FY 2006 Wage Index Update

E. Verification of Worksheet S-3 Wage Data

F. Computation of the FY 2006 Unadjusted Wage Index

G. Computation of the FY 2006 Blended Wage Index

H. Revisions to the Wage Index Based on Hospital Redesignation

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1. General

2. Effects of Reclassification

3. Application of Hold Harmless Protection for Certain Urban Hospitals Redesignated as Rural

4. FY 2006 MGCRB Reclassifications

5. FY 2006 Redesignations under Section 1886(d)(8)(B) of the Act

6. Reclassifications under Section 508 of Pub. L. 108-173

I. FY 2006 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees

J. Requests for Wage Index Data Corrections IV. Rebasing and Revision of the Hospital Market Baskets

A. Background

B. Rebasing and Revising the Hospital Market Basket

1. Development of Cost Categories and Weights

2. PPS--Selection of Price Proxies

3. Labor-Related Share

C. Separate Market Basket for Hospitals and Hospital Units Excluded from the IPPS

1. Hospitals Paid Based on Their Reasonable Costs

2. Excluded Hospitals Paid Under Blend Methodology

3. Development of Cost Categories and Weights for the 2002-Based Excluded Hospital Market Basket

D. Frequency of Updates of Weights in IPPS Hospital Market Basket

E. Capital Input Price Index Section V. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs

A. Postacute Care Transfer Payment Policy

1. Background

2. Changes to DRGs Subject to the Postacute Care Transfer Policy

B. Reporting of Hospital Quality Data for Annual Hospital Payment Update

1. Background

2. Requirements for Hospital Reporting of Quality Data

C. Sole Community Hospitals and Medicare Dependent Hospitals

1. Background

2. Budget Neutrality Adjustment to Hospital Payments Based on Hospital-Specific Rate

3. Technical Change

D. Rural Referral Centers

1. Case-Mix Index

2. Discharges

3. Technical Change

E. Payment Adjustment for Low-Volume Hospitals

F. Indirect Medical Education (IME) Adjustment

1. Background

2. IME Adjustment for IPPS-Excluded Hospitals Converting to IPPS Hospitals

3. Section 1886(d)(3)(E) Teaching Hospitals That Withdraw Rural Reclassification

G. Payment to Disproportionate Share Hospitals (DSHs)

1. Background

2. Implementation of Section 951 of Pub. L. 108-173

3. Calculation of the Medicare Fraction

4. Calculation of the Medicaid Fraction

H. Geographic Reclassifications

1. Background

2. Multicampus Hospitals

3. Urban Group Hospital Reclassifications

4. Clarification of Goldsmith Modification Criterion for Urban Hospitals Seeking Reclassification as Rural

I. Payment for Direct Graduate Medical Education

1. Background

2. Direct GME Initial Residency Period

a. Background

b. Direct GME Initial Residency Period Limitation: Simultaneous Match

3. New Teaching Hospitals' Participation in Medicare GME Affiliated Groups

4. GME FTE Cap Adjustments for Rural Hospitals

5. Technical Changes: Cross-References

J. Provider-Based Status of Facilities under Medicare

1. Background

2. Limits on Scope of Provider-Based Regulations--Facilities for Which Provider-Based Determinations Will Not Be Made

3. Location Requirement for Off-Campus Facilities: Application to Certain Neonatal Intensive Care Units

4. Technical and Clarifying Changes

K. Rural Community Hospital Demonstration Program

L. Definition of a Hospital in Connection with Specialty Hospitals VI. PPS for Capital-Related Costs VII. Changes for Hospitals and Hospital Units Excluded From the IPPS

A. Payments to Excluded Hospitals and Hospital Units

1. Payments to Existing Excluded Hospitals and Hospital Units

2. Updated Caps for New Excluded Hospitals and Units

3. Implementation of a PPS for IRFs

4. Implementation of a PPS for LTCHs

5. Implementation of a PPS for IPFs

6. Report of Adjustment (Exception) Payments

B. Critical Access Hospitals (CAHs)

1. Background

2. Policy Change Relating to Continued Participation by CAHs in Lugar Counties

3. Policy Change Relating to Designation of CAHs as Necessary Providers

a. Determination of the Relocation Status of a CAH

b. Relocation of a CAH Using a Waiver To Meet the CoP for Distance VIII. Payment for Blood Clotting Factor Administered to Hemophilia Inpatients IX. MedPAC Recommendations

A. Medicare Payment Policy

1. Update Factor

2. Quality Incentive Payment Policy

3. Refinement of DRGs Based on Severity of Illness

4. APR-DRGs

5. DRG Relative Weights

6. High-Cost Outliers

B. Other MedPAC Recommendations X. Other Required Information

A. Requests for Data From the Public

B. Collection of Information Requirements

Regulation Text

Addendum--Schedule of Standardized Amounts Effective with Discharges Occurring On or After October 1, 2005 and Update Factors and Rate-of- Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 2005

I. Summary and Background II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for FY 2006

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

2. Computing the Average Standardized Amount

3. Updating the Average Standardized Amount

4. Other Adjustments to the Average Standardized Amount

a. Recalibration of DRG Weights and Updated Wage Index--Budget Neutrality Adjustment

b. Reclassified Hospitals--Budget Neutrality Adjustment

c. Outliers

d. Rural Community Hospital Demonstration Program Adjustment (Section 410A of Pub. L. 108-173)

5. FY 2006 Standardized Amount

B. Adjustments for Area Wage Levels and Cost-of-Living

1. Adjustment for Area Wage Levels

2. Adjustment for Cost-of-Living in Alaska and Hawaii

C. DRG Relative Weights

D. Calculation of Prospective Payment Rates for FY 2006

1. Federal Rate

2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)

a. Calculation of Hospital-Specific Rate

b. Updating the FY 1982, FY 1987, and FY 1996 Hospital-Specific Rates for FY 2006

3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2005 and Before October 1, 2006

a. Puerto Rico Rate

b. National Rate III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2006

A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update

1. Capital Standard Federal Rate Update

a. Description of the Update Framework

b. Comparison of CMS and MedPAC Update Recommendation

2. Outlier Payment Adjustment Factor

3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the Geographic Adjustment Factor

4. Exceptions Payment Adjustment Factor

5. Capital Standard Federal Rate for FY 2006

6. Special Capital Rate for Puerto Rico Hospitals

B. Calculation of Inpatient Capital-Related Prospective Payments for FY 2006

C. Capital Input Price Index

1. Background

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2. Forecast of the CIPI for FY 2006 IV. Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages

A. Payments to Existing Excluded Hospitals and Units

B. Updated Caps for New Excluded Hospitals and Units V. Payment for Blood Clotting Factor Administered to Hemophilia Inpatients

Tables

Table 1A--National Adjusted Operating Standardized Amounts, Labor/ Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index Is Greater Than 1) Table 1B--National Adjusted Operating Standardized Amounts, Labor/ Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Is Less Than or Equal to 1) Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D--Capital Standard Federal Payment Rate Table 2--Hospital Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2004; Hospital Wage Indexes for Federal Fiscal Year 2006; Hospital Average Hourly Wage for Federal Fiscal Years 2004 (2000 Wage Data), 2005 (2001 Wage Data), and 2006 (2002 Wage Data); Wage Indexes and 3-Year Average of Hospital Average Hourly Wages Table 3A--FY 2006 and 3-Year Average Hourly Wage for Urban Areas by CBSA Table 3B--FY 2006 and 3-Year Average Hourly Wage for Rural Areas by CBSA Table 4A--Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas by CBSA Table 4B--Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas by CBSA Table 4C--Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified by CBSA Table 4F--Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) by CBSA Table 4J--Out-Migration Wage Adjustment--FY 2006 Table 5--List of Diagnosis-Related Groups (DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay (LOS) 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--Additions to the CC Exclusions List Table 6H--Deletions from the CC Exclusions List Table 7A--Medicare Prospective Payment System Selected Percentile Lengths of Stay [FY 2004 MedPAR Update March 2005 GROUPER V22.0] Table 7B--Medicare Prospective Payment System Selected Percentile Lengths of Stay: [FY 2004 MedPAR Update March 2005 GROUPER V23.0] Table 8A--Statewide Average Operating Cost-to-Charge Ratios-July 2005 Table 8B--Statewide Average Capital Cost-to-Charge Ratios-July 2005 Table 9A--Hospital Reclassifications and Redesignations by Individual Hospital and CBSA--FY 2006 Table 9B--Hospital Reclassifications and Redesignation by Individual Hospital Under Section 508 of Pub. L. 108-173--FY 2006 Table 9C--Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act--FY 2006 Table 10--Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Diagnosis-Related Groups (DRGs)--July 2005 Table 11--FY 2006 LTC-DRGs, Relative Weights, Geometric Average Length of Stay, and 5/6ths of the Geometric Average Length of Stay Appendix A--Regulatory Impact Analysis Appendix B--Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services

I. Background

A. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system (PPS). 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; and 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 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 patient. For qualifying hospitals, the amount of this adjustment may vary based on the outcome of the statutory calculations.

If the hospital is an approved teaching hospital, 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 outlier payment due 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 the higher of a hospital-specific rate based on their costs in a base year (the higher of FY 1982, FY 1987, or FY 1996) or the IPPS rate based on the standardized amount. For example, sole community hospitals (SCHs) are the sole source of care in their areas, and Medicare- dependent, small rural hospitals (MDHs) are a major source of care for Medicare beneficiaries in their areas. Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. (An MDH receives only 50 percent of the difference between the IPPS rate and its hospital- specific rates if the hospital-specific rate is higher than the IPPS rate. In addition, an MDH does not have the option of using FY 1996 as the base year for its hospital-specific rate.)

Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ``in accordance with a prospective payment system established by the Secretary.'' The basic methodology for determining

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capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital PPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Similar adjustments are also made for IME and DSH as under the operating IPPS. In addition, hospitals may receive an outlier payment for those cases that have unusually high costs.

The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR Part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS

Under section 1886(d)(1)(B) of the Act, as amended, certain specialty hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Psychiatric hospitals and units; rehabilitation hospitals and units; long-term care hospitals (LTCHs); children's hospitals; and cancer hospitals. Various sections of the Balanced Budget Act of 1997 (Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106- 554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)), and LTCHs, as discussed below. Children's hospitals and cancer hospitals continue to be paid under reasonable cost-based reimbursement.

The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413. a. IRFs

Under section 1886(j) of the Act, as amended, rehabilitation hospitals and units (IRFs) have been transitioned from payment based on a blend of reasonable cost reimbursement subject to a hospital-specific annual limit under section 1886(b) of the Act and the adjusted facility Federal prospective payment rate for cost reporting periods beginning on or after January 1, 2002 through September 30, 2002, to payment at 100 percent of the Federal rate effective for cost reporting periods beginning on or after October 1, 2002 (66 FR 41316, August 7, 2001; 67 FR 49982, August 1, 2002; 68 FR 45674, August 1, 2003, and 69 FR 45721, July 30, 2004). The existing regulations governing payments under the IRF PPS are located in 42 CFR part 412, subpart P. b. LTCHs

Under the authority of sections 123(a) and (c) of Pub. L. 106-113 and section 307(b)(1) of Pub. L. 106-554, LTCHs are being transitioned from being paid for inpatient hospital services based on a blend of reasonable cost-based reimbursement under section 1886(b) of the Act to 100 percent of the Federal rate during a 5-year period, beginning with cost reporting periods that start on or after October 1, 2002. For cost reporting periods beginning on or after October 1, 2006, LTCHs will be paid 100 percent of the Federal rate (LTCH PPS final rule (70 FR 24168)). LTCHs not meeting the definition in Sec. 412.23(e)(4) of the regulations may elect to be paid based on 100 percent of the Federal rate instead of a blended payment in any year during the 5-year transition period. LTCHs meeting the definition in Sec. 412.23(e)(4) will be paid based on 100 percent of the standard Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. c. IPFs

Under the authority of sections 124(a) and (c) of Pub. L. 106-113, inpatient psychiatric facilities (IPFs) (formerly psychiatric hospitals and psychiatric units of acute care hospitals) are paid under the new IPF PPS. Under the IPF PPS, some IPFs are transitioning from being paid for inpatient hospital services based on a blend of reasonable cost- based payment and a Federal per diem payment rate, effective for cost reporting periods beginning on or after January 1, 2005 (November 15, 2004 IPF PPS final rule (69 FR 66921)). For cost reporting periods beginning on or after January 1, 2008, IPFs will be paid 100 percent of the Federal per diem payment amount. The existing regulations governing payment under the IPF PPS are located in 42 CFR 412, subpart N. 3. Critical Access Hospitals (CAHs)

Under sections 1814, 1820, and 1834(g) of the Act, payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR parts 413 and 415. 4. Payments for Graduate Medical Education (GME)

Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act; the amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR part 413.

B. Summary of the Provisions of the FY 2006 IPPS Proposed Rule

In the FY 2006 IPPS proposed rule (70 FR 23306), we set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs in FY 2006. We also set forth proposed changes relating to payments for GME costs, payments to certain hospitals and units that continue to be excluded from the IPPS and paid on a reasonable cost basis, payments for DSHs, and requirements and payments for CAHs. The changes were proposed to be effective for discharges occurring on or after October 1, 2005, unless otherwise noted.

The following is a summary of the major changes that we proposed and the issues we addressed in the FY 2006 IPPS proposed rule. 1. Changes to the DRG Reclassifications and Recalibrations of Relative Weights

As required by section 1886(d)(4)(C) of the Act, we proposed annual adjustments to the DRG classifications and relative weights. Based on analyses of Medicare claims data, we proposed to establish a number of new DRGs and make changes to the designation of diagnosis and procedure codes under other existing DRGs.

We also presented analysis of FY 2006 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).

We proposed the annual update of the long-term care diagnosis- related group (LTC-DRG) classifications and relative weights for use under the LTCH PPS for FY 2006. 2. Changes to the Hospital Wage Index

We proposed revisions to the wage index and the annual update of the wage data. Specific issues addressed included the following:

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The FY 2006 wage index update, using wage data from cost reporting periods that began during FY 2002.

The occupational mix adjustment to the wage index that we began to apply effective October 1, 2004.

The revisions to the wage index based on hospital redesignations and reclassifications.

The adjustment to the wage index for FY 2006 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

The timetable for reviewing and verifying the wage data that were in effect for the FY 2006 wage index. 3. Revision and Rebasing of the Hospital Market Baskets

We proposed rebasing and revising the hospital operating and capital market baskets to be used in developing the FY 2006 update factor for the operating prospective payment rates and the excluded hospital market basket to be used in developing the FY 2006 update factor for the excluded hospital rate-of-increase limits. We also set forth the data sources used to determine the proposed revised market basket relative weights and choice of price proxies. 4. Other Decisions and Changes to the PPS for Inpatient Operating and GME Costs

In the proposed rule, we discussed a number of provisions of the regulations in 42 CFR parts 412 and 413 and set forth proposed changes concerning the following:

Solicitation of public comments on two options for possible expansion of the current postacute care transfer policy.

The reporting of hospital quality data as a condition for receiving the full annual payment update increase.

Changes in the application of the budget neutrality adjustment to MDHs and SCHs for computing the hospital-specific rate.

Updated national and regional case-mix values and discharges for purposes of determining rural referral center status.

The payment adjustment for low-volume hospitals.

The IME adjustment for TEFRA hospitals that are converting to IPPS hospitals, and IME FTE resident caps for urban hospitals that are granted rural reclassification and then withdraw that rural classification.

Changes to implement section 951 of Pub. L. 108-173 relating to the provision of patient stay days/SSI data maintained by CMS to hospitals for the purpose of determining their DSH percentage.

Changes relating to hospitals' geographic classifications, including multicampus hospitals and urban group hospital reclassifications.

Changes and clarifications relating to GME, including GME initial residency period limitation, new teaching hospitals' participation in Medicare GME affiliated groups, and the GME FTE cap adjustment for rural hospitals;

Solicitation of public comments on possible changes in requirements for provider-based entities relating to the location requirements for certain neonatal intensive care units as off-campus facilities;

Discussion of the second year of implementation of the Rural Community Hospital Demonstration Program; and

Clarification of the definition of a hospital as it relates to ``specialty hospitals'' participating in the Medicare program. 5. PPS for Capital-Related Costs

In the proposed rule, we did not propose any policy changes to the capital-related prospective payment system. For the readers' benefit, we discussed the payment policy requirements for capital-related costs and capital payments to hospitals. 6. Changes for Hospitals and Hospital Units Excluded from the IPPS

In the proposed rule, we discussed the proposed revisions and clarifications concerning excluded hospitals and hospital units, proposed policy changes relating to continued participation by CAHs located in counties redesignated under section 1886(d)(8)(B) of the Act (Lugar counties), and proposed policy changes relating to designation of CAHs as necessary providers. 7. Changes in Payment for Blood Clotting Factor

In the proposed rule, we discussed the proposed change in payment for blood clotting factor administered to inpatients with hemophilia for FY 2006. 8. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits

In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the FY 2006 prospective payment rates for operating costs and capital-related costs. We also established the proposed threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2006 for hospitals and hospital units excluded from the PPS. 9. Impact Analysis

In Appendix A of the proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected hospitals. 10. Recommendation of Update Factor for Hospital Inpatient Operating Costs

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 2006 for the following:

A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs (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 hospitals and hospital units excluded from the IPPS. 11. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, the Medicare Payment Advisory Commission (MedPAC) is required to submit a report to Congress, no later than March 1 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2005 recommendation concerning hospital inpatient payment policies addressed only the update factor for inpatient hospital operating costs and capital-related costs under the IPPS and for hospitals and distinct part hospital units excluded from the IPPS. This recommendation is addressed in Appendix B of the proposed rule. MedPAC issued a second Report to Congress: Physician-Owned Specialty Hospitals, March 2005, which addressed other issues relating to Medicare payments to hospitals for inpatient services. The recommendations on these issues from this second report were addressed in section IX. of the preamble of the proposed rule. For further information relating specifically to the MedPAC March 2005 reports or to obtain a copy of the reports, contact MedPAC at (202) 220-3700 or visit MedPAC's Web site at: http://www.medpac.gov .

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C. Public Comments Received in Response to the FY 2006 IPPS Proposed Rule

We received over 2,000 timely items of correspondence containing multiple comments on the FY 2006 IPPS proposed rule. Summaries of the public comments and our responses to those comments are set forth below under the appropriate heading.

II. Changes to DRG Classifications and Relative Weights

A. Background

Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as DRGs) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, we pay 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.

Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. The changes to the DRG classification system and the recalibration of the DRG weights for discharges occurring on or after October 1, 2005, are discussed below. 1. General

Cases are classified into DRGs for payment under the IPPS based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay. In a small number of DRGs, classification is also based on the age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM).

The process of forming the DRGs was begun by dividing all possible principal diagnoses into mutually exclusive principal diagnosis areas referred to as Major Diagnostic Categories (MDCs). The MDCs were formed by physician panels as the first step toward ensuring that the DRGs would be clinically coherent. The diagnoses in each MDC correspond to a single organ system or etiology and, in general, are associated with a particular medical specialty. Thus, in order to maintain the requirement of clinical coherence, no final DRG could contain patients in different MDCs. Most MDCs are based on a particular organ system of the body. For example, MDC 6 is Diseases and Disorders of the Digestive System. This approach is used because clinical care is generally organized in accordance with the organ system affected. However, some MDCs are not constructed on this basis because they involve multiple organ systems (for example, MDC 22 (Burns)). For FY 2005, cases are assigned to one of 520 DRGs in 25 MDCs. (We note that, in the FY 2006 proposed rule (70 FR 23313), we inadvertently stated that there were 519 DRGs.) The table below lists the 25 MDCs.

Major Diagnostic Categories (MDCs)

1 Diseases and Disorders of the Nervous System. 2 Diseases and Disorders of the Eye. 3 Diseases and Disorders of the Ear, Nose, Mouth, and Throat. 4 Diseases and Disorders of the Respiratory System. 5 Diseases and Disorders of the Circulatory System. 6 Diseases and Disorders of the Digestive System. 7 Diseases and Disorders of the Hepatobiliary System and Pancreas. 8 Diseases and Disorders of the Musculoskeletal System and Connective Tissue. 9 Diseases and Disorders of the Skin, Subcutaneous Tissue, and Breast. 10 Endocrine, Nutritional and Metabolic Diseases and Disorders. 11 Diseases and Disorders of the Kidney and Urinary Tract. 12 Diseases and Disorders of the Male Reproductive System. 13 Diseases and Disorders of the Female Reproductive System. 14 Pregnancy, Childbirth, and the Puerperium. 15 Newborns and Other Neonates with Conditions Originating in the Perinatal Period. 16 Diseases and Disorders of the Blood and Blood Forming Organs and Immunological Disorders. 17 Myeloproliferative Diseases and Disorders and Poorly Differentiated Neoplasms. 18 Infectious and Parasitic Diseases (Systemic or Unspecified Sites). 19 Mental Diseases and Disorders. 20 Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders. 21 Injuries, Poisonings, and Toxic Effects of Drugs. 22 Burns. 23 Factors Influencing Health Status and Other Contacts with Health Services. 24 Multiple Significant Trauma. 25 Human Immunodeficiency Virus Infections.

In general, cases are assigned to an MDC based on the patient's principal diagnosis before assignment to a DRG. However, for FY 2005, there are nine DRGs to which cases are directly assigned on the basis of ICD-9-CM procedure codes. These DRGs are for heart transplant or implant of heart assist systems, liver and/or intestinal transplants, bone marrow, lung, simultaneous pancreas/kidney, and pancreas transplants and for tracheostomies. Cases are assigned to these DRGs before they are classified to an MDC. The table below lists the current nine pre-MDCs.

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Pre-Major Diagnostic Categories (Pre-MDCs)

DRG 103.............................. Heart Transplant or Implant of Heart Assist System DRG 480.............................. Liver Transplant and/or Intestinal Transplant DRG 481.............................. Bone Marrow Transplant DRG 482.............................. Tracheostomy for Face, Mouth, and Neck Diagnoses DRG 495.............................. Lung Transplant DRG 512.............................. Simultaneous Pancreas/Kidney Transplant DRG 513.............................. Pancreas Transplant DRG 541.............................. Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis with Major Operating Room Procedures DRG 542.............................. Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis Without Major Operating Room Procedures

Once the MDCs were defined, each MDC was evaluated to identify those additional patient characteristics that would have a consistent effect on the consumption of hospital resources. Since the presence of a surgical procedure that required the use of the operating room would have a significant effect on the type of hospital resources used by a patient, most MDCs were initially divided into surgical DRGs and medical DRGs. Surgical DRGs are based on a hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. Medical DRGs generally are differentiated on the basis of diagnosis and age (less than or greater than 17 years of age). Some surgical and medical DRGs are further differentiated based on the presence or absence of a complication or a comorbidity (CC).

Generally, nonsurgical procedures and minor surgical procedures that are not usually performed in an operating room are not treated as O.R. procedures. However, there are a few non-O.R. procedures that do affect DRG assignment for certain principal diagnoses, for example, extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones.

Once the medical and surgical classes for an MDC were formed, each class of patients was evaluated to determine if complications, comorbidities, or the patient's age would consistently affect the consumption of hospital resources. Physician panels 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 which, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least one day in at least 75 percent of the patients. Each medical and surgical class within an MDC was tested to determine if the presence of any substantial comorbidities or complications would consistently affect the consumption of hospital resources.

A patient's diagnosis, procedure, discharge status, and demographic information is fed into the Medicare claims processing systems and subjected to a series of automated screens called the Medicare Code Editor (MCE). The MCE screens are designed to identify cases that require further review before classification into a DRG.

After patient information is screened through the MCE and any further development of the claim is conducted, the cases are classified into the appropriate DRG by the Medicare GROUPER software program. The GROUPER program was developed as a means of classifying each case into a DRG on the basis of the diagnosis and procedure codes and, for a limited number of DRGs, demographic information (that is, sex, age, and discharge status).

After cases are screened through the MCE and assigned to a DRG by the GROUPER, the PRICER software calculates a base DRG payment. The PRICER calculates the payments for each case covered by the IPPS based on the DRG relative weight and additional factors associated with each hospital, such as IME and DSH adjustments. These additional factors increase the payment amount to hospitals above the base DRG payment.

The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible DRG classification changes and to recalibrate the DRG weights. However, in the July 30, 1999 IPPS final rule (64 FR 41500), we discussed a process for considering non-MedPAR data in the recalibration process. In order for us to consider using particular non-MedPAR data, we must have sufficient time to evaluate and test the data. The time necessary to do so depends upon the nature and quality of the non-MedPAR data submitted. Generally, however, a significant sample of the non-MedPAR data should be submitted by mid-October for consideration in conjunction with the next year's proposed rule. This allows us time to test the data and make a preliminary assessment as to the feasibility of using the data. Subsequently, a complete database should be submitted by early December for consideration in conjunction with the next year's proposed rule.

In the FY 2006 IPPS proposed rule (70 FR 23312), we proposed numerous changes to the DRG classification system for FY 2006 and to the methodology used to recalibrate the DRG weights. The changes we proposed to the DRG classification system, the public comments we received concerning the proposed changes, the final DRG changes, and the methodology used to recalibrate the DRG weights are set forth below. The changes we are implementing in this final rule will be reflected in the FY 2006 GROUPER, version 23.0, and are effective for discharges occurring on or after October 1, 2005. Unless otherwise noted in this final rule, our DRG analysis is based on data from the September 2004 update of the FY 2004 MedPAR file, which contains hospital bills received through September 30, 2004 for discharges in FY 2004. 2. Yearly Review for Making DRG Changes; Request for Public Comment

Many of the changes to the DRG classifications are the result of specific issues brought to our attention by interested parties. We encourage individuals with concerns about DRG classifications to bring those concerns to our attention in a timely manner so they can be carefully considered for possible inclusion in the next proposed rule and, if included, may be subjected to public review and comment. Therefore, similar to the timetable for interested parties to submit non-MedPAR data for consideration in the DRG recalibration process, concerns about DRG classification issues should be brought to our attention no later than early

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December in order to be considered and possibly included in the next annual proposed rule updating the IPPS.

The actual process of forming the DRGs was, and continues to be, highly iterative, involving a combination of statistical results from test data combined with clinical judgment. In deciding whether to create a separate DRG, 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 in the DRG. We evaluate patient care costs using average charges and lengths of stay as proxies for costs and rely on the judgment of our medical officers to decide whether patients are distinct or clinically similar to other patients in the DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average charges between the cases we are selecting for review and the remainder of cases in the DRG. We also consider variation in charges within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of charges or length of stay, or both. Further, we also consider the number of patients who will have a given set of characteristics and generally prefer not to create a new DRG unless it will include a substantial number of cases. As we explain in more detail in section IX. of this preamble, MedPAC has made a number of recommendations regarding the DRG system.

To date, we have not used specific statistical standards as part of our guidelines for determining when DRG changes are warranted. However, we could potentially establish objective guidelines that are used in the DRG development process. For instance, such standards could include a minimum percentage or absolute difference in average charges or length of stay and number of cases in order for us to create a DRG or change the DRG assignment of a particular code or service. As part of our review and analysis of MedPAC's recommendations, we will consider whether to establish such guidelines for making DRG reclassification decisions. We welcome public comments on this issue. 3. Pre-MDC: Intestinal Transplantation

In the FY 2005 IPPS final rule (69 FR 48976), we moved intestinal transplantation cases that were assigned to ICD-9-CM procedure code 46.97 (Transplant of intestine) out of DRG 148 (Major Small and Large Bowel Procedures with CC) and DRG 149 (Major Small and Large Bowel Procedures Without CC) and into DRG 480 (Liver Transplant). We also changed the title for DRG 480 to ``Liver Transplant and/or Intestinal Transplant.'' We moved these cases out of DRGs 148 and 149 because our analysis demonstrated that the average charges for intestinal transplants are significantly higher than the average charges for other cases in these DRGs. We stated at that time that we would continue to monitor these cases.

Based on our review of the FY 2004 MedPAR data, we found 959 cases assigned to DRG 480 with overall average charges of approximately $165,622. There were only three cases involving an intestinal transplant alone and one case in which both an intestinal transplant and a liver transplant were performed. The average charges for the intestinal transplant cases ($138,922) were comparable to the average charges for the liver transplant cases ($165,314), while the remaining combination of an intestinal transplant and a liver transplant case had much higher charges ($539,841), and would be paid as an outlier case. Therefore, we did not propose any DRG modification for intestinal transplantation cases for FY 2006.

We note that an institution that performs intestinal transplantation, in correspondence to us written following the publication of the FY 2005 IPPS final rule, agreed with our decision to move cases assigned to code 46.97 to DRG 480.

Comment: Several commenters, including an institute that performs intestinal transplantation, supported our decision to reassign intestinal transplantation cases to DRG 480. One commenter commended CMS for its progress, but urged us to continue to evaluate a separate DRG for intestinal transplantation. While payment has improved, the commenter stated that it is still inadequate, and insufficient reimbursement could ultimately hinder beneficiary access to care.

Response: As indicated in the FY 2006 IPPS proposed rule (70 FR 23315), we found only three cases in the Medicare data that included an intestinal transplant. We found that the average charges were less for intestinal transplant cases ($138,922) than liver transplant cases ($165,314). Thus, even though we have a very low number of cases to make these comparisons, the data do not suggest that intestinal transplants are underpaid in DRG 480. We remain committed to assigning procedures to the most appropriate DRG based on clinical coherence and utilization of resources using the most recently available data. As we stated in the FY 2005 IPPS final rule (69 FR 48977), when we receive sufficient additional Medicare data on intestinal transplantation cases, we will again consider the DRG assignment for intestinal transplants.

Comment: One commenter concurred with the decision to assign intestinal transplant cases to DRG 480 but recommended that CMS create separate DRGs for liver-intestinal and liver-kidney transplants. The commenter requested that CMS report average charges for these cases in the final rule. The commenter noted that DRGs have been created for double organ transplants such as DRG 512 (Simultaneous Pancreas/Kidney Transplant).

Response: While the focus of our review in the proposed rule was limited to whether we should reassign intestinal transplants to DRG 480, we reviewed all cases in this DRG. Based on our review of the FY 2004 MedPAR data, the following table illustrates our findings:

Number of Average length Average DRG

cases

of stay

charges

DRG 480.........................................................

959

16.65

$165,622 Liver Transplantation...........................................

876

16.5

165,314 Intestinal Transplantation......................................

3

26.0

138,922 Liver-Intestinal Transplantation................................

1

72.0

539,841 Liver-Kidney Transplantation....................................

79

21.3

237,759

As we stated in the proposed rule (70 FR 23315), while the average charges and length of stay were much higher for the one liver- intestinal transplantation case, for which we had data, than the other cases in DRG 480, the case would likely be paid as an outlier. One case is insufficient to create a new DRG. Similarly, we are reluctant to create a

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new DRG for such a small number of liver-kidney transplant cases, even though average charges and length of stay are higher for liver-kidney transplants than other cases in DRG 480. As discussed, in section IX.A. of this final rule, we plan in the next year to undertake a comprehensive review of the existing Medicare DRG system and expect to make changes to the DRGs to better reflect the severity of illness. As we study this issue, we will further analyze hospital costs for patients needing multiple organ transplants. At this time, we are not making any further modifications to the DRGs for multiple transplants in FY 2006. 4. MDC 1 (Diseases and Disorders of the Nervous System) a. Strokes

In 1996, the Food and Drug Administration (FDA) approved the use of tissue plasminogen activator (tPA), one type of thrombolytic agent that dissolves blood clots. In 1998, the ICD-9-CM Coordination and Maintenance Committee created code 99.10 (Injection or infusion of thrombolytic agent) in order to be able to uniquely identify the administration of thrombolytic agents. Studies have shown that tPA can be effective in reducing the amount of damage the brain sustains during an ischemic stroke, which is caused by blood clots that block blood flow to the brain. tPA is approved for patients who have blood clots in the brain, but not for patients who have a bleeding or hemorrhagic stroke. Thrombolytic therapy has been shown to be most effective when used within the first 3 hours after the onset of a stroke, and it is contraindicated in hemorrhagic stroke. The presence or absence of code 99.10 does not currently influence DRG assignment. Since code 99.10 became effective, CMS has been monitoring the DRGs and cases in which this code can be found, particularly with respect to cardiac and stroke DRGs.

Last year, CMS met with representatives from several hospital stroke centers who recommended modification of the existing stroke DRGs 14 (Intracranial Hemorrhage or Cerebral Infarction) and 15 (Nonspecific CVA and Precerebral Occlusion Without Infarction) by using the administration of tPA as a proxy to identify patients who have severe strokes. The representatives stated that using tPA as a proxy would help to identify patients who have strokes that are more severely and costly and would recognize the higher charges that these cases generate because of their higher hospital resource utilization. At that time, the presenters provided evidence that strokes where tPA was used were both more severe and more resource intensive. Specifically, they showed that patients who were given tPA for strokes had higher stroke severity scores at presentation, and that they were more expensive to care for because of increased intensive care unit monitoring requirements, increased diagnostic imaging costs, and increased laboratory and pharmacy costs. They also demonstrated that these patients had markedly better clinical outcomes. The stroke representatives made two suggestions concerning the stroke DRGs.

The first proposal suggested modifying DRG 14 by renaming it ``Ischemic Stroke Treatment with a Reperfusion Agent'', and including only those cases containing code 99.10. The remainder of stroke cases where the patient was not treated with a reperfusion agent would be included in DRG 15, renamed ``Hemorrhagic Stroke or Ischemic Stroke without a Reperfusion Agent''. Hemorrhagic stroke cases now found in DRG 14 that are not treated with a reperfusion agent would migrate to DRG 15.

The second suggestion was to leave DRGs 14 and 15 as they currently exist, and create a new DRG, with a recommended title ``Ischemic Stroke Treatment with a Reperfusion Agent''. This suggested DRG would include only cases where patients with strokes caused by arterial occlusion (or clot(s)) are also treated with tPA thrombolytic therapy.

We have examined the MedPAR data for the cases in DRGs 14 and 15. We divided the cases based on the presence of a principal diagnosis of hemorrhage or occlusive ischemia and the presence of procedure code 99.10. The following table displays the results:

Average length Average DRG

Count

of stay

charges

14--All Cases...................................................

221,879

5.67

$18,997 14--Cases with intracranial hemorrhage..........................

41,506

5.40

19,193 14--Cases with intracranial hemorrhage with code 99.10..........

61

7.4

37,045 14--Cases with intracranial hemorrhage without code 99.10.......

41,445

5.3

19,167 14--Cases without intracranial hemorrhage.......................

180,373

5.74

18,952 14--Cases without intracranial hemorrhage with code 99.10.......

2,085

7.20

35,128 14--Cases without intracranial hemorrhage without code 99.10....

178,288

5.72

18,763 15--All cases...................................................

71,335

4.53

14,382 15--Cases with intracranial hemorrhage..........................

0

0

0 15--Cases without intracranial hemorrhage.......................

71,335

4.53

14,382 15--Cases without intracranial hemorrhage with code 99.10.......

302

5.10

24,876 15--Cases without intracranial hemorrhage without code 99.10....

71,033

4.53

14,337

The above table shows that the average standardized charges for cases treated with a reperfusion agent are more than $16,000 and $10,000 higher than all other cases in DRGs 14 and 15, respectively. While these data suggest that patients treated with a reperfusion agent are more expensive than all other stroke patients, this conclusion is based on a small number of cases. In the FY 2006 IPPS proposed rule, we did not propose a change to the stroke DRGs because of the small number of reperfusion cases reported. However, we stated that we believe it is possible that more patients are being treated with a reperfusion agent than indicated by our data because the presence of code 99.10 does not affect DRG assignment and may be underreported.

In the FY 2006 IPPS proposed rule, we invited public comment on the changes to DRGs 14 and 15 suggested by the hospital representatives. In addition, we solicited public comment on the number of patients currently being treated with a reperfusion agent as well as the potential costs of these patients relative to others with strokes that are also included in DRGs 14 and 15.

Comment: Forty commenters supported the creation of a new DRG to recognize the group of patients who presented with stroke and who also received thrombolytic therapy. The commenters cited the following reasons for supporting this proposal: Increased costs of caring for these patients, specifically in intensive care unit, more

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diagnostic imaging studies, and laboratory and pharmacy resources. In addition, the commenters noted that the proposal is also supported by evidence that patients receiving thrombolytic therapy have strokes of increased severity. The commenters also stated that the proposal demonstrates the need for hospitals to have an incentive to establish the infrastructure necessary to provide stroke patients with aggressive evaluation and management services, such as thrombolytic therapy, which have become the standard of care.

Response: We appreciate the commenters' responses in reply to our solicitation for public comment on the changes to DRGs 14 and 15 as suggested in the proposed rule. The level of detail provide in the responses helped us to formulate a change to the medical stroke DRGs. We agree with the commenters that there is an increased cost in caring for these patients including increased use of the intensive care unit, more diagnostic imaging studies, and laboratory and pharmacy resources. We also agree that--(1) the data indicate that patients receiving thrombolytic therapy have increased severity; and (2) reperfusion therapy is a good means to segregate these patients into a separate DRG.

Comment: One commenter encouraged CMS to modify DRGs 14 and 15 using one of two options. The first option would be to create DRG ``A'' where hemorrhagic and ischemic strokes were combined, but only supportive care was given, while DRG ``B'' would contain those hemorrhagic and ischemic stroke cases in which reperfusion or hemostatic agents were administered.

Alternatively, the commenter suggested that DRGs 14 and 15 could be modified by creating four new DRGs. DRG ``A'' would contain cases of hemorrhagic stroke and supportive care, DRG ``B'' would contain cases of hemorrhagic stroke treated with hemostatic agents, DRG ``C'' would contain cases of ischemic stroke and supportive care, and DRG ``D'' would contain cases of ischemic stroke treated with reperfusion agents.

Response: This commenter is suggesting that the DRG system recognize treatment of hemorrhage strokes with hemostatic agents as well as ischemic strokes with reperfusion agents. While we anticipate great industry strides in the treatment of stroke, currently no approved hemostatic agent is on the market. According to the manufacturer(s) of hemostatic agents, it is unlikely that these agents will be available for use during FY 2006. Therefore, we do not have any Medicare charge information that supports creating separate DRGs for hemorrhagic stroke patients treated with hemostatic agents as we do for ischemic stroke patients treated with thrombolytic therapy. When hemostatic agents are available on the market, we will reevaluate this issue.

Comment: One commenter believed that the two potential changes to the stroke DRGs as set forth in the proposed rule are too limited as written. The commenter believed that the descriptor, ``reperfusion agent'', is not broad enough to encompass other promising pharmacotherapies for stroke that are in late stages of clinical development. The commenter pointed out that these therapies include treatment for both ischemic stroke and hemorrhagic stroke. The commenter further noted that it is unlikely that any of the potential therapies will be approved for use during FY 2006. The commenter recommended that CMS broaden the title for the proposed new DRG to include a wider range of any newly approved therapies.

Response: While we look forward to improved therapies for treating patients with strokes, we are unable to create DRGs that recognize as yet unapproved treatment modalities. When the FDA has approved additional pharmaceuticals for the treatment of either ischemic or hemorrhagic stroke, we will evaluate the data and make DRG changes as appropriate. We point out that the DRG titles cannot possibly acknowledge all the codes located therein. The important part of the DRG is the structure of the logic; that is, what codes are assigned to the DRG.

Comment: One commenter recommended that CMS commit to creating a surgical DRG for ischemic stroke patients who are treated with surgical interventions. The commenter included several scenarios of possible diagnosis and procedure coding combinations that CMS could use to identify stroke cases and increase the scope of our analysis.

Response: Our goal was not to review all stroke cases within the MedPAR database, but to identify those cases in medical DRG 14, and possibly DRG 15, that might have included the administration of tPA as identified by procedure code 99.10. DRGs that identify a precise surgical procedure already exist; all of the combinations of procedure codes suggested by the commenter already appropriately group to DRGs within MDC 1.

Comment: One commenter stated that because code 99.10 was not reimbursable [did not have an impact on DRG assignment], hospital coders often did not use it. Some hospitals in which reperfusion therapy was commonplace never used this code.

Response: We would like to take this opportunity to reiterate that all cases should be accurately and completely coded, irrespective of the DRG implications of a specific code or codes. By coding accurately and completely, we will have more information on patient care costs for different services and treatments that better enable us to research further changes to the DRG system.

Comment: One commenter noted that, because only a single type of reperfusion agent is presently approved for stroke treatment, the proposed change would create a DRG that is, de facto, product specific. In addition, the commenter stated that the DRG change on which CMS requested comment would improve access to therapy for only a small fraction of all stroke patients. The commenter added that implementation of a narrowly-defined change [by creating a specific stroke-plus-tPA DRG] may necessitate further changes to the stroke DRGs in the near future to ensure patient access to emerging drug therapies once approved.

Response: While we did not propose a specific change to the stroke DRGs in the proposed notice, we have decided to modify the DRGs to distinguish those cases in which tPA is used as a treatment modality based on the strong support for this change voiced by commenters. When we reviewed the data represented in the above table, we noted that the average standardized charges for all cases in DRG 14 were $18,997, but that the subset of 2,085 cases in which tPA was used had average standardized charges of $35,128. We noted that the cases in DRG 14 without hemorrhage that did not report the use of tPA had average standardized charges of $18,763, which was comparable with the figures for all cases in the DRG. Given that these cases are easily identifiable through the use of procedure code 99.10, and that the average standardized charges are $16,131 higher for the cases using tPA, we decided to carve these cases out of the existing DRGs 14 and 15, and represent them in a new DRG. We are changing the structure of stroke DRGs not to award higher payment for a specific drug but to recognize the need for better overall care for this group of patients. Even though a tPA is indicated only for a small proportion of stroke patients (only those experiencing ischemic strokes treated within 3 hours of the onset of symptoms), our data suggest that there are enough patients to support the DRG change. While our goal

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is to make payment relate more closely to resource use, we also note that use of a tPA in a carefully selected patient population will lead to better outcomes and overall care and may lessen the need for postacute care. With regard to the potential need to modify stroke DRGs in the future, we note that we perform an update to the DRGs and modify DRGs every year. We reiterate that should additional types of therapy be approved, we will evaluate them, and after judicious study, will make appropriate DRG title and/or logic changes as required.

In this final rule, after consideration of public comments received and based on our analysis of MedPAR data that supports the creation of a DRG that identifies embolic stroke combined with tPA treatment, we are creating new DRG 559 (Acute Ischemic Stroke with Use of Thrombolytic Agent). From a data consistency standpoint, we believe that adding a new DRG identifying these cases will be less disruptive to our stakeholders than creating three new DRGs, two of which would mimic existing DRGs 14 and 15. The GROUPER logic for DRGs 14 and 15 will not be affected by this change; that is, the GROUPER content of DRGs 14 and 15 will be the same in FY 2006 as it was in FY 2005. The structure of the new DRG 559 includes the following codes:

Principal Diagnosis

433.01, Occlusion and stenosis of basilar artery, with cerebral infarction

433.11, Occlusion and stenosis of carotid artery, with cerebral infarction

433.21, Occlusion and stenosis of vertebral artery, with cerebral infarction

433.31, Occlusion and stenosis of multiple and bilateral arteries, with cerebral infarction

433.81, Occlusion and stenosis of other specified precerebral artery, with cerebral infarction

433.91, Occlusion and stenosis of unspecified precerebral artery, with cerebral infarction

434.01, Cerebral thrombosis, with cerebral infarction

434.11, Cerebral embolism, with cerebral infarction

434.91, Cerebral artery occlusion, unspecified, with cerebral infarction

and

Nonoperating Room Procedure

99.10, Injection or infusion of thrombolytic agent

We will continue to monitor stroke DRGs in the future. As noted above, should treatment modalities change, we will be open to making changes to the DRG structure that will recognize improvements in treatment and technology. b. Unruptured Cerebral Aneurysms

In the FY 2004 IPPS final rule (68 FR 45353), we created DRG 528 (Intracranial Vascular Procedures With a Principal Diagnosis of Hemorrhage) in MDC 1. We received a comment at that time that suggested we create another DRG for intracranial vascular procedures for unruptured cerebral aneurysms. For the FY 2004 IPPS final rule (68 FR 45353) and the FY 2005 IPPS final rule (69 FR 48957), we evaluated the data for cases in the MedPAR file involving unruptured cerebral aneurysms assigned to DRG 1 (Craniotomy Age >17 With CC) and DRG 2 (Craniotomy Age >17 Without CC) and concluded that the average charges were consistent with those for other cases found in DRGs 1 and 2. Therefore, we did not propose a change to the DRG assignment for unruptured cerebral aneurysms.

We have reviewed data for unruptured cerebral aneurysms cases in DRGs 1 and 2. In our analysis of these FY 2004 MedPAR data, we found 1,136 unruptured cerebral aneurysm cases assigned to DRG 1 and 964 unruptured cerebral aneurysm cases assigned to DRG 2. Although the average charges for the unruptured cerebral aneurysm cases in DRG 1 ($53,455) and DRG 2 ($34,028) were slightly higher than the average charges for all cases in DRG 1 ($51,466) and DRG 2 ($30,346), we do not believe these differences are significant enough to warrant a change in these two DRGs at this time. Therefore, we did not propose a change in the structure of these DRGs relating to unruptured cerebral aneurysm cases for FY 2006.

Comment: Several commenters agreed that the minimal differences in charges for unruptured cerebral aneurysms cases compared to all cases assigned to DRGs 1 and 2 do not justify a change in the DRG assignment for these cases. One commenter stated that unruptured cerebral aneurysm cases should be reclassified into a new DRG. The commenter stated that a new DRG is warranted to understand the true weight of these procedures and to establish reimbursement that recognizes the cost of medical devices used to treat unruptured cerebral aneurysms.

Response: Our analysis is based on the most recent charge information available reflecting the overall resources used to treat unruptured cerebral aneurysms in Medicare patients. We concur with the commenters that there are minimal differences in the charges for the unruptured cerebral aneurysm cases compared to all cases assigned to DRGs 1 and 2 and that the results of the data do not justify creation of a new DRG. We believe that unruptured cerebral aneurysms are appropriately assigned to DRGs 1 and 2. Therefore, we are not making any modifications to the DRG assignment for unruptured cerebral aneurysms. 5. MDC 5 (Diseases and Disorders of the Circulatory System) a. Severity Adjusted Cardiovascular Procedures

In response to the FY 2006 IPPS proposed rule, one commenter noted that section 507(c) of Pub. L. 108-173 required MedPAC to conduct a study to determine how the DRG system should be updated to better reflect the cost of delivering care in a hospital setting. The commenter noted that MedPAC reported that the ``cardiac surgery DRGs had high relative profitability ratios.'' While the commenter noted that it may take time to conduct and complete a thorough evaluation of the MedPAC payment recommendations for all DRGs, the commenter strongly encouraged CMS to revise the cardiac DRGs through patient severity refinements as part of the final rule to be effective for FY 2006. In section IX.A. of the preamble to this final rule, we are responding in detail to this comment by making significant revisions to a number of cardiovascular DRGs that currently contain patients with a wide range of severity and resource consumption in order to reflect more accurately the resources required to care for different kinds of cardiovascular patients. Accordingly, in response to the issues raised by the commenter and as an interim step until we can complete a comprehensive review of MedPAC's recommendations, we are deleting current DRGs 107, 109, 111, 116, 478, 516, 517, 526, and 527, and creating new DRGs 547 through 558 in their place.

We received several comments on the FY 2006 IPPS proposed rule that recommended that we split additional cardiovascular DRGs based on the presence or absence of heart failure, acute myocardial infarction, and shock. As indicated in section IX.A. of this final rule, we conducted a focused review of a number of different cardiovascular DRGs and are making revisions to them based on a newly designated list of ``major cardiovascular conditions.''

We believe these new DRGs will help to address a number of the concerns raised by these commenters. We intend to monitor these DRGs carefully in upcoming years and welcome input regarding the success of these DRGs in

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reflecting patient severity and resource use. b. Automatic Implantable Cardioverter/Defibrillator

As part of our annual review of DRGs, for FY 2006, we performed a review of cases in the FY 2004 MedPAR file involving the implantation of a defibrillator in the following DRGs:

DRG 515 (Cardiac Defibrillator Implant Without Cardiac Catheterization) DRG 535 (Cardiac Defibrillator Implant With Cardiac Catheterization With Acute Myocardial Infarction, Heart Failure, or Shock) DRG 536 (Cardiac Defibrillator Implant With Cardiac Catheterization Without Acute Myocardial Infarction, Heart Failure, or Shock)

While conducting our review, we noted that there had been considerable comments from hospital coders on code 37.26 (Cardiac electrophysiologic stimulation and recording studies (EPS)), which is included in these DRGs. These comments from hospital coders were directed to both CMS and the American Hospital Association. The procedure codes for these three DRGs describe the procedures that are considered to be a cardiac catheterization. Code 37.26 is classified as a cardiac catheterization within these DRGs. Therefore, the submission of code 37.26 affects the DRG assignment for defibrillator cases and leads to the assignment of DRGs 535 or 536. When a cardiac catheterization is performed, the case is assigned to DRGs 535 or 536, depending on whether or not the patient also had an acute myocardial infarction, heart failure, or shock. The following chart shows the number of cases in each DRG, along with their average length of stay and average charges, found in the data:

Number of Average length Average DRG

cases

of stay

charges

515.............................................................

25,236

4.32 $83,659.76 535.............................................................

12,118

8.27 113,175.43 536.............................................................

18,305

5.39 94,453.62

We have received a number of questions from hospital coders regarding the correct use of code 37.26. There is considerable confusion about whether or not code 37.26 should be reported when the procedure is performed as part of the defibrillator implantation. Currently, the ICD-9-CM instructs the coder not to report code 37.26 when a defibrillator is inserted. There is an inclusion term under the defibrillator code 37.94 (Implantation or replacement of automatic cardioverter/defibrillator, total system [AICD]) which states that EPS is included in code 37.94. We discussed modifying this instruction at the October 7-8, 2004 meeting of the ICD-9-CM Coordination and Maintenance Committee. We received a number of comments opposing a modification to the use of code 37.26 that would also allow it to be reported with an AICD insertion. A report of this meeting can be found on the Web site: http://www.cms.hhs.gov/paymentsystem/icd9.

We performed an analysis of cases within DRGs 535 and 536 with cardiac catheterization and with and without code 37.26 and with code 37.26 only reported without cardiac catheterization and found the following:

Number of Average length- Average DRG

cases

of-stay

charges

535--Cardiac Catheterization Without Code 37.26.................

5,060

10.63 $127,130.79 535--With Code 37.26 Only Without Cardiac Catheterization.......

5,264

5.61 98,900.13 535--With Cardiac Catheterization and Code 37.26................

1,794

9.44 115,701.09 536--Cardiac Catheterization Without Code 37.26.................

4,799

8.11 110,493.86 536--With Code 37.26 Only Without Cardiac Catheterization.......

10,829

3.85 85,390.88 536--With Cardiac Catheterization and Code 37.26................

2,677

6.76 102,359.21

The data show that when code 37.26 is the only procedure reported from the list of cardiac catheterizations, the average charges and the average length of stay are considerably lower. For example, the average standardized charges for a defibrillator implant with only an EPS are $85,390.88 in DRG 536, while the average standardized charges for DRG 536 with a cardiac catheterization, but not an EPS, are $110,493.86. The average standardized charges for all cases in DRG 536 are $94,453.62. The data show similar findings for DRG 535, with lower lengths of stay and average charges when the only code reported from the cardiac catheterization list is an EPS. When we also consider the acknowledged coding problems in the use of code 37.26, we believe it is inappropriate to base a defibrillator DRG assignment on the EPS code. Cases identified with this code capture patients who require less resource use than patients who have a cardiac catheterization.

Data reflected in the chart above show that the average standardized charges for DRG 515 were $83,659.76. These average charges are closer to those in DRG 536 with code 37.26 and without any other cardiac catheterization code reported. While the cases in DRG 535 with code 37.26 and without a cardiac catheterization have higher average charges than the average charges for cases in DRG 515, these cases have much lower average charges than the average charges for overall cases in DRG 535. For these reasons, we proposed to remove code 37.26 from the list of cardiac catheterizations for DRGs 535 and 536. If a defibrillator is implanted and an EPS is performed with no other type of cardiac catheterization, the case would be assigned to DRG 515.

CMS issued a National Coverage Determination for implantable cardioverter defibrillators, effective January 27, 2005, that expands coverage and requires, in certain cases, that patient data be reported when the defibrillator is implanted for the clinical indication of primary prevention of sudden cardiac death. The submission of data on patients receiving an implantable cardioverter defibrillator for primary prevention to a data collection system is needed for the determination that the implantable cardioverter defibrillator is reasonable and necessary and for quality improvement. These

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data will be made available in some form to providers and practitioners to inform their decisions, monitor performance quality, and benchmark and identify best practices. We made a temporary registry available for use when the policy became effective and used the Quality Net Exchange for data submission because Medicare-participating hospitals already use the Exchange to report data.

We intend to transition from the temporary registry using the Quality Net Exchange to a more sophisticated follow-on registry that will have the ability to collect longitudinal data. Some providers have suggested that CMS increase reimbursement for implantable cardioverter defibrillators to compensate the provider for reporting data. ICD data reporting includes elements of patient demographics, clinical characteristics and indications, medications, provider information, and complications. Since these data elements are commonly found in patient medical records, it is CMS' expectation that these data are readily available to the individuals abstracting and reporting data. Therefore, we believe that increased reimbursement is not needed at this time.

Comment: One commenter stated that there has been considerable confusion surrounding the use of code 37.26. The commenter indicated that coders are unclear whether code 37.26 should be reported when an electrophysiologic study (EPS) is performed as part of a defibrillator implantation or only when defibrillator device checks are performed. The commenter pointed out that the continuing efforts of the Editorial Advisory Board for Coding Clinic to clarify the use of this code have led to changes in coding advice published in Coding Clinic for ICD-9-CM by the American Hospital Association. However, the commenter stated, while the change in coding advice was intended to clarify use of code 37.26, coders continue to have questions about it. The commenter supported our proposal to remove code 37.26 from the list of cardiac catheterizations for DRGs 535 and 536 and agreed with CMS' plans to continue working to clarify use of this code or modify the code through the ICD-9-CM Coordination and Maintenance Committee. The commenter suggested that, once the coding issues are resolved and consistent data are collected, CMS should reexamine the DRG assignment(s) for code 37.26.

Other commenters opposed our proposal to remove code 37.26 from DRGs 535 and 536. These commenters stated that code 37.26 is used to capture a variety of disparate procedures with varying purposes, sites of service, and intensity, and that the resultant data are not representative of any one of these. Other commenters stated that the code contains three separate procedures of varying intensity: Electrophysiology study, intraoperative device interrogation, and noninvasive programmed stimulation. Several commenters believed that the payment change would have a severe financial impact on their hospitals. They believed it is inappropriate to make the change without the data to justify the change. Several commenters stated that the change would have a significant impact on the use of CRT-D implants because the devices are more costly. The commenters suggested that, before considering a revision to DRGs 535 and 536 for code 37.26, CMS should resolve the coding confusion. The commenters asked that the code be discussed at the September 29, 2005 ICD-9-CM Coordination and Maintenance Committee meeting and suggested that separate codes be created for the different procedures currently captured by code 37.26. According to the commenters, the new codes that are created could go into effect on October 1, 2006. The commenters suggested that, once data are available, CMS should consider a revision to DRGs 535 and 536 for EPS procedures.

Response: We agree with the commenter that there is considerable confusion regarding the use of code 37.26. It is possible that code 37.26 is being used for a variety of electrophysiologic procedures such as EPS, noninvasive programmed electrical stimulation, and programmed electrical stimulation. However, as indicated in the proposed rule and above in this final rule, our data show that the cases coded with 37.26 that were not separately coded with a cardiac catheterization had average charges of $98,900.13 in DRG 535 and $85,390.88 in DRG 536 compared to $127,130.79 and $110,493.86, respectively, for all other cases in these DRGs. For this reason, we believe it is appropriate to include code 37.26 in DRG 515 and no longer assign it to DRGs 535 and 536 that are for patients who receive a cardiac catheterization.

As we discussed earlier in this section of the preamble, Medicare significantly expanded coverage of implantable defibrillators on January 27, 2005 (Pub. No. 100-3, section 20.4) to patients who have a prior history of heart disease but are not in acute heart failure. These prophylactic defibrillator implants are expected to significantly increase the number of patients in DRGs 515, 535, and 536. It is our experience that most of these patients will not be receiving a cardiac catheterization and will be less resource-intensive than the acute heart failure patients receiving an implantable defibrillator. We note that the Bernstein Research Call publication of April 27, 2005 stated that this DRG change could ``dampen the elective implantation of de- novo CRT-D or dual chamber devices into relatively stable patients.'' The article further states that CMS ``realizes that the new prophylactic ICD [implantable cardioverter defibrillators] eligibility requirements do not require an EP test, and that EP tests per se do not consume sufficient resources to justify the reimbursement differentials seen between DRGs 515 versus 535 and 536.'' We believe it is particularly important to make the change to DRGs 515, 535, and 536 at this time, given the expansion of Medicare coverage of implantable defibrillators and the evidence that suggests that patients who receive an EP test, but not a cardiac catheterization, are less expensive than other patients receiving these devices.

We will address code 37.26 at our September 29-30, 2005 meeting of the ICD-9-CM Coordination and Maintenance Committee meeting. The public is encouraged to participate in this meeting and offer suggestions for code modifications. Information on this meeting can be found at: http://www.cms.hhs.gov/paymentsystems/icd9 .

Comment: Five commenters stated that CMS' data show that the average charges for cases with code 37.26 are significantly higher than those in DRG 515. The commenters suggested that the volume of cases is significant enough to create a new DRG for cases with cardiac defibrillator implant without cardiac catheterization, but with code 37.26.

Response: Given the extensive comments concerning coding problems with code 37.26, we do not believe it is appropriate to create a new DRG that would specifically capture defibrillator implants with this code. Therefore, we are not creating the suggested new DRG at this time. As stated earlier, we will continue to work with the coding and health care community to modify code 37.26 so that it will lead to more consistent reporting. Once we have better data, we will evaluate additional DRG modifications.

After consideration of the public comments received on the proposed rule, in this final rule, we are implementing the modification of DRGs 535 and 536 as proposed for FY 2006. We are removing code 37.26 from the list of cardiac catheterizations for DRGs

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535 and 536 and adding the code in DRG 515. c. Coronary Artery Stents

In the FY 2005 IPPS final rule (69 FR 48971 through 48974), we addressed two comments from industry representatives about the DRG assignments for coronary artery stents. These commenters had expressed concern about whether the reimbursement for stents is adequate, especially for insertion of multiple stents. They also expressed concern about whether the current DRG structure represents the most clinically coherent classification of stent cases. In the FY 2006 proposed rule (70 FR 23318 through 23319), we included the following discussion regarding the commenter's concerns:

The current DRG structure incorporates stent cases into the following two pairs of DRGs, depending on whether bare metal or drug-eluting stents are used and whether acute myocardial infarction (AMI) is present:

DRG 516 (Percutaneous Cardiovascular Procedures with AMI)

DRG 517 (Percutaneous Cardiovascular Procedures with Nondrug-Eluting Stent without AMI)

DRG 526 (Percutaneous Cardiovascular Procedures with Drug-Eluting Stent with AMI)

DRG 527 (Percutaneous Cardiovascular Procedures with Drug-Eluting Stent without AMI)

The commenters presented two recommendations for refinement and restructuring of the current coronary stent DRGs. One of the recommendations involved restructuring these DRGs to create two additional stent DRGs that are closely patterned after the existing pairs, and would reflect insertion of multiple stents with and without AMI. The commenters recommended incorporating either stenting code 36.06 (Insertion of nondrug-eluting coronary artery stent(s)) or code 36.07 (Insertion of drug-eluting coronary artery stent(s)) when they are reported along with code 36.05 (Multiple vessel percutaneous transluminal coronary angioplasty [PTCA] or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent). The commenter's first concern was that hospitals may be steering patients toward coronary artery bypass graft surgery in place of stenting in order to avoid significant financial losses due to what it considered the inadequate reimbursement for inserting multiple stents.

In our response to comments in the FY 2005 IPPS final rule, we indicated that it was premature to act on this recommendation because the current coding structure for coronary artery stents cannot distinguish cases in which multiple stents are inserted from those in which only a single stent is inserted. Current codes are able to identify performance of PTCA in more than one vessel by use of code 36.05. However, while this code indicates that PTCA was performed in more than one vessel, its use does not reflect the exact number of procedures performed or the exact number of vessels treated. Similarly, when codes 36.06 and 36.07 are used, they document the insertion of at least one stent. However, these stenting codes do not identify how many stents were inserted in a procedure, nor distinguish insertion of a single stent from insertion of multiple stents. Even the use of one of the stenting codes in conjunction with multiple-PTCA code 36.05 does not distinguish insertion of a single stent from multiple stents. The use of code 36.05 in conjunction with code 36.06 or code 36.07 indicates only performance of PTCA in more than one vessel, along with insertion of at least one stent. The precise numbers of PTCA- treated vessels, the number of vessels into which stents were inserted, and the total number of stents inserted in all treated vessels cannot be determined. Therefore, the capabilities of the current coding structure do not permit the distinction between single and multiple vessel stenting that would be required under the recommended restructuring of the coronary stent DRGs.

We agree that the DRG classification of cases involving coronary stents must be clinically coherent and provide for adequate reimbursement, including those cases requiring multiple stents. For this reason, we created four new ICD-9-CM codes identifying multiple stent insertion (codes 00.45, 00.46, 00.47, and 00.48) and four new codes identifying multiple vessel treatment (codes 00.40, 00.41, 00.42, and 00.43) at the October 7, 2004 ICD-9-CM Coordination and Maintenance Committee Meeting. These eight new codes can be found in Table 6B of this proposed rule. We have worked closely with the coronary stent industry and the clinical community to identify the most logical code structure to identify new codes for both multiple vessel and multiple stent use. Effective October 1, 2005, code 36.05 will be deleted and the eight new codes will be used in its place. Coders are encouraged to use as many codes as necessary to describe each case, using one code to describe the angioplasty or atherectomy, and one code each for the number of vessels treated and the number of stents inserted. Coders are encouraged to record codes accurately, as these data will potentially be the basis for future DRG restructuring. While we agree that use of multiple vessel and stent codes will provide useful information in the future on hospital costs associated with percutaneous coronary procedures, we believe it remains premature to proceed with a restructuring of the current coronary stent DRGs on the basis of the number of vessels treated or the number of stents inserted, or both, in the absence of data reflecting use of this new coding structure. The commenter's second recommendation was that we distinguish ``complex'' from ``noncomplex'' cases in the stent DRGs by expanding the higher weighted DRGs (516 and 526) to include conditions other than AMI. The commenter recommended recognizing certain comorbid and complicating conditions, including hypertensive renal failure, congestive heart failure, diabetes, arteriosclerotic cardiovascular disease, cerebrovascular disease, and certain procedures such as multiple vessel angioplasty or atherectomy (as evidenced by the presence of procedure code 36.05), as indicators of complex cases for this purpose. Specifically, the commenters recommended replacing the current structure with the following four DRGs:

Recommended restructured DRG 516 (Complex percutaneous cardiovascular procedures with non-drug-eluting stents).

Recommended restructured DRG 517 (Noncomplex percutaneous cardiovascular procedures with non-drug-eluting stents).

Recommended restructured DRG 526 (Complex percutaneous cardiovascular procedures with drug-eluting stents).

Recommended restructured DRG 527 (Noncomplex percutaneous cardiovascular procedures with drug-eluting stents).

The commenter argued that this structure would provide an improvement in both clinical and resource coherence over the current structure that classifies cases according to the type of stent inserted and the presence or absence of AMI alone, without considering other complicating conditions. The commenter also presented an analysis, based on previous MedPAR data, that evaluated charges and lengths of stay for cases with expected high resource use and reclassified cases into its recommended new structure of paired ``complex'' and ``noncomplex'' DRGs. The commenter's analysis showed some evidence of clinical and resource coherence in the recommended DRG structure. However, we did not adopt the proposal in the FY 2005 IPPS final rule. First, the data presented by the commenter still represented preliminary experience under a relatively new DRG structure. Second, the analysis did not reveal significant gains in resource coherence compared to existing DRGs for stenting cases. Therefore, we were reluctant to adopt this approach because of comments and concern about whether the overall level of payment in the coronary stent DRGs was adequate. However, we indicated that this issue deserved further study and consideration, and that we would conduct an analysis of this recommendation and other approaches to restructuring these DRGs with updated data in the FY 2006 proposed rule.''

In response to those comments, we analyzed the MedPAR data to determine the impact of certain secondary diagnoses or complicating conditions on the four stent DRGs. Specifically, we examined the data in DRGs 516, 517, 526, and 527, based on the presence of coronary stents (codes 36.06 and 36.07) and the following additional diagnoses:

Congestive heart failure (represented by codes 398.91 (Rheumatic heart failure (congestive)), 402.01 (Hypertensive heart disease, malignant, with heart failure), 402.11, (Hypertensive heart disease, benign, with heart failure), 402.91 (Hypertensive heart disease, unspecified, with heart failure), 404.01 (Hypertensive heart and renal disease, malignant, with heart failure), 404.03 (Hypertensive heart and renal disease, malignant, with heart

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failure and renal failure), 404.11 (Hypertensive heart and renal disease, benign, with heart failure), 404.13 (Hypertensive heart and renal disease, benign, with heart failure and renal failure), 404.91 (Hypertensive heart and renal disease, unspecified, with heart failure), 404.93 (Hypertensive heart and renal disease, unspecified, with heart failure and renal failure), 428.0 (Congestive heart failure, unspecified), and 428.1 (Left heart failure)).

Arteriosclerotic cardiovascular disease (represented by code 429.2 (Cardiovascular disease, unspecified)).

Cerebrovascular disease (represented by codes 430 (Subarachnoid hemorrhage), 431 (Intracerebral hemorrhage), 432.0 (Nontraumatic extradural hemorrhage), 432.1, Subdural hemorrhage, 432.9, (Unspecified intracranial hemorrhage), 433.01 (Occlusion and stenosis of basilar artery, with cerebral infarction), 433.11 (Occlusion and stenosis of carotid artery, with cerebral infarction), 433.21 (Occlusion and stenosis of vertebral artery, with cerebral infarction), 433.31 (Occlusion and stenosis of multiple and bilateral precerebral arteries, with cerebral infarction), 433.81 (Occlusion and stenosis of other specified precerebral artery, with cerebral infarction), 434.01 (Cerebral thrombosis with cerebral infarction), 434.11 (Cerebral embolism with cerebral infarction), 434.91 (Cerebral artery occlusion with cerebral infarction, unspecified), 436 (Acute, but ill-defined, cerebrovascular disease)).

Secondary diagnosis of acute myocardial infarction (represented by codes 410.01 (Acute myocardial infarction of anterolateral wall, initial episode of care), 410.11 (Acute myocardial infarction of other anterior wall, initial episode of care), 410.21 (Acute myocardial infarction of inferolateral wall, initial episode of care), 410.31 (Acute myocardial infarction of inferoposterior wall, initial episode of care), 410.41 (Acute myocardial infarction of other inferior wall, initial episode of care), 410.51 (Acute myocardial infarction of other lateral wall, initial episode of care), 410.61 (True posterior wall infarction, initial episode of care), 410.71 (Subendocardial infarction, initial episode of care), 410.81 (Acute myocardial infarction of other specified sites, initial episode of care), 410.91 (Acute myocardial infarction of unspecified site, initial episode of care)).

Renal failure (represented by codes 403.01 (Hypertensive renal disease, malignant, with renal failure), 403.11 (Hypertensive renal disease, benign, with renal failure), 403.91 (Hypertensive renal disease, unspecified, with renal failure), 585 (Chronic renal failure), V42.0 (Organ or tissue replaced by transplant, kidney), V45.1 (Renal dialysis status), V56.0 (Extracorporeal dialysis), V56.1 (Fitting and adjustment of extracorporeal dialysis catheter), V56.2 (Fitting and adjustment of peritoneal dialysis catheter)). Any renal failure with congestive heart failure will be captured in the 404.xx codes listed above.

We reviewed the cases in the four coronary stent DRGs and found that most of the additional or ``complicated'' cases did, in fact, have higher average charges in most instances. However, these results could potentially be duplicated for many DRGs, or sets of DRGs, within the PPS structure. That is, cases with selected complicating factors will tend to have higher average lengths of stay and average charges than cases without those complicating factors. Because cases with the selected complicating factors necessarily contain sicker patients, longer lengths of stay and higher average charges are to be expected. For example, cases in which patients with a cardiac condition also have renal failure are quite likely to consume higher resources than patients only with a cardiac condition. The presence of code 403.11 (Hypertensive renal disease, malignant, with renal failure) may distinguish cases with higher average charges, but the same argument could be raised for many other procedures across other MDCs.

Generally, we have taken into account the higher costs of cases with complications by maintaining a general list of comorbidities and complications (the CC) list), and, where appropriate, distinguishing pairs of DRGs by ``with and without CCs.'' (This system also specifies exclusions from each pair, to account for cases where a condition on the CC list is an expected and normal constituent of the diagnoses reflected in the paired DRGs.)

Thus, we proposed to restructure the coronary stent DRGs on the basis of the standard CC list to differentiate cases that require greater resources. We believed this list to be more inclusive of true comorbid or complicating conditions than selection of specific secondary diagnosis codes. Therefore, we anticipated that restructuring these DRGs on this basis would result in a logical arrangement of cases with regard to both clinical coherence and resource consumption. We compared the existing CC list with the list of the codes recommended by the commenter as secondary diagnoses. All of the recommended codes already appear on the CC list except for codes 429.2, 432.9, V56.1, and V56.2. Code 429.2 represents a very vague diagnosis (arteriosclerotic cardiovascular disease (ASCVD)). Code 432.9 represents a nonspecific principal diagnosis that is rejected by the MCE when reported as the principal diagnosis. Codes V56.1 and V56.2 describe conditions relating to dialysis for renal failure. Therefore, we believe that our proposal to utilize the existing CC list encompassed most of the cases on the recommended list, as well as other cases with additional CCs requiring additional resources. We examined the MedPAR data for the cases in the coronary stent DRGs, distinguishing cases that include CCs and those that do not. The following table displays the results:

Number of Average length- Average DRG

cases

of-stay

charges

DRG 516--All Cases..............................................

37,325

4.79

$40,278 DRG 516 Cases With CC...........................................

25,806

5.5

43,691 DRG 516 Cases Without CC........................................

11,519

3.0

32,631 DRG 517--All Cases..............................................

64,022

2.58

32,145 DRG 517 Cases With CC...........................................

50,960

2.8

33,178 DRG 517 Cases Without CC........................................

13,062

1.5

28,113 DRG 526--All Cases..............................................

51,431

4.36

45,924 DRG 526 Cases With CC...........................................

32,904

5.2

49,751 DRG 526 Cases Without CC........................................

18,527

2.8

39,126 DRG 527--All Cases..............................................

176,956

2.23

36,087 DRG 527 Cases With CC...........................................

137,641

2.4

37,142 DRG 527 Cases Without CC........................................

39,315

1.3

32,392

[[Page 47294]]

The data show a clear differentiation in average charges between the cases in DRG 516 and 526 ``with CC'' and those ``without CC.'' Therefore, the data suggested that a ``with and without CC'' split in DRG 516 and 526 was warranted. At the same time, the data did not show such a clear differentiation, in either average charges or lengths of stay, among the cases in DRGs 517 and 527.

As a result of this analysis, in the proposed rule, we had originally proposed to delete DRGs 516 and 526, and to substitute four new DRGs in their place. These new DRGs were to have been patterned after existing DRGs 516 and 526, except that they would be split based on the presence or absence of a secondary diagnosis on the existing CC list. Specifically, we intended to create DRG 547 (Percutaneous Cardiovascular Procedure with AMI with CC), DRG 548 (Percutaneous Cardiovascular Procedure with AMI without CC), DRG 549 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with AMI with CC), and DRG 550 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with AMI without CC). As we noted above, the MedPAR data did not support restructuring DRGs 517 and 527 based on the presence or absence of a CC. Therefore, we proposed to retain these two DRGs in their current forms. We believed this revised structure would result in a more inclusive and comprehensive array of cases within MDC 5 without selectively recognizing certain secondary diagnoses as ``complex.''

We received a number of comments on the proposed restructuring of DRGs 516, 517, 526, and 527 in the FY 2006 IPPS proposed rule.

Comment: All of the commenters approved of the proposed restructuring of these DRGs, especially with regard to dividing DRGs 516 and 526 on the basis of the presence or absence of complicating secondary diagnoses.

Response: We appreciate the comments submitted in support of this proposal.

Comment: One commenter noted that the average patient receives 1.5 stents, and expressed the desire for CMS to begin ``appropriate reimbursement'' in FY 2006, consistent with the additional expense involved when multiple stents are inserted. One commenter remained concerned that the DRG weights significantly underestimate the true costs of performing drug-eluting stent procedures, especially for multiple vessel, multiple stent procedures, and expressed concern that the proposed relative weights could result in financial losses for hospitals, with the result that access to stent procedures is discouraged.

Response: We created new ICD-9-CM procedure codes effective for discharges on or after October 1, 2005, to capture both the number of stents inserted and the number of vessels treated. Absent accurate charge data, we cannot predict the correct relative weight for a DRG containing more than one stent. We reiterate that we will continue to monitor the MedPAR data, and will make future evidence-based changes to the DRG structure and logic as warranted.

Comment: Several commenters supported the maintenance of separate reimbursement structures for drug-eluting stents and recommended that we continue to separate drug-eluting and bare metal stents in different DRGs until such time as the bare metal stents represent an insignificant proportion of the total coronary stent discharges.

Response: We recognize that the resources surrounding bare metal stents and drug-eluting stents differ appreciably and will continue to keep these cases separate from each other until such time as it is appropriate, according to the evidence provided in our MedPAR data, that these cases can be combined.

Comment: Several commenters supported CMS' proposal to create eight new procedure codes; four codes describing the number of vessels treated and four codes describing the number of stents inserted. In addition, two commenters suggested that CMS should issue a separate communication reiterating the correct use of these codes.

Response: We take this opportunity to clear up a misconception. The codes published in Tables 6A through 6F are not proposed codes. They are final codes, and as such, are not subject to comment. Absent any typographical errors or late changes to the codes, they may be considered available for use on October 1 of the following fiscal year. This year, because of the changes made by the March 31, 2005 and April 1, 2005 ICD-9-CM Coordination and Maintenance Committee, the codes in the proposed rule were not as complete as those codes published in this final rule. The codes contained in Tables 6A through 6F of this final rule include all new codes for FY 2006, which will go into effect on October 1, 2005.

CMS partners with the American Hospital Association with regard to correct coding advice published in the Coding Clinic for ICD-9-CM. AHA's fourth edition of the year always includes the new codes for the upcoming year and includes examples on their proper use. In addition, CMS' MedLearn site at http://www.cms.hhs.gov/medlearn/icd9code.asp#top

contains coding information.

Comment: One commenter recommended that the use of the eight new codes describing number of vessels and number of stents be used on both coronary and peripheral vessels.

Response: The note that will appear at the top of the 00.4 (Adjunct Vascular System Procedures) section of Tabular section of the ICD-9-CM Procedure Coding Book will read as follows: ``These codes can apply to both coronary and peripheral vessels. These codes are to be used in conjunction with other therapeutic procedure codes to provide additional information on the number of vessels upon which a procedure was performed or the number of stents inserted, or both. As appropriate, hospitals should code both the number of vessels operated on (00.40 through 00.43) and the number of stents inserted (00.45 through 00.48).

Comment: One commenter stated that by the time CMS gets data on the eight new codes, it will be FY 2008, and hospitals will have had inadequate reimbursement for multiple stents until then. The commenter suggested that CMS incorporated additional payment for multiple stents and multiple vessels treated into the FY 2007 weights.

Response: We will follow the use of these codes, but may not be prepared to make any DRG changes based on their use with only one year's worth of data.

Comment: One commenter stated that DRGs should not be restructured for multiple stent insertion without adequate data to support our decisionmaking process.

Response: We agree and intend to closely follow the use of these eight new codes in the MedPAR data.

Comment: One commenter was not convinced that the proposed new structure of DRGs 516 and 526, with and without comorbidities and complications should be the permanent solution for all coronary stent DRGs. This commenter agreed that the new structure of these DRGs should not preclude subsequent restructuring of the stent DRGs.

Response: We agree that restructuring DRGs 516 and 526 in the proposed manner might not be a permanent solution for classifying all stent DRGs. However, we have now decided not to adopt the proposed restructuring of DRGs 516 and 526 that was described in the proposed rule. We have now determined that it is appropriate to restructure nine DRGs in MDC 5, including DRGs 516, 517, 526, and 527,

[[Page 47295]]

on the basis of the presence or absence of a major cardiovascular condition. We are making this change in the DRG structure in response to public comments concerning our response to MedPAC's recommendations to better recognize severity in the DRG system. The full text of the changes we are making to the cardiovascular DRG, including the coronary artery stent DRGs, can be found in section IX.A. of this final rule.

Comment: One commenter requested that CMS adopt an ICD-9-CM code that was discussed at the October 7, 2004 ICD-9-CM Coordination and Maintenance Committee. That code, had it been adopted, would have been 00.44 (Procedure on bifurcated vessels) in the new series of codes describing the number of vessels treated. The commenter stated that the creation of this code is critical to understanding the contemporary approaches to treatment of coronary artery disease. The commenter further stated that treatment of stenosis [of a blood vessel] at a bifurcation represents 25 to 30 percent of percutaneous coronary interventions and recommended that coders use one code for number of vessels, one code for number of stents, and an additional code to note that a bifurcated vessel was treated. According to the commenter, a new code for the treatment of a bifurcated vessel is necessary because the existing codes that describe the number of vessels treated (codes 00.40 through 00.43) will only be used by coders for the counting of uninterrupted, straight vessels.

Response: We did not choose to create a new code for procedure on a bifurcated vessel for two reasons. First, we do not believe that level of granularity is needed in order to accurately code stent insertion for bifurcated vessels. We believe that the codes for multiple stents and vessels will provide the necessary information about resource use for the procedure. Second, we are concerned that coders will not have sufficient information documented in the medical record to identify procedures on bifurcated vessels as opposed to a specific number of procedures on a specific number of vessels. Because procedures on bifurcated vessels are so prevalent (25 to 30 percent, according to the commenter), they should be considered technical variants rather than distinct entities to be coded separately. We solicited input from the industry when creating the new coronary stent codes, and we believe that the new codes as they exist adequately capture resource utilization. We also note that this level of detail is not present in the Current Procedural Terminology (CPT) coding structure, which is the basis upon which physicians are paid.

Accordingly, in this final rule, for FY 2006, we are deleting DRGs 516, 517, 526, and 527 for percutaneous placement of both drug-eluting and nondrug-eluting stents. We are creating four new DRGs in their places. Rather than divide these DRG pairs based on whether the patient had an acute myocardial (AMI), we are splitting each pair of DRGs based on the presence or absence of a major cardiovascular condition. Although, as discussed in the proposed rule, in the past we have expressed concerns regarding selectively recognizing secondary diagnoses or complicating conditions, particularly conditions from other MDCs, in making DRG assignments, we believe these concerns are not relevant to the new cardiovascular DRGs. While we are adopting an approach for distinguishing patients with complex conditions, with a few exceptions, our approach uses complex cardiovascular conditions (or diagnoses within the MDC) to decide whether a patient should be assigned to the higher weighted DRG. In those cases where we have used a diagnosis from another MDC in assigning a patient to the MCV DRG, the condition is generally a closely related vascular condition that is linked to the patient's cardiovascular illness. We believe that this revised structure identifies subgroups of significantly more severe patients who use greater hospital resources more accurately than was possible under the previous DRGs. The new DRG titles are:

DRG 555 (Percutaneous Cardiovascular Procedure With Major Cardiovascular Diagnosis (formerly DRG 516)

DRG 556 (Percutaneous Cardiovascular Procedure With Non- Drug-Eluting Stent Without Major Cardiovascular Diagnosis (formerly DRG 517)

DRG 557 (Percutaneous Cardiovascular Procedure With Drug- Eluting Stent With Major Cardiovascular Diagnosis (formerly DRG 526)

DRG 558 (Percutaneous Cardiovascular Procedure With Drug- Eluting Stent Without Major Cardiovascular Diagnosis (formerly DRG 527)

We refer the reader to section IX.A. of the preamble to this final rule for a full presentation of the changes to the DRGs for coronary artery stents for FY 2006.

Although we are adopting some restructuring of the coronary stent DRGs for FY 2006, it is important to note that this change does not preclude proposals in subsequent years to further restructure the coronary stent DRGs based on the number of vessels treated. We will continue to monitor and analyze clinical and resource trends in this area. For example, we have found indications in the current data that treatment may be moving toward use of drug-eluting stents, and away from use of bare metal stents. Specifically, cases in DRGs 516 and 517, which utilize bare metal stents, comprise only 44.4 percent, or less than half, of the cases in the four coronary stent DRGs in the MedPAR data we analyzed. As use of drug-eluting stents becomes the standard of treatment, we may consider over time whether to dispense with the distinction between these stents and the older bare metal stent technology in the structure of the coronary stent DRGs. In addition, we will continue to consider whether the structure of these DRGs ought to reflect differences in the number of vessels treated or the number of stents inserted, or both. As we discussed above, a new coding structure capable of identifying multiple vessel treatment and the insertion of multiple stents will go into effect on October 1, 2005. It remains premature to restructure the coronary stent DRGs on the basis of the number of vessels treated or the number of stents inserted, or both, until data reflecting the use of these new codes become available. After we have pertinent data in our historical MedPAR database, we will analyze those data in order to determine whether a restructuring of the DRGs based on multiple vessel treatment or insertion of multiple stents, or both, is warranted.

We refer the reader to Table 6B of this final rule for the descriptions of four new ICD-9-CM codes identifying multiple stent insertion (codes 00.45, 00.46, 00.47, and 00.48) and four new codes identifying multiple vessel treatment (codes 00.40, 00.41, 00.42, and 00.43). Coders are encouraged to use as many codes as necessary to describe each case, using new code 00.66 (Percutaneous transluminal coronary angioplasty [PTCA] or coronary atherectomy) and one code each for the number of vessels treated and the number of stents inserted. Coders are encouraged to record codes accurately, irrespective of whether the code has an impact on the DRG assignment, as these data will potentially be the basis for future DRG restructuring. d. Insertion of Left Atrial Appendage Device

Atrial fibrillation is a common heart rhythm disorder that can lead to a cardiovascular blood clot formation

[[Page 47296]]

leading to increased risk of stroke. According to product literature, nearly all strokes are from embolic clots arising in the left atrial appendage of the heart: an appendage for which there is no useful function. Standard therapy uses anticoagulation drugs. However, these drugs may be contraindicated in certain patients and may cause complications such as bleeding. The underlying concept behind the left atrial appendage device is to block off the left atrial appendage, so that the blood clots formed therein cannot travel to other sites in the vascular system. The device is implanted using a percutaneous catheter procedure under fluoroscopy through the femoral vein. Implantation is performed in a hospital catheterization laboratory using standard transseptal technique, with the patient generally under local anesthesia. The procedure takes approximately 1 hour, and most patients stay overnight in the hospital.

In the FY 2005 IPPS final rule (69 FR 48978, August 11, 2004), we discussed the DRG assignment of new ICD-9-CM procedure code 37.90 (Insertion of left atrial appendage device) for clinical trials, effective for discharges occurring on or after October 1, 2004, to DRG 518 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or Acute Myocardial Infarction). In that final rule, we addressed the DRG assignment of procedure code 37.90 in response to a comment from a manufacturer who suggested that placement of the code in DRG 108 (Other Cardiothoracic Procedures) was more representative of the complexity of the procedure than placement in DRG 518. The manufacturer indicated that the suggested placement of procedure code 37.90 in DRG 108 was justified because another percutaneous procedure, described by ICD-9-CM procedure code 35.52 (Repair of atrial septal defect with prosthesis, closed technique), was assigned to DRG 108. As we indicated in the FY 2005 final rule (69 FR 48978), this comment prompted us to examine data in the FY 2003 MedPAR file for cases of code 35.52 assigned to DRG 108 and DRG 518 in comparison to all cases assigned to DRG 108. We found the following:

Number of Average length Average DRG

cases

of stay

charges

DRG 108 With Code 35.52 Reported................................

523

2.69

$29,231 DRG 108--All cases..............................................

5,293

10.1

76,274 DRG 518--All cases..............................................

39,553

4.3

31,955

Therefore, we concluded that procedure code 35.52 showed a decided similarity to the cases found in DRG 518, not DRG 108. At that time, we determined that we would analyze the cases for both clinical coherence and charge data as part of the IPPS FY 2006 process of identifying the most appropriate DRG assignment for procedure code 35.52.

We examined data from the FY 2004 MedPAR file and found results for cases assigned to DRG 108 and DRG 518 that are similar to last year's findings as indicated in the chart below:

Number of Average length- Average DRG

cases

of-stay

charges

DRG 108 With Code 35.52 Reported................................

872

2.42

$29,579 DRG 108--All cases..............................................

8,264

9.81

81,323 DRG 518--All cases..............................................

38,624

3.49

27,591

From this comparison, we found that when an atrial septal defect is percutaneously repaired, and procedure code 35.52 is the only code reported in DRG 108, there is a significant discrepancy in both the average charges and the average length of stay between the cases with procedure code 35.52 reported in DRG 108 and the total cases in DRG 108. The total cases in DRG 108 have average charges of $51,744 greater than the 872 cases in DRG 108 reporting procedure code 35.52 as the only procedure. The total cases in DRG 108 also have an average length of stay of 7.39 days greater than the average length of stay for cases in DRG 108 with procedure code 35.52 reported. In comparison, the total cases in DRG 518 have average charges of only $1,988 lower than the cases in DRG 108 with only procedure code 35.52 reported. In addition, the length of stay in total cases in DRG 518 is more closely related to cases in DRG 108 with only procedure code 35.52 reported. Based on this analysis, we proposed to move procedure code 35.52 out of DRG 108 and place it in DRG 518.

Comment: One commenter agreed that the left atrial appendage device procedure code should be moved out of DRG 108 and into DRG 518 based on significantly lower average charges and length of stay as compared to the majority of cases within the current classification.

Response: Even though this comment did not exactly reflect our proposal regarding the left atrial appendage device, we are interpreting the commenter's statement to mean that it agreed that code 35.52 should be removed from DRG 108.

Comment: One commenter addressed the proposed removal of code 35.52 from DRG 108. The commenter acknowledged that the resource intensity for patients undergoing percutaneous atrial septal defect repair is less than that of open repair, but did not believe that the costs are akin to procedures presently assigned to DRG 518 because of the cost of the closure device and additional testing, such as electrocardiography. The commenter recommended that CMS not move code 35.52 out of DRG 108 until better data can be gathered and a more appropriate reimbursement calculation can be developed.

Response: This year, CMS undertook an extensive review of MDC 5 after issuance of the FY 2006 IPPS proposed rule in response to MedPAC's recommendations regarding restructuring the Medicare DRG system to improve payment accuracy under the IPPS. A discussion of the results of that review and our subsequent decision in response to a comment on the proposed rule to make changes to nine cardiovascular DRGs, can be found in section IX.A. of this preamble. During that review, we evaluated each surgical DRG within MDC 5. In addition, within each DRG, we evaluated each procedure code to determine the number of cases,

[[Page 47297]]

the average length of stay, and the average standardized charges. In DRG 108, the results were the same as in the table shown above in this section, and published in the FY 2006 IPPS proposed rule. Code 35.52 had an average length of stay of approximately one fourth of the rest of the cases in that DRG, and had average charges that were greater than $51,700 less than the remainder of the cases in DRG 108. In addition, code 35.52 represents a closed technique approach, unlike the other cases in DRG 108. We believe this is compelling evidence that this procedure is not most appropriately assigned to DRG 108. Therefore, we are finalizing our proposal to move code 35.52 out of DRG 108 and into DRG 518 with cases that resemble it in average length of stay, average charges, and clinical coherence. We believe that this move will result in a more coherent group of cases in DRG 518 that reflect all percutaneous procedures.

Comment: Three commenters did not believe that the left atrial appendage device, represented by new code 37.90, should be placed in DRG 518. They believed that DRG 518 does not cover the costs for the procedure and device, and suggested placement in another DRG that would include similar procedures and a better reimbursement. Two commenters suggested that a more appropriate DRG would be either DRG 108 or DRG 111 (Major Cardiovascular Procedures Without CC).

Response: Based on our data review and discussion above, we do not believe that placement of code 37.90 is appropriate in DRG 108. Code 37.90 is a percutaneously placed device utilizing local anesthesia, and with an expected length of stay of one day.

We reviewed cases in the MedPAR file assigned to both DRG 110 (Major Cardiovascular Procedures With CC) and DRG 111. The results of the review show that both open and percutaneous procedures are grouped in these paired DRGs. A comparison of the MedPAR data in DRGs 110, 111, and 518 is shown in the following table:

Average DRG

Number of Average length standardized cases

of stay

charges

DRG 110.........................................................

53,527

\1\ 8.4

$66,475 DRG 111.........................................................

9,438

\1\ 3.43

26,941 DRG 518--All cases..............................................

38,624

3.49

27,591 DRG 518 with code 37.90.........................................

0

0

0

\1\ Days.

As shown in the table, code 37.90 in DRG 518 has not been reported in the database yet. It is a new code; therefore, it has no payment history. We note that the cases in DRG 518 closely match those in DRG 111 in terms of both average length of stay and average charges. However, we also note that DRGs 110 and 111 are paired DRGs with significantly different average charges and lengths of stay. Even with a CC, we believe it is unlikely that an endovascular placement of a left atrial appendage device will approximate the costs of cases to be assigned to DRG 110. Therefore, in our view, there is the potential for significant overpayment if we were to assign the left atrial appendage device to DRG pairs 110 and 111. We continue to believe that placement of the left atrial appendage device in DRG 518 is appropriate absent any evidence that would convince us otherwise. Therefore, we are not making any changes in our proposal in this final rule. We will continue to monitor its data in our annual review of DRGs and the IPPS.

As we proposed, in this final rule we are moving procedure code 35.52 out of DRG 108 and placing it in DRG 518. We believe that this move will result in a more coherent group of cases in DRG 518 that reflect all percutaneous procedures. e. External Heart Assist System Implant

In the August 1, 2002 final rule (67 FR 49989), we attempted to clinically and financially align ventricular assist device (VAD) procedures by creating DRG 525 (Heart Assist System Implant). We also noted that cases in which a heart transplant also occurred during the same hospitalization episode would continue to be assigned to DRG 103 (Heart Transplant).

After further data review during the subsequent 2 years, we decided to realign the DRGs containing VAD codes for FY 2005. In the August 11, 2004 final rule (69 FR 48927), we announced changes to DRG 103, DRG 104 (Cardiac Valve and Other Major Cardiothoracic Procedure with Cardiac Catheterization), DRG 105 (Cardiac Valve and Other Major Cardiothoracic Procedures Without Cardiac Catheterization), and DRG 525.

In summary, these changes included--

Moving code 37.66 (Insertion of implantable heart assist system) out of DRG 525 and into DRG 103.

Renaming DRG 525 as ``Other Heart Assist System Implant.''

Moving code 37.62 (Insertion of non-implantable heart assist system) out of DRGs 104 and 105 and back into DRG 525.

DRG 525 currently consists of any principal diagnosis in MDC 5, plus the following surgical procedure codes:

37.52, Implantation of total replacement heart system*

37.53, Replacement or repair of thoracic unit of total replacement heart system*

37.54, Replacement or repair of other implantable component of total replacement heart system*

37.62, Insertion of non-implantable heart assist system

37.63, Repair of heart assist system

37.65, Implant of external heart assist system

*These codes represent noncovered services for Medicare beneficiaries. However, it is our longstanding practice to assign every code in the ICD-9-CM classification to a DRG. Therefore, they have been assigned to DRG 525.

Since that decision, we have been encouraged by a manufacturer to reevaluate DRG 525 for FY 2006. The manufacturer requested that we again review the data surrounding cases reporting code 37.65, and suggested moving these cases into DRG 103. The manufacturer pointed out the following: Code 37.65 describes the implantation of an external heart assist system and is currently approved by the FDA as a bridge- to-recovery device. From the standpoint of clinical status, the patients in DRG 103 and the patients receiving an external heart assist system are similar because their native hearts cannot support circulation, and absent a heart transplant, a mechanical pump is needed for patient survival. The surgical procedures for implantation of both an internal VAD and an external VAD are very similar. However, the external heart assist system (code 37.65) is a less expensive device than the implantable heart assist system (code 37.66).

[[Page 47298]]

Further, the Medicare charge data show that patients in DRG 525 receiving the external heart assist system had an average length of stay that was more than 28 days less than all patients in DRG 103.

The manufacturer suggested that the payment differential between DRGs 103 and 525 provides an incentive to choose the higher paying device, and asserted that only a subset of patients receiving an implantable heart assist system are best served by this device (code 37.66). The manufacturer also suggested that the initial use of the least expensive therapeutically appropriate device yields both the best clinical outcomes and the lowest total system costs.

We note that, under the DRG system, our intent is to create payments that are reflective of the average resources required to treat a particular case. Our goal is that physicians and hospitals should make treatment decisions based on the clinical needs of the patient and not financial incentives.

When we reviewed the FY 2004 MedPAR data, we were able to demonstrate the following comparisons:

Number of Average length Average DRG

cases

of stay

charges

DRG 103--All cases..............................................

633

37.5

$313,583 DRG 103 with code 37.65 reported................................

9

81.3

625,065 DRG 525--All cases..............................................

291

13.66

173,854 DRG 525 with code 37.65 reported................................

110

9.26

206,497 DRG 525 without code 37.65 reported.............................

181

16.34

154,015

Note: This table does not contain the same data that appear in the table in the proposed rule (70 FR 23322). The row containing ``DRG 103 without code 37.65'' had values of ``0'' in all fields. These entries were confusing and therefore deleted.

The above table shows that the 37.8 percent of cases in DRG 525 that reported code 37.65 have average charges that are nearly $33,000 higher than the average charges for all cases in the DRG. However, the average charges for the subset of cases with code 37.65 in DRG 525 ($206,497) are more than $107,086 lower than the average charges for all cases in DRG 103 ($313,583). Furthermore, the average length of stay for the subset of patients in DRG 525 receiving an external heart assist system was 9.26 days compared to 37.5 days for the 633 cases in DRG 103.

We note that the analysis above presents the difference in average charges, not costs. Because hospitals' charges are higher than costs, the difference in hospital costs will be less than the figures shown here.

Moving all cases containing code 37.65 from DRG 525 to DRG 103 would have two consequences. The cases in DRG 103 reporting code 37.65 would be appreciably overpaid, which would be inconsistent with our goal of coherent reimbursement structure within the DRGs. In addition, the relative weight of DRG 103 would ultimately decrease by moving the less resource-intensive external heart procedures into the same DRG with the more expensive heart transplant cases. The net effect would be an underpayment for heart transplant cases. Alternatively, we also reconsidered our position on moving the insertion of an implantable heart assist system (code 37.66) back into DRG 525. However, as shown in the FY 2005 IPPS final rule (69 FR 48929), the resource costs associated with caring for a patient receiving an implantable heart assist system are far more similar to those cases receiving a heart transplant in DRG 103 than they are to cases in DRG 525. For these reasons, we did not propose to make any changes to the structure of either DRG 103 or DRG 525.

Comment: Six commenters mentioned the high cost of the external heart assist device and for treatment for implantation of the device, and requested that CMS increase payment to cover the cost of caring for the patients that can benefit from this technology.

Two commenters agreed with CMS' assessment that the cost associated with implantation of an external heart assist system are considerably less than a heart transplant or insertion of an implantable heart assist system. One commenter echoed CMS' concerns that movement of code 37.65 to DRG 103 would result in overpayment for that service and would result in a decrease of the relative weight of the heart transplant DRG, ultimately resulting in underpayment of heart transplant cases. Both commenters agreed with CMS' decision not to include the implantation of external heart assist systems in DRG 103.

Several commenters noted that significant achievements in the areas of patient selection, implantation technique, and post-implant management have been made surrounding this technology. They added that improvements in the external heart assist device itself have been reported to make the newer devices safer and more durable. One commenter noted that observations from personal experience and research demonstrate that recent improvements to the device have resulted in increased survival rates from 35 percent (the national average) to nearly 50 percent. Several commenters mentioned that, with experience, they have discovered that a longer period of support is required than was originally anticipated for the patient's native heart to recover. The commenters stated that, originally, patients were supported an average of 5 to 7 days, but it has been found that patient outcomes were better with a longer support period, perhaps as long as 30 to 60 days. These commenters cited the increased expenses related to supporting the patient and the major financial commitment on the part of the hospitals choosing to treat this severely ill group of patients as reasons for requesting increased payment for this population of cases.

One commenter offered the following four proposals to address the payment differences between the external heart assist device and an implantable device:

Create a new DRG for patients requiring heart assist devices who also sustained an Acute Myocardial Infarction (AMI) because these patients have higher resource consumption than patients with other diagnoses in MDC 5.

Assign all cases with AMI and a procedure code of 37.65 to DRG 103.

Increase the overall weight of DRG 525 to better align it with ``true hospital charges.''

Allow a second DRG payment or an add-on payment for heart transplantations if recovery of the patient's native heart is first attempted.

Response: We appreciate the commenters' thorough understanding of the IPPS DRG grouping and payment process. We are aware that the external heart assist device cases represent a very resource-intensive group of patients. For this reason, we carefully reviewed the suggestions from the commenter about potential DRG payment policy changes that we could make to address the issue. We reviewed the MedPAR data in DRG 525, using ICD-9-CM codes 410.01 through 410.91 to identify AMIs. In

[[Page 47299]]

addition, we reviewed all cases of patients who received the external heart assist device procedure represented by ICD-9-CM code 37.65. The results are summarized in the following table:

Average length Number of

of stay

Average cases

(days)

charges

DRG 525--Cases with Any Diagnosis of AMI........................

46

8.5

$195,758 DRG 525--Cases of Principal Diagnosis of AMI....................

31

8.9

210,369 DRG 525--Cases with Secondary Diagnosis of AMI..................

15

7.7

165,562 DRG 525--Cases with No Diagnosis of AMI.........................

71

9.2

204,472 DRG 525--All Cases..............................................

291

13.66

206,497

We do not believe that these data demonstrate that the presence of an AMI has significant impact on either the length of stay or the average standardized charges. All cases with AMI have lower lengths of stay than both the average of all cases in DRG 525 (13.66 days) and the 71 cases in which no AMI was documented (9.2 days). Likewise, only those cases with a principal diagnosis of AMI have slightly higher charges than either the group without AMI, or the total of all cases. Because the data do not justify it, we are rejecting the suggestion of creating a new DRG for patients receiving an external heart assist device, as identified by procedure code 37.65, with any diagnosis of AMI.

With respect to the commenter's second suggestion, our data clearly demonstrate in the above table that patients with an AMI and procedure code 37.65 have average standardized charges of $210,369. The first table in this section that was included in the proposed rule shows that cases in DRG 103 have average standardized charges of $313,583. We believe that the relative weight of DRG 103 would eventually decrease by moving all of the less resource-intensive external heart procedures into the same DRG with the more expensive heart transplant cases. For these reasons, we are rejecting the commenter's proposal to assign cases with AMI and code 37.65 to DRG 103.

With regard to the suggestion (received many times) to selectively increase the relative weight of specific DRGs, the DRG relative weights are annually recalibrated based on Medicare hospital discharges using the most current charge information available (FY 2004 MedPAR file for the FY 2006 relative weights). We use a complex mathematical algorithm to determine the relative weights that is fully explained in section II. of this preamble. The DRG relative weights are neither arbitrarily nor capriciously assigned. However, if we adopted the suggestion to select a relative weight for a specific DRG outside of this process, we are concerned that the relative weight determination would be viewed as arbitrary and capricious, and we would lose the advantage of having an objective methodology that bases the relative weight on average hospital charges. For this reason, we are not adopting the commenter's suggestion to select a relative weight for external heart assist device cases outside of our traditional process.

The commenter's fourth suggestion was to make two payments for a single inpatient stay when the patient receives the external heart assist system, recovery of the patient's native heart is attempted and fails, and the patient receives a heart transplant. In cases where the patient received the external heart assist system and later receives a heart transplant, the case is already paid using DRG 103. In this situation, the relative weight for DRG 103 will reflect the average charges for all patients in the DRG, including those described in the scenario presented by the commenter. Thus, to the extent that hospital charges for these patients are already reflected in the relative weight for the DRG, we do not believe that it is necessary for Medicare to make a second payment. To arbitrarily select one DRG, or a group of DRGs, and add an additional DRG payment to those cases is contrary to our stated goal of having a system in which all cases are fairly considered by the same recalibration formula. Therefore, we do not intend to either determine an additional DRG payment or an add-on payment for this category of patients.

We reiterate that our data do not support the argument that patients receiving the external heart assist device have longer lengths of stay than other patients in DRG 525, even though the data show that their average charges are higher, as noted in the above table. In determining the possible reasons for higher average charges and lower lengths of stay, we further examined the Medicare billing data. We found that almost 76 percent of the Medicare beneficiaries receiving the external heart device expired during the hospital stay. Thus, the shorter length of stay and the higher average charges for these patients compared to other patients in DRG 525 are likely explained by the high cost of the device and the fact that these patients are severely ill and frequently expire.

Upon further analysis of the data, we did find that there was a single subgroup of patients who are comparable in resource usage and length of stay to those included in DRG 103. These patients received both the external heart assist device and later had it removed after a lengthy period of rest and recovery. We note that commenters provided information indicating that survival rates are improving for patients receiving more advanced versions of these devices. In addition, commenters provided information indicating that longer periods of support with the external heart assist device are improving patients' survival chances and opportunity to be discharged with their native heart. According to information included with the comments, the data show a 50-percent survival rate with an average total length of stay of 43 days for all AMI heart recovery patients. On average, a surviving patient will receive 31 days of average support time followed by an additional 38 days in the hospital after the device is removed. Based on the commenter's information from a later year than our MedPAR data, it is clear that patients weaned from the external heart assist system have longer lengths of stay and are very different from the average patients having this procedure that are in our FY 2004 data. Given the newness of this procedure, the Medicare charge data included a limited number of patients having the device implanted and removed. However, the Medicare charge data did support that patients receiving both an implant and removal of an external heart assist system in a single hospital stay had an average length of stay exceeding 50 days and average charges of $378,000 that are more comparable to

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patients in DRG 103 than DRG 525. While we did not suggest a change to DRG 103 in the proposed rule, we believe that consideration of the comments is best served by recognizing this unique subset of patients and making a DRG change which acknowledges the increased resources required for improvements in their care.

The commenter has provided us with data showing that with superior patient selection, and increased duration of treatment with an improved device, the patients are more likely to be discharged from the hospital with the native heart intact. While we have limited Medicare data and the data are from a different year than the commenter's data, our data do support that patients having an external heart assist device implanted and removed during the same admission are comparable to in costs and average length of stay to heart transplant and implantable heart assist system patients in DRG 103. While we did not suggest a change to DRG 103 in the proposed rule, we believe that consideration of the comments is best served by recognizing this unique subset of patients, and making a DRG change that acknowledges the increased resources required for improvement in their care. Because we believe that this therapy offers a treatment option to patients who have limited alternatives, we are making a change to the DRG using the limited Medicare data we have available rather than waiting a year to receive more supporting data.

For the reasons stated above, for FY 2006, we are reconfiguring DRG 103 in the following manner: Those patients who have both the implantation of the external VAD (code 37.65) and the explantation of that VAD (code 37.64) prior to the hospital discharge will be assigned to DRG 103. The revised DRG 103 contains the following codes:

33.6, Combined heart-lung transplantation

37.51, Heart transplantation

37.66, Insertion of implantable heart assist system

Or

37.65, Implant of external heart assist system

And

37.64, Removal of heart assist system.

By making this change, Medicare will be making higher payments for patients who receive both an implant and an explant of an external heart assist system during a single hospital stay. Our intent in establishing this policy is to recognize the higher costs of patients who have a longer length of stay and are discharged alive with their native heart. Cases in which a heart transplant also occurs during the same hospitalization episode would continue to be assigned to DRG 103.

In order to accurately monitor these patients and obtain more information on patients with these conditions, we intend to have the Quality Improvement Organizations (QIOs, formerly the PROs) review all cases in DRG 103 under the auspices of their eighth scope of work to determine whether implantation and care during the admission were reasonable and necessary to promote the recovery of the injured myocardium and lead to improvement of the patient's condition. For medical review under this contract, the QIOs determine whether items and services are reasonable and medically necessary and whether the quality of such services meets professionally recognized standards of health care. In addition, in hospitals subject to the IPPS, the QIOs review the validity of diagnostic information, the completeness, adequacy, and quality of care provided, and the appropriateness of admissions and discharges. We will continue to examine the claims data in upcoming years to determine if CMS' consideration surrounding the unique circumstances of these patients and this treatment modality were in the best interest of both the patients and the Medicare program. f. Carotid Artery Stent

Stroke is the third leading cause of death in the United States and the leading cause of serious, long-term disability. Approximately 70 percent of all strokes occur in people age 65 and older. The carotid artery, located in the neck, is the principal artery supplying the head and neck with blood. Accumulation of plaque in the carotid artery can lead to stroke either by decreasing the blood flow to the brain or by having plaque break free and lodge in the brain or in other arteries to the head. The percutaneous transluminal angioplasty (PTA) procedure involves inflating a balloon-like device in the narrowed section of the carotid artery to reopen the vessel. A carotid stent is then deployed in the artery to prevent the vessel from closing or restenosing. A distal filter device (embolic protection device) may also be present, which is intended to prevent pieces of plaque from entering the bloodstream.

Effective July 1, 2001, Medicare covers PTA of the carotid artery concurrent with carotid stent placement when furnished in accordance with the FDA-approved protocols governing Category B Investigational Device Exemption (IDE) clinical trials. PTA of the carotid artery, when provided solely for the purpose of carotid artery dilation concurrent with carotid stent placement, is considered to be a reasonable and necessary service only when provided in the context of such clinical trials and, therefore, is considered a covered service for the purposes of these trials. Performance of PTA in the carotid artery when used to treat obstructive lesions outside of approved protocols governing Category B IDE clinical trials remains a noncovered service. At its April 1, 2004 meeting, the ICD-9-CM Coordination and Maintenance Committee discussed creation of a new code or codes to identify carotid artery stenting, along with a concomitant percutaneous angioplasty or atherectomy (PTA) code for delivery of the stent(s). We established codes for carotid artery stenting procedures for use with discharges occurring on or after October 1, 2004 inpatients who are enrolled in an FDA-approved clinical trial and are using on-label FDA-approved stents and embolic protection devices. These codes are as follows:

00.61 (Percutaneous angioplasty or atherectomy of precerebral (extracranial vessel(s)); and

00.63 (Percutaneous insertion of carotid artery stent(s)).

We assigned procedure code 00.61 to four MDCs and seven DRGs. The most likely scenario is that in which cases are assigned to MDC 1 (Diseases and Disorders of the Nervous System) in DRGs 533 (Extracranial Procedures with CC) and 534 (Extracranial Procedures without CC). Other DRG assignments can be found in Table 6B of the Addendum to the FY 2005 IPPS final rule (69 FR 49624).

In the FY 2005 IPPS final rule, we indicated that we would continue to monitor DRGs 533 and 534 and procedure code 00.61 in combination with procedure code 00.63 in upcoming annual DRG reviews. For the FY 2006 IPPS proposed rule and this final rule, we used proxy codes to evaluate the costs and DRG assignments for carotid artery stenting because codes 00.61 and 00.63 were only approved for use beginning October 1, 2004, and MedPAR data for this period are not yet available. We used procedure code 39.50 (Angioplasty or atherectomy of other noncoronary vessel(s)) in combination with procedure code 39.90 (Insertion of nondrug-eluting peripheral vessel stent(s)) in DRGs 533 and 534 as the proxy codes for carotid artery stenting. For this evaluation, we used principal diagnosis code 433.10 (Occlusion and stenosis of carotid artery, without mention of cerebral

[[Page 47301]]

infarction) to reflect the clinical trial criteria.

The following chart shows our findings:

Number of Average length Average DRG

cases

of stay

charges

DRG 533--All cases..............................................

44,677

3.73

$24,464 DRG 533 with codes 39.50 and 39.90 reported.....................

1,586

3.13

29,737 DRG 534--All cases..............................................

42,493

1.79

15,873 DRG 534 with codes 39.50 and 39.90 reported.....................

1,397

1.54

22,002

The patients receiving a carotid stent (codes 39.50 and 39.90) represented 3.5 percent of all cases in DRG 534. On average, patients receiving a carotid stent had slightly shorter average lengths of stay than other patients in DRGs 533 and 534. While the average charges for patients receiving a carotid artery stent were higher than for other patients in DRG 534, in our view, the small number of cases and the magnitude of the difference in average charges are not sufficient to justify a change in the DRGs.

Because we have a paucity of data for the carotid stent device and its insertion, we believe it is premature to revise the DRG structure at this time. We expect to revisit this analysis once data become available on the new codes for carotid artery stents.

We received 11 comments on our presentation of the carotid stent device issue in the FY 2006 IPPS proposed rule.

Comment: One commenter recommended that CMS include carotid stenting in the DRG for carotid endarterectomy in FY 2006 and ensure that the data it is collecting for setting payment rates in FY 2007 appropriately accounts for the cost of the device.

Response: Code 38.12 (Endarterectomy, other vessels of head and neck) describes the open endarterectomy procedure, and is assigned to DRGs 533 and 534 which is the same DRG assignment as the endovascular endarterectomy. Therefore, both the open endarterectomy and the placement of carotid stent result in assignment to the same DRG, which reflects CMS' policy of placing new codes in predecessor DRGs. We point out that codes 00.61 and 00.63 must be used together to allow payment for carotid stenting. Code 00.63 is not recognized by the GROUPER program as a stand-alone O.R. procedure and, as such, has no impact on DRG assignment. Therefore, we anticipate that the cost of the device will be reflected in the hospital charges.

Comment: One commenter agreed with our presentation in the proposed rule and suggested that we should make no change to the DRG assignment for carotid artery stenting.

Response: We agree and will not be making a change to the DRG assignment for carotid artery stenting.

Comment: Nine commenters encouraged CMS to create two new DRGs for carotid stent procedures and split these new DRGs on the basis of the presence or absence of comorbidities or complications. They believed that, even though the current volume of carotid artery stenting cases appears small, the recent availability of FDA-approved devices, new and ongoing clinical trials, multiple post-market registries, as well as expanded Medicare coverage, will result in a large increase in the number of cases. They also expressed concern that the potential increase in patient volume and their perceived inadequate payment for carotid artery stent cases will create a financial hardship on facilities providing this technology, potentially resulting in decreased Medicare beneficiary access to this beneficial therapy.

Response: We continue to believe that the most appropriate changes to the IPPS and the structure of the DRGs are based on evidence of a significant difference in average costs between technology itself and the DRG where its code is assigned. Because the ICD-9-CM procedure codes are new, we do not have data showing that carotid artery stents are more costly than other cases in DRGs 533 and 534. Further, using codes 39.50 and 39.90 as proxies for carotid artery stenting, we did not observe a substantial difference in average charges between cases using these codes and other cases in the DRGs. For this reason, we do not have sufficient evidence to warrant a DRG change at this time.

In this final rule, we are retaining code 00.61 in DRGs 533 and 534 for FY 2006. We will continue to monitor the Medicare charge data in our annual review of DRGs and the IPPS. g. Extracorporeal Membrane Oxygenation (ECMO)

Extracorporeal membrane oxygenation (ECMO) is a procedure to create a closed chest, heart-lung bypass system by insertion of vascular catheters. Patients receiving this procedure require mechanical ventilation. ECMO is performed for a small number of severely ill patients who are at high risk of dying without this procedure. Most often it is done for neonates with persistent pulmonary hypertension and respiratory failure for whom other treatments have failed, certain severely ill neonates receiving major cardiac procedures or diaphragmatic hernia repair, and certain older children and adults, most of whom are receiving major cardiac procedures.

Prior to the proposed rule, we received several letters from institutions that perform ECMO. The commenters stated that, in the CMS GROUPER logic, this procedure has little or no impact on the DRG assignment in the newborn, pediatric, and adult population. According to these letters, patients receiving ECMO are highly resource intensive and should have a unique DRG that reflects the costs of these resources. The commenters recommended the creation of a new DRG for ECMO with a DRG weight equal to or greater than the DRG weight for tracheostomy.

ECMO is assigned to procedure code 39.65 (Extracorporeal membrane oxygenation). This code is classified as an O.R. procedure and is assigned to DRG 104 (Cardiac Valve and Other Major Cardiothoracic Procedure With Cardiac Catheterization) and DRG 105 (Cardiac Valve and Other Major Cardiothoracic Procedure Without Cardiac Catheterization). When ECMO is performed with other O.R. procedures, the case is assigned to the higher weighted DRG. For example, when ECMO and a tracheostomy are performed during the same admission, the case would be assigned to DRG 541 (Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses With Major O.R.).

We note that the primary focus of updates to the Medicare DRG classification system is changes relating to the Medicare patient population, not the pediatric patient population.

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Because ECMO is primarily a pediatric procedure and rarely performed in an adult population, we have few cases in our data to use to evaluate resource costs. We are aware that other insurers sometimes use Medicare's rates to make payments. We advise private insurers to make appropriate modifications to our payment system when it is being used for children or other patients who are not generally found in the Medicare population.

To evaluate the appropriateness of payment under the current DRG assignment, we have reviewed the FY 2004 MedPAR data and found 78 ECMO cases in 13 DRGs.

The following table illustrates the results of our findings:

Average Number of Average length Average charges for DRG with code 39.65 reported

cases

of stay

charges for all cases in ECMO cases

the DRG

4..............................................

23

9

$147,766

$120,496 105............................................

21

8

131,700

89,831 541............................................

14

62.9

561,210

273,656 All Other DRGs.................................

20

18.1

308,341

NA

The average charges for all ECMO cases were approximately $258,821, and the average length of stay was approximately 20.7 days. The average charges for the ECMO cases are closer to the average charges for DRG 541 ($273,656) than to the average charges of DRG 104 ($147,766) and DRG 105 ($131,700). Of the 78 ECMO cases, 14 cases are already assigned to DRG 541. We believe that the data indicate that DRG 541 would be a more appropriate DRG assignment for cases where ECMO is performed. We further note that under the All Payer DRG System used in New York State, cases involving ECMO are assigned to the tracheostomy DRG. Thus, the assignment of ECMO cases to the tracheostomy DRG for Medicare would be similar to how these cases are grouped in another DRG system. For these reasons, we proposed to reassign ECMO cases reporting code 39.65 to DRG 541. We also proposed to change the title of DRG 541 to: ``ECMO or Tracheostomy With Mechanical Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth and Neck Diagnoses With Major O.R. Procedure''.

Comment: Several commenters supported the proposed modification to ECMO cases reporting code 39.65 to DRG 541.

Response: We appreciate the commenters' support.

Accordingly, in this final rule, we are adopting as final the proposed change to ECMO cases reporting code 39.65 to DRG 541 with minor modification. To further clarify the change, we are changing the title of DRG 541 to ``ECMO or Tracheostomy With Mechanical Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth, and Neck With Major O.R.'' This title has been modified since the proposed rule (70 FR 23324) to delete the term ``Diagnoses'' from the title. For consistency purposes, we are also changing the DRG title for DRG 542 from ``Tracheostomy With Mechanical Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses Without Major O.R. Procedure'' to ``Tracheostomy With Mechanical Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth, and Neck Without Major O.R.'' 6. MDC 6 (Diseases and Disorders of the Digestive System): Artificial Anal Sphincter

In the FY 2003 IPPS final rule (67 FR 50242), we created two new codes for procedures involving an artificial anal sphincter, effective for discharges occurring on or after October 1, 2002: Code 49.75 (Implantation or revision of artificial anal sphincter) is used to identify cases involving implantation or revision of an artificial anal sphincter and code 49.76 (Removal of artificial anal sphincter) is used to identify cases involving the removal of the device. In Table 6B of that final rule, we assigned both codes to one of four MDCs, based on principal diagnosis, and one of six DRGs within those MDCs: MDC 6 (Diseases and Disorders of the Digestive System), DRGs 157 and 158 (Anal and Stomal Procedures With and Without CC, respectively); MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast), DRG 267 (Perianal and Pilonidal Procedures); MDC 21 (Injuries, Poisonings, and Toxic Effects of Drugs), DRGs 442 and 443 (Other O.R. Procedures for Injuries With and Without CC, respectively); and MDC 24 (Multiple Significant Trauma), DRG 486 (Other O.R. Procedures for Multiple Significant Trauma).

In the FY 2004 IPPS final rule (68 FR 45372), we discussed the assignment of these codes in response to a request we received to consider reassignment of these two codes to different MDCs and DRGs. The requester believed that the average charges ($44,000) for these codes warranted reassignment. In the FY 2004 IPPS final rule, we stated that we did not have sufficient MedPAR data available on the reporting of codes 49.75 and 49.76 to make a determination on DRG reassignment of these codes. We agreed that, if warranted, we would give further consideration to the DRG assignments of these codes because it is our customary practice to review DRG assignment(s) for newly created codes to determine clinical coherence and similar resource consumption after we have had the opportunity to collect MedPAR data on utilization, average lengths of stay, average charges, and distribution throughout the system. In the FY 2005 IPPS final rule, we reviewed the FY 2003 MedPAR data for the presence of codes 49.75 and 49.76 and determined that these procedures were not a clinical match with the other procedures in DRGs 157 and 158. Therefore, for FY 2005, we moved procedure codes 49.75 and 49.76 out of DRGs 157 and 158 and into DRGs 146 and 147 (Rectal Resection With and Without CC, respectively). This change had the effect of doubling the payment for the cases with procedure codes 49.75 and 49.76 assigned to DRGs 146 and 147 based on increases in the relative weights. One commenter suggested that we create a new DRG for ``Complex Anal/Rectal Procedure with Implant.'' However, we noted that the DRG structure is a system of averages and is based on groups of patients with similar characteristics. At that time, we indicated that we would continue to monitor procedure codes 49.75 and 49.76 and the DRGs to which they are assigned.

For the FY 2006 proposed rule, we reviewed the FY 2004 MedPAR data for the presence of codes 49.75 and 49.76. We found that these two procedures are still of low incidence. Among the six possible DRG assignments, we found a total of 18 cases reported with codes 49.75 and 49.76 for the implant,

[[Page 47303]]

revision, or removal of the artificial anal sphincter. We found 13 of these cases in DRGs 146 and 147 (compared to 12,558 total cases in these DRGs), and the remaining 5 cases in DRGs 442 and 443 (compared to 19,701 total cases in these DRGs).

We believe the number of cases with codes 49.75 and 49.76 in these DRGs is too low to provide meaningful data of statistical significance. Therefore, we did not propose any further changes to the DRGs for these procedures at this time. Neither did we propose to change the structure of DRGs 146 or 147 at this time.

Comment: One commenter agreed that we should maintain the current DRG assignment for codes 49.75 and 49.76. The commenter recommended that CMS continue to monitor the use of these codes and their DRG assignment.

Response: We acknowledge the support of the commenter and will continue to monitor utilization of the services with codes 49.75 and 49.76.

For FY 2006, we are retaining codes 49.75 and 49.76 within DRGs 146 and 147, as proposed. 7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Hip and Knee Replacements

Orthopedic surgeons representing the American Association of Orthopaedic Surgeons (AAOS) requested that we subdivide DRG 209 (Major Joint and Limb Reattachment Procedures of Lower Extremity) in MDC 8 by creating a new DRG for revision of lower joint procedures. The AAOS made a presentation at the October 7-8, 2004 meeting of the ICD-9-CM Coordination and Maintenance Committee meeting. A summary report of this meeting can be found at the CMS Web site: http://www. cms. hhs.

gov/ payment systems/ icd9/. We also received written comments on this request prior to the issuance of the FY 2006 IPPS proposed rule.

The AAOS surgeons stated that cases involving patients who require a revision of a prior replacement of a knee or hip require significantly more resources than cases in which patients receive an initial joint replacement. They pointed out that total joint replacement is one of the most commonly performed and successful operations in orthopedic surgery. The surgeons mentioned that, in 2002, over 300,000 hip replacement and 350,000 knee replacement procedures were performed in the United States. They also pointed out that these procedures are a frequent reason for Medicare hospitalization. The surgeons stated that total joint replacements have been shown to be highly cost-effective procedures, resulting in dramatic improvements in quality of life for patients suffering from disabling arthritic conditions involving the hip or knee. In addition, they reported that the medical literature indicates success rates of greater than 90 percent for implant survivorship, reduction in pain, and improvement in function at a 10- to 15-year followup. However, despite these excellent results with primary total joint replacement, factors related to implant longevity and evolving patient demographics have led to an increase in the volume of revision total joint procedures performed in the United States over the past decade.

Total hip replacement is an operation that is intended to reduce pain and restore function in the hip joint by replacing the arthritic hip joint with a prosthetic ball and socket joint. The prosthetic hip joint consists of a metal alloy femoral component with a modular femoral head made of either metal or ceramic (the ``ball'') that articulates with a metal acetabular component with a modular liner made of either metal, ceramic, or high-density polyethylene (the ``socket'').

The AAOS surgeons stated that, in a normal knee, four ligaments help hold the bones in place so that the joint works properly. When a knee becomes arthritic, these ligaments can become scarred or damaged. During knee replacement surgery, some of these ligaments, as well as the joint surfaces, are substituted or replaced by the new artificial prostheses. Two types of fixation are used to hold the prostheses in place. Cemented designs use polymethyl methacrylate to hold the prostheses in place. Cementless designs rely on bone growing into the surface of the implant for fixation.

The surgeons stated that all hip and knee replacements have an articular bearing surface that is subject to wear (the acetabular bearing surface in the hip and the tibial bearing surface in the knee). Traditionally, these bearing surfaces have been made of metal-on-metal or metal-on-polyethylene, although newer materials (both metals and ceramics) have been used more recently. Earlier hip and knee implant designs had nonmodular bearing surfaces, but later designs included modular articular bearing surfaces to reduce inventory and potentially simplify revision surgery. Wear of the articular bearing surface occurs over time and has been found to be related to many factors, including the age and activity level of the patient. In some cases, wear of the articular bearing surface can produce significant debris particles that can cause peri-prosthetic bone resorption (also known as osteolysis) and mechanical loosening of the prosthesis. Wear of the bearing surface can also lead to instability or prosthetic dislocation, or both, and is a common cause of revision hip or knee replacement surgery.

Depending on the cause of failure of the hip replacement, the type of implants used in the previous surgery, the amount and quality of the patient's remaining bone stock, and factors related to the patient's overall health and anatomy, revision hip replacement surgery can be relatively straightforward or extremely complex. Revision hip replacement can involve replacing any part or all of the implant, including the femoral or acetabular components, and the bearing surface (the femoral head and acetabular liner), and may involve major reconstruction of the bones and soft tissues around the hip. All of these procedures differ significantly in their clinical indications, outcomes, and resource intensity.

The AAOS surgeons provided the following summary of the types of revision knee replacement procedures: Among revision knee replacement procedures, patients who underwent complete revision of all components had longer operative times, higher complication rates, longer lengths of stay, and significantly higher resource utilization, according to studies conducted by the AAOS. Revision of the isolated modular tibial insert component was the next most resource-intensive procedure, and primary total knee replacement was the least resource-intensive of all the procedures studied.

Isolated Modular Tibial Insert Exchange. Isolated removal and exchange of the modular tibial bearing surface involves replacing the modular polyethylene bearing surface without removing the femoral, tibial, or patellar components of the prosthetic joint. Common indications for this procedure include wear of the polyethylene bearing surface or instability (for example, looseness) of the prosthetic knee joint. Patient recovery times are much shorter with this procedure than with removal and exchange of either the tibial, femoral, or patellar components.

Revision of the Tibial Component. Revision of the tibial component involves removal and exchange of the entire tibial component, including both the metal base plate and the modular polyethylene bearing surface. Common indications for tibial component revision are wear of the modular bearing surface, aseptic loosening (often

[[Page 47304]]

associated with osteolysis), or infection. Depending on the amount of associated bone loss and the integrity of the ligaments around the knee, tibial component revision may require the use of specialized implants with stems that extend into the tibial canal and/or the use of metal augments or bone graft to fill bony defects.

Revision of the Femoral Component. Revision of the femoral component involves removal and exchange of the metal implant that covers the end of the thigh-bone (the distal femur). Common indications for femoral component revision are aseptic loosening with or without associated osteolysis/bone loss, or infection. Similar to tibial revision, femoral component revision that is associated with extensive bone loss often involves the use of specialized implants with stems that extend into the femoral canal and/or the use of metal augments or bone graft to fill bony defects.

Revision of the Patellar Component. Complications related to the patella-femoral joint are one of the most common indications for revision knee replacement surgery. Early patellar implant designs had a metal backing covered by high-density polyethylene; these implants were associated with a high rate of failure due to fracture of the relatively thin polyethylene bearing surface. Other common reasons for isolated patellar component revision include poor tracking of the patella in the femoral groove leading to wear and breakage of the implant, fracture of the patella with or without loosening of the patellar implant, rupture of the quadriceps or patellar tendon, and infection.

Revision of All Components (Tibial, Femoral, and Patellar). The most common type of revision knee replacement procedure is a complete total knee revision. A complete revision of all implants is more common in knee replacements than hip replacements because the components of an artificial knee are not compatible across vendors or types of prostheses. Therefore, even if only one of the implants is loose or broken, a complete revision of all components is often required in order to ensure that the implants are compatible. Complete total knee revision often involves extensive surgical approaches, including osteotomizing (for example, cutting) the tibia bone in order to adequately expose the knee joint and gain access to the implants. These procedures often involve extensive bone loss, requiring reconstruction with specialized implants with long stems and metal augments or bone graft to fill bony defects. Depending on the status of the ligaments in the knee, complete total knee revision at times requires implantation of a highly constrained or ``hinged'' knee replacement in order to ensure stability of the knee joint.

Reimplantation from previous resection or cement spacer. In cases of deep infection of a prosthetic knee, removal of the implants with implantation of an antibiotic-impregnated cement spacer, followed by 6 weeks of intravenous antibiotics is often required in order to clear the infection. Revision knee replacement from an antibiotic impregnated cement spacer often involves complex bony reconstruction due to extensive bone loss that occurs as a result of the infection and removal of the often well-fixed implants. As noted above, the clinical outcomes following revision from a spacer are often poor due to limited functional capacity while the spacer is in place, prolonged periods of protected weight bearing (following reconstruction of extensive bony defects), and the possibility of chronic infection.

The surgeons stated that the current ICD-9-CM codes did not adequately capture the complex nature of revisions of hip and knee replacements. Currently, code 81.53 (Revision of hip replacement) captures all ``partial'' and ``total'' revision hip replacement procedures. Code 81.55 (Revision of knee replacement) captures all revision knee replacement procedures. These two codes currently capture a wide variety of procedures that differ in their clinical indications, resource intensity, and clinical outcomes.

An AAOS representative made a presentation at the October 7-8, 2004 ICD-9-CM Coordination and Maintenance Committee. Based on the comments received at the October 7-8, 2004 meeting and subsequent written comments, new ICD-9-CM procedure codes were developed to better capture the variety of ways that revision of hip and knee replacements can be performed: Codes 00.70 through 00.73 and code 81.53 for revisions of hip replacements and codes 00.80 through 00.84 and code 81.55 for revisions of knee replacements. These new and revised procedure codes, which will be effective on October 1, 2005, can be found in Table 6B and Table 6F of this final rule. The commenters stated that claims data using these new and specific codes should provide improved data on these procedures for future DRG modifications.

However, the commenters requested that CMS consider DRG modifications based on current data using the existing revision codes. The commenters reported on a recently completed study comparing detailed hospital resource utilization and clinical characteristics in over 10,000 primary and revision hip and knee replacement procedures at 3 high volume institutions: The Massachusetts General Hospital, the Mayo Clinic, and the University of California at San Francisco. The purpose of this study was to evaluate differences in clinical outcomes and resource utilization among patients who underwent different types of primary and revision hip or knee replacement procedures. The study found significant differences in operative time, complication rates, hospital length of stay, discharge disposition, and resource utilization among patients who underwent different types of revision hip or knee replacement procedures.

Among revision hip replacement procedures, patients who underwent both femoral and acetabular component revision had longer operative times, higher complication rates, longer lengths of stay, significantly higher resource utilization, and were more likely to be discharged to a subacute care facility. Isolated femoral component revision was the next most resource-intensive procedure, followed by isolated acetabular revision. Primary hip replacement was the least resource intensive of all the procedures studied. Similarly, among revision knee replacement procedures, patients who underwent complete revision of all components had longer operative times, higher complication rates, longer lengths of stay, and significantly higher resource utilization. Revision of one component was the next most resource-intensive procedure. Primary total knee replacement was the least resource intensive of all the procedures studied.

In addition, the commenters indicated that the data showed that extensive bone loss around the implants and the presence of a peri- prosthetic fracture were the most significant predictors of higher resource utilization among all revision hip and knee replacement procedures, even when controlling for other significant patient and procedural characteristics.

For the FY 2006 IPPS proposed rule, we examined data in the FY 2004 MedPAR file on the current hip replacement procedures (codes 81.51, 81.52, 81.53) as well as the replacements and revisions of knee replacement procedures (codes 81.54 and 81.55) in DRG 209. We found that revisions were significantly more resource intensive than the original hip and knee replacements. We found average charges for revisions of hip and knee replacements were approximately

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$7,000 higher than average charges for the original joint replacements, as shown in the following charts. The average charges for revisions of hip replacements were 21 percent higher than the average charges for initial hip replacements. The average charges for revisions of knee replacements were 25 percent higher than for initial knee replacements.

Average length DRG

Number of

of stay

Average cases

(days)

charges

209--All cases..................................................

430,776

4.57 $30,695.41 209 With hip replacement codes 81.51 and 81.52 reported.........

181,460

5.21 31,795.84 209 With hip revision code 81.53 reported.......................

20,894

5.57 38,432.04 209 With knee replacement code 81.54 reported...................

209,338

3.92 28,525.66 209 With knee revision code 81.55 reported......................

18,590

4.64 35,671.66

We note that there were no cases in DRG 209 for reattachment of the foot, lower leg, or thigh (codes 84.29, 84.27, and 84.28).

To address the higher resource costs associated with hip and knee revisions relative to the initial joint replacement procedure, we proposed to delete DRG 209, create a proposed new DRG 544 (Major Joint Replacement or Reattachment of Lower Extremity), and create a proposed new DRG 545 (Revision of Hip or Knee Replacement).

We proposed to assign the following codes to the new proposed DRG 544: 81.51, 81.52, 81.54, 81.56, 84.26, 84.27, and 84.28.

We proposed to assign the following codes to the proposed new DRG 545: 00.70, 00.71, 00.72, 00.73, 00.80, 00.81, 00.82, 00.83, 00.84, 81.53, and 81.55.

In response to the FY 2006 IPPS proposed rule, we received the following public comments:

Comment. Four commenters supported our proposal to delete DRG 209 and to create proposed new DRGs 544 and DRG 545. One commenter stated that the proposed rule reveals that the average joint revision charges are $7,000 higher than original joint replacements, which supports the point that joint revision procedures are more resource-intensive than initial replacements.

Another commenter commended CMS for its efforts to provide appropriate payment for revision hip and knee arthroplasty by proposing to split DRG 209 into DRG 544 and 545, and to expand the scope of the relevant ICD-9-CM procedure codes included in these DRGs. The commenter stated that the new codes, in particular, are an important component in aligning hospital reimbursement with hospital costs and patient benefits of total joint arthroplasty. The commenter encouraged CMS to continue its dialogue with industry and providers regarding further DRG changes to primary joint arthroplasty procedures, which represent approximately 90 percent of total hip and knee arthroplasty procedures.

One commenter recommended that CMS consider the number of individual components used in the joint replacement when future DRG revisions are made. The commenter stated the hospital's costs will vary based on the number of parts replaced during the procedure. According to the commenter, we may be overpaying simple head and/or liner exchanges in hips, and patellar/insert exchanges in knees relative to primary hip and knee procedures. The commenter indicated that, with the more specific ICD-9-CM codes, CMS will be able to evaluate further changes in the joint replacement and revision DRGs.

We did not receive any comments that opposed the proposed DRG revisions for hip and knee replacements.

Response: We appreciate the support of the commenters. We will use the data obtained from use of the new codes to consider future DRG revisions for joint replacement and revision procedures.

In this final rule, for FY 2006, we are adopting the DRG revisions relating to hip and knee replacements as proposed. We are deleting DRG 209 and creating new DRG 544 (Major Joint Replacement or Reattachment of Lower Extremity) and new DRG 545 (Revision of Hip or Knee Replacement). The new DRG 544 includes the following code assignments:

81.51, Total hip replacement

81.52, Partial hip replacement

81.54, Total knee replacement

81.56, Total ankle replacement

84.26, Foot reattachment

84.27, Lower leg/ankle reattach

84.28, Thigh reattachment

The new DRG 545 includes the following code assignments:

00.70, Revision of hip replacement, both acetabular and femoral components

00.71, Revision of hip replacement, acetabular component

00.72, Revision of hip replacement, femoral component

00.73, Revision of hip replacement, acetabular liner and/ or femoral head only

00.80, Revision of knee replacement, total (all components)

00.81, Revision of knee replacement, tibial component

00.82, Revision of knee replacement, femoral component

00.83, Revision of knee replacement, patellar component

00.84, Revision of knee replacement, tibial insert (liner)

81.53, Revision of hip replacement, not otherwise specified

81.55, Revision of knee replacement, not otherwise specified

We believe that the creation of the new DRGs for revisions of hip and knee replacements should resolve payment issues for hospitals that perform the more difficult revisions of joint replacements. In addition, as stated earlier, we have worked with the orthopedic community to develop new procedure codes that better capture data on the types of revisions of hip and knee replacements. These new codes will be implemented on October 1, 2005. Once we receive claims data using these new codes, we will review data to determine if additional DRG modifications are needed. This effort may include assigning some of the revision codes, such as 00.83 and 00.84, to a separate DRG. As stated earlier, the AAOS has found that some of the procedures may not be as resource intensive. Therefore, the AAOS has requested that CMS closely examine data from the use of the new codes and consider future revisions. b. Kyphoplasty

In the FY 2005 IPPS final rule (69 FR 48938), we discussed the creation of new codes for vertebroplasty (81.65) and kyphoplasty (81.66), which went into effect on October 1, 2004. Prior to October 1, 2004, both of these surgical procedures were assigned to code 78.49 (Other repair or plastic operation on bone). For FY 2005, we assigned these codes to DRGs 233 and 234 (Other

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Musculoskeletal System and Connective Tissue O.R. Procedure With and Without CC, respectively) in MDC 8 (Table 6B of the FY 2005 final rule). (In the FY 2005 IPPS final rule (69 FR 48938), we indicated that new codes 81.65 and 81.66 were assigned to DRGs 223 and 234. We made a typographical error when indicating that these codes were assigned to DRG 223. Codes 81.65 and 81.66 have been assigned to DRGs 233 and 234.) Last year, we received comments opposing the assignment of code 81.66 to DRGs 233 and 234. The commenters supported the creation of the codes for kyphoplasty and vertebroplasty, but recommended that code 81.66 be assigned to DRGs 497 and 498 (Spinal Fusion Except Cervical With and Without CC, respectively). The commenters stated that kyphoplasty requires special inflatable bone tamps and bone cement and is a significantly more resource intensive procedure than vertebroplasty. The commenters further stated that, while kyphoplasty involves internal fixation of the spinal fracture and restoration of vertebral heights, vertebroplasty involves only fixation. The commenters indicated that hospital costs for kyphoplasty procedures are more similar to resources used in a spinal fusion.

We stated in the FY 2005 IPPS final rule that we did not have data in the MedPAR file on kyphoplasty and vertebroplasty. Prior to October 1, 2004, both procedures were assigned in code 78.49, which was assigned to DRGs 233 and 234 in MDC 8. We stated that we would continue to review this area as part of our annual review of MedPAR data. While we do not have separate data for kyphoplasty because code 81.66 was not established until October 1, 2004, for the FY 2006 IPPS proposed rule, we did examine data on code 78.49, which includes both kyphoplasty and vertebroplasty procedures reported in DRGs 233 and 234. The following chart illustrates our findings:

Number of Average length Average DRG

cases of stay (days) charges

233--All cases..................................................

14,066

6.66 $28,967.78 233 With code 78.49 reported....................................

8,702

5.91 25,402.71 233 Without code 78.49 reported.................................

5,364

7.88 34,571.39 234--All cases..................................................

7,106

2.79 18,954.80 234 With code 78.49 reported....................................

4,437

2.61 18,426.11 234 Without code 78.94 reported.................................

2,669

3.09 19,833.71

We do not believe these data findings support moving cases represented by code 78.49 out of DRGs 233 and 234. While we cannot distinguish cases that are kyphoplasty from cases that are vertebroplasty, cases represented by code 78.49 have lower charges than do other cases within DRGs 233 and 234. Therefore, in the FY 2006 IPPS proposed rule, we did not propose to change the DRG assignment of code 81.66 to DRGs 233 and 234.

Comment: Two commenters supported our proposal not to change the DRG assignment of code 81.66 (Kyphoplasty). Both commenters agreed with our proposal to keep code 81.66 in DRGs 233 and 234. They also agreed that we should wait for bill data using the new kyphoplasty code prior to considering any DRG modification.

Response: We appreciate the commenters' support for our proposal.

In this final rule, for FY 2006, we are retaining the assignment of code 81.66 in DRGs 233 and 234. As we proposed, we will consider whether further changes are warranted once additional hospital charge data are available using the new code. c. Multiple Level Spinal Fusion

On October 1, 2003, the following ICD-9-CM codes were created to identify the number of levels of vertebra fused during a spinal fusion procedure:

81.62, Fusion or refusion of 2-3 vertebrae

81.63, Fusion or refusion of 4-8 vertebrae

81.64, Fusion or refusion of 9 or more vertebrae

Prior to the creation of these codes, we received a comment recommending the establishment of new DRGs that would be differentiated based on the number of vertebrae fused. In the FY 2005 IPPS final rule (69 FR 48936), we stated that we did not yet have any reported cases utilizing these multiple level spinal fusion codes. We stated that we would wait until sufficient data were available prior to making a final determination on whether to create separate DRGs based on the number of vertebrae fused. We also stated that spinal fusion surgery was an area undergoing rapid changes.

Effective October 1, 2004, we created a series of codes that describe a new type of spinal surgery, spinal disc replacement. Our medical advisors describe these procedures as a more conservative approach for back pain than the spinal fusion surgical procedure. These codes are as follows:

84.60, Insertion of spinal disc prosthesis, not otherwise specified

84.61, Insertion of partial spinal disc prosthesis, cervical

84.62, Insertion of total spinal disc prosthesis, cervical

84.63, Insertion of spinal disc prosthesis, thoracic

84.64, Insertion of partial spinal disc prosthesis, lumbosacral

84.65, Insertion of total spinal disc prosthesis, lumbosacral

84.66, Revision or replacement of artificial spinal disc prosthesis, cervical

84.67, Revision or replacement of artificial spinal disc prosthesis, thoracic

84.68, Revision or replacement of artificial spinal disc prosthesis, lumbosacral

84.69, Revision or replacement of artificial spinal disc prosthesis, not otherwise specified

We also created the following two codes effective October 1, 2004, for these new types of spinal surgery that are also a more conservative approach to back pain than is spinal fusion:

81.65, Vertebroplasty

81.66, Kyphoplasty

We do not yet have data in the MedPAR file on these new types of procedures. Therefore, we cannot yet determine what effect these new types of procedures will have on the frequency of spinal fusion procedures.

However, we do have data in the MedPAR file on multiple level spinal procedures for analysis for this year's IPPS rule. We examined data in the FY 2004 MedPAR file on spinal fusion cases in the following DRGs:

DRG 496 (Combined Anterior/Posterior Spinal Fusion)

DRG 497 (Spinal Fusion Except Cervical With CC)

DRG 498 (Spinal Fusion Except Cervical Without CC)

DRG 519 (Cervical Spinal Fusion With CC)

[[Page 47307]]

DRG 520 (Cervical Spinal Fusion Without CC)

Multiple level spinal fusion is captured by code 81.63 (Fusion or refusion of 4-8 vertebrae) and code 81.64 (Fusion or refusion of 9 or more vertebrae). Code 81.62 includes the fusion of 2-3 vertebrae and is not considered a multiple level spinal fusion. Orthopedic surgeons stated at the October 7-8, 2004 ICD-9-CM Coordination and Maintenance Committee meeting that the most simple and common type of spinal fusion involves fusing either 2 or 3 vertebrae. These surgeons stated that there was not a significant difference in resource utilization for cases involving the fusion of 2 versus 3 vertebrae. For this reason, the orthopedic surgeons recommended that fusion of 2 and 3 vertebrae remain grouped into one ICD-9-CM code.

We reviewed the Medicare charge data to determine whether the number of vertebrae fused or specific diagnoses have an effect on average length of stay and resource use for a patient. We found that, while fusing 4 or more levels of the spine results in a small increase in the average length of stay and a somewhat larger increase in average charges for spinal fusion patients, an even greater impact was made by the presence of a principal diagnosis of curvature of the spine or malignancy. The following list of diagnoses describes conditions that have a significant impact on resource use for spinal fusion patients:

170.2, Malignant neoplasm of vertebral column, excluding sacrum and coccyx

198.5, Secondary malignant neoplasm of bone and bone marrow

732.0, Juvenile osteochondrosis of spine

733.13, Pathologic fracture of vertebrae

737.0, Adolescent postural kyphosis

737.10, Kyphosis (acquired) (postural)

737.11, Kyphosis due to radiation

737.12, Kyphosis, postlaminectomy

737.19, Kyphosis (acquired), other

737.20, Lordosis (acquired) (postural)

737.21, Lordosis, postlaminectomy

737.22, Other postsurgical lordosis

737.29, Lordosis (acquired), other

737.30, Scoliosis [and kyphoscoliosis], idiopathic

737.31, Resolving infantile idiopathic scoliosis

737.32, Progressive infantile idiopathic scoliosis

737.33, Scoliosis due to radiation

737.34, Thoracogenic scoliosis

737.39, Other kyphoscoliosis and scoliosis

737.40, Curvature of spine, unspecified

737.41, Curvature of spine associated with other conditions, kyphosis

737.42, Curvature of spine associated with other conditions, lordosis

737.43, Curvature of spine associated with other conditions, scoliosis

737.8, Other curvatures of spine

737.9, Unspecified curvature of spine

754.2, Congenital scoliosis

756.51, Osteogenesis imperfecta

The majority of fusion patients with these diagnoses were in DRGs 497 and 498. The chart below reflects our findings. We also include in the chart statistics for cases in DRGs 497 and 498 with spinal fusion of 4 or more vertebrae and cases with a principal diagnosis of curvature of the spine or bone malignancy.

Average length DRG

Number of

of stay

Average cases

(days)

charges

497.............................................................

27,346

6.08 $64,471.82 498.............................................................

17,943

3.80 48,440.80 497 and 498 With spinal fusions of 4 or more vertebrae reported.

7,881

6.3

77,352.00 497 and 498 With principal diagnosis of curvature of the spine

2,006

8.91 95,315.00 or bone malignancy.............................................

Thus, these diagnoses result in a significant increase in resource use. While the fusing of 4 or more vertebrae resulted in average charges of $77,352, the impact of a principal diagnosis of curvature of the spine or bone malignancy was substantially greater with average charges of $95,315.

Based on this analysis, we proposed to create a new DRG 546 for noncervical spinal fusions with a principal diagnosis of curvature of the spine and malignancies: proposed new DRG 546 (Spinal Fusions Except Cervical With Principal Diagnosis of Curvature of the Spine or Malignancy). We proposed to include in the proposed new DRG cases all noncervical spinal fusions cases previously assigned to DRGs 497 and 498 that have a principal diagnosis of curvature of the spine or malignancy and with the following codes listed above: 170.2, 198.5, 732.0, 733.13, 737.0, 737.10, 737.11, 737.12, 737.19, 737.20, 737.21, 737.22, 737.29, 737.30, 737.31, 737.32, 737.33, 737.34, 737.39, 737.40, 737.41, 737.42, 737.43, 737.8, 737.9, 754.2, and 756.51. We proposed that the proposed DRG 546 would not include cases currently assigned to DRGs 496, 519, or 520 that have a principal diagnosis of curvature of the spine or malignancy and that the structure of DRGs 496, 519, and 520 would remain the same.

As part of our meeting with the AAOS on DRG 209 in February 2005 (discussed under section II.B.6.a. of this preamble), the AAOS offered to work with CMS to analyze clinical issues and make revisions to the spinal fusion DRGs (DRGs 496 through 498 and 519 and 520). Therefore, we limited our proposed changes to the spinal fusion DRGs for FY 2006 to the creation of the proposed DRG 546 discussed above. However, we indicated that we look forward to working with the AAOS to obtain its clinical recommendations concerning our proposed changes and potential additional modifications to the spinal fusion DRGs. We also solicited comments from the public on our proposed changes and how to incorporate new types of spinal procedures such as kyphoplasty and spinal disc prostheses into the spinal fusion DRGs.

Comment: A number of commenters supported our proposal to create new DRG 546 (Spinal Fusions Except Cervical With Principal Diagnosis of Curvature of the Spine or Malignancy) to include all noncervical spinal fusions previously assigned to DRGs 497 and 498 that have a principal diagnosis of curvature of the spine or malignancy. One commenter stated that the addition of new DRG 546, with its higher weight, would help reimburse hospitals more adequately for the resources used in treating patients with significant spinal deformities and other problems. One commenter stated that the cost associated with a multilevel spine fusion when the patient has a diagnosis of curvature of the spine or malignancy exceeds the current Medicare reimbursement.

Several commenters noted that the following four ICD-9-CM diagnosis

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codes are manifestation codes that cannot be reported as a principal diagnosis:

737.40, Curvature of spine, unspecified

737.41, Curvature of spine associated with other conditions, kyphosis

737.42, Curvature of spine associated with other conditions, lordosis

737.43, Curvature of spine associated with other conditions, scoliosis

The commenter pointed out that these codes can only be reported as a secondary diagnosis. Therefore, the commenters stated that our proposed DRG logic for DRG 546 would not work with these four codes.

Response: We appreciate the support of the commenters for the creation of the new DRG 546. We agree that this new DRG would better align Medicare payment with hospital costs for treating these more severe orthopedic cases. We also agree that codes 737.40, 737.41, 737.42, and 737.43 are not to be reported as a principal diagnosis because they are manifestation codes. We inadvertently included them among the list of principal diagnoses that would be assigned to DRG 546. In this final rule, we are removing codes 737.40, 737.41, 737.42, and 737.43 from the list of principal diagnosis codes that would lead to an assignment of DRG 546. However, we will retain these codes as a secondary diagnosis that will result in an assignment to DRG 546 because they describe curvature of the spine. Therefore, patients admitted with an orthopedic diagnosis who receive a spinal fusion will be assigned to DRG 546 if codes 737.40, 737.41, 737.42, and 737.43 are present as a secondary diagnosis. Consistent with this change in the GROUPER logic, we will also remove the term ``principal diagnosis'' from the proposed title so that DRG 546 will be titled ``Spinal Fusions Except Cervical With Curvature of the Spine or Malignancy.''

Comment: One commenter suggested that CMS consider adding the following diagnoses to the list of codes that would be assigned to the new DRG 546:

213.2, Benign neoplasm of bone and articular cartilage; vertebral column, excluding sacrum and coccyx

238.0, Neoplasm of uncertain behavior of other and unspecified sites and tissues; Bone and articular cartilage

239.2, Neoplasms of unspecified nature; Bone, soft tissue, and skin

721.7, Spondylosis and allied disorders; Traumatic spondylopathy

724.3, Other and unspecified disorders of back; Sciatica

732.8, Other specified forms of osteochondropathy

756.19, Anomalies of spine; Other

Response: We discussed these additional diagnosis codes recommended by the commenter with our medical advisors and they agree that the first three listed codes (213.2, 238.0, and 239.2) should be added because they are neoplasm codes. Therefore, they are clinically similar to the other neoplasm codes on our proposed list. Our medical advisors did not support the addition on the latter four codes because they are vague codes that do not necessarily represent significant conditions. Therefore, in this final rule, we are adding codes 213.2, 238.0, 239.2 to our list of conditions in DRG 546. We are not adding codes 721.7, 724.3, 732.8, or 756.19.

After careful consideration of the public comments received, in this final rule, we are establishing a new DRG 546 (Spinal Fusions Except Cervical with Curvature of the Spine or Malignancy). New DRG 546 will be composed of all noncervical spinal fusions previously assigned to DRGs 497 and 498 that have a principal or secondary diagnosis of curvature of the spine or a principal diagnosis of a malignancy. The principal diagnosis codes that will lead to this DRG assignment are the following:

170.2, Malignant neoplasm of vertebral column, excluding sacrum and coccyx

198.5, Secondary malignant neoplasm of bone and bone marrow

213.2, Benign neoplasm of bone and articular cartilage; vertebral column, excluding sacrum and coccyx

238.0, Neoplasm of uncertain behavior of other and unspecified sites and tissues; Bone and articular cartilage

239.2, Neoplasms of unspecified nature; bone, soft tissue, and skin

732.0, Juvenile osteochondrosis of spine

733.13, Pathologic fracture of vertebrae

737.0, Adolescent postural kyphosis

737.10, Kyphosis (acquired) (postural)

737.11, Kyphosis due to radiation

737.12, Kyphosis, postlaminectomy

737.19, Kyphosis (acquired), other

737.20, Lordosis (acquired) (postural)

737.21, Lordosis, postlaminectomy

737.22, Other postsurgical lordosis

737.29, Lordosis (acquired), other

737.30, Scoliosis [and kyphoscoliosis], idiopathic

737.31, Resolving infantile idiopathic scoliosis

737.32, Progressive infantile idiopathic scoliosis

737.33, Scoliosis due to radiation

737.34, Thoracogenic scoliosis

737.39, Other kyphoscoliosis and scoliosis

737.8, Other curvatures of spine

737.9, Unspecified curvature of spine

754.2, Congenital scoliosis

756.51, Osteogenesis imperfecta

The secondary diagnoses that will lead to the new DRG 546 assignment are:

737.40, Curvature of spine, unspecified

737.41, Curvature of spine associated with other conditions, kyphosis

737.42, Curvature of spine associated with other conditions, lordosis

737.43, Curvature of spine associated with other conditions, scoliosis d. CHARITE\TM\ Spinal Disc Replacement Device

As we noted in our discussion of applications for new technology add-on payments for FY 2006 in section II.E. of the IPPS proposed rule (70 FR 23362), the applicant for new technology for CHARITE\TM\ requested a DRG reassignment for cases involving implantation of the CHARITE\TM\ Artificial Disc. CHARITE\TM\ is a prosthetic intervertebral disc. On October 26, 2004, the FDA approved the CHARITE\TM\ Artificial Disc for single level spinal arthroplasty in skeletally mature patients with degenerative disc disease between L4 and S1. The applicant requested a DRG assignment for these cases from DRG 499 (Back and Neck Procedures Except Spinal Fusion With CC) and 500 (Back and Neck Procedures Except Spinal Fusion Without CC) to DRGs 497 (Spinal Fusion Except Cervical With CC) and 498 (Spinal Fusion Except Cervical Without CC). The applicant argued that the costs of an inpatient stay to implant an artificial disc prosthesis are similar to spinal fusion and inclusion in DRGs 497 and 498 should be made consistent with section 1886(d)(5)(K) of the Act that indicates a clear preference for assigning a new technology to a DRG based on similar clinical or anatomical characteristics and costs. As indicated in section II.E. of this final rule, we did not find that CHARITE\TM\ meets the substantial clinical improvement criterion and are not considering a DRG reassignment under the new technology provisions. However, we did evaluate whether to reassign CHARITE\TM\ to a different DRG using the Secretary's authority under section 1886(d)(4) of the Act.

[[Page 47309]]

On October 1, 2004, we created new codes for the insertion of spinal disc prostheses (codes 84.60 through 84.69). In the FY 2005 IPPS proposed and final rules, we described the new DRG assignments for these new codes in Table 6B of the Addendum to those rules. We received a number of comments on the FY 2005 IPPS proposed rule recommending that we change the assignments for these codes from DRG DRGs 499 and 500 to the DRGs for spinal fusion (DRGs 497 and 498). In the FY 2005 IPPS final rule (69 FR 48938), we indicated that DRGs 497 and 498 are limited to spinal fusion procedures. Because the surgery involving the CHARITE\TM\ is not a spinal fusion, we decided not to include this procedure in these DRGs. However, we stated that we would continue to analyze this issue and solicited further public comments on the DRG assignment for spinal disc prostheses.

We received a number of public comments in response to the FY 2006 proposed rule. A summary of the comments and our responses follow.

Comment: One commenter supported our recommendation to keep the CHARITE\TM\ spinal disc procedure code in DRGs 499 and 500. The commenter took no position on CMS' decision on whether to grant add-on payment for new technology for the CHARITE\TM\ spinal disc procedure. However, the commenter stated that until further data becomes publicly available, it would be premature to reassign spinal disc prostheses to DRGs 497 and 498. The commenter stated that waiting for Medicare data would be consistent with the approach CMS used in considering changes to DRGs 497 and 498 for account for multilevel spinal fusion. (We did not propose a change for FY 2006 to account for multilevel spinal fusions because sufficient data were not available in MedPAR under the new multilevel spine fusion procedure codes.) The commenter also stated that the spinal fusion DRGs were well-established based on several years of utilization and accrual of cost experience. Without a fuller understanding of the expected resource use of cases with spinal disc prostheses, the commenter was concerned that reassignment of these procedures to DRGs 497 and 498 may have the potential to cause an inappropriate reduction in future weights for spinal fusion. Therefore, the commenter recommended that spinal disc replacements be kept in DRGs 499 and 500 until data are available to evaluate this change.

Response: We agree with the commenter that our policy is to assign a new procedure code to a DRG based on the assignment of its predecessor code until we have Medicare charge data to evaluate a DRG modification. We also agree that the spinal fusion cases are well- established based on several years of utilization and cost experience. Without Medicare data that shows Medicare charges for CHARITE\TM\ artificial discs in DRGs 499 and 500 and until we receive Medicare charge data using the new procedure codes, it is difficult to evaluate a request for a DRG modification.

Comment: Eight commenters opposed our proposal of keeping CHARITE\TM\ artificial discs in DRGs 499 and 500 until we received Medicare charge data. These commenters recommended that the CHARITE\TM\ spinal disc procedure (code 84.65) be moved out of DRGs 499 and 500 and into the spinal fusion DRGs (DRG 497 and 498). According to the commenters, the current DRG assignment to DRGs 499 and 500 provides a very significant economic disincentive for hospitals to use CHARITE\TM\ in the Medicare population. Based on information submitted with its new technology application, these commenters argued that hospital resources for patients receiving CHARITE\TM\ artificial discs are most closely comparable to patients in DRGs 497 and 498 (the data provided to support the new technology application are discussed in detail in section II.E. of this final rule). The commenters also stated that the Health Service Cost Review Commission (HSCRC) of Maryland developed new artificial disc DRGs for its DRG system.

Response: With respect to the commenter's point regarding the HSCRC, we acknowledge that they recently decided to create new DRGs for artificial disc patients. We understand that the HSCRC established these new DRGs with relative weights that are higher than DRGs 499 and 500 and less than the spinal fusion DRGs (DRGs 497 and 498). We are unaware of the criteria that the HSCRC uses for creating separate DRGs. Currently, we do not have a basis for creating a separate DRG for spinal disc protheses because we have no FY 2004 Medicare charge data that could be used to set the FY 2006 relative weight. Therefore, we are unable to adopt an option similar to that of the HSCRC at this time.

For its new technology application, we note that the applicant supplied cost data for 376 total cases where CHARITE\TM\ was actually used, including 12 cases involving Medicare patients. The data for the 12 Medicare patients did not come from the MedPAR data systems because that information is not yet available due to the fact that give that FDA approval and the code used to identify these patients was not effective until October 2004. Thus, as with all new technology applications, the data supporting whether the technology meets the cost criterion came directly from the applicant and not from Medicare's data systems. While the applicant also supplied data from the FY 2003 MedPAR file, we note that these cases did not actually involve the CHARITE\TM\ artificial disc. Rather the applicant modified the claims data for spinal fusion cases by removing the medical and surgical costs associated with the spinal fusions. The applicant then replaced these costs with costs represented to be those of a typical CHARITE\TM\ artificial disc. These data are acceptable to evaluate whether a new technology meets the cost criterion in a new technology application because, by definition, there is limited or no Medicare data upon which to evaluate a new technology's costs. However, these data do not meet the standards that we apply for making a change to a DRG. That is, we use the predecessor code for a new technology until we have evidence from Medicare's data systems that suggest a change to the DRG assignment is warranted.

As stated previously, we do not have Medicare charge information to evaluate a DRG change at this time. For this reason, we are not making a change to the DRG assignment for CHARIT[Eacute]TM. However, we will consider whether a DRG reassignment for CHARIT[Eacute]TMis warranted for FY 2007, once we have information from Medicare's data system that will assist us in evaluating the cost of these patients. 8. MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified Sites)): Severe Sepsis

As we did for FY 2005, we received a request to consider the creation of a separate DRG for the diagnosis of severe sepsis for FY 2006. Severe sepsis is described by ICD-9-CM code 995.92 (Systemic inflammatory response syndrome due to infection with organ dysfunction). Patients admitted with sepsis as a principal diagnosis currently are assigned to DRG 416 (Septicemia Age >17) and DRG 417 (Septicemia Age 0-17) in MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified Sites)). The commenter requested that all cases in which severe sepsis is present on admission, as well as those cases in which it develops after admission (which are currently classified elsewhere), be included in this new DRG. We again addressed this issue in the FY 2006 IPPS proposed rule

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(70 FR 23329) as we had in the FY 2005 IPPS final rule (69 FR 48975). In both instances, we did not believe the current clinical definition of severe sepsis is specific enough to identify a meaningful cohort of patients in terms of clinical coherence and resource utilization to warrant a separate DRG. Sepsis is found across hundreds of medical and surgical DRGs, and the term ``organ dysfunction'' implicates numerous currently existing diagnosis codes. While we recognize that Medicare beneficiaries with severe sepsis are quite ill and require extensive hospital resources, we do not believe that they can be identified adequately to justify removing them from all of the other DRGs in which they appear. For this reason, we did not propose a new DRG for severe sepsis for FY 2006.

Comment: Two commenters expressed concerns about the sequencing instructions for severe sepsis. They pointed out that current ICD-9-CM coding guidelines mandate that a code from category 038.x be sequenced as the principal diagnosis followed by code 995.92 for patients admitted in respiratory failure who also have severe sepsis. The commenters expressed concerns that this sequencing instruction results in lower hospital reimbursement for patients with severe sepsis placed on mechanical ventilation. These commenters did not recommend that CMS create a new DRG for patients with severe sepsis. Instead, they suggested that the codes or guidelines, or both, be modified so that other conditions can be sequenced as the principal diagnosis.

Response: We share the concern of the commenters about sequencing guidelines for patients with severe sepsis and respiratory failure. The current ICD-9-CM codes for systemic inflammatory response syndrome (SIRS), codes 995.91 through 995.94, that include severe sepsis mandate these sequencing guidelines. However, the National Center for Health Statistics (NCHS) discussed modifications to these codes at the April 1, 2005 ICD-9-CM Coordination and Maintenance Committee meeting. NCHS has scheduled this topic for further discussion at the September 29-30, 2005 Committee meeting. Suggestions for revising these codes and any resulting guidelines should be sent to Donna Pickett, NCHS, 3311 Toledo Road, Room 2402, Hyattsville, MD 2082, or to the e-mail address dfp4@cdc.gov.

Comment: One commenter expressed disappointment that CMS did not create a new DRG for severe sepsis. The commenter disagreed with our statement that these patients could not be easily identified within our Medicare data. The commenter stated that severe sepsis is a systemic inflammatory syndrome in response to infection that is associated with acute organ dysfunction. The commenter suggested that CMS use the SIRS ICD-9-CM codes for infection plus organ dysfunction along with an ICD- 9-CM procedure code for organ support such as ventilation management (code 96.7x), acute renal replacement (codes 39.95 and 54.98), or vasopressor support (code 00.17), to identify these patients. The commenter recommended that CMS create two new DRGs, one for medical severe sepsis patients with organ support and another for surgical severe sepsis patients with organ support. The commenter recommended that these two DRGs be assigned as pre-MDCs.

Response: There were extensive discussions about the problems in using the current SIRS codes at the March 31-April 1, 2005 ICD-9-CM Coordination and Maintenance Committee meeting. A summary report of this meeting can be found at the Web site: http://www.cdc.gov/nchs/icd9cm. As stated earlier, NCHS has scheduled further discussions on

this topic for the September 29-30 Committee meeting.

Given the considerable confusion among the coding community regarding the use of these codes, we believe it would be premature to consider new DRGs for severe sepsis patients at this time. Therefore, we are not making revisions to the DRG for severe sepsis patients at this time. We will continue to work with NCHS to improve the codes so that our data on these patients improve. We will continue to examine data on these patients as we consider future modifications. 9. MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders): Drug-Induced Dementia

In the FY 2005 IPPS final rule (69 FR 48939, August 11, 2004), we discussed a request that CMS modify DRGs 521 through 523 by removing the principal diagnosis code 292.82 (Drug-induced dementia) from these alcohol and drug abuse DRGs. These DRGs are as follows:

DRG 521 (Alcohol/Drug Abuse or Dependence With CC).

DRG 522 (Alcohol/Drug Abuse or Dependence With Rehabilitation Therapy Without CC).

DRG 523 (Alcohol/Drug Abuse or Dependence Without Rehabilitation Therapy Without CC).

The commenter indicated that a patient who has a drug-induced dementia should not be classified to an alcohol/drug DRG. However, the commenter did not propose a new DRG assignment for code 292.82. Our medical advisors evaluated the request and determined that the most appropriate DRG classification for a patient with drug-induced dementia was within MDC 20. The medical advisors indicated that because the dementia is drug induced, it is appropriately classified to DRGs 521 through 523 in MDC 20. Therefore, we did not propose a new DRG classification for the principal diagnosis code 292.82.

In the FY 2005 IPPS final rule, we addressed a comment from an organization representing hospital coders that disagreed with our decision to keep code 292.82 in DRGs 521 through 523. The commenter stated that DRGs 521 through 523 are described as alcohol/drug abuse and dependence DRGs, and that drug-induced dementia can be caused by an adverse effect of a prescribed medication or a poisoning. The commenter did not believe that assignment to DRGs 521 through 523 was appropriate if the drug-induced dementia is due to one of these events and the patient is not alcohol or drug dependent. The commenter recommended that admissions for drug-induced dementia be classified to DRGs 521 through 523 only if there is a secondary diagnosis indicating alcohol/ drug abuse or dependence.

The commenter recommended that drug-induced dementia that is due to the adverse effect of a drug or poisoning be classified to the same DRGs as other types of dementia, such as DRG 429 (Organic Disturbances and Mental Retardation). The commenter believed that when drug-induced dementia is caused by a poisoning, either accidental or intentional, the appropriate poisoning code would be sequenced as the principal diagnosis and, therefore, these cases would likely already be assigned to DRGs 449 and 450 (Poisoning and Toxic Effects of Drugs, Age Greater than 17, With and Without CC, respectively) and DRG 451 (Poisoning and Toxic Effects of Drugs, Age 0-17). The commenter stated that these would be the appropriate DRG assignments for drug-induced dementia due to a poisoning. We received a similar comment from a hospital organization.

In the FY 2005 IPPS final rule, we acknowledged that the commenters raised additional issues surrounding the DRG assignment for code 292.82 that should be considered. The commenters provided alternatives for DRG assignment based on sequencing of the principal diagnosis and reporting of additional secondary diagnoses. We recognized that patients may develop drug-induced dementia from drugs that

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are prescribed, as well as from drugs that are not prescribed. However, because dementia develops as a result of use of a drug, we believed the current DRG assignment to DRGs 521 through 523 remained appropriate. Some commenters have agreed with the current DRG assignment of code 292.82 since the dementia was caused by use of a drug. We agree that if either accidental or intentional poisoning caused the drug-induced dementia, the appropriate poisoning code should be sequenced as the principal diagnosis. As one commenter stated, these cases would be assigned to DRGs 449 through 451. We encouraged hospitals to examine the coding for these types of cases to determine if there were any coding or sequencing errors. As suggested by the commenter, if code 292.82 were reported as a secondary diagnosis and not a principal diagnosis in cases of poisoning or adverse drug reactions, the number of cases on DRGs 521 through 523 would decline.

In the FY 2005 IPPS final rule, we agreed to analyze this area for FY 2006 and to look at the alternative DRG assignments suggested by the commenters. As indicated in the FY 2006 IPPS proposed rule, we examined data from the FY 2004 MedPAR file on cases in DRGs 521 through 523 with a principal diagnosis of code 292.82. We found that there were only 134 cases reported with the principal diagnosis code 292.82 in DRGs 521 through 523 without a diagnosis of drug and alcohol abuse. The average standardized charges for cases with a principal diagnosis of code 292.82 that did not have a secondary diagnosis of drug/alcohol abuse or dependence were $12,244.35, compared to the average standardized charges for all cases in DRG 521, which were $10,543.69. There were no cases in DRG 522 with a principal diagnosis of code 292.82. We found only 24 cases in DRG 523 with a principal diagnosis of code 292.82. Given the small number of cases in DRG 522 and 523, and the similarity in average standardized charges between those cases in DRG 521 with a principal diagnosis of code 292.82 and without a secondary diagnosis of drug/alcohol abuse or dependence to the overall average for all cases in the DRG, we do not believe the data suggest that a modification to DRGs 521 through 523 is warranted. Therefore, we did not propose changes to the current structure of DRGs 521 through 523 for FY 2006.

Comment: One commenter expressed concern that CMS did not propose any DRG change to code 292.82, drug-induced dementia. The commenter stated that a patient admitted with dementia due to an adverse effect of a drug would result in code 292.82, followed by the appropriate E code as a secondary diagnosis, grouping to one of the alcohol and drug abuse DRGs (521 through 523). The commenter indicated an adverse effect of a drug should not be confused with alcohol or drug abuse and recommended that CMS examine the potential impact of not reassigning code 292.82 into a new DRG from both a quality of care and a financial perspective.

Response: We appreciate the commenter's recommendation. However, as we indicated above and in the FY 2006 IPPS proposed rule, drug-induced dementia develops as a result of use of a drug. Therefore, it is appropriate to assign the code to DRGs 521, 522, or 523. As we indicated in the FY 2006 proposed rule (70 FR 23330), we did receive suggestions that drug-induced dementia due to the adverse effects of a drug or poisoning be assigned to DRGs 429, 449, 450, or 451. However, we believe these DRGs should only be assigned when the hospital uses the appropriate poisoning or other codes sequenced as the principal diagnosis. In addition, the data analyzed from the FY 2004 MedPAR file did not support a modification to DRGs 521 through 523. Our data show that hospital charges for patients assigned to DRGs 521 through 523 with a principal diagnosis of code 292.82 and no drug abuse secondary diagnosis were similar to other patients in these DRGs. Given that no other secondary diagnosis codes were used, it is not possible to know whether these patients were more clinically similar to patients in DRGs 426, 449, 450, 451, or 521 through 523. Absent any other diagnoses other than code 292.82, we have no evidence that these patients were clinically different than other patients in DRGs 521 through 523.

After consideration of the comments received, as we proposed, in this final rule we are not changing the DRG assignment for drug-induced dementia (code 292.82) for FY 2006. 10. Medicare Code Editor (MCE) Changes

As explained under section II.B.1. of this preamble, 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), discharge status, and demographic information go 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 a DRG. a. Newborn Age Edit

In the past, we have discussed and received comments concerning revision of the pediatric portions of the Medicare IPPS DRG classification system, that is, MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period). Most recently, we addressed these comments in both the FY 2005 proposed rule (69 FR 28210) and the FY 2005 IPPS final rule (69 FR 48938). In those rules, we indicated that we would be responsive to specific requests for updating MDC 15 on a limited, case-by-case basis.

We have recently received a request through the Open Door Forum to revise the MCE ``newborn age edit'' by removing over 100 codes located in Chapter 15 of ICD-9-CM that are identified as ``newborn'' codes. This request was made because these codes usually cause an edit or denial to be triggered when they are used on children greater than 1 year of age. However, the underlying issue with these particular edits is that other payers have adopted the CMS Medicare Code Editor in a wholesale manner, instead of adapting it for use in their own patient populations.

We acknowledge that Medicare DRGs are sometimes used to classify other patient groups. However, CMS' primary focus of updates to the Medicare DRG classification system is on changes relating to the Medicare patient population, not the pediatric or neonatal patient populations.

There are practical considerations regarding the assumption of a larger role for the Medicare DRGs in the pediatric or neonatal areas, given the difference between the Medicare population and that of newborns and children. There are also challenges surrounding the development of DRG classification systems and applications appropriate to children. We do not have the clinical expertise to make decisions about these patients, and must rely on outside clinicians for advice. In addition, because newborns and other children are generally not eligible for Medicare, we must rely on outside data to make decisions. We recognize that there are evolving alternative classification systems for children and encourage payers to use the CMS MCE as a template while making modifications appropriate for pediatric patients.

Therefore, we would encourage those non-Medicare systems needing a more comprehensive pediatric system of edits to update their systems by choosing from other existing systems or programs that are currently in use. Because of our reluctance to assume expertise in the

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pediatric arena, as we proposed we are not making the commenter's suggested changes to the MCE ``newborn age edit'' for FY 2006.

Comment: One commenter requested that CMS reconsider making the necessary revisions to the ``newborn age edit'' and other pediatric data. The commenter suggested that if CMS continues its current stance regarding the internal level of expertise to develop newborn and pediatric edits, then these edit should be removed from the MCE.

Response: We believe the commenter's recommendation to remove the newborn and pediatric edits from the MCE has merits and will consider it for FY 2007. However, we believe it is important that we have an opportunity to analyze this issue further and consider any comments from interested parties before eliminating these edits. b. Newborn Diagnoses Edit

Last year, in our changes to the MCE, we inadvertently added code 796.6 (Abnormal findings on neonatal screening) to both the MCE edit for ``Maternity Diagnoses--age 12 through 55'', and the MCE edit for ``Diagnoses Allowed for Females Only''. In the FY 2006 IPPS proposed rule, we proposed to remove code 796.6 from these two edits and add it to the ``Newborn Diagnoses'' edit.

We did not receive any comments on this proposal. Therefore, in this final rule, we are adopting the proposal as final without modification. c. Diagnoses Allowed for ``Males Only'' Edit

We have received a request to remove two codes from the ``Diagnoses Allowed for Males Only'' edit, related to androgen insensitivity syndrome (AIS). AIS is a new term for testicular feminization. Code 257.8 (Other testicular dysfunction) is used to describe individuals who, despite having XY chromosomes, develop as females with normal female genitalia and mammary glands. Testicles are present in the same general area as the ovaries, but are undescended and are at risk for development of testicular cancer, so are generally surgically removed. These individuals have been raised as females, and would continue to be considered female, despite their XY chromosome makeup. Therefore, as AIS is coded to 257.8, and has posed a problem associated with the gender edit, in the FY 2006 IPPS proposed rule, we proposed to remove this code from the ``Males Only'' edit in the MCE.

A similar clinical scenario can occur with certain disorders that cause a defective biosynthesis of testicular androgen. This disorder is included in code 257.2 (Other testicular hypofunction). Therefore, we also proposed to remove code 257.2 from the ``Male Only'' gender edit in the MCE.

We did not receive any comments on these proposals. Therefore, in this final rule, we are adopting the proposals as final without modification. d. Tobacco Use Disorder Edit

We have become aware of the possible need to add code 305.1 (Tobacco use disorder) to the MCE in order to make admissions for tobacco use disorder a noncovered Medicare service when code 305.1 is reported as the principal diagnosis. On March 22, 2005, CMS published a final decision memorandum and related national coverage determination (NCD) on smoking cessation counseling services on its Web site: (http://www.cms.hhs.gov/coverage/ ). Among other things, this NCD provides

that: ``Inpatient hospital stays with the principal diagnosis of 305.1, Tobacco Use Disorder, are not reasonable and necessary for the effective delivery of tobacco cessation counseling services. Therefore, we will not cover tobacco cessation services if tobacco cessation is the primary reason for the patient's hospital stay.'' Therefore, in order to maintain internal consistency with CMS programs and decisions, we proposed to add code 305.1 to the MCE edit ``Questionable Admission- Principal Diagnosis Only'' in order to make tobacco use disorder a noncovered admission.

We did not receive any comments on this proposal. Therefore, in this final rule, we are adopting the proposal as final without modification. e. Noncovered Procedure Edit

Effective October 1, 2004, CMS adopted the use of code 00.61 (Percutaneous angioplasty or atherectomy of precerebral (extracranial) vessel(s) (PTA)) and code 00.63 (Percutaneous insertion of carotid artery stent(s). Both codes are to be recorded to indicate the insertion of a carotid artery stent or stents. At the time of the creation of the codes, the coverage indication for carotid artery stenting was only for patients in a clinical trial setting, and diagnostic code V70.7 (Examination of participation in a clinical trial) was required for payment of these cases. However, effective October 12, 2004, Medicare covers PTA of the carotid artery concurrent with the placement of an FDA-approved carotid stent for an FDA-approved indication when furnished in accordance with FDA-approved protocols governing post-approval studies. Therefore, as the coverage indication has changed, we proposed to remove codes 00.61, 00.63, and V70.7 from the MCE noncovered procedure edit.

We did not receive any comments on this proposal. Therefore, in this final rule, we are adopting the proposal as final without modification. f. Error in Non-Covered Procedure Edit--code 36.32

It has come to our attention that an entry in the Non-Covered Procedures section of the MCE was made in error. Procedure code 36.32 (Other transmyocardial revascularization) is covered as a late or last resort for patients with severe (Canadian Cardiovascular Society classification Classes III or IV) angina (stable or unstable). The angina symptoms must be caused by areas of the heart not amenable to surgical therapies. Therefore, as code 36.32 is erroneously in the Non- Covered Procedure edit in the MCE, we are removing it from the