Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; and Technical Changes Relating to Costs to Organizations and Medicare Cost Reports

 
CONTENT

Federal Register, Volume 81 Issue 81 (Wednesday, April 27, 2016)

Federal Register Volume 81, Number 81 (Wednesday, April 27, 2016)

Proposed Rules

Pages 24945-25322

From the Federal Register Online via the Government Publishing Office www.gpo.gov

FR Doc No: 2016-09120

Page 24945

Vol. 81

Wednesday,

No. 81

April 27, 2016

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; and Technical Changes Relating to Costs to Organizations and Medicare Cost Reports; Proposed Rule

Page 24946

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, and 485

CMS-1655-P

RIN 0938-AS77

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; and Technical Changes Relating to Costs to Organizations and Medicare Cost Reports

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

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2017. Some of the proposed changes would implement certain statutory provisions contained in the Pathway for Sustainable Growth (SGR) Reform Act of 2013, the Improving Medicare Post-Acute Care Transformation Act of 2014, the Notice of Observation Treatment and Implications for Care Eligibility Act of 2015, and other legislation. We also are providing the estimated market basket update to apply to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits for FY 2017.

We are proposing to update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) for FY 2017.

In addition, we are proposing to make changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments to hospitals with rural track training programs. We are proposing to establish new requirements or revise requirements for quality reporting by specific providers (acute care hospitals, PPS-

exempt cancer hospitals, LTCHs, and inpatient psychiatric facilities) that are participating in Medicare, including related provisions for eligible hospitals and critical care hospitals (CAHs) participating in the Electronic Health Record (EHR) Incentive Program. We are proposing to update policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. We also are proposing to: Implement statutory provisions that require hospitals and CAHs to furnish notification to Medicare beneficiaries, including Medicare Advantage enrollees, when the beneficiaries receive outpatient observation services for more than 24 hours; announce the implementation of the Frontier Community Health Integration Project Demonstration; and make technical corrections and changes to regulations relating to costs to organizations and Medicare cost reports.

DATES: To be assured consideration, comments must be received at one of the addresses provided in the ADDRESSES section, no later than 5 p.m. EDT on June 17, 2016.

ADDRESSES: In commenting, please refer to file code CMS-1655-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the ``submit a comment'' tab.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1655-P, P.O. Box 8011, Baltimore, MD 21244-1850.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1655-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

  1. For delivery in Washington, DC--Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-

    in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

  2. For delivery in Baltimore, MD--Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

    Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

    For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section.

    FOR FURTHER INFORMATION CONTACT: Ing Jye Cheng, (410) 786-4548, and Donald Thompson, (410) 786-4487, Operating Prospective Payment, MS-

    DRGs, Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital (DSH) Issues, Medicare-Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital Payment Adjustment Issues.

    Michele Hudson, (410) 786-4487, and Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG Relative Weights Issues.

    Mollie Knight (410) 786-7948, and Bridget Dickensheets, (410) 786-

    8670, Rebasing and Revising the LTCH Market Basket Issues.

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

    Jason Pteroski, (410) 786-4681, and Siddhartha Mazumdar, (410) 786-

    6673, Frontier Community Health Integration Project Demonstration Issues.

    Kathryn McCann Smith, (410) 786-7623, Hospital Notification Procedures for Beneficiaries Receiving Outpatient Observation Services Issues; or

    Page 24947

    Stephanie Simons, (206) 615-2420, only for Related Medicare Health Plans Issues.

    Lein Han, (617) 879-0129, Hospital Readmissions Reduction Program--

    Readmission Measures for Hospitals Issues.

    Delia Houseal, (410) 786-2724, Hospital-Acquired Condition Reduction Program and Hospital Readmissions Reduction Program--Program Administration Issues.

    Joseph Clift, (410) 786-4165, Hospital-Acquired Condition Reduction Program--Measures Issues.

    James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing--Program Administration, Validation, and Reconsideration Issues.

    Cindy Tourison, (410) 786-1093, Hospital Inpatient Quality Reporting--Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues.

    Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing Efficiency Measures Issues.

    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality Reporting--Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues.

    James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality Reporting Issues.

    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data Reporting Issues.

    Jeffrey Buck, (410) 786-0407 and Cindy Tourison (410) 786-1093, Inpatient Psychiatric Facilities Quality Data Reporting Issues.

    Deborah Krauss, (410) 786-5264, and Lisa Marie Gomez, (410) 786-

    1175, EHR Incentive Program Clinical Quality Measure Related Issues.

    Elizabeth Myers, (410) 786-4751, EHR Incentive Program Nonclinical Quality Measure Related Issues.

    Lauren Wu, (202) 690-7151, Certified EHR Technology Related Issues.

    Kellie Shannon, (410) 786-0416, Technical Changes Relating to Costs to Organizations and Medicare Cost Reports Issues.

    SUPPLEMENTARY INFORMATION:

    Electronic Access

    Inspection of Public Comments: All public comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all public comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

    Electronic Access

    This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at: http://www.gpo.gov/fdsys.

    Tables Available Only Through the Internet on the CMS Web Site

    In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables are no longer published in the Federal Register. Instead, these tables generally will be available only through the Internet. The IPPS tables for this proposed rule are available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the screen titled, ``FY 2017 IPPS Proposed Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCHy PPS tables for this FY 2017 proposed rule are available through the Internyet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1655-P. For further details on the contents of the tables referenced in this proposed rule, we refer readers to section VI. of the Addendum to this proposed rule.

    Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Michael Treitel at (410) 786-4552.

    Acronyms

    3M 3M Health Information System

    AAMC Association of American Medical Colleges

    ACGME Accreditation Council for Graduate Medical Education

    ACoS American College of Surgeons

    AHA American Hospital Association

    AHIC American Health Information Community

    AHIMA American Health Information Management Association

    AHRQ Agency for Healthcare Research and Quality

    AJCC American Joint Committee on Cancer

    ALOS Average length of stay-

    ALTHA Acute Long-Term Hospital Association

    AMA American Medical Association

    AMGA American Medical Group Association

    AMI Acute myocardial infarction

    AOA American Osteopathic Association

    APR DRG All Patient Refined Diagnosis Related Group System

    APRN Advanced practice registered nurse

    ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-

    5

    ASCA Administrative Simplification Compliance Act of 2002, Public Law 107-105

    ASITN American Society of Interventional and Therapeutic Neuroradiology

    ASPE Assistant Secretary for Planning and Evaluation (DHHS)

    ATRA American Taxpayer Relief Act of 2012, Public Law 112-240

    BBA Balanced Budget Act of 1997, Public Law 105-33

    BBRA Medicare, Medicaid, and SCHIP State Children's Health Insurance Program Balanced Budget Refinement Act of 1999, Public Law 106-113

    BIPA Medicare, Medicaid, and SCHIP State Children's Health Insurance Program Benefits Improvement and Protection Act of 2000, Public Law 106-554

    BLS Bureau of Labor Statistics

    CABG Coronary artery bypass graft surgery

    CAH Critical access hospital

    CARE Medicare Continuity Assessment Record & Evaluation Instrument

    CART CMS Abstraction & Reporting Tool

    CAUTI Catheter-associated urinary tract infection

    CBSAs Core-based statistical areas

    CC Complication or comorbidity

    CCN CMS Certification Number

    CCR Cost-to-charge ratio

    CDAC Medicare Clinical Data Abstraction Center

    CDAD Clostridium difficile-associated disease

    CDC Centers for Disease Control and Prevention

    CERT Comprehensive error rate testing

    CDI Clostridium difficile C. difficile infection

    CFR Code of Federal Regulations

    CLABSI Central line-associated bloodstream infection

    CIPI Capital input price index

    CMI Case-mix index

    CMS Centers for Medicare & Medicaid Services

    CMSA Consolidated Metropolitan Statistical Area

    COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 99-272

    COLA Cost-of-living adjustment

    CoP Hospital condition of participation

    COPD Chronic obstructive pulmonary disease

    CPI Consumer price index

    CQL Clinical quality language

    CQM Clinical quality measure

    CY Calendar year

    DACA Data Accuracy and Completeness Acknowledgement

    Page 24948

    DPP Disproportionate patient percentage

    DRA Deficit Reduction Act of 2005, Public Law 109-171

    DRG Diagnosis-related group

    DSH Disproportionate share hospital

    EBRT External beam radiotherapy

    ECE Extraordinary circumstances exemption

    ECI Employment cost index

    eCQM Electronic clinical quality measure

    EDB Medicare Enrollment Database

    EHR Electronic health record

    EMR Electronic medical record

    EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 99-272

    EP Eligible professional

    FAH Federation of American Hospitals

    FDA Food and Drug Administration

    FFY Federal fiscal year

    FPL Federal poverty line

    FQHC Federally qualified health center

    FR Federal Register

    FTE Full-time equivalent

    FY Fiscal year

    GAF Geographic Adjustment Factor

    GME Graduate medical education

    HAC Hospital-acquired condition

    HAI Healthcare-associated infection

    HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

    HCFA Health Care Financing Administration

    HCO High-cost outlier

    HCP Healthcare personnel

    HCRIS Hospital Cost Report Information System

    HF Heart failure

    HHA Home health agency

    HHS Department of Health and Human Services

    HICAN Health Insurance Claims Account Number

    HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104-191

    HIPC Health Information Policy Council

    HIS Health information system

    HIT Health information technology

    HMO Health maintenance organization

    HPMP Hospital Payment Monitoring Program

    HSA Health savings account

    HSCRC Maryland Health Services Cost Review Commission

    HSRV Hospital-specific relative value

    HSRVcc Hospital-specific relative value cost center

    HQA Hospital Quality Alliance

    HQI Hospital Quality Initiative

    HwH Hospital-within-hospital

    ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification

    ICD-10-CM International Classification of Diseases, Tenth Revision, Clinical Modification

    ICD-10-PCS International Classification of Diseases, Tenth Revision, Procedure Coding System

    ICR Information collection requirement

    ICU Intensive care unit

    IGI IHS Global Insight, Inc.

    IHS Indian Health Service

    IME Indirect medical education

    IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 2014, Public Law 113-185

    I-O Input-Output

    IOM Institute of Medicine

    IPF Inpatient psychiatric facility

    IPFQR Inpatient Psychiatric Facility Quality Reporting Program

    IPPS Acute care hospital inpatient prospective payment system

    IRF Inpatient rehabilitation facility

    IQR Hospital Inpatient Quality Reporting

    LAMCs Large area metropolitan counties

    LEP Limited English proficiency

    LOC Limitation on charges

    LOS Length of stay

    LTC-DRG Long-term care diagnosis-related group

    LTCH Long-term care hospital

    LTCH QRP Long-Term Care Hospital Quality Reporting Program

    MA Medicare Advantage

    MAC Medicare Administrative Contractor

    MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10

    MAP Measure Application Partnership

    MCC Major complication or comorbidity

    MCE Medicare Code Editor

    MCO Managed care organization

    MDC Major diagnostic category

    MDH Medicare-dependent, small rural hospital

    MedPAC Medicare Payment Advisory Commission

    MedPAR Medicare Provider Analysis and Review File

    MEI Medicare Economic Index

    MGCRB Medicare Geographic Classification Review Board

    MIEA-TRHCA Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Public Law 109-432

    MIPPA Medicare Improvements for Patients and Providers Act of 2008, Public Law 110-275

    MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108-173

    MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309

    MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110-173

    MOON Medicare Outpatient Observation Notice

    MRHFP Medicare Rural Hospital Flexibility Program

    MRSA Methicillin-resistant Staphylococcus aureus

    MSA Metropolitan Statistical Area

    MS-DRG Medicare severity diagnosis-related group

    MS-LTC-DRG Medicare severity long-term care diagnosis-related group

    MU Meaningful Use EHR Incentive Program

    MUC Measure under consideration

    NAICS North American Industrial Classification System

    NALTH National Association of Long Term Hospitals

    NCD National coverage determination

    NCHS National Center for Health Statistics

    NCQA National Committee for Quality Assurance

    NCVHS National Committee on Vital and Health Statistics

    NECMA New England County Metropolitan Areas

    NHSN National Healthcare Safety Network

    NOP Notice of Participation

    NOTICE Act Notice of Observation Treatment and Implication for Care Eligibility Act, Public Law 114-42

    NQF National Quality Forum

    NQS National Quality Strategy

    NTIS National Technical Information Service

    NTTAA National Technology Transfer and Advancement Act of 1991, Public Law 104-113

    NUBC National Uniform Billing Code

    NVHRI National Voluntary Hospital Reporting Initiative

    OACT CMS' Office of the Actuary

    OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509

    OES Occupational employment statistics

    OIG Office of the Inspector General

    OMB Executive Office of Management and Budget

    ONC Office of the National Coordinator for Health Information Technology

    OPM U.S. Office of Personnel Management

    OQR Hospital Outpatient Quality Reporting

    O.R. Operating room

    OSCAR Online Survey Certification and Reporting System

    PAC Post-acute care

    PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93

    PCH PPS-exempt cancer hospital

    PCHQR PPS-exempt cancer hospital quality reporting

    PMSAs Primary metropolitan statistical areas

    POA Present on admission

    PPI Producer price index

    PPR Potentially Preventable Readmissions

    PPS Prospective payment system

    PRM Provider Reimbursement Manual

    ProPAC Prospective Payment Assessment Commission

    PRRB Provider Reimbursement Review Board

    PRTFs Psychiatric residential treatment facilities

    PSF Provider-Specific File

    PSI Patient safety indicator

    PS&R Provider Statistical and Reimbursement System

    PQRS Physician Quality Reporting System

    PUF Public use file

    QDM Quality data model

    QIES ASAP Quality Improvement Evaluation System Assessment Submission and Processing

    QIG Quality Improvement Group CMS

    QIO Quality Improvement Organization

    QM Quality measure

    QRDA Quality Reporting Document Architecture

    RFA Regulatory Flexibility Act, Public Law 96-354

    RHC Rural health clinic

    RHQDAPU Reporting hospital quality data for annual payment update

    RIM Reference information model

    RNHCI Religious nonmedical health care institution

    RPL Rehabilitation psychiatric long-term care (hospital)

    RRC Rural referral center

    Page 24949

    RSMR Risk-standard mortality rate

    RSP Risk-standardized payment

    RSSR Risk-standard readmission rate

    RTI Research Triangle Institute, International

    RUCAs Rural-urban commuting area codes

    RY Rate year

    SAF Standard Analytic File

    SCH Sole community hospital

    SCHIP State Child Health Insurance Program

    SCIP Surgical Care Improvement Project

    SFY State fiscal year

    SGR Sustainable Growth Rate

    SIC Standard Industrial Classification

    SIR Standardized infection ratio

    SNF Skilled nursing facility

    SNF QRP Skilled Nursing Facility Quality Reporting Program

    SNF VBP Skilled Nursing Facility Value-Based Purchasing

    SOCs Standard occupational classifications

    SOM State Operations Manual

    SRR Standardized risk ratio

    SSI Surgical site infection

    SSI Supplemental Security Income

    SSO Short-stay outlier

    SUD Substance use disorder

    TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97-248

    TEP Technical expert panel

    THA/TKA Total hip arthroplasty/total knee arthroplasty

    TMA TMA Transitional Medical Assistance, Abstinence Education, and QI Qualifying Individuals Programs Extension Act of 2007, Public Law 110-90

    TPS Total Performance Score

    UHDDS Uniform hospital discharge data set

    UR Utilization review

    VBP Hospital Value Based Purchasing Program

    VTE Venous thromboembolism

    Table of Contents

    I. Executive Summary and Background

    1. Executive Summary

      1. Purpose and Legal Authority

      2. Summary of the Major Provisions

      3. Summary of Costs and Benefits

    2. Summary

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

      2. Hospitals and Hospital Units Excluded from the IPPS

      3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)

      4. Critical Access Hospitals (CAHs)

      5. Payments for Graduate Medical Education (GME)

    3. Summary of Provisions of Recent Legislation Proposed to be Implemented in this Proposed Rule

      1. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)

      2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)

      3. Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185)

      4. The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10)

      5. The Consolidated Appropriations Act, 2016 (Pub. L. 114-113)

      6. The Notice of Observation Treatment and Implication for Care Eligibility Act (the NOTICE Act) of 2015 (Pub. L. 114-42)

    4. Summary of the Provisions of this Proposed Rule

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

    5. Background

    6. MS-DRG Reclassifications

    7. Adoption of the MS-DRGs in FY 2008

    8. Proposed FY 2017 MS-DRG Documentation and Coding Adjustment

      1. Background on the Prospective MS-DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90

      2. Adjustment to the Average Standardized Amounts Required by Public Law 110-90

  3. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110-90

  4. Recoupment or Repayment Adjustments in FYs 2010 through 2012 Required by Section 7(b)(1)(B) of Public Law 110-90

    3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data

    4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110-90

    5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110-90

    6. Proposed Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)

    1. Refinement of the MS-DRG Relative Weight Calculation

      1. Background

      2. Discussion of Policy for FY 2017

    2. Proposed Changes to Specific MS-DRG Classifications

      1. Discussion of Changes to Coding System and Basis for MS-DRG Updates

  5. Conversion of MS-DRGs to the International Classification of Diseases, 10th Revision (ICD-10)

  6. Basis for Proposed FY 2017 MS-DRG Updates

    2. Pre-Major Diagnostic Category (Pre-MDC): Total Artificial Heart Replacement

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

  7. Endovascular Embolization (Coiling) or Occlusion of Head and Neck Procedures

  8. Mechanical Complication Codes

    4. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)

  9. Proposed Reassignment of Diagnosis Code R22.2 (Localized Swelling, Mass and Lump, Trunk)

  10. Pulmonary Embolism with tPA or Other Thrombolytic Therapy

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

  11. Implant of Loop Recorder

  12. Endovascular Thrombectomy of the Lower Limbs

  13. Pacemaker Procedures Code Combinations

  14. Transcatheter Mitral Valve Repair with Implant

  15. MS-DRG 245 (AICD Generator Procedures)

    6. MDC 6 (Diseases and Disorders of the Digestive System): Excision of Ileum

    7. MDC 7 (Diseases and Disorders of the Hepatobiliary System and Pancreas): Bypass Procedures of the Veins

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

  16. Proposed Updates to MS-DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with and without MCC, respectively)

    (1) Total Ankle Replacement (TAR) Procedures

    (2) Hip Replacements Procedures with Principal Diagnosis of Hip Fracture

  17. Revision of Total Ankle Replacement Procedures

    (1) Revision of Total Ankle Replacement Procedures

    (2) Combination Codes for Removal and Replacement of Knee Joints

  18. Decompression Laminectomy

  19. Lordosis

    9. MDC 13 (Diseases and Disorders of the Female Reproductive System): Pelvic Evisceration

    10. MDC 19 (Mental Diseases and Disorders): Proposed Modification of Title of MS-DRG 884 (Organic Disturbances and Mental Retardation)

    11. MDC 23 (Factors Influencing Health Status and Other Contacts with Health Services): Logic of MS-DRGs 945 and 946 (Rehabilitation with and without CC/MCC, Respectively)

    12. Proposed Medicare Code Editor (MCE) Changes

  20. Age Conflict Edit

    (1) Newborn Diagnosis Category

    (2) Pediatric Diagnosis Category

  21. Sex Conflict Edit

  22. Non-Covered Procedure Edit

    (1) Endovascular Mechanical Thrombectomy

    (2) Radical Prostatectomy

  23. Unacceptable Principal Diagnosis Edit

    (1) Liveborn Infant

    (2) Multiple Gestation

    (3) Supervision of High Risk Pregnancy

  24. Other MCE Issues

    (1) Procedure Inconsistent with Length of Stay Edit

    (2) Maternity Diagnoses

    (3) Manifestation Codes Not Allowed as Principal Diagnosis Edit

    (4) Questionable Admission Edit

    (5) Removal of Edits and Future Enhancement

    13. Proposed Changes to Surgical Hierarchies

    14. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2017

    15. Proposed Complications or Comorbidity (CC) Exclusions List

  25. Background of the CC List and the CC Exclusions List

  26. Proposed CC Exclusions List for FY 2017

    16. Review of Procedure Codes in MS DRGs 981 through 983; 984 through 986; and 987 through 989

  27. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-

    DRGs 987 through 989 into MDCs

  28. Reassignment of Procedures among MS-DRGs 981 through 983, 984 through 986, and 987 through 989

    Page 24950

  29. Adding Diagnosis or Procedure Codes to MDCs

    (1) Angioplasty of Extracranial Vessel

    (2) Excision of Abdominal Arteries

    (3) Excision of Retroperitoneal Tissue

    (4) Occlusion of Vessels: Esophageal Varices

    (5) Excision of Vulva

    (6) Lymph Node Biopsy

    (7) Obstetrical Laceration Repair

    17. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems

  30. ICD-10 Coordination and Maintenance Committee

  31. Code Freeze

    18. Replaced Devices Offered without Cost or With a Credit

  32. Background

  33. Proposed Changes for FY 2017

    19. Other Proposed Policy Changes

  34. MS-DRG GROUPER Logic

    (1) Operations on Products of Conception

    (2) Other Heart Revascularization

    (3) Procedures on Vascular Bodies: Chemoreceptors

    (4) Repair of the Intestine

    (5) Insertion of Infusion Pump

    (6) Procedures on the Bursa

    (7) Procedures on the Breast

    (8) Excision of Subcutaneous Tissue and Fascia

    (9) Shoulder Replacement

    (10) Reposition

    (11) Insertion of Infusion Device

    (12) Bladder Neck Repair

    (13) Future Consideration

  35. Issues Relating to MS-DRG 999 (Ungroupable)

  36. Other Operating Room (O.R.) and Non-O.R. Issues

    (1) O.R. Procedures to Non-O.R. Procedures

    (a) Endoscopic/Transorifice Insertion

    (b) Endoscopic/Transorifice Removal

    (c) Tracheostomy Device Removal

    (d) Endoscopic/Percutaneous Insertion

    (e) Percutaneous Removal

    (f) Percutaneous Drainage

    (g) Percutaneous Inspection

    (h) Inspection without Incision

    (i) Dilation of Stomach

    (j) Endoscopic/Percutaneous Occlusion

    (k) Infusion Device

    (2) Non-O.R. Procedures to O.R. Procedures

    (a) Drainage of Pleural Cavity

    (b) Drainage of Cerebral Ventricle

    1. Recalibration of the Proposed FY 2017 MS-DRG Relative Weights

      1. Data Sources for Developing the Proposed Relative Weights

      2. Methodology for Calculation of the Proposed Relative Weights

      3. Development of National Average CCRs

    2. Proposed Add-On Payments for New Services and Technologies

      1. Background

      2. Public Input Before Publication of a Notice of Proposed Rulemaking on Add-On Payments

      3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and Technologies

      4. Proposed FY 2017 Status of Technologies Approved for FY 2016 Add-On Payments

  37. KcentraTM

  38. Argussupreg II Retinal Prosthesis System

  39. CardioMEMSTM HF (Heart Failure) Monitoring System

  40. MitraClipsupreg System

  41. Responsive Neurostimulator (RNSsupreg) System

  42. Blinatumomab (BLINCYTOTM Trade Brand)

  43. Lutonixsupreg Drug Coated Balloon PTA Catheter and In.PACTTM AdmiralTM Pacliaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter

    5. Proposed FY 2017 Applications for New Technology Add-On Payments

  44. MAGECsupreg Spinal Bracing and Distraction System (MAGECsupreg Spine)

  45. MIRODERM Biologic Wound Matrix (MIRODERM)

  46. Idarucizumab

  47. Titan Spine (Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device)

  48. Andexanet Alfa

  49. Defiteliosupreg (Defibrotide)

  50. EDWARDS INTUITY EliteTM Valve System

  51. GOREsupreg EXCLUDERsupreg Iliac Branch Endoprosthesis (IBE)

  52. VistogardTM (Uridine Triacetate)

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

    1. Background

      1. Legislative Authority

      2. Core-Based Statistical Areas (CBSAs) Revisions for the Proposed FY 2017 Hospital Wage Index

    2. Worksheet S-3 Wage Data for the Proposed FY 2017 Wage Index

      1. Included Categories of Costs

      2. Excluded Categories of Costs

      3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS

    3. Verification of Worksheet S-3 Wage Data

    4. Method for Computing the Proposed FY 2017 Unadjusted Wage Index

    5. Proposed Occupational Mix Adjustment to the FY 2017 Wage Index

      1. Use of 2013 Occupational Mix Survey for the Proposed FY 2017 Wage Index

      2. Development of the 2016 Medicare Wage Index Occupational Mix Survey for the FY 2019 Wage Index

      3. Calculation of the Proposed Occupational Mix Adjustment for FY 2017

    6. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2017 Occupational Mix Adjusted Wage Index

    7. Transitional Wage Indexes

      1. Background

      2. Transition for Hospitals in Urban Areas That Became Rural

      3. Transition for Hospitals Deemed Urban under Section 1886(d)(8)(B) of the Act Where the Urban Area Became Rural under the New OMB Delineations

      4. Budget Neutrality

    8. Proposed Application of the Proposed Rural, Imputed, and Frontier Floors

      1. Proposed Rural Floor

      2. Proposed Imputed Floor for FY 2017

      3. Proposed State Frontier Floor for FY 2017

      I. Proposed FY 2017 Wage Index Tables

    9. Proposed Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications

      1. General Policies and Effects of Reclassification and Redesignation

      2. MGCRB Reclassification and Redesignation Issues for FY 2017

  53. FY 2017 Reclassification Requirements and Approvals

  54. Requirements for FY 2018 Applications and Proposed Revisions Regarding Paper Application Requirements

  55. Other Policy Regarding Reclassifications for Terminated Hospitals

    3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act

    4. Waiving Lugar Redesignation for the Out-Migration Adjustment

    1. Proposed Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees for FY 2017

      L. Notification Regarding Proposed CMS ``Lock-In'' Date for Urban to Rural Reclassifications Under Sec. 412.103

    2. Process for Requests for Wage Index Data Corrections

    3. Proposed Labor Market Share for the Proposed FY 2017 Wage Index

    4. Solicitation of Comments on Treatment of Overhead and Home Office Costs in the Wage Index Calculation

      IV. Other Decisions and Proposed Changes to the IPPS for Operating Costs and Graduate Medical Education (GME) Costs

    5. Changes to Operating Payments for Subsection (d) Puerto Rico Hospitals as a Result of Section 601 of Public Law 114-113

    6. Proposed Changes in the Inpatient Hospital Updates for FY 2017 (Sec. Sec. 412.64(d) and 412.211(c))

      1. Proposed FY 2017 Inpatient Hospital Update

      2. Proposed FY 2017 Puerto Rico Hospital Update

      3. Electronic Health Records (EHR) Adjustment to IPPS Market Basket

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

      1. Case-Mix Index (CMI)

      2. Discharges

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

    9. Indirect Medical Education (IME) Payment Adjustment (Sec. 412.105)

      1. IME Adjustment Factor for FY 2017

      2. Other Proposed Policy Changes Affecting IME

    10. Proposed Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2017 and Subsequent Years (Sec. 412.106)

      1. General Discussion

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

      3. Empirically Justified Medicare DSH Payments

      4. Uncompensated Care Payments

  56. Calculation of Proposed Factor 1 for FY 2017

  57. Calculation of Proposed Factor 2 for FY 2017

  58. Calculation of Proposed Factor 3 for FY 2017

    Page 24951

  59. Proposed Calculation of Factor 3 for FY 2018 and Subsequent Fiscal Years

    (1) Background

    (2) Proposed Data Source and Time Period for FY 2018 and Subsequent Years, Including Methodology for Incorporating Worksheet S-10 Data

    (3) Proposed Definition of Uncompensated Care for FY 2018 and Subsequent Fiscal Years

    (4) Other Methodological Considerations for FY 2018 and Subsequent Fiscal Years

    1. Hospital Readmissions Reduction Program: Proposed Updates and Changes (Sec. Sec. 412.150 through 412.154)

      1. Statutory Basis for the Hospital Readmissions Reduction Program

      2. Regulatory Background

      3. Proposed Policies for the FY 2017 Hospital Readmissions Reduction Program

      4. Maintenance of Technical Specifications for Quality Measures

      5. Proposed Applicable Period for FY 2017

      6. Proposed Calculation of Aggregate Payments for Excess Readmissions for FY 2017

      7. Extraordinary Circumstance Exception Policy

      8. Timeline for Public Reporting of Excess Readmission Ratios on Hospital Compare for the FY 2017 Payment Determination

    2. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy Changes for the FY 2018 Program Year and Subsequent Years

      1. Background

  60. Statutory Background and Overview of Past Program Years

  61. FY 2017 Program Year Payment Details

    2. PSI 90 Measure in the FY 2018 and Future Program Years

  62. Proposed PSI 90 Measure Performance Period Change for the FY 2018 Program Year

  63. Intent To Propose in Future Rulemaking To Adopt the Modified PSI 90 Measure

    3. Retention Policy, Domain Name Proposal, and Updating of Quality Measures for the FY 2019 Program Year

  64. Retention of Previously Adopted Hospital VBP Program Measures

  65. Proposed Domain Name Change

  66. Proposed Inclusion of Selected Ward Non-Intensive Care Unit (ICU) Locations in Certain NHSN Measures Beginning With the FY 2019 Program Year

  67. Summary of Previously Adopted Measures and Newly Proposed Measure Refinements for the FY 2019 Program Year

    4. Newly Proposed Measures and Measure Refinements for the FY 2021 Program Year and Subsequent Years

  68. Condition-Specific Hospital Level, Risk-Standardized Payment Measures

  69. Proposed Update to an Existing Measure for the FY 2021 Program Year: Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Pneumonia (PN) Hospitalization (NQF #0468) (Updated Cohort)

    5. Proposed New Measure for the FY 2022 Program Year: Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2558)

    6. Previously Adopted and Newly Proposed Baseline and Performance Periods

  70. Background

  71. Patient- and Caregiver-Centered Experience of Care/Care Coordination Domain (Proposed Person and Community Engagement Domain)

  72. Efficiency and Cost Reduction Domain

  73. Safety Domain

  74. Clinical Care Domain

  75. Summary of Previously Adopted and Newly Proposed Baseline and Performance Periods for the FY 2018, FY 2019, FY 2020, FY 2021, and FY 2022 Program Years

    7. Proposed Immediate Jeopardy Policy Changes

  76. Background

  77. Proposed Increase of Immediate Jeopardy Citations From Two to Three Surveys

  78. EMTALA-Related Immediate Jeopardy Citations

    8. Proposed Performance Standards for the Hospital VBP Program

  79. Background

  80. Previously Adopted and Proposed Performance Standards for the FY 2019 Program Year

  81. Previously Adopted Performance Standards for Certain Measures for the FY 2020 Program Year

  82. Previously Adopted and Newly Proposed Performance Standards for Certain Measures for the FY 2021 Program Year

  83. Proposed Performance Standards for Certain Measures for the FY 2022 Program Year

    9. FY 2019 Program Year Scoring Methodology

  84. Domain Weighting for the FY 2019 Program Year for Hospitals That Receive a Score on All Domains

  85. Domain Weighting for the FY 2019 Program Year for Hospitals Receiving Scores on Fewer Than Four Domains

    I. Proposed Changes to the Hospital-Acquired Condition (HAC) Reduction Program

    1. Background

    2. Statutory Basis for the HAC Reduction Program

    3. Overview of Previous HAC Reduction Program Rulemaking

    4. Implementation of the HAC Reduction Program for FY 2017

  86. Clarification of Complete Data Requirements for Domain 1

  87. Clarification of NHSN CDC HAI Data Submission Requirements for Newly Opened Hospitals

    5. Implementation of the HAC Reduction Program for FY 2018

  88. Proposed Adoption of PSI 90: Patient Safety and Adverse Events Composite (NQF # 0531)

  89. Applicable Time Periods for the FY 2018 HAC Reduction Program and the FY 2019 HAC Reduction Program

  90. Proposed Changes to the HAC Reduction Program Scoring Methodology

    6. Request for Comments on Additional Measures for Potential Future Adoption

    7. Maintenance of Technical Specifications for Quality Measures

    8. Extraordinary Circumstance Exception Policy for the HAC Reduction Program Beginning in FY 2016 and for Subsequent Years

    1. Payment for Graduate Medical Education (GME) and Indirect Medical Education (IME) Costs (Sec. Sec. 412.105, 413.75 through 413.83)

    1. Background

    2. Change in New Program Growth From 3 Years to 5 Years

  91. Urban and Rural Hospitals

  92. Proposed Policy Changes Relating to Rural Training Tracks at Urban Hospitals

  93. Proposed Effective Date

    1. Rural Community Hospital Demonstration Program

    1. Background

    2. Budget Neutrality Offset Adjustments: Fiscal Years 2005 Through 2016

  94. Fiscal Years 2005 Through 2013

  95. Fiscal Years 2014 and 2015

  96. Fiscal Year 2016

    3. Proposed Budget Neutrality Methodology for FY 2017

    L. Proposed Hospital and CAH Notification Procedures for Outpatients Receiving Observation Services

    1. Background

  97. Statutory Authority

  98. Proposed Effective Date

    2. Proposed Implementation of the NOTICE Act Provisions

  99. Proposed Notice Process

  100. Proposed Notification Recipients

  101. Proposed Timing of Notice Delivery

  102. Proposed Requirements for Written Notice

  103. Outpatient Observation Services and Beneficiary Financial Liability

  104. Delivering the Medicare Outpatient Observation Notice

  105. Proposed Oral Notice

  106. Proposed Signature Requirements

  107. No Appeal Rights Under the NOTICE Act

    1. Proposed Technical Changes and Correction of Typographical Errors in Certain Regulations Under 42 CFR part 413 Relating to Costs to Related Organizations and Medicare Cost Reports

      1. General Background

      2. Proposed Technical Change to Regulations at 42 CFR 413.17(d)(1) on Cost to Related Organizations

      3. Proposed Changes to 42 CFR 413.24(f)(4)(i) Relating to Electronic Submission of Cost Reports

      4. Proposed Technical Changes to 42 CFR 413.24(f)(4)(ii) Relating to Electronic Submission of Cost Reports and Due Dates

      5. Proposed Technical Changes to 42 CFR 413.24(f)(4)(iv) Relating to Reporting Entities, Cost Report Certification Statement, Electronic Submission and Cost Reports Due Dates

      6. Proposed Technical Correction to 42 CFR 413.200(c)(1)(i) Relating to Medicare Cost Report Due Dates for Organ Procurement Organizations and Histocompatibility Laboratories

    2. Clarification Regarding the Medicare Utilization Requirement for Medicare-

      Page 24952

      Dependent, Small Rural Hospitals (MDHs) (Sec. 412.108)

      1. Background

      2. Clarification of Medicare Utilization Criterion for MDH Classification

    3. Adjustment to IPPS Rates Resulting From 2-Midnight Policy

      V. Proposed Changes to the IPPS for Capital-Related Costs

    4. Overview

    5. Additional Provisions

      1. Exception Payments

      2. New Hospitals

      3. Proposed Changes in Payments for Hospitals Located in Puerto Rico

    6. Proposed Annual Update for FY 2017

      VI. Proposed Changes for Hospitals Excluded From the IPPS

    7. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2017

    8. Critical Care Hospitals (CAHs)

      1. Background

      2. Frontier Community Health Integration Project (FCHIP) Demonstration

      VII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2015

    9. Background of the LTCH PPS

      1. Legislative and Regulatory Authority

      2. Criteria for Classification as a LTCH

  108. Classification as a LTCH

  109. Hospitals Excluded From the LTCH PPS

    3. Limitation on Charges to Beneficiaries

    4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance

    1. Proposed Modifications to the Application of the Site Neutral Payment Rate (Sec. 412.522)

      1. Background

      2. Technical Correction of Definition of ``Subsection (d) Hospital'' for the Site Neutral Payment Rate (Sec. 412.503)

    2. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2017

      1. Background

      2. Patient Classifications Into MS-LTC-DRGs

  110. Background

  111. Proposed Changes to the MS-LTC-DRGs for FY 2017

    3. Development of the Proposed FY 2017 MS-LTC-DRG Relative Weights

  112. General Overview of the Development of the MS-LTC-DRG Relative Weights

  113. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2017

  114. Data

  115. Hospital-Specific Relative Value (HSRV) Methodology

  116. Treatment of Severity Levels in Developing the MS-LTC-DRG Relative Weights

  117. Proposed Low-Volume MS-LTC-DRGs

  118. Steps for Determining the Proposed FY 2017 MS-LTC-DRG Relative Weights

    1. Proposed Rebasing of the LTCH Market Basket

    1. Background

    2. Overview of the Proposed 2013-Based LTCH Market Basket

    3. Development of the Proposed 2013-Based LTCH Market Basket Cost Categories and Weights

  119. Use of Medicare Cost Report Data

    (1) Wages and Salaries Costs

    (2) Employee Benefit Costs

    (3) Contract Labor Costs

    (4) Pharmaceutical Costs

    (5) Professional Liability Insurance Costs

    (6) Capital Costs

  120. Final Major Cost Category Computation

  121. Derivation of the Detailed Operating Cost Weights

  122. Derivation of the Detailed Capital Cost Weights

  123. Proposed 2013-Based LTCH Market Basket Cost Categories and Weights

    4. Selection of Proposed Price Proxies

  124. Price Proxies for the Operating Portion of the Proposed 2013-

    Based LTCH Market Basket

    (1) Wages and Salaries

    (2) Employee Benefits

    (3) Electricity

    (4) Fuel, Oil, and Gasoline

    (5) Water and Sewage

    (6) Professional Liability Insurance

    (7) Pharmaceuticals

    (8) Food: Direct Purchases

    (9) Food: Contract Services

    (10) Chemicals

    (11) Medical Instruments

    (12) Rubber and Plastics

    (13) Paper and Printing Products

    (14) Miscellaneous Products

    (15) Professional Fees: Labor-Related

    (16) Administrative and Facilities Support Services

    (17) Installation, Maintenance, and Repair Services

    (18) All Other: Labor-Related Services

    (19) Professional Fees: Nonlabor-Related

    (20) Financial Services

    (21) Telephone Services

    (22) All Other: Nonlabor-Related Services

  125. Price Proxies for the Capital Portion of the Proposed 2013-

    Based LTCH Market Basket

    (1) Capital Price Proxies Prior to Vintage Weighting

    (2) Vintage Weights for Price Proxies

  126. Summary of Price Proxies of the Proposed 2013-Based LTCH Market Basket

  127. Proposed FY 2017 Market Basket Update for LTCHs

  128. Proposed FY 2017 Labor-Related Share

    1. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed Changes to the LTCH PPS for FY 2017

    1. Overview of Development of the LTCH PPS Standard Federal Payment Rates

    2. Proposed FY 2017 LTCH PPS Standard Federal Payment Rate Annual Market Basket Update

  129. Overview

  130. Proposed Market Basket Under the LTCH PPS for FY 2017

  131. Revision of Certain Market Basket Updates as Required by the Affordable Care Act

  132. Proposed Adjustment to the LTCH PPS Standard Federal Payment Rate Under the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

  133. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2017

    3. Proposed Update Under the Payment Adjustment for ``Subclause (II)'' LTCHs

    1. Proposed Modifications to the ``25-Percent Threshold Policy'' Payment Adjustments (Sec. Sec. 412.534 and 412.536)

    2. Proposed Refinement to the Payment Adjustment for ``Subclause II'' LTCHs

      VIII. Quality Data Reporting Requirements for Specific Providers and Suppliers

    3. Hospital Inpatient Quality Reporting (IQR) Program

      1. Background

  134. History of the Hospital IQR Program

  135. Maintenance of Technical Specifications for Quality Measures

  136. Public Display of Quality Measures

    2. Process for Retaining Previously Adopted Hospital IQR Program Measures for Subsequent Payment Determinations

    3. Removal and Suspension of Hospital IQR Program Measures

  137. Considerations in Removing Quality Measures From the Hospital IQR Program

  138. Proposed Removal of Hospital IQR Program Measures for the FY 2019 Payment Determination and Subsequent Years

    4. Previously Adopted Hospital IQR Program Measures for the FY 2018 and FY 2019 Payment Determination and Subsequent Years

    5. Expansion and Updating of Quality Measures

    6. Proposed Refinements to Existing Measures in the Hospital IQR Program

  139. Proposed Expansion of the Cohort for the PN Payment Measure: Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Pneumonia (NQF # 2579)

  140. Proposed Adoption of Modified PSI 90: Patient Safety and Adverse Events Composite Measure (NQF #0531)

    7. Proposed Additional Hospital IQR Program Measures for the FY 2019 Payment Determinations and Subsequent Years

  141. Proposed Adoption of Three Clinical Episode-Based Payment Measures

  142. Proposed Adoption of Excess Days in Acute Care After Hospitalization for Pneumonia (PN Excess Days) Measure

  143. Summary of Previously Adopted and Newly Proposed Hospital IQR Program Measures for the FY 2019 Payment Determination and Subsequent Years

    8. Proposed Changes to Policies on Reporting of eCQMs

  144. Proposed Requirement That Hospitals Report on All eCQMs in the Hospital IQR Program Measure Set for the CY 2017 Reporting Period/FY 2019 Payment Determination and Subsequent Years

  145. Proposed Requirement That Hospitals Report a Full Year of eCQM Data

  146. Clarification Regarding Data Submission for ED-1, ED-2, PC-

    01, STK-4, VTE-5, and VTE-6

    9. Possible New Quality Measures and Measure Topics for Future Years

  147. Potential Inclusion of the National Institutes of Health (NIH) Stroke Scale for the Hospital 30-Day Mortality Following Acute Ischemic Stroke Hospitalization Measure Beginning as Early as the FY 2022 Payment Determination

    Page 24953

  148. Potential Inclusion of National Healthcare Safety Network (NHSN) Antimicrobial Use Measure (NQF #2720)

  149. Potential Measures for Behavioral Health in the Hospital IQR Program

  150. Potential Public Reporting of Quality Measures Data Stratified by Race, Ethnicity, Sex, and Disability and Future Hospital Quality Measures That Incorporate Health Equity

    10. Form, Manner, and Timing of Quality Data Submission

  151. Background

  152. Procedural Requirements for the FY 2019 Payment Determination and Subsequent Years

  153. Data Submission Requirements for Chart-Abstracted Measures

  154. Proposed Alignment of the Hospital IQR Program With the Medicare and Medicaid EHR Incentive Programs for Eligible Hospitals and CAHs

  155. Sampling and Case Thresholds for the FY 2019 Payment Determination and Subsequent Years

  156. HCAHPS Requirements for the FY 2019 Payment Determination and Subsequent Years

  157. Data Submission Requirements for Structural Measures for the FY 2019 Payment Determination and Subsequent Years

  158. Data Submission and Reporting Requirements for HAI Measures Reported via NHSN

    11. Proposed Modifications to the Existing Processes for Validation of Hospital IQR Program Data

  159. Background

  160. Proposed Modifications to the Existing Processes for Validation of Hospital IQR Program Data

    12. Data Accuracy and Completeness Acknowledgement (DACA) Requirements for the FY 2019 Payment Determination and Subsequent Years

    13. Public Display Requirements for the FY 2019 Payment Determination and Subsequent Years

    14. Reconsideration and Appeal Procedures for the FY 2019 Payment Determination and Subsequent Years

    15. Proposed Changes to the Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions (ECE) Policy

  161. Proposal To Extend the General ECE Request Deadline for Non-

    eCQM Circumstances

  162. Proposal To Establish a Separate Submission Deadline for ECE Requests Related to eCQMs

    1. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

    1. Background

    2. Proposed Criteria for Removal and Retention of PCHQR Program Measures

    3. Retention and Proposed Update to Previously Finalized Quality Measures for PCHs Beginning With the FY 2019 Program Year

  163. Background

  164. Proposed Update of Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382) Measure for FY 2019 Program Year and Subsequent Years

    4. Proposed New Quality Measure Beginning With the FY 2019 Program Year

  165. Considerations in the Selection of Quality Measures

  166. Admissions and Emergency Department (ED) Visits for Patients Receiving Outpatient Chemotherapy

    5. Possible New Quality Measure Topics for Future Years

    6. Maintenance of Technical Specifications for Quality Measures

    7. Public Display Requirements

  167. Background

  168. Proposed Additional Public Display Requirements

  169. Proposed Public Display of Additional PCHQR Measure

  170. Proposed Public Display of Updated Measure

  171. Proposed Postponement of Public Display of Two Measures

    8. Form, Manner, and Timing of Data Submission

    9. Exceptions From PCHQR Program Requirements

    1. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

    1. Background and Statutory Authority

    2. General Considerations Used for Selection of Quality, Resource Use, and Other Measures for the LTCH QRP

    3. Policy for Retention of LTCH QRP Measures Adopted for Previous Payment Determinations

    4. Policy for Adopting Changes to LTCH QRP Measures

    5. Quality Measures Previously Finalized for and Currently Used in the LTCH QRP

    6. LTCH QRP Quality, Resource Use and Other Measures Proposed for the FY 2018 Payment Determination and Subsequent Years

  172. Proposal To Address the IMPACT Act Domain of Resource Use and Other Measures: Total Estimated MSPB--PAC LTCH QRP

  173. Proposal To Address the IMPACT Act Domain of Resource Use and Other Measures: Discharge to Community-Post-Acute Care (PAC) Long-

    Term Care Hospital Quality Reporting Program

  174. Proposal To Address the IMPACT Act Domain of Resource Use and Other Measures: Potentially Preventable 30-Day Post-Discharge Readmission Measure for the Long-Term Care Hospital Quality Reporting Program

    7. LTCH QRP Quality Measure Proposed for the FY 2020 Payment Determination and Subsequent Years

  175. Background

  176. Quality Measure Addressing the IMPACT Act Domain of Medication Reconciliation: Drug Regimen Review Conducted With Follow-Up for Identified Issues-Post-Acute Care LTCH QRP

    8. LTCH QRP Quality Measures and Measure Concepts Under Consideration for Future Years

    9. Proposed Form, Manner, and Timing of Quality Data Submission for the FY 2018 Payment Determination and Subsequent Years

  177. Background

  178. Timeline for Data Submission Under the LTCH QRP for the FY 2018 and Subsequent Years Payment Determinations

  179. Proposed Timeline and Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for New LTCH QRP Resource Use and Other Measures--Claims-Based Measures

  180. Proposal To Revise the Previously Adopted Data Collection Period and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) for the FY 2019 Payment Determination and Subsequent Years

  181. Proposed Timeline and Data Submission Mechanisms for the Proposed LTCH QRP Quality Measure for the FY 2020 Payment Determination and Subsequent Years

    10. LTCH QRP Data Completion Thresholds for the FY 2016 Payment Determination and Subsequent Years

    11. LTCH QRP Data Validation Process for the FY 2016 Payment Determination and Subsequent Years

    12. Proposed Change to Previously Codified LTCH QRP Submission Exception and Extension Policies

    13. Previously Finalized LTCH QRP Reconsideration and Appeals Procedures

    14. Proposals and Policies Regarding Public Display of Measure Data for the LTCH QRP and Procedures for the Opportunity To Review and Correct Data and Information

  182. Public Display of Measures

  183. Procedures for the Opportunity To Review and Correct Data and Information

    15. Proposed Mechanism for Providing Feedback Reports to LTCHs

    1. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

    1. Background

  184. Statutory Authority

  185. Covered Entities

  186. Considerations in Selecting Quality Measures

    2. Retention of IPFQR Program Measures Adopted in Previous Payment Determinations

    3. Proposed Update to Previously Finalized Measure: Screening for Metabolic Disorders

    4. Proposed New Quality Measures for the FY 2019 Payment Determination and Subsequent Years

  187. SUB-3--Alcohol and Other Drug Use Disorder Treatment Provided or Offered at Discharge and the Subset Measure SUB-3a--Alcohol and Other Drug Use Disorder Treatment at Discharge (NQF #1664)

  188. Thirty-Day All-Cause Unplanned Readmission Following Psychiatric Hospitalization in an IPF

    5. Summary of Proposed Measures for the FY 2019 Payment Determination and Subsequent Years

    6. Possible IPFQR Program Measures and Topics for Future Consideration

    7. Public Display and Review Requirements

    Page 24954

    8. Form, Manner, and Timing of Quality Data Submission

  189. Procedural and Submission Requirements

  190. Proposed Change to the Reporting Periods and Submission Timeframes

  191. Population and Sampling

  192. Data Accuracy and Completeness Acknowledgement (DACA) Requirements

    9. Reconsideration and Appeals Procedures

    10. Exceptions to Quality Reporting Requirements

    1. Clinical Quality Measurement for Eligible Hospitals and Critical Access Hospitals (CAHs) Participating in the EHR Incentive Programs in 2017

    1. Background

    2. CQM Reporting for the Medicare and Medicaid EHR Incentive Programs in 2017

  193. Background

  194. CQM Reporting Period for the Medicare and Medicaid EHR Incentive Programs in CY 2017

  195. CQM Reporting Form and Method for the Medicare EHR Incentive Program in 2017

    IX. MedPAC Recommendations

    X. Other Required Information

    1. Requests for Data From the Public

    2. Collection of Information Requirements

      1. Statutory Requirement for Solicitation of Comments

      2. ICRs for Add-On Payments for New Services and Technologies

      3. ICRs for the Occupational Mix Adjustment to the Proposed FY 2017 Wage Index (Hospital Wage Index Occupational Mix Survey)

      4. Hospital Applications for Geographic Reclassifications by the MGCRB

      5. ICRs for the Notice of Observation Treatment by Hospitals and CAHs

      6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program

      7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

      8. ICRs for Hospital Value-Based Purchasing (VBP) Program

      9. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

      10. ICRs for the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

      11. ICRs for the Electronic Health Record (EHR) Incentive Program and Meaningful Use

    3. Response to Public Comments

      Regulation Text

      Addendum--Proposed Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2016 and Payment Rates for LTCHs Effective With Discharges Occurring on or After October 1, 2016

      I. Summary and Background

      II. Proposed Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2017

    4. Calculation of the Adjusted Standardized Amount

    5. Proposed Adjustments for Area Wage Levels and Cost-of-Living

    6. Calculation of the Prospective Payment Rates

      III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2017

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

    8. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2017

    9. Capital Input Price Index

      IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-

      of-Increase Percentages for FY 2017

      V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 2017

    10. Proposed LTCH PPS Standard Federal Payment Rate for FY 2017

    11. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2017

      1. Background

      2. Proposed Geographic Classifications (Labor Market Areas) for the LTCH PPS Standard Federal Payment Rate

      3. Proposed Labor-Related Share for the LTCH PPS Standard Federal Payment Rate

      4. Proposed Wage Index for FY 2017 for the LTCH PPS Standard Federal Payment Rate

      5. Proposed Budget Neutrality Adjustment for Changes to the LTCH PPS Standard Federal Payment Rate Area Wage Level Adjustment

    12. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii

    13. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

    14. Proposed Update to the IPPS Comparable/Equivalent Amounts to Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology

    15. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for FY 2017

      VI. Tables Referenced in This Proposed Rulemaking and Available Through the Internet on the CMS Web site

      Appendix A--Economic Analyses

      I. Regulatory Impact Analysis

    16. Introduction

    17. Need

    18. Objectives of the IPPS

    19. Limitations of Our Analysis

    20. Hospitals Included in and Excluded From the IPPS

    21. Effects on Hospitals and Hospital Units Excluded From the IPPS

    22. Quantitative Effects of the Proposed Policy Changes Under the IPPS for Operating Costs

      1. Basis and Methodology of Estimates

      2. Analysis of Table I

      3. Impact Analysis of Table II

    23. Effects of Other Proposed Policy Changes

      1. Effects of Proposed Policy Relating to New Medical Service and Technology Add-On Payments

      2. Effect of Proposed Changes Relating to Payment Adjustment for Medicare Disproportionate Share Hospitals

      3. Effects of Proposed Reduction Under the Hospital Readmissions Reduction Program

      4. Effects of Proposed Changes Under the FY 2017 Hospital Value-

      Based Purchasing (VBP) Program

      5. Effects of the Proposed Changes to the HAC Reduction Program for FY 2017

      6. Effects of Proposed Policy Changes Relating to Direct GME and IME Payments for Rural Training Tracks at Urban Hospitals

      7. Effects of Implementation of Rural Community Hospital Demonstration Program

      8. Effects of Proposed Implementation of the Notice of Observation Treatment and Implications for Care Eligibility Act (NOTICE Act)

      9. Effects of Proposed Technical Changes and Correction of Typographical Errors in Certain Regulations Under 42 CFR part 413 Relating to Costs to Related Organizations and Medicare Cost Reports

      10. Effects of Proposed Implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration

      I. Effects of Proposed Changes in the Capital IPPS

      1. General Considerations

      2. Results

    24. Effects of Proposed Payment Rate Changes and Policy Changes Under the LTCH PPS

      1. Introduction and General Considerations

      2. Impact on Rural Hospitals

      3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes and Policy Changes

      4. Effect on the Medicare Program

      5. Effect on Medicare Beneficiaries

    25. Effects of Proposed Requirements for Hospital Inpatient Quality Reporting (IQR) Program

      L. Effects of Proposed Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

    26. Effects of Proposed Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP) for the FY 2018 Payment Determination and Subsequent Years

    27. Effects of Proposed Updates to the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

    28. Effects of Proposed Requirements Regarding Electronic Health Record (EHR) Meaningful Use Program

    29. Alternatives Considered

    30. Overall Conclusion

      1. Acute Care Hospitals

      2. LTCHs

      II. Accounting Statements and Tables

    31. Acute Care Hospitals

    32. LTCHs

      III. Regulatory Flexibility Act (RFA) Analysis

      IV. Impact on Small Rural Hospitals

      V. Unfunded Mandate Reform Act (UMRA) Analysis

      VI. Executive Order 12866

      Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services

      I. Background

      II. Inpatient Hospital Update for FY 2017

    33. Proposed FY 2017 Inpatient Hospital Update

    34. Proposed Update for SCHs and MDHs for FY 2017

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    35. Proposed FY 2017 Puerto Rico Hospital Update

    36. Proposed Update for Hospitals Excluded From the IPPS

    37. Proposed Update for LTCHs for FY 2017

      III. Secretary's Recommendation

      IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare

      I. Executive Summary and Background

    38. Executive Summary

      1. Purpose and Legal Authority

      This proposed rule would make payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it would make payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). It also would make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.

      We are proposing to establish new requirements or revise requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs, and inpatient psychiatric facilities) that are participating in Medicare, including related provisions for eligible hospitals and critical assess hospitals (CAHs) participating in the Electronic Health Record (EHR) Incentive Program. We are proposing to update policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. We also are proposing to: Implement statutory provisions that require hospitals and CAHs to furnish notification to Medicare beneficiaries, including Medicare Advantage enrollees, when the beneficiaries receive outpatient observation services for more than 24 hours; announce the implementation of the Frontier Community Health Integration Project Demonstration; make technical corrections and changes to regulations relating to costs to organizations and Medicare cost reports.

      Under various statutory authorities, we are proposing to make changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2017 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following:

      Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS).

      Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.

      Sections 123(a) and (c) of Public Law 106-113 and section 307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of long-term care hospitals (LTCHs) described in section 1886(d)(1)(B)(iv) of the Act.

      Sections 1814(l), 1820, and 1834(g) of the Act, which specify that payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services and that these payments are generally based on 101 percent of reasonable cost.

      Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer hospitals.''

      Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act.

      Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase in payments to a subsection (d) hospital for a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary.

      Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program under which value-based incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year.

      Section 1886(p) of the Act, as added by section 3008 of the Affordable Care Act, which establishes a Hospital-Acquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-

      acquired conditions.

      Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act, which establishes the ``Hospital Readmissions Reduction Program'' effective for discharges from an ``applicable hospital'' beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions.

      Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital (DSH) payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, subsection (d) hospitals that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act will receive two separate payments: (1) 25 percent of the amount they previously would have received under section 1886(d)(5)(F) of the Act for DSH (``the empirically justified amount''), and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.

      Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS with implementation beginning in FY 2016.

      Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206 (c) of the Pathway for SGR Reform Act of 2013, which provides for the establishment of a functional status quality measure under the LTCH QRP for change in

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      mobility among inpatients requiring ventilator support.

      Section 1899B of the Act, as added by the Improving Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act), which imposes data reporting requirements for certain post-acute care providers, including LTCHs.

      Section 1886(d)(12) of the Act, as amended by section 204 of the Medicare Access and CHIP Reauthorization Act of 2015, which extended, through FY 2017, changes to the inpatient hospital payment adjustment for certain low-volume hospitals; and section 1886(d)(5)(G) of the Act, as amended by section 205 of the Medicare Access and CHIP Reauthorization Act of 2015, which extended, through FY 2017, the Medicare-dependent, small rural hospital (MDH) program.

      2. Summary of the Major Provisions

  196. MS-DRG Documentation and Coding Adjustment

    Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-

    240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS-

    DRG documentation and coding that do not reflect real changes in case-

    mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

    While our actuaries estimated that a -9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in one year, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, we made a -0.8 percent recoupment adjustment to the standardized amount in FY 2014, FY 2015, and FY 2016. For FY 2017, we are proposing to make an additional -1.5 percent recoupment adjustment to the standardized amount.

  197. Adjustment to IPPS Rates Resulting From 2-Midnight Policy

    In this proposed rule, we are proposing a permanent adjustment of (1/0.998) to the standardized amount, the hospital-specific payment rates, and the national capital Federal rate using our authority under sections 1886(d)(5)(I)(i) and 1886(g) of the Act to prospectively remove the 0.2 percent reduction to the rate put in place in FY 2014 to offset the estimated increase in IPPS expenditures as a result of the 2-midnight policy. In addition, we are proposing a temporary one-time prospective increase to the FY 2017 standardized amount, the hospital-

    specific payment rates, and the national capital Federal rate of 0.6 percent by including a temporary one-time factor of 1.006 in the calculation of the standardized amount, the hospital-specific payment rates, and the national capital Federal rate using our authority under sections 1886(d)(5)(I)(i) and 1886(g) of the Act, to address the effects of the 0.2 percent reduction to the rate for the 2-midnight policy in effect for FYs 2014, 2015, and 2016.

  198. Reduction of Hospital Payments for Excess Readmissions

    We are proposing to make changes to policies for the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FY 2017 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/

    TKA), and coronary artery bypass graft (CABG). In this proposed rule, to align with other quality reporting programs and allow us to post data as soon as possible, we are clarifying our public reporting policy so that excess readmission rates will be posted to the Hospital Compare Web site as soon as feasible following the preview period, and we are proposing the methodology to include the addition of the CABG applicable condition in the calculation of the readmissions payment adjustment for FY 2017.

  199. Hospital Value-Based Purchasing (VBP) Program

    Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year.

    In this proposed rule, we are proposing to refine two previously adopted measures beginning with the FY 2019 program year, to update one previously adopted measure beginning with the FY 2021 program year, to adopt two new measures beginning with the FY 2021 program year, and to adopt one new measure beginning with the FY 2022 program year. We also are proposing to change the performance period for one previously adopted measure for the FY 2018 program year and to change the name of the Patient- and Caregiver-Centered Experience of Care/Care Coordination domain to the Person and Community Engagement domain beginning with the FY 2019 program year. In addition, we are proposing changes to the immediate jeopardy citation policy.

  200. Hospital-Acquired Condition (HAC) Reduction Program

    Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an incentive to hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to make an adjustment to payments to applicable hospitals effective for discharges beginning on October 1, 2014. This 1-percent payment reduction applies to a hospital whose ranking is in the top quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital's discharges for the specified fiscal year. In this proposed rule, we are proposing the following HAC Reduction Program policies: (1) Establishing NHSN CDC HAI data submission requirements for newly opened hospitals; (2) a clarification of data requirements for Domain 1 scoring; (3) establishing performance periods for the FY 2018 and FY 2019 HAC Reduction Programs, including revising our regulations to accommodate variable timeframes; (4) adopting the refined PSI 90: Patient Safety and Adverse Events Composite (NQF #0531); and (5) changing the program scoring methodology from the current decile-based scoring to a continuous scoring methodology.

  201. DSH Payment Adjustment and Additional Payment for Uncompensated Care

    Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY

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    2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH will receive an additional payment based on its share of the total amount of uncompensated care for all Medicare DSHs for a given time period.

    In this proposed rule, we are proposing to update our estimates of the three factors used to determine uncompensated care payments for FY 2017 and proposing to continue our methodology of using a hospital's share of insured low-income days for purposes of determining Factor 3. For Puerto Rico hospitals, we are proposing to use 14 percent of Medicaid days as a proxy for SSI days in the calculation of Factor 3. We are proposing to continue to use the methodology we established in FY 2015 to calculate the uncompensated care payment amounts for merged hospitals such that we combine uncompensated care data for the hospitals that have undergone a merger in order to calculate their relative share of uncompensated care. We are proposing to expand the time period of the data used to calculate the uncompensated care payment amounts to be distributed, from one cost reporting period to three cost reporting periods. We also are proposing a future transition to using Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments. Specifically, we are proposing a 3-year transition beginning in FY 2018 where we use a combination of Worksheet S-10 and proxy data until FY 2020 when all data used in computing the uncompensated care payment amounts to be distributed would come from Worksheet S-10.

  202. Payments for Capital-Related Costs for Hospitals Located in Puerto Rico

    Capital IPPS payments to hospitals located in Puerto Rico are currently computed based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-

    113) increased the applicable Federal percentage of the operating IPPS payment for hospitals located in Puerto Rico from 75 percent to 100 percent and decreased the applicable Puerto Rico percentage of the operating IPPS payments for hospitals located in Puerto Rico from 25 percent to zero percent, applicable to discharges occurring on or after January 1, 2016. In this proposed rule, we are proposing to revise the calculation of capital IPPS payments to hospitals located in Puerto Rico to parallel the change in the statutory calculation of operating IPPS payments to hospitals located in Puerto Rico, beginning in FY 2017.

  203. Proposed Changes to the LTCH PPS

    In this proposed rule, we are proposing to revise and rebase the market basket used under the LTCH PPS (currently the 2009-based LTCH-

    specific market basket) to reflect a 2013 base year. In addition, in this proposed rule, we are proposing to change our 25-percent threshold policy by proposing to sunset our existing regulations at 42 CFR 412.534 and 412.536 and replace them with a single consolidated 25-

    percent threshold policy at proposed Sec. 412.538. We also are proposing to change our existing regulations limiting allowable charges to beneficiaries for Subclause (II) LTCHs and proposing to make technical corrections to Sec. 412.503.

  204. Hospital Inpatient Quality Reporting (IQR) Program

    Under section 1886(b)(3)(B)(viii) of the Act, hospitals are required to report data on measures selected by the Secretary for the Hospital IQR Program in order to receive the full annual percentage increase in payments. In past years, we have established measures for reporting data and the process for submittal and validation of the data.

    In this proposed rule, we are making several proposals. First, we are proposing to remove 15 measures for the FY 2019 payment determination and subsequent years. Thirteen of these measures are electronic clinical quality measures (eCQMs), two of which we are proposing also to remove in their chart-abstracted form, because they are ``topped-out,'' and two others are structural measures.

    Second, we are proposing to refine two previously adopted measures beginning with the FY 2018 payment determination: (1) The Hospital-

    level, Risk-standardized Payment Associated with a 30-day Episode-of-

    Care for Pneumonia (NQF #2579); and (2) the Patient Safety and Adverse Events Composite (NQF #0531).

    Third, we are proposing to add four new claims-based measures: (1) Aortic Aneurysm Procedure Clinical Episode-Based Payment Measure; (2) Cholecystectomy and Common Duct Exploration Clinical Episode-Based Payment Measure; (3) Spinal Fusion Clinical Episode-Based Payment Measure; and (4) Excess Days in Acute Care after Hospitalization for Pneumonia for the FY 2019 payment determination and subsequent years.

    Fourth, we are inviting public comment on potential new quality measures under consideration for future inclusion in the Hospital IQR Program: (1) A refined version of the NIH Stroke Scale for the Hospital 30-Day Mortality Following Acute Ischemic Stroke Hospitalization Measure beginning as early as the FY 2022 payment determination; (2) the National Healthcare Safety Network (NHSN) Antimicrobial Use Measure (NQF #2720); and (3) one or more measures of behavioral health for the inpatient hospital setting, including measures previously adopted for the IPFQR Program (80 FR 46417). Also, we are seeking public comment on the possibility of future stratification of Hospital IQR Program data by race, ethnicity, sex, and disability on Hospital Compare, as well as on potential future hospital quality measures that incorporate health equity.

    Fifth, we are proposing to require hospitals to submit all available eCQMs included in the Hospital IQR Program measure set for four quarters of data, on an annual basis, beginning with the CY 2017 reporting period/FY 2019 payment determination, in order to align the Hospital IQR Program with the Medicare and Medicaid EHR Incentive Programs. Also, we are proposing related eCQM submission requirements beginning with the FY 2019 payment determination.

    Sixth, we are proposing to modify the existing validation process for Hospital IQR Program data to include validation of eCQMs beginning with the FY 2020 payment determination.

    Seventh, we are proposing to update our Extraordinary Circumstances Extensions or Exemptions (ECE) policy by: (1) Extending the ECE request deadline for non-eCQM circumstances from 30 to 90 calendar days following an extraordinary circumstance, beginning in FY 2017 as related to extraordinary circumstance events that occur on or after October 1, 2016; and (2) establishing a separate submission deadline of April 1 following the end of the reporting calendar year for ECEs related to eCQMs beginning with an April 1, 2017 deadline and applying for subsequent eCQM reporting years.

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  205. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

    Section 3004(a) of the Affordable Care Act amended section 1886(m)(5) of the Act to require the Secretary to establish the Long-

    Term Care Hospital Quality Reporting Program (LTCH QRP). This program applies to all hospitals certified by Medicare as LTCHs. Beginning with the FY 2014 payment determination and subsequent years, the Secretary is required to reduce any annual update to the LTCH PPS standard Federal rate for discharges occurring during such fiscal year by 2 percentage points for any LTCH that does not comply with the requirements established by the Secretary.

    The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) amended the Act in ways that affect the LTCH QRP. Specifically, section 2(a) of the IMPACT Act amended title XVIII of the Act by adding section 1899B, titled Standardized Post-Acute Care (PAC) Assessment Data for Quality, Payment, and Discharge Planning. The Act requires that each LTCH submit, for FYs beginning on or after the specified application date (as defined in section 1899B(a)(2)(E) of the Act), data on quality measures specified under section 1899B(c)(1) of the Act and data on resource use and other measures specified under section 1899B(d)(1) of the Act in a manner and within the timeframes specified by the Secretary. In addition, each LTCH is required to submit standardized patient assessment data required under section 1899B(b)(1) of the Act in a manner and within the timeframes specified by the Secretary. Sections 1899B(c)(1) and 1899B(d)(1) of the Act require the Secretary to specify quality measures and resource use and other measures with respect to certain domains no later than the specified application date in section 1899B(a)(2)(E) of the Act that applies to each measure domain and PAC provider setting.

    In this proposed rule, we are proposing three new measures for the FY 2018 payment determination and subsequent years to meet the requirements as set forth by the IMPACT Act. These proposed measures are: (1) MSPB-PAC LTCH QRP; (2) Discharge to Community-PAC LTCH QRP; and (3) Potentially Preventable 30-Day Post-Discharge Readmission Measure for the PAC LTCH QRP. We also are proposing one new quality measure to meet the requirements of the IMPACT Act for the FY 2020 determination and subsequent years. The proposed measure, Drug Regimen Review Conducted with Follow-Up for Identified Issues-PAC LTCH QRP, addresses the IMPACT Act domain of Medication Reconciliation.

    In addition, we will publicly report LTCH quality data beginning in fall 2016, on a CMS Web site, such as Hospital Compare. We will initially publicly report quality data on four quality measures. In this proposed rule, we are proposing to publicly report data in 2017 on four additional measures. We are proposing additional details regarding procedures that would allow individual LTCHs to review and correct their data and information on measures that are to be made public before those measure data are made public. We also are proposing to provide confidential feedback reports to LTCHs on their performance on the specified measures, beginning 1 year after the specified application date that applies to such measures and LTCHs.

    Finally, we are proposing to change the timing for submission of exception and extension requests from 30 days to 90 days from the date of the qualifying event which is preventing an LTCH from submitting their quality data for the LTCH QRP.

  206. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

    Section 1886(s)(4) of the Act, as added and amended by sections 3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Section 1886(s)(4)(C) of the Act requires that, for FY 2014 (October 1, 2013 through September 30, 2014) and each subsequent year, each psychiatric hospital and psychiatric unit must submit to the Secretary data on quality measures as specified by the Secretary. The data must be submitted in a form and manner and at a time specified by the Secretary. In this proposed rule, for the IPFQR Program, we are making several proposals. We are proposing two new measures beginning with the FY 2019 payment determination:

    SUB-3 Alcohol & Other Drug Use Disorder Treatment Provided or Offered at Discharge and SUB-3a Alcohol and Other Drug Use Disorder Treatment at Discharge (NQF #1664); and

    Thirty-day all-cause unplanned readmission following psychiatric hospitalization in an IPF.

    We also are proposing a technical update to the previously finalized measure, ``Screening for Metabolic Disorder.'' In addition, we are proposing to no longer specify in rulemaking the date of the public display of the program's data or that the preview period will be approximately 12 weeks before the public display date.

    3. Summary of Costs and Benefits

    Adjustment for MS-DRG Documentation and Coding Changes. We are proposing to make a -1.5 percent recoupment adjustment to the standardized amount for FY 2017 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

    While our actuaries estimated that a -9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Taking into account the cumulative effects of this proposed adjustment and the adjustments made in FYs 2014, 2015, and 2016, we estimate that we would recover the full $11 billion required under section 631 of the ATRA by the end of FY 2017. We note that section 414 of the MACRA (Pub. L. 114-10), enacted on April 16, 2015, requires us to not make the single positive adjustment we intended to make in FY 2018, but instead make a 0.5 percent positive adjustment for each of FYs 2018 through 2023. The provision under section 414 of the MACRA does not impact our proposed FY 2017 recoupment adjustment, and we will address this MACRA provision in future rulemaking.

    Proposed Adjustment to IPPS Payment Rates as a Result of the 2-Midnight Policy. The proposed adjustment to IPPS rates resulting from the 2-midnight policy would increase IPPS payment rates by (1/

    0.998) * 1.006 for FY 2017. The 1.006 is a one-time factor that would be applied to the standardized amount, the hospital-specific rates, and the national capital Federal rate for FY 2017 only. Therefore, for FY 2018, we would apply a one-time factor of (1/1.006) in the calculation of the rates to remove this one-time prospective increase.

    Proposed Changes to the Hospital Readmissions Reduction Program. For FY 2017 and subsequent years, the

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    reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG). Overall, in this proposed rule, we estimate that 2,603 hospitals will have their base operating DRG payments reduced by their proposed proxy FY 2017 hospital-specific readmission adjustment. As a result, we estimate that the Hospital Readmissions Reduction Program will save approximately $532 million in FY 2017, an increase of approximately $100 million over the estimated FY 2016 savings. This increase in the estimated savings for the Hospital Readmissions Reduction Program in FY 2017 as compared to FY 2016 is primarily due to the inclusion of the refinement of the pneumonia readmissions measure, which expanded the measure cohort, along with the addition of the CABG readmission measure, in the calculation of the payment adjustment.

    Value-Based Incentive Payments under the Hospital VBP Program. We estimate that there will be no net financial impact to the Hospital VBP Program for the FY 2017 program year in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given year must be equal to the total amount of base operating MS-DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating MS-DRG payment amount reductions for the FY 2017 program year and, therefore, the estimated amount available for value-based incentive payments for FY 2017 discharges is approximately $1.7 billion.

    Proposed Changes to the HAC Reduction Program. In regard to the five proposed changes to existing HAC Reduction Program policies described earlier, because a hospital's Total HAC score and its ranking in comparison to other hospitals in any given year depends on several different factors, any significant impact due to the HAC Reduction Program proposed changes for FY 2017, including which hospitals receive the adjustment, would depend on actual experience.

    Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3133 of the Affordable Care Act), DSH payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment for uncompensated care is made to eligible hospitals beginning in FY 2014. Hospitals that receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for determining the additional payments for uncompensated care after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives Medicare DSH payments will receive an additional payment for uncompensated care based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral.

    For FY 2017, we are providing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 56.74 percent of the amount to reflect changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, approximately 42.56 percent (the product of 75 percent and 56.74 percent) of our estimate of Medicare DSH payments, prior to the application of section 3133 of the Affordable Care Act, is available to make additional payments to hospitals for their relative share of the total amount of uncompensated care. We project that estimated Medicare DSH payments, and additional payments for uncompensated care made for FY 2017, would reduce payments overall by approximately 0.3 percent as compared to the estimate of Medicare DSH payments and uncompensated care payments that will be distributed in FY 2016. The additional payments have redistributive effects based on a hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that are estimated to receive Medicare DSH payments, and the proposed payment amount is not directly tied to a hospital's number of discharges.

    Proposed Update to the LTCH PPS Payment Rates and Other Payment Factors. Based on the best available data for the 419 LTCHs in our data base, we estimate that the proposed changes to the payment rates and factors that we are presenting in the preamble and Addendum of this proposed rule, which includes the second year under the transition of the statutory application of the new site neutral payment rate required by section 1886(m)(6)(A) of the Act, the proposed update to the LTCH PPS standard Federal payment rate for FY 2017, the proposed update to the LTCH PPS adjustment for differences in area wage levels (which includes the proposed update to the labor-related share based on the proposed revised and rebased LTCH PPS market basket) and estimated changes to the site neutral payment rate and short-stay outlier (SSO) and high-cost outlier (HCO) payments would result in an estimated decrease in payments from FY 2016 of approximately $355 million.

    Hospital Inpatient Quality Reporting (IQR) Program. In this proposed rule, we are proposing to remove 15 measures for the FY 2019 payment determination and subsequent years. We are proposing to add four new claims-based measures to the Hospital IQR Program for the FY 2019 payment determination and subsequent years. We also are proposing to require hospitals to report on all Hospital IQR Program electronic clinical quality measures that align with the Medicare EHR Incentive Program for four quarters of data on an annual basis for the FY 2019 payment determination and subsequent years. In addition, we are proposing to modify the existing validation process for the Hospital IQR Program data to include a random sample of up to 200 hospitals for validation of eCQMs. We estimate that our policies for the adoption and removal of measures will result in total hospital costs of $30 million across 3,300 IPPS hospitals.

    Proposed Changes Related to the LTCH QRP. In this proposed rule, we are proposing four quality measures for the LTCH QRP. We estimate that the total cost related to one of these proposed measures, the Drug Regimen Review Conducted with Follow-up for Identified Issues-

    PAC measure, would be $3,080 per LTCH annually, or $1,330,721 for all LTCHs annually. We also estimate that while there will be some additional burden associated with our proposal to expand data collection for the measure NQF #0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (77 FR 53624 through 53627), this burden has been previously accounted for in PRA submissions approved under OMB control number 0938-1163. For a detailed explanation, we refer readers to section I.M. of Appendix A (Economic Analyses) of this proposed rule. There is no additional burden for the three other claims-based measures proposed for adoption. Overall, we estimate the total cost for the 13 previously adopted measures and the four proposed new

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    measures would be $27,905 per LTCH annually or $12,054,724 for all LTCHs annually. These estimates were based on 432 LTCHs that are currently certified by Medicare. This is an average increase of 14 percent over the burden for FY 2016. This increase includes all quality measures that LTCHs are required to report, with the exception of the four proposed measures for FY 2017. Section VIII.C. of this proposed rule includes a detailed discussion of the policies.

    Proposed Changes to the IPFQR Program. In this proposed rule, we are proposing to add two new measures beginning with the FY 2019 payment determination and for subsequent years. One of these measures, the 30-Day All-Cause Unplanned Readmissions following Psychiatric Hospitalization in an Inpatient Psychiatric Facility measure, is calculated from administrative claims data. For the second measure, we estimate that our proposed policies would result in total costs of $11,834,748 for 1,684 IPFs nationwide.

    1. Summary

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

      Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these ``subsection (d) hospitals.'' Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs).

      The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-

      living adjustment factor. This base payment rate is multiplied by the DRG relative weight.

      If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-

      adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for a new additional Medicare payment that considers the amount of uncompensated care beginning on October 1, 2013.

      If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.

      Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-

      on payment, it would be inadequately paid under the regular DRG payment.

      The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments.

      Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.

      Under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through FY 2017. Through and including FY 2006, an MDH received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate was exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. For discharges occurring on or after October 1, 2007, but before October 1, 2017, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-

      specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years).

      Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ``in accordance with a prospective payment system established by the Secretary.'' The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs.

      The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M.

      2. Hospitals and Hospital Units Excluded From the IPPS

      Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of

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      1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and SCHIP State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-

      increase ceiling on inpatient operating costs.

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

      3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)

      The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH's payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. Section 1206(a) of Public Law 113-67 established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, based on a rolling effective date that is linked to the date on which a given LTCH's Federal FY 2016 cost reporting period begins, LTCHs are paid for LTCH discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS (73 FR 26797 through 26798).

      4. Critical Access Hospitals (CAHs)

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

      5. Payments for Graduate Medical Education (GME)

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

    2. Summary of Provisions of Recent Legislation Proposed To Be Implemented in This Proposed Rule

      1. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)

      The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), enacted on January 2, 2013, made a number of changes that affect the IPPS. In this proposed rule, we are proposing to make policy changes to implement section 631 of the American Taxpayer Relief Act of 2012, which amended section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary's estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied).

      2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)

      The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) introduced new payment rules in the LTCH PPS. Under section 1206 of this law, discharges in cost reporting periods beginning on or after October 1, 2015 under the LTCH PPS will receive payment under a site neutral rate unless the discharge meets certain patient-specific criteria. In this proposed rule, we are providing clarifications to prior policy changes that implemented provisions under section 1206 of the Pathway for SGR Reform Act.

      3. Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185)

      The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act (Pub. L. 113-185), enacted on October 6, 2014, made a number of changes that affect the Long-Term Care Quality Reporting Program (LTCH QRP). In this proposed rule, we are continuing to implement portions of section 1899B of the Act, as added by section 2 of the IMPACT Act, which, in part, requires LTCHs, among other postacute care providers, to report standardized patient assessment data, data on quality measures, and data on resource use and other measures.

      4. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10)

      The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) extended the MDH program and changes to the payment adjustment for low-volume hospitals through FY 2017. In this proposed rule, we are proposing to update the low-volume hospital payment adjustment for FY 2017 under the extension of the temporary changes to the low-volume hospital payment adjustment provided for by section 204 of Public Law 114-10. We also state our intention to finalize in the FY 2017 IPPS/

      LTCH PPS final rule the provisions of the FY 2016 IPPS/LTCH PPS interim final rule with comment period (80 FR 49594 through 49597) that implemented sections 204 and 205 of Public Law 114-10.

      5. The Consolidated Appropriations Act, 2016 (Pub. L. 114-113)

      The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015, made changes that affect the IPPS and the LTCH PPS. Section 231 of Public Law 114-113 provides for a temporary exception for certain wound care discharges from the application of the site neutral payment rate under the LTCH PPS for certain LTCHs, which is being implemented in an interim final rule with comment period. Section 601 of Public Law 114-113 made changes to the payment calculation for operating IPPS payments for hospitals located in Puerto Rico. Section 602 of Public Law 114-113 specifies that Puerto Rico hospitals are eligible for incentive payments for the

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      meaningful use of certified EHR technology, effective beginning FY 2016, and also applies the adjustments to the applicable percentage increase under the statute for Puerto Rico hospitals that are not meaningful EHR users, effective FY 2022. In this proposed rule, we are proposing conforming changes to our regulations to reflect the provisions of section 601 of Public Law 114-113, which increased the applicable Federal percentage of the operating IPPS payment for hospitals located in Puerto Rico from 75 percent to 100 percent and decreased the applicable Puerto Rico percentage of the operating IPPS payments for hospitals located in Puerto Rico from 25 percent to zero percent, applicable to discharges occurring on or after January 1, 2016.

      6. The Notice of Observation Treatment and Implication for Care Eligibility Act (the NOTICE Act) (Pub. L. 114-42)

      The Notice of Observation Treatment and Implication for Care Eligibility Act (the NOTICE Act) (Pub. L. 114-42) enacted on August 6, 2015, amended section 1866(a)(1) of the Act by adding new subparagraph (Y) that requires hospitals and CAHs to provide written notification and an oral explanation of such notification to individuals receiving observation services as outpatients for more than 24 hours at the hospitals or CAHs. In this proposed rule, we are proposing to implement the provisions of Public Law 114-42.

    3. Summary of the Provisions of This Proposed Rule

      In this proposed rule, we are setting forth proposed payment and policy changes to the Medicare IPPS for FY 2017 operating costs and for capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS, including proposed changes relating to payments for IME and direct GME to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in this proposed rule, we are setting forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2017.

      Below is a summary of the major changes that we are proposing to make:

      1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights

      In section II. of the preamble of the proposed rule, we include--

      Proposed changes to MS-DRG classifications based on our yearly review for FY 2017.

      Proposed application of the documentation and coding adjustment for FY 2017 resulting from implementation of the MS-DRG system.

      Proposed recalibrations of the MS-DRG relative weights.

      A discussion of the FY 2017 status of new technologies approved for add-on payments for FY 2016 and a presentation of our evaluation and analysis of the FY 2017 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Public Law 108-173, obtained in a town hall meeting).

      2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals

      In section III. of the preamble to this proposed rule, we are proposing revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but not limited to, the following:

      The proposed FY 2017 wage index update using wage data from cost reporting periods beginning in FY 2013.

      Calculation of the proposed occupational mix adjustment for FY 2017 based on the 2013 Occupational Mix Survey.

      Analysis and implementation of the proposed FY 2017 occupational mix adjustment to the wage index for acute care hospitals.

      Proposed application of the rural floor, the proposed imputed floor, and the proposed frontier State floor.

      Transitional wage indexes relating to the continued use of the revised OMB labor market area delineations based on 2010 Decennial Census data.

      Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications under sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.

      Notification regarding proposed CMS ``lock-in'' date for urban to rural reclassifications under Sec. 412.103.

      The proposed adjustment to the wage index for acute care hospitals for FY 2017 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

      Determination of the labor-related share for the proposed FY 2017 wage index.

      Solicitation of Comments on Treatment of Overhead and Home Office Costs in the Wage Index Calculation

      3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs

      In section IV. of the preamble of this proposed rule, we discuss proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR parts 412 and 413, including the following:

      Proposed conforming changes to our regulations to reflect the changes to operating payments for subsection (d) Puerto Rico hospitals in accordance with the provisions of section 601 of Public Law 114-113.

      Proposed changes to the inpatient hospital update for FY 2017.

      Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status.

      Proposed payment adjustment for low-volume hospitals for FY 2017.

      The statutorily required IME adjustment factor for FY 2017.

      Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care.

      Proposed changes to the rules for payment adjustments under the Hospital Readmissions Reduction Program based on hospital readmission measures and the process for hospital review and correction of those rates for FY 2017.

      Proposed changes to the requirements and provision of value-based incentive payments under the Hospital Value-Based Purchasing Program for FY 2017.

      Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2017.

      Proposed changes relating to direct GME and IME payments to urban hospitals with rural track training programs.

      Discussion of the Rural Community Hospital Demonstration Program and a proposal for making a budget neutrality adjustment for the demonstration program.

      Proposed implementation of the Notice of Observation Treatment and Implications for Care Eligibility Act (the NOTICE Act) for hospitals and CAHs.

      Proposed technical changes and corrections to regulations relating to cost to related organizations and Medicare cost reports.

      4. Proposed FY 2017 Policy Governing the IPPS for Capital-Related Costs

      In section V. of the preamble to this proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital

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      payments to hospitals for FY 2017. In addition, we discuss proposed changes to the calculation of capital IPPS payments to hospitals located in Puerto Rico to parallel the change in the statutory calculation of operating IPPS payments to hospitals located in Puerto Rico, beginning in FY 2017.

      5. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages

      In section VI. of the preamble of this proposed rule, we discuss--

      Proposed changes to payments to certain excluded hospitals for FY 2017.

      Proposed implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration.

      6. Proposed Changes to the LTCH PPS

      In section VII. of the preamble of this proposed rule, we set forth--

      Proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2017.

      Proposals to sunset our existing 25-percent threshold policy regulations, and replace them with single consolidated 25 percent threshold policy regulation.

      Proposed changes to the limitation on charges (LOC) to beneficiaries and related billing requirements for ``subclause (II)'' LTCHs to align those LTCH PPS payment adjustment policies with the LOC policies applied in the TEFRA payment context.

      Proposed technical corrections to certain definitions to correct and clarify their use under the application of the site neutral payment rate and proposed additional definitions in accordance with our proposed modifications to the 25-percent policy.

      Proposed rebasing and revising of the LTCH market basket to update the LTCH PPS, effective for FY 2017.

      7. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers

      In section VIII. of the preamble of the proposed rule, we address--

      Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program as a condition for receiving the full applicable percentage increase.

      Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program).

      Proposed changes to the requirements under the LTCH Quality Reporting Program (LTCH QRP).

      Proposed changes to the requirements under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program.

      Proposed changes relating to clinical quality measures for the Medicare Electronic Health Record (EHR) Incentive Program and eligible hospitals and CAHs.

      8. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals

      In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2017 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We are proposing to establish the threshold amounts for outlier cases. In addition, we address the update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2017 for certain hospitals excluded from the IPPS.

      9. Determining Prospective Payment Rates for LTCHs

      In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2017 LTCH PPS standard Federal payment rate and other factors used to determine LTCH PPS payments under both the LTCH PPS standard Federal payment rate and the site neutral payment rate in FY 2017. We are proposing to establish the adjustments for wage levels, the labor-

      related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates. We also are providing the estimated market basket update to apply to the ceiling used to determine payments under the existing payment adjustment for ``subclause (II)'' LTCHs for cost reporting periods beginning in FY 2017.

      10. Impact Analysis

      In Appendix A of this proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected acute care hospitals, CAHs, LTCHs, PCHs, and IPFs.

      11. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services

      In Appendix B of this 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 2017 for the following:

      A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs).

      Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.

      The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges.

      12. Discussion of Medicare Payment Advisory Commission Recommendations

      Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2016 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2016 report or to obtain a copy of the report, contact MedPAC at (202) 220-

      3700 or visit MedPAC's Web site at: http://www.medpac.gov.

      II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-

      DRG) Classifications and Relative Weights

    4. Background

      Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs.

      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

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      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.

    5. MS-DRG Reclassifications

      For general information about the MS-DRG system, including yearly reviews and changes to the MS-DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50512), the FY 2015 IPPS/LTCH PPS final rule (79 FR 49871), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49342).

    6. Adoption of the MS-DRGs in FY 2008

      For information on the adoption of the MS-DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189).

    7. Proposed FY 2017 MS-DRG Documentation and Coding Adjustment

      1. Background on the Prospective MS-DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90

      In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS-DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS-DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, for FY 2016, there are 756 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS-DRGs encourage hospitals to improve their documentation and coding of patient diagnoses.

      In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we indicated that the adoption of the MS-DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount, to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries estimated that maintaining budget neutrality required an adjustment of -4.8 percent to the national standardized amount. We provided for phasing in this -4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of -1.2 percent for FY 2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.

      On September 29, 2007, Congress enacted the TMA Transitional Medical Assistance, Abstinence Education, and QI Qualifying Individuals Programs Extension Act of 2007 (Pub. L. 110-90). Section 7(a) of Public Law 110-90 reduced the documentation and coding adjustment made as a result of the MS-DRG system that we adopted in the FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008 and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment through rulemaking, effective October 1, 2007 (72 FR 66886).

      For FY 2009, section 7(a) of Public Law 110-90 required a documentation and coding adjustment of -0.9 percent, and we finalized that adjustment through rulemaking effective October 1, 2008 (73 FR 48447). The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, which reflected the amendments made by section 7(a) of Public Law 110-90, are cumulative. As a result, the -0.9 percent documentation and coding adjustment for FY 2009 was in addition to the -0.6 percent adjustment for FY 2008, yielding a combined effect of -1.5 percent.

      2. Adjustment to the Average Standardized Amounts Required by Public Law 110-90

  207. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110-90

    Section 7(b)(1)(A) of Public Law 110-90 requires that, if the Secretary determines that implementation of the MS-DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110-90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act.

    Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years.

  208. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Public Law 110-90

    If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS-DRG system resulted in changes in documentation and coding that did not reflect real changes in case-

    mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110-90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110-90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 matched the changes that occurred in those years. Public Law 110-90 requires that the Secretary only make these recoupment or repayment adjustments for discharges occurring during FYs 2010, 2011, and 2012.

    3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data

    In order to implement the requirements of section 7 of Public Law 110-90, we performed a retrospective

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    evaluation of the FY 2008 data for claims paid through December 2008 using the methodology first described in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 through 43772). We performed the same analysis for FY 2009 claims data using the same methodology as we did for FY 2008 claims (75 FR 50057 through 50068). The results of the analysis for the FY 2011 IPPS/LTCH PPS proposed and final rules, and subsequent evaluations in FY 2012, supported that the 5.4 percent estimate accurately reflected the FY 2009 increases in documentation and coding under the MS-DRG system. We were persuaded by both MedPAC's analysis (as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own review of the methodologies proposed by various commenters that the methodology we employed to determine the required documentation and coding adjustments was sound.

    As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files are available to the public to allow independent analysis of the FY 2008 and FY 2009 documentation and coding effects. Interested individuals may still order these files through the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)--

    Hospital (National). This CMS Web page describes the file and provides directions and further detailed instructions for how to order.

    Persons placing an order must send the following: A Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check (refer to the Web site for the required payment amount) to:

    Mailing address if using the U.S. Postal Service:

    Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207-0520.

    Mailing address if using express mail:

    Centers for Medicare & Medicaid Services, OFM/Division of Accounting--

    RDDC, 7500 Security Boulevard, C3-07-11, Baltimore, MD 21244-1850.

    4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by Section 7(b)(1)(A) of Public Law 110-90

    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777), we opted to delay the implementation of any documentation and coding adjustment until a full analysis of case-mix changes based on FY 2009 claims data could be completed. We refer readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/

    LTCH PPS final rule (75 FR 50057 through 50073), we found a total prospective documentation and coding effect of 5.4 percent. After accounting for the -0.6 percent and the -0.9 percent documentation and coding adjustments in FYs 2008 and 2009, we found a remaining documentation and coding effect of 3.9 percent. As we have discussed, an additional cumulative adjustment of -3.9 percent would be necessary to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to make an adjustment to the average standardized amounts in order to eliminate the full effect of the documentation and coding changes that do not reflect real changes in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not specify when we must apply the prospective adjustment, but merely requires us to make an ``appropriate'' adjustment. Therefore, as we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we believed the law provided some discretion as to the manner in which we applied the prospective adjustment of -3.9 percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our practice to moderate payment adjustments when necessary to mitigate the effects of significant downward adjustments on hospitals, to avoid what could be widespread, disruptive effects of such adjustments on hospitals. Therefore, we stated that we believed it was appropriate to not implement the -3.9 percent prospective adjustment in FY 2011 because we finalized a -2.9 percent recoupment adjustment for that fiscal year. Accordingly, we did not propose a prospective adjustment under section 7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868 through 23870). We noted that, as a result, payments in FY 2011 (and in each future fiscal year until we implemented the requisite adjustment) would be higher than they would have been if we had implemented an adjustment under section 7(b)(1)(A) of Public Law 110-90.

    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we indicated that, because further delay of this prospective adjustment would result in a continued accrual of unrecoverable overpayments, it was imperative that we implement a prospective adjustment for FY 2012, while recognizing CMS' continued desire to mitigate the effects of any significant downward adjustments to hospitals. Therefore, we implemented a -2.0 percent prospective adjustment to the standardized amount instead of the full -3.9 percent.

    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53276), we completed the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9 percent adjustment to the standardized amount for FY 2013. We stated that this adjustment would remove the remaining effect of the documentation and coding changes that do not reflect real changes in case-mix that occurred in FY 2008 and FY 2009. We believed that it was imperative to implement the full remaining adjustment, as any further delay would result in an overstated standardized amount in FY 2013 and any future fiscal years until a full adjustment was made.

    We noted again that delaying full implementation of the prospective portion of the adjustment required under section 7(b)(1)(A) of Public Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY 2012 being overstated. These overpayments could not be recovered by CMS, as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to overpayments made in FY 2008 and FY 2009.

    5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Public Law 110-90

    Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make an adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2008 and FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110-90. This determination must be based on a retrospective evaluation of claims data. Our actuaries estimated that there was a 5.8 percentage point difference resulting in an increase in aggregate payments of approximately $6.9 billion. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined that an aggregate adjustment of -5.8 percent in FYs 2011 and 2012 would be necessary in order to meet the requirements of section 7(b)(1)(B) of Public Law 110-90

    Page 24966

    to adjust the standardized amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of the increase in aggregate payments (including interest) in FYs 2008 and 2009.

    It is often our practice to phase in payment rate adjustments over more than one year in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an adjustment to the standardized amount of -2.9 percent, representing approximately half of the aggregate adjustment required under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An adjustment of this magnitude allowed us to moderate the effects on hospitals in one year while simultaneously making it possible to implement the entire adjustment within the timeframe required under section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY 2012). For FY 2012, in accordance with the timeframes set forth by section 7(b)(1)(B) of Public Law 110-90, and consistent with the discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the recoupment adjustment by implementing the remaining -2.9 percent adjustment, in addition to removing the effect of the -2.9 percent adjustment to the standardized amount finalized for FY 2011 (76 FR 51489 and 51498). Because these adjustments, in effect, balanced out, there was no year-to-year change in the standardized amount due to this recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a final +2.9 percent adjustment to the standardized amount, completing the recoupment portion of section 7(b)(1)(B) of Public Law 110-90. We note that with this positive adjustment, according to our estimates, all overpayments made in FY 2008 and FY 2009 have been fully recaptured with appropriate interest, and the standardized amount has been returned to the appropriate baseline.

    6. Proposed Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)

    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment or adjustments totaling $11 billion by FY 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier, this delay in implementation resulted in overstated payment rates in FYs 2010, 2011, and 2012. The resulting overpayments could not have been recovered under Public Law 110-90.

    Similar to the adjustments authorized under section 7(b)(1)(B) of Public Law 110-90, the adjustment required under section 631 of the ATRA is a one-time recoupment of a prior overpayment, not a permanent reduction to payment rates. Therefore, we anticipated that any adjustment made to reduce payment rates in one year would eventually be offset by a positive adjustment in 2018, once the necessary amount of overpayment was recovered. However, section 414 of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, Public Law 114-10, enacted on April 16, 2015, replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment for each of FYs 2018 through 2023. We stated in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49345) that we will address this MACRA provision in future rulemaking.

    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), our actuaries estimate that a -9.3 percent adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by section 631 of the ATRA in FY 2014. It is often our practice to phase in payment rate adjustments over more than one year, in order to moderate the effect on payment rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases, and after consideration of the public comments we received, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we implemented a -0.8 percent recoupment adjustment to the standardized amount in FY 2014. We stated that if adjustments of approximately -0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we estimate that the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As estimates of any future adjustments are subject to slight variations in total savings, we did not provide for specific adjustments for FYs 2015, 2016, or 2017 at that time. We stated that we believed that this level of adjustment for FY 2014 was a reasonable and fair approach that satisfies the requirements of the statute while mitigating extreme annual fluctuations in payment rates.

    Consistent with the approach discussed in the FY 2014 rulemaking for recouping the $11 billion required by section 631 of the ATRA, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49874) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49345), we implemented additional -0.8 percent recoupment adjustments to the standardized amount in FY 2015 and FY 2016, respectively. We estimated that these adjustments, combined with leaving the prior -0.8 percent adjustments in place, would recover up to $2 billion in FY 2015 and another $3 billion in FY 2016. When combined with the approximately $1 billion adjustment made in FY 2014, we estimated that approximately $5 to $6 billion would be left to recover under section 631 of the ATRA by the end of FY 2016.

    However, due to lower than previously estimated inpatient spending, an adjustment of -0.8 percent in FY 2017 would not recoup the $11 billion under section 631 of the ATRA. Based on the FY 2017 President's Budget, our actuaries currently estimate that FY 2014 through FY 2016 spending subject to the documentation and coding recoupment adjustment in the absence of the -0.8 percent adjustments made in FYs 2014 through 2016 would have been $123.783 billion in FY 2014, $124.361 billion in FY 2015, and $127.060 billion in FY 2016. As shown in the following table, the amount recouped in each of those fiscal years is therefore calculated as the difference between those amounts and the amounts determined to have been spent in those years with the -0.8 percent adjustment applied, namely $122.801 billion in FY 2014, $122.395 billion in FY 2015, and $124.059 billion in FY 2016. This yields an estimated total recoupment through the end of FY 2016 of $5.950 billion.

    Recoupment Made Under Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)

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

    Cumulative Adjusted IPPS Recoupment

    IPPS Spending adjustment spending amount

    * (billions) factor (billions) (billions)

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

    FY 2014......................................... $122.801 1.00800 $123.783 $0.98

    Page 24967

    FY 2015......................................... 122.395 1.01606 124.361 1.97

    FY 2016......................................... 124.059 1.02419 127.060 3.00

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

    Total....................................... .............. .............. .............. 5.95

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

    * Based on FY 2017 President's Budget, including capital, IME, and DSH payments.

    These estimates and the estimate of FY 2017 spending subject to the documentation and coding recoupment adjustment also will be contained in a memorandum from the Office of the Actuary that we will make publicly available on the CMS Web site. A description of the President's Budget for FY 2017 is currently available on the OMB Web site at: https://www.whitehouse.gov/omb/budget.

    Our actuaries currently estimate that the FY 2017 spending subject to the documentation and coding recoupment adjustment (including capital, IME, and DSH payment) would be $129.625 billion in the absence of any documentation and recoupment adjustments from FY 2014 through FY 2017. Therefore, our actuaries currently estimate that, to the nearest tenth of a percent, the FY 2017 documentation and coding adjustment factor that will recoup as closely as possible $11 billion from FY 2014 through FY 2017 without exceeding this amount is -1.5 percent. This adjustment factor yields an estimated spending amount in FY 2017 of $124.693 billion, calculated as $129.625/(1.008*1.008*1.008*1.015). This estimated -1.5 percent adjustment factor will be updated for the final rule based on the FY 2017 President's Budget Midsession Review. It is possible that, based on updated estimates, the necessary adjustment factor to the nearest tenth of a percent could be different than our actuaries' current estimate of -1.5 percent. The proposed -1.5 percent adjustment would be the final adjustment required under section 631 of the ATRA, and when combined with the effects of previous adjustments made in FY 2014, FY 2015, and FY 2016, we estimate will satisfy the section 631 of the ATRA recoupment. As stated earlier, once the recoupment was complete, we had anticipated making a single positive adjustment in FY 2018 to offset the reductions required to recoup the $11 billion under section 631 of the ATRA. However, as stated earlier, section 414 of the MACRA requires that we not make the single positive adjustment we intended to make in FY 2018, but instead make a 0.5 percent positive adjustment for each of FYs 2018 through 2023. The provision under section 414 of the MACRA does not impact our proposed FY 2017 adjustment, and we will address this MACRA provision in future rulemaking.

    1. Refinement of the MS-DRG Relative Weight Calculation

      1. Background

      Beginning in FY 2007, we implemented relative weights for DRGs based on cost report data instead of charge information. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed discussion of our final policy for calculating the cost-based DRG relative weights and to the FY 2008 IPPS final rule with comment period (72 FR 47199) for information on how we blended relative weights based on the CMS DRGs and MS-DRGs.

      As we implemented cost-based relative weights, some public commenters raised concerns about potential bias in the weights due to ``charge compression,'' which is the practice of applying a higher percentage charge markup over costs to lower cost items and services, and a lower percentage charge markup over costs to higher cost items and services. As a result, the cost-based weights would undervalue high-cost items and overvalue low-cost items if a single cost-to-charge ratio (CCR) is applied to items of widely varying costs in the same cost center. To address this concern, in August 2006, we awarded a contract to the Research Triangle Institute, International (RTI) to study the effects of charge compression in calculating the relative weights and to consider methods to reduce the variation in the CCRs across services within cost centers. For a detailed summary of RTI's findings, recommendations, and public comments that we received on the report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452 through 48453). In addition, we refer readers to RTI's July 2008 final report titled ``Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).

      In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in response to the RTI's recommendations concerning cost report refinements, we discussed our decision to pursue changes to the cost report to split the cost center for Medical Supplies Charged to Patients into one line for ``Medical Supplies Charged to Patients'' and another line for ``Implantable Devices Charged to Patients.'' We acknowledged, as RTI had found, that charge compression occurs in several cost centers that exist on the Medicare cost report. However, as we stated in the FY 2009 IPPS final rule, we focused on the CCR for Medical Supplies and Equipment because RTI found that the largest impact on the MS-DRG relative weights could result from correcting charge compression for devices and implants. In determining the items that should be reported in these respective cost centers, we adopted the commenters' recommendations that hospitals use revenue codes established by the AHA's National Uniform Billing Committee to determine the items that should be reported in the ``Medical Supplies Charged to Patients'' and the ``Implantable Devices Charged to Patients'' cost centers. Accordingly, a new subscripted line for ``Implantable Devices Charged to Patients'' was created in July 2009. This new subscripted cost center has been available for use for cost reporting periods beginning on or after May 1, 2009.

      As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527), in addition to the findings regarding implantable devices, RTI found that the costs and charges of computed tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and the

      Page 24968

      OPPS relative weights would better estimate the costs of those services if CMS were to add standard cost centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRIs, and cardiac catheterization, and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed discussion of the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization.) The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

      In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due to what is typically a 3-year lag between the reporting of cost report data and the availability for use in ratesetting, we anticipated that we might be able to use data from the new ``Implantable Devices Charged to Patients'' cost center to develop a CCR for ``Implantable Devices Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle. However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43782), due to delays in the issuance of the revised cost report Form CMS 2552-10, we determined that a new CCR for ``Implantable Devices Charged to Patients'' might not be available before FY 2013. Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule to add new cost centers for CT scans, MRIs, and cardiac catheterization, we explained that data from any new cost centers that may be created will not be available until at least 3 years after they are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH PPS rulemaking, we checked the availability of data in the ``Implantable Devices Charged to Patients'' cost center on the FY 2009 cost reports, but we did not believe that there was a sufficient amount of data from which to generate a meaningful analysis in this particular situation. Therefore, we did not propose to use data from the ``Implantable Devices Charged to Patients'' cost center to create a distinct CCR for ``Implantable Devices Charged to Patients'' for use in calculating the MS-DRG relative weights for FY 2012. We indicated that we would reassess the availability of data for the ``Implantable Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS rulemaking cycle and, if appropriate, we would propose to create a distinct CCR at that time.

      During the development of the FY 2013 IPPS/LTCH PPS proposed and final rules, hospitals were still in the process of transitioning from the previous cost report Form CMS-2552-96 to the new cost report Form CMS-2552-10. Therefore, we were able to access only those cost reports in the FY 2010 HCRIS with fiscal year begin dates on or after October 1, 2009, and before May 1, 2010; that is, those cost reports on Form CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not available because cost reports filed on the Form CMS-2552-10 were not accessible in the HCRIS. Further complicating matters was that, due to additional unforeseen technical difficulties, the corresponding information regarding charges for implantable devices on hospital claims was not yet available to us in the MedPAR file. Without the breakout in the MedPAR file of charges associated with implantable devices to correspond to the costs of implantable devices on the cost report, we believed that we had no choice but to continue computing the relative weights with the current CCR that combines the costs and charges for supplies and implantable devices. We stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do have the necessary data for supplies and implantable devices on the claims in the MedPAR file to create distinct CCRs for the respective cost centers for supplies and implantable devices, we hoped that we would also have data for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac catheterization, which could then be finalized through rulemaking. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that, prior to proposing to create these CCRs, we would first thoroughly analyze and determine the impacts of the data, and that distinct CCRs for these new cost centers would be used in the calculation of the relative weights only if they were first finalized through rulemaking.

      At the time of the development of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27506 through 27507), we had a substantial number of hospitals completing all, or some, of these new cost centers on the FY 2011 Medicare cost reports, compared to prior years. We stated that we believed that the analytic findings described using the FY 2011 cost report data and FY 2012 claims data supported our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we saw no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in FY 2014, we proposed a policy to calculate the MS-DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization.

      We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507 through 27509) and final rule (78 FR 50518 through 50523) in which we presented data analyses using distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/

      LTCH PPS final rule also set forth our responses to public comments we received on our proposal to implement these CCRs. As explained in more detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our proposal to use 19 CCRs to calculate MS-DRG relative weights beginning in FY 2014--the then existing 15 cost centers and the 4 new CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Therefore, beginning in FY 2014, we calculate the IPPS MS-DRG relative weights using 19 CCRs, creating distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization.

      2. Discussion of Policy for FY 2017

      Consistent with our established policy, we calculated the proposed MS-DRG relative weights for FY 2017 using two data sources: The MedPAR file as the claims data source and the HCRIS as the cost report data source. We adjusted the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the proposed 19 CCRs and the proposed MS-DRG relative weights for FY 2017 is included in section II.G. of the preamble of this proposed rule. As we did with the FY 2016 IPPS/LTCH PPS final rule, we are providing the version of the HCRIS from which we calculated these proposed 19 CCRs on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the screen titled, ``FY 2017 IPPS Proposed Rule Home Page'' or ``Acute Inpatient Files for Download.''

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    2. Proposed Changes to Specific MS-DRG Classifications

      1. Discussion of Changes to Coding System and Basis for MS-DRG Updates

  209. Conversion of MS-DRGs to the International Classification of Diseases, 10th Revision (ICD-10)

    As of October 1, 2015, providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system instead of the ICD-9-CM coding system, which was used through September 30, 2015. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the Official ICD-10-CM and ICD-10-PCS Guidelines for Coding and Reporting. The ICD-10 coding system was initially adopted for transactions conducted on or after October 1, 2013, as described in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Administrative Simplification: Modifications to Medical Data Code Set Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the Federal Register on January 16, 2009 (74 FR 3328 through 3362) (hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final rule''). However, the Secretary of Health and Human Services (the Secretary) issued a final rule that delayed the compliance date for ICD-10 from October 1, 2013, to October 1, 2014. That final rule, entitled ``Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for ICD-

    10-CM and ICD-10-PCS Medical Data Code Sets,'' CMS-0040-F, was published in the Federal Register on September 5, 2012 (77 FR 54664) and is available for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly, the U.S. Department of Health and Human Services released a final rule in the Federal Register on August 4, 2014 (79 FR 45128 through 45134) that included a new compliance date that required the use of ICD-10 beginning October 1, 2015. The rule also required HIPAA-covered entities to continue to use ICD-9-CM through September 30, 2015.

    The anticipated move to ICD-10 necessitated the development of an ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on the creation of the ICD-10 version of the MS-DRGs to be implemented at the same time as ICD-10 (75 FR 50127 and 50128). While we did not propose an ICD-10 version of the MS-DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that we have been actively involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10 codes and sharing this information through the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee. We undertook this early conversion project to assist other payers and providers in understanding how to implement their own conversion projects. We posted ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also posted a paper that describes how CMS went about completing this project and suggestions for other payers and providers to follow. Information on the ICD-10 MS-DRG conversion project can be found on the ICD-10 MS-DRG Conversion Project Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have continued to keep the public updated on our maintenance efforts for ICD-10-CM and ICD-10-PCS coding systems, as well as the General Equivalence Mappings that assist in conversion through the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee. Information on these committee meetings can be found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.

    During FY 2011, we developed and posted Version 28.0 of the ICD-10 MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-

    10 MS-DRGs Version 28.0 also included the CC Exclusion List and the ICD-10 version of the hospital-acquired conditions (HACs), which was not posted with Version 26. We also discussed this update at the September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM Coordination and Maintenance Committee. The minutes of these two meetings are posted on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.

    We reviewed comments on the ICD-10 MS-DRGs Version 28 and made updates as a result of these comments. We called the updated version the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions Manual of ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion Project Web site. To make the review of Version 28-R1 updates easier for the public, we also made available pilot software on a CD ROM that could be ordered through the National Technical Information Service (NTIS). A link to the NTIS ordering page was provided on the CMS ICD-10 MS-DRGs Web site. We stated that we believed that, by providing the ICD-10 MS-

    DRGs Version 28-R1 Pilot Software (distributed on CD ROM), the public would be able to more easily review and provide feedback on updates to the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs Version 28-

    R1 at the September 14, 2011 ICD-9-CM Coordination and Maintenance Committee meeting. We encouraged the public to continue to review and provide comments on the ICD-10 MS-DRGs so that CMS could continue to update the system.

    In FY 2012, we prepared the ICD-10 MS-DRGs Version 29, based on the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012 IPPS/

    LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-DRGs Version 29 on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 28 to Version 29 to facilitate a review. The ICD-10 MS-DRGs Version 29 was discussed at the ICD-9-CM Coordination and Maintenance Committee meeting on March 5, 2012. Information was provided on the types of updates made. Once again the public was encouraged to review and comment on the most recent update to the ICD-10 MS-DRGs.

    CMS prepared the ICD-10 MS-DRGs Version 30 based on the FY 2013 MS-

    DRGs (Version 30) that we finalized in the FY 2013 IPPS/LTCH PPS final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs Version 30 on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 29 to Version 30 to facilitate a review. We produced mainframe and computer software for Version 30, which was made available to the public in February 2013. Information on ordering the mainframe and computer software through NTIS was posted on the ICD-10 MS-DRG Conversion Project

    Page 24970

    Web site. The ICD-10 MS-DRGs Version 30.0 computer software facilitated additional review of the ICD-10 MS-DRGs conversion.

    We provided information on a study conducted on the impact of converting the MS-DRGs to ICD-10. Information on this study is summarized in a paper entitled ``Impact of the Transition to ICD-10 on Medicare Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10 MS-DRGs Conversion Project Web site and was distributed and discussed at the September 15, 2010 ICD-9-CM Coordination and Maintenance Committee meeting. The paper described CMS' approach to the conversion of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010), which was converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the impact on aggregate payment to hospitals and the distribution of payments across hospitals. The impact of the conversion from ICD-9-CM to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY 2009 Medicare claims data. The study found a hospital payment increase of 0.05 percent using the ICD-10 MS-DRGs Version 27.

    CMS provided an overview of this hospital payment impact study at the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee meeting. This presentation followed presentations on the creation of ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At this March 2012 meeting, CMS announced that it would produce an update on this impact study based on an updated version of the ICD-10 MS-DRGs. This update of the impact study was presented at the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee meeting. The study found that moving from an ICD-

    9-CM-based system to an ICD-10 MS-DRG replicated system would lead to DRG reassignments on only 1 percent of the 10 million MedPAR sample records used in the study. Ninety-nine percent of the records did not shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1 percent of the records that shifted, 45 percent of the shifts were to a higher-weighted MS-DRG, while 55 percent of the shifts were to lower-

    weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by 4/10000 or minus 4 pennies per $100. The updated paper is posted on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee meeting can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-

    10 MS-DRG Version 30 software provided additional information to the public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-

    DRGs.

    CMS prepared the ICD-10 MS-DRGs Version 31 based on the FY 2014 MS-

    DRGs (Version 31) that we finalized in the FY 2014 IPPS/LTCH PPS final rule. In November 2013, we posted a Definitions Manual of the ICD-10 MS-DRGs Version 31 on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described changes made from Version 30 to Version 31 to facilitate a review. We produced mainframe and computer software for Version 31, which was made available to the public in December 2013. Information on ordering the mainframe and computer software through NTIS was posted on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-

    10 MS-DRGs Version 31.0 computer software facilitated additional review of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD-10 MS-DRGs did not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs Version 31.

    We reviewed public comments received and developed an update of ICD-10 MS-DRGs Version 31, which we called ICD-10 MS-DRGs Version 31-R. We posted a Definitions Manual of the ICD-10 MS-DRGs Version 31-R on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made from Version 31 to Version 31-R to facilitate a review. We continued to share ICD-10 MS-DRG conversion activities with the public through this Web site.

    CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 MS-

    DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS final rule. In November 2014, we made available a Definitions Manual of the ICD-10 MS DRGs Version 32 on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described changes made from Version 31-R to Version 32 to facilitate a review. We produced mainframe and computer software for Version 32, which was made available to the public in January 2015. Information on ordering the mainframe and computer software through NTIS was made available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-10 MS-DRGs Version 32 computer software facilitated additional review of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to CMS any comments on areas where they believed the ICD-10 MS-

    DRGs did not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs Version 32. We discussed five requests from the public to update the ICD-10 MS-DRGs Version 32 to better replicate the ICD-9-CM MS-DRGs in section II.G.3., 4., and 5. of the preamble of the FY 2016 IPPS/LTCH PPS final rule. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24351), we proposed to implement the MS-DRG code logic in the ICD-10 MS-DRGs Version 32 along with any finalized updates to the ICD-

    10 MS-DRGs Version 32 for the final ICD-10 MS-DRGs Version 33. In the proposed rule, we proposed the ICD-10 MS-DRGs Version 33 as the replacement logic for the ICD-9-CM based MS-DRGs Version 32 as part of the proposed MS-DRG updates for FY 2016. We invited public comments on how well the ICD-10 MS-DRGs Version 32 replicated the logic of the MS-

    DRGs Version 32 based on ICD-9-CM codes.

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49356 through 49357 and 49363 through 49407), we addressed the public comments we received on the replication in the ICD-10 MS-DRGs Version 32 of the logic of the MS-DRGs Version 32 based on ICD-9-CM codes. We refer readers to that final rule for a discussion of the changes we made in response to public comments.

  210. Basis for Proposed FY 2017 MS-DRG Updates

    CMS encourages input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes

    Page 24971

    in FY 2017, comments and suggestions should have been submitted by December 7, 2015. The comments that were submitted in a timely manner for FY 2017 are discussed in this section of the proposed rule. Interested parties should submit any comments and suggestions for FY 2018 by December 7, 2016, via the new CMS MS-DRG Classification Change Requests Mailbox located at: MSDRGClassificationChange@cms.hhs.gov.

    Following are the changes we are proposing to the MS-DRGs for FY 2017. We are inviting public comment on each of the MS-DRG classification proposed changes described in this rule, as well as our proposals to maintain certain existing MS-DRG classifications, which are also discussed later in this section of the proposed rule. In some cases, we are proposing changes to the MS-DRG classifications based on our analysis of claims data. In other cases, we are proposing to maintain the existing MS-DRG classification based on our analysis of claims data. For this FY 2017 proposed rule, our MS-DRG analysis is based on claims data from the December 2015 update of the FY 2015 MedPAR file, which contains hospital bills received through September 30, 2015, for discharges occurring through September 30, 2015. In our discussion of the proposed MS-DRG reclassification changes that follows, we refer to our analysis of claims data from the ``December 2015 update of the FY 2015 MedPAR file.''

    As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modification to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on the judgment of our clinical advisors to decide whether patients are clinically distinct or similar to other patients in the MS-DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average costs between the cases we select for review and the remainder of cases in the MS-DRG. We also consider variation in costs within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of costs or length of stay, or both. Further, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS-DRG unless it would include a substantial number of cases.

    In our examination of the claims data, we apply the following criteria established in FY 2008 (72 FR 47169) to determine if the creation of a new complication or comorbidity (CC) or major complication or comorbidity (MCC) subgroup within a base MS-DRG is warranted:

    A reduction in variance of costs of at least 3 percent.

    At least 5 percent of the patients in the MS-DRG fall within the CC or MCC subgroup.

    At least 500 cases are in the CC or MCC subgroup.

    There is at least a 20-percent difference in average costs between subgroups.

    There is a $2,000 difference in average costs between subgroups.

    In order to warrant creation of a CC or MCC subgroup within a base MS-DRG, the subgroup must meet all five of the criteria.

    We note that some of the issues being evaluated for the FY 2017 MS-

    DRGs update continue to relate to the need for the ICD-10 MS-DRGs to accurately replicate the logic of the ICD-9-CM based version of the MS-

    DRGs. Replication is important because both the logic for the proposed MS-DRGs and the data source used to calculate and develop proposed relative payment weights are based on the same MedPAR claims data. In other words, as the logic for the proposed FY 2017 ICD-10 MS-DRGs is based upon the FY 2015 ICD-9-CM MedPAR claims data, the data source used to calculate and develop the proposed FY 2017 relative payment weights is also based on the FY 2015 ICD-9-CM MedPAR claims data, including any proposed MS-DRG classification changes discussed in this proposed rule. This is consistent with how the current FY 2016 relative payment weights are based on the ICD-9-CM diagnosis and procedure codes from the FY 2014 MedPAR claims data that were grouped through the ICD-

    9-CM version of the FY 2016 GROUPER Version 33. We note that we made the MS-DRG GROUPER and Medicare Code Editor (MCE) ICD-9-CM Software Version 33 available to the public for use in analyzing ICD-9-CM data to create relative payment weights using ICD-9-CM data on our CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page.html?DLSort=0&DLEntries=10&DLPage=1&DLSortDir=ascending. Therefore, as discussed in section II.G. of the preamble of this proposed rule, ICD-9-CM data were used for computing the proposed FY 2017 MS-DRG relative payment weights. If the ICD-9 and ICD-10 versions of MS-DRGs cease to be replications of each other, the relative payment weights computed using the ICD-9 claims data and MS-DRGs would be inconsistent with the relative payment weights assigned for the ICD-10 MS-DRGs, causing unintended payment redistributions. Thus, if the findings of our data analyses and the recommendations of our clinical advisors supported modifications to the current ICD-10 MS-DRG structure, prior to proposing any changes, we first evaluated whether the requested change could be replicated in the ICD-9-CM MS-DRGs. If the answer was ``yes,'' from a replication perspective, the change was considered feasible. If the answer was ``no,'' we examined whether the change in the ICD-10 MS-DRGs was likely to cause a significant number of patient cases to change or ``shift'' ICD-10 MS-DRGs. If relatively few patient cases would be impacted, we evaluated if it would be feasible to propose the change even though it could not be replicated by the ICD-9 MS-DRGs because it would not cause a material payment redistribution. For the ICD-10 MS-DRG classification change requests that could not be replicated in ICD-9-CM and that would cause a significant number of patient cases to shift MS-DRG assignment, we considered other alternatives.

    2. Pre-Major Diagnostic Category (Pre-MDC): Total Artificial Heart Replacement

    An ICD-10 MS-DRG replication issue regarding the assignment of two ICD-10-PCS procedure codes was identified after the October 1, 2015 implementation of the Version 33 ICD-10 MS-DRGs. ICD-10-PCS procedure codes 02RK0JZ (Replacement of right ventricle with synthetic substitute, open approach) and 02RL0JZ (Replacement of left ventricle with synthetic substitute, open approach), when reported together, describe a biventricular heart replacement (artificial heart). Under the Version 32 ICD-9-CM based MS-DRGs, this procedure was described by ICD-9-CM procedure code 37.52 (Implantation of total internal biventricular heart replacement system) and grouped to MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively).

    As discussed in section II.F.1.a. of the preamble of this proposed rule, to assist in the conversion from the ICD-9-CM

    Page 24972

    based MS-DRGs to ICD-10, beginning in FY 2011, draft versions of the ICD-10 based MS-DRGs were developed and made available for public comment. The two ICD-10-PCS procedure codes (02RK0JZ and 02RL0JZ) were assigned as a ``cluster'' to the draft ICD-10 based MS-DRGs 001 and 002 in prior draft versions of the ICD-10 MS-DRGs. In ICD-10-PCS, a cluster is the term used to describe when a combination of ICD-10-PCS procedure codes are needed to fully satisfy the equivalent meaning of an ICD-9-CM procedure code for it to be considered a plausible translation. Upon review of prior draft versions of the ICD-10 MS-DRGs, it was determined that Version 30 was the last version to include ICD-10-PCS procedure codes 02RK0JZ and 02RL0JZ as a code cluster (from ICD-9-CM procedure code 37.52) that grouped to the draft ICD-10 based MS-DRGs 001 and 002. Subsequent draft versions of the ICD-10 MS-DRGs inadvertently omitted this code cluster from those MS-DRGs.

    Therefore, for FY 2017, we are proposing to assign ICD-10-PCS procedure codes 02RK0JZ and 02RL0JZ as a code cluster to ICD-10 Version 34 MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively) to accurately replicate the Version 32 ICD-9-CM based MS-DRG logic of procedure code 37.52. We are inviting public comments on our proposal.

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

  211. Endovascular Embolization (Coiling) or Occlusion of Head and Neck Procedures

    We received a repeat request to change the MS-DRG assignment for procedure codes describing endovascular embolization (coiling) or occlusion of the head and neck. This topic was discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28005 through 28007); the FY 2015 IPPS/LTCH PPS final rule (79 FR 49883 through 49886); the FY 2016 IPPS/

    LTCH PPS proposed rule (80 FR 24351 through 24356); and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49358 through 49363). For these 2 fiscal years, we did not change the MS-DRG assignment for procedure codes describing endovascular embolization (coiling) or occlusion of the head and neck for the reasons discussed in these proposed and final rules.

    For FY 2017, the requestor again asked that CMS change the MS-DRG assignment for procedure codes describing endovascular embolization or occlusion of the head and neck as well as several other codes describing endovascular procedures of the head and neck.

    The ICD-10-PCS procedure codes listed in the following table capture endovascular embolization or occlusion of the head and neck procedures that are assigned to the following MS-DRGs in ICD-10 Version 33 MS-DRGs: MS-DRG 020 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with MCC); MS-DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with CC); MS-DRG 022 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage without CC/MCC); MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant); MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without MCC); MS-DRG 025 (Craniotomy and Endovascular Intracranial Procedures with MCC); MS-DRG 026 (Craniotomy and Endovascular Intracranial Procedures with CC); and MS-

    DRG 027 (Craniotomy and Endovascular Intracranial Procedures without CC/MCC):

    ICD-10-PCS Codes for Endovascular Embolization or Occlusion of the Head

    and Neck Procedures Assigned to MS-DRGs 020 Through 027 in ICD-10 MS-

    DRGs Version 33

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

    ICD-10-PCS code Code description

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

    03LG3BZ.................. Occlusion of intracranial artery with

    bioactive intraluminal device, percutaneous

    approach.

    03LG3DZ.................. Occlusion of intracranial artery with

    intraluminal device, percutaneous approach.

    03LG4BZ.................. Occlusion of intracranial artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03LG4DZ.................. Occlusion of intracranial artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LH3BZ.................. Occlusion of right common carotid artery with

    bioactive intraluminal device, percutaneous

    approach.

    03LH3DZ.................. Occlusion of right common carotid artery with

    intraluminal device, percutaneous approach.

    03LH4BZ.................. Occlusion of right common carotid artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03LH4DZ.................. Occlusion of right common carotid artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LJ3BZ.................. Occlusion of left common carotid artery with

    bioactive intraluminal device, percutaneous

    approach.

    03LJ3DZ.................. Occlusion of left common carotid artery with

    intraluminal device, percutaneous approach.

    03LJ4BZ.................. Occlusion of left common carotid artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03LJ4DZ.................. Occlusion of left common carotid artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LK3BZ.................. Occlusion of right internal carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03LK3DZ.................. Occlusion of right internal carotid artery

    with intraluminal device, percutaneous

    approach.

    03LK4BZ.................. Occlusion of right internal carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03LK4DZ.................. Occlusion of right internal carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03LL3BZ.................. Occlusion of left internal carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03LL3DZ.................. Occlusion of left internal carotid artery

    with intraluminal device, percutaneous

    approach.

    03LL4BZ.................. Occlusion of left internal carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03LL4DZ.................. Occlusion of left internal carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03LM3BZ.................. Occlusion of right external carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03LM3DZ.................. Occlusion of right external carotid artery

    with intraluminal device, percutaneous

    approach.

    03LM4BZ.................. Occlusion of right external carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03LM4DZ.................. Occlusion of right external carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03LN3BZ.................. Occlusion of left external carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03LN3DZ.................. Occlusion of left external carotid artery

    with intraluminal device, percutaneous

    approach.

    03LN4BZ.................. Occlusion of left external carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03LN4DZ.................. Occlusion of left external carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03LP3BZ.................. Occlusion of right vertebral artery with

    bioactive intraluminal device, percutaneous

    approach.

    03LP3DZ.................. Occlusion of right vertebral artery with

    intraluminal device, percutaneous approach.

    03LP4BZ.................. Occlusion of right vertebral artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    Page 24973

    03LP4DZ.................. Occlusion of right vertebral artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LQ3BZ.................. Occlusion of left vertebral artery with

    bioactive intraluminal device, percutaneous

    approach.

    03LQ3DZ.................. Occlusion of left vertebral artery with

    intraluminal device, percutaneous approach.

    03LQ4BZ.................. Occlusion of left vertebral artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03LQ4DZ.................. Occlusion of left vertebral artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LR3DZ.................. Occlusion of face artery with intraluminal

    device, percutaneous approach.

    03LR4DZ.................. Occlusion of face artery with intraluminal

    device, percutaneous endoscopic approach.

    03LS3DZ.................. Occlusion of right temporal artery with

    intraluminal device, percutaneous approach.

    03LS4DZ.................. Occlusion of right temporal artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03LT3DZ.................. Occlusion of left temporal artery with

    intraluminal device, percutaneous approach.

    03LT4DZ.................. Occlusion of left temporal artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VG3BZ.................. Restriction of intracranial artery with

    bioactive intraluminal device, percutaneous

    approach.

    03VG3DZ.................. Restriction of intracranial artery with

    intraluminal device, percutaneous approach.

    03VG4BZ.................. Restriction of intracranial artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03VG4DZ.................. Restriction of intracranial artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VH3BZ.................. Restriction of right common carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VH3DZ.................. Restriction of right common carotid artery

    with intraluminal device, percutaneous

    approach.

    03VH4BZ.................. Restriction of right common carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VH4DZ.................. Restriction of right common carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VJ3BZ.................. Restriction of left common carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VJ3DZ.................. Restriction of left common carotid artery

    with intraluminal device, percutaneous

    approach.

    03VJ4BZ.................. Restriction of left common carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VJ4DZ.................. Restriction of left common carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VK3BZ.................. Restriction of right internal carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VK3DZ.................. Restriction of right internal carotid artery

    with intraluminal device, percutaneous

    approach.

    03VK4BZ.................. Restriction of right internal carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VK4DZ.................. Restriction of right internal carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VL3BZ.................. Restriction of left internal carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VL3DZ.................. Restriction of left internal carotid artery

    with intraluminal device, percutaneous

    approach.

    03VL4BZ.................. Restriction of left internal carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VL4DZ.................. Restriction of left internal carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VM3BZ.................. Restriction of right external carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VM3DZ.................. Restriction of right external carotid artery

    with intraluminal device, percutaneous

    approach.

    03VM4BZ.................. Restriction of right external carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VM4DZ.................. Restriction of right external carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VN3BZ.................. Restriction of left external carotid artery

    with bioactive intraluminal device,

    percutaneous approach.

    03VN3DZ.................. Restriction of left external carotid artery

    with intraluminal device, percutaneous

    approach.

    03VN4BZ.................. Restriction of left external carotid artery

    with bioactive intraluminal device,

    percutaneous endoscopic approach.

    03VN4DZ.................. Restriction of left external carotid artery

    with intraluminal device, percutaneous

    endoscopic approach.

    03VP3BZ.................. Restriction of right vertebral artery with

    bioactive intraluminal device, percutaneous

    approach.

    03VP3DZ.................. Restriction of right vertebral artery with

    intraluminal device, percutaneous approach.

    03VP4BZ.................. Restriction of right vertebral artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03VP4DZ.................. Restriction of right vertebral artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VQ3BZ.................. Restriction of left vertebral artery with

    bioactive intraluminal device, percutaneous

    approach.

    03VQ3DZ.................. Restriction of left vertebral artery with

    intraluminal device, percutaneous approach.

    03VQ4BZ.................. Restriction of left vertebral artery with

    bioactive intraluminal device, percutaneous

    endoscopic approach.

    03VQ4DZ.................. Restriction of left vertebral artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VR3DZ.................. Restriction of face artery with intraluminal

    device, percutaneous approach.

    03VR4DZ.................. Restriction of face artery with intraluminal

    device, percutaneous endoscopic approach.

    03VS3DZ.................. Restriction of right temporal artery with

    intraluminal device, percutaneous approach.

    03VS4DZ.................. Restriction of right temporal artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VT3DZ.................. Restriction of left temporal artery with

    intraluminal device, percutaneous approach.

    03VT4DZ.................. Restriction of left temporal artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VU3DZ.................. Restriction of right thyroid artery with

    intraluminal device, percutaneous approach.

    03VU4DZ.................. Restriction of right thyroid artery with

    intraluminal device, percutaneous endoscopic

    approach.

    03VV3DZ.................. Restriction of left thyroid artery with

    intraluminal device, percutaneous approach.

    03VV4DZ.................. Restriction of left thyroid artery with

    intraluminal device, percutaneous endoscopic

    approach.

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

    Cases reporting any of the ICD-10-PCS procedures codes listed in the table above that are assigned to MS-DRGs 020, 021, and 022 under MDC 1 require a principal diagnosis of hemorrhage. Cases reporting any of the ICD-10-PCS procedure codes listed in the table above that are assigned to MS-DRGs 023 and 024 require the insertion of a major implant or an acute complex central nervous system (CNS) principal diagnosis. Cases reporting any of the ICD-10-PCS procedure codes listed in the table above that are assigned to MS-DRGs 025, 026, and 027 do not have a principal diagnosis of hemorrhage, an acute complex CNS principal diagnosis, or a major device implant.

    The requestor expressed concerns about the appropriateness of the MS-DRG assignment for the endovascular embolization or occlusion of head and neck procedures. The requestor stated that past data demonstrated that the cost of cases involving endovascular coils

    Page 24974

    exceeds the average cost of all cases within each of the MS-DRGs to which these procedures are assigned. The requestor pointed out that these procedures were formerly captured by the following ICD-9-CM codes that were assigned to MS-DRGs 020 through 027:

    39.72 (Endovascular (total) embolization or occlusion of head and neck vessels);

    39.75 (Endovascular embolization or occlusion of vessel(s) of head or neck using bare coils); and

    39.76 (Endovascular embolization or occlusion of vessel(s) of head or neck using bioactive coils).

    The commenter also expressed concern about the appropriateness of the current ICD-10 MS-DRG assignment of the following ICD-9-CM codes that describe other endovascular procedures of head and neck that were previously assigned to MS-DRGs 023 through 027 in the ICD-9-CM MS-DRGs Version 32. The commenter stated that these procedures are more clinically complex than other procedures assigned to these MS-DRGs.

    00.62 (Percutaneous angioplasty of intracranial vessels(s));

    39.74 (Endovascular removal of obstruction from head and neck vessel(s)); and

    39.79 (Other endovascular procedures on other vessels).

    We examined claims data from the December 2015 update of the FY 2015 MedPAR file for the endovascular embolization or occlusion of the head and neck procedures or other endovascular procedures reported under ICD-9-CM procedure codes 00.62, 39.72, 39.74, 39.75, 39.76, and 39.79 in MS-DRGs 020 through 027. The table below shows our findings.

    Endovascular Embolization or Occlusion of the Head and Neck Procedures and Other Endovascular Procedures

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 020--All cases........................................... 1,213 16.44 $70,716

    MS-DRG 020--Cases with procedure code 00.62, 39.72, 39.74, 895 16.15 72,357

    39.75, 39.76, or 39.79.........................................

    MS-DRG 021--All cases........................................... 350 13.74 53,289

    MS-DRG 021--Cases with procedure code 00.62, 39.72, 39.74, 272 13.21 53,478

    39.75, 39.76, or 39.79.........................................

    MS-DRG 022--All cases........................................... 84 7.83 33,598

    MS-DRG 022--Cases with procedure code 00.62, 39.72, 39.74, 63 7.27 33,606

    39.75, 39.76, or 39.79.........................................

    MS-DRG 023--All cases........................................... 6,360 10.63 38,204

    MS-DRG 023--Cases with procedure code 00.62, 39.72, 39.74, 2,183 8.57 38,935

    39.75, 39.76, or 39.79.........................................

    MS-DRG 024--All cases........................................... 2,376 5.52 28,270

    MS-DRG 024--Cases with procedure code 00.62, 39.72, 39.74, 1,402 5.46 28,543

    39.75, 39.76, or 39.79.........................................

    MS-DRG 025--All cases........................................... 17,756 9.19 29,657

    MS-DRG 025--Cases with procedure code 00.62, 39.72, 39.74, 671 9.20 47,579

    39.75, 39.76 or 39.79..........................................

    MS-DRG 026--All cases........................................... 7,630 5.80 21,441

    MS-DRG 026--Cases with procedure code 00.62, 39.72, 39.74, 825 3.11 27,429

    39.75, 39.76, or 39.79.........................................

    MS-DRG 027--All cases........................................... 9,628 2.99 17,158

    MS-DRG 027--Cases with procedure code 00.62, 39.72, 39.74, 1,847 1.62 22,845

    39.75, 39.76 or 39.79..........................................

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

    As can be seen from the table, most of the cases of endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures reported with procedure codes 00.62, 39.72, 39.74, 39.75, 39.76, and 39.79 occur in MS-DRGs 023, 024, and 027. There were 2,183 of these procedure cases reported in MS-DRG 023 with an average length of stay of 8.57 days and average costs of $38,935, compared to an average length of stay of 10.63 days and average costs of $38, 204 for all 6,360 cases reported in MS-DRG 023. There were 1,402 of these cases reported in MS-DRG 024 with an average length of stay of 5.46 days and average costs of $28,543, compared to an average length of stay of 5.52 days and average costs of $28,270 for all 2,376 cases reported in MS-DRG 024. There were 1,847 of these cases reported in MS-DRG 027 with an average length of stay of 1.62 days and average costs of $22,845, compared to an average length of stay of 2.99 days and average costs of $17,158 for all 9,628 cases reported in MS-DRG 027. The average costs for endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRGs 023 and 024 are not significantly different from the average costs for all cases reported in MS-DRGs 023 and 024. The average costs for endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 027 are higher ($22,845) than the average costs of all cases reported in MS-DRG 027 ($17,158). However, average costs are not significantly different for the endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 020 ($72,357) compared to the average costs for all cases ($70,716) reported in MS-DRS 020; for the endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 021 ($53,478) compared to the average costs for all cases ($53,289) reported in MS-DRG 021; and for the endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 022 ($33,606) compared to the average costs for all cases ($33,598) reported in MS-DRG 022.

    Average costs were higher for the 671 endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 025 ($47,579) compared to the average costs for all 17,756 cases ($29,657) reported in MS-DRG 025. The average costs also were higher for the 825 endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases reported in MS-DRG 26 ($27,429) compared to the average costs for all 7,630 cases ($21,441) reported in MS-DRG 26. Given that average costs are similar for most endovascular embolization or occlusion of the head and neck

    Page 24975

    procedures and other endovascular procedures cases reported in MS-DRGs 020, 021, 022, 023, 024, 025, 026, and 027, we do not believe that all endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures should be reassigned from these eight MS-DRGs.

    We also examined the average costs for each specific ICD-9-CM code compared to the average costs of all cases within each of the eight MS-

    DRGs. The following table shows our findings.

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 020--All cases........................................... 1,213 16.44 $70,716

    MS-DRG 020--Cases with code 00.62............................... 11 16.09 95,422

    MS-DRG 020--Cases with code 39.72............................... 422 16.31 74,951

    MS-DRG 020--Cases with code 39.74............................... 9 16.78 71,478

    MS-DRG 020--Cases with code 39.75............................... 424 15.79 69,081

    MS-DRG 020--Cases with code 39.76............................... 39 18.26 71,630

    MS-DRG 020--Cases with code 39.79............................... 25 16.64 73,043

    MS-DRG 021--All cases........................................... 350 13.74 53,289

    MS-DRG 021--Cases with code 00.62............................... 1 11.00 75,492

    MS-DRG 021--Cases with code 39.72............................... 130 13.12 54,715

    MS-DRG 021--Cases with code 39.74............................... 1 11.00 75,492

    MS-DRG 021--Cases with code 39.75............................... 133 13.46 52,819

    MS-DRG 021--Cases with code 39.76............................... 7 10.57 48,749

    MS-DRG 021--Cases with code 39.79............................... 3 12.00 40,458

    MS-DRG 022--All cases........................................... 84 7.83 33,598

    MS-DRG 022--Cases with code 00.62............................... 0 0 0

    MS-DRG 022--Cases with code 39.72............................... 40 6.43 32,598

    MS-DRG 022--Cases with code 39.74............................... 0 0 0

    MS-DRG 022--Cases with code 39.75............................... 21 8.81 32,690

    MS-DRG 022--Cases with code 39.76............................... 3 10.00 62,417

    MS-DRG 022--Cases with code 39.79............................... 0 0 0

    MS-DRG 023--All cases........................................... 6,360 10.63 38,204

    MS-DRG 023--Cases with code 00.62............................... 67 9.30 43,741

    MS-DRG 023--Cases with code 39.72............................... 56 11.14 52,589

    MS-DRG 023--Cases with code 39.74............................... 2,016 8.30 38,047

    MS-DRG 023--Cases with code 39.75............................... 20 12.65 53,837

    MS-DRG 023--Cases with code 39.76............................... 3 23.00 84,947

    MS-DRG 023--Cases with code 39.79............................... 71 13.08 50,720

    MS-DRG 024--All cases........................................... 2,376 5.52 28,270

    MS-DRG 024--Cases with code 00.62............................... 76 6.74 32,415

    MS-DRG 024--Cases with code 39.72............................... 31 6.35 29,977

    MS-DRG 024--Cases with code 39.74............................... 1,284 5.35 28,268

    MS-DRG 024--Cases with code 39.75............................... 8 6.50 50,333

    MS-DRG 024--Cases with code 39.76............................... 2 1.50 19,567

    MS-DRG 024--Cases with code 39.79............................... 27 6.74 28,019

    MS-DRG 025--All cases........................................... 17,756 9.19 29,657

    MS-DRG 025--Cases with code 00.62............................... 17 5.88 29,036

    MS-DRG 025--Cases with code 39.72............................... 380 9.46 51,082

    MS-DRG 025--Cases with code 39.74............................... 55 9.87 45,895

    MS-DRG 025--Cases with code 39.75............................... 139 8.94 52,188

    MS-DRG 025--Cases with code 39.76............................... 25 5.84 38,654

    MS-DRG 025--Cases with code 39.79............................... 82 11.04 39,839

    MS-DRG 026--All cases........................................... 7,630 5.80 21,441

    MS-DRG 026--Cases with code 00.62............................... 31 3.48 25,611

    MS-DRG 026--Cases with code 39.72............................... 481 3.00 27,180

    MS-DRG 026--Cases with code 39.74............................... 16 4.69 27,519

    MS-DRG 026--Cases with code 39.75............................... 253 2.77 26,863

    MS-DRG 026--Cases with code 39.76............................... 31 3.32 27,891

    MS-DRG 026--Cases with code 39.79............................... 45 5.42 37,410

    MS-DRG 027--All cases........................................... 9,628 2.99 17,158

    MS-DRG 027--Cases with code 00.62............................... 61 2.23 21,337

    MS-DRG 027--Cases with code 39.72............................... 1,159 1.58 22,893

    MS-DRG 027--Cases with code 39.74............................... 13 1.62 69,081

    MS-DRG 027--Cases with code 39.75............................... 580 1.63 23,296

    MS-DRG 027--Cases with code 39.76............................... 61 1.74 27,403

    MS-DRG 027--Cases with code 39.79............................... 30 1.53 17,740

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

    As can be seen from the table above, there are a large number of cases reporting procedure code 39.74 in MS-DRGs 023 and 024. There were 2,016 cases that reported procedure code 39.74 in MS-DRG 023 compared to 6,360 total cases reported in the MS-DRG. The cases that reported procedure code 39.74 in MS-DRG 023 had an average length of stay of 8.30 days and average costs of $38,047, compared to an average length of stay of 10.63 days and average costs of $38,204 for all cases reported in MS-DRG 023. There were 1,284 cases that reported

    Page 24976

    procedure code 39.74 in MS-DRG 024 compared to 2,376 total cases reported in MS-DRG 024. The cases that reported procedure code 39.74 in MS-DRG 024 had an average length of stay of 5.35 days and average costs of $28,268, compared to an average length of stay of 5.52 days and average costs of $28,270 for all cases reported in MS-DRG 024. The average length of stay and average costs for cases that reported procedure code 39.74 are very similar to the average length of stay and average costs for all cases reported in MS-DRGs 023 and 024. The only other group of endovascular embolization or occlusion of the head and neck procedures and other endovascular procedures cases that exceeded 1,000 in number was reported in MS-DRG 027. There were 1,159 cases that reported procedure code 39.72 in MS-DRG 027, compared to 9,628 total cases reported in MS-DRG 027. The cases that reported procedure code 39.72 in MS-DRG 027 had an average length of stay of 1.58 days and average costs of $22,893, compared to an average length of stay of 2.99 days and average costs of $17,158 for all cases reported in MS-DRG 027. In other words, the cases that reported procedure code 39.72 in MS-DRG 027 had a shorter average length of stay and average costs that were $5,735 higher than the average costs for all cases reported in MS-DRG 027. The cases that reported procedure code 39.72 in MS-DRG 020 had a shorter average length of stay and average costs that were $4,235 higher than the average costs for all cases reported in MS-DRG 020. However, the average costs for the cases that reported procedure code 39.72 in MS-DRGs 021, 022, and 024 were close to the average costs for all cases reported in the three MS-DRGs ($54,715 compared to $53,289 in MS-DRG 021; $32,598 compared to $33,598 in MS-DRG 022; and $29,997 compared to $28,270 in MS-DRG 024).

    Our clinical advisors reviewed this issue and advised us that the endovascular embolization or occlusion of head and neck procedures and other endovascular procedures currently are appropriately assigned to MS-DRGs 020 through 027. They did not support reassigning these procedures from MS-DRGs 020 through 027 to another MS-DRG or creating a new MS-DRG for these procedures. Our clinical advisors stated that these procedures are all clinically similar to other procedures in these MS-DRGs. In addition, they stated that the surgical techniques are all designed to correct the same clinical problem and advised us against reassigning the procedures from MS-DRGs 020 through 027.

    Based on the findings from our data analyses and the recommendations from our clinical advisors, we are not proposing to reassign the cited endovascular embolization or occlusion of head and neck procedures and other endovascular procedures from MS-DRGs 020 through 027 to another MS-DRG or to create a new MS-DRG for these procedures for FY 2017. We are inviting public comments on our proposal to maintain the current MS-DRG assignments of these procedures in MS-

    DRGs 020 through 027.

  212. Mechanical Complication Codes

    We received a request to reassign the following four ICD-10-CM diagnosis codes from MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) under MS-DRGs 919, 920, and 921 (Complications of Treatment with MCC, with CC, and without CC/MCC, respectively) to MDC 1 (Diseases and Disorders of the Nervous System) under MS-DRGs 091, 092, and 093 (Other Disorders of the Nervous System with MCC, with CC, and without CC/MCC, respectively):

    T85.610A (Breakdown (mechanical) of epidural and subdural infusion catheter, initial encounter);

    T85.620A (Displacement of epidural and subdural infusion catheter, initial encounter);

    T85.630A (Leakage of epidural and subdural infusion catheter, initial encounter); and

    T85.690A (Other mechanical complication of epidural and subdural infusion catheter, initial encounter).

    The requestor stated that these ICD-10-CM diagnosis code titles clearly describe mechanical complications of nervous system devices, implants, or grafts and are unquestionably nervous system codes. Therefore, the requestor recommended that these diagnosis codes be reassigned to MDC 1 under MS-DRGs 091, 092, and 093.

    We examined ICD-10-CM diagnosis codes T85.610A, T85.620A, T85.630A, and T85.690A that are currently assigned to MDC 21 under MS-DRGs 919, 920, and 921. We note that the predecessor ICD-9-CM diagnosis code for these four ICD-10-CM diagnosis codes was diagnosis code 996.59 (Mechanical complication due to other implant and internal device, not elsewhere classified), which also was assigned to MDC 21 under MS-DRGs 919, 920, and 921. ICD-9-CM diagnosis code 996.59 did not describe the location of the device. However, ICD-10-CM diagnosis codes T85.610A, T85.620A, T85.630A, and T85.690A provide additional detail that describes the location of the mechanical complication as being within the nervous system.

    Based on the results of our examination, we agree with the requestor that ICD-10-CM diagnosis codes T85.610A, T85.620A, T85.630A, and T85.690A describe conditions occurring within the nervous system. Within the ICD-9-CM MS-DRGs, codes describing nervous system disorders were assigned to MDC 1. The prior ICD-9-CM codes for mechanical complications did not indicate the type of complication and therefore could not be assigned to a specific MDC. Therefore, the nonspecific complication codes were assigned to MDC 21. These new ICD-10-CM diagnosis codes describe concepts not previously captured by the ICD-9-

    CM codes and capture nervous system conditions. Therefore, ICD-10-CM diagnosis codes T85.610A, T85.620A, T85.630A, and T85.690A should be reassigned from MDC 21 under MS-DRGs 919, 920, and 921 to MDC 1 under MS-DRGs 091, 092, and 093. Our clinical advisors reviewed this issue and also agree that the four ICD-10-CM diagnosis codes describe conditions occurring within the nervous system and therefore should be reassigned from MDC 21 to MDC 1. Based on the results of our analysis and the recommendations of our clinical advisors, we are proposing to reassign ICD-10-CM diagnosis codes T85.610A, T85.620A, T85.630A, and T85.690A from MDC 21 under MS-DRGs 919, 920, and 921 to MDC 1 under MS-

    DRGs 091, 092, and 093.

    We are inviting public comments on our proposal.

    4. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)

  213. Proposed Reassignment of Diagnosis Code R22.2 (Localized Swelling, Mass and Lump, Trunk)

    We received a request to reassign ICD-10-CM diagnosis code R22.2 (Localized swelling, mass and lump, trunk) from MDC 4 (Diseases and Disorders of the Respiratory System) to MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast). The requestor stated that this code is used to capture a buttock mass. The requestor pointed out that the ICD-10-CM index for localized swelling and localized mass directs the coder to diagnosis code R22.2 for both the chest and the trunk as sites.

    We reviewed this issue and note that diagnosis code R22.2 is included in a category of ICD-10-CM codes describing symptoms and signs

    Page 24977

    involving the skin and subcutaneous tissue (categories R20 through R23). Diagnosis code R22.2 is clearly designated within the ICD-10 coding system as a code that describes a condition of the skin and subcutaneous tissue. Therefore, we agree with the requester that ICD-

    10-CM diagnosis code R22.2 should be reassigned from MDC 4 to MDC 9. One of the predecessor ICD-9-CM codes for ICD-10-CM diagnosis code R22.2 was diagnosis code 782.2 (Localized superficial swelling, mass, or lump), which is assigned to MS-DRG 606 and 607 (Minor Skin Disorders with and without MCC, respectively). Our clinical advisors reviewed this issue and agree that ICD-10-CM diagnosis code R22.2 captures a skin diagnosis. Therefore, for FY 2017, we are proposing to reassign ICD-10-CM diagnosis code R22.2 from MDC 4 to MDC 9 under MS-DRGs 606 and 607 (Minor Skin Disorders with and without MCC, respectively).

    We are inviting public comments on our proposal to reassign ICD-10-

    CM diagnosis code R22.2 from MDC 4 to MDC 9 under MS-DRGs 606 and 607.

  214. Pulmonary Embolism With tPA or Other Thrombolytic Therapy

    We received a request to create a new MS-DRG or to reassign cases with a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy was administered from MS-DRGs 175 and 176 (Pulmonary Embolism with and without MCC, respectively) to a higher paying MS-DRG. The requestor suggested that CMS review cases reporting the following ICD-9-CM diagnosis codes describing pulmonary embolism: 415.11 (Iatrogenic pulmonary embolism and infarction), 415.12 (Septic pulmonary embolism), 415.13 (Saddle embolus of pulmonary artery), and 415.19 (Other pulmonary embolism and infarction), when reported in combination with ICD-9-CM procedure code 99.10 (Injection or infusion of thrombolytic agent), to identify that thrombolytic therapy was administered.

    The comparable ICD-10-CM diagnosis code translations for the ICD-9-

    CM pulmonary embolism diagnosis codes to which the requestor cited consist of the following:

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

    ICD-10-CM diagnosis code Description

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

    I26.01................... Septic pulmonary embolism with acute cor

    pulmonale.

    I26.02................... Saddle embolus of pulmonary artery with acute

    cor pulmonale.

    I26.09................... Other pulmonary embolism with acute cor

    pulmonale.

    I26.90................... Septic pulmonary embolism without acute cor

    pulmonale.

    I26.92................... Saddle embolus of pulmonary artery without

    acute cor pulmonale.

    I26.99................... Other pulmonary embolism without acute cor

    pulmonale.

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

    Thrombolytic therapy is identified with the following ICD-10-PCS procedure codes:

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

    ICD-10-PCS procedure code Description

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

    3E03017.................. Introduction of other thrombolytic into

    peripheral vein, open approach.

    3E03317.................. Introduction of other thrombolytic into

    peripheral vein, percutaneous approach.

    3E04017.................. Introduction of other thrombolytic into

    central vein, open approach.

    3E04317.................. Introduction of other thrombolytic into

    central vein, percutaneous approach.

    3E05017.................. Introduction of other thrombolytic into

    peripheral artery, open approach.

    3E05317.................. Introduction of other thrombolytic into

    peripheral artery, percutaneous approach.

    3E06017.................. Introduction of other thrombolytic into

    central artery, open approach.

    3E06317.................. Introduction of other thrombolytic into

    central artery, percutaneous approach.

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

    A pulmonary embolism is an obstruction of pulmonary vasculature most commonly caused by a venous thrombus, and less commonly by fat or tumor tissue or air bubbles or both. Risk factors for a pulmonary embolism include prolonged immobilization from any cause, obesity, cancer, fractured hip or leg, use of certain medications such as oral contraceptives, presence of certain medical conditions such as heart failure, sickle cell anemia, or certain congenital heart defects. Common symptoms of pulmonary embolism include shortness of breath with or without chest pain, tachycardia, hemoptysis, low grade fever, pleural effusion, and depending on the etiology of the embolus, might include lower extremity pain or swelling, syncope, jugular venous distention, and finally a pulmonary embolus could be asymptomatic.

    We examined the claims data from the December 2015 update of the FY 2015 MedPAR file for ICD-9-CM MS-DRGs 175 and 176 for cases with a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy (procedure code 99.10) was administered and cases of a principal diagnosis of pulmonary embolism where no tPA or other thrombolytic therapy was administered. Our findings are shown in the table below.

    Principal Diagnosis of Pulmonary Embolism With and Without tPA or Other Thrombolytic Therapy Administered

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 175--All MCC cases....................................... 19,274 5.76 $10,479

    Page 24978

    MS-DRG 175--MCC cases with principal diagnosis of pulmonary 630 6.31 19,419

    embolism with tPA or other thrombolytic therapy administered...

    MS-DRG 175--MCC cases with principal diagnosis of pulmonary 18,529 5.74 10,181

    embolism without tPA or other thrombolytic therapy administered

    MS-DRG 176--All Without MCC cases............................... 33,565 3.81 6,645

    MS-DRG 176--Without MCC cases with principal diagnosis of 544 5.07 16,345

    pulmonary embolism with tPA or other thrombolytic therapy

    administered...................................................

    MS-DRG 176--Without MCC cases with principal diagnosis of 32,789 3.79 6,483

    pulmonary embolism without tPA or other thrombolytic therapy

    administered...................................................

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

    As shown in the table above, for MS-DRG 175, there were a total of 19,274 cases with an average length of stay of 5.76 days and average costs of $10,479. Of the 19,274 cases in MS-DRG 175, there were 630 cases that reported a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy was also reported with an average length of stay of 6.31 days and average costs of $19,419. For MS-DRG 176, there were a total of 33,565 cases with an average length of stay of 3.81 days and average costs of $6,645. Of the 33,565 cases reported in MS-DRG 176, there were 544 cases that reported a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy also was reported with an average length of stay of 5.07 days and average costs of $16,345.

    To address the request we received to create a new MS-DRG, we reviewed the data for the 1,174 total cases (630 and 544, respectively) that reported a principal diagnosis of pulmonary embolism that received tPA or other thrombolytic therapy in MS-DRGs 175 and 176. As shown in the table above, our data analysis demonstrates the average costs for these cases are higher ($19,419 compared to $10,479 for MS-DRG 175, and $16,345 compared to $6,645 for MS-DRG 176) and the length of stay is slightly longer (6.31 days compared to 5.76 days for MS-DRG 175, and 5.07 days compared to 3.81 days for MS-DRG 176) compared to all cases reported in MS-DRGs 175 and 176. Out of a total of 52,492 cases (630 + 18,529 + 544 + 32,789) in MS-DRGs 175 and 176 reporting a principal diagnosis of pulmonary embolism, 1,174 (2.24 percent) of these cases also received tPA or other thrombolytic therapy. While we recognize the differences in average costs and length of stay for these cases, the volume of these cases as well as the potential creation of a new MS-DRG for this subset of patients raised some concerns with our clinical advisors. We present our clinical advisors' concerns following the additional data analysis discussions below.

    We then conducted additional data analyses to determine if reassignment of cases with a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy was administered to a higher paying MS-DRG was supported. As displayed in the data findings in the tables below, we explored reassigning cases with a principal diagnosis of pulmonary embolism that received tPA or other thrombolytic therapy from MS-DRG 176 to the higher severity level MS-DRG 175. The data do not adequately support this reassignment, as the cases with a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy is administered would continue to be underpaid.

    As shown in the data findings in the table below, the initial data analysis for MS-DRG 175 found the average costs for cases that reported a principal diagnosis of pulmonary embolism that received tPA or other thrombolytic therapy were $19,419, and for MS-DRG 176, the average costs for these cases were $16,345.

    Principal Diagnosis of Pulmonary Embolism With tPA or Other Thrombolytic Therapy Administered

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 175--All MCC cases....................................... 19,274 5.76 $10,479

    MS-DRG 175--MCC cases with principal diagnosis of pulmonary 630 6.31 19,419

    embolism with tPA or other thrombolytic therapy administered...

    MS-DRG 176--All without MCC cases............................... 33,565 3.81 6,645

    MS-DRG 176--Without MCC cases with principal diagnosis of 544 5.07 16,345

    pulmonary embolism with tPA or other thrombolytic therapy

    administered...................................................

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

    As displayed in the table below, if we reassigned the 544 cases with a principal diagnosis of pulmonary embolism where tPA or other thrombolytic therapy is administered from the ``without MCC'' level, MS-DRG 176, to the ``with MCC'' severity level, MS-DRG 175, the average costs for all cases in MS-DRG 175 would be approximately $10,640. This figure continues to result in a difference of approximately $9,000 for the MCC cases and $6,000 for the without MCC cases when compared to findings for the average costs of these cases from the initial data analysis ($19,419-$10,640 = $8,779 and $16,345-$10,640 = $5,705, respectively). In addition, our clinical advisors had concerns about the prospect of moving the subset of 544 patients from the ``without MCC'' level to the ``with MCC'' level. We present these concerns following the additional data analysis discussion below.

    Page 24979

    Option of Reassignment of Cases of Principal Diagnosis of Pulmonary Embolism With and Without tPA

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

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

    MS-DRG 175--Cases with pulmonary embolism with MCC or tPA or 19,818 5.74 $10,640

    other thrombolytic therapy.....................................

    MS-DRG 176--Cases with pulmonary embolism without MCC........... 33,021 3.79 6,486

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

    We also reviewed claims data in considering the option of adding another severity level to the current structure of MS-DRGs 175 and 176 and assigning the cases with a principal diagnosis of pulmonary embolism that receive tPA or other thrombolytic therapy to the highest level. This option would involve modifying the current 2-way severity level split of ``with MCC'' and ``without MCC'' to a 3-way severity level split of ``with MCC or tPA, with CC, and without CC/MCC.'' Therefore, it would include proposing new MS-DRGs if the data and our clinical advisors supported creation of new MS-DRGs. However, as displayed in the data findings in the table below, the data did not support this option. In addition to similar results from the previous option's discussion regarding continued differences in average costs for these cases, the data failed to meet the criterion that there be at least a $2,000 difference between the ``with CC'' and ``without CC/

    MCC'' subgroups. Our data analysis shows the average costs in the hypothetical ``with CC'' subgroup of $6,932 and the average costs in the hypothetical ``without CC/MCC'' subgroup of $5,309. The difference only amounts to $1,623 ($6,932 minus $5,309 = $1,623).

    Principal Diagnosis of Pulmonary Embolism With and Without tPA or Other Thrombolytic Therapy

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

    Number of Average length

    Optional new MS-DRG cases of stay Average costs

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

    MS-DRG XXX--Pulmonary embolism with MCC or tPA or other 19,819 5.74 $10,641

    thrombolytic therapy...........................................

    MS-DRG XXX--Pulmonary embolism with CC.......................... 23,929 4.04 6,932

    MS-DRG XXX--Pulmonary embolism without CC/MCC................... 9,091 3.13 5,309

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

    Lastly, we explored reassigning cases with a principal diagnosis of pulmonary embolism that receive tPA or other thrombolytic therapy to other MS-DRGs within MDC 4. However, our review did not support reassignment of these cases to any other medical MS-DRGs as these cases would not be clinically coherent with the cases assigned to those other MS-DRGs.

    In addition to the results of the various data analyses we performed for creating a new MS-DRG or for reassignment of cases of pulmonary embolism with tPA or other thrombolytic therapy to another higher paying MS-DRG, our clinical advisors also expressed a number of concerns. They pointed out that all patients with a diagnosis of pulmonary embolism are considered high risk and the small subset of patients receiving thrombolytic therapy does not necessarily warrant a separate MS-DRG or reassignment at this time. Our clinical advisors noted that it is unclear if: (1) The higher costs associated with receiving tPA or other thrombolytic therapy are due to a different subset of patients or complications; (2) if those patients treated with tPA or other thrombolytic therapy for pulmonary embolism are indeed sicker patients; (3) if the cost of tPA or other thrombolytic therapy for patients with pulmonary embolism is the reason for the higher costs seen with these cases; or (4) if the increased average costs for cases of pulmonary embolism with tPA or other thrombolytic therapy is a combination of numbers (1) through (3). They recommended maintaining the current structure of MS-DRGs 175 and 176 at this time.

    As a result of the data analysis and the concerns expressed by our clinical advisors, we are not proposing to create a new MS-DRG or to reassign cases with a principal diagnosis of pulmonary embolism with tPA or other thrombolytic therapy for FY 2017. We are inviting public comment on our proposal.

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

  215. Implant of Loop Recorder

    We received a request to examine a potential ICD-9 to ICD-10 replication issue for procedures describing implantation or revision of loop recorder that were reported using ICD-9-CM procedure code 37.79 (Revision or relocation of cardiac device pocket). A loop recorder is also known as an implantable cardiac monitor. It is indicated for patients who experience episodes of unexplained syncope (fainting), heart palpitations, or patients at risk for various types of cardiac arrhythmias, such as atrial fibrillation or ventricular tachyarrhythmia. Loop recorders function by detecting and monitoring potential episodes of these kinds of conditions. The requestor acknowledged that these implantation procedures are frequently performed in the outpatient setting. However, the requestor also noted that the implantation procedures are often performed in the inpatient setting and suggested that they be recognized under the ICD-10 MS-DRGs as they had been under the ICD-9-CM based MS-DRG logic.

    The requestor stated that, under the ICD-9-CM based MS-DRGs, procedure code 37.79 was designated as an operating room (O.R.) procedure in the Definitions Manual under Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index and grouped to MS-DRGs 040, 041, and 042 (Peripheral, Cranial Nerve and Other Nervous System Procedures with MCC, with CC or peripheral neurostimulator, and without CC/MCC, respectively); MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/

    MCC, respectively); MS-DRGs 579, 580, and 581 (Other Skin, Subcutaneous Tissue and Breast Procedures with MCC, with CC and without CC/MCC, respectively); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively); and MS-

    DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple Significant Trauma with MCC, with CC, and without CC/MCC, respectively).

    Under the current Version 33 ICD-10 MS-DRGs, there are two comparable ICD-10-PCS code translations for ICD-9-CM code 37.79. They are procedure codes 0JWT0PZ (Revision of cardiac

    Page 24980

    rhythm related device in trunk subcutaneous tissue and fascia, open approach) and 0JWT3PZ (Revision of cardiac rhythm related device in trunk subcutaneous tissue and fascia, percutaneous approach), which are designated as O.R. procedures and group to the above listed MS-DRGs.

    According to the requestor, the following six ICD-10-PCS procedure codes identify the implantation or revision of a loop recorder and were not replicated appropriately because they are currently designated as nonoperating room (non-O.R.) procedures under the ICD-10 MS-DRGs. The requestor suggested that these codes be designated as O.R. procedures and assigned to the same MS-DRGs as the former ICD-9-CM procedure code 37.79:

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

    ICD-10-PCS procedure code Description

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

    0JH602Z.................. Insertion of monitoring device into chest

    subcutaneous tissue and fascia, open

    approach.

    0JH632Z.................. Insertion of monitoring device into chest

    subcutaneous tissue and fascia, percutaneous

    approach.

    0JH802Z.................. Insertion of monitoring device into abdomen

    subcutaneous tissue and fascia, open

    approach.

    0JH832Z.................. Insertion of monitoring device into abdomen

    subcutaneous tissue and fascia, percutaneous

    approach.

    0JWT02Z.................. Revision of monitoring device in trunk

    subcutaneous tissue and fascia, open

    approach.

    0JWT32Z.................. Revision of monitoring device in trunk

    subcutaneous tissue and fascia, percutaneous

    approach.

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

    We examined the six ICD-10-PCS procedure codes that the commenter recommended be designated as O.R. procedures and assigned to the same MS-DRGs as ICD-9-CM procedure code 37.79. As discussed in section II.F.1.b. of the preamble of this proposed rule, in evaluating requested MS-DRG changes, we determined if they could be replicated in the ICD-9-CM MS-DRGs so as not to affect the FY 2017 relative payment weights. If the answer was ``no,'' we examined whether the change in the ICD-10 MS-DRGs was likely to cause a significant number of patient cases to change or ``shift'' ICD-10 MS-DRGs. If relatively few patient cases would be impacted, we evaluated if it would be feasible to propose the change even though it could not be replicated by the ICD-9 MS-DRGs logic because it would not cause a material payment redistribution.

    Under our review, we recognized that the six ICD-10-PCS procedure codes are currently identified as comparable translations of ICD-9-CM procedure code 86.09 (Other incision of skin and subcutaneous tissue), which was designated as a non-O.R. procedure code under the ICD-9-CM based MS-DRGs. Therefore, changing the designation of the six ICD-10-

    PCS procedure codes from non-O.R. to O.R. for the ICD-10 MS-DRGs cannot be replicated in the ICD-9-CM based MS-DRGs. In other words, we cannot designate ICD-9-CM procedure code 86.09 as an O.R. code. However, we believe that if we limit the change in designation to four of the six identified ICD-10-PCS procedure codes from non-O.R. to O.R., the change would not have any impact. We are not including the two ICD-10-PCS procedure codes that describe the insertion of a monitoring device into the abdomen in our proposal because a loop recorder is not inserted into that location and it would not be clinically appropriate.

    Therefore, for FY 2017, we are proposing to designate the following four ICD-10-PCS codes as O.R. procedures within Appendix E of the Version 34 ICD-10 MS-DRG Definitions Manual:

    0JH602Z (Insertion of monitoring device into chest subcutaneous tissue and fascia, open approach);

    0JH632Z (Insertion of monitoring device into chest subcutaneous tissue and fascia, percutaneous approach);

    0JWT02Z (Revision of monitoring device in trunk subcutaneous tissue and fascia, open approach); and

    0JWT32Z (Revision of monitoring device in trunk subcutaneous tissue and fascia, percutaneous approach).

    We also are proposing that the ICD-10 MS-DRG assignment for these four ICD-10-PCS codes replicate the ICD-9-CM based MS-DRG assignment for procedure code 37.79; that is, MS-DRGs 040, 041, 042, 260, 261, 262, 579,580, 581, 907, 908, 909, 957, 958, and 959 as cited earlier in this section.

    We are inviting public comments on our proposals.

  216. Endovascular Thrombectomy of the Lower Limbs

    We received a comment stating that the logic for ICD-10 MS-DRGs Version 33 is not compatible with the ICD-9-CM MS-DRGs Version 32 for the assignment of procedures describing endovascular thrombectomy of the lower limbs. The commenter asked CMS to reconfigure the MS-DRG structure within the ICD-10 MS-DRGs for endovascular thrombectomy of the lower limbs, specifically MS-DRGs 270, 271, and 272 (Endovascular Thrombectomy of the Lower Limbs with MCC, with CC, and without CC/MCC, respectively). The commenter believed that this requested restructuring would be consistent with the MS-DRG assignments for the other procedures describing lower extremity thrombectomy, and would accurately replicate the logic of the ICD-9-CM MS-DRGs Version 32. Under the ICD-9-CM, endovascular thrombectomy of the lower limbs is described by procedure code 39.79 (Other endovascular procedures on other vessels). The commenter stated that, with deep vein thrombosis (DVT) or any other circulatory system disorders as the principal diagnosis, cases involving procedures described by procedure code 39.79 grouped to ICD-9-CM MS-DRGs 237 and 238 (Major Cardiovascular Procedures with and without MCC, respectively). However, the commenter pointed out that, for FY 2016, ICD-9-CM MS-DRGs 237 and 238 were deleted and replaced with ICD-10 Version 33 MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon with and without MCC, respectively), for the higher complexity procedures, and MS-DRGs 270, 271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, and without CC/MCC, respectively), for the lower complexity procedures (80 FR 49389). The commenter stated that ICD-9-CM procedure code 39.79 describes the lower complexity procedures assigned to ICD-

    10-PCS MS-DRGs 270, 271, and 272. The commenter believed that the comparable ICD-10-PCS procedure codes also should have been assigned to MS-DRGs 270, 271, and 272.

    We agree with the requestor that procedures describing endovascular thrombectomy of the lower limbs should be assigned to ICD-10 MS-DRGs 270, 271, and 272. Therefore, for implementation October 1, 2016, we are proposing to restructure the ICD-10-PCS MS-DRG configuration and add the ICD-10-PCS code translations listed in the following chart (which would

    Page 24981

    capture procedures describing endovascular thrombectomy of the lower limbs) to ICD-10-PCS Version 34 MS-DRGs 270, 271, and 272.

    ICD-10-PCS Endovascular Thrombectomy Procedure Codes Proposed To Be

    Assigned to MS-DRGs 270, 271, and 272 for FY 2017

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

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

    03C53ZZ.................. Extirpation of matter from right axillary

    artery, percutaneous approach.

    03C63ZZ.................. Extirpation of matter from left axillary

    artery, percutaneous approach.

    03C73ZZ.................. Extirpation of matter from right brachial

    artery, percutaneous approach.

    03C83ZZ.................. Extirpation of matter from left brachial

    artery, percutaneous approach.

    03C93ZZ.................. Extirpation of matter from right ulnar

    artery, percutaneous approach.

    03CA3ZZ.................. Extirpation of matter from left ulnar artery,

    percutaneous approach.

    03CB3ZZ.................. Extirpation of matter from right radial

    artery, percutaneous approach.

    03CC3ZZ.................. Extirpation of matter from left radial

    artery, percutaneous approach.

    03CD3ZZ.................. Extirpation of matter from right hand artery,

    percutaneous approach.

    03CF3ZZ.................. Extirpation of matter from left hand artery,

    percutaneous approach.

    03CY3ZZ.................. Extirpation of matter from upper artery,

    percutaneous approach.

    04CK3ZZ.................. Extirpation of matter from right femoral

    artery, percutaneous approach.

    04CL3ZZ.................. Extirpation of matter from left femoral

    artery, percutaneous approach.

    04CM3ZZ.................. Extirpation of matter from right popliteal

    artery, percutaneous approach.

    04CN3ZZ.................. Extirpation of matter from left popliteal

    artery, percutaneous approach.

    04CP3ZZ.................. Extirpation of matter from right anterior

    tibial artery, percutaneous approach.

    04CQ3ZZ.................. Extirpation of matter from left anterior

    tibial artery, percutaneous approach.

    04CR3ZZ.................. Extirpation of matter from right posterior

    tibial artery, percutaneous approach.

    04CS3ZZ.................. Extirpation of matter from left posterior

    tibial artery, percutaneous approach.

    04CT3ZZ.................. Extirpation of matter from right peroneal

    artery, percutaneous approach.

    04CU3ZZ.................. Extirpation of matter from left peroneal

    artery, percutaneous approach.

    04CV3ZZ.................. Extirpation of matter from right foot artery,

    percutaneous approach.

    04CW3ZZ.................. Extirpation of matter from left foot artery,

    percutaneous approach.

    04CY3ZZ.................. Extirpation of matter from lower artery,

    percutaneous approach.

    05C73ZZ.................. Extirpation of matter from right axillary

    vein, percutaneous approach.

    05C83ZZ.................. Extirpation of matter from left axillary

    vein, percutaneous approach.

    05C93ZZ.................. Extirpation of matter from right brachial

    vein, percutaneous approach.

    05CA3ZZ.................. Extirpation of matter from left brachial

    vein, percutaneous approach.

    05CB3ZZ.................. Extirpation of matter from right basilic

    vein, percutaneous approach.

    05CC3ZZ.................. Extirpation of matter from left basilic vein,

    percutaneous approach.

    05CD3ZZ.................. Extirpation of matter from right cephalic

    vein, percutaneous approach.

    05CF3ZZ.................. Extirpation of matter from left cephalic

    vein, percutaneous approach.

    05CG3ZZ.................. Extirpation of matter from right hand vein,

    percutaneous approach.

    05CH3ZZ.................. Extirpation of matter from left hand vein,

    percutaneous approach.

    05CL3ZZ.................. Extirpation of matter from intracranial vein,

    percutaneous approach.

    05CM3ZZ.................. Extirpation of matter from right internal

    jugular vein, percutaneous approach.

    05CN3ZZ.................. Extirpation of matter from left internal

    jugular vein, percutaneous approach.

    05CP3ZZ.................. Extirpation of matter from right external

    jugular vein, percutaneous approach.

    05CQ3ZZ.................. Extirpation of matter from left external

    jugular vein, percutaneous approach.

    05CR3ZZ.................. Extirpation of matter from right vertebral

    vein, percutaneous approach.

    05CS3ZZ.................. Extirpation of matter from left vertebral

    vein, percutaneous approach.

    05CT3ZZ.................. Extirpation of matter from right face vein,

    percutaneous approach.

    05CV3ZZ.................. Extirpation of matter from left face vein,

    percutaneous approach.

    05CY3ZZ.................. Extirpation of matter from upper vein,

    percutaneous approach.

    06C33ZZ.................. Extirpation of matter from esophageal vein,

    percutaneous approach.

    06CM3ZZ.................. Extirpation of matter from right femoral

    vein, percutaneous approach.

    06CN3ZZ.................. Extirpation of matter from left femoral vein,

    percutaneous approach.

    06CP3ZZ.................. Extirpation of matter from right greater

    saphenous vein, percutaneous approach.

    06CQ3ZZ.................. Extirpation of matter from left greater

    saphenous vein, percutaneous approach.

    06CR3ZZ.................. Extirpation of matter from right lesser

    saphenous vein, percutaneous approach.

    06CS3ZZ.................. Extirpation of matter from left lesser

    saphenous vein, percutaneous approach.

    06CT3ZZ.................. Extirpation of matter from right foot vein,

    percutaneous approach.

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

    We are inviting public comments on our proposal to assign the ICD-

    10-PCS procedures describing the endovascular thrombectomy of the lower limbs listed in the table above to ICD-10 Version 34 MS-DRGs 270, 271, and 272 for FY 2017.

  217. Pacemaker Procedures Code Combinations

    We received a request that CMS examine the list of ICD-10-PCS procedure code combinations that describe procedures involving pacemakers to determine if some procedure code combinations were excluded from the ICD-10 MS-DRG assignments for MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/MCC). The requestor believed that some ICD-10-PCS procedure code combinations describing procedures involving pacemaker devices and leads are not included in the current list.

    We reviewed the list of ICD-10-PCS procedure code combinations describing procedures involving pacemakers assigned to ICD-10 MS-DRGs 242, 243, and 244, and determined that our initial approach of using specified procedure code combinations to identify procedures involving pacemakers and leads was overly complex and may have led to inadvertent omissions of qualifying procedure code combinations. Under our initial approach, we developed a list of

    Page 24982

    possible ICD-10-PCS procedure code combinations that describe procedures involving pacemaker devices and leads as well as ICD-10-PCS procedure code combinations for procedures describing the removal and replacement of pacemaker devices. We now believe that a more appropriate approach would be to compile a list of all procedure codes describing procedures involving pacemaker devices and a list of all procedure codes describing procedures involving pacemaker leads. If a procedure code from the list of procedure codes describing procedures involving pacemaker devices and a procedure code from the list of procedure codes describing procedures involving pacemaker leads are reported in combination with one another, the case would be assigned to ICD-10 MS-DRGs 242, 243, and 244. We believe that this more generic approach would capture a wider range of possible reported procedure codes describing procedures involving pacemaker devices and leads. Therefore, we are proposing to modify the ICD-10 MS-DRG logic so that if one of the ICD-10-PCS procedure codes describing procedures involving pacemaker devices listed in column 1 of the table below is reported in combination with one of the ICD-10-PCS procedure codes describing procedures involving leads listed in column 3 of the table below, the case would be assigned to MS-DRGs 242, 243, and 244. We believe that this proposed simplified approach would capture all possible cases reporting procedure code combinations describing procedures involving pacemaker devices and leads to ensure that these cases would be assigned to MS-DRGs 242, 243, and 244.

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

    ICD-10-PCS Procedure codes describing ICD-10-PCS Procedure codes describing

    procedures involving cardiac pacemaker devices procedures involving cardiac pacemaker leads

    (any one code reported from this column list) In combination (any one code reported from this column list)

    (1) with (2) (3)

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

    Procedure code Code description Procedure code Code description

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

    0JH604Z................ Insertion of ............... 02H40JZ Insertion of

    pacemaker, single pacemaker lead into

    chamber into chest coronary vein, open

    subcutaneous tissue approach.

    and fascia, open

    approach.

    0JH605Z................ Insertion of ............... 02H40MZ Insertion of cardiac

    pacemaker, single lead into coronary

    chamber rate vein, open approach.

    responsive into chest

    subcutaneous tissue

    and fascia, open

    approach.

    0JH606Z................ Insertion of ............... 02H43JZ Insertion of

    pacemaker, dual pacemaker lead into

    chamber into chest coronary vein,

    subcutaneous tissue percutaneous

    and fascia, open approach.

    approach.

    0JH607Z................ Insertion of cardiac ............... 02H43MZ Insertion of cardiac

    resynchronization lead into coronary

    pacemaker pulse vein, percutaneous

    generator into chest approach.

    subcutaneous tissue

    and fascia, open

    approach.

    0JH60PZ................ Insertion of cardiac ............... 02H44JZ Insertion of

    rhythm related device pacemaker lead into

    into chest coronary vein,

    subcutaneous tissue percutaneous

    and fascia, open endoscopic approach.

    approach.

    0JH634Z................ Insertion of ............... 02H44MZ Insertion of cardiac

    pacemaker, single lead into coronary

    chamber into chest vein, percutaneous

    subcutaneous tissue endoscopic approach.

    and fascia,

    percutaneous approach.

    0JH635Z................ Insertion of ............... 02H60JZ Insertion of

    pacemaker, single pacemaker lead into

    chamber rate right atrium, open

    responsive into chest approach.

    subcutaneous tissue

    and fascia,

    percutaneous approach.

    0JH636Z................ Insertion of ............... 02H60MZ Insertion of cardiac

    pacemaker, dual lead into right

    chamber into chest atrium, open

    subcutaneous tissue approach.

    and fascia,

    percutaneous approach.

    0JH637Z................ Insertion of cardiac ............... 02H63JZ Insertion of

    resynchronization pacemaker lead into

    pacemaker pulse right atrium,

    generator into chest percutaneous

    subcutaneous tissue approach.

    and fascia,

    percutaneous approach.

    0JH63PZ................ Insertion of cardiac ............... 02H63MZ Insertion of cardiac

    rhythm related device lead into right

    into chest atrium, percutaneous

    subcutaneous tissue approach.

    and fascia,

    percutaneous approach.

    0JH804Z................ Insertion of ............... 02H64JZ Insertion of

    pacemaker, single pacemaker lead into

    chamber into abdomen right atrium,

    subcutaneous tissue percutaneous

    and fascia, open endoscopic approach.

    approach.

    0JH805Z................ Insertion of ............... 02H64MZ Insertion of cardiac

    pacemaker, single lead into right

    chamber rate atrium, percutaneous

    responsive into endoscopic approach.

    abdomen subcutaneous

    tissue and fascia,

    open approach.

    0JH806Z................ Insertion of ............... 02H70JZ Insertion of

    pacemaker, dual pacemaker lead into

    chamber into abdomen left atrium, open

    subcutaneous tissue approach.

    and fascia, open

    approach.

    0JH807Z................ Insertion of cardiac ............... 02H70MZ Insertion of cardiac

    resynchronization lead into left

    pacemaker pulse atrium, open

    generator into approach.

    abdomen subcutaneous

    tissue and fascia,

    open approach.

    0JH80PZ................ Insertion of cardiac ............... 02H73JZ Insertion of

    rhythm related device pacemaker lead into

    into abdomen left atrium,

    subcutaneous tissue percutaneous

    and fascia, open approach.

    approach.

    0JH834Z................ Insertion of ............... 02H73MZ Insertion of cardiac

    pacemaker, single lead into left

    chamber into abdomen atrium, percutaneous

    subcutaneous tissue approach.

    and fascia,

    percutaneous approach.

    Page 24983

    0JH835Z................ Insertion of ............... 02H74JZ Insertion of

    pacemaker, single pacemaker lead into

    chamber rate left atrium,

    responsive into percutaneous

    abdomen subcutaneous endoscopic approach.

    tissue and fascia,

    percutaneous approach.

    0JH836Z................ Insertion of ............... 02H74MZ Insertion of cardiac

    pacemaker, dual lead into left

    chamber into abdomen atrium, percutaneous

    subcutaneous tissue endoscopic approach.

    and fascia,

    percutaneous approach.

    0JH837Z................ Insertion of cardiac ............... 02HK0JZ Insertion of

    resynchronization pacemaker lead into

    pacemaker pulse right ventricle,

    generator into open approach.

    abdomen subcutaneous

    tissue and fascia,

    percutaneous approach.

    0JH83PZ................ Insertion of cardiac ............... 02HK0MZ Insertion of cardiac

    rhythm related device lead into right

    into abdomen ventricle, open

    subcutaneous tissue approach.

    and fascia,

    percutaneous approach.

    02HK3JZ Insertion of

    pacemaker lead into

    right ventricle,

    percutaneous

    approach.

    02HK3MZ Insertion of cardiac

    lead into right

    ventricle,

    percutaneous

    approach.

    02HK4JZ Insertion of

    pacemaker lead into

    right ventricle,

    percutaneous

    endoscopic approach.

    02HK4MZ Insertion of cardiac

    lead into right

    ventricle,

    percutaneous

    endoscopic approach.

    02HL0JZ Insertion of

    pacemaker lead into

    left ventricle, open

    approach.

    02HL0MZ Insertion of cardiac

    lead into left

    ventricle, open

    approach.

    02HL3JZ Insertion of

    pacemaker lead into

    left ventricle,

    percutaneous

    approach.

    02HL3MZ Insertion of cardiac

    lead into left

    ventricle,

    percutaneous

    approach.

    02HL4JZ Insertion of

    pacemaker lead into

    left ventricle,

    percutaneous

    endoscopic approach.

    02HL4MZ Insertion of cardiac

    lead into left

    ventricle,

    percutaneous

    endoscopic approach.

    02HN0JZ Insertion of

    pacemaker lead into

    pericardium, open

    approach.

    02HN0MZ Insertion of cardiac

    lead into

    pericardium, open

    approach.

    02HN3JZ Insertion of

    pacemaker lead into

    pericardium,

    percutaneous

    approach.

    02HN3MZ Insertion of cardiac

    lead into

    pericardium,

    percutaneous

    approach.

    02HN4JZ Insertion of

    pacemaker lead into

    pericardium,

    percutaneous

    endoscopic approach.

    02HN4MZ Insertion of cardiac

    lead into

    pericardium,

    percutaneous

    endoscopic approach.

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

    We are inviting public comments on our proposal to modify the MS-

    DRG logic for MS-DRGs 242, 243, and 244 to establish that cases reporting one ICD-10-PCS code from the list of procedure codes describing procedures involving pacemaker devices and one ICD-10-PCS code from the list of procedure codes describing procedures involving pacemaker leads in combination with one another would qualify the case for assignment to MS-DRGs 242, 243, and 244.

    We also examined our GROUPER logic for MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with and without MCC, respectively). Assignments of cases to these MS-DRGs also include qualifying ICD-10-

    PCS procedure code combinations describing procedures that involve the removal of pacemaker devices and the insertion of new devices. We believe that this logic may also be overly complex. Moreover, we believe that a more simplified approach would be to compile a list of all ICD-10-PCS procedure codes describing procedures involving cardiac pacemaker device insertions. Therefore, we are proposing this approach for FY 2017. Under the proposed approach, if one of the procedure codes describing procedures involving pacemaker device insertions is reported, and there are no other procedure codes describing procedures involving the insertion of a pacemaker lead reported in combination with one of these procedures, the case would be assigned to MS-DRG 258 and 259. Cases reporting any one of the following ICD-10-PCS procedure codes describing procedures involving pacemaker device insertions would be assigned to MS-DRG 258 and 259.

    Page 24984

    Procedure Codes Describing Procedures Involving Cardiac Pacemaker Device

    Insertions Reported Without Any Other Pacemaker Device Procedure Code

    Proposed To Be Assigned to ICD-10 MS-DRGs 258 and 259

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

    Procedure code Description

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

    0JH604Z.................. Insertion of pacemaker, single chamber into

    chest subcutaneous tissue and fascia, open

    approach.

    0JH605Z.................. Insertion of pacemaker, single chamber rate

    responsive into chest subcutaneous tissue

    and fascia, open approach.

    0JH606Z.................. Insertion of pacemaker, dual chamber into

    chest subcutaneous tissue and fascia, open

    approach.

    0JH607Z.................. Insertion of cardiac resynchronization

    pacemaker pulse generator into chest

    subcutaneous tissue and fascia, open

    approach.

    0JH60PZ.................. Insertion of cardiac rhythm related device

    into chest subcutaneous tissue and fascia,

    open approach.

    0JH634Z.................. Insertion of pacemaker, single chamber into

    chest subcutaneous tissue and fascia,

    percutaneous approach.

    0JH635Z.................. Insertion of pacemaker, single chamber rate

    responsive into chest subcutaneous tissue

    and fascia, percutaneous approach.

    0JH636Z.................. Insertion of pacemaker, dual chamber into

    chest subcutaneous tissue and fascia,

    percutaneous approach.

    0JH637Z.................. Insertion of cardiac resynchronization

    pacemaker pulse generator into chest

    subcutaneous tissue and fascia, percutaneous

    approach.

    0JH63PZ.................. Insertion of cardiac rhythm related device

    into chest subcutaneous tissue and fascia,

    percutaneous approach.

    0JH804Z.................. Insertion of pacemaker, single chamber into

    abdomen subcutaneous tissue and fascia, open

    approach.

    0JH805Z.................. Insertion of pacemaker, single chamber rate

    responsive into abdomen subcutaneous tissue

    and fascia, open approach.

    0JH806Z.................. Insertion of pacemaker, dual chamber into

    abdomen subcutaneous tissue and fascia, open

    approach.

    0JH807Z.................. Insertion of cardiac resynchronization

    pacemaker pulse generator into abdomen

    subcutaneous tissue and fascia, open

    approach.

    0JH80PZ.................. Insertion of cardiac rhythm related device

    into abdomen subcutaneous tissue and fascia,

    open approach.

    0JH834Z.................. Insertion of pacemaker, single chamber into

    abdomen subcutaneous tissue and fascia,

    percutaneous approach.

    0JH835Z.................. Insertion of pacemaker, single chamber rate

    responsive into abdomen subcutaneous tissue

    and fascia, percutaneous approach.

    0JH836Z.................. Insertion of pacemaker, dual chamber into

    abdomen subcutaneous tissue and fascia,

    percutaneous approach.

    0JH837Z.................. Insertion of cardiac resynchronization

    pacemaker pulse generator into abdomen

    subcutaneous tissue and fascia, percutaneous

    approach.

    0JH83PZ.................. Insertion of cardiac rhythm related device

    into abdomen subcutaneous tissue and fascia,

    percutaneous approach.

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

    We are inviting public comments on our proposal to modify the GROUPER logic for MS-DRGs 258 and 259 to establish that a case reporting one procedure code from the above list of ICD-10-PCS procedure codes describing procedures involving pacemaker device insertions without any other procedure codes describing procedures involving pacemaker leads reported would be assigned to MS-DRGs 258 and 259.

    We also examined our GROUPER logic for MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except Device with MCC, with CC, and without CC/MCC, respectively). Cases assigned to MS-DRGs 260, 261, and 262 also include lists of procedure code combinations describing procedures involving the removal of pacemaker leads and the insertion of new leads, in addition to lists of single procedure codes describing procedures involving the insertion of pacemaker leads, removal of devices, and revision of devices. We believe that this logic may also be overly complex. Moreover, we believe that a more simplified approach would be to provide a single list of procedure codes describing procedures involving cardiac pacemaker lead insertions and other related procedures involving device insertions that would be assigned to MS-DRGs 260, 261, and 262. If one of these procedure codes describing procedures involving the insertion of pacemaker leads is reported, and there are no other procedure codes describing procedures involving the insertion of a device reported, the case would be assigned to MS-DRG 260, 261, and 262. We are proposing that the list of ICD-10-PCS procedure codes describing procedures involving pacemaker lead insertion, removal, or revisions and insertion of hemodynamic devices in the following table would be assigned to MS-DRGs 260, 261, and 262. We are simply proposing to use a single list of ICD-10-PCS procedure codes to determine the MS-DRG assignment.

    List of Procedure Codes Proposed To Be Assigned to MS-DRGs 260, 261, and

    262

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

    Procedure code Description

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

    02H40JZ.................. Insertion of pacemaker lead into coronary

    vein, open approach.

    02H40MZ.................. Insertion of cardiac lead into coronary vein,

    open approach.

    02H43JZ.................. Insertion of pacemaker lead into coronary

    vein, percutaneous approach.

    02H43MZ.................. Insertion of cardiac lead into coronary vein,

    percutaneous approach.

    02H44JZ.................. Insertion of pacemaker lead into coronary

    vein, percutaneous endoscopic approach.

    02H44MZ.................. Insertion of cardiac lead into coronary vein,

    percutaneous endoscopic approach.

    02H60MZ.................. Insertion of pacemaker lead into right

    atrium, open approach.

    02H63JZ.................. Insertion of cardiac lead into right atrium,

    open approach.

    02H63MZ.................. Insertion of pacemaker lead into right

    atrium, percutaneous approach.

    02H64JZ.................. Insertion of cardiac lead into right atrium,

    percutaneous approach.

    02H64MZ.................. Insertion of pacemaker lead into right

    atrium, percutaneous endoscopic approach.

    02H70JZ.................. Insertion of cardiac lead into right atrium,

    percutaneous endoscopic approach.

    02H70MZ.................. Insertion of pacemaker lead into left atrium,

    open approach.

    02H73JZ.................. Insertion of cardiac lead into left atrium,

    open approach.

    02H73MZ.................. Insertion of pacemaker lead into left atrium,

    percutaneous approach.

    02H74JZ.................. Insertion of cardiac lead into left atrium,

    percutaneous approach.

    02H74MZ.................. Insertion of pacemaker lead into left atrium,

    percutaneous endoscopic approach.

    02HK00Z.................. Insertion of cardiac lead into left atrium,

    percutaneous endoscopic approach.

    Page 24985

    02HK02Z.................. Insertion of pressure sensor monitoring

    device into right ventricle, open approach.

    02HK0JZ.................. Insertion of monitoring device into right

    ventricle, open approach.

    02HK0MZ.................. Insertion of pacemaker lead into right

    ventricle, open approach.

    02HK30Z.................. Insertion of cardiac lead into right

    ventricle, open approach.

    02HK32Z.................. Insertion of pressure sensor monitoring

    device into right ventricle, percutaneous

    approach.

    02HK3JZ.................. Insertion of monitoring device into right

    ventricle, percutaneous approach.

    02HK3MZ.................. Insertion of pacemaker lead into right

    ventricle, percutaneous approach.

    02HK40Z.................. Insertion of cardiac lead into right

    ventricle, percutaneous approach.

    02HK42Z.................. Insertion of pressure sensor monitoring

    device into right ventricle, percutaneous

    endoscopic approach.

    02HK4JZ.................. Insertion of monitoring device into right

    ventricle, percutaneous endoscopic approach.

    02HK4MZ.................. Insertion of pacemaker lead into right

    ventricle, percutaneous endoscopic approach.

    02HL0JZ.................. Insertion of cardiac lead into right

    ventricle, percutaneous endoscopic approach.

    02HL0MZ.................. Insertion of pacemaker lead into left

    ventricle, open approach.

    02HL3JZ.................. Insertion of cardiac lead into left

    ventricle, open approach.

    02HL3MZ.................. Insertion of pacemaker lead into left

    ventricle, percutaneous approach.

    02HL4JZ.................. Insertion of cardiac lead into left

    ventricle, percutaneous approach.

    02HL4MZ.................. Insertion of pacemaker lead into left

    ventricle, percutaneous endoscopic approach.

    02HN0JZ.................. Insertion of cardiac lead into left

    ventricle, percutaneous endoscopic approach.

    02HN0MZ.................. Insertion of pacemaker lead into pericardium,

    open approach.

    02HN3JZ.................. Insertion of cardiac lead into pericardium,

    open approach.

    02HN3MZ.................. Insertion of pacemaker lead into pericardium,

    percutaneous approach.

    02HN4JZ.................. Insertion of cardiac lead into pericardium,

    percutaneous approach.

    02HN4MZ.................. Insertion of pacemaker lead into pericardium,

    percutaneous endoscopic approach.

    02PA0MZ.................. Insertion of cardiac lead into pericardium,

    percutaneous endoscopic approach.

    02PA3MZ.................. Removal of cardiac lead from heart, open

    approach.

    02PA4MZ.................. Removal of cardiac lead from heart,

    percutaneous approach.

    02PAXMZ.................. Removal of cardiac lead from heart,

    percutaneous endoscopic approach.

    02WA0MZ.................. Revision of cardiac lead in heart, open

    approach.

    02WA3MZ.................. Revision of cardiac lead in heart,

    percutaneous approach.

    02WA4MZ.................. Revision of cardiac lead in heart,

    percutaneous endoscopic approach.

    0JH600Z.................. Insertion of hemodynamic monitoring device

    into chest subcutaneous tissue and fascia,

    open approach.

    0JH630Z.................. Insertion of hemodynamic monitoring device

    into chest subcutaneous tissue and fascia,

    percutaneous approach.

    0JH800Z.................. Insertion of hemodynamic monitoring device

    into abdomen subcutaneous tissue and fascia,

    open approach.

    0JH830Z.................. Insertion of hemodynamic monitoring device

    into abdomen subcutaneous tissue and fascia,

    percutaneous approach.

    0JPT0PZ.................. Removal of cardiac rhythm related device from

    trunk subcutaneous tissue and fascia, open

    approach.

    0JPT3PZ.................. Removal of cardiac rhythm related device from

    trunk subcutaneous tissue and fascia,

    percutaneous approach.

    0JWT0PZ.................. Revision of cardiac rhythm related device in

    trunk subcutaneous tissue and fascia, open

    approach.

    0JWT3PZ.................. Revision of cardiac rhythm related device in

    trunk subcutaneous tissue and fascia,

    percutaneous approach.

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

    We are inviting public comments on our proposal to modify the GROUPER logic for MS-DRGs 260, 261, and 262 so that cases reporting any one of the ICD-10-PCS procedure codes describing procedures involving pacemakers and related procedures and associated devices listed in the table above would be assigned to MS-DRGs 260, 261, and 262.

  218. Transcatheter Mitral Valve Repair With Implant

    As we did for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28008 through 28010), for FY 2017, we received a request to modify the MS-DRG assignment for transcatheter mitral valve repair with implant procedures. We refer readers to detailed discussions of the MitraClipsupreg System (hereafter referred to as MitraClipsupreg) for transcatheter mitral valve repair in previous rulemakings, including the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR 51528 through 51529) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27902 through 27903) and final rule (77 FR 53308 through 53310), in response to requests for MS-DRG reclassification, as well as the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552), under the new technology add-on payment policy. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50575), the application for a new technology add-on payment for MitraClipsupreg was unable to be considered further due to lack of FDA approval by the July 1, 2013 deadline.

    In the FY 2015 IPPS/LTCH PPS final rule, we finalized our proposal to not create a new MS-DRG or to reassign cases reporting procedures involving the MitraClipsupreg to another MS-DRG (79 FR 49890 through 49892). Under a separate process, the request for a new technology add-

    on payment for the MitraClipsupreg System was approved (79 FR 49941 through 49946). As discussed in section II.I.4.e. of the preamble of this proposed rule, we are proposing to discontinue the new technology add-on payment for MitraClipsupreg for FY 2017.

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49371), we finalized a modification to the MS-DRGs to which the procedure involving the MitraClipsupreg System was assigned. For the ICD-10 based MS-DRGs to fully replicate the ICD-9-CM based MS-DRGs, ICD-10-PCS code 02UG3JZ (Supplement mitral valve with synthetic substitute, percutaneous approach), which identifies the use of the MitraClipsupreg technology and is the ICD-10-PCS code translation for ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with implant), was assigned to new MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, respectively) and continued to be assigned to MS-DRGs 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC, respectively). According to the requestor, there are substantial clinical and resource differences between the transcatheter mitral valve repair procedure and other procedures currently grouping to MS-

    DRGs 273 and 274, which are the focus of the request.

    Page 24986

    The requestor submitted three options for CMS to consider for FY 2017. The first option was to create a new MS-DRG for endovascular cardiac valve repair with implant; the second option was to reassign cases for the MitraClipsupreg implant from MS-DRGs 273 and 274 to MS-

    DRGs 266 and 267 (Endovascular Cardiac Valve Replacement with and without MCC, respectively); and the third option was to reassign cases involving the MitraClipsupreg system to another higher paying MS-DRG.

    We analyzed claims data from the December 2015 update of the FY 2015 MedPAR file on reported cases of percutaneous mitral valve repair with implant (ICD-9-CM procedure code 35.97) in MS-DRGs 273 and 274. Our findings are shown in the table below.

    Percutaneous Mitral Valve Repair With Implant

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 273--All cases........................................... 6,620 8.01 $27,625

    MS-DRG 273--Cases with procedure code 35.97..................... 457 7.57 50,560

    MS-DRG 274--All cases........................................... 14,220 3.46 19,316

    MS-DRG 274--Cases with procedure code 35.97..................... 693 2.67 37,686

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

    As shown in the table, the total number of cases reported in MS-DRG 273 was 6,620 and had an average length of stay of 8.01 days and average costs of $27,625. The number of cases reporting the ICD-9-CM procedure code 35.97 in MS-DRG 273 totaled 457 and had an average length of stay of 7.57 days and average costs of $50,560. For MS-DRG 274, there were a total of 14,220 cases with an average length of stay of 3.46 days and average costs of $19,316. There were a total of 693 cases in MS-DRG 274 that reported procedure code 35.97; these cases had an average length of stay of 2.67 days and average costs of $37,686. We recognize that the cases reporting procedure code 35.97 had a shorter length of stay and higher average costs in comparison to all the cases within MS-DRGs 273 and 274.

    As stated above, the first option of the requestor was that we create a new MS-DRG for endovascular cardiac valve repair with implant procedures for all cardiac valve repairs. We reviewed the following list of ICD-10-PCS procedure codes that the requestor submitted to comprise this proposed new MS-DRG.

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

    ICD-10-PCS Code Description

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

    02UF37Z.................. Supplement aortic valve with autologous

    tissue substitute, percutaneous approach.

    02UF38Z.................. Supplement aortic valve with zooplastic

    tissue, percutaneous approach.

    02UF3JZ.................. Supplement aortic valve with synthetic

    substitute, percutaneous approach.

    02UF3KZ.................. Supplement aortic valve with nonautologous

    tissue substitute, percutaneous approach.

    02UG37Z.................. Supplement mitral valve with autologous

    tissue substitute, percutaneous approach.

    02UG38Z.................. Supplement mitral valve with zooplastic

    tissue, percutaneous approach.

    02UG3JZ.................. Supplement mitral valve with synthetic

    substitute, percutaneous approach.

    02UG3KZ.................. Supplement mitral valve with nonautologous

    tissue substitute, percutaneous approach.

    02UH37Z.................. Supplement pulmonary valve with autologous

    tissue substitute, percutaneous approach.

    02UH38Z.................. Supplement pulmonary valve with zooplastic

    tissue, percutaneous approach.

    02UH3JZ.................. Supplement pulmonary valve with synthetic

    substitute, percutaneous approach.

    02UH3KZ.................. Supplement pulmonary valve with nonautologous

    tissue substitute, percutaneous approach.

    02UJ37Z.................. Supplement tricuspid valve with autologous

    tissue substitute, percutaneous approach.

    02UJ38Z.................. Supplement tricuspid valve with zooplastic

    tissue, percutaneous approach.

    02UJ3JZ.................. Supplement tricuspid valve with synthetic

    substitute, percutaneous approach.

    02UJ3KZ.................. Supplement tricuspid valve with nonautologous

    tissue substitute, percutaneous approach.

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

    The above list of ICD-10-PCS procedure codes are currently assigned to MS-DRGs 216 through 221 (Cardiac Valve and Other Major Cardiovascular Procedures with and without Cardiac Catheterization with MCC, with CC, and without CC/MCC, respectively), with the exception of procedure code 02UG3JZ, which is assigned to MS-DRGs 273 and 274, as noted earlier in this section.

    All 16 of the ICD-10-PCS procedure codes submitted by the requester are comparable translations of ICD-9-CM procedure code 35.33 (Annuloplasty), which also grouped to MS-DRGs 216 through 221. However, ICD-10-PCS procedure code 02UG3JZ (Supplement mitral valve with synthetic substitute, percutaneous approach) is the comparable translation for both ICD-9-CM procedure code 35.33 and ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with implant), which grouped to MS-DRGs 273 and 274 as mentioned previously.

    Upon review of the 16 ICD-10-PCS procedure codes submitted for consideration by the requestor, we determined that we cannot propose the suggested change because the resulting ICD-10 MS-DRG logic would not be an accurate replication of the ICD-9-CM based MS-DRG logic. Specifically, it is not possible to replicate reassigning the percutaneous annuloplasty codes from ICD-9-CM based MS-DRGs 216 through 221 to a new MS-DRG because we cannot isolate those cases from procedure code 35.33. Under ICD-9-CM, procedure code 35.33 does not differentiate the specific type of approach used to perform the procedure. This is in contrast to the 60 comparable ICD-10 code translations that do differentiate among various approaches (open, percutaneous, and percutaneous endoscopic).

    As stated previously, if the ICD-9-CM and ICD-10 versions of the MS-DRGs cease to be replications of each other, the relative payment weights (computed using the ICD-9-CM based MS-DRGs) would be inconsistent with the ICD-10 MS-DRG assignment, which may cause unintended payment redistribution. Therefore, we are not proposing to

    Page 24987

    create a new MS-DRG for transcatheter mitral valve repair with implant procedures for FY 2017.

    The second option in the request was to evaluate reassigning cases involving the MitraClipsupreg to MS-DRGs 266 and 267. This option is not supported for the same reasons provided in previous rulemaking regarding differences between valve replacements and valve repairs. Our clinical advisors do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClipsupreg technology is utilized for a percutaneous mitral valve repair, while the other technologies assigned to MS-DRGs 266 and 267 are utilized for transcatheter/endovascular cardiac valve replacements. In addition, if cases involving the MitraClipsupreg were reassigned to MS-DRGs 266 and 267, they would be overpaid by approximately $10,000 as shown in the table below. Our clinical advisors agree that we should not propose to reassign endovascular cardiac valve repair procedures to the endovascular cardiac valve replacement MS-DRGs.

    Endovascular Cardiac Valve Replacement With and Without MCC

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

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

    MS-DRG 266--All cases........................................... 7,436 8.54 $59,675

    MS-DRG 267--All cases........................................... 8,480 4.45 47,013

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

    Next, we analyzed claims data from the December 2015 update of the FY 2015 MedPAR file relating to the possible reassignment of cases involving the MitraClipsupreg (identified by ICD-9-CM procedure code 35.97) to MS-DRGs 228, 229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC, respectively). However, as shown in the findings in the table below, the claims data did not support this option under the current 3-way severity level split. That is, the data findings based on reassignment of MitraClipsupreg cases (ICD-9-

    CM procedure code 35.97) to MS-DRGs 228, 229, and 230 did not support the required criterion that there be at least a $2,000 difference between subgroups. A reassignment would not meet the requirement for the ``with CC'' and ``without CC/MCC'' subgroups ($34,461 - $33,216 = $1,245).

    Other Cardiothoracic Procedures (With Procedure Code 35.97)

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 228--with MCC............................................ 1,966 11.53 $51,634

    MS-DRG 229--with CC............................................. 2,318 6.28 34,461

    MS-DRG 230--without CC/MCC...................................... 709 3.76 33,216

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

    We then performed additional analysis consisting of the base DRG report for MS-DRGs 228, 229 and 230. As shown in the table below, the average costs between the ``with CC'' and the ``without CC/MCC'' subgroups no longer meet the criterion that there be at least a 20-

    percent difference in average costs between subgroups. These data findings support collapsing MS-DRGs 228, 229, and 230 from a 3-way severity level split into a 2-way severity level split (with MCC and without MCC) based on 2 years (FY 2014 and FY 2015) of MedPAR data. This option would involve the deletion of an MS-DRG.

    Other Cardiothoracic Procedures

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

    Average length Average length

    MS-DRG Number of of stay FY Average costs Number of of stay FY Average costs

    cases FY 2015 2015 FY 2015 cases FY 2014 2014 FY 2014

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

    MS-DRG 228--with MCC.................................... 1,509 12.73 $51,960 1,486 12.75 $50,688

    MS-DRG 229--with CC..................................... 1,835 7.16 33,786 1,900 7.46 33,277

    MS-DRG 230--without CC/MCC.............................. 499 4.52 30,697 443 4.84 31,053

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

    In the additional analysis, we evaluated if reassignment of cases reporting ICD-9-CM procedure code 35.97 to this proposed 2-way severity split was supported. We confirmed that the reassignment of ICD-9-CM procedure code 35.97 could be replicated under the ICD-9 MS-DRGs. We believe that deleting MS-DRG 230, revising MS-DRG 229, and reassigning cases with procedure code 35.97 from MS-DRGs 273 and 274 to this new structure would reflect these procedures more accurately in the ICD-10 MS-DRGs. Our clinical advisors agreed with a proposal to delete MS-DRG 230 and reassign cases involving percutaneous mitral valve repair with implant (MitraClipsupreg) to MS-DRG 228 and revised MS-DRG 229. We believe that this approach would maintain clinical coherence for these MS-DRGs and reflect more appropriate payment for procedures involving percutaneous mitral valve repair. The proposed revisions to the MS-

    DRGs, which include the MitraClipsupreg cases, are shown in the table below.

    Page 24988

    Other Cardiothoracic Procedures

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

    Number of Average length

    Proposed revised MS-DRGs cases of stay Average costs

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

    MS-DRG 228--with MCC............................................ 1,966 11.53 $51,634

    MS-DRG 229--without MCC......................................... 3,027 5.69 34,169

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

    For FY 2017, we are proposing to collapse MS-DRGs 228, 229, and 230 from three severity levels to two severity levels by deleting MS-DRG 230 and revising MS-DRG 229. We also are proposing to reassign ICD-9-CM procedure code 35.97 and the cases reporting ICD-10-PCS procedure code 02UG3JZ (Supplement mitral valve with synthetic substitute, percutaneous approach) from MS-DRGs 273 and 274 to MS-DRG 228 and proposed revised MS-DRG 229. The title of MS-DRG 229 would be modified as follows to reflect the ``without MCC'' designation. The title of proposed revised MS-DRG 229 would be ``Other Cardiothoracic Procedures without MCC''. The title for MS-DRG 228 would remain the same: MS-DRG 228 (Other Cardiothoracic Procedures with MCC). We are inviting public comments on our proposals.

    We also note that, as discussed earlier in this section, in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49371), ICD-10-PCS code 02UG3JZ (Supplement mitral valve with synthetic substitute, percutaneous approach) was assigned to MS-DRGs 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC, respectively), in addition to new MS-

    DRGs 273 and 274, to fully replicate the ICD-9-CM based MS-DRG logic for ICD-9-CM procedure code 35.97. If our proposal in this FY 2017 proposed rule to reassign ICD-10-PCS code 02UG3JZ to MS-DRGs 228 and proposed revised MS-DRG 229 is finalized in the FY 2017 IPPS/LTCH PPS final rule, it will eliminate the need to continue having ICD-10-PCS code 02UG3JZ and ICD-9-CM code 35.97 group to MS-DRGs 231 and 232. This is due to the fact that, currently, MS-DRGs 228, 229, and 230 are listed higher than MS-DRGs 231 through 236 in the surgical hierarchy, as shown in the ICD-9 and ICD-10 MS-DRGs Definitions Manual Files in Appendix D--MS-DRG Surgical Hierarchy by MDC and MS-DRG, which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending. Therefore, if the proposal is finalized for FY 2017, cases reporting ICD-10-PCS procedure code 02UG3JZ will group to MS-DRGs 228 and revised MS-DRG 229 versus MS-DRGs 231 and 232 because of the surgical hierarchy GROUPER logic.

    As a result, we are proposing to remove ICD-10-PCS procedure code 02UG3JZ and ICD-9-CM procedure code 35.97 from the PTCA list in MS-DRGs 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC, respectively) for FY 2017 if the proposal to reassign ICD-9-CM procedure code 35.97 and the cases reporting ICD-10-PCS procedure codes 02UG3JZ from MS-DRGs 273 and 274 to MS-DRGs 228 and proposed revised MS-DRG 229 is finalized. We are inviting public comments on our proposals.

  219. MS-DRG 245 (AICD Generator Procedures)

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49369), we stated that we would continue to monitor MS-DRG 245 (AICD Generator Procedures) to determine if the data supported subdividing this base MS-DRG into severity levels. As displayed in the table below, the results of the FY 2015 data analysis showed there were a total of 1,464 cases, with an average length of stay of 5.5 days and average costs of $34,564 for MS-DRG 245.

    AICD Generator Procedures

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

    Average length

    MS-DRG Number of cases of stay Average costs

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

    MS-DRG 245................................................... 1,464 5.5 $34,564

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

    We applied the five criteria established in the FY 2008 IPPS final rule (72 FR 47169), as described in section II.F.1.b. of the preamble of this proposed rule to determine if it was appropriate to subdivide MS-DRG 245 into severity levels. The table below illustrates our findings.

    AICD Generator Procedures

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

    Number of Average length

    MS-DRG by suggested severity level cases of stay Average costs

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

    MS-DRG 245--with MCC............................................ 449 8.37 $40,175

    MS-DRG 245--with CC............................................. 861 4.59 32,518

    MS-DRG 245--without CC/MCC...................................... 154 2.86 29,646

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

    Based on our analysis of claims data from the December 2015 update of the FY 2015 MedPAR file, the data findings do not support creating new severity levels. The findings show that the data do not meet the criteria for a 3-way severity level split as the criterion that there be at least a 20-percent difference in average costs between subgroups is

    Page 24989

    not met for the ``with CC'' and ``without CC/MCC'' severity levels. We also looked at the prospect of a 2-way severity level split.

    AICD Generator Procedures

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

    Number of Average length

    MS-DRG by suggested severity level cases of stay Average costs

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

    MS-DRG 245--with MCC............................................ 449 8.37 $40,175

    MS-DRG 245--without MCC......................................... 1,015 4.33 32,081

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

    The findings do show that the data are close to meeting the criteria for a 2-way severity level split of ``with MCC and without MCC.'' However, the required criterion that there must be at least 500 cases in the MCC group is not met.

    Therefore, for FY 2017, we are not proposing to subdivide MS-DRG 245 into severity levels. We are inviting public comments on our proposal to maintain the current structure for MS-DRG 245.

    6. MDC 6 (Diseases and Disorders of the Digestive System): Excision of Ileum

    We received a request to analyze an MS-DRG replication issue from the ICD-9-CM based MS-DRGs to the ICD-10 based MS-DRGs for excision procedures performed on the ileum. Under ICD-9-CM, procedure code 45.62 (Other partial resection of small intestine) was assigned to MS-DRGs 329, 330 and 331 (Major Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively). Under the current ICD-10 MS-DRGs Version 33, ICD-10-PCS procedure code 0DBB0ZZ (Excision of ileum, open approach) is assigned to MS-DRGs 347, 348, and 349 (Anal and Stomal Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor indicated that, despite the variation in terms for ``excision'' and ``resection'' between the two code sets, the surgical procedure to remove a portion of the small intestine, whether it is the ileum, duodenum, or jejunum, has not changed and should not result in different MS-DRG assignments when translated from ICD-9-CM to ICD-10.

    We agree that this is a replication error. In addition to ICD-10-

    PCS code 0DBB0ZZ, we also reviewed the MS-DRG assignments for ICD-10-

    PCS code 0DBA0ZZ (Excision of jejunum, open approach) and determined the MS-DRG assignment for this code resulted in the same replication error. Therefore, we are proposing to reassign ICD-10-PCS codes 0DBB0ZZ and 0DBA0ZZ from MS-DRGs 347, 348, and 349 to MS-DRGs 329, 330, and 331, effective with the ICD-10 MS-DRGs Version 34 on October 1, 2016.

    We are inviting public comments on our proposal.

    7. MDC 7 (Diseases and Disorders of the Hepatobiliary System and Pancreas): Bypass Procedures of the Veins

    We received a request to assign ICD-10-PCS code 06183DY (Bypass portal vein to lower vein with intraluminal device, percutaneous approach) to MDC 7 (Diseases and Disorders of the Hepatobiliary System and Pancreas) under MS-DRGs 405, 406, and 407 (Pancreas Liver and Shunt Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor described this code as capturing a transjugular intrahepatic portosystem shunt procedure. The requestor stated that, under ICD-9-CM, when a procedure for cirrhosis of the liver was performed, the procedure was assigned to ICD-9-CM code 39.1 (Intra-abdominal venous shunt). The requestor noted that when ICD-9-CM procedure code 39.1 is reported with a principal diagnosis of cirrhosis of the liver, the procedure was assigned to MS-DRG 405, 406, or 407 in the ICD-9-CM MS-

    DRGs.

    Currently, ICD-10-PCS procedure code 06183DY is assigned to only MDC 5 (Diseases and Disorders of the Circulatory System) and MS-DRGs 270, 271, and 272 (Other Major Cardiovascular Procedures with MCC, with CC, and without CC/MCC, respectively) under ICD-10 MS-DRGs Version 33. The requestor stated that ICD-10-PCS procedure code 06183DY code should also be assigned to MDC 7 and MS-DRGs 405, 406, and 407 to be consistent with the ICD-9-CM MS-DRGs Version 32.

    We analyzed this issue and agree that the ICD-10 MS-DRGs do not fully replicate the ICD-9-CM MS-DRGs. We agree that ICD-10-PCS procedure code 06183DY should be assigned to MDC 7 and MS-DRGs 405, 406, and 407 to replicate the ICD-9-CM MS-DRGs. Our clinical advisors reviewed this issue and also agree that ICD-10-PCS procedure code 06183DY should be assigned to MDC 7 and MS-DRGs 405, 406, and 407. Therefore, we are proposing to assign ICD-10-PCS procedure code 06183DY to MDC 7 and MS-DRGs 405, 406, and 407 for FY 2017.

    We are inviting public comments on our proposal.

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

  220. Proposed Updates to MS-DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity With and Without MCC, respectively)

    (1) Total Ankle Replacement (TAR) Procedures

    We received a request to create a new MS-DRG for total ankle replacement (TAR) procedures, which are currently assigned to MS-DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with and without MCC, respectively). We previously discussed requested changes to the MS-DRG assignment for TAR procedures in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28013 through 28015) and in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49896 through 49899). For FY 2015, we did not change the MS-DRG assignment for total ankle replacements. The requestor stated that reassigning total ankle replacement procedures from MS-DRGs 469 and 470 to a new MS-DRG would have an important benefit for the new Medicare Comprehensive Care for Joint Replacement (CJR) model. The commenter noted that because total ankle replacement cases currently are assigned to MS-DRGs 469 and 470, they are included in the model.

    Ankle replacement procedures were captured by ICD-9-CM code 81.56 (Total ankle replacement). We examined claims data for total ankle procedures using the December 2015 update of the FY 2015 MedPAR file. Our findings are displayed in the table below.

    Page 24990

    Total Ankle Replacement Cases Reported in MS-DRGs 469 and 470

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

    Number of Average length

    MS-DRG cases of stay Average costs

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

    MS-DRG 469--All cases........................................... 25,729 6.92 $22,358

    MS-DRG 469--Total ankle replacement cases....................... 30 5.40 34,889

    MS-DRG 470--All cases........................................... 421,149 2.92 14,834

    MS-DRG 470--Total ankle replacement cases....................... 1,626 1.94 20,019

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

    As the total ankle replacement claims data analysis showed, these procedures represent a small fraction of the total number of cases reported in MS-DRGs 469 and 470. There were 30 total ankle replacement cases reported in MS-DRG 469 and 1,626 total ankle replacement cases in MS-DRG 470, compared to 25,729 total cases reported in MS-DRG 469 and 421,149 total cases reported in MS-DRG 470. The average length of stay for total ankle replacement cases was 5.40 days and average costs for total ankle replacement cases were $34,889 reported in MS-DRG 469, compared to average length of stay of 6.92 days and average costs of $22,358 for all cases reported in MS-DRG 469. The average length of stay for total ankle replacement cases was 1.94 days and average costs of total ankle replacement cases were $20,019 reported in MS-DRG 470, compared to an average length of stay of 2.92 days and average costs of $14,834 for all cases reported in MS-DRG 470.

    Given the low volume of cases, we believe that these cost data may not be a complete measure of actual differences in inpatient resource utilization for beneficiaries receiving total ankle replacements. In addition, these total ankle replacement cases may have been impacted by other factors such as complication or comorbidities. Several expensive cases could impact the average costs for a very small number of patients. The average cost of total ankle replacement cases reported in MS-DRG 469 was $12,531 higher than all cases reported in MS-DRG 469 ($34,889 compared to $22,358 for all reported cases), but there were only 30 cases compared to a total of 25,729 cases reported in MS-DRG 469. The average cost of total ankle replacement cases reported in MS-

    DRG 470 was $5,185 higher than all cases reported in MS-DRG 470. There were 1,626 total ankle replacement cases out of a total of 421,149 cases reported in MS-DRG 470. The average costs of the total ankle replacement cases were higher than those for all cases reported in MS-

    DRG 469 and 470. However, some cases have higher and some cases have lower average costs within any MS-DRG. MS-DRGs are groups of clinically similar cases that have similar overall costs. Within a group of cases, one would expect that some cases have costs that are higher than the overall average and some cases have costs that are lower than the overall average.

    The data do not support creating a new total ankle replacement MS-

    DRG for this small number of cases. Also, our clinical advisors pointed out that creating a new MS-DRG for total ankle replacements would result in combining cases reporting an MCC with an average length of stay of 5.40 days and cases not reporting an MCC with an average length of stay of 1.94 days. Our clinical advisors did not recommend the creation of a new MS-DRG for this single procedure with such a small number of cases. They also stated that patients undergoing total ankle replacement have similar clinical features compared to other patients undergoing procedures included in MS-DRGs 469 and 470. Furthermore, we believe that the volume of total ankle replacement procedures performed relative to hip and knee replacement procedures minimizes the benefit that a new MS-DRG would have on the Medicare CJR model. Our clinical advisors determined that the cases involving total ankle replacements are more appropriately assigned to MS-DRGs 469 and 470 with the two severity levels.

    Based on the findings from our data analysis and the recommendations from our clinical advisors, we are not proposing to create a new MS-DRG for total ankle replacement procedures. We are proposing to maintain the current MS-DRG structure for MS-DRGs 469 and 470.

    We are inviting public comments on this proposal.

    (2) Hip Replacement Procedures With Principal Diagnosis of Hip Fracture

    We received several requests to remove hip replacement procedures with a principal diagnosis of hip fracture from MS-DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with and without MCC, respectively) and to create a new MS-DRG for assignment of these hip replacement procedures. One requestor suggested that if such a new MS-DRG could not be created, CMS consider reassigning all hip replacement procedures with a principal diagnosis of hip fracture only to MS-DRG 469, even if there were no reported MCC.

    The requestors stated that hip replacement procedures performed on patients with hip fractures involve a more fragile population of patients than the typical patient population who undergo elective hip or knee replacement and that these more fragile patient cases also are assigned to MS-DRGs 469 and 470. The requestors stated that cases of patients who have hip replacements with hip fractures may have significant comorbidities not present in patients who undergo elective hip replacements. One requestor stated that the absolute number of hospitalizations for hip fractures in the United States is currently more than 350,000 and the number is rising. The requestor stated that 90 percent of hip fractures result from a simple fall, and that hip fracture rates increase with age. According to the requestor, the 1-

    year mortality rate for patients who undergo hip replacement procedures after a hip fracture was approximately 20 percent, and the 3-year mortality rate was up to 50 percent. The requestor also stated that one out of three adults who lived independently before their hip fracture remains in a nursing home for at least a year after the hip fracture. In contrast, the requestor noted that patients under elective hip replacement procedures for arthritis have fewer comorbidities, improved health after the procedure, low rates of readmission, and less postacute needs. The requestor believed that there are many factors that impact the outcome of hip replacements for hip fractures, including patient factors, fracture type, surgeon and hospital factors, treatment decisions, complication rates, and rehabilitation factors/

    access. The requestor added that, despite the commitment to standardization, the use of protocol-driven care, early surgery ( M40.50 (Lordosis, unspecified, site unspecified);

    M40.55 (Lordosis, unspecified, thoracolumbar region);

    M40.56 (Lordosis, unspecified, lumbar region); and

    M40.57 (Lordosis, unspecified, lumbosacral region).

    We are proposing to remove the above four diagnosis codes from the secondary diagnosis list. We also are proposing to maintain these same four codes in the logic for the principal diagnosis list. This proposed change for MS-DRGs 456, 457, and 458 would be effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    We are inviting public comments on our proposals.

    9. MDC 13 (Diseases and Disorders of the Female Reproductive System): Pelvic Evisceration

    In the ICD-10 MS-DRG Definitions Manual Version 33, the GROUPER logic for ICD-10 MS-DRGs 332, 333, and 334 (Rectal Resection with MCC, with CC and without CC/MCC, respectively) under MDC 6 (Diseases and Disorders of the Digestive System) and the GROUPER logic for MS-DRGs 734 and 735 (Pelvic Evisceration, Radical Hysterectomy and Radical Vulvectomy with CC/MCC and without CC/MCC, respectively) under MDC 13 (Diseases and Disorders of the Female Reproductive System) include a ``cluster'' of ICD-10-PCS procedure codes that describe pelvic evisceration. A ``cluster'' is the term used to describe a circumstance when a combination of ICD-10-PCS procedure codes is needed to fully satisfy the equivalent meaning of an ICD-9-CM procedure code for it to be considered a plausible code translation. The code cluster in MS-DRGs 332, 333, and 334 and MS-DRGs 734 and 735 is shown in the table below.

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

    ICD-10-PCS procedure code

    in cluster Description

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

    0TTB0ZZ.................. Resection of bladder, open approach.

    0TTD0ZZ.................. Resection of urethra, open approach.

    0UT20ZZ.................. Resection of bilateral ovaries, open

    approach.

    0UT70ZZ.................. Resection of bilateral fallopian tubes, open

    approach.

    0UT90ZZ.................. Resection of uterus, open approach.

    0UTC0ZZ.................. Resection of cervix, open approach.

    0UTG0ZZ.................. Resection of vagina, open approach.

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

    Pelvic evisceration (or exenteration) is a procedure performed to treat gynecologic cancers (cervical, uterine, vulvar, and vaginal, among others) and involves resection of pelvic structures such as the procedures described by the cluster of procedure codes listed above.

    Under the ICD-9-CM MS-DRGs Version 32, procedure code 68.8 (Pelvic evisceration) was used to report pelvic evisceration. ICD-9-CM procedure code 68.8 also was assigned to ICD-9-CM MS-DRGs 332, 333, and 334 and MS-DRGs 734 and 735 in MDCs 6 and 13, respectively. The inclusion term in the ICD-9-CM Tabular List of Diseases for pelvic evisceration (procedure code 68.8) was ``Removal of ovaries, tubes, uterus, vagina, bladder, and urethra (with removal of sigmoid colon and rectum).'' In the ICD-9-CM Tabular List, the terms shown in parentheses are called a ``non-essential modifier''. A ``non-essential modifier'' is used in the classification to identify a supplementary word that may, or may not, be present in the statement of a disease or procedure. In other words, the terms in parentheses do not have to be documented to report the code.

    Because the removal of sigmoid colon and the removal of rectum were classified as non-essential modifiers under ICD-9-CM, documentation that identified that removal of those body sites occurred was not required to report the procedure code describing pelvic evisceration (procedure code 68.8). In other words, when a pelvic evisceration procedure was performed and included removal of other body sites (ovaries and tubes, among others) listed in the

    Page 24998

    inclusion term, absent the terms in parentheses, procedure code 68.8 could be reported and grouped appropriately to MDC 13 under MS-DRGs 734 and 735. When a pelvic evisceration procedure was performed and removal of the body sites listed in the inclusion term occurred, including the terms in parentheses, procedure code 68.8 could be reported and grouped appropriately to MDC 6 under MS-DRGs 332 through 334.

    Under ICD-10-PCS, users are instructed to code separately the organs or structures that are actually removed and for which there is a distinctly defined body part. Therefore, the case of a patient who undergoes a pelvic evisceration (exenteration) that involves the removal of the sigmoid colon and rectum would have each of those procedure sites (sigmoid colon and rectum) coded and reported separately (in addition to the procedure codes displayed in the cluster). In this scenario, if the principal diagnosis is a condition from the MDC 6 diagnosis list, the case would group to MS-DRGs 332, 333, and 334, regardless of the code cluster. In other words, it would not be necessary to retain the code cluster describing procedures performed on female pelvic organs in MDC 6.

    Therefore, for FY 2017, we are proposing to remove the procedure code cluster for pelvic evisceration procedures from MDC 6 under the ICD-10 MS-DRGs Version 34. The cluster would remain in ICD-10 MDC 13 under MS-DRGs 734 and 735 only. We are inviting public comments on our proposal.

    10. MDC 19 (Mental Diseases and Disorders): Proposed Modification of Title of MS-DRG 884 (Organic Disturbances and Mental Retardation)

    We received a request to change the title of MS-DRG 884 (Organic Disturbances and Mental Retardation) under MDC 19 (Mental Diseases and Disorders) to ``MS-DRG 884 (Organic Disturbances and Intellectual Disability)'' to reflect more recent terminology used to appropriately describe the latter medical condition in the MDC.

    We agree with the requestor that the reference to the phrase ``Mental Retardation'' should be changed to ``Intellectual Disability'', to reflect the current terminology used to describe the condition. Therefore, we are proposing to change the title of MS-DRG 884 as requested by the requestor.

    We are inviting public comments on our proposal to change the title of MS-DRG 884 from ``Organic Disturbances and Mental Retardation'' to ``Organic Disturbances and Intellectual Disability'', effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    11. MDC 23 (Factors Influencing Health Status and Other Contacts With Health Services): Logic of MS-DRGs 945 and 946 (Rehabilitation With and Without CC/MCC, Respectively)

    We received several requests to examine the MS-DRG logic for MS-

    DRGs 945 and 946 (Rehabilitation with CC/MCC and without CC/MCC, respectively). The requestors were concerned that ICD-9-CM codes that clearly identified an encounter for rehabilitation services such as procedure codes V57.89 (Care involving other specified rehabilitation procedure) and V57.9 (Care involving unspecified rehabilitation procedure) were not included in ICD-10-CM Version 33. In addition, the requestors pointed out that ICD-10-CM has significantly changed the guidelines for coding of admissions/encounters for rehabilitation. The requestors pointed out that under ICD-9-CM, Section I.B.15. of the Official Guidelines for Coding and Reporting indicates that ``when the purpose for the admission/encounter is rehabilitation, sequence the appropriate V code from category V57, Care involving use of rehabilitation procedures, as the principal/first listed diagnosis.'' The requestors stated that the concept of the ICD-9-CM category V57 codes is no longer valid in ICD-10-CM and the guidelines have been revised to provide greater specificity. Instead, the requestors added, the ICD-10-CM guidelines state in Section II.K., ``When the purpose for the admission/encounter is rehabilitation, sequence first the code for the condition for which the service is being performed. For example, for an admission/encounter for rehabilitation for right-sided dominant hemiplegia following a cerebrovascular infarction, report code I69.351, Hemiplegia and hemiparesis following cerebral infarction affecting right dominant side, as the first-listed or principal diagnosis.''

    Given this lack of ICD-10-CM codes to indicate that the reason for the encounter was for rehabilitation, some requesters asked that CMS review ICD-10-CM codes for conditions requiring rehabilitation (such as codes from category I69) and add them to MS-DRGs 945 and 946 when rehabilitation services are provided in order to replicate the logic found in the ICD-9-CM MS-DRG GROUPER. The requestors did not suggest any specific ICD-10-CM codes to add to MS-DRGs 945 and 946.

    One requestor made a specific recommendation for updating MS-DRGs 945 and 946. The requestor previously recommended that CMS review diagnosis codes in ICD-10-CM category I69 for possible addition to MS-

    DRGs 945 and 946. The requestor stated that, upon further review, they believe that a great number of diagnosis codes beyond sequelae of stroke (ICD-10-CM category I69) would need to be added in order to replicate the logic of the ICD-9-CM MS-DRGs. Therefore, they modified their recommendation as follows:

    Designate MS-DRGs 945 and 946 as pre-major diagnostic categories (Pre-MDC) MS-DRGs so that cases are grouped to these MS-DRGs on the basis of the procedure code rather than the principal diagnosis. The requestor stated that the ICD-10-PCS rehabilitation codes (Section F, Physical Rehabilitation and Diagnostic Audiology, Body system 0, Rehabilitation) should be used to group cases to MS-DRGs 945 and 946 similar to how the MS-DRG GROUPER logic currently treats lung transplants and tracheostomies. This would ensure that the rehabilitation procedure codes drive the MS-DRG assignment.

    Revise ICD-10-PCS Official Guidelines for Coding and Reporting and designate that the ICD-10-PCS rehabilitation codes be used only for admissions for rehabilitation therapy.

    We acknowledge that ICD-10-CM does not have clear diagnosis codes that indicate the reason for the encounter was for rehabilitation services. For that reason, CMS had to modify the MS-DRG logic using ICD-10-PCS procedure codes to assign these cases to MS-DRGs 945 and 946. The logic used in MS-DRGs 945 and 946 is shown in the Definitions Manual Version 33, which is posted on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending. We also posted a Frequently Asked Question section to explain how inpatient admissions are assigned to MS-DRGs 945 and 946, which is posted on the CMS Web site at: https://questions.cms.gov/faq.php?id=5005&faqId=12548. As indicated in the Frequently Asked Question section, the ICD-10-CM codes required a different approach to make sure the same cases captured with ICD-9-CM codes would be captured with ICD-10-CM codes. As stated earlier, ICD-10-CM does not contain specific codes for encounters for rehabilitation such as ICD-9-CM procedure codes V57.89 and V57.9. In order to replicate the ICD-9-CM MS-DRG logic using ICD-

    10-CM and ICD-

    Page 24999

    10-PCS codes, CMS developed the new logic included in the MS-DRG Version 33 Definitions Manual.

    The Frequently Asked Question section explains that, in order to be assigned to ICD-10 MS-DRG 945 or 946, a case must first have a principal diagnosis from MDC 23 (Factors Influencing Health Status and Other Contacts with Health Services), where MS-DRGs 945 and 946 are assigned. This is currently the logic with the ICD-9-CM MS-DRGs Version 33 where one would first have to have a MDC 23 principal diagnosis. A complete list of ICD-10-CM principal diagnoses for MDC 23 can be found in the ICD-10 MS-DRGs Version 33 Definitions Manual which is posted on the FY 2016 IPPS Final Rule Home Page under the link for the FY 2016 Final Rule Data Files at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html. Look under the Related Links section and select the ICD-10-CM/PCS MS-DRG v33 Definitions Manual Table of Contents Full Titles HTML Version file. Open this file and the Table of Contents page will appear. Click on the link for MDC 23 (Factors Influencing Health Status and Other Contacts with Health Services). On the next page that opens (MDC 23), click on the link titled ``MDC 23 Assignment of Diagnosis Codes'' on the upper left side of the screen. By using the navigation arrows at the top right hand side of the page, users can review the 24 pages listing all of the principal diagnosis codes assigned to MDC 23, including many injury codes for subsequent encounters.

    Under the GROUPER Logic, cases are assigned to MS-DRGs 945 and 946 in one of two ways as described in the Definitions Manual as follows:

    The encounter has a principal diagnosis code Z44.8 (Encounter for fitting and adjustment of other external prosthetic devices) or Z44.9 (Encounter for fitting and adjustment of unspecified external prosthetic device). Both of these codes are included in the list of principal diagnosis codes assigned to MDC 23.

    The encounter has an MDC 23 principal diagnosis code and one of the rehabilitation procedure codes listed under MS-DRGs 945 and 946.

    If the case does not have a principal diagnosis code from the MDC 23 list, but does have a procedure code from the list included under the Rehabilitation Procedures for MS-DRGs 945 and 946, the case will not be assigned to MS-DRGs 945 or 946. The case will instead be assigned to a MS-DRG within the MDC where the principal diagnosis code is found.

    Example: The encounter has a principal diagnosis code of S02119D (Unspecified fracture of occiput, subsequent encounter for fracture with routine healing). This code is included in MDC 8. Therefore, diagnosis code S02119D and a procedure code from the MS-

    DRG 945 and 946 Rehabilitation Procedure list, such as procedure code F0706GZ (Therapeutic Exercise Treatment of Neurological System--Head and Neck using Aerobic Endurance and Conditioning Equipment) would not lead to assignment of the case to MS-DRGs 945 and 946 because the principal diagnosis code is not included in MDC 23.

    Diagnosis code S02119D is included in MDC 8 as was the ICD-9-CM predecessor code, V54.19 (Aftercare for healing traumatic fracture of other bone). Therefore, these cases would be assigned to MS-DRGs 559, 560, and 561 (Aftercare, Musculoskeletal System and Connective Tissue with MCC, with CC, and without MCC/CC, respectively) within MDC 8.

    At this time, we do not have any claims data that indicate how well this MS-DRG logic is working. We are hesitant to simply add more codes from category I69 without evaluating the impact of doing so using claims data. We also do not have claims data to indicate whether or not there have been changes in the types or numbers of cases assigned to MS-DRGs 945 and 946. We welcome specific suggestions of codes to be added to MS-DRGs 945 and 946 based on hospitals' experience in coding these cases. We would evaluate these suggestions once we have claims data to study the impact.

    We have major concerns about the recommendation to revise the ICD-

    10-PCS Official Guidelines for Coding and Reporting and designate that the ICD-10-PCS rehabilitation codes be assigned and reported only for admissions for rehabilitation therapy. This would be a major new precedent for developing coding and reporting guidelines based on one specific payer's payment polices, in this case Medicare inpatient acute care prospective payment system policies. Hospitals would need to know who the payer was prior to knowing whether or not they could assign a code for a rehabilitation service that they provided. If those payment policies change, the hospital coder would need to be aware of those changes in order to determine whether or not they could submit a code that captures the fact that a rehabilitation service was provided. CMS has worked with the Centers for Disease Control and Prevention (CDC), the American Hospital Association (AHA), and the American Health Information Management Association (AHIMA) to make ICD-10-PCS guidelines generic and applicable to all types of inpatient facilities and for all payer types. The current ICD-10-PCS Guidelines for Coding and Reporting do not support this recommendation that rehabilitation services could only be coded and reported if the admission was specifically for rehabilitation therapy. The ICD-10-PCS codes were created to accurately capture services provided.

    We also have concerns about designating MS-DRGs 945 and 946 as pre-

    MDCs so that cases are grouped to these MS-DRGs on the basis of a rehabilitation procedure code rather than a principal diagnosis. Pre-

    MDCs were an addition to Version 8 of the Diagnosis Related Groups. This was the first departure from the use of principal diagnosis as the initial variable in DRG and subsequently MS-DRG assignment. For Pre-MDC DRGs, the initial step in DRG assignment was not the principal diagnosis, but was instead certain surgical procedures with extremely high costs such as heart transplant, liver transplant, bone marrow transplant, and tracheostomies performed on patients on long-term ventilation. These types of services were viewed as being very resource intensive. Recognizing these resource intensive services and assigning them to one of the high-cost MS-DRGs assures appropriate payment even if the patient is admitted for a variety of principal diagnoses. We believe it is inappropriate to consider rehabilitation services in the same group as high-cost procedures such as heart transplants. There is the significant potential of patients being classified out of higher paying surgical MS-DRGs in other MDCs and into the lower paying MS-DRGs 945 and 946 based on the reporting of a rehabilitation procedure code if these MS-DRGs are moved to the Pre-MDCs. We examined claims data for cases reporting a rehabilitation therapy code and found cases assigned to a wide variety of both medical and surgical MS-DRGs. The current coding and reporting of rehabilitation procedure codes for services provided suggest the potential of significant payment problems if MS-

    DRGs 945 and 946 were assigned to the Pre-MDC section and the reporting of cases with a rehabilitation code led to an inappropriate reassignment to the lower paying medical MS-DRGs 945 and 946.

    The following are only a few examples of current claims data that showed the hospital reported a rehabilitation therapy procedure code for services provided which did not impact the MS-DRG assignment. Under the suggested approach of making MS-

    Page 25000

    DRGs 945 and 946 a Pre-MDC, these cases would move from the appropriately assigned MS-DRGs which may have significantly higher average costs, to MS-DRGs 945 and 946, which have much lower average costs. Based on claims data from the December 2015 update of the FY 2015 MedPAR file, the average costs for cases reported in MS-DRGs 945 and 946 were $8,531 and $8,411, respectively.

    Examples of cases reporting a rehabilitation therapy code that would move to MS-DRGs 945 and 946 based on the suggested logic change are as follows:

    An MS-DRG 460 (Spinal Fusion Except Cervical with MCC) case with average costs of $42,390;

    An MS-DRG 464 (Wound Debridement and Skin Graft Excluding Hand, for Musculoskeletal Tissue Disease with CC) case with average costs of $55,633;

    An MS-DRG 579 (Other Skin, Subcutaneous Tissue and Breast Procedure with MCC) case with average costs of $63,834;

    An MS-DRG 854 (Infectious and Parasitic Diseases with O.R. procedure with MCC) case with average costs of $62,455; and

    An MS-DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis of Hemorrhage with CC) case with average costs of $90,522.

    Our clinical advisors reviewed this issue and agreed that we should wait for ICD-10 claims data to become available prior to proposing updates to MS-DRGs 945 and 946. They did not support adding MS-DRGs 945 and 946 to the Pre-MDCs because the rehabilitation services are not as resource intensive as are the other MS-DRGs in the Pre-MDC section.

    Considering these ICD-10-PCS guideline concerns, the structure of the pre-MDC section, and the lack of any ICD-10 claims data for MS-DRGs 945 and 946, we are proposing to maintain the current structure of MS-

    DRGs 945 and 946 and reconsider the issue when ICD-10 claims data become available and prior to proposing any updates.

    We are inviting public comments on our proposal to maintain the current structure of MS-DRGs 945 and 946.

    12. Proposed Medicare Code Editor (MCE) Changes

    The Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into an MS-DRG.

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49409 through 49412), we finalized the ICD-10 Definitions of Medicare Code Edits (ICD-10 MCE) Version 33. ICD-10 MCE Version 33 was based on the FY 2015 ICD-9-CM MCE Version 32 and the draft ICD-10 MCE Version 32 that had been made publicly available for comments in November 2014 on the ICD-

    10 MS-DRG Conversion Project Web site at: https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. In August 2015, we posted the finalized FY 2016 ICD-10 MCE Version 33 manual file and an ICD-9-CM MCE Version 33.0A manual file (for analysis purposes only). The links to these MCE manual files, along with the links to purchase the mainframe and computer software for the MCE Version 33 (and ICD-10 MS-DRGs) were posted on the CMS Web site through the FY 2016 IPPS Final Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page.html?DLSort=0&DLEntries=10&DLPage=1&DLSortDir=ascending.

    After implementation of the ICD-10 MCE Version 33, we received several requests to examine specific code edit lists that the requestors believed were incorrect and that affected claims processing functions. We received requests to review the MCE relating specifically to the Age conflict edit, the Sex conflict edit, the Non-covered procedure edit, and the Unacceptable principal diagnosis code edit. We discuss these code edit issues below.

  221. Age Conflict Edit

    In the MCE, the Age conflict edit exists to detect inconsistencies between a patient's age and any diagnosis on the patient's record; for example, a 5-year-old patient with benign prostatic hypertrophy or a 78-year-old patient coded with a delivery. In these cases, the diagnosis is clinically and virtually impossible for a patient of the stated age. Therefore, either the diagnosis or the age is presumed to be incorrect. Currently, in the MCE, the following four age diagnosis categories appear under the Age conflict edit and are listed in the manual and written in the software program:

    Newborn--Age of 0 years; a subset of diagnoses intended only for newborns and neonates (e.g., fetal distress, perinatal jaundice).

    Pediatric--Age is 0-17 years inclusive (e.g., Reye's syndrome, routine child health exam).

    Maternity--Age range is 12-55 years inclusive (e.g., diabetes in pregnancy, antepartum pulmonary complication).

    Adult--Age range is 15-124 years inclusive (e.g., senile delirium, mature cataract).

    (1) Newborn Diagnosis Category

    Under the ICD-10-CM Official Guidelines for Coding and Reporting (available on the Web site at: https://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-CM-and-GEMs.html), there are general guidelines and chapter-specific coding guidelines. The chapter-specific guidelines state that diagnosis codes from Chapter 16 (Certain Conditions Originating in the Perinatal Period) may be reported throughout the life of the patient if the condition is still present. The requestors noted that several codes from this Chapter 16 appear on the ICD-10 MCE Version 33 Age conflict edit for the newborn diagnosis category. Codes from this chapter are included in the P00 through P96 code range. Therefore, the requestors believed that because the chapter-specific guidelines state that codes within this chapter may be reported throughout the life of a patient, all codes within this range (P00 through P96) should be removed from the newborn diagnosis category on the Age conflict edit code list.

    We examined the newborn diagnosis category on the age conflict edit list in the ICD-9-CM MCE Version 32 in comparison to the ICD-9-CM chapter-specific guidelines. Under ICD-9-CM, Chapter 15 (Certain Conditions Originating in the Perinatal Period) includes codes within the 760 through 779 range. We found that the same chapter-specific guideline under ICD-10 exists under ICD-9-CM: Diagnosis codes from Chapter 15 may be reported throughout the life of the patient if the condition is still present. Similar to the ICD-10 MCE Version 33 newborn diagnosis category in the Age conflict edit code list, we noted that several codes from this Chapter 15 appear on the ICD-9-CM MCE Version 32 Age conflict edit for the newborn diagnosis category.

    Because the full definition of the chapter-specific guideline for ``Certain Conditions Originating in the Perinatal Period'' clearly states the codes within the chapter may be reported throughout the life of the patient if the condition is still present, we believe that, historically, under ICD-9-CM, this was the rationale for inclusion of the

    Page 25001

    diagnosis codes that were finalized for the newborn diagnosis category under the Age conflict edit (in code range 760 through 779). For example, under ICD-9-CM, there are four diagnosis codes in the 760.6x series that specifically include the term ``newborn'' in the title. These diagnosis codes are:

    760.61 (Newborn affected by amniocentesis);

    760.62 (Newborn affected by other in utero procedure);

    760.63 (Newborn affected by other surgical operations on mother during pregnancy); and

    760.64 (Newborn affected by previous surgical procedure on mother not associated with pregnancy).

    Under the ICD-9-CM classification, the chapter-specific guidelines in Chapter 15 (Certain Conditions Originating in the Perinatal Period) state that, for coding and reporting purposes, the perinatal period is defined as before birth through the 28th day following birth. As such, for coding and reporting purposes, a patient that is beyond the 28th day of life is no longer considered a newborn. Therefore, we believe that the diagnosis codes listed on the newborn diagnosis category in the Age conflict edit code list are, in fact, appropriate because they identify what the title of Chapter 15 describes (certain conditions specific to beginning in the perinatal period); that is, a newborn. The intent of the diagnosis codes included on the Age conflict edit code list is to identify claims where any one of the listed diagnoses is reported for a patient who is beyond the 28th day of life. If that definition is met according to the patient's date of birth, the edit is correctly triggered in those cases.

    Transitioning to the ICD-10 MCE was based on replication of the ICD-9-CM based MCE (in parallel with the transition to the ICD-10 MS-

    DRGs, which was based on replication of the ICD-9-CM MS-DRGs). Therefore, the diagnosis codes included in the newborn diagnosis category on the Age conflict edit code list in the ICD-10 MCE are a replication of the diagnosis code descriptions included on the newborn diagnosis category on the Age conflict edit code list under the ICD-9-

    CM MCE. However, the chapter-specific guideline in ICD-10-CM Chapter 16, section C.16.e. (Low birth weight and immaturity status), specifies that codes within category P07 (Disorders of newborn related to short gestation and low birth weight, not elsewhere classified) are for use for a child or adult who was premature or had a low birth weight as a newborn and this condition is affecting the patient's current health status. Therefore, we agree that codes within the range of P07.00 through P07.39 should not be listed under newborn diagnosis category on the Age conflict edit code list in the ICD-10 MCE. It is unclear why this range of codes within category P07 is distinguished separately when under the General Perinatal Rules for Chapter 16 (Certain Conditions Originating in the Perinatal Period), section I.C.16.a.1. states that diagnosis codes from Chapter 16 may be reported throughout the life of the patient if the condition is still present. In addition, the guideline at section I.C.16.a.4. states that ``should a condition originate in the perinatal period, and continue throughout the life of the patient, the perinatal code should continue to be used regardless of the patient's age.'' According to these general guidelines, we could assume that potentially all codes within Chapter 16 in the code range of P00 through P96 should be considered for removal from the newborn diagnosis category on the Age conflict edit code list. However, a subsequent section of Chapter 16, section 1.C.16.c.2. (Codes for conditions specified as having implication for future health care needs), instructs users to assign codes for conditions that have been specified by the provider as having implications for future health care needs. Immediately below that instruction is a note which states: ``This guideline should not be used for adult patients.''

    The ICD-10-CM Official Guidelines for Coding and Reporting are updated separately from the IPPS rulemaking process. Due to the confusion with the chapter-specific guidelines for codes in Chapter 16 and how they impact the newborn diagnosis category on the Age conflict edit code list, we believe it would be beneficial to fully evaluate the intent of these guidelines with the Centers for Disease Control's (CDC's) National Center for Health Statistics (NCHS) because NCHS has the lead responsibility for the ICD-10-CM diagnosis codes.

    In the meantime, to address claims processing concerns related to the newborn diagnosis category on the Age conflict edit code list, we are proposing to remove all the ICD-10-CM diagnoses in the code range of P00 through P96 from the newborn diagnosis category in the Age conflict code edit list for the ICD-10 MCE for FY 2017. We are inviting public comments on our proposal. We also are soliciting public comments on the appropriateness of the other diagnosis codes currently listed under the newborn diagnosis category in the Age conflict edit in the ICD-10 MCE Version 33. We refer readers to Table 6P.1a. associated with this proposed rule (which is available via the Internet on the CMs Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for review of the diagnosis codes we are proposing to remove. In addition, for FY 2017, we are examining the need to revise the description for the newborn diagnosis category in the Age conflict edit under the MCE. The current description as written, Newborn--Age of 0 years; a subset of diagnoses intended only for newborns and neonates (e.g., fetal distress, perinatal jaundice), is not consistent with the instructions for reporting the diagnosis codes in Chapter 16. We are inviting public comments on our proposal to revise the description of the newborn diagnosis category in the Age conflict edit under the MCE.

    (2) Pediatric Diagnosis Category

    Under the ICD-10 MCE Version 33, the pediatric diagnosis category for the Age conflict edit considers the age range of 0 to 17 years inclusive. For that reason, the diagnosis codes on this Age conflict edit list would be expected to apply to conditions or disorders specific to that age group only. The code list for the pediatric diagnosis category in the Age conflict edit currently includes 12 diagnosis codes that fall within the F90 through F98 code range. These codes were included as a result of replication from the ICD-9-CM MCE Version 32 and the draft ICD-10 MCE Version 32.

    We received a request to review the 12 ICD-10-CM diagnosis codes listed in the following table because they appear to conflict with guidance in the ICD-10-CM classification:

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

    ICD-10-CM diagnosis

    code Description

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

    F93.0.................... Separation anxiety disorder of childhood.

    F93.8.................... Other childhood emotional disorders.

    F93.9.................... Childhood emotional disorder, unspecified.

    Page 25002

    F94.1.................... Reactive attachment disorder of childhood.

    F94.2.................... Disinhibited attachment disorder of

    childhood.

    F94.8.................... Other childhood disorders of social

    functioning.

    F94.9.................... Childhood disorder of social functioning,

    unspecified.

    F98.21................... Rumination disorder of infancy.

    F98.29................... Other feeding disorders of infancy and early

    childhood.

    F98.3.................... Pica of infancy and childhood.

    F98.8.................... Other specified behavioral and emotional

    disorders with onset usually occurring in

    childhood and adolescence.

    F98.9.................... Unspecified behavioral and emotional

    disorders with onset usually occurring in

    childhood and adolescence.

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

    Under the ICD-10-CM Tabular List of Diseases and Injuries, Chapter 5 (Mental, Behavioral and Neurodevelopmental Disorders) contains a section titled ``Behavioral and emotional disorders with onset usually occurring in childhood and adolescence'' which includes codes for the F90 to F98 code range. At the beginning of this tabular section is an instructional ``note'' that states: ``Codes within categories F90-F98 may be used regardless of the age of a patient. These disorders generally have onset within the childhood or adolescent years, but may continue throughout life or not be diagnosed until adulthood.''

    Because the note specifically states that these codes may be used regardless of the age of a patient, we believe they should not be included on the pediatric diagnosis category on the Age conflict edit code list. Therefore, we are proposing to remove the 12 codes that fall within the F90 through F98 code range currently listed for the pediatric diagnosis category on the ICD-10 MCE age conflict edit code list, effective October 1, 2016, for FY 2017. We are inviting public comments on our proposal.

    We also received a request to review whether another group of diagnosis codes is clinically incorrect for the ICD-10 MCE Version 33 pediatric diagnosis category in the Age conflict edit. The requestor stated that ICD-10-CM diagnosis codes describing infantile and juvenile cataracts, by their titles, appear to merit inclusion on the pediatric diagnosis category on the Age conflict edit code list. However, according to the requestor, the diagnosis is not constrained to a patient's age, but rather the ``infantile'' versus ``juvenile'' reference is specific to the type of cataract the patient has. These diagnosis codes that are currently listed for the pediatric diagnosis category in the ICD-10 MCE Age conflict edit code list are as follows:

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

    ICD-10-CM diagnosis

    code Description

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

    H26.001.................. Unspecified infantile and juvenile cataract,

    right eye.

    H26.002.................. Unspecified infantile and juvenile cataract,

    left eye.

    H26.003.................. Unspecified infantile and juvenile cataract,

    bilateral.

    H26.009.................. Unspecified infantile and juvenile cataract,

    unspecified eye.

    H26.011.................. Infantile and juvenile cortical, lamellar, or

    zonular cataract, right eye.

    H26.012.................. Infantile and juvenile cortical, lamellar, or

    zonular cataract, left eye.

    H26.013.................. Infantile and juvenile cortical, lamellar, or

    zonular cataract, bilateral.

    H26.019.................. Infantile and juvenile cortical, lamellar, or

    zonular cataract, unspecified eye.

    H26.031.................. Infantile and juvenile nuclear cataract,

    right eye.

    H26.032.................. Infantile and juvenile nuclear cataract, left

    eye.

    H26.033.................. Infantile and juvenile nuclear cataract,

    bilateral.

    H26.039.................. Infantile and juvenile nuclear cataract,

    unspecified eye.

    H26.041.................. Anterior subcapsular polar infantile and

    juvenile cataract, right eye.

    H26.042.................. Anterior subcapsular polar infantile and

    juvenile cataract, left eye.

    H26.043.................. Anterior subcapsular polar infantile and

    juvenile cataract, bilateral.

    H26.049.................. Anterior subcapsular polar infantile and

    juvenile cataract, unspecified eye.

    H26.051.................. Posterior subcapsular polar infantile and

    juvenile cataract, right eye.

    H26.052.................. Posterior subcapsular polar infantile and

    juvenile cataract, left eye.

    H26.053.................. Posterior subcapsular polar infantile and

    juvenile cataract, bilateral.

    H26.059.................. Posterior subcapsular polar infantile and

    juvenile cataract, unspecified eye.

    H26.061.................. Combined forms of infantile and juvenile

    cataract, right eye.

    H26.062.................. Combined forms of infantile and juvenile

    cataract, left eye.

    H26.063.................. Combined forms of infantile and juvenile

    cataract, bilateral.

    H26.069.................. Combined forms of infantile and juvenile

    cataract, unspecified eye.

    H26.09................... Other infantile and juvenile cataract.

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

    Our clinical advisors reviewed the list of diagnoses presented above and confirmed that these diagnosis codes are appropriate to include in the ICD-10 MCE for the pediatric diagnosis category in the Age conflict edit because the diseases described by these codes are typically diagnosed in early childhood and treated very rapidly to prevent amblyopia. Therefore, for FY 2017, we are not proposing to remove these codes under the pediatric diagnosis category in the Age conflict edit. We are proposing to maintain this list in the ICD-10 MCE Version 34, effective October 1, 2016. We are inviting public comments on our proposal.

    As stated earlier, for the pediatric diagnosis category in the Age conflict edit, the MCE considers the age range of 0 through 17 years inclusive. In the ICD-10 MCE Version 33, there are four diagnosis codes describing the body

    Page 25003

    mass index (BMI) for pediatric patients in the pediatric diagnosis category on the Age conflict edit code list. The four ICD-10-CM diagnosis codes describing the BMI percentiles for pediatric patients are as follows:

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

    ICD-10-CM diagnosis

    code Description

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

    Z68.51................... Body mass index (BMI) pediatric, less than

    5th percentile for age.

    Z68.52................... Body mass index (BMI) pediatric, 5th

    percentile to less than 85th percentile for

    age.

    Z68.53................... Body mass index (BMI) pediatric, 85th

    percentile to less than 95th percentile for

    age.

    Z68.54................... Body mass index (BMI) pediatric, greater than

    or equal to 95th percentile for age.

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

    Under the ICD-10-CM Tabular List of Diseases and Injuries, the BMI pediatric diagnosis codes are designated for use in persons 2 through 20 years of age. The percentiles are based on the growth charts published by the CDC. As a result of the age discrepancy between the MCE pediatric diagnosis category in the Age conflict edit (ages 0 through 17) and the Tabular reference for the BMI pediatric codes (ages 2 through 20), we are proposing to remove ICD-10 diagnosis codes Z68.51, Z68.52, Z68.53, and Z68.54 from the ICD-10 MCE pediatric diagnosis category on the Age conflict edit code list for Version 34, effective FY 2017. We are inviting public comments on our proposal.

    One requestor also asked that CMS review the ICD-10-CM diagnosis codes currently included in ICD-10-CM category R62 (Lack of expected normal physiological development in childhood and adults) series. Specifically, the requestor noted that there are adult patients diagnosed with the conditions in subcategory R62.5 (Other and unspecified lack of expected normal physiological development in childhood) and that three of these conditions also were listed in the ICD-10 MCE Version 33 pediatric diagnosis category on the Age conflict edit code list. These three diagnosis codes are:

    R62.50 (Unspecified lack of expected normal physiological development in childhood);

    R62.52 (Short stature (child)); and

    R62.59 (Other lack of expected normal physiological development in childhood).

    We acknowledge that subcategory R62.5 can be confusing with regard to how to appropriately report a condition diagnosed for an adult when the titles reference the terms ``child'' or ``childhood''. Therefore, we consulted with the ICD-10-CM classification staff at the NCHS to determine the intended use and reporting of the diagnosis codes R62.50, R62.52, and R62.59. The NCHS staff agreed that the three diagnosis codes should not be restricted to the pediatric ages as defined by the MCE. The NCHS staff stated the codes are appropriate to report for adult patients, noting that if a patient is diagnosed with short stature as a child, the patient could very well carry over that diagnosis into adulthood.

    During our review of the issue relating to the subcategory R62.5 pediatric diagnosis category on the Age conflict edit code list, we identified another diagnosis code that also appeared appropriate to report for an adult patient. ICD-10-CM diagnosis code Y93.6A (Activity, physical games generally associated with school recess, summer camp and children) is one of several activity codes included in ICD-10-CM Chapter 20 (External Causes of Morbidity). This diagnosis code includes games such as dodge ball and captures the flag, which one can reasonably expect an adult to be engaged in for physical activity.

    We discussed this diagnosis code with the NCHS staff to receive their input on the intent for coding and reporting the code. They agreed that ICD-10-CM diagnosis code Y93.6A is applicable for adults as well as children. Therefore, for FY 2017, we are proposing to remove ICD-10-CM diagnosis codes R62.50, R62.52, and R62.59 in subcategory R62.5 and ICD-10-CM diagnosis code Y93.6A from the ICD-10 MCE pediatric diagnosis category on the Age conflict edit code list. We are inviting public comment on our proposal.

  222. Sex Conflict Edit

    In the MCE, the Sex conflict edit detects inconsistencies between a patient's sex and any diagnosis or procedure on the patient's record; for example, a male patient with cervical cancer (diagnosis) or a female patient with a prostatectomy (procedure). In both instances, the indicated diagnosis or the procedure conflicts with the stated sex of the patient. Therefore, the patient's diagnosis, procedure, or sex is presumed to be incorrect.

    We received a request to review ICD-10-CM diagnosis code Z79.890 (Hormone replacement therapy (postmenopausal)). This code is listed on the Diagnoses for females only edit code list. Therefore, when the diagnosis is reported for a male patient, the edit will be triggered. However, the requester noted that the term ``postmenopausal'' is enclosed in parentheses and is a ``non-essential modifier.'' A ``non-

    essential modifier'' is used in the ICD-10-CM classification to identify a supplementary word that may, or may not be present in the statement of a disease or procedure. In other words, the term in parentheses does not have to be documented to report the code. If the medical record documentation states a female patient is undergoing hormone replacement therapy, the documentation supports assignment of the case to ICD-10-CM diagnosis code Z79.890 (Hormone replacement therapy (postmenopausal)). There does not need to be a diagnostic statement that the patient is postmenopausal to assign the code. The requester asked that CMS review why this diagnosis code is being classified as applicable to females only because, in the absence of the non-essential modifier (postmenopausal), the code could also apply to males.

    We note that the ICD-9-CM equivalent code, V07.4 Hormone replacement therapy (postmenopausal) has been on the female only edit since October 1, 1992 in the ICD-9-CM MCE. We consulted with the ICD-

    10-CM classification staff at the NCHS to determine the intended use and reporting of this diagnosis code. The staff at NCHS acknowledged that, historically, the intent of the ICD-9-CM diagnosis code was for females only. However, they agreed that, under ICD-10-CM, the diagnosis code Z79.890 can be reported for both men and women. Therefore, we are proposing to remove this diagnosis code from the Diagnoses for females only edit code list effective October 1, 2016. We are inviting public comments on our proposal.

    We also considered the ICD-10-CM diagnosis codes listed in the table below that are included on the Diagnoses for females only edit code list.

    Page 25004

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

    ICD-10-CM diagnosis

    code Description

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

    Z44.30................... Encounter for fitting and adjustment of

    external breast prosthesis, unspecified

    breast.

    Z44.31................... Encounter for fitting and adjustment of

    external right breast prosthesis.

    Z44.32................... Encounter for fitting and adjustment of

    external left breast prosthesis).

    Z45.811.................. Encounter for adjustment or removal of right

    breast implant.

    Z45.812.................. Encounter for adjustment or removal of left

    breast implant.

    Z45.819.................. Encounter for adjustment or removal of

    unspecified breast implant).

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

    These codes describe encounters for breast implants or prostheses. Our clinical advisors and the NCHS staff agree that diagnosis codes Z44.30, Z44.31, Z44.32, Z45.811, Z45.812, and Z45.819 are clinically appropriate to report for male patients and should not be restricted to females. Therefore, we are proposing to remove these diagnosis codes from the Diagnoses for females only edit code list in the ICD-10 MCE, effective October 1, 2016. We are inviting public comments on our proposal.

  223. Non-Covered Procedure Edit

    In the MCE, the Non-covered procedure edit identifies procedures for which Medicare does not provide payment. Payment is not provided due to specific criteria that are established in the National Coverage Determination (NCD) process. We refer readers to the Web site at: https://www.cms.gov/Medicare/Coverage/DeterminationProcess/howtorequestanNCD.html for additional information on this process. In addition, there are procedures that would normally not be paid by Medicare but, due to the presence of certain diagnoses, are paid.

    (1) Endovascular Mechanical Thrombectomy

    We received several requests to review ICD-10-PCS procedure code 03CG3ZZ (Extirpation of matter from intracranial artery, percutaneous approach) which is currently listed as a non-covered procedure in the ICD-10 MCE Non-covered procedure edit code list. The comparable ICD-9-

    CM code translations for ICD-10-PCS code 03CG3ZZ are ICD-9-CM codes 17.54 (Percutaneous atherectomy of intracranial vessel(s)) and 39.74 (Endovascular removal of obstruction from head and neck vessel(s)).

    The requestors noted that, under ICD-9-CM, endovascular mechanical thrombectomy of a cerebral artery to remove a clot that is causing an ischemic stroke was reported with procedure code 39.74 (Endovascular removal of obstruction from head and neck vessel(s)) and is a well-

    recognized procedure that has been covered by Medicare. After implementation of ICD-10 on October 1, 2015, claims that were correctly submitted for endovascular mechanical thrombectomy procedures with ICD-

    10-PCS procedure code 03CG3ZZ were triggering the Non-covered procedure edit. The requestors sought clarification as to whether there was a change in coverage or if there was a replication issue.

    Under the ICD-9-CM MCE Version 32, procedure code 00.62 is listed on the Non-covered procedure edit code list. Percutaneous angioplasty of an intracranial vessel procedure (with and without stent) may be reported under ICD-10 with the ICD-10-PCS procedure codes listed in the following table:

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

    ICD-10-PCS procedure code Description

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

    037G34Z.................. Dilation of intracranial artery with drug-

    eluting intraluminal device, percutaneous

    approach.

    037G3DZ.................. Dilation of intracranial artery with

    intraluminal device, percutaneous approach.

    037G3ZZ.................. Dilation of intracranial artery, percutaneous

    approach.

    037G44Z.................. Dilation of intracranial artery with drug-

    eluting intraluminal device, percutaneous

    endoscopic approach.

    037G4DZ.................. Dilation of intracranial artery with

    intraluminal device, percutaneous endoscopic

    approach.

    037G4ZZ.................. Dilation of intracranial artery, percutaneous

    endoscopic approach.

    057L3DZ.................. Dilation of intracranial vein with

    intraluminal device, percutaneous approach.

    057L4DZ.................. Dilation of intracranial vein with

    intraluminal device, percutaneous endoscopic

    approach.

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

    We discovered that a replication error occurred due to an outdated ICD-9-CM entry for procedure code 00.62. This error led to ICD-10-PCS procedure codes 03CG3ZZ (Extirpation of matter from intracranial artery, percutaneous approach) and 05CL3ZZ (Extirpation of matter from intracranial vein, percutaneous approach) being listed as comparable translations for ICD-9-CM code 00.62. As a result, ICD-10-PCS procedure code 03CG3ZZ was included on the ICD-10 MCE Version 33 Non-covered procedure edit code list.

    For FY 2017, we are proposing to remove the ICD-10-PCS procedure codes listed in the following table from the ICD-10 MCE Version 34.0 Non-covered procedure edit code list.

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

    ICD-10-PCS procedure code Description

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

    03CG3ZZ.................. Extirpation of matter from intracranial

    artery, percutaneous approach.

    03CG4ZZ.................. Extirpation of matter from intracranial

    artery, percutaneous endoscopic approach.

    05CL3ZZ.................. Extirpation of matter from intracranial vein,

    percutaneous approach.

    05CL4ZZ.................. Extirpation of matter from intracranial vein,

    percutaneous endoscopic approach.

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

    Page 25005

    We are inviting public comments on our proposal.

    (2) Radical Prostatectomy

    We received a request to review ICD-10-PCS procedure codes related to a radical prostatectomy. Specifically, the requestor noted that when coding cases where the removal of the vas deferens is also performed, a Non-covered procedure edit is triggered. The requestor suggested that the edit for this procedure may be intended for cases where the removal of the vas deferens is being performed for sterilization (vasectomy) purposes. According to the requester, removal of the vas deferens also may be involved with removing the prostate in the radical prostatectomy procedure. The requestor suggested that CMS address this issue by revising the ICD-10 MCE Non-covered procedure edit code list to reflect non-coverage of the procedure codes when the removal of vas deferens procedure is being performed solely for sterilization (vasectomy) purposes.

    Because radical procedures can have different meanings, depending on the procedure, the term ``radical'' is not always reliable information for coding and reporting the procedure. Under ICD-10-PCS, users are instructed to code separately the organs or structures that were actually removed and for which there is a distinctly defined body part. A radical prostatectomy is coded as a ``cluster'' under ICD-10-

    PCS. A ``cluster'' is the term used to describe the circumstance when a combination of ICD-10-PCS procedure codes are needed to fully satisfy the equivalent meaning of an ICD-9-CM procedure code for it to be considered a plausible translation.

    The cluster definition for a radical prostatectomy in ICD-10-PCS currently consists of the one of the following codes:

    0VT00ZZ (Resection of prostate, open approach);

    0VT04ZZ (Resection of prostate, percutaneous endoscopic approach);

    0VT07ZZ (Resection of prostate, via natural or artificial opening); or

    0VT08ZZ Resection of prostate, via natural or artificial opening endoscopic; in combination with one of the following codes:

    0VT30ZZ (Resection of bilateral seminal vesicles, open approach); or

    0VT34ZZ (Resection of bilateral seminal vesicles, percutaneous endoscopic approach).

    As stated earlier, under ICD-10-PCS, users are instructed to code separately the organs or structures that were actually removed and for which there is a distinctly defined body part. Therefore, a patient who undergoes a radical prostatectomy that involves removal of the vas deferens would have this procedure reported separately, in addition to the options displayed in the ``cluster.''

    The ICD-10-PCS procedure codes that may be reported for sterilization and involve the bilateral vas deferens include the following:

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

    ICD-10-PCS procedure code Description

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

    0V5Q0ZZ.................. Destruction of bilateral vas deferens, open

    approach.

    0V5Q3ZZ.................. Destruction of bilateral vas deferens,

    percutaneous approach.

    0V5Q4ZZ.................. Destruction of bilateral vas deferens,

    percutaneous endoscopic approach.

    0VBQ0ZZ.................. Excision of bilateral vas deferens, open

    approach.

    0VBQ3ZZ.................. Excision of bilateral vas deferens,

    percutaneous approach.

    0VBQ4ZZ.................. Excision of bilateral vas deferens,

    percutaneous endoscopic approach.

    0VTQ0ZZ.................. Resection of bilateral vas deferens, open

    approach.

    0VTQ4ZZ.................. Resection of bilateral vas deferens,

    percutaneous endoscopic approach.

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

    The eight procedure codes listed above describing various methods to remove the bilateral vas deferens are currently listed on the ICD-10 MCE Version 33 Non-covered procedure edit code list.

    The requester is correct in stating that the codes related to removal of the bilateral vas deferens are included on the ICD-10 MCE Version 33 Non-covered procedure edit code list to reflect a sterilization procedure. While the vast majority of sterilization procedures will involve reporting the bilateral procedure codes, there are instances where one vas deferens may have been previously removed for other reasons and the remaining vas deferens requires sterilization. Therefore, the procedure codes describing removal of a unilateral vas deferens are also included on the ICD-10 MCE Version 33 Non-covered procedure edit code list to reflect a sterilization procedure. We agree that revising the language in the edit will resolve the issue of covered procedures being inappropriately subject to the edit.

    In addition, while reviewing the Non-covered procedure edit list of codes that may be reported to identify sterilization procedures for males, we considered the procedure codes that may be reported to identify sterilization procedures for females. We examined the list of ICD-10-PCS procedure codes included on the ICD-10 MCE Version 33 Non-

    covered procedure edit code list that could reflect female sterilization (removal of fallopian tubes) and determined those codes also could be reported for other conditions and could be inappropriately subject to the current edit as well.

    Therefore, for FY 2017, we are proposing to create a new ICD-10 MCE Version 34 Non-covered procedure edit to reflect that procedures performed on males involving the unilateral or bilateral vas deferens and procedures performed on females involving the fallopian tubes are not covered procedures for sterilization purposes. The proposed new ICD-10 MCE Version 34 Non-covered procedure edit would be displayed as follows: ``G. Non-covered procedure. The procedure codes shown below are identified as non-covered procedures only when ICD-10-CM diagnosis code Z30.2 (Encounter for sterilization) is listed as the principal diagnosis.''

    We refer readers to Table 6P.1b. associated with this proposed rule (which are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to review the proposed list of non-

    covered procedure codes describing sterilization procedures for males and females for this proposed Non-covered procedure edit. We are inviting public comments on our proposal to create this new Non-covered procedure edit and also invite public comments on the proposed list of codes to describe sterilization procedures for the proposed edit.

  224. Unacceptable Principal Diagnosis Edit

    In the MCE, there are select codes that describe a circumstance which influences an individual's health status

    Page 25006

    but does not actually describe a current illness or injury. There also are codes that are not specific manifestations but may be due to an underlying cause. These codes are considered unacceptable as a principal diagnosis. In limited situations, there are a few codes on the MCE Unacceptable principal diagnosis edit code list that are considered ``acceptable'' when a specified secondary diagnosis is also coded and reported on the claim.

    (1) Liveborn Infant

    We received a request to examine ICD-10-CM diagnosis codes Z38.1 (Single liveborn infant, born outside hospital), Z38.4 (Twin liveborn infant, born outside hospital), and Z38.7 (Other multiple liveborn infant, born outside hospital), all of which are currently listed on the Unacceptable principal diagnosis edit code list for the ICD-10 MCE Version 33. The requestor believed that these codes are listed in error and suggested their removal.

    The ICD-10-CM diagnosis code descriptions for liveborn infants differ from the ICD-9-CM diagnosis code descriptions for liveborn infants. The ICD-9-CM codes differentiate between a liveborn infant that was born prior to admission and hospitalized versus a liveborn infant that was born prior to admission and not hospitalized. The following codes in the ICD-9-CM MCE Version 32 included on the Unacceptable principal diagnosis edit code list are those that describe a liveborn infant that was born outside the hospital and not hospitalized:

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

    ICD-9-CM diagnosis code Description

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

    V30.2.................... Single liveborn, born outside hospital and

    not hospitalized.

    V31.2.................... Twin birth, mate liveborn, born outside

    hospital and not hospitalized.

    V32.2.................... Twin birth, mate stillborn, born outside

    hospital and not hospitalized.

    V33.2.................... Twin birth, unspecified whether mate liveborn

    or stillborn, born outside hospital and not

    hospitalized.

    V34.2.................... Other multiple birth (three or more), mates

    all liveborn, born outside hospital and not

    hospitalized.

    V35.2.................... Other multiple birth (three or more), mates

    all stillborn, born outside of hospital and

    not hospitalized.

    V36.2.................... Other multiple birth (three or more), mates

    liveborn and stillborn, born outside

    hospital and not hospitalized.

    V37.2.................... Other multiple birth (three or more),

    unspecified whether mates liveborn or

    stillborn, born outside of hospital.

    V39.1.................... Liveborn, unspecified whether single, twin or

    multiple, born before admission to hospital.

    V39.2.................... Liveborn, unspecified whether single, twin or

    multiple, born outside hospital and not

    hospitalized.

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

    For replication purposes, the comparable ICD-10-CM diagnosis codes for the above listed codes are: Z38.1 (Single liveborn infant, born outside hospital); Z38.4 (Twin liveborn infant, born outside hospital); and Z38.7 (Other multiple liveborn infant, born outside hospital). There are no other ICD-10-CM diagnosis codes that describe a liveborn infant born outside a hospital.

    The liveborn infant codes are an example of where a particular concept involving the place of birth is not the same between the ICD-9-

    CM and ICD-10-CM classification systems. Because the ICD-10-CM diagnosis codes do not include the same concept as the ICD-9-CM diagnosis codes regarding whether the liveborn infant was hospitalized or not, we agree it would not be appropriate to continue to include the ICD-10-CM diagnosis codes on the Unacceptable principal diagnosis list.

    For FY 2017, we are proposing to remove ICD-10-CM diagnosis codes Z38.1, Z38.4, and Z38.7 from the Unacceptable principal diagnosis edit in the ICD-10 MCE Version 34. We are inviting public comments on our proposal.

    (2) Multiple Gestation

    We received a request to review the ICD-10-CM diagnosis codes related to multiple gestation that are currently listed on the ICD-10 MCE Version 33 Unacceptable principal diagnosis edit code list. The requestor expressed concern that these codes were included in the edit and suggested that CMS evaluate further to determine if they were appropriate.

    In the ICD-10-CM classification, a single diagnosis code describes a multiple gestation and contains information pertaining to the placenta. This differs from the ICD-9-CM classification, where two diagnosis codes are required to separately report (1) multiple gestation with a delivery or complication and (2) multiple gestation with the status of the placenta.

    In the ICD-9-CM MCE Version 32, only the ICD-9-CM diagnosis codes describing the status of the placenta are listed on the Unacceptable principal diagnosis edit code list. These ICD-9-CM diagnosis codes are:

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

    ICD-9-CM diagnosis code Description

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

    V91.00................... Twin gestation, unspecified number of

    placenta, unspecified number of amniotic

    sacs.

    V91.01................... Twin gestation, monochorionic/monoamniotic

    (one placenta, one amniotic sac).

    V91.02................... Twin gestation, monochorionic/diamniotic (one

    placenta, two amniotic sacs).

    V91.03................... Twin gestation, dichorionic/diamniotic (two

    placentae, two amniotic sacs).

    V91.09................... Twin gestation, unable to determine number of

    placenta and number of amniotic sacs.

    V91.10................... Triplet gestation, unspecified number of

    placenta and unspecified number of amniotic

    sacs.

    V91.11................... Triplet gestation, with two or more

    monochorionic fetuses.

    V91.12................... Triplet gestation, with two or more

    monoamniotic fetuses.

    V91.19................... Triplet gestation, unable to determine number

    of placenta and number of amniotic sacs.

    V91.20................... (Quadruplet gestation, unspecified number of

    placenta and unspecified number of amniotic

    sacs.

    V91.21................... Quadruplet gestation, with two or more

    monochorionic fetuses.

    V91.22................... Quadruplet gestation, with two or more

    monoamniotic fetuses.

    V91.29................... Quadruplet gestation, unable to determine

    number of placenta and number of amniotic

    sacs.

    V91.90................... Other specified multiple gestation,

    unspecified number of placenta and

    unspecified number of amniotic sacs.

    V91.91................... Other specified multiple gestation, with two

    or more monochorionic fetuses.

    V91.92................... Other specified multiple gestation, with two

    or more monoamniotic fetuses.

    Page 25007

    V91.99................... Other specified multiple gestation, unable to

    determine number of placenta and number of

    amniotic sacs.

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

    There are 68 ICD-10-CM diagnosis codes included on the ICD-10 MCE Version 33 Unacceptable principal diagnosis edit code list as comparable translations that describe multiple gestation and status of the placenta. The list of these codes is included in Table 6P.1c. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).

    Because only one, and not both, concepts from the ICD-9-CM classification was considered to be an unacceptable principal diagnosis (status of placenta) in the ICD-9-CM MCE, we agree this was a replication error that incorrectly included the ICD-10-CM diagnosis codes that identify both concepts (multiple gestation and status of placenta) in a single code on the ICD-10 MCE. The edit cannot isolate the status of placenta for the ICD-10 MCE because it is reported in combination with the multiple gestation as a single code. Therefore, it is inappropriate to include these codes on the Unacceptable principal diagnosis edit code list.

    For FY 2017, we are proposing to remove the ICD-10-CM diagnosis codes listed in Table 6P.1c. associated with this proposed rule (which is available via Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the ICD-10 MCE Version 34 Unacceptable principal diagnosis list. We are inviting public comments on our proposal.

    (3) Supervision of High Risk Pregnancy

    We received a request to review the ICD-10-CM diagnosis codes related to supervision of high risk pregnancy (elderly primigravida and multigravida) that are currently listed on the ICD-10 MCE Version 33 Unacceptable principal diagnosis edit code list. The requestor stated that these codes were not included in the edit under the ICD-9-CM MCE. According to the requester, the codes describing these conditions should be allowed for reporting as a principal diagnosis based on the ICD-10-CM Tabular List of Diseases instructions for Chapter 15 (Certain Conditions Originating in the Perinatal Period). The chapter-specific guidelines for ICD-10-CM state that ``diagnosis code O80 (Encounter for full-term uncomplicated delivery) should be assigned when a woman is admitted for a full-term normal delivery and delivers a single, healthy infant without any complications antepartum, during the delivery, or postpartum during the delivery episode. Code O80 is always a principal diagnosis. It is not to be used if any other code from Chapter 15 is needed to describe a current complication of the antenatal, delivery, or perinatal period.'' The requestor stated that obstetric patients admitted as inpatients often meet the definition of an elderly primigravida or elderly multigravida, \1\ which is the appropriate condition to be reported as the principal diagnosis. However, because the codes describing this condition are listed on the Unacceptable principal diagnosis edit code list, they are unable to be reported.

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

    \1\ The ICD-10-CM classification defines an elderly primigravida or elderly multigravida as a complication of the pregnancy since the management and care of the expectant mother is affected by the fact they are an older patient.

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

    The diagnosis codes describing high-risk patients admitted for delivery differ between the ICD-10-CM and ICD-9-CM classifications. Under ICD-9-CM, two diagnosis codes are required to separately report concept 1 of elderly primigravida or elderly multigravida and whether a delivery occurred and concept 2 of supervision of high-risk pregnancy with elderly primigravida or elderly multigravida. We display the codes that correspond to these concepts below and titled them as Code List 1 and Code List 2. A code from each list would be reported to fully describe the circumstances of the admission and the patient.

    Code List 1--We note that the following codes are listed on the ICD-9-CM MCE Version 32 Unacceptable principal diagnosis edit code list:

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

    ICD-9-CM diagnosis code Description

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

    V23.81................... Supervision of high-risk pregnancy with

    elderly primigravida

    V23.82................... Supervision of high-risk pregnancy with

    elderly multigravida

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

    Code List 2--We note that the following codes are not listed on the ICD-9-CM MCE Version 32 Unacceptable principal diagnosis edit code list. However, we display them here for the benefit of the reader in the discussion that follows.

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

    ICD-9-CM diagnosis code Description

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

    659.50................... Elderly primigravida, unspecified as to

    episode of care or not applicable

    659.51................... Elderly primigravida, delivered, with or

    without mention of antepartum condition

    659.53................... Elderly primigravida, antepartum condition or

    complication

    659.60................... Elderly multigravida, unspecified as to

    episode of care or not applicable

    659.61................... Elderly multigravida, delivered with or

    without mention of antepartum condition

    659.63................... Elderly multigravida, antepartum condition or

    complication

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

    As noted above, in the ICD-9-CM MCE Version 32, only the ICD-9-CM diagnosis codes describing the supervision of high-risk pregnancy are listed on the Unacceptable principal diagnosis edit code list.

    Page 25008

    There are eight ICD-10-CM diagnosis codes included on the ICD-10 MCE Version 33 Unacceptable principal diagnosis edit code list that describe the concept of elderly primigravida or elderly multigravida and supervision of high-risk pregnancy, in a single code. As shown below, the concept of whether a delivery occurred is not included in the code description for the eight codes.

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

    ICD-10-CM diagnosis code Description

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

    O09.511.................. Supervision of elderly primigravida, first

    trimester

    O09.512.................. Supervision of elderly primigravida, second

    trimester

    O09.513.................. Supervision of elderly primigravida, third

    trimester

    O09.519.................. Supervision of elderly primigravida,

    unspecified trimester

    O09.521.................. Supervision of elderly multigravida, first

    trimester

    O09.522.................. Supervision of elderly multigravida, second

    trimester

    O09.523.................. Supervision of elderly multigravida, third

    trimester

    O09.529.................. Supervision of elderly multigravida,

    unspecified trimester

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

    Because the concepts and coding guidelines between the ICD-9-CM and ICD-10-CM classifications differ greatly in how they define this subset of patients, we acknowledge that the eight ICD-10-CM diagnosis codes listed above should be removed from the ICD-10 MCE Unacceptable principal diagnosis edit code list to permit the reporting of these codes as principal diagnosis when the documentation supports such assignment.

    We also note that during our analysis of the eight diagnosis codes describing elderly primigravida and elderly multigravida high risk pregnancy patients, we found additional codes on the ICD-10 MCE Version 33 Unacceptable principal diagnosis edit code list related to high-risk pregnancy that we believe should also be removed so as to permit the reporting of these codes as principal diagnosis when the documentation supports such assignment.

    For FY 2017, we are proposing to remove all the ICD-10-CM diagnosis codes related to high-risk pregnancy currently listed in Table 6P.1d. associated with this proposed rule (which is available via Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the ICD-10 MCE Version 34 Unacceptable principal diagnosis edit code list. We are inviting public comment on our proposal.

  225. Other MCE Issues

    The following MCE discussion and proposals are the result of internal review of other MCE issues.

    (1) Procedure Inconsistent With Length of Stay Edit

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49411), we finalized a revision for the language of the ICD-10 MCE Version 33 edit for ``Procedure inconsistent with length of stay'' with regard to ICD-10-

    PCS procedure code 5A1955Z (Respiratory ventilation, greater than 96 consecutive hours). The current description of the code edit reads as follows: ``The following procedure code should only be coded on claims with a length of stay greater than four days.''

    As we strive to assist providers with correct coding and reporting of this service, we are proposing to further revise the description of this code edit. For FY 2017, we are proposing to modify the edit description to read as follows: ``The following procedure code should only be coded on claims when the respiratory ventilation is provided for greater than four consecutive days during the length of stay.''

    We believe this modification will further clarify the appropriate circumstances in which ICD-10-PCS code 5A1955Z may be reported. We are inviting public comments on our proposal.

    Also, consistent with the discussion in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49411 through 49412), we believe it would be beneficial to revise the title for ICD-10 MS-DRG 208 (Respiratory System Diagnosis with Ventilator Support C58 (Malignant neoplasm of placenta);

    D39.2 (Neoplasm of uncertain behavior of placenta); and

    F53 (Puerperal psychosis).

    To be consistent with other related conditions currently included on the Age conflict edit code list for maternity diagnoses, we are proposing to add ICD-10-CM diagnosis codes C58, D39.2, and F53 to the Age conflict edit code list for maternity diagnoses.

    We are inviting public comments on our proposals for changes to the FY 2017 ICD-10 MCE Version 34.

    (3) Manifestation Codes Not Allowed as Principal Diagnosis Edit

    Section I.A.13. of the FY 2016 ICD-10-CM Official Guidelines for Coding and Reporting states that certain conditions have both an underlying etiology and multiple body system manifestations due to the underlying etiology. For such conditions, the classification has a coding convention that requires the underlying condition be sequenced first followed by the manifestation. Wherever such a combination exists, there is a ``use additional code'' note at the etiology code, and a ``code first'' note at the manifestation code. These instructional notes indicate proper sequencing order of the codes, etiology followed by manifestation.

    We found that in the ICD-10-CM Tabular List of Diseases at category M02- (Postinfective and reactive arthropathies), a ``Code first underlying disease'' note exists. This would

    Page 25009

    indicate that there are codes in that category that are manifestations of an underlying etiology. We then examined the ICD-10 MCE Version 33 to determine if diagnosis codes from that category were included on the Manifestation codes not allowed as principal diagnosis edit code list. Only three ICD-10-CM diagnosis codes from that category were listed:

    M02.88 (Other reactive arthropathies, vertebrae);

    M02.89 (Other reactive arthropathies, multiple sites); and

    M02.9 (Reactive arthropathy, unspecified).

    Based on the instructional note at the M02- category level, the title at subcategory M02.8 (Other reactive arthropathies), and the three diagnosis codes listed above on the current ICD-10 MCE Version 33 Manifestation codes not allowed as principal diagnosis edit code list, it seems appropriate that all of the diagnosis codes in subcategory M02.8 should be identified as manifestation codes.

    We are proposing to add the ICD-10-CM diagnosis codes listed in the following table to the ICD-10 MCE Version 34 Manifestation codes not allowed as principal diagnosis edit code list.

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

    ICD-10-CM diagnosis code Description

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

    M02.80................... Other reactive arthropathies, unspecified

    site.

    M02.811.................. Other reactive arthropathies, right shoulder.

    M02.812.................. Other reactive arthropathies, left shoulder.

    M02.819.................. Other reactive arthropathies, unspecified

    shoulder.

    M02.821.................. Other reactive arthropathies, right elbow.

    M02.822.................. Other reactive arthropathies, left elbow.

    M02.829.................. Other reactive arthropathies, unspecified

    elbow.

    M02.831.................. Other reactive arthropathies, right wrist.

    M02.832.................. Other reactive arthropathies, left wrist.

    M02.839.................. Other reactive arthropathies, unspecified

    wrist.

    M02.841.................. Other reactive arthropathies, right hand.

    M02.842.................. Other reactive arthropathies, left hand.

    M02.849.................. Other reactive arthropathies, unspecified

    hand.

    M02.851.................. Other reactive arthropathies, right hip.

    M02.852.................. Other reactive arthropathies, left hip.

    M02.859.................. Other reactive arthropathies, unspecified

    hip.

    M02.861.................. Other reactive arthropathies, right knee.

    M02.862.................. Other reactive arthropathies, left knee.

    M02.869.................. Other reactive arthropathies, unspecified

    knee.

    M02.871.................. Other reactive arthropathies, right ankle and

    foot.

    M02.872.................. Other reactive arthropathies, left ankle and

    foot.

    M02.879.................. Other reactive arthropathies, unspecified

    ankle and foot.

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

    We are inviting public comments on our proposal.

    (4) Questionable Admission Edit

    In the MCE, some diagnoses are not usually sufficient justification for admission to an acute care hospital. For example, if a patient is assigned ICD-10-CM diagnosis code R03.0 (Elevated blood pressure reading, without diagnosis of hypertension), the patient would have a questionable admission because an elevated blood pressure reading is not normally sufficient justification for admission to a hospital.

    Upon review of the ICD-10-CM diagnosis codes listed under the ICD-

    10 MCE Version 33 Questionable Admission edit, our clinical advisors determined that certain diagnoses clinically warrant hospital admission. Therefore, we are proposing to remove the following diagnosis codes from the ICD-10 MCE Version 34.0 Questionable admission edit.

    T81.81XA (Complication of inhalation therapy, initial encounter);

    T88.4XXA (Failed or difficult intubation, initial encounter);

    T88.7XXA (Unspecified adverse effect of drug or medicament, initial encounter);

    T88.8XXA (Other specified complications of surgical and medical care, not elsewhere classified, initial encounter); and

    T88.9XXA (Complication of surgical and medical care, unspecified, initial encounter).

    We are inviting public comments on our proposal.

    (5) Removal of Edits and Future Enhancement

    With the implementation of ICD-10, it is clear that there are several concepts that differ from the ICD-9-CM classification. These differences are evident in the MCE as discussed earlier in this section. Looking ahead to the needs and uses of coded data as the data continue to evolve from the reporting, collection, processing, coverage, payment and analysis aspect, we believe the need to ensure the accuracy of the coded data becomes increasingly significant.

    The purpose of the MCE is to ensure that errors and inconsistencies in the coded data are recognized during Medicare claims processing. As shown in the FY 2016 ICD-10 MCE Version 33 manual file and an ICD-9-CM MCE Version 33.0A manual file (developed for analysis only), an edit code list exists according to the definition or criteria set forth for each specified type of edit. Over time, certain edits under the ICD-9-

    CM MCE became discontinued as they were no longer needed. However, the MCE manual has continued to make reference to these discontinued edits, including through the replication process with transitioning to ICD-10.

    Currently, the FY 2016 ICD-10 MCE Version 33 manual file displays the following edits:

    12. Open biopsy check. Effective October 1, 2010, the Open biopsy check edit was discontinued and will appear for claims processed using MCE Version 2.0-26.0 only.

    13. Bilateral procedure. Effective with the ICD-10 implementation, the bilateral procedure edit will be discontinued.

    Because these edits are no longer valid, we are proposing to remove the reference to them, effective with the ICD-10 MCE manual and software

    Page 25010

    Version 34.0, for FY 2017. We are inviting public comments on our proposal.

    As we continue to evaluate the purpose and function of the MCE with respect to the transition to ICD-10, we encourage public input for future discussion. For instance, we recognize a need to further examine the current list of edits and the definitions of those edits. We encourage public comments on whether there are additional concerns with the current edits, including specific edits or language that should be removed or revised, edits that should be combined, or new edits that should be added to assist in detecting errors or inaccuracies in the coded data.

    13. Proposed Changes to Surgical Hierarchies

    Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS-DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS-DRG. The surgical hierarchy, an ordering of surgical classes from most resource-

    intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS-DRG associated with the most resource-intensive surgical class.

    Because the relative resource intensity of surgical classes can shift as a function of MS-DRG reclassification and recalibrations, for FY 2017, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization.

    A surgical class can be composed of one or more MS-DRGs. For example, in MDC 11, the surgical class ``kidney transplant'' consists of a single MS-DRG (MS-DRG 652) and the class ``major bladder procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS-DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS-DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS-DRGs 001 and 002 and surgical class B includes MS-

    DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 001 are higher than that of MS-DRG 003, but the average costs of MS-

    DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weigh the average costs of each MS-DRG in the class by frequency (that is, by the number of cases in the MS-DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of ``other O.R. procedures'' as discussed in this rule.

    This methodology may occasionally result in assignment of a case involving multiple procedures to the lower-weighted MS-DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable.

    We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the ``other O.R. procedures'' surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS-DRG or MS-DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The ``other O.R. procedures'' class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate.

    A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higher-

    ordered surgical class has lower average costs than the class ordered below it.

    Based on the changes that we are proposing to make for FY 2017, as discussed in section II.F.4.c. of the preamble of this FY 2017 IPPS/

    LTCH PPS proposed rule, we are proposing to maintain the existing surgical hierarchy in MDC 5 for proposed revised MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with MCC and without MCC, respectively).

    We are inviting public comments on our proposals.

    14. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2017

    The tables identifying the proposed additions and deletions to the MCC severity levels list and the proposed additions and deletions to the CC severity levels list for FY 2017 are available via the Internet on the CMS Web site at: http://cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as follows:

    Table 6I.1--Proposed Additions to the MCC List--FY 2017;

    Table 6I.2--Proposed Deletions to the MCC List--FY 2017;

    Table 6J.1--Proposed Additions to the CC List--FY 2017; and

    Table 6J.2--Proposed Deletions to the CC List--FY 2017.

    15. Proposed Complications or Comorbidity (CC) Exclusions List

  226. Background of the CC List and the CC Exclusions List

    Under the IPPS MS-DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 (72 FR 47152 through 47171).

    Page 25011

  227. Proposed CC Exclusions List for FY 2017

    In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As previously indicated, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list.

    In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles:

    Chronic and acute manifestations of the same condition should not be considered CCs for one another;

    Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another;

    Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another;

    Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and

    Closely related conditions should not be considered CCs for one another.

    The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541) for detailed information regarding revisions that were made to the CC Exclusion Lists under the ICD-9-CM MS-DRGs.

    For FY 2017, we are proposing changes to the ICD-10 MS-DRGs Version 34 CC Exclusion List. Therefore, we have developed Table 6G.1.--

    Proposed Secondary Diagnosis Order Additions to the CC Exclusions List--FY 2017; Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC Exclusions List--FY 2017; Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2017; and Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2017. Each of these principal diagnosis codes for which there is a CC exclusion is shown in Table 6G.2. with an asterisk and the conditions that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. Beginning with discharges on or after October 1 of each year, the indented diagnoses are not recognized by the GROUPER as valid CCs for the asterisked principal diagnoses. Tables 6G and 6H associated with this proposed rule are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

    To capture new and deleted diagnosis and procedure codes, for FY 2017, we have developed Table 6A.--New Diagnosis Codes, Table 6B.--New Procedure Codes, and Table 6C--Invalid Diagnosis Codes to this proposed rule. However, they are not published in the Addendum to this proposed rule but are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, as described in section VI. of the Addendum to this proposed rule. We note that while we did not specifically develop a Table 6E.--Revised Diagnosis Code Titles for this proposed rule, a document containing the FY 2017 revised diagnosis code titles, as well as new diagnosis codes that have been finalized to date since implementation of the partial code freeze, was made available in advance in response to requests from the health care industry. During the March 9-10, 2016 ICD-10 Coordination and Maintenance Committee meeting, a discussion regarding this document was presented. Participants were informed that the document titled ``FY 2017 New Released ICD-10-CM Codes'' would contain the information that would otherwise be included for this table. This document has been posted along with the other March 9-10, 2016 ICD-10 Coordination and Maintenance Committee meeting materials on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd9cm_maintenance.htm.

    In addition, we did not specifically develop a Table 6F.--Revised Procedure Code Titles for this proposed rule. However, a document containing the FY 2017 revised procedure code titles, as well as new procedure codes that have been finalized to date since implementation of the partial code freeze, was made available in advance in response in response to requests from the health care industry. During the March 9-10, 2016 ICD-10 Coordination and Maintenance Committee meeting, a discussion regarding this document was presented. Participants were informed that the document titled ``FY 2017 New Revised ICD-10-PCS Codes'' would contain the information that would otherwise be included for this table. This document is posted on the CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2016-03-09-MeetingMaterials.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=descending.

    As mentioned in section II.F.14. of this proposed rule, we are proposing additions and deletions to the MS-DRG MCC and CC Lists for FY 2017 based on the creation of new ICD-10-CM codes. This information is available in Tables 6I.1 (Proposed Additions to the MCC List--FY 2017), 6I.2 (Proposed Deletions to the MCC List--FY 2017), 6J.1 (Proposed Additions to the CC List--FY 2017), and 6J.2 (Proposed Deletions to the CC List--FY 2017). However, they are not published in the Addendum to this proposed rule but are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, as described in section VI. of the Addendum to this proposed rule.

    16. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 986; and 987 Through 989

    Each year, we review cases assigned to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively); MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively); and MS-DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) to determine whether it would be appropriate to change the procedures assigned among these MS-

    DRGs. MS-DRGs 981 through 983, 984 through 986, and 987 through 989 are reserved for those cases in which none of the O.R. procedures performed are related to the

    Page 25012

    principal diagnosis. These MS-DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. Under ICD-9-CM, MS-

    DRGs 984 through 986 are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis:

    60.0 (Incision of prostate);

    60.12 (Open biopsy of prostate);

    60.15 (Biopsy of periprostatic tissue);

    60.18 (Other diagnostic procedures on prostate and periprostatic tissue);

    60.21 (Transurethral prostatectomy);

    60.29 (Other transurethral prostatectomy);

    60.61 (Local excision of lesion of prostate);

    60.69 (Prostatectomy, not elsewhere classified);

    60.81 (Incision of periprostatic tissue);

    60.82 (Excision of periprostatic tissue);

    60.93 (Repair of prostate);

    60.94 (Control of (postoperative) hemorrhage of prostate);

    60.95 (Transurethral balloon dilation of the prostatic urethra);

    60.96 (Transurethral destruction of prostate tissue by microwave thermotherapy);

    60.97 (Other transurethral destruction of prostate tissue by other thermotherapy); and

    60.99 (Other operations on prostate).

    Under the ICD-10 MS-DRGs Version 33, the comparable ICD-10-PCS code translations for the above list of codes are available in Table 6P.2. associated with this proposed rule (which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html). All remaining O.R. procedures are assigned to MS-DRGs 981 through 983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.

    We refer the reader to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50544 through 50545) for detailed information regarding modifications that were made to the former ICD-9-CM CMS DRG 468 (MS-DRGs 981 through 983), CMS DRG 476 (MS-DRGs 984 through 986), and CMS DRG 477 (MS-DRGs 987 through 989) with regard to the movement of procedure codes. We note that no procedure codes were moved from these DRGs from FY 2008 through FY 2016.

    Our review of MedPAR claims data showed that there are no cases that merited movement or should logically be reassigned from ICD-10 MS-

    DRGs 984 through 986 to any of the other MDCs. Therefore, for FY 2017, we are not proposing to change the procedures assigned among these MS-

    DRGs. We are inviting public comments on our proposal to maintain the current structure of these MS-DRGs.

  228. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 Through 989 Into MDCs

    We annually conduct a review of procedures producing assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS-DRGs into one of the surgical MS-DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC.

    We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS-DRGs for the MDC in which the diagnosis falls. Upon review of the claims data from the December 2015 update of the FY 2015 MedPAR file, we did not find any cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2017, we are not proposing to remove any procedures from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the surgical MS-

    DRGs for the MDC into which the principal diagnosis is assigned. We are inviting public comments on our proposal to maintain the current structure of these MS-DRGs.

  229. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 Through 986, and 987 Through 989

    We also reviewed the list of ICD-10-PCS procedures that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, 984 through 986, or 987 through 989, to ascertain whether any of those procedures should be reassigned from one of those three groups of MS-DRGs to another of the three groups of MS-

    DRGs based on average costs and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS-DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MS-DRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data.

    There are no cases representing shifts in treatment practice or reporting practice that would make the resulting MS-DRG assignment illogical, or that merited movement so that cases should logically be assigned to any of the other MDCs. Therefore, for FY 2017, we are not proposing to move any procedure codes among these MS-DRGs. We are inviting public comments on our proposal.

  230. Adding Diagnosis or Procedure Codes to MDCs

    Based on the review of cases in the MDCs, we are proposing to add multiple diagnosis and procedure codes to MDCs for FY 2017 to address replication issues. We discuss each of these proposals below.

    (1) Angioplasty of Extracranial Vessel

    In the ICD-9-CM MS-DRGs Version 32, procedures describing angioplasty of an extracranial vessel were assigned to MDC 1 (Diseases and Disorders of the Nervous System) under MS-DRGs 037, 038, and 039 (Extracranial Procedures with MCC, with CC, or without CC/MCC, respectively). Under ICD-9-CM, more than one ICD-9-CM code could be reported for these procedures, depending on the approach that was documented. For example, ICD-9-CM procedure code 00.61 (Percutaneous angioplasty of extracranial vessel(s)) would have been appropriately reported if the percutaneous approach was documented, and procedure code 39.50 (Angioplasty of other non-coronary vessel(s)) would have been appropriately reported if a specified approach was not documented.

    A replication issue for 41 ICD-10-PCS procedure codes describing angioplasty with the open approach was identified after implementation of the ICD-10 MS-DRGs Version 33. In the code translation, these 41 ICD-10-PCS procedure codes were grouped and assigned to ICD-10 MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with

    Page 25013

    MCC, with CC, and without CC/MCC, respectively). However, these procedure codes should have been grouped to ICD-10 MS-DRGs 037 through 039 when a principal diagnosis was reported under MDC 1.

    To resolve this replication issue, we are proposing to add the 41 ICD-10-PCS procedure codes listed in the following table to ICD-10 MS-

    DRGs 037 through 039 under MDC 1.

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

    ICD-10-PCS procedure code Description

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

    037H04Z.................. Dilation of right common carotid artery with

    drug-eluting intraluminal device, open

    approach.

    037H0DZ.................. Dilation of right common carotid artery with

    intraluminal device, open approach.

    037H0ZZ.................. Dilation of right common carotid artery, open

    approach.

    037J04Z.................. Dilation of left common carotid artery with

    drug-eluting intraluminal device, open

    approach.

    037J0DZ.................. Dilation of left common carotid artery with

    intraluminal device, open approach.

    037J0ZZ.................. Dilation of left common carotid artery, open

    approach.

    037K04Z.................. Dilation of right internal carotid artery

    with drug-eluting intraluminal device, open

    approach.

    037K0DZ.................. Dilation of right internal carotid artery

    with intraluminal device, open approach.

    037K0ZZ.................. Dilation of right internal carotid artery,

    open approach.

    037L04Z.................. Dilation of left internal carotid artery with

    drug-eluting intraluminal device, open

    approach.

    037L0DZ.................. Dilation of left internal carotid artery with

    intraluminal device, open approach.

    037L0ZZ.................. Dilation of left internal carotid artery,

    open approach.

    037M04Z.................. Dilation of right external carotid artery

    with drug-eluting intraluminal device, open

    approach.

    037M0DZ.................. Dilation of right external carotid artery

    with intraluminal device, open approach.

    037M0ZZ.................. Dilation of right external carotid artery,

    open approach.

    037N04Z.................. Dilation of left external carotid artery with

    drug-eluting intraluminal device, open

    approach.

    037N0DZ.................. Dilation of left external carotid artery with

    intraluminal device, open approach.

    037N0ZZ.................. Dilation of left external carotid artery,

    open approach.

    037P04Z.................. Dilation of right vertebral artery with drug-

    eluting intraluminal device, open approach.

    037P0DZ.................. Dilation of right vertebral artery with

    intraluminal device, open approach.

    037P0ZZ.................. Dilation of right vertebral artery, open

    approach.

    037Q04Z.................. Dilation of left vertebral artery with drug-

    eluting intraluminal device, open approach.

    037Q0DZ.................. Dilation of left vertebral artery with

    intraluminal device, open approach.

    037Q0ZZ.................. Dilation of left vertebral artery, open

    approach.

    037Y04Z.................. Dilation of upper artery with drug-eluting

    intraluminal device, open approach.

    037Y0DZ.................. Dilation of upper artery with intraluminal

    device, open approach.

    037Y0ZZ.................. Dilation of upper artery, open approach.

    057M0DZ.................. Dilation of right internal jugular vein with

    intraluminal device, open approach.

    057M0ZZ.................. Dilation of right internal jugular vein, open

    approach.

    057N0DZ.................. Dilation of left internal jugular vein with

    intraluminal device, open approach.

    057N0ZZ.................. Dilation of left internal jugular vein, open

    approach.

    057P0DZ.................. Dilation of right external jugular vein with

    intraluminal device, open approach.

    057P0ZZ.................. Dilation of right external jugular vein, open

    approach

    057Q0DZ.................. Dilation of left external jugular vein with

    intraluminal device, open approach.

    057Q0ZZ.................. Dilation of left external jugular vein, open

    approach.

    057R0DZ.................. Dilation of right vertebral vein with

    intraluminal device, open approach.

    057R0ZZ.................. Dilation of right vertebral vein, open

    approach.

    057S0DZ.................. Dilation of left vertebral vein with

    intraluminal device, open approach.

    057S0ZZ.................. Dilation of left vertebral vein, open

    approach.

    057T0DZ.................. Dilation of right face vein with intraluminal

    device, open approach.

    057T0ZZ.................. Dilation of right face vein, open approach.

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

    We are inviting public comments on our proposal to add the above listed codes to ICD-10 MS-DRGs 037, 038, and 039 (Extracranial Procedures with MCC, with CC, or without CC/MCC, respectively) under MDC 1, effective October 1, 2016, for the ICD-10 MS-DRGs Version 34.

    (2) Excision of Abdominal Arteries

    In the ICD-9-CM MS-DRGs Version 32, procedures involving excision of a vessel and anastomosis, such as those performed for the treatment of an abdominal artery aneurysm (aneurysmectomy), are identified with procedure code 38.36 (Resection of vessel with anastomosis, abdominal arteries) and are assigned to the following MDCs and MS-DRGs:

    MDC 5 (Diseases and Disorders of the Circulatory System): MS-DRGs 270 through 272 (Other Major Cardiovascular Procedures with MCC, with CC and without CC/MCC, respectively);

    MDC 6 (Diseases and Disorders of the Digestive System): MS-DRGs 356 through 358 (Other Digestive System O.R. Procedures with MCC, with CC and without CC/MCC, respectively);

    MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract): MS-DRGs 673 through 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC and without CC/MCC, respectively);

    MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): MS-DRGs 907 through 909 (Other O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC, respectively); and

    MDC 24 (Multiple Significant Trauma): MS-DRG 957 through 959 (Other O.R. Procedures for Multiple Significant Trauma without CC/

    MCC).

    A replication issue for 34 ICD-10-PCS procedure codes describing aneurysmectomy procedures with the open and percutaneous endoscopic approach was identified after implementation of the ICD-10 MS-DRGs Version 33. For example, cases with a principal diagnosis of I72.2 (Aneurysm of renal artery) and procedure code 04BA0ZZ (Excision of left renal artery, open approach) are resulting in assignment to ICD-10 MS-

    DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and

    Page 25014

    without CC/MCC, respectively) instead of to MDC 11 in MS-DRGs 673 through 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively).

    To resolve this replication issue, we are proposing to add the 34 ICD-10-PCS procedure codes listed in the following table that are comparable translations of ICD-9-CM procedure code 38.36 to ICD-10 MDCs 6, 11, 21, and 24. We note that there is no replication issue related to MDC 5 as the ICD-10-PCS procedure codes listed in the table below group there appropriately.

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

    ICD-10-PCS procedure code Description

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

    04B10ZZ.................. Excision of celiac artery, open approach.

    04B14ZZ.................. Excision of celiac artery, percutaneous

    endoscopic approach.

    04B20ZZ.................. Excision of gastric artery, open approach.

    04B24ZZ.................. Excision of gastric artery, percutaneous

    endoscopic approach.

    04B30ZZ.................. Excision of hepatic artery, open approach.

    04B34ZZ.................. Excision of hepatic artery, percutaneous

    endoscopic approach.

    04B40ZZ.................. Excision of splenic artery, open approach.

    04B44ZZ.................. Excision of splenic artery, percutaneous

    endoscopic approach.

    04B50ZZ.................. Excision of superior mesenteric artery, open

    approach.

    04B54ZZ.................. Excision of superior mesenteric artery,

    percutaneous endoscopic approach.

    04B60ZZ.................. Excision of right colic artery, open

    approach.

    04B64ZZ.................. Excision of right colic artery, percutaneous

    endoscopic approach.

    04B70ZZ.................. Excision of left colic artery, open approach.

    04B74ZZ.................. Excision of left colic artery, percutaneous

    endoscopic approach.

    04B80ZZ.................. Excision of middle colic artery, open

    approach.

    04B84ZZ.................. Excision of middle colic artery, percutaneous

    endoscopic approach.

    04B90ZZ.................. Excision of right renal artery, open

    approach.

    04B94ZZ.................. Excision of right renal artery, percutaneous

    endoscopic approach.

    04BA0ZZ.................. Excision of left renal artery, open approach.

    04BA4ZZ.................. Excision of left renal artery, percutaneous

    endoscopic approach.

    04BB0ZZ.................. Excision of inferior mesenteric artery, open

    approach.

    04BB4ZZ.................. Excision of inferior mesenteric artery,

    percutaneous endoscopic approach.

    04BC0ZZ.................. Excision of right common iliac artery, open

    approach.

    04BC4ZZ.................. Excision of right common iliac artery,

    percutaneous endoscopic approach.

    04BD0ZZ.................. Excision of left common iliac artery, open

    approach.

    04BD4ZZ.................. Excision of left common iliac artery,

    percutaneous endoscopic approach.

    04BE0ZZ.................. Excision of right internal iliac artery, open

    approach.

    04BE4ZZ.................. Excision of right internal iliac artery,

    percutaneous endoscopic approach.

    04BF0ZZ.................. Excision of left internal iliac artery, open

    approach.

    04BF4ZZ.................. Excision of left internal iliac artery,

    percutaneous endoscopic approach.

    04BH0ZZ.................. Excision of right external iliac artery, open

    approach.

    04BH4ZZ.................. Excision of right external iliac artery,

    percutaneous endoscopic approach.

    04BJ0ZZ.................. Excision of left external iliac artery, open

    approach.

    04BJ4ZZ.................. Excision of left external iliac artery,

    percutaneous endoscopic approach.

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

    Adding these procedures to those MDCs in the ICD-10 MS-DRGs Version 34 will result in a more accurate replication for the same procedure under the ICD-9-CM MS-DRGs Version 32. We also are proposing that these procedure codes be assigned to the corresponding MS-DRGs in each respective MDC as listed above. The proposed changes would eliminate erroneous assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) for these procedures.

    We are inviting public comments on our proposal to add the above listed codes to MDCs 6, 11, 21, and 24 in the corresponding MS-DRGs, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    (3) Excision of Retroperitoneal Tissue

    In the ICD-9-CM MS-DRGs Version 32, procedures involving excision of a retroperitoneal lesion (or tissue), such as those performed for the treatment of a neoplasm, are identified with procedure code 54.4 (Excision or destruction of peritoneal tissue) and are assigned to a number of MDCs and MS-DRGs across a variety of body systems, some of which include the following:

    MDC 6 (Diseases and Disorders of the Digestive System): MS-DRGs 356 through 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively);

    MDC 7 (Diseases and Disorders of the Hepatobiliary System and Pancreas): MS-DRGs 423 through 425 (Other Hepatobiliary or Pancreas O.R. Procedures with MCC, with CC, and without CC/MCC, respectively); and

    MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): MS-DRGs 628 through 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for the ICD-10-PCS procedure codes describing excision of retroperitoneum that involves MDC 6 was identified after implementation of the ICD-10 MS-DRGs Version 33. These procedure codes are ICD-10-PCS codes 0WBH0ZZ (Excision of retroperitoneum, open approach), 0WBH3ZZ (Excision of retroperitoneum, percutaneous approach), and 0WBH4ZZ (Excision of retroperitoneum, percutaneous endoscopic approach). For example, when an ICD-10-CM diagnosis code such as D20.0 (Benign neoplasm of soft tissue of retroperitoneum) is reported with any one of these three ICD-10-PCS procedure codes, the case is assigned to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

    To resolve this replication issue, we are proposing to add the three ICD-10-PCS procedure codes to MDC 6 in MS-DRGs 356 through 358 (Other Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively). This would result in a more accurate replication of the comparable procedure under the ICD-9-CM MS-DRGs Version

    Page 25015

    32. The proposed changes also would eliminate erroneous assignment to MS-DRGs 981 through 983 for these procedures.

    We are inviting public comments on our proposal to add the three ICD-10-PCS codes describing excision of retroperitoneum to MDC 6 in MS-

    DRGs 356 through 358, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    (4) Occlusion of Vessels: Esophageal Varices

    In the ICD-9-CM MS-DRGs Version 32, procedures including ligation or surgical occlusion of esophageal varices are identified with procedure code 42.91 (Ligation of esophageal varices) and are assigned to MDC 6 (Diseases and Disorders of the Digestive System) under MS-DRGs 326 through 328 (Stomach, Esophageal and Duodenal Procedures with MCC, with CC, and without CC/MCC, respectively) and MDC 7 (Diseases and Disorders of the Hepatobiliary System and Pancreas) under MS-DRGs 423 through 425 (Other Hepatobiliary or Pancreas O.R. procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for MDC 7 involving ICD-10-PCS procedure codes 06L30CZ (Occlusion of esophageal vein with extraluminal device, open approach) and 06L30DZ (Occlusion of esophageal vein with intraluminal device, open approach) was identified in the ICD-10 MS-DRGs Version 33 after implementation on October 1, 2015. For instance, when an ICD-10-

    CM diagnosis code such as K70.30 (Alcoholic cirrhosis of liver without ascites) is reported with either one of the ICD-10-PCS procedure codes, it results in assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

    To resolve this replication issue, we are proposing to add the two ICD-10-PCS procedure codes describing occlusion of esophageal vein to MDC 7 under MS-DRGs 423 through 425. This will result in a more accurate replication of the comparable procedure under the ICD-9-CM MS-

    DRGs Version 32. The proposed changes also would eliminate erroneous assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) for these procedures.

    We are inviting public comments on our proposal to add ICD-10-PCS procedure codes 06L30CZ and 06L30DZ to MDC 7 under MS-DRGs 423 through 425, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    (5) Excision of Vulva

    In the ICD-9-CM MS-DRGs Version 32, procedures involving excision of the vulva are identified with procedure code 71.3 (Other local excision or destruction of vulva and perineum) and are assigned to the following MDCs and MS-DRGs:

    MDC 9 (Diseases & Disorders of the Skin, Subcutaneous Tissue and Breast): MS-DRGs 579 through 581 (Other Skin, Subcutaneous Tissue and Breast Procedures with MCC, with CC, and without CC/MCC, respectively); and

    MDC 13 (Diseases & Disorders of the Female Reproductive System): MS-DRG 746 (Vagina, cervix and vulva procedures with CC/MCC) and MS-DRG 747 (Vagina, Cervix and Vulva procedures without CC/MCC).

    A replication issue involving ICD-10-PCS procedure code 0UBMXZZ (Excision of vulva, external approach) was identified after implementation of the ICD-10 MS-DRGs Version 33. For example, when cases with an ICD-10-CM principal diagnosis of code D07.1 (Carcinoma in situ of vulva) are reported with ICD-10-PCS procedure code 0UBMXZZ (Excision of vulva, external approach), they are resulting in assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

    To resolve this replication issue, we are proposing to add ICD-10-

    PCS procedure code 0UBMXZZ to MDC 13 under MS-DRGs 746 and 747. Adding procedure code 0UBMXZZ to MDC 13 in MS-DRGs 746 and 747 would result in a more accurate replication of the comparable procedure under the ICD-

    9-CM MS-DRGs Version 32. The proposed changes also would eliminate erroneous assignment to MS-DRGs 981 through 983 for these procedures. In addition, the proposed changes would be consistent with the assignment of other clinically similar procedures, such as ICD-10-PCS procedure code 0WBNXZZ (Excision of female perineum, external approach). Finally, we note that there is no replication issue for MDC 9 regarding this procedure code.

    We are inviting public comment on our proposal to add ICD-10-PCS procedure code 0UBMXZZ to MDC 13 in MS-DRGs 746 and 747, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    (6) Lymph Node Biopsy

    In the ICD-9-CM MS-DRGs Version 32, procedures involving a lymph node biopsy are identified with procedure code 40.11 (Biopsy of lymphatic structure), which may be assigned to several MDCs representing various body systems. Under the ICD-10 MS-DRGs Version 33, this procedure has 114 ICD-10-PCS procedure codes considered to be comparable translations that describe diagnostic drainage or excision of specified lymphatic structures and also warrant assignment to the same MDCs across various body systems.

    A replication issue for the lymph node biopsy procedure involving MDC 4 (Diseases and Disorders of the Respiratory System) under the ICD-

    10 MS-DRGs Version 33 was identified after implementation on October 1, 2015. For example, when a respiratory system diagnosis is reported with the comparable ICD-10-PCS procedure code 07B74ZX (Excision of thorax lymphatic, percutaneous endoscopic approach, diagnostic), the case is assigned to MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

    To resolve this replication issue, we are proposing to add ICD-10-

    PCS procedure code 07B74ZX to MDC 4 under MS-DRGs 166 through 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) to more accurately replicate assignment of the comparable procedure code under the ICD-9-CM MS-DRGs Version 32.

    While reviewing that specific example, we also identified two other comparable ICD-10-PCS procedure code translations of ICD-9-CM procedure code 40.11 (Biopsy of lymphatic structure) describing diagnostic excision of thoracic lymphatic structures that were not replicated consistent with the ICD-9-CM MS-DRGs Version 32. These are ICD-10-PCS procedure codes 07B70ZX (Excision of thorax lymphatic, open approach, diagnostic) and 07B73ZX (Excision of thorax lymphatic, percutaneous approach, diagnostic). Therefore, we are proposing to add these two ICD-10-PCS procedure codes to MDC 4 in MS-DRGs 166 through 168 as well.

    Adding ICD-10-PCS procedure codes 07B74ZX, 07B70ZX, and 07B73ZX that describe diagnostic excision of thoracic lymphatic structures to MDC 4 under MS-DRGs 166 through 168 would result in a more accurate replication of the comparable procedure under ICD-9-CM MS-DRGs Version 32. The proposed changes would eliminate erroneous assignment to MS-

    DRGs 987 through 989 for these procedures.

    Page 25016

    We are inviting public comments on our proposal to add ICD-10-PCS procedure codes 07B74ZX, 07B70ZX, and 07B73ZX to the ICD-10 MS-DRGs Version 34 for MS-DRGs 166 through 168 in MDC 4, effective October 1, 2016.

    (7) Obstetrical Laceration Repair

    A replication issue for eight ICD-10-PCS procedure codes describing procedures that may be performed for the repair of obstetrical lacerations was identified after implementation of the ICD-10 MS-DRGs Version 33. These codes are:

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

    ICD-10-PCS procedure

    code Description

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

    0DQQ0ZZ.................. Repair anus, open approach.

    0DQQ3ZZ.................. Repair anus, percutaneous approach.

    0DQQ4ZZ.................. Repair anus, percutaneous endoscopic

    approach.

    0DQQ7ZZ.................. Repair anus, via natural or artificial

    opening.

    0DQQ8ZZ.................. Repair anus, via natural or artificial

    opening endoscopic.

    0DQR0ZZ.................. Repair anal sphincter, open approach.

    0DQR3ZZ.................. Repair anal sphincter, percutaneous approach.

    0DQR4ZZ.................. Repair anal sphincter, percutaneous

    endoscopic approach.

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

    We discovered that the ICD-10 MDC and MS-DRG assignment are not consistent with other ICD-10-PCS procedure codes that identify and describe clinically similar procedures for the repair of obstetrical lacerations which are coded and reported based on the extent of the tear. For example, ICD-10-PCS procedure code 0DQP0ZZ (Repair rectum, open approach) is appropriately assigned to MDC 14 (Pregnancy, Childbirth and the Puerperium) under MS-DRG 774 (Vaginal Delivery with Complicating Diagnoses). This procedure may be performed in the treatment of a fourth-degree perineal laceration involving the rectal mucosa. In contrast, ICD-10-PCS procedure code 0DQR0ZZ (Repair anal sphincter, open approach), when reported for repair of a perineal laceration, currently results in assignment to MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis).

    To resolve this replication issue, we are proposing to add these eight ICD-10-PCS procedure codes to MDC 14 in MS-DRG 774. The proposed changes would eliminate erroneous assignment to MS-DRGs 987 through 989 for these procedures.

    We are inviting public comments on our proposal to add the eight listed codes to MDC 14 under MS-DRG 774, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

    17. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems

  231. ICD-10 Coordination and Maintenance Committee

    In September 1985, the ICD-9-CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD-9-CM system. The final update to ICD-

    9-CM codes was to be made on October 1, 2013. Thereafter, the name of the Committee was changed to the ICD-10 Coordination and Maintenance Committee, effective with the March 19-20, 2014 meeting. The ICD-10 Coordination and Maintenance Committee addresses updates to the ICD-10-

    CM and ICD-10-PCS coding systems. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the coding systems to reflect newly developed procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and non-

    Federal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system.

    The official list of ICD-9-CM diagnosis and procedure codes by fiscal year can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.

    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-

    9-CM procedure codes included in the Tabular List and Alphabetic Index for Procedures.

    The Committee encourages participation in the previously mentioned process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies.

    The Committee presented proposals for coding changes for implementation in FY 2017 at a public meeting held on September 22-23, 2015, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 13, 2015.

    The Committee held its 2016 meeting on March 9-10, 2016. It was announced at this meeting that any new ICD-10-CM/PCS codes for which there was consensus of public support and for which complete tabular and indexing changes would be made by May 2016 would be included in the October 1, 2016 update to ICD-10-CM/ICD-10-PCS. As discussed in earlier sections of this preamble, there are new and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes that are captured in Table 6A.--New Diagnosis Codes, Table 6B.--New Procedure Codes, and Table 6C.--Invalid Diagnosis Codes for the proposed rule, which are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Because of the length of these tables, they are not

    Page 25017

    published in the Addendum to this proposed rule. Rather, they are available via the Internet as discussed in section VI. of the Addendum to this proposed rule.

    Live Webcast recordings of the discussions of procedure codes at the Committee's September 22-23, 2015 meeting and March 9-10, 2016 meeting can be obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icD9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the discussions of diagnosis codes at the September 23-24, 2015 meeting and March 9-10, 2016 meeting are found at: http://www.cdc.gov/nchs/icd/icd9cm_maintenance.html. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates.

    We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10 Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by Email to: nchc@cdc.gov.

    Questions and comments concerning the procedure codes should be addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by Email to: ICDProcedureCodeRequest@cms.hhs.gov.

    In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October.

    Section 503(a) of Public Law 108-173 included a requirement for updating diagnosis and procedure codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) until the fiscal year that begins after such date. This requirement improves the recognition of new technologies under the IPPS system by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1.

    While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes.

    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all diagnosis and procedure coding changes, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems.

    A discussion of this timeline and the need for changes are included in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance Committee Meeting minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital systems and obtain new code books and coding software. There was considerable concern expressed about the impact this new April update would have on providers.

    In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108-173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee's public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April l, 2016 implementation of a code at the September 22-23, 2015 Committee meeting. Therefore, there were no new codes implemented on April 1, 2016.

    ICD-9-CM addendum and code title information is published on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/

    icD9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and ICD-10-PCS addendum and code title information is published on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. Information on ICD-10-CM diagnosis codes, along with the Official ICD-

    10-CM Coding Guidelines, can also be found on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10.htm. Information on new, revised, and deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for publication in the Coding Clinic for ICD-10. AHA also distributes information to publishers and software vendors.

    CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding changes to its Medicare contractors for use in updating their systems and providing education to providers.

    Page 25018

    The code titles are adopted as part of the ICD-10 (previously ICD-

    9-CM) Coordination and Maintenance Committee process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules.

  232. Code Freeze

    In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR 3340), there was a discussion of the need for a partial or total freeze in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes. The public comment addressed in that final rule stated that the annual code set updates should cease l year prior to the implementation of ICD-10. The commenters stated that this freeze of code updates would allow for instructional and/or coding software programs to be designed and purchased early, without concern that an upgrade would take place immediately before the compliance date, necessitating additional updates and purchases.

    HHS responded to comments in the ICD-10 final rule that the ICD-9-

    CM Coordination and Maintenance Committee has jurisdiction over any action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS indicated that the issue of consideration of a moratorium on updates to the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the Committee at a future public meeting.

    The code freeze was discussed at multiple meetings of the ICD-9-CM Coordination and Maintenance Committee and public comment was actively solicited. The Committee evaluated all comments from participants attending the Committee meetings as well as written comments that were received. The Committee also considered the delay in implementation of ICD-10 until October 1, 2014. There was an announcement at the September 19, 2012 ICD-9-CM Coordination and Maintenance Committee meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be implemented as follows:

    The last regular annual update to both ICD-9-CM and ICD-10 code sets was made on October 1, 2011.

    On October 1, 2012 and October 1, 2013, there will be only limited code updates to both ICD-9-CM and ICD-10 code sets to capture new technology and new diseases.

    On October 1, 2014, there were to be only limited code updates to ICD-10 code sets to capture new technology and diagnoses as required by section 503(a) of Public Law 108-173. There were to be no updates to ICD-9-CM on October 1, 2014.

    On October 1, 2015, one year after the originally scheduled implementation of ICD-10, regular updates to ICD-10 were to begin.

    On May 15, 2014, CMS posted an updated Partial Code Freeze schedule on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-9-CM-Coordination-and-Maintenance-Committee-Meetings.html. This updated schedule provided information on the extension of the partial code freeze until 1 year after the implementation of ICD-10. As stated earlier, on April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the Secretary may not adopt ICD-10 prior to October 1, 2015. On August 4, 2014, the Department published a final rule with a compliance date to require the use of ICD-10 beginning October 1, 2015. The final rule also required HIPAA-covered entities to continue to use ICD-9-CM through September 30, 2015. Accordingly, the updated schedule for the partial code freeze was as follows:

    The last regular annual updates to both ICD-9-CM and ICD-

    10 code sets were made on October 1, 2011.

    On October 1, 2012, October 1, 2013, and October 1, 2014, there will be only limited code updates to both the ICD-9-CM and ICD-10 code sets to capture new technologies and diseases as required by section 1886(d)(5)(K) of the Act.

    On October 1, 2015, there will be only limited code updates to ICD-10 code sets to capture new technologies and diagnoses as required by section 1886(d)(5)(K) of the Act. There will be no updates to ICD-9-CM, as it will no longer be used for reporting.

    On October 1, 2016 (1 year after implementation of ICD-

    10), regular updates to ICD-10 will begin.

    The ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee announced that it would continue to meet twice a year during the freeze. At these meetings, the public was encouraged to comment on whether or not requests for new diagnosis and procedure codes should be created based on the need to capture new technology and new diseases. Any code requests that do not meet the criteria will be evaluated for implementation within ICD-10 one year after the implementation of ICD-

    10, once the partial freeze is ended.

    Complete information on the partial code freeze and discussions of the issues at the Committee meetings can be found on the ICD-10 Coordination and Maintenance Committee Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting, along with both written and audio transcripts of this meeting, is posted on the Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.

    This partial code freeze dramatically decreased the number of codes created each year as shown by the following information.

    Total Number of Codes and Changes in Total Number of Codes per Fiscal Year

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

    ICD-9-CM Codes ICD-10-CM and ICD-10-PCS Codes

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

    Fiscal year Number Change Fiscal year Number Change

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

    FY 2009 (October 1, 2008) FY 2009 .............. ..............

    Diagnoses.................................. 14,025 348 ICD-10-CM.......................... 68,069 +5

    Procedures................................. 3,824 56 ICD-10-PCS......................... 72,589 -14,327

    FY 2010 (October 1, 2009) FY 2010 .............. ..............

    Diagnoses.................................. 14,315 290 ICD-10-CM.......................... 69,099 +1,030

    Procedures................................. 3,838 14 ICD-10-PCS......................... 71,957 -632

    FY 2011 (October 1, 2010)

    Diagnoses.................................. 14,432 117 ICD-10-CM.......................... 69,368 +269

    Procedures................................. 3,859 21 ICD-10-PCS......................... 72,081 +124

    FY 2012 (October 1, 2011) FY 2012 .............. ..............

    Diagnoses.................................. 14,567 135 ICD-10-CM.......................... 69,833 +465

    Page 25019

    Procedures................................. 3,877 18 ICD-10-PCS......................... 71,918 -163

    FY 2013 (October 1, 2012) FY 2013 .............. ..............

    Diagnoses.................................. 14,567 0 ICD-10-CM.......................... 69,832 -1

    Procedures................................. 3,878 1 ICD-10-PCS......................... 71,920 +2

    FY 2014 (October 1, 2013) FY 2014 .............. ..............

    Diagnoses.................................. 14,567 0 ICD-10-CM.......................... 69,823 -9

    Procedures................................. 3,882 4 ICD-10-PCS......................... 71,924 +4

    FY 2015 (October 1, 2014) FY 2015 .............. ..............

    Diagnoses.................................. 14,567 0 ICD-10-CM.......................... 69,823 0

    Procedures................................. 3,882 0 ICD-10-PCS......................... 71,924 0

    FY 2016 (October 1, 2015) FY 2016 .............. ..............

    Diagnoses.................................. 14,567 0 ICD-10-CM.......................... 69,823 0

    Procedures................................. 3,882 0 ICD-10-PCS......................... 71,924 0

    Proposed FY 2017 (October 1, 2016) Proposed FY 2017 .............. ..............

    Diagnoses.................................. 14,567 0 ICD-10-CM.......................... 71,558 0

    Procedures................................. 3,882 0 ICD-10-PCS......................... 75,625 0

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

    As mentioned previously, the public is provided the opportunity to comment on any requests for new diagnosis or procedure codes discussed at the ICD-10 Coordination and Maintenance Committee meeting. The public has supported only a limited number of new codes during the partial code freeze, as can be seen by previously shown data. We have gone from creating several hundred new codes each year to creating only a limited number of new ICD-9-CM and ICD-10 codes.

    At the September 22-23, 2015 and March 9-10, 2016 Committee meetings, we discussed any requests we had received for new ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes that were to be implemented on October 1, 2016. We did not discuss ICD-9-CM codes. Because the partial code freeze will end on October 1, 2016, the public no longer had to comment on whether or not new ICD-10-CM and ICD-10-PCS codes should be created based on the partial code freeze criteria. We invited public comments on any code requests discussed at the September 22-23, 2015 and March 9-10, 2016 Committee meetings for implementation as part of the October 1, 2016 update. The deadline for commenting on code proposals discussed at the September 22-23, 2015 Committee meeting was November 13, 2015. The deadline for commenting on code proposals discussed at the March 9-10, 2016 Committee meeting was April 8, 2016.

    18. Replaced Devices Offered Without Cost or With a Credit

  233. Background

    In the FY 2008 IPPS final rule with comment period (72 FR 47246 through 47251), we discussed the topic of Medicare payment for devices that are replaced without cost or where credit for a replaced device is furnished to the hospital. We implemented a policy to reduce a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that has been recalled determined the base MS-DRG assignment. At that time, we specified that we will reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit for a replaced device equal to 50 percent or more of the cost of the device.

    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 51557), we clarified this policy to state that the policy applies if the hospital received a credit equal to 50 percent or more of the cost of the replacement device and issued instructions to hospitals accordingly.

  234. Proposed Changes for FY 2017

    For FY 2017 we are proposing not to add any MS-DRGs to the policy for replaced devices offered without cost or with a credit. We are proposing to continue to include the existing MS-DRGs currently subject to the policy as displayed in the table below.

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

    MDC MS-DRG MS-DRG Title

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

    Pre-MDC........ 001 Heart Transplant or Implant of Heart

    Assist System with MCC.

    Pre-MDC........ 002 Heart Transplant or Implant of Heart

    Assist System without MCC.

    1.............. 023 Craniotomy with Major Device Implant/Acute

    Complex CNS Principal Diagnosis with MCC

    or Chemo Implant.

    1.............. 024 Craniotomy with Major Device Implant/Acute

    Complex CNS Principal Diagnosis without

    MCC.

    1.............. 025 Craniotomy & Endovascular Intracranial

    Procedures with MCC.

    1.............. 026 Craniotomy & Endovascular Intracranial

    Procedures with CC.

    1.............. 027 Craniotomy & Endovascular Intracranial

    Procedures without CC/MCC.

    1.............. 040 Peripheral/Cranial Nerve & Other Nervous

    System Procedure with MCC.

    1.............. 041 Peripheral/Cranial Nerve & Other Nervous

    System Procedure with CC or Peripheral

    Neurostimulator.

    1.............. 042 Peripheral/Cranial Nerve & Other Nervous

    System Procedure without CC/MCC.

    3.............. 129 Major Head & Neck Procedures with CC/MCC

    or Major Device.

    3.............. 130 Major Head & Neck Procedures without CC/

    MCC.

    5.............. 215 Other Heart Assist System Implant.

    5.............. 216 Cardiac Valve & Other Major Cardiothoracic

    Procedure with Cardiac Catheter with MCC.

    5.............. 217 Cardiac Valve & Other Major Cardiothoracic

    Procedure with Cardiac Catheter with CC.

    5.............. 218 Cardiac Valve & Other Major Cardiothoracic

    Procedure with Cardiac Catheter without

    CC/MCC.

    5.............. 219 Cardiac Valve & Other Major Cardiothoracic

    Procedure without Cardiac Catheter with

    MCC.

    5.............. 220 Cardiac Valve & Other Major Cardiothoracic

    Procedure without Cardiac Catheter with

    CC.

    Page 25020

    5.............. 221 Cardiac Valve & Other Major Cardiothoracic

    Procedure without Cardiac Catheter

    without CC/MCC.

    5.............. 222 Cardiac Defibrillator Implant with Cardiac

    Catheter with AMI/Heart Failure/Shock

    with MCC.

    5.............. 223 Cardiac Defibrillator Implant with Cardiac

    Catheter with AMI/Heart Failure/Shock

    without MCC.

    5.............. 224 Cardiac Defibrillator Implant with Cardiac

    Catheter without AMI/Heart Failure/Shock

    with MCC.

    5.............. 225 Cardiac Defibrillator Implant with Cardiac

    Catheter without AMI/Heart Failure/Shock

    without MCC.

    5.............. 226 Cardiac Defibrillator Implant without

    Cardiac Catheter with MCC.

    5.............. 227 Cardiac Defibrillator Implant without

    Cardiac Catheter without MCC.

    5.............. 242 Permanent Cardiac Pacemaker Implant with

    MCC.

    5.............. 243 Permanent Cardiac Pacemaker Implant with

    CC.

    5.............. 244 Permanent Cardiac Pacemaker Implant

    without CC/MCC.

    5.............. 245 AICD Generator Procedures.

    5.............. 258 Cardiac Pacemaker Device Replacement with

    MCC.

    5.............. 259 Cardiac Pacemaker Device Replacement

    without MCC.

    5.............. 260 Cardiac Pacemaker Revision Except Device

    Replacement with MCC.

    5.............. 261 Cardiac Pacemaker Revision Except Device

    Replacement with CC.

    5.............. 262 Cardiac Pacemaker Revision Except Device

    Replacement without CC/MCC.

    5.............. 266 Endovascular Cardiac Valve Replacement

    with MCC.

    5.............. 267 Endovascular Cardiac Valve Replacement

    without MCC.

    5.............. 268 Aortic and Heart Assist Procedures Except

    Pulsation Balloon with MCC.

    5.............. 269 Aortic and Heart Assist Procedures Except

    Pulsation Balloon without MCC.

    5.............. 270 Other Major Cardiovascular Procedures with

    MCC.

    5.............. 271 Other Major Cardiovascular Procedures with

    CC.

    5.............. 272 Other Major Cardiovascular Procedures

    without CC/MCC.

    8.............. 461 Bilateral or Multiple Major Joint

    Procedures Of Lower Extremity with MCC.

    8.............. 462 Bilateral or Multiple Major Joint

    Procedures of Lower Extremity without

    MCC.

    8.............. 466 Revision of Hip or Knee Replacement with

    MCC.

    8.............. 467 Revision of Hip or Knee Replacement with

    CC.

    8.............. 468 Revision of Hip or Knee Replacement

    without CC/MCC.

    8.............. 469 Major Joint Replacement or Reattachment of

    Lower Extremity with MCC.

    8.............. 470 Major Joint Replacement or Reattachment of

    Lower Extremity without MCC.

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

    We are soliciting public comments on our proposal to continue to include the existing MS-DRGs currently subject to the policy and to not add any additional MS-DRGs to the policy. The final list of MS-DRGs subject to the policy for FY 2017 will be listed in the FY 2017 IPPS/

    LTCH PPS final rule, as well as issued to providers in the form of a Change Request (CR).

    19. Other Proposed Policy Changes

  235. MS-DRG GROUPER Logic

    (1) Operations on Products of Conception

    In the ICD-9-CM MS-DRGs Version 32, intrauterine operations that may be performed in an attempt to correct a fetal abnormality are identified by ICD-9-CM procedure code 75.36 (Correction of fetal defect). This procedure code is designated as an O.R. procedure and is assigned to MDC 14 (Pregnancy, Childbirth and the Puerperium) in MS-DRG 768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or Dilation and Curettage).

    A replication issue for 208 ICD-10-PCS comparable code translations that describe operations on the products of conception (fetus) to correct fetal defects was identified during an internal review. These 208 procedure codes were inadvertently omitted from the MDC 14 GROUPER logic for ICD-10 MS-DRG 768. To resolve this replication issue, we are proposing to add the 208 ICD-10-PCS procedure codes shown in Table 6P.3a. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) to MDC 14 in MS-DRG 768, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    Separate from the replication issue described above, during our internal review, we also concluded that the proposed MS-DRG logic for these intrauterine procedures under ICD-10 may not accurately represent a subset of the 208 ICD-10-PCS procedure codes (listed in Table 6P.3a.). For example, the GROUPER logic for MS-DRG 768 requires that a vaginal delivery occur during the same episode of care in which an intrauterine procedure is performed. However, this scenario may not be clinically consistent with all pregnant patients who undergo fetal surgery. For example, a pregnant patient whose fetus is diagnosed with a congenital diaphragmatic hernia (CDH) may undergo a fetoscopic endoluminal tracheal occlusion (FETO) procedure in which the pregnant patient does not subsequently deliver during the same hospital stay. The goal of this specific fetal surgery is to allow the fetus to remain in utero until its lungs have developed to increase the chance of survival. Therefore, this scenario of a patient who has fetal surgery but does not have a delivery during the same hospital stay is not appropriately captured in the GROUPER logic. We believe that further analysis is warranted regarding a future proposal for a new MS-DRG to better recognize this subset of patients.

    In past rulemaking (72 FR 24700 and 24705), we have acknowledged that CMS does not have the expertise or data to maintain the DRGs in clinical areas that have very low volume in the Medicare population, including for conditions associated with and/or occurring in the maternal-fetal patient population. Additional information is needed to fully and accurately evaluate all the possible fetal conditions that may fall under similar scenarios to the one described above before making a specific proposal. Therefore, we are soliciting public comments on two clinical concepts for consideration for a possible future proposal for the FY 2018 ICD-10 MS-DRGs Version 35: (1) The ICD-

    10-CM diagnosis codes and ICD-10-PCS procedure codes that describe fetal abnormalities for which fetal surgery may be performed in the absence of a delivery during the same hospital stay; and (2) the ICD-

    10-CM diagnosis codes and ICD-10-PCS procedure codes that describe fetal abnormalities for which fetal surgery

    Page 25021

    may be performed with a subsequent delivery during the same hospital stay. This second concept is the structure of current MS-DRG 768. Commenters should submit their code recommendations for these concepts to the following email address MSDRGClassificationChange@cms.hhs.gov by December 7, 2016. We encourage public comments as we consider these enhancements for the FY 2018 ICD-10 MS-DRGs Version 35.

    (2) Other Heart Revascularization

    In the ICD-9-CM MS-DRGs Version 32, revascularization procedures that are performed to restore blood flow to the heart are identified with procedure code 36.39 (Other heart revascularization). This procedure code is designated as an O.R. procedure and is assigned to MDC 5 (Diseases and Disorders of the Circulatory System) in MS-DRGs 228 through 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for 16 ICD-10-PCS comparable code translations that describe revascularization procedures was identified after implementation of the ICD-10 MS-DRGs Version 33. These 16 procedure codes were inadvertently omitted from the MDC 5 GROUPER logic for ICD-

    10 MS-DRGs 228 through 230. We note that, as discussed in section II.F.5.d. of the preamble of this proposed rule, we are proposing to delete MS-DRG 230 and revise MS-DRG 229. Accordingly, to resolve this replication issue, we are proposing to add the 16 ICD-10-PCS procedure codes listed in the table below to MDC 5 in MS-DRG 228 and proposed revised MS-DRG 229.

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

    ICD-10-PCS procedure code Description

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

    0210344.................. Bypass coronary artery, one site from

    coronary vein with drug-eluting intraluminal

    device, percutaneous approach.

    02103D4.................. Bypass coronary artery, one site from

    coronary vein with intraluminal device,

    percutaneous approach.

    0210444.................. Bypass coronary artery, one site from

    coronary vein with drug-eluting intraluminal

    device, percutaneous endoscopic approach.

    02104D4.................. Bypass coronary artery, one site from

    coronary vein with intraluminal device,

    percutaneous endoscopic approach.

    0211344.................. Bypass coronary artery, two sites from

    coronary vein with drug-eluting intraluminal

    device, percutaneous approach.

    02113D4.................. Bypass coronary artery, two sites from

    coronary vein with intraluminal device,

    percutaneous approach.

    0211444.................. Bypass coronary artery, two sites from

    coronary vein with drug-eluting intraluminal

    device, percutaneous endoscopic approach.

    02114D4.................. Bypass coronary artery, two sites from

    coronary vein with intraluminal device,

    percutaneous endoscopic approach.

    0212344.................. Bypass coronary artery, three sites from

    coronary vein with drug-eluting intraluminal

    device, percutaneous approach.

    02123D4.................. Bypass coronary artery, three sites from

    coronary vein with intraluminal device,

    percutaneous approach.

    0212444.................. Bypass coronary artery, three sites from

    coronary vein with drug-eluting intraluminal

    device, percutaneous endoscopic approach.

    02124D4.................. Bypass coronary artery, three sites from

    coronary vein with intraluminal device,

    percutaneous endoscopic approach.

    0213344.................. Bypass coronary artery, four or more sites

    from coronary vein with drug-eluting

    intraluminal device, percutaneous approach.

    02133D4.................. Bypass coronary artery, four or more sites

    from coronary vein with intraluminal device,

    percutaneous approach.

    0213444.................. Bypass coronary artery, four or more sites

    from coronary vein with drug-eluting

    intraluminal device, percutaneous endoscopic

    approach.

    02134D4.................. Bypass coronary artery, four or more sites

    from coronary vein with intraluminal device,

    percutaneous endoscopic approach.

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

    We are inviting public comments on our proposal to add the above listed ICD-10-PCS procedure codes to MDC 5 in MS-DRG 228 and proposed revised MS-DRG 229 (Other Cardiothoracic Procedures with and without MCC, respectively), effective October 1, 2016, in ICD-10 MS-DRGs Version 34.

    (3) Procedures on Vascular Bodies: Chemoreceptors

    In the ICD-9-CM MS-DRGs Version 32, procedures performed on the sensory receptors are identified with ICD-9-CM procedure code 39.89 (Other operations on carotid body, carotid sinus and other vascular bodies). This procedure code is designated as an O.R. procedure and is assigned to MDC 5 (Diseases and Disorders of the Circulatory System) in MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for 234 ICD-10-PCS comparable code translations that describe these procedures was identified after implementation of the ICD-10 MS-DRGs Version 33. These 234 procedure codes were inadvertently omitted from the MDC 5 GROUPER logic for ICD-10 MS-DRGs 252 through 254. To resolve this replication issue, we are proposing to add the 234 ICD-10-PCS procedure codes listed in Table 6P.3b. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) to MDC 5 in MS-DRG 252, 253, and 254, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (4) Repair of the Intestine

    In the ICD-9-CM MS-DRGs Version 32, the procedure for a repair to the intestine may be identified with procedure code 46.79 (Other repair of intestine). This procedure code is designated as an O.R. procedure and is assigned to MDC 6 (Diseases and Disorders of the Digestive System) in MS-DRGs 329, 330, and 331 (Major Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for four ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These four procedure codes are:

    0DQF0ZZ (Repair right large intestine, open approach);

    0DQG0ZZ (Repair left large intestine, open approach);

    0DQL0ZZ (Repair transverse colon, open approach); and

    0DQM0ZZ (Repair descending colon, open approach).

    These four ICD-10-PCS codes were inadvertently omitted from the MDC 6 GROUPER logic for ICD-10 MS-DRGs 329 through 331. To resolve this replication issue, we are proposing to add the four ICD-10-PCS procedure codes to MDC 6 in MS-DRG 329, 230, and 331, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (5) Insertion of Infusion Pump

    In the ICD-9-CM MS-DRGs Version 32, the procedure for insertion of an infusion pump is identified with procedure code 86.06 (Insertion of

    Page 25022

    totally implantable infusion pump), which is designated as an O.R. procedure and assigned to a number of MDCs and MS-DRGs across various body systems. We refer readers to the ICD-9-CM MS-DRG Definitions Manual Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index, which is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Rule-Data-Files.html, for the complete list of MDCs and MS-DRGs to which procedure code 86.06 is assigned

    A replication issue for 16 ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These 16 procedure codes are listed in the table below:

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

    ICD-10-PCS procedure code Description

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

    0JHD0VZ.................. Insertion of infusion pump into right upper

    arm subcutaneous tissue and fascia, open

    approach.

    0JHD3VZ.................. Insertion of infusion pump into right upper

    arm subcutaneous tissue and fascia,

    percutaneous approach.

    0JHF0VZ.................. Insertion of infusion pump into left upper

    arm subcutaneous tissue and fascia, open

    approach.

    0JHF3VZ.................. Insertion of infusion pump into left upper

    arm subcutaneous tissue and fascia,

    percutaneous approach.

    0JHG0VZ.................. Insertion of infusion pump into right lower

    arm subcutaneous tissue and fascia, open

    approach.

    0JHG3VZ.................. Insertion of infusion pump into right lower

    arm subcutaneous tissue and fascia,

    percutaneous approach.

    0JHH0VZ.................. Insertion of infusion pump into left lower

    arm subcutaneous tissue and fascia, open

    approach.

    0JHH3VZ.................. Insertion of infusion pump into left lower

    arm subcutaneous tissue and fascia,

    percutaneous approach.

    0JHL0VZ.................. Insertion of infusion pump into right upper

    leg subcutaneous tissue and fascia, open

    approach.

    0JHL3VZ.................. Insertion of infusion pump into right upper

    leg subcutaneous tissue and fascia,

    percutaneous approach.

    0JHM0VZ.................. Insertion of infusion pump into left upper

    leg subcutaneous tissue and fascia, open

    approach.

    0JHM3VZ.................. Insertion of infusion pump into left upper

    leg subcutaneous tissue and fascia,

    percutaneous approach.

    0JHN0VZ.................. Insertion of infusion pump into right lower

    leg subcutaneous tissue and fascia, open

    approach.

    0JHN3VZ.................. Insertion of infusion pump into right lower

    leg subcutaneous tissue and fascia,

    percutaneous approach.

    0JHP0VZ.................. Insertion of infusion pump into left lower

    leg subcutaneous tissue and fascia, open

    approach.

    0JHP3VZ.................. Insertion of infusion pump into left lower

    leg subcutaneous tissue and fascia,

    percutaneous approach.

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

    These codes were inadvertently omitted from the MDCs and MS-DRGs to which they should be assigned (consistent with the assignment of ICD-9-

    CM procedure code 86.06) to accurately replicate the ICD-9-CM MS-DRG logic. To resolve this replication issue, we are proposing to add the 16 ICD-10-PCS procedure codes listed above to the corresponding MDCs and MS-DRGs, as set forth in the ICD-9-CM MS-DRG Definitions Manual--

    Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index as described earlier, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (6) Procedures on the Bursa

    In the ICD-9-CM MS-DRGs Version 32, procedures that involve cutting into the bursa are identified with procedure code 83.03 (Bursotomy). This procedure code is designated as an O.R. procedure and is assigned to MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) in MS-DRGs 500, 501, and 502 (Soft Tissue Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for six ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These six procedure codes are:

    0M850ZZ (Division of right wrist bursa and ligament, open approach);

    0M853ZZ (Division of right wrist bursa and ligament, percutaneous approach);

    0M854ZZ (Division of right wrist bursa and ligament, percutaneous endoscopic approach);

    0M860ZZ (Division of left wrist bursa and ligament, open approach);

    0M863ZZ (Division of left wrist bursa and ligament, percutaneous approach); and

    0M864ZZ (Division of left wrist bursa and ligament, percutaneous endoscopic approach).

    These codes were inadvertently omitted from the MDC 8 GROUPER logic for ICD-10 MS-DRGs 500, 501, and 502. To resolve this replication issue, we are proposing to add the six ICD-10-PCS procedure codes listed above to MDC 8 in MS-DRGs 500, 501, and 502, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (7) Procedures on the Breast

    In the ICD-9-CM MS-DRGs Version 32, procedures performed for a simple repair to the skin of the breast may be identified with procedure code 86.59 (Closure of skin and subcutaneous tissue of other sites). This procedure code is designated as a non-O.R. procedure. Therefore, this procedure code does not have an impact on MS-DRG assignment.

    A replication issue for two ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These two procedure codes are: 0HQVXZZ (Repair bilateral breast, external approach) and 0HQYXZZ (Repair supernumerary breast, external approach). These ICD-10-PCS procedures codes were inadvertently assigned to ICD-10 MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC, respectively) in the ICD-10 MS-DRG GROUPER logic. To resolve this replication issue, we are proposing to remove these two ICD-10-PCS procedure codes from MS-DRG 981, 982, and 983, to designate them as non-O.R. procedures, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (8) Excision of Subcutaneous Tissue and Fascia

    In the ICD-9-CM MS-DRGs Version 32, procedures involving excision of the skin and subcutaneous tissue are identified with procedure code 86.3 (Other local excision of lesion or tissue of skin and subcutaneous tissue). This procedure code is designated as a non-O.R. procedure that affects MS-DRG assignment for MS-DRGs 579, 580, and 581 (Other Skin, Subcutaneous Tissue and Breast Procedures with MCC, with CC and without CC/MCC, respectively) in MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast).

    A replication issue for 19 ICD-10-PCS comparable code translations was

    Page 25023

    identified after implementation of the ICD-10 MS-DRGs Version 33. These 19 procedure codes are listed in the table below:

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

    ICD-10-PCS code Description

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

    0JB03ZZ.................. Excision of scalp subcutaneous tissue and

    fascia, percutaneous approach.

    0JB43ZZ.................. Excision of anterior neck subcutaneous tissue

    and fascia, percutaneous approach.

    0JB53ZZ.................. Excision of posterior neck subcutaneous

    tissue and fascia, percutaneous approach.

    0JB63ZZ.................. Excision of chest subcutaneous tissue and

    fascia, percutaneous approach.

    0JB73ZZ.................. Excision of back subcutaneous tissue and

    fascia, percutaneous approach.

    0JB83ZZ.................. Excision of abdomen subcutaneous tissue and

    fascia, percutaneous approach.

    0JB93ZZ.................. Excision of buttock subcutaneous tissue and

    fascia, percutaneous approach.

    0JBB3ZZ.................. Excision of perineum subcutaneous tissue and

    fascia, percutaneous approach.

    0JBC3ZZ.................. Excision of pelvic region subcutaneous tissue

    and fascia, percutaneous approach.

    0JBD3ZZ.................. Excision of right upper arm subcutaneous

    tissue and fascia, percutaneous approach.

    0JBF3ZZ.................. Excision of left upper arm subcutaneous

    tissue and fascia, percutaneous approach.

    0JBG3ZZ.................. Excision of right lower arm subcutaneous

    tissue and fascia, percutaneous approach.

    0JBH3ZZ.................. Excision of left lower arm subcutaneous

    tissue and fascia, percutaneous approach.

    0JBL3ZZ.................. Excision of right upper leg subcutaneous

    tissue and fascia, percutaneous approach.

    0JBM3ZZ.................. Excision of left upper leg subcutaneous

    tissue and fascia, percutaneous approach.

    0JBN3ZZ.................. Excision of right lower leg subcutaneous

    tissue and fascia, percutaneous approach.

    0JBP3ZZ.................. Excision of left lower leg subcutaneous

    tissue and fascia, percutaneous approach.

    0JBQ3ZZ.................. Excision of right foot subcutaneous tissue

    and fascia, percutaneous approach.

    0JBR3ZZ.................. Excision of left foot subcutaneous tissue and

    fascia, percutaneous approach.

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

    These codes were inadvertently omitted from the ICD-10 MS-DRG GROUPER logic for MDC 9 in MS-DRGs 579, 580, and 581. To resolve this replication issue, we are proposing to add the 19 ICD-10-PCS procedure codes listed in the table above to MDC 9 in MS-DRGs 579, 580, and 581, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (9) Shoulder Replacement

    In the ICD-9-CM MS-DRGs Version 32, procedures that involve replacing a component of bone from the upper arm are identified with procedure code 78.42 (Other repair or plastic operations on bone, humerus). This procedure code is designated as an O.R. procedure and is assigned to MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) in MS-DRGs 492, 493, and 494 (Lower Extremity and Humerus Procedures Except Hip, Foot and Femur with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for two ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These two procedure codes are: 0PRC0JZ (Replacement of right humeral head with synthetic substitute, open approach) and 0PRD0JZ (Replacement of left humeral head with synthetic substitute, open approach). These two codes were inadvertently omitted from the ICD-10 MS-DRG GROUPER logic for MDC 8 in MS-DRGs 492, 493, and 494. To resolve this replication issue, we are proposing to add these two ICD-10-PCS procedure codes to MDC 8 in MS-DRGs 492, 493, and 494, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (10) Reposition

    In the ICD-9-CM MS-DRGs Version 32, procedures that involve the percutaneous repositioning of an area in the vertebra are identified with procedure code 81.66 (Percutaneous vertebral augmentation). This procedure code is designated as an O.R. procedure and is assigned to MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) in MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for four ICD-10-PCS comparable code translations was identified after implementation of the ICD-10 MS-DRGs Version 33. These four procedure codes are:

    0PS33ZZ (Reposition cervical vertebra, percutaneous approach);

    0PS43ZZ (Reposition thoracic vertebra, percutaneous approach);

    0QS03ZZ (Reposition lumbar vertebra, percutaneous approach); and

    0QS13ZZ (Reposition sacrum, percutaneous approach).

    These four ICD-10PCS procedure codes were inadvertently omitted from the ICD-10 MS-DRG GROUPER logic for MDC 8 and MS-DRGs 515, 516, and 517. To resolve this replication issue, we are proposing to add these four ICD-10-PCS procedure codes to MDC 8 in MS-DRGs 515, 516, and 517, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (11) Insertion of Infusion Device

    In the ICD-9-CM MS-DRGs Version 32, the procedure for insertion of an infusion pump is identified with procedure code 86.06 (Insertion of totally implantable infusion pump) which is designated as an O.R. procedure and assigned to a number of MDCs and MS-DRGs, one of which is MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) in MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

    A replication issue for 49 ICD-10-PCS comparable code translations that describe insertion of an infusion device into a joint or disc was identified after implementation of the ICD-10 MS-DRGs Version 33. These 49 procedure codes appear to describe procedures that utilize a specific type of infusion device known as an infusion pump and were inadvertently omitted from the ICD-10 MS-DRG GROUPER logic for MDC 8. To resolve this replication issue, we are proposing to add the 49 ICD-

    10-PCS procedure codes shown in Table 6P.3c. (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) to MDC 8 in MS-DRGs 515, 516, and 517, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (12) Bladder Neck Repair

    In the ICD-9-CM MS-DRGs Version 32, a procedure involving a bladder

    Page 25024

    repair is identified with procedure code 57.89 (Other repair of bladder) which is designated as an O.R. procedure and assigned to MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract) in MS-DRGs 653, 654, and 655 (Major Bladder Procedures with MCC, with CC, and without CC/MCC, respectively) and MDC 13 (Diseases and Disorders of the Female Reproductive System) in MS-DRGs 749 and 750 (Other Female Reproductive System O.R. Procedures with CC/MCC and without CC/MCC, respectively).

    A replication issue for five ICD-10-PCS comparable code translations that describe a bladder neck repair was identified after implementation of the ICD-10 MS-DRGs Version 33. These five procedure codes are:

    0TQC0ZZ (Repair Bladder Neck, Open Approach);

    0TQC3ZZ (Repair Bladder Neck, Percutaneous Approach);

    0TQC4ZZ (Repair Bladder Neck, Percutaneous Endoscopic Approach);

    0TQC7ZZ (Repair Bladder Neck, Via Natural or Artificial Opening); and

    0TQC8ZZ (Repair Bladder Neck, Via Natural or Artificial Opening Endoscopic).

    These five ICD-10-PCS procedure codes were inadvertently omitted from the ICD-10 MS-DRG GROUPER logic for MDC 11 in MS-DRGs 653, 654, and 655 and MDC 13 in MS-DRGs 749 and 750. To resolve this replication issue, we are proposing to add these five ICD-10-PCS procedure codes to MDC 11 in MS-DRGs 653, 654, and 655 and MDC 13 in MS-DRGs 749 and 750, effective October 1, 2016, in ICD-10 MS-DRGs Version 34. We are inviting public comments on our proposal.

    (13) Future Consideration

    We note that commenters have suggested that there are a number of procedure codes that may not appear to be clinically feasible due to a specific approach or device value in relation to a unique body part in a given body system. These commenters have not identified a comprehensive list of codes to be deleted. However, they have suggested that CMS examine these codes further. Due to the multiaxial structure of ICD-10-PCS, the current system allows for multiple possibilities for a given procedure, some of which may not currently be used. As our focus to refine the ICD-10 MS-DRGs continues, for FY 2018, we will begin to conduct an analysis of where such ICD-10-PCS codes may exist. We welcome suggestions from the public of code refinements that could address the issue of current ICD-10-PCS codes that capture procedures that would not reasonably be performed. Commenters should submit their recommendations for these code refinements to the following email address: MSDRGClassificationChanges@cms.hhs.gov by December 7, 2016.

    We also note that any suggestions that are received by December 7, 2016 to update ICD-10-PCS, including creating new codes or deleting existing codes, will be addressed by the ICD-10 Coordination and Maintenance Committee. Proposals to address the modification of any ICD-10-PCS codes are discussed at the ICD-10 Coordination and Maintenance Committee meetings held in March and September of each year. We refer the reader to section II.F.17. of the preamble of this proposed rule for information related to this process to request updates to ICD-10-PCS.

  236. Issues Relating to MS-DRG 999 (Ungroupable)

    Under the ICD-9-CM MS-DRGs Version 32, a diagnosis of complications of an obstetric surgical wound after delivery is identified with diagnosis code 674.32 (Other complications of obstetrical surgical wounds, delivered, with mention of postpartum complication) and is assigned to MDC 14 (Pregnancy, Childbirth and the Puerperium) under MS-

    DRG 769 (Postpartum and Post Abortion Diagnoses with O.R. Procedure) or MS-DRG 776 (Postpartum and Post Abortion Diagnoses without O.R. Procedure). A replication issue under the ICD-10 MS-DRGs Version 33 for this condition was identified after implementation on October 1, 2015. Under ICD-10-CM, diagnosis code O90.2 (Hematoma of obstetric wound) is the comparable translation for ICD-9-CM diagnosis code 674.32. We discovered that cases where a patient has been readmitted to the hospital after a delivery and ICD-10-CM diagnosis code O90.2 is reported as the principal diagnosis are resulting in assignment to MS-

    DRG 999 (Ungroupable).

    In the ICD-9-CM diagnosis code description, the concept of ``delivery'' is included in the code title. This concept is not present in the ICD-10-CM classification and has led to a replication issue for patients who delivered during a previous stay and are subsequently readmitted for the complication. To resolve this replication issue, we are proposing to add ICD-10-CM diagnosis code O90.2 to MDC 14 under MS-

    DRGs 769 and 776. This refinement would be consistent with the ICD-9-CM diagnosis code assignment and result in a more accurate replication of the ICD-9-CM MS-DRGs Version 32.

    We are inviting public comments on our proposal to add ICD-10-CM diagnosis code O90.2 to MS-DRG 769 and MS-DRG 776 in MDC 14, effective October 1, 2016, in the ICD-10 MS-DRGs Version 34.

  237. Other Operating Room (O.R.) and Non-O.R. Issues

    (1) O.R. Procedures to Non-O.R. Procedures

    For this FY 2017 IPPS/LTCH PPS proposed rule, we continued our efforts to address the MS-DRG replication issues between ICD-9-CM logic and ICD-10 that were brought to our attention. As a result of analyzing those specific requests, we identified areas in the ICD-10-PCS classification where additional refinements could further support our replication efforts. We discuss these below.

    We evaluated specific groups of ICD-10-PCS procedure codes with respect to their current operating room (O.R.) designation that were determined to be inconsistent with the ICD-9-CM procedure codes from which the designation was initially derived. Our review demonstrated that these ICD-10-PCS procedure codes should instead have the attributes of a more logical ICD-9-CM procedure code translation for MS-DRG replication purposes. As specified below, we are proposing to change the status of ICD-10-PCS procedure codes from being designated as O.R. to non-O.R. for the ICD-10 MS-DRGs Version 34. For each group summarized below, the detailed code lists are shown in Tables 6P.4a. through 6P.4k. (ICD-10-CM and ICD-10-PCS Codes for Proposed MCE and MS-

    DRG Changes--FY 2017) associated with this proposed rule, which are available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

    (a) Endoscopic/Transorifice Insertion

    We found 72 ICD-10-PCS procedure codes describing an endoscopic/

    transorifice (via natural or artificial opening) insertion of infusion and monitoring devices into various tubular body parts that, when coded under ICD-9-CM, would reasonably correlate to other noninvasive catheterization and monitoring types of procedure codes versus an ``incision of body part'' or ``other operation on a body part'' procedure code. We are proposing that the 72 ICD-10-PCS procedure codes in Table 6P.4a. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/

    Page 25025

    Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (b) Endoscopic/Transorifice Removal

    We found 155 ICD-10-PCS procedure codes describing an endoscopic/

    transorifice (via natural or artificial opening) removal of common devices such as a drainage device, infusion device, intraluminal device, or monitoring device from various tubular body parts that, when coded under ICD-9-CM, would reasonably correlate to other nonoperative removal of a wide range of devices/appliances procedure codes versus an ``incision of body part'' or ``other operation on a body part'' procedure code. We are proposing that the 155 ICD-10-PCS procedure codes in Table 6P.4b. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (c) Tracheostomy Device Removal

    We found five ICD-10-PCS procedure codes describing removal of a tracheostomy device with various approaches such that, when coded under ICD-9-CM, would reasonably correlate to the nonoperative removal of a tracheostomy device procedure code versus an ``incision of body part'' or ``other operation on a body part'' procedure code. We acknowledge that, under ICD-10-PCS, an ``open'' approach is defined as ``cutting through.'' However, this procedure was designated as non-O.R. under ICD-9-CM. For replication purposes, we are proposing that the five ICD-10-PCS procedure codes in Table 6P.4c. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-

    CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (d) Endoscopic/Percutaneous Insertion

    We found 117 ICD-10-PCS procedure codes describing the endoscopic/

    percutaneous insertion of infusion and monitoring devices into vascular and musculoskeletal body parts that, when coded under ICD-9-CM, would reasonably correlate to other noninvasive catheterization and monitoring types of procedure codes versus an ``incision of body part'' or ``other operation on a body part'' procedure code. We are proposing that the 117 ICD-10-PCS procedure codes in Table 6P.4d. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are less accurate correlations. We are inviting public comments on this proposal.

    (e) Percutaneous Removal

    We found 124 ICD-10-PCS procedure codes describing the percutaneous removal of drainage, infusion and monitoring devices from vascular and musculoskeletal body parts that, when coded under ICD-9-CM, would reasonably correlate to the nonoperative removal of a wide range of devices/appliances procedure codes versus an ``incision of body part'' or ``other operation on a body part'' procedure code. We are proposing that the 124 ICD-10-PCS procedure codes in Table 6P.4e. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (f) Percutaneous Drainage

    We found 518 ICD-10-PCS procedure codes describing the percutaneous therapeutic drainage of all body sites that do not have specific percutaneous drainage codes. The list includes procedure codes for drainage with or without placement of a drainage device. Exceptions to this are cranial, intracranial and the eye where small incisions are the norm and appropriately classified as O.R. These 518 ICD-10-PCS procedures codes, when coded under ICD-9-CM, would reasonably correlate to the nonoperative puncture or drainage of various body sites and other miscellaneous procedures versus an ``incision of body part'' procedure code. We are proposing that the 518 ICD-10-PCS procedure codes in Table 6P.4f. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (g) Percutaneous Inspection

    We found 131 ICD-10-PCS procedure codes describing the percutaneous inspection of body part sites, with the exception of the cranial cavity and brain, whose designation is not consistent with other percutaneous inspection codes. When coded under ICD-9-CM, these procedure codes would reasonably correlate to the ``other nonoperative examinations'' and ``other diagnostic procedures on body part'' codes where the approach is not specified and the codes are designated as non-O.R. We are proposing that the 131 ICD-10-PCS procedure codes in Table 6P.4g. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM procedure code specified in column C. The ICD-9-CM procedure codes and descriptions in column C would replace the ICD-9-CM procedure codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    Page 25026

    (h) Inspection Without Incision

    We found 40 ICD-10-PCS procedure codes describing the inspection of various body sites with endoscopic/transorifice and external approaches. Under ICD-9-CM, these codes would reasonably correlate to ``other diagnostic procedures on body part'' codes where the approach is not specified and the codes are designated as non-O.R. We are proposing that the 40 ICD-10-PCS codes in Table 6P.4h. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-

    CM code specified in column C. The ICD-9-CM codes and descriptions in column C would replace the ICD-9-CM codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (i) Dilation of Stomach

    We found six ICD-10-PCS procedure codes describing the dilation of stomach and pylorus body sites with various approaches whose designation is not consistent with all other gastrointestinal body parts dilation codes. Under ICD-9-CM, where a unique dilation code exists, the approach is not specified and these codes are designated as non-O.R. Therefore, we are proposing that the six ICD-10-PCS procedure codes in Table 6P.4i. (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-CM code specified in column C. The ICD-9-CM codes and descriptions in column C would replace the ICD-9-CM codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (j) Endoscopic/Percutaneous Occlusion

    We found six ICD-10-PCS codes describing percutaneous occlusion of esophageal vein with and without a device that, when coded under ICD-9-

    CM would reasonably correlate to the endoscopic excision or destruction of the vessel versus an open surgical procedure. We are proposing that the six ICD-10-PCS procedure codes in Table 6P.4j. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be assigned the attributes of the ICD-9-

    CM code specified in column C. The ICD-9-CM codes and descriptions in column C would replace the ICD-9-CM codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (k) Infusion Device

    We found 82 ICD-10-PCS codes describing the insertion of an infusion device to various body parts that, when coded under ICD-9-CM, would reasonably correlate to the insertion of a common infusion catheter versus the insertion of a totally implantable infusion pump. We are proposing that the 82 ICD-10-PCS procedure codes in Table 6P.4k. associated with this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) be assigned the attributes of the ICD-9-CM code specified in column C. The ICD-9-CM codes and descriptions in column C would replace the ICD-9-CM codes and descriptions reflected in column D, which are considered less accurate correlations. We are inviting public comments on this proposal.

    (2) Non-O.R. Procedures to O.R. Procedures

    (a) Drainage of Pleural Cavity

    In the ICD-9-CM MS-DRGs Version 32 Definitions Manual under Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index, procedure code 34.06 (Thoracoscopic drainage of pleural cavity) is designated as an O.R. procedure code and is assigned to MS-DRGs 166 through 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 4 (Diseases and Disorders of the Respiratory System).

    A replication issue regarding the procedure code designation and MS-DRG assignment for the comparable code translations under the ICD-10 MS-DRGs Version 33 was brought to our attention after implementation on October 1, 2015. The replication issue involves the following four ICD-

    10-PCS procedure codes:

    0W9940Z (Drainage of right pleural cavity with drainage device, percutaneous endoscopic approach);

    0W994ZZ (Drainage of right pleural cavity, percutaneous endoscopic approach);

    0W9B40Z (Drainage of left pleural cavity with drainage device, percutaneous endoscopic approach); and

    0W9B4ZZ (Drainage of left pleural cavity, percutaneous endoscopic approach).

    In the ICD-10 MS-DRGs Version 33, these four ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. We agree that this was a replication error and the designation and MS-DRG assignment should be consistent with the designation and MS-DRG assignment of ICD-9-CM procedure code 34.06.

    To resolve this replication issue, we are proposing to add ICD-10-

    PCS procedure codes 0W9940Z, 0W994ZZ, 0W9B40Z, and 0W9B4ZZ to the FY 2017 ICD-10 MS-DRGs Version 34 Definitions Manual in Appendix E--

    Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 166 through 168 in MDC 4. We are inviting public comments on our proposal.

    (b) Drainage of Cerebral Ventricle

    In the ICD-9-CM MS-DRGs Version 32 Definitions Manual under Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index, procedure code 02.22 (Intracranial ventricular shunt or anastomosis) is designated as an O.R. procedure code and is assigned to MS-DRGs 023 through 027, collectively referred to as the ``Craniotomy'' MS-DRGs, in MDC 1 (Diseases and Disorders of the Nervous System).

    A replication issue regarding the procedure code designation and MS-DRG assignment for the comparable code translations under the ICD-10 MS-DRGs Version 33 was brought to our attention after implementation on October 1, 2015. The replication issue involves the following ICD-10-

    PCS procedure codes:

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

    ICD-10-PCS procedure code Description

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

    009130Z.................. Drainage of cerebral meninges with drainage

    device, percutaneous approach.

    00913ZZ.................. Drainage of cerebral meninges, percutaneous

    approach.

    009140Z.................. Drainage of cerebral meninges with drainage

    device, percutaneous endoscopic approach.

    Page 25027

    00914ZZ.................. Drainage of cerebral meninges with drainage

    device, percutaneous endoscopic approach.

    009230Z.................. Drainage of dura mater with drainage device,

    percutaneous approach.

    00923ZZ.................. Drainage of dura mater, percutaneous

    approach.

    009240Z.................. Drainage of dura mater with drainage device,

    percutaneous endoscopic approach.

    00924ZZ.................. Drainage of dura mater, percutaneous

    endoscopic approach.

    009430Z.................. Drainage of subdural space with drainage

    device, percutaneous approach.

    00943ZZ.................. Drainage of subdural space, percutaneous

    approach.

    009440Z.................. Drainage of subdural space with drainage

    device, percutaneous endoscopic approach.

    00944ZZ.................. Drainage of subdural space, percutaneous

    endoscopic approach.

    009530Z.................. Drainage of subarachnoid space with drainage

    device, percutaneous approach.

    00953ZZ.................. Drainage of subarachnoid space, percutaneous

    approach.

    009540Z.................. Drainage of subarachnoid space with drainage

    device, percutaneous endoscopic approach.

    00954ZZ.................. Drainage of subarachnoid space, percutaneous

    endoscopic approach.

    00963ZZ.................. Drainage of cerebral ventricle, percutaneous

    approach.

    00964ZZ.................. Drainage of cerebral ventricle, percutaneous

    endoscopic approach.

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

    In the ICD-10 MS-DRGs Version 33, these ICD-10-PCS procedure codes are not recognized as O.R. procedures for purposes of MS-DRG assignment. We agree that this was a replication error and their translation should be consistent with the designation and MS-DRG assignment of ICD-9-CM procedure 02.22.

    To resolve this replication issue, we are proposing to add the ICD-

    10-PCS procedure codes listed above to the FY 2017 ICD-10 MS-DRGs Version 34 Definitions Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 023 through 027 in MDC 1. We are inviting public comments on our proposal.

    1. Recalibration of the Proposed FY 2017 MS-DRG Relative Weights

      1. Data Sources for Developing the Relative Weights

      In developing the proposed FY 2017 system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2015 MedPAR data used in this proposed rule include discharges occurring on October 1, 2014, through September 30, 2015, based on bills received by CMS through December 31, 2015, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which at that time were under a waiver from the IPPS). The FY 2015 MedPAR file used in calculating the proposed relative weights includes data for approximately 9,706,869 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR ``GHO Paid'' indicator field on the claim record is equal to ``1'' or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR ``Indirect Medical Education (IME)'' payment field, indicating that the claim was an ``IME only'' claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the December 31, 2015 update of the FY 2015 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called ``claim type.'' Claim type ``60'' indicates that the claim was an inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the proposed relative weights for FY 2017 also excludes claims with claim type values not equal to ``60.'' The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. We note that the proposed FY 2017 relative weights are based on the ICD-9-CM diagnoses and procedures codes from the FY 2015 MedPAR claims data, grouped through the ICD-9-CM version of the FY 2017 GROUPER (Version 34).

      The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the December 31, 2015 update of the FY 2014 HCRIS for calculating the proposed FY 2017 cost-based relative weights.

      2. Methodology for Calculation of the Proposed Relative Weights

      As we explain in section II.E.2. of the preamble of this proposed rule, we calculated the proposed FY 2017 relative weights based on 19 CCRs, as we did for FY 2016. The methodology we used to calculate the proposed FY 2017 MS-DRG cost-based relative weights based on claims data in the FY 2015 MedPAR file and data from the FY 2014 Medicare cost reports is as follows:

      To the extent possible, all the claims were regrouped using the proposed FY 2017 MS-DRG classifications discussed in sections II.B. and II.F. of the preamble of this proposed rule.

      The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicare-approved transplant centers that have cases in the FY 2015 MedPAR file. (Medicare coverage for heart, heart-

      lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)

      Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS-DRG and before eliminating statistical outliers.

      Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges,

      Page 25028

      intensive care charges, pharmacy charges, special equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood charges, and anesthesia charges were also deleted.

      At least 92.4 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted.

      Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS-DRG.

      Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to ``Y'' for ``Yes'' for all claims that otherwise have an ``N'' (No) or a ``U'' (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field.

      Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a ``Y'' indicator is associated with the diagnosis on the claim), it is not a HAC, and the hospital is paid for the higher severity (and, therefore, the higher weighted MS-DRG). If the particular condition is not present on admission (that is, an ``N'' indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG GROUPER assigns the claim to a lower severity (and, therefore, the lower weighted MS-DRG) as a penalty for allowing a Medicare inpatient to contract a HAC. While the POA reporting meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. Because cases identified as HACs are likely to be more complex than similar cases that are not identified as HACs, the charges associated with HAC cases are likely to be higher as well. Therefore, if the higher charges of these HAC claims are grouped into lower severity MS-DRGs prior to the relative weight-setting process, the relative weights of these particular MS-DRGs would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS-DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost.

      To avoid these problems, we reset the POA indicator field to ``Y'' only for relative weight-setting purposes for all claims that otherwise have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' the more costly HAC claims into the higher severity MS-DRGs as appropriate, and the relative weights calculated for each MS-DRG more closely reflect the true costs of those cases.

      In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent fiscal years, we finalized a policy to treat hospitals that participate in the Bundled Payments for Care Improvement (BPCI) initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to hospitals' participation within these bundled payment models (that is, as if hospitals were not participating in those models under the BPCI initiative). The BPCI initiative, developed under the authority of section 3021 of the Affordable Care Act (codified at section 1115A of the Act), is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the BPCI initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. For FY 2017, we are proposing to continue to include all applicable data from subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on our final policy for the treatment of hospitals participating in the BPCI initiative in our ratesetting process. For additional information on the BPCI initiative, we refer readers to the CMS' Center for Medicare and Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/

      LTCH PPS final rule (77 FR 53341 through 53343).

      Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-of-living adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS-DRG for each of the 19 cost groups so that each MS-DRG had 19 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2014 cost report data.

      The 19 cost centers that we used in the proposed relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the proposed 19 national cost center CCRs. If stakeholders have comments about the groupings in this table, we may consider those comments as we finalize our policy.

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

      Medicare charges

      Revenue codes Cost from HCRIS Charges from HCRIS from HCRIS

      Cost center group name (19 MedPAR charge contained in Cost report line (worksheet C, Part (worksheet C, Part (worksheet D-3,

      total) field MedPAR charge description 1, column 5 and 1, column 6 & 7 column & line

      field line number) form and line number) number) form CMS-

      CMS-2552-10 form CMS-2552-10 2552-10

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

      Routine Days.................... Private Room 011X and 014X..... Adults & C_1_C5_30......... C_1_C6_30......... D3_HOS_C2_30

      Charges. Pediatrics

      (General Routine

      Care).

      Page 25029

      SemidashPrivate 012X, 013X and

      Room Charges. 016X-019X.

      Ward Charges...... 015X..............

      Intensive Days.................. Intensive Care 020X.............. Intensive Care C_1_C5_31......... C_1_C6_31......... D3_HOS_C2_31

      Charges. Unit.

      Coronary Care 021X.............. Coronary Care Unit C_1_C5_32......... C_1_C6_32......... D3_HOS_C2_32

      Charges.

      Burn Intensive C_1_C5_33......... C_1_C6_33......... D3_HOS_C2_33

      Care Unit.

      Surgical Intensive C_1_C5_34......... C_1_C6_34......... D3_HOS_C2_34

      Care Unit.

      Other Special Care C_1_C5_35......... C_1_C6_35......... D3_HOS_C2_35

      Unit.

      Drugs........................... Pharmacy Charges.. 025X, 026X and Intravenous C_1_C5_64......... C_1_C6_64......... D3_HOS_C2_64

      063X. Therapy. C_1_C7_64.........

      Drugs Charged To C_1_C5_73......... C_1_C6_73......... D3_HOS_C2_73

      Patient. C_1_C7_73.........

      Supplies and Equipment.......... Medical/Surgical 0270, 0271, 0272, Medical Supplies C_1_C5_71......... C_1_C6_71......... D3_HOS_C2_71

      Supply Charges. 0273, 0274, 0277, Charged to C_1_C7_71.........

      0279, and 0621, Patients.

      0622, 0623.

      Durable Medical 0290, 0291, 0292 DMEdashRented... C_1_C5_96......... C_1_C6_96......... D3_HOS_C2_96

      Equipment Charges. and C_1_C7_96.........

      0294dash0299.

      Used Durable 0293.............. DMEdashSold..... C_1_C5_97......... C_1_C6_97......... D3_HOS_C2_97

      Medical Charges. C_1_C7_97.........

      Implantable Devices............. .................. 0275, 0276, 0278, Implantable C_1_C5_72......... C_1_C6_72......... D3_HOS_C2_72

      0624. Devices Charged C_1_C7_72.........

      to Patients.

      Therapy Services................ Physical Therapy 042X.............. Physical Therapy.. C_1_C5_66......... C_1_C6_66......... D3_HOS_C2_66

      Charges. C_1_C7_66.........

      Occupational 043X.............. Occupational C_1_C5_67......... C_1_C6_67......... D3_HOS_C2_67

      Therapy Charges. Therapy. C_1_C7_67.........

      Speech Pathology 044X and 047X..... Speech Pathology.. C_1_C5_68......... C_1_C6_68......... D3_HOS_C2_68

      Charges. C_1_C7_68.........

      Inhalation Therapy.............. Inhalation Therapy 041X and 046X..... Respiratory C_1_C5_65......... C_1_C6_65......... D3_HOS_C2_65

      Charges. Therapy. C_1_C7_65.........

      Operating Room.................. Operating Room 036X.............. Operating Room.... C_1_C5_50......... C_1_C6_50......... D3_HOS_C2_50

      Charges. C_1_C7_50.........

      071X.............. Recovery Room..... C_1_C5_51......... C_1_C6_51......... D3_HOS_C2_51

      C_1_C7_51.........

      Labor & Delivery................ Operating Room 072X.............. Delivery Room and C_1_C5_52......... C_1_C6_52......... D3_HOS_C2_52

      Charges. Labor Room. C_1_C7_52.........

      Anesthesia...................... Anesthesia Charges 037X.............. Anesthesiology.... C_1_C5_53......... C_1_C6_53......... D3_HOS_C2_53

      C_1_C7_53.........

      Cardiology...................... Cardiology Charges 048X and 073X..... Electro-cardiology C_1_C5_69......... C_1_C6_69......... D3_HOS_C2_69

      C_1_C7_69.........

      Cardiac Catheterization......... .................. 0481.............. Cardiac C_1_C5_59......... C_1_C6_59......... D3_HOS_C2_59

      Catheterization. C_1_C7_59.........

      Laboratory...................... Laboratory Charges 030X, 031X, and Laboratory........ C_1_C5_60......... C_1_C6_60......... D3_HOS_C2_60

      075X. C_1_C7_60.........

      PBP Clinic C_1_C5_61......... C_1_C6_61......... D3_HOS_C2_61

      Laboratory C_1_C7_61.........

      Services.

      074X, 086X........ Electro- C_1_C5_70......... C_1_C6_70......... D3_HOS_C2_70

      Encephalography. C_1_C7_70.........

      Radiology....................... Radiology Charges. 032X, 040X........ Radiology--Diagnos C_1_C5_54......... C_1_C6_54......... D3_HOS_C2_54

      tic. C_1_C7_54.........

      028x, 0331, 0332, Radiology--Therape C_1_C5_55......... C_1_C6_55......... D3_HOS_C2_55

      0333, 0335, 0339, utic.

      0342.

      0343 and 344...... Radioisotope...... C_1_C5_56......... C_1_C6_56......... D3_HOS_C2_56

      C_1_C7_56.........

      Computed Tomography (CT) Scan... CT Scan Charges... 035X.............. Computed C_1_C5_57......... C_1_C6_57......... D3_HOS_C2_57

      Tomography (CT) C_1_C7_57.........

      Scan.

      Page 25030

      Magnetic Resonance Imaging (MRI) MRI Charges....... 061X.............. Magnetic Resonance C_1_C5_58......... C_1_C6_58......... D3_HOS_C2_58

      Imaging (MRI). C_1_C7_58.........

      Emergency Room.................. Emergency Room 045x.............. Emergency......... C_1_C5_91......... C_1_C6_91......... D3_HOS_C2_91

      Charges. C_1_C7_91.........

      Blood and Blood Products........ Blood Charges..... 038x.............. Whole Blood & C_1_C5_62......... C_1_C6_62......... D3_HOS_C2_62

      Packed Red Blood C_1_C7_62.........

      Cells.

      Blood Storage/ 039x.............. Blood Storing, C_1_C5_63......... C_1_C6_63......... D3_HOS_C2_63

      Processing. Processing, & C_1_C7_63.........

      Transfusing.

      Other Services.................. Other Service 0002-0099, 022X,

      Charge. 023X, 024X, 052X,

      053X.

      055X-060X, 064X-

      070X, 076X-078X,

      090X-095X and

      099X.

      Renal Dialysis.... 0800X............. Renal Dialysis.... C_1_C5_74......... C_1_C6_74......... D3_HOS_C2_74

      ESRD Revenue 080X and 082X-088X C_1_C7_74.........

      Setting Charges.

      Home Program C_1_C5_94......... C_1_C6_94......... D3_HOS_C2_94

      Dialysis. C_1_C7_94.........

      Outpatient Service 049X.............. ASC (Non Distinct C_1_C5_75......... C_1_C6_75......... D3_HOS_C2_75

      Charges. Part). C_1_C7_75.........

      Lithotripsy Charge 079X..............

      Other Ancillary... C_1_C5_76......... C_1_C6_76......... D3_HOS_C2_76

      C_1_C7_76.........

      Clinic Visit 051X.............. Clinic............ C_1_C5_90......... C_1_C6_90......... D3_HOS_C2_90

      Charges. C_1_C7_90.........

      Observation beds.. C_1_C5_92.01...... C_1_C6_92.01...... D3_HOS_C2_92.01

      C_1_C7_92.01......

      Professional Fees 096X, 097X, and Other Outpatient C_1_C5_93......... C_1_C6_93......... D3_HOS_C2_93

      Charges. 098X. Services. C_1_C7_93.........

      Ambulance Charges. 054X.............. Ambulance......... C_1_C5_95......... C_1_C6_95......... D3_HOS_C2_95

      C_1_C7_95.........

      Rural Health C_1_C5_88......... C_1_C6_88......... D3_HOS_C2_88

      Clinic. C_1_C7_88.........

      FQHC.............. C_1_C5_89......... C_1_C6_89......... D3_HOS_C2_89

      C_1_C7_89.........

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

      3. Development of National Average CCRs

      We developed the national average CCRs as follows:

      Using the FY 2014 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicare-specific CCR was determined by taking the Medicare charges for each line item from Worksheet D-3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D-3. Once each hospital's Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs.

      After we multiplied the total charges for each MS-DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 ``costs'' across each MS-DRG to produce a total standardized cost for the MS-DRG. The average standardized cost for each MS-DRG was then computed as the total standardized cost for the MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The average cost for each MS-DRG was then divided by the national average standardized cost per case to determine the relative weight.

      The proposed FY 2017 cost-based relative weights were then normalized by an adjustment factor of 1.690233 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total

      Page 25031

      payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.

      The proposed 19 national average CCRs for FY 2017 are as follows:

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

      Group CCR

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

      Routine Days................................................. 0.459

      Intensive Days............................................... 0.378

      Drugs........................................................ 0.194

      Supplies & Equipment......................................... 0.298

      Implantable Devices.......................................... 0.336

      Therapy Services............................................. 0.322

      Laboratory................................................... 0.120

      Operating Room............................................... 0.192

      Cardiology................................................... 0.113

      Cardiac Catheterization...................................... 0.119

      Radiology.................................................... 0.154

      MRIs......................................................... 0.079

      CT Scans..................................................... 0.039

      Emergency Room............................................... 0.172

      Blood and Blood Products..................................... 0.325

      Other Services............................................... 0.368

      Labor & Delivery............................................. 0.411

      Inhalation Therapy........................................... 0.170

      Anesthesia................................................... 0.090

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

      Since FY 2009, the relative weights have been based on 100 percent cost weights based on our MS-DRG grouping system.

      When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. For FY 2017, we are proposing to use that same case threshold in recalibrating the MS-DRG relative weights for FY 2017. Using data from the FY 2015 MedPAR file, there were 8 MS-DRGs that contain fewer than 10 cases. Under the MS-DRGs, we have fewer low-

      volume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients aged 0 to 17 years. With the exception of newborns, we previously separated some DRGs based on whether the patient was age 0 to 17 years or age 17 years and older. Other than the age split, cases grouping to these DRGs are identical. The DRGs for patients aged 0 to 17 years generally have very low volumes because children are typically ineligible for Medicare. In the past, we have found that the low volume of cases for the pediatric DRGs could lead to significant year-to-year instability in their relative weights. Although we have always encouraged non-Medicare payers to develop weights applicable to their own patient populations, we have received frequent complaints from providers about the use of the Medicare relative weights in the pediatric population. We believe that eliminating this age split in the MS-DRGs will provide more stable payment for pediatric cases by determining their payment using adult cases that are much higher in total volume. Newborns are unique and require separate MS-DRGs that are not mirrored in the adult population. Therefore, it remains necessary to retain separate MS-DRGs for newborns. All of the low-volume MS-DRGs listed are for newborns. For FY 2017, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS-DRGs, we are proposing to compute relative weights for the low-volume MS-DRGs by adjusting their final FY 2016 relative weights by the percentage change in the average weight of the cases in other MS-DRGs. The crosswalk table is shown:

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

      Low-volume MS-DRG MS-DRG title Crosswalk to MS-DRG

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

      768...................... Vaginal Delivery Final FY 2016 relative

      with O.R. weight (adjusted by

      Procedure Except percent change in

      Sterilization and/ average weight of the

      or D&C. cases in other MS-

      DRGs).

      789...................... Neonates, Died or Final FY 2016 relative

      Transferred to weight (adjusted by

      Another Acute Care percent change in

      Facility. average weight of the

      cases in other MS-

      DRGs).

      790...................... Extreme Immaturity Final FY 2016 relative

      or Respiratory weight (adjusted by

      Distress Syndrome, percent change in

      Neonate. average weight of the

      cases in other MS-

      DRGs).

      791...................... Prematurity with Final FY 2016 relative

      Major Problems. weight (adjusted by

      percent change in

      average weight of the

      cases in other MS-

      DRGs).

      792...................... Prematurity without Final FY 2016 relative

      Major Problems. weight (adjusted by

      percent change in

      average weight of the

      cases in other MS-

      DRGs).

      793...................... Full-Term Neonate Final FY 2016 relative

      with Major weight (adjusted by

      Problems. percent change in

      average weight of the

      cases in other MS-

      DRGs).

      794...................... Neonate with Other Final FY 2016 relative

      Significant weight (adjusted by

      Problems. percent change in

      average weight of the

      cases in other MS-

      DRGs).

      795...................... Normal Newborn..... Final FY 2016 relative

      weight (adjusted by

      percent change in

      average weight of the

      cases in other MS-

      DRGs).

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

      We are inviting public comments on this proposal.

    2. Proposed Add-On Payments for New Services and Technologies for FY 2017

      1. Background

      Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate. We note that, beginning with discharges occurring in FY 2008, CMS transitioned from CMS-DRGs to MS-DRGs.

      The regulations at 42 CFR 412.87 implement these provisions and specify three criteria for a new medical service or technology to receive the additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. Below we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria, as well as other information. For a complete discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574).

      Under the first criterion, as reflected in Sec. 412.87(b)(2), a specific medical service or technology will be considered ``new'' for purposes of new medical service or technology add-on payments

      Page 25032

      until such time as Medicare data are available to fully reflect the cost of the technology in the MS-DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a technology receives a new FDA approval, it may not necessarily be considered ``new'' for purposes of new technology add-on payments if it is ``substantially similar'' to a technology that was approved by FDA and has been on the market for more than 2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically: (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS-DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of these criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments. For a detailed discussion of the criteria for substantial similarity, we refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).

      Under the second criterion, Sec. 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, the MS-DRG prospective payment rate otherwise applicable to the discharge involving the new medical services or technologies must be assessed for adequacy. Under the cost criterion, consistent with the formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess the adequacy of payment for a new technology paid under the applicable MS-DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. Table 10 that was released with the FY 2016 IPPS/LTCH PPS final rule contains the final thresholds that we used to evaluate applications for new medical service and new technology add-on payments for FY 2017. We refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Tables.html to download and view Table 10.

      In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed the issue of whether the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims information that providers submit with applications for new medical service and new technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue.

      Under the third criterion, Sec. 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule for a more detailed discussion of this criterion (66 FR 46902).)

      The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under Sec. 412.88, if the costs of the discharge (determined by applying cost-to-

      charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology or medical service (if the estimated costs for the case including the new technology or medical service exceed Medicare's payment); or (2) 50 percent of the difference between the full DRG payment and the hospital's estimated cost for the case. Unless the discharge qualifies for an outlier payment, the additional Medicare payment is limited to the full MS-DRG payment plus 50 percent of the estimated costs of the new technology or new medical service.

      Section 503(d)(2) of Public Law 108-173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108-173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality.

      In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at Sec. 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We amended Sec. 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance for their new medical service or technology by July 1 of each year prior to the beginning of the fiscal year that the application is being considered.

      The Council on Technology and Innovation (CTI) at CMS oversees the agency's cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies and medical services between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108-

      173. The Council is co-chaired by the Director of the Center for Clinical Standards and Quality (CCSQ) and the Director of the Center for Medicare (CM), who is also designated as the CTI's Executive Coordinator.

      The specific processes for coverage, coding, and payment are implemented by CM, CCSQ, and the local claims-payment contractors (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, these processes by working to assure that all of these activities reflect the agency-wide priority to promote high-

      quality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical

      Page 25033

      decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries.

      To improve the understanding of CMS' processes for coverage, coding, and payment and how to access them, the CTI has developed an ``Innovator's Guide'' to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS Web site, in a user-

      friendly format. This guide was published in 2010 and is available on the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.

      As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical services or technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency's coverage decisions for Medicare.

      The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare's coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov.

      We note that applicants for add-on payments for new medical services or technologies for FY 2018 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2018, the CMS Web site also will post the tracking forms completed by each applicant.

      2. Public Input Before Publication of a Notice of Proposed Rulemaking on Add-On Payments

      Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Public Law 108-173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to--

      Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries;

      Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending;

      Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement; and

      Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS.

      In order to provide an opportunity for public input regarding add-

      on payments for new medical services and technologies for FY 2017 prior to publication of the FY 2017 IPPS/LTCH PPS proposed rule, we published a notice in the Federal Register on November 30, 2015 (80 FR 74774), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 16, 2016. In the announcement notice for the meeting, we stated that the opinions and presentations provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2017 new medical service and technology add-on payment applications before the publication of the FY 2017 IPPS/

      LTCH PPS proposed rule.

      Approximately 76 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. We also live-streamed the town hall meeting and posted the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=dn-R5KGQu-M. We considered each applicant's presentation made at the town hall meeting, as well as written comments submitted on the applications that were received by the due date of February 26, 2016, in our evaluation of the new technology add-on payment applications for FY 2017 in this proposed rule.

      As indicated earlier in this section, CMS is required to provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In recent years, CMS has live-streamed the town hall meeting through the CMS YouTube Web page and later posted the recorded version of the town hall meeting, in addition to maintaining an open telephone line. We are proposing to conduct future town hall meetings entirely via teleconference and Webcast using the same technologies. Under this proposal, we would continue to publish a notice informing the public of the date of the meeting, as well as requirements for the submission of presentations. We also would continue to maintain an open telephone line, with an option for participation in the Webcast. The recording of the town hall meeting would continue to be available on the CMS You Tube Web page or other CMS Web site following the meeting. This recording would include closed captioning of all presentations and comments. In addition to submitting materials for discussion at the town hall meeting, individuals would continue to be able to submit other written comments after the town hall meeting on whether the service or technology represents a substantial clinical improvement. We are inviting public comments on this proposal.

      In response to the published notice and the February 16, 2016 New Technology Town Hall meeting, we received written comments regarding the applications for FY 2017 new technology add-on payments. We summarize below a general comment that does not relate to a specific application for FY 2017 new technology

      Page 25034

      add-on payments. We also summarize comments regarding individual applications, or, if applicable, indicate that there were no comments received in section II.H.5. of the preamble of this proposed rule at the end of each discussion of the individual applications.

      Comment: One commenter recommended that CMS broaden the criteria applied in making substantial clinical improvement determinations to require, in addition to existing criteria, consideration of whether the new technology or medical service meets one or more of the following additional suggested criteria: (1) Results in a reduction of the length of a hospital stay; (2) improves patient quality of life; (3) creates long-term clinical efficiencies in treatment; (3) addresses patient-

      centered objectives as defined by the Secretary; or (4) meets such other criteria as the Secretary may specify. The commenter also suggested that an entity that submits an application for new technology add-on payments be entitled to administrative review of an adverse determination made by the Secretary.

      Response: We appreciate these recommendations and suggestions and will consider them in future rulemaking.

      We note that the commenter also provided comments that were unrelated to the substantial clinical improvement criterion. As stated earlier, the purpose of the new technology town hall meeting is specifically to discuss the substantial clinical improvement criterion in regard to pending new technology add-on payment applications for FY 2017. Therefore, we are not summarizing these additional comments in this proposed rule. However, the commenter is welcome to resubmit its comments in response to proposals presented in this proposed rule.

      3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and Technologies

      As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49434), the ICD-10-PCS includes a new section containing the new Section ``X'' codes, which began being used with discharges occurring on or after October 1, 2015. Decisions regarding changes to ICD-10-PCS Section ``X'' codes will be handled in the same manner as the decisions for all of the other ICD-10-PCS code changes. That is, proposals to create, delete, or revise Section ``X'' codes under the ICD-10-PCS structure will be referred to the ICD-10 Coordination and Maintenance Committee. In addition, several of the new medical services and technologies that have been, or may be, approved for new technology add-on payments may now, and in the future, be assigned a Section ``X'' code within the structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS ``X'' codes. We encourage providers to view the material provided on ICD-10-PCS Section ``X'' codes.

      4. Proposed FY 2017 Status of Technologies Approved for FY 2016 Add-On Payments

  238. KcentraTM

    CSL Behring submitted an application for new technology add-on payments for KcentraTM for FY 2014. KcentraTM is a replacement therapy for fresh frozen plasma (FFP) for patients with an acquired coagulation factor deficiency due to warfarin and who are experiencing a severe bleed. KcentraTM contains the Vitamin K dependent coagulation factors II, VII, IX and X, together known as the prothrombin complex, and antithrombotic proteins C and S. Factor IX is the lead factor for the potency of the preparation. The product is a heat-treated, non-activated, virus filtered and lyophilized plasma protein concentrate made from pooled human plasma. KcentraTM is available as a lyophilized powder that needs to be reconstituted with sterile water prior to administration via intravenous infusion. The product is dosed based on Factor IX units. Concurrent Vitamin K treatment is recommended to maintain blood clotting factor levels once the effects of KcentraTM have diminished.

    KcentraTM was approved by the FDA on April 29, 2013. Under the ICD-10 coding system, KcentraTM is uniquely identified by ICD-10-CM procedure code 30283B1 (Transfusion of nonautologous 4-factor prothrombin complex concentrate into vein, percutaneous approach).

    After evaluation of the newness, cost, and substantial clinical improvement criteria for new technology add-on payments for KcentraTM and consideration of the public comments we received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we approved KcentraTM for new technology add-on payments for FY 2014 (78 FR 50575 through 50580). In the application, the applicant estimated that the average Medicare beneficiary would require an average dosage of 2500 International Units (IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases of KcentraTM would incur an average cost per case of $3,175 ($635 x 5). Under Sec. 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum add-on payment for a case of KcentraTM was $1,587.50 for FY 2014. We refer the reader to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579) for complete details on the new technology add-on payments for KcentraTM.

    As stated above, the new technology add-on payment regulations provide that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD-9-CM code assigned to the new service or technology (Sec. 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year. In general, we extend add-on payments for an additional year only if the 3-year anniversary date of the product's entry on the market occurs in the latter half of the fiscal year (70 FR 47362).

    With regard to the newness criterion for KcentraTM, we considered the beginning of the newness period to commence when KcentraTM was approved by the FDA on April 29, 2013. Because the 3-year anniversary date for KcentraTM will occur in the latter half of FY 2016 (April 29, 2016), in the FY 2016 IPPS/LTCH PPS final rule, we continued new technology add-on payments for this technology for FY 2016 (80 FR 49437). However, for FY 2017, the 3-year anniversary date of the entry of KcentraTM on the U.S. market (April 29, 2016) will occur prior to the beginning of FY 2017. Therefore, we are proposing to discontinue new technology add-on payments for this technology for FY 2017. We are inviting public comments on this proposal.

  239. Argussupreg II Retinal Prosthesis System

    Second Sight Medical Products, Inc. submitted an application for new technology add-on payments for the Argussupreg II Retinal Prosthesis System (Argussupreg II System) for FY 2014. The Argussupreg II System is an active implantable medical device that is intended to provide electrical stimulation of the retina to induce visual perception in patients who are profoundly blind due to retinitis

    Page 25035

    pigmentosa (RP). These patients have bare or no light perception in both eyes. The system employs electrical signals to bypass dead photo-

    receptor cells and stimulate the overlying neurons according to a real-

    time video signal that is wirelessly transmitted from an externally worn video camera. The Argussupreg II implant is intended to be implanted in a single eye, typically the worse-seeing eye. Currently, bilateral implants are not intended for this technology. According to the applicant, the surgical implant procedure takes approximately 4 hours and is performed under general anesthesia.

    With regard to the newness criterion, the applicant received a Humanitarian Device Exemption (HDE) approval from the FDA on February 14, 2013. However, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49924 through 49925), we discussed comments we had received informing CMS that the Argussupreg II System was not available on the U.S. market until December 20, 2013. The applicant explained that, as part of the lengthy approval process, it was required to submit a request to the Federal Communications Commission (FCC) for a waiver of section 15.209(a) of the FCC rules that would allow the applicant to apply for FCC authorization to utilize this specific RF band. The FCC approved the applicant's waiver request on November 30, 2011. After receiving the FCC waiver of the section 15.209(a) rules, the applicant requested and obtained a required Grant of Equipment Authorization to utilize the specific RF band, which the FCC issued on December 20, 2013. Therefore, the applicant stated that the date the Argussupreg II System first became available for commercial sale in the United States was December 20, 2013. We agreed with the applicant that, due to the delay, the date of newness for the Argussupreg II System was December 20, 2013, instead of February 14, 2013.

    After evaluation of the new technology add-on payment application and consideration of public comments received, we concluded that the Argussupreg II System met all of the new technology add-on payment policy criteria. Therefore, we approved the Argussupreg II System for new technology add-on payments in FY 2014 (78 FR 50580 through 50583). Cases involving the Argussupreg II System that are eligible for new technology add-on payments currently are identified when one of the following ICD-10-PCS procedure codes is reported: 08H005Z (Insertion of epiretinal visual prosthesis into right eye, open approach); or 08H105Z (Insertion of epiretinal visual prosthesis into left eye, open approach). In the application, the applicant provided a breakdown of the costs of the Argussupreg II System. The total operating cost of the Argussupreg II System is $144,057.50. Under Sec. 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum add-on payment for a case involving the Argussupreg II System for FY 2014 was $72,028.75.

    With regard to the newness criterion for the Argussupreg II System, we considered the beginning of the newness period to commence when the Argussupreg II System became available on the U.S. market on December 20, 2013. Because the 3-year anniversary date for the Argussupreg II System will occur after FY 2016 (December 20, 2016), in the FY 2016 IPPS/LTCH PPS final rule, we continued new technology add-on payments for this technology for FY 2016 (80 FR 49439). However, for FY 2017, the 3-year anniversary date of the entry of the Argussupreg II System on the U.S. market (December 20, 2016) will occur in the first half of FY 2017. As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry on to the U.S. market occurs in the latter half of the fiscal year. Therefore, we are proposing to discontinue new technology add-on payments for this technology for FY 2017. We are inviting public comments on this proposal.

  240. CardioMEMSTM HF (Heart Failure) Monitoring System

    CardioMEMS, Inc. submitted an application for new technology add-on payment for FY 2015 for the CardioMEMSTM HF (Heart Failure) Monitoring System, which is an implantable hemodynamic monitoring system comprised of an implantable sensor/monitor placed in the distal pulmonary artery. Pulmonary artery hemodynamic monitoring is used in the management of heart failure. The CardioMEMSTM HF Monitoring System measures multiple pulmonary artery pressure parameters for an ambulatory patient to measure and transmit data via a wireless sensor to a secure Web site.

    The CardioMEMSTM HF Monitoring System utilizes radiofrequency (RF) energy to power the sensor and to measure pulmonary artery (PA) pressure and consists of three components: An Implantable Sensor with Delivery Catheter, an External Electronics Unit, and a Pulmonary Artery Pressure Database. The system provides the physician with the patient's PA pressure waveform (including systolic, diastolic, and mean pressures) as well as heart rate. The sensor is permanently implanted in the distal pulmonary artery using transcatheter techniques in the catheterization laboratory where it is calibrated using a Swan-

    Ganz catheter. PA pressures are transmitted by the patient at home in a supine position on a padded antenna, pushing one button which records an 18-second continuous waveform. The data also can be recorded from the hospital, physician's office or clinic.

    The hemodynamic data, including a detailed waveform, are transmitted to a secure Web site that serves as the Pulmonary Artery Pressure Database, so that information regarding PA pressure is available to the physician or nurse at any time via the Internet. Interpretation of trend data allows the clinician to make adjustments to therapy and can be used along with heart failure signs and symptoms to adjust medications.

    The applicant received FDA approval on May 28, 2014.

    After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for the CardioMEMSTM HF Monitoring System and consideration of the public comments we received in response to the FY 2015 IPPS/LTCH PPS proposed rule, we approved the CardioMEMSTM HF Monitoring System for new technology add-on payments for FY 2015 (79 FR 49940). Cases involving the CardioMEMSTM HF Monitoring System that are eligible for new technology add-on payments are identified by either ICD-10-PCS procedure code 02HQ30Z (Insertion of pressure sensor monitoring device into right pulmonary artery, percutaneous approach) or ICD-10-PCS procedure code 02HR30Z (Insertion of pressure sensor monitoring device into left pulmonary artery, percutaneous approach). With the new technology add-on payment application, the applicant stated that the total operating cost of the CardioMEMSTM HF Monitoring System is $17,750. Under Sec. 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for a case involving the CardioMEMSTM HF Monitoring System is $8,875.

    With regard to the newness criterion for the CardioMEMSTM HF Monitoring System, we considered the beginning of the newness period to commence when the CardioMEMSTM HF Monitoring System was approved by the FDA on May 28, 2014. Because the 3-year

    Page 25036

    anniversary date of the entry of the CardioMEMSTM HF Monitoring System on the U.S. market will occur in the latter half of FY 2017 (May 28, 2017), we are proposing to continue new technology add-on payments for this technology for FY 2017. The maximum payment for a case involving the CardioMEMSTM HF Monitoring System would remain at $8,875 for FY 2017. We are inviting public comments on our proposal.

  241. MitraClipsupreg System

    Abbott Vascular submitted an application for new technology add-on payments for the MitraClipsupreg System for FY 2015. The MitraClipsupreg System is a transcatheter mitral valve repair system that includes a MitraClipsupreg device implant, a Steerable Guide Catheter, and a Clip Delivery System. It is designed to perform reconstruction of the insufficient mitral valve for high-risk patients who are not candidates for conventional open mitral valve repair surgery.

    With regard to the newness criterion, the MitraClipsupreg System received a premarket approval from the FDA on October 24, 2013. The MitraClipsupreg System is indicated ``for the percutaneous reduction of significant symptomatic mitral regurgitation (MR >= 3+) due to primary abnormality of the mitral apparatus (degenerative MR) in patients who have been determined to be at prohibitive risk for mitral valve surgery by a heart team, which includes a cardiac surgeon experienced in mitral valve surgery and a cardiologist experienced in mitral valve disease, and in whom existing comorbidities would not preclude the expected benefit from reduction of the mitral regurgitation.'' The MitraClipsupreg System became immediately available on the U.S. market following FDA approval. The MitraClipsupreg System is a Class III device, and has an investigational device exemption (IDE) for the EVEREST study (Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip Percutaneous Therapy for Health Failure Patients with Functional Mitral Regurgitation)--IDE G120024. Cases involving the MitraClipsupreg System are identified using ICD-10-PCS procedure code 02UG3JZ (Supplement mitral valve with synthetic substitute, percutaneous approach).

    On August 7, 2014, CMS issued a National Coverage Decision (NCD) concerning Transcatheter Mitral Valve Repair procedures. We refer readers to the CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273 for information related to this NCD.

    After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for the MitraClipsupreg System and consideration of the public comments we received in response to the FY 2015 IPPS/LTCH PPS proposed rule, we approved the MitraClipsupreg System for new technology add-on payments for FY 2015 (79 FR 49946). As discussed in the FY 2015 IPPS/

    LTCH PPS final rule, this approval is on the basis of using the MitraClipsupreg consistent with the NCD. The average cost of the MitraClipsupreg System is reported as $30,000. Under section 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for a case involving the MitraClipsupreg System is $15,000 for FY 2015.

    With regard to the newness criterion for the MitraClipsupreg System, we considered the beginning of the newness period to commence when the MitraClipsupreg System was approved by the FDA on October 24, 2013. Because the 3-year anniversary date of the entry of the MitraClipsupreg System on the U.S. market (October 24, 2016) will occur after FY 2016, in the FY 2016 IPPS/LTCH PPS final rule, we continued new technology add-on payments for this technology for FY 2016 (80 FR 49442). However, for FY 2017, the 3-year anniversary date of the entry of MitraClipsupreg System on the U.S. market (October 24, 2016) will occur in the first half of FY 2017. As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry on to the U.S. market occurs in the latter half of the fiscal year. Therefore, we are proposing to discontinue new technology add-on payments for this technology for FY 2017. We are inviting public comments on this proposal.

  242. Responsive Neurostimulator (RNSsupreg) System

    NeuroPace, Inc. submitted an application for new technology add-on payments for FY 2015 for the use of the RNSsupreg System. (We note that the applicant submitted an application for new technology add-on payments for FY 2014, but failed to receive FDA approval prior to the July 1 deadline.) Seizures occur when brain function is disrupted by abnormal electrical activity. Epilepsy is a brain disorder characterized by recurrent, unprovoked seizures. According to the applicant, the RNSsupreg System is the first implantable medical device (developed by NeuroPace, Inc.) for treating persons diagnosed with epilepsy whose partial onset seizures have not been adequately controlled with antiepileptic medications. The applicant further stated that, the RNSsupreg System is the first closed-loop, responsive system to treat partial onset seizures. Responsive electrical stimulation is delivered directly to the seizure focus in the brain when abnormal brain activity is detected. A cranially implanted programmable neurostimulator senses and records brain activity through one or two electrode-containing leads that are placed at the patient's seizure focus/foci. The neurostimulator detects electrographic patterns previously identified by the physician as abnormal, and then provides brief pulses of electrical stimulation through the leads to interrupt those patterns. Stimulation is delivered only when abnormal electrocorticographic activity is detected. The typical patient is treated with a total of 5 minutes of stimulation a day. The RNSsupreg System incorporates remote monitoring, which allows patients to share information with their physicians remotely.

    With regard to the newness criterion, the applicant stated that some patients diagnosed with partial onset seizures that cannot be controlled with antiepileptic medications may be candidates for the vagus nerve stimulator (VNS) or for surgical removal of the seizure focus. According to the applicant, these treatments are not appropriate for, or helpful to, all patients. Therefore, the applicant believed that there is an unmet clinical need for additional therapies for partial onset seizures. The applicant further stated that the RNSsupreg System addresses this unmet clinical need by providing a novel treatment option for treating persons diagnosed with medically intractable partial onset seizures. The applicant received FDA premarket approval on November 14, 2013.

    After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for the RNSsupreg System and consideration of the public comments we received in response to the FY 2015 IPPS/LTCH PPS proposed rule, we approved the RNSsupreg System for new technology add-on payments for FY 2015 (79 FR 49950). Cases involving the RNSsupreg System that are eligible for new technology add-on payments are identified using the following ICD-10-

    PCS procedure code

    Page 25037

    combination: 0NH00NZ (Insertion of neurostimulator generator into skull, open approach) in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach). According to the applicant, cases using the RNSsupreg System would incur an anticipated cost per case of $36,950. Under Sec. 412.88(a)(2) of the regulations, we limit new technology add-on payments to the lesser of 50 percent of the average costs of the device or 50 percent of the costs in excess of the MS-DRG payment rate for the case. As a result, the maximum new technology add-on payment for cases involving the RNSsupreg System is $18,475.

    With regard to the newness criterion for the RNSsupreg System, we considered the beginning of the newness period to commence when the RNSsupreg System was approved by the FDA on November 14, 2013. Because the 3-year anniversary date of the entry of the RNSsupreg System on the U.S. market (November 14, 2016) will occur after FY 2016, in the FY 2016 IPPS/LTCH PPS final rule, we continued new technology add-on payments for this technology for FY 2016 (80 FR 49443). However, for FY 2017, the 3-year anniversary date of the entry of RNSsupreg System on the U.S. market (November 14, 2016) will occur in the first half of FY 2017. As discussed previously in this section, in general, we extend new technology add-on payments for an additional year only if the 3-year anniversary date of the product's entry on to the U.S. market occurs in the latter half of the fiscal year. Therefore, we are proposing to discontinue new technology add-on payments for this technology for FY 2017. We are inviting public comments on this proposal.

  243. Blinatumomab (BLINCYTOTM Trade Brand)

    Amgen, Inc. submitted an application for new technology add-on payments for FY 2016 for Blinatumomab (BLINCYTOTM), a bi-

    specific T-cell engager (BiTE) used for the treatment of Philadelphia chromosome-negative (Ph-) relapsed or refractory (R/R) B-cell precursor acute-lymphoblastic leukemia (ALL), which is a rare aggressive cancer of the blood and bone marrow. Approximately 6,050 individuals are diagnosed with Ph- R/R B-cell precursor ALL in the United States each year, and approximately 2,400 individuals, representing 30 percent of all new cases, are adults. Ph- R/R B-cell precursor ALL occurs when there are malignant transformations of B-cell or T-cell progenitor cells, causing an accumulation of lymphoblasts in the blood, bone marrow, and occasionally throughout the body. As a bi-specific T-cell engager, the BLINCYTOTM technology attaches to a molecule on the surface of the tumorous cell, as well as to a molecule on the surface of normal T-cells, bringing the two into closer proximity and allowing the normal T-cell to destroy the tumorous cell. Specifically, the BLINCYTOTM technology attaches to a cell identified as CD19, which is present on all of the cells of the malignant transformations that cause Ph- R/R B-cell precursor ALL and helps attract the cell into close proximity of the T-cell CD3 with the intent of getting close enough to allow the T-cell to inject toxins that destroy the cancerous cell. According to the applicant, the BLINCYTOTM technology is the first, and the only, bi-

    specific CD19-directed CD3 T-cell engager single-agent immunotherapy approved by the FDA.

    BLINCYTOTM is administered as a continuous IV infusion delivered at a constant flow rate using an infusion pump. A single cycle of treatment consists of 28 days of continuous infusion, and each treatment cycle followed by 2 weeks without treatment prior to administering any further treatments. A course of treatment would consist of two phases. Phase 1 consists of initial inductions or treatments intended to achieve remission followed by additional inductions and treatments to maintain consolidation; or treatments given after remission has been achieved to prolong the duration. During phase 1 of a single treatment course, up to two cycles of BLINCYTOTM are administered, and up to three additional cycles are administered during consolidation. The recommended dosage of BLINCYTOTM administered during the first cycle of treatment is 9 mcg per day for the first 7 days of treatment. The dosage is then increased to 28 mcg per day for 3 weeks until completion. During phase 2 of the treatment course, all subsequent doses are administered as 28 mcg per day throughout the entire duration of the 28-day treatment period.

    With regard to the newness criterion, the BLINCYTOTM technology received FDA approval on December 3, 2014, for the treatment of patients diagnosed with Ph- R/R B-cell precursor ALL, and the product gained entry onto the U.S. market on December 17, 2014.

    After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for BLINCYTOTM and consideration of the public comments we received in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved BLINCYTOTM for new technology add-on payments for FY 2016 (80 FR 49449). Cases involving BLINCYTOTM that are eligible for new technology add-on payments are identified using one of the following ICD-10-PCS procedure codes: XW03351 (Introduction of Blinatumomab antineoplastic immunotherapy into peripheral vein, percutaneous approach, new technology group 1) or XW04351 (Introduction of Blinatumomab antineoplastic immunotherapy into central vein, percutaneous approach, new technology group1).

    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49449), the applicant recommended that CMS consider and use the cost of the full 28-day inpatient treatment cycle as the expected length of treatment when determining the maximum new technology add-on payment for cases involving the BLINCYTOTM rather than the average cost of lesser number of days used as other variables. For the reasons discussed, we disagreed with the applicant and established the maximum new technology add-on payment amount for a case involving the BLINCYTOTM technology for FY 2016 using the weighted average of the cycle 1 and cycle 2 observed treatment length. Specifically, in the Phase II trial, the most recent data available, 92 patients received cycle 1 for an average length of 21.2 days, and 52 patients received cycle 2 for an average length of 10.2 days. The weighted average of cycle 1 and 2 treatment length is 17 days. We noted that a small number of patients also received 3 to 5 treatment cycles. However, based on the data provided, these cases do not appear to be typical at this point and we excluded them from this calculation. We noted that, if we included all treatment cycles in this calculation, the weighted average number of days of treatment is much lower, 10 days. Using the clinical data provided by the applicant, we stated that we believe that setting the maximum new technology add-on payment amount for a case involving the BLINCYTOTM technology for FY 2016 based on a 17-day length of treatment cycle is representative of historical and current practice. We also stated that, for FY 2017, if new data on length of treatment are available, we would consider any such data in evaluating the maximum new technology add-on payment amount. However, we did not receive any new data from the applicant to evaluate for FY 2017.

    In the application, the applicant estimated that the average Medicare beneficiary would require a dosage of 9mcg/day for the first 7 days under the

    Page 25038

    first treatment cycle, followed by a dosage of 28mcg/day for the duration of the treatment cycle, as well as all days included in subsequent cycles. All vials contain 35mcg at a cost of $3,178.57 per vial. The applicant noted that all vials are single-use. Therefore, we determined that cases involving the use of the BLINCYTOTM technology would incur an average cost per case of $54,035.69 (1 vial/

    day x 17 days x $3,178.57/vial). Under 42 CFR 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment amount for a case involving the use of the BLINCYTOTM is $27,017.85 for FY 2016.

    With regard to the newness criterion for BLINCYTOTM, we considered the beginning of the newness period to commence when the product gained entry onto the U.S. market on December 17, 2014. Because the 3-year anniversary date of the entry of the BLINCYTOTM on the U.S. market will occur after FY 2017 (December 17, 2017), we are proposing to continue new technology add-on payments for this technology for FY 2017. The maximum payment for a case involving BLINCYTOTM would remain at $27,017.85 for FY 2017. We are inviting public comments on this proposal.

  244. Lutonixsupreg Drug Coated Balloon PTA Catheter and In.PACTTM AdmiralTM Paclitaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter

    Two manufacturers, CR Bard Inc. and Medtronic, submitted applications for new technology add-on payments for FY 2016 for LUTONIXsupreg Drug-Coated Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) Catheter (LUTONIXsupreg) and IN.PACTTM AdmiralTM Paclitaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter (IN.PACTTM AdmiralTM), respectively. Both of these technologies are drug-coated balloon angioplasty treatments for patients diagnosed with peripheral artery disease (PAD). Typical treatments for patients with PAD include angioplasty, stenting, atherectomy and vascular bypass surgery. PAD most commonly occurs in the femoropopliteal segment of the peripheral arteries, is associated with significant levels of morbidity and impairment in quality of life, and requires treatment to reduce symptoms and prevent or treat ischemic events.\2\ Treatment options for symptomatic PAD include noninvasive treatment such as medication and life-style modification (for example, exercise programs, diet, and smoking cessation) and invasive options which include endovascular treatment and surgical bypass. The 2013 American College of Cardiology and American Heart Association (ACC/AHA) guidelines for the management of PAD recommend endovascular therapy as the first-line treatment for femoropopliteal artery lesions in patients suffering from claudication (Class I, Level A recommendation).\3\

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

    \2\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzwalder U, Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U.: Local delivery of paclitaxel to inhibit restenosis during angioplasty of the leg. N Engl J Med 2008; 358: 689-99.

    \3\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG, Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM, Pressler SJ, Sellke FW, Shen WK.: Management of patients with peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA guideline recommendations): a report of the American College of Cardiology Foundation/American Heart Association Task Force on Practice Guidelines. J Am Coll Cardiol 2013; 61:1555-70. Available at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.

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

    According to both applicants, LUTONIXsupreg and IN.PACTTM AdmiralTM are the first drug coated balloons that can be used for treatment of patients who are diagnosed with PAD. In the FY 2016 IPPS/LTCH final rule, we stated that because cases eligible for the two devices would group to the same MS-DRGs and we believe that these devices are substantially similar to each other (that is, they are intended to treat the same or similar disease in the same or similar patient population and are purposed to achieve the same therapeutic outcome using the same or similar mechanism of action), we evaluated both technologies as one application for new technology add-

    on payment under the IPPS. The applicants submitted separate cost and clinical data, and we reviewed and discussed each set of data separately. However, we made one determination regarding new technology add-on payments that applied to both devices. We believe that this is consistent with our policy statements in the past regarding substantial similarity. Specifically, we have noted that approval of new technology add-on payments would extend to all technologies that are substantially similar (66 FR 46915), and that we believe that continuing our current practice of extending a new technology add-on payment without a further application from the manufacturer of the competing product or a specific finding on cost and clinical improvement if we make a finding of substantial similarity among two products is the better policy because we avoid--

    Creating manufacturer-specific codes for substantially similar products;

    Requiring different manufacturers of substantially similar products from having to submit separate new technology applications;

    Having to compare the merits of competing technologies on the basis of substantial clinical improvement; and

    Bestowing an advantage to the first applicant representing a particular new technology to receive approval (70 FR 47351).

    CR Bard, Inc. received FDA approval for LUTONIXsupreg on October 9, 2014. Commercial sales in the U.S. market began on October 10, 2014. Medtronic received FDA approval for IN.PACTTM AdmiralTM on December 30, 2014. Commercial sales in the U.S. market began on January 29, 2015.

    In accordance with our policy, we stated in the FY 2016 IPPS\LTCH final rule (80 FR 49463) that we believe it is appropriate to use the earliest market availability date submitted as the beginning of the newness period. Accordingly, for both devices, we stated that the beginning of the newness period will be October 10, 2014.

    After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for the LUTONIXsupreg and IN.PACTTM AdmiralTM technologies and consideration of the public comments we received in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved the LUTONIXsupreg and IN.PACTTM AdmiralTM technologies for new technology add-on payments for FY 2016 (80 FR 49469). Cases involving the LUTONIXsupreg and IN.PACTTM AdmiralTM technologies that are eligible for new technology add-on payments are identified using one of the ICD-10-PCS procedure codes in the following table:

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

    ICD-10-PCS Code Code description

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

    047K041.................. Dilation of right femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, open approach.

    Page 25039

    047K0D1.................. Dilation of right femoral artery with

    intraluminal device using drug-coated

    balloon, open approach.

    047K0Z1.................. Dilation of right femoral artery using drug-

    coated balloon, open approach.

    047K341.................. Dilation of right femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous approach.

    047K3D1.................. Dilation of right femoral artery with

    intraluminal device using drug-coated

    balloon, percutaneous approach.

    047K3Z1.................. Dilation of right femoral artery using drug-

    coated balloon, percutaneous approach.

    047K441.................. Dilation of right femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047K4D1.................. Dilation of right femoral artery with

    intraluminal device using drug-coated

    balloon, percutaneous endoscopic approach.

    047K4Z1.................. Dilation of right femoral artery using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047L041.................. Dilation of left femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, open approach.

    047L0D1.................. Dilation of left femoral artery with

    intraluminal device using drug-coated

    balloon, open approach.

    047L0Z1.................. Dilation of left femoral artery using drug-

    coated balloon, open approach.

    047L341.................. Dilation of left femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous approach.

    047L3D1.................. Dilation of left femoral artery with

    intraluminal device using drug-coated

    balloon, percutaneous approach.

    047L3Z1.................. Dilation of left femoral artery using drug-

    coated balloon, percutaneous approach.

    047L441.................. Dilation of left femoral artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047L4D1.................. Dilation of left femoral artery with

    intraluminal device using drug-coated

    balloon, percutaneous endoscopic approach.

    047L4Z1.................. Dilation of left femoral artery using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047M041.................. Dilation of right popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, open approach.

    047M0D1.................. Dilation of right popliteal artery with

    intraluminal device using drug-coated

    balloon, open approach.

    047M0Z1.................. Dilation of right popliteal artery using drug-

    coated balloon, open approach.

    047M341.................. Dilation of right popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous approach.

    047M3D1.................. Dilation of right popliteal artery with

    intraluminal device using drug-coated

    balloon, percutaneous approach.

    047M3Z1.................. Dilation of right popliteal artery using drug-

    coated balloon, percutaneous approach.

    047M441.................. Dilation of right popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047M4D1.................. Dilation of right popliteal artery with

    intraluminal device using drug-coated

    balloon, percutaneous endoscopic approach.

    047M4Z1.................. Dilation of right popliteal artery using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047N041.................. Dilation of left popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, open approach.

    047N0D1.................. Dilation of left popliteal artery with

    intraluminal device using drug-coated

    balloon, open approach.

    047N0Z1.................. Dilation of left popliteal artery using drug-

    coated balloon, open approach.

    047N341.................. Dilation of left popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous approach.

    047N3D1.................. Dilation of left popliteal artery with

    intraluminal device using drug-coated

    balloon, percutaneous approach.

    047N3Z1.................. Dilation of left popliteal artery using drug-

    coated balloon, percutaneous approach.

    047N441.................. Dilation of left popliteal artery with drug-

    eluting intraluminal device using drug-

    coated balloon, percutaneous endoscopic

    approach.

    047N4D1.................. Dilation of left popliteal artery with

    intraluminal device using drug-coated

    balloon, percutaneous endoscopic approach.

    047N4Z1.................. Dilation of left popliteal artery using drug-

    coated balloon, percutaneous endoscopic

    approach.

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

    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49469), each of the applicants submitted operating costs for its DCB. The manufacturer of the LUTONIXsupreg stated that a mean of 1.37 drug-

    coated balloons was used during the LEVANT 2 clinical trial. The acquisition price for the hospital will be $1,900 per drug-coated balloon, or $2,603 per case (1.37 x $1,900). The applicant projected that approximately 8,875 cases will involve use of the LUTONIXsupreg for FY 2016. The manufacturer for the IN.PACTTM AdmiralTM stated that a mean of 1.4 drug-coated balloons was used during the IN.PACTTM AdmiralTM DCB arm. The acquisition price for the hospital will be $1,350 per drug-coated balloon, or $1,890 per case (1.4 x $1,350). The applicant projected that approximately 26,000 cases will involve use of the IN.PACTTM AdmiralTM for FY 2016.

    For FY 2016, we based the new technology add-on payment for cases involving these technologies on the weighted average cost of the two DCBs described by the ICD-10-PCS procedure codes listed above (which are not manufacturer specific). Because ICD-10 codes are not manufacturer specific, we cannot set one new technology add-on payment amount for IN.PACTTM AdmiralTM and a different new technology add-on payment amount for LUTONIXsupreg; both technologies will be captured by using the same ICD-10-PCS procedure code. As such, we stated that we believe that the use of a weighted average of the cost of the standard DCBs based on the projected number of cases involving each technology to determine the maximum new technology add-on payment would be most appropriate. To compute the weighted cost average, we summed the total number of projected cases for each of the applicants, which equaled 34,875 cases (26,000 plus 8,875). We then divided the number of projected cases for each of the applicants by the total number of cases, which resulted in the following case-weighted percentages: 25 Percent for the LUTONIXsupreg and 75 percent for the IN.PACTTM AdmiralTM. We then multiplied the cost per case for the manufacturer specific DCB by the case-weighted percentage (0.25 * $2,603=$662.41 for LUTONIXsupreg and 0.75 * $1,890=$1,409.03 for the IN.PACTTM AdmiralTM). This resulted in a case-weighted average cost of $2,071.45 for DCBs. Under Sec. 412.88(a)(2), we limit new technology add-on payments to the lesser of 50 percent of the average cost of the device or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum payment for a case involving the LUTONIXsupreg or IN.PACTTM AdmiralTM DCBs is $1,035.72.

    With regard to the newness criterion for LUTONIXsupreg and IN.PACTTM AdmiralTM technologies, we considered the beginning of the newness period to commence when LUTONIXsupreg gained entry onto the U.S. market on October 10, 2014. Because the 3-

    year anniversary date of the entry of LUTONIXsupreg on the U.S. market will occur after FY 2017 (October 10, 2017), we are proposing to continue new technology add-on payments for both the LUTONIXsupreg and IN.PACTTM AdmiralTM technologies for

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    FY 2017. The maximum add-on payment for a case involving LUTONIXsupreg and IN.PACTTM AdmiralTM would remain at $1,035.72 for FY 2017. We are inviting public comments on this proposal.

    5. Proposed FY 2017 Applications for New Technology Add-On Payments

    We are reviewing nine applications for new technology add-on payments for FY 2017. In accordance with the regulations under Sec. 412.87(c), applicants for new technology add-on payments must have FDA approval by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. One applicant withdrew its application prior to the issuance of this proposed rule.

  245. MAGECsupreg Spinal Bracing and Distraction System (MAGECsupreg Spine)

    Ellipse Technologies, Inc. submitted an application for new technology add-on payments for FY 2017 for the MAGECsupreg Spine. According to the applicant, the MAGECsupreg Spine has been developed for use in the treatment of children diagnosed with severe spinal deformities, such as scoliosis. The system can be used in the treatment of skeletally immature patients less than 10 years of age who have been diagnosed with severe progressive spinal deformities associated with or at risk of Thoracic Insufficiency Syndrome (TIS). The MAGECsupreg Spine consists of a (spinal growth) rod that can be lengthened through the use of magnets that are controlled by an external remote controller (ERC). The rod(s) can be implanted into children as young as 2 years of age. According to the applicant, use of the MAGECsupreg Spine has proven to be successfully used in the treatment of patients diagnosed with scoliosis who have not been responsive to other treatments.

    The MAGECsupreg Spine initially received FDA approval for use of the predicate device, which used a Harrington Rod on February 27, 2014. Subsequent FDA approval was granted for use of the modified device, which uses a shorter 70 mm on September 18, 2014. After minor modification of the product, the MAGECsupreg Spine received its final FDA approvals on March 24, 2015, and May 29, 2015, respectively. Currently, there is no ICD-9-CM or ICD-10-PCS code to uniquely describe procedures involving the MAGECsupreg Spine.

    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically: (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) whether a product is assigned to the same or a different MS-DRG; and (3) whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of these criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments. For a detailed discussion of the criteria for substantial similarity, we refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).

    With regard to the first criterion, the applicant stated that the MAGECsupreg Spine's mechanism of action is dependent upon growing rods used for the treatment of patients diagnosed with early onset scoliosis (EOS), and is unique because the technique uses magnetic distraction (lengthening), which does not require the patients to be subjected to the potential and adverse effects of additional surgeries.

    The applicant explained that treatment of patients diagnosed with EOS involves the implantation of traditional growth rods (TGRs) followed by surgery every 6 months to distract the rods to accommodate the growing spine until the patient reaches a level of spinal maturity when the spine can then be fused. The average number of distraction surgeries per patient is 12 over the course of 6 years. Once spinal alignment and maturity is reached, the TGRs are surgically and permanently removed. The applicant stated that, while the most recent modification to the MAGECsupreg Spine's rods accomplish the same goal as the predicate device, Harrington rods, MAGECsupreg Spine rods achieve the predetermined goal with minimally invasive techniques after implantation, which prevents the patients from being subjected to the potential and adverse effects of numerous lengthening surgeries. The applicant further noted that after the MAGECsupreg Spine's rod has been implanted, the ERC is placed externally over the patient's spine at the location of the magnet in the MAGECsupreg Spine's rod. Periodic, noninvasive distraction of the rod is performed to lengthen the spine and to provide adequate bracing during growth. Routine X-ray or ultrasound procedures are used to confirm the position and amount of distraction. The frequency of distraction sessions is customized to the needs of the individual patient by the treating surgeon.

    With regard to the first criterion, we are concerned that the MAGECsupreg Spine uses the same mechanism of action, spinal rod distraction, to achieve the same therapeutic outcome of spinal alignment as other currently available technologies and treatment options for Medicare beneficiaries. Specifically, TGRs are implanted and affixed to the immature spine in order to correct spinal deformities. As a child grows, the TGRs must be distracted to accommodate spinal growth. The common denominator between TGRs and the MAGECsupreg Spine is that they both are devices (rods) that use the same mechanism of action to perform and achieve spinal distraction, the implantation of rods that are later lengthened. While we acknowledge the applicant noted that the MAGECsupreg Spine does not require the patient to endure the potential and adverse effects of additional surgeries, this assertion seems to be a component of substantial clinical improvement rather than a basis to distinguish the mechanism of action.

    In consideration of the applicant's statements that the mechanism of action of the MAGECsupreg Spine, which uses growing rods in the treatment of patients diagnosed with EOS, is unique because the technique of using magnetic distraction (lengthening) does not require patients to endure the potential and adverse effects of additional surgeries, we note that there are other technologies and products currently available that achieve spinal growth without the need to subject patients to potential and adverse effects of additional surgeries. For example, the Shilla growth guidance system, which received FDA approval in 2014, uses a non-locking set screw at the proximal and distal portions of the construct's rods. This specific feature is designed to allow the rod to slide through the screw heads as a child's spine grows, while still providing correction of the spinal deformity. The Shilla technique also eliminates the need for scheduled distraction surgeries, as the applicant pointed out are needed with the use of TGRs. Therefore, we believe that the MAGECsupreg Spine's mechanism of action may be similar to the mechanism of action employed by the Shilla growth guidance system because both technologies achieve the same therapeutic outcome and do not require the patient to endure the potential and adverse effects of additional surgeries.

    With regard to the second criterion, cases that may be eligible for treatment involving the MAGECsupreg Spine map to the following MS-

    DRGs: 456 (Spinal

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    Fusion Except Cervical With Spinal Curvature or Malignancy or Infection or Extensive Fusions with MCC); 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions with CC); and 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions without CC/MCC). All cases involving procedures describing spinal distraction devices, including those that use TGRs and the Shilla growth guidance system, currently map to the same MS-DRGs.

    With regard to the third criterion, we believe that the MAGECsupreg Spine technology involves the treatment of the same or similar type of disease and the same or similar patient population. Although the applicant stated that the MAGECsupreg Spine was developed for the use in the treatment of children diagnosed with severe spinal deformities, the MAGECsupreg Spine treats the same patient population as other currently available spinal distraction devices and technologies, including those that use TGRs and the Shilla growth guidance system. Because it appears that the MAGECsupreg Spine is substantially similar to these other currently available devices used to treat the same or similar types of diseases and the same or similar patient populations, we are concerned that the technology may not be considered ``new'' for the purposes of new technology add-on payments. We are inviting public comments on whether the MAGECsupreg Spine meets the newness criterion.

    With regard to the cost criterion, the applicant maintained that there is an insufficient number of cases in the Medicare claims data to evaluate because of the small number of potential cases and cases reflecting patients who were actually diagnosed with or who experience early onset scoliosis (EOS) requiring the implantation of growing rods. Specifically, the majority of the Medicare population is 65 years of age and older, while patients who may be eligible for the MAGECsupreg Spine are typically less than 10 years of age. Therefore, the applicant estimated the number of EOS cases using internal estimates for de novo cases ( The applicant did not specify how many cases were the basis for the average standardized case-weighted charges per case. Therefore, we cannot determine if the charges per case represent a statistical sample relative to the projected cases eligible for the MAGECsupreg Spine for the upcoming fiscal year.

    The applicant did not specify how many cases included in the analysis were Medicare and non-Medicare cases. We typically rely on Medicare data and understand the limitations of this patient population in the Medicare data (as the applicant explained above). However, CMS would still like the details regarding the numerical representation of Medicare and non-Medicare cases the applicant used in its analysis.

    The applicant did not explain the methodology it used to remove the charges for the predicate technology, as well as the type of technology that the charges replaced. Therefore, we are unable to validate the accuracy of the applicant's methodology.

    The applicant did not explain the basis of using a 10-

    percent inflation factor. Specifically, the applicant used cases from CY 2016 and inflated the costs to FY 2017 using a 10-percent inflation factor. However, the 1-year inflation factor in the FY 2016 IPPS/LTCH final rule (80 FR 49784) is 3.7 percent. Therefore, we do not believe that a 10-percent inflation factor is appropriate.

    The applicant used the average overall CCR of the six hospitals to convert the costs of the MAGECsupreg Spine to charges. However, rather than using an average CCR, to increase the precision of determining the charges of the MAGECsupreg Spine, the applicant could have instead used each hospital's individual CCR or the implantable device CCR of 0.337 as reported in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49429).

    We are inviting public comments on whether the MAGECsupreg Spine meets the cost criterion, particularly with regard to the concerns we have raised.

    With regard to substantial clinical improvement, the applicant stated that use of the MAGECsupreg Spinal Bracing and Distraction System significantly improves clinical outcomes for the pediatric patient population with spinal deformities when compared to technologies and treatment options that employ TGRs by decreasing the number of subsequent surgeries and potential adverse effects following implantation. The applicant provided results from a study \4\, which demonstrated that patients receiving treatment using the magnetically controlled growth rods (MCGR) system had 57 fewer surgeries as a whole than those patients receiving treatment options using TGRs. According to the applicant, the results further projected decreased rates of infection and attendant costs because the need for additional distraction (lengthening) surgeries is eliminated. In addition, the applicant stated that 1,500 patients located around the world have been successfully treated with the use of this technology. The applicant indicated that the results from another study \5\ cited the following qualitative outcomes: Minimal surgical scarring, decreased psychological distress and improved quality of life, improved

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    pulmonary function tests (PFTs), and capabilities to continuously monitor neurological behaviors because the patient is not exposed to anesthesia during follow-up distractions.

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    \4\ Akbarnia BA, Cheung K, Noordeen H et al. Traditional rods versus magnetically controlled growing rods in early onset scoliosis: a case-matched two year study. 2013.

    \5\ Cheng, KMC, Cheung JPY, Damartzis, D, Mak, KC, Wong, WYC, Akbaria, BA, Luk KDK. Magnetically controlled growing rods for sever spinal curvature in young children. A prospective study. Lancet 379 (830) 26 May-1 June 2012, pp. 1967-1974.

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

    We are concerned that the applicant's assertions that the MAGECsupreg Spine technology leads to significantly better clinical outcomes; specifically, decreased rates of infection, when compared to treatment options that use TGRs has not been shown by the results of the studies provided. The results of the studies provided did not compare rates of infection for patients receiving treatment using the MAGECsupreg Spine versus patients receiving treatment using TGRs or other spinal growth rods. Also, as previously mentioned, there are other currently available technologies and devices such as the Shilla growth guidance system that also achieve the same therapeutic outcome and do not require the patient to be subjected to the potential and adverse effects of additional surgery. Therefore, we are concerned that the MAGECsupreg Spine may not represent a substantial clinical improvement over existing technologies. We are inviting public comments on whether the MAGECsupreg Spine meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  246. MIRODERM Biologic Wound Matrix (MIRODERM)

    Miromatrix Medical, Inc. submitted an application for new technology add-on payments for FY 2017 for MIRODERM. MIRODERM is a non-

    crosslinked acellular wound matrix that is derived from the porcine liver and is processed and stored in a phosphate buffered aqueous solution. MIRODERM is clinically indicated for the management of wounds, including: Partial and full-thickness wounds, pressure ulcers, venous ulcers, chronic vascular ulcers, diabetic ulcers, trauma wounds, drainage wounds, and surgical wounds. Typical decellularization where tissues are immersed in a decellularization solution is a diffusion-

    based process, and thereby limits the ability to fully decellularize thick, complex tissues such as the liver. MIRODERM uses a perfusion decellularization process that rapidly removes cellular material while maintaining the native architecture, vasculature and tissue structure. Following decellularization, MIRODERM is isolated from partial thickness liver sections following slight compression of the liver. This allows for the retention of the native liver structure, including the vasculature, within MIRODERM. The applicant noted that the MIRODERM is the only acellular skin substitute product that is derived from the liver.

    According to the applicant, MIRODERM is positioned to completely contact the entire surface of the wound bed and extend slightly beyond all wound margins. As required, it is securely anchored to the wound site with a physician's preferred fixation method. An appropriate, primary non-adherent wound dressing is then applied over the MIRODERM matrix. A secondary dressing (multi-layer compression bandage system), total contact cast, or other appropriate dressing that will manage the wound exudate should be applied in order to keep the MIRODERM matrix moist and keep all layers securely in place. Additional applications of MIRODERM are applied as needed until the wound closes.

    MIRODERM received FDA approval for its use on January 27, 2015. Currently, there are no ICD-10-PCS procedure codes to uniquely identify the use of MIRODERM. The applicant submitted a request for a unique ICD-10-PCS procedure code that was presented at the March 2016 ICD-10 Coordination and Maintenance Committee meeting. If approved, the procedure codes would become effective on October 1, 2016 (FY 2017). More information on this request can be found on the CMS Web site located at: http://www.cms.gov/Medicare/Coding/ICD10ProviderDiagnosticCodes/ICD-10-CM-C-and-M-Meeting-Materials.html.

    As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments.

    With regard to the first substantial similarity criterion, whether the product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant stated that current wound healing therapies are provided in several different modalities, which include hyperbaric oxygen treatment, negative wound pressure therapy, and treatment with other bioengineered skin substitute products. The applicant noted that other products that have been commonly used for similar procedures are Oasis Wound Matrix, Primatrix Dermal Repair, and Theraskin. The applicant asserted that MIRODERM is different from these other products because it is the only product sourced from porcine liver and undergoes a unique, patented process of perfusion decellularization that rapidly removes cellular material, while maintaining the native architecture, vasculature and tissue structure. The applicant explained that MIRODERM is isolated from partial thickness liver sections following slight compression of the liver, which allows for the retention of the native liver structure, including the vasculature, within MIRODERM. The applicant stated that partial thickness allows for one surface of MIRODERM to retain the native liver capsule (an epithelial basement membrane) and the other opposite surface to be comprised of open liver matrix. The applicant further stated that case studies of the MIRODERM demonstrated accelerated healing, which is likely the result of the unique perfusion decellularization technology that retains a 3-dimensional extracellular matrix that includes the vasculature.

    With regard to the first criterion, similar to other current wound matrix treatments, the MIRODERM uses a collagen matrix for tissue repair and regeneration. Therefore, we are concerned that MIRODERM employs the same mechanism of action as other wound matrix treatments. Although the applicant has described how the MIRODERM differs from other wound matrix treatments due to the perfusion decellularization process, and is the first product that is derived from the porcine liver, we believe that the mechanism of action of MIRODERM may be substantially similar or the same as those employed by other wound treatment matrixes. With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, cases that may be eligible for treatment using MIRODERM map to the same MS-DRGs as other currently approved wound treatment matrixes. With regard to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, MIRODERM is used to treat the same patient population as other currently approved wound treatment matrixes. Because it appears that the MIRODERM may be substantially similar to currently approved wound treatment matrixes, we are concerned that the technology may not be considered ``new'' for the purposes of new technology add-on payments. We are inviting public comments on whether MIRODERM meets the newness criterion.

    With regard to the cost criterion, the applicant conducted the following

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    analysis. The applicant began by researching the 2014 Medicare Inpatient Hospital Standard Analytical File (SAF) file for cases primarily associated with dermal regenerative grafts that may be eligible for treatment using MIRODERM. The applicant searched for claims that reported ICD-9-CM procedure code 86.67 (Dermal regenerative graft) that mapped to one of the following MS-DRGs: 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal System and Connective Tissue Disorders with MCC, with CC, or without CC/MCC, respectively); 573, 574, and 575 (Skin Graft for Skin Ulcer or Cellulitis with MCC, with CC, or without CC/MCC, respectively); 576, 577, and 578 (Skin Graft Except for Skin Ulcer or Cellulitis with MCC, with CC, or without CC/MCC, respectively); 622, 623, and 624 (Skin Grafts and Wound Debridement for Endocrine, Nutritional and Metabolic Diseases with MCC, with CC or without CC/MCC, respectively); and 904 and 905 (Skin Grafts for Injuries with CC/MCC or without CC/MCC, respectively). As a result, the applicant identified 1,130 cases across the MS-DRGs listed, which resulted in an average case-weighted charge per case of $83,059.

    Included in the average case-weighted charge per case were charges for other previously used dermal regenerative grafts. According to the applicant, the MIRODERM would replace the need for other dermal regenerative grafts and, therefore, the applicant removed charges related to the use of other currently used dermal regenerative grafts from the average case-weighted charge per case. Specifically, using the January 2016 CMS Part B Drug Pricing File, the applicant first computed an average cost per square centimeter for currently used dermal regenerative grafts (Apligraf $31.207/cm\2\, Oasis $10.676/cm\2\, Integra DRT $21.585/cm\2\, Dermagraft $32.858/cm\2\, Integra skin substitute $35.627/cm\2\, Primatrix $37.590/cm\2\, and Theraskin $38.474/cm\2\), which equaled $29.72/cm\2\. To determine the average amount of square centimeters of the other dermal regenerative grafts used for each case within the MS-DRG, given the vast complexity and variation in wounds, the applicant used clinical judgment based on experience, observation and typical sizes and depths of wounds that would present on different parts of the body. For an example, wounds on the hand would typically be smaller than those located on the lower extremities. The applicant also assumed that other dermal regenerative grafts would require three applications to close a wound as opposed to treatment using MIRODERM, which requires only two applications. Based on this assumption, the applicant noted that it assumed that the first application required 100 percent of the amount of skin substitute required to treat the original wound area, the second application required 70 percent, and the third application required 40 percent, totaling 210 percent. To compute the total amount of square centimeters used for each case within the MS-DRG, the applicant multiplied this percentage (210 percent) by the amount of square centimeters used for the first application for each case within the MS-DRG. The applicant then multiplied the average cost of the other previously used dermal regenerative grafts ($29.72/cm\2\) by the average amount of centimeters used for each case within the MS-DRG to determine the average cost of the other previously used dermal regenerative grafts for each case within the MS-DRG. To convert the costs to charges, the applicant computed an average CCR for each MS-DRG using CCRs from the FY 2014 Standardizing File of the hospitals indicated on each of the claims for each case within the MS-DRG. The applicant then divided the average cost of the other previously used dermal regenerative grafts for each MS-DRG by the average CCR for each MS-DRG to determine the average charges of the other previously used dermal regenerative grafts for each MS-DRG. The applicant also reduced the charges for the number of days of hospitalization by 30 percent because the applicant believed that MIRODERM heals patients faster than the other currently used dermal regenerative grafts, resulting in a reduction in the average lengths of stay. The applicant then deducted the charges related to the other previously used dermal regenerative grafts and the charges for the reduction in the average lengths of stay from the average case-

    weighted charge per case and then standardized the charges, which resulted in an average standardized case-weighted charge per case of $34,279. The applicant then inflated the average standardized case-

    weighted charge per case by 7.7 percent, the same inflation factor used by CMS to update the FY 2016 outlier threshold (80 FR 49784).

    After inflating the charges it was necessary to add the associated charges for the use of MIRODERM. The applicant conducted a similar calculation to compute the charges for MIRODERM. Specifically, the applicant used clinical judgment based on experience, observation, and typical sizes and depths of wounds that would be present on different parts of the body. The applicant stated that because MIRODERM has shown greater efficacy in wound closure based on their case series, the applicant modeled for only two applications with 50 percent closure of the wound after the first application and full closure of the wound after the second application. Based on this assumption, the applicant noted that it assumed that the first application required 100 percent of the amount of skin substitute required to treat the original wound area and the second application required 50 percent, totaling 150 percent. To compute the total amount of square centimeters used for each MS-DRG, the applicant multiplied this percentage (150 percent) by the amount of square centimeters used for the first application for each MS-DRG. The applicant then multiplied the cost per square centimeter for MIRODERM by the average amount of centimeters used for each case within the MS-DRG to determine the average cost of MIRODERM grafts used for each MS-DRG. Similar to above, to convert the costs to charges, the applicant used the same average CCRs for each MS-DRG and divided the average cost of MIRODERM for each MS-DRG by the average CCR for each MS-DRG to determine the average charges of MIRODERM for each MS-DRG. The applicant then added charges related to the use of MIRODERM to the inflated average standardized charges and determined a final inflated average standardized case-weighted charge per case of $94,009. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount was $67,559 (all calculations above were performed using unrounded numbers). Because the final inflated average standardized case-weighted charge per case exceeds the average case-

    weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

    We are inviting public comments on whether the MIRODERM technology meets the cost criterion.

    With regard to substantial clinical improvement, the applicant believed that the technology represents a substantial clinical improvement over existing technologies because patients treated with the MIRODERM for complicated wounds heal quicker and avoid additional surgeries. To demonstrate that the technology meets the substantial clinical improvement criterion, the applicant submitted the results of two actual case studies of a complicated wound from necrotizing fasciitis that was treated with the

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    MIRODERM. According to the applicant, one case study involved a complicated wound that would typically be treated with a diverting colostomy. The applicant noted that that the patient was discharged with intact anoplasty and good sphincter control after 35 days and four applications for MIRODERM. The applicant further stated that the use of MIRODERM demonstrated rapid healing and likely avoided at least two major debilitating surgeries, as well as the emotional and physical impact of a colostomy for 3 to 6 months. In the second case study, according to the applicant, the attending physician estimated the wound would likely take greater than 90 days to close using traditional wound care matrixes. The applicant stated that after 12 days and two applications of MIRODERM the patient was discharged and after 21 days the wound was sutured closed.

    The applicant noted that additional patients have been treated with MIRODERM. According to the applicant, given the recent product launch, the case studies have not been completed, but similar results have been communicated to the applicant.

    We are concerned that the clinical data the applicant submitted is from a very small sample with no comparisons to other currently approved wound treatment matrixes. Specifically, the applicant submitted data from only two case studies. Also, the applicant compared the use of MIRODERM to the use of other treatments, such as diverting colostomy. While MIRODERM may represent an improvement in treatment options compared to the other treatment options such as diverting colostomy, we are unable to determine if use of MIRODERM represents a substantial clinical improvement when compared to other wound treatment matrixes of other currently approved treatments. We are inviting public comments on whether MIRODERM meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  247. Idarucizumab

    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2017 for Idarucizumab; a product developed as an antidote to reverse the effects of PRADAXAsupreg (Dabigatran), which is also manufactured by Boehringer Ingelheim Pharmaceuticals, Inc. (We note that the applicant submitted an application for new technology add-on payments for FY 2016, but failed to obtain FDA approval prior to the July 1 deadline.) Dabigatran is an oral direct thrombin inhibitor currently indicated to: (1) Reduce the risk of stroke and systemic embolism in patients who have been diagnosed with nonvalvular atrial fibrillation (NVAF); (2) treat deep venous thrombosis (DVT) and pulmonary embolism (PE) in patients who have been administered a parenteral anticoagulant for 5 to 10 days; and (3) reduce the risk of recurrence of DVT and PE in patients who have been previously diagnosed with NVAF. Currently, unlike the anticoagulant Warfarin, there is no specific way to reverse the anticoagulant effect of Dabigatran in the event of a major bleeding episode.

    Idarucizumab is a humanized fragment antigen binding (Fab) molecule, which specifically binds to Dabigatran to deactivate the anticoagulant effect, thereby allowing thrombin to act in blood clot formation. The applicant stated that Idarucizumab represents a new pharmacologic approach to neutralizing the specific anticoagulant effect of Dabigatran in emergency situations. Idarucizumab was approved by the FDA on October 16, 2015. The applicant noted that Idarucizumab is the only FDA-approved therapy available to neutralize the anticoagulant effect of Dabigatran. Before the FDA approval of Idarucizumab, the approach for the management of the anticoagulant effect of Dabigatran prior to an invasive procedure was to withhold administration of Dabigatran, when possible, for a certain duration of time prior to the procedure to allow sufficient time for the patient's kidneys to flush out the medication. The duration of time needed to flush out the medication prior to the surgical procedure is based on the patient's kidney function. According to the applicant, if surgery cannot be delayed to allow the kidneys the necessary time to flush out the traces of Dabigatran, there is an increased risk of bleeding.

    Based on the FDA indication for Idarucizumab, the product can be used in the treatment of patients who have been diagnosed with NVAF and administered Dabigatran to reverse life-threatening bleeding events, or who require emergency surgery or medical procedures and rapid reversal of the anticoagulant effects of Dabigatran is necessary and desired. The applicant received a unique ICD-10-PCS procedure code that became effective October 1, 2015. The approved procedure code is XW03331 (Introduction of Idarucizumab, Dabigatran reversal agent into central vein, percutaneous approach, New Technology Group 1). We are inviting public comments on whether Idarucizumab meets the newness criterion.

    With regard to the cost criterion, the applicant conducted two analyses. The applicant began by researching claims data in the FY 2014 MedPAR file for cases that may be eligible for Idarucizumab using a combination of ICD-9-CM diagnosis and procedure codes. Specifically, the applicant searched the database for cases reporting anticoagulant therapy diagnosis code E934.2 (Agents primarily affecting blood constituents, anticoagulants) or V58.61 (Long-term (current) use of anticoagulants) in combination with either current standard of care procedure code 99.03 (Other transfusion of whole blood), 99.04 (Transfusion of packed cells), 99.05 (Transfusion of platelets), 99.06 (Transfusion of coagulation factors), 99.07 (Transfusion of other serum), or 39.95 (Hemodialysis), and Dabigatran indication diagnosis code 427.31 (Atrial fibrillation), 453.40 (Acute venous embolism and thrombosis of unspecified deep vessels of lower extremity), 453.41 (Acute venous embolism and thrombosis of deep vessels of proximal lower extremity), 453.42 (Acute venous embolism and thrombosis of deep vessels of distal lower extremity), 453.50 (Chronic venous embolism and thrombosis of unspecified deep vessels of lower extremity), 453.51 (Chronic venous embolism and thrombosis of deep vessels of proximal lower extremity), 453.52 (Chronic venous embolism and thrombosis of deep vessels of distal lower extremity), 415.11 (Iatrogenic pulmonary embolism and infarction), 415.12 (Septic pulmonary embolism), 415.13 (Saddle embolus of pulmonary artery), 415.19 (Other pulmonary embolism and infarction), 416.2 (Chronic pulmonary embolism), V12.51 (Personal history of venous thrombosis and embolism), or V12.55 (Personal history of pulmonary embolism).

    To further target potential cases that may be eligible for Idarucizumab, the applicant also excluded specific cases based on Dabigatran contraindications, including all cases representing patients who have been diagnosed with chronic kidney disease (CKD) stage V (diagnosis code 585.5), end-stage renal disease (diagnosis code 585.6), prosthetic heart valves (diagnosis code V43.3), and cases representing patients who have been diagnosed with both CKD stage IV (diagnosis code 585.4) and either DVT or PE (using the same ICD-9-CM

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    diagnosis codes listed above). As a result, the applicant identified 84,224 cases that mapped to 684 MS-DRGs. The applicant standardized the charges and computed an average case-weighted standardized charge per case of $60,089.

    The applicant then identified hospital charges potentially associated with the current treatments to reverse anticoagulation, specifically charges associated with pharmacy services, dialysis services, and laboratory services for blood work. Due to limitations associated with the claims data, the applicant was unable to determine the specific drugs used to reverse anticoagulation and if these cases represented patients who required laboratory services for blood work or dialysis services unrelated to the reversal of anticoagulation. Therefore, the applicant subtracted 40 percent of the charges related to these three categories from the standardized charge per case, based on the estimation that the full amount of charges associated with these services would not be incurred by hospitals when Idarucizumab is administered for use in the treatment of patients who have been diagnosed with NVAF and Dabigatran is administered during treatment. The applicant then inflated the standardized charge per case by 7.665 percent, the same inflation factor used by CMS to update the FY 2016 outlier threshold (80 FR 49784) and added charges for Idarucizumab. This resulted in an inflated average case-weighted standardized charge per case of $67,617. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount across all 684 MS-DRGs is $55,586 (all calculations above were performed using unrounded numbers). Because the inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion under this analysis.

    Further, the applicant conducted an additional analysis using the same data from the FY 2014 MedPAR file and variables used in the previous analysis. However, instead of using potentially eligible cases that mapped to 100 percent of the 684 MS-DRGs identified, the applicant used potentially eligible cases that mapped to the top 75 percent of the 684 MS-DRGs identified. By applying this limitation, the applicant identified 63,033 cases that mapped to 87 MS-DRGs. The applicant computed an inflated average case-weighted standardized charge per case of $55,872. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount across all 87 MS-DRGs is $63,323 (all calculations above were performed using unrounded numbers). Because the inflated average case-weighted standardized charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology also meets the cost criterion under this analysis. We are inviting public comments regarding the applicant's analyses with regard to the cost criterion.

    With regard to substantial clinical improvement, according to the applicant, aside from Idarucizumab, there are no other FDA-approved antidotes to reverse the anticoagulant effects of Dabigatran. Management of the treatment of patients who have been diagnosed with NVAF and administered Dabigatran and experience bleeding may often include supportive care such as Hemodialysis and the use of fresh frozen plasma, blood factor products such as prothrombin complex concentrates (PCC), activated prothrombin complex concentrates, and recombinant factor VIIa or delayed intervention. Protamine sulfate and Vitamin K are typically used to reverse the effects of Heparin and Warfarin, respectively. However, due to the mechanism of action in Dabigatran, the applicant maintained that the use of protamine sulfate and Vitamin K may not be effective to reverse the anticoagulant effect of Dabigatran.

    The applicant provided information regarding the management of major bleeding events experienced by patients who were administered Dabigatran and Warfarin during the RE-LY trial.\6\ During this study, most major bleeding events were only managed by supportive care. Patients who were administered 150 mg of Dabigatran were transfused with pack red blood cells more often when compared to patients who were administered Warfarin (61.4 percent versus 49.9 percent, respectively). However, patients who were administered Warfarin were transfused with plasma more often when compared to patients who were administered 150 mg of Dabigatran (30.2 percent versus 21.6 percent, respectively). In addition, the use of Vitamin K in the treatment of patients who were administered Warfarin was more frequent when compared to the frequency of use in the treatment of patients who were administered 150 mg of Dabigatran (27.3 percent versus 10.3 percent, respectively). The use of PCCs, recombinant factor VIIa and other coagulation factor replacements in the treatment of patients who were administered both Warfarin and 150 mg of Dabigatran was minimal, and did not significantly differ in frequency when compared among patients assigned to either group. Hemodialysis was used in a single case.

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    \6\ Healy, et al.: Periprocedural bleeding and thromboembolic events with dabigatran compared with Warfarin: results from the randomized evaluation of long-term anticoagulation therapy (RE-LY) randomized trial, Circulation, 2012; 126:343-348.

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    The applicant reported that, currently, it is recommended that the administration of Dabigatran be discontinued 1 to 2 days (CrCl >=50 ml/

    min) or 3 to 5 days (CrCl 8 9 in patients who may have life-threatening bleeding, or require emergency procedures. The applicant noted that published results of the interim data based on 90 patients suggested the following: Reversal of the Dabigatran anticoagulant effect, which was evident immediately after administration; reversal was 100 percent in the first 4 hours and greater than 89 percent of patients achieved complete reversal; hemostasis in 35 patients in Group A was restored at a median of 11.4 hours. Also, the 5 gram dose of Idarucizumab was calculated to reverse the total body load of Dabigatran that was associated

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    with the 99th percentile of the Dabigatran levels measured in the RE-LY trial.

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    \8\ Pollack C, et al. Design and rationale for RE-VERSE AD: A phase 3 study of idarucizumab, a specific reversal agent for dabigatran. Thromb Haemost. 2015 Jul; 114(1):198-205.

    \9\ Pollack C, et al. Idarucizumab for Dabigatran Reversal. N Engl J Med. 2015 Aug 6; 373(6):511-20.

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    The applicant provided safety data from three Phase I studies and interim data from the Phase III study. In the Phase I study, 110 healthy male patients enrolled in the study were administered dosages of Idarucizumab that ranged from 20 mg to 8 grams. In this study, 135 patients received placebo. The applicant reported that adverse events were generally mild in intensity and nonspecific. Healthy human volunteers enrolled in the Phase I study were administered Idarucizumab in dosages of 2 and 4 grams, which resulted in immediate and complete reversal of the anticoagulant effect of Dabigatran that was sustained for several hours. In the Phase III study, five thrombotic events occurred. One occurred 2 days after treatment and the remainder occurred 7, 9, 13, and 26 days after treatment. These patients were not receiving antithrombotic therapy when the events occurred, and complications or adverse effects can be attributed to patients' underlying medical conditions. Twenty-one patients (13 in Group A and 8 in Group B) had a serious adverse event. The most frequently reported adverse reactions in greater than or equal to 5 percent of the patients treated with Idarucizumab were hypokalemia, delirium, constipation, pyrexia, and pneumonia. The applicant concluded that the data from these studies demonstrated that Idarucizumab effectively, safely, and potently reverses the anticoagulant effect of Dabigatran. We are inviting public comments on whether Idarucizumab meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  248. Titan Spine (Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device)

    Titan Spine submitted an application for new technology add-on payments for the Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device (the Titan Spine nanoLOCKTM) for FY 2017. The Titan Spine nanoLOCKTM is a nanotechnology-based interbody medical device with a dual acid-etched titanium interbody system used to treat patients diagnosed with degenerative disc disease (DDD). One of the key distinguishing features of the device is the surface manufacturing technique and materials, which produce macro, micro, and nano surface textures. According to the applicant, the combination of surface topographies enables initial implant fixation, mimics an osteoclastic pit for bone growth, and produces the nano-scale features that interface with the integrins on the outside of the cellular membrane. Further, the applicant noted that these features generate better osteogenic and angiogenic responses that enhance bone growth, fusion, and stability. The applicant asserted that the Titan Spine nanoLOCKTM's clinical features also reduce pain, improve recovery time, and produces lower rates of device complications such as debris and inflammation.

    On October 27, 2014, the Titan Spine nanoLOCKTM received FDA approval for the use of five lumbar interbody devices and one cervical interbody device: The nanoLOCK\TM\ TA-Sterile Packaged Lumbar ALIF Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy; the nanoLOCK\TM\ TAS-Sterile Packaged Lumbar ALIF Stand Alone Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy; the nanoLOCK\TM\ TL-Sterile Packaged Lumbar Lateral Approach Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy; the nanoLOCK\TM\ TO-Sterile Packaged Lumbar Oblique/PLIF Approach Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy; the nanoLOCK\TM\ TT-Sterile Packaged Lumbar TLIF Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy and the nanoLOCK\TM\ TC-Sterile Packaged Cervical Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy. The applicant received FDA approval on December 14, 2015, for the nanoLOCKTM TCS-Sterile Package Cervical Stand Alone Interbody Fusion Device with nanoLOCKTM surface, available in multiple sizes to accommodate anatomy. Currently, there are no ICD-10-PCS procedure codes that uniquely describe procedures involving use of the Titan Spine nanoLOCKTM surface technology.

    We note that cases reporting procedures involving lumbar and cervical interbody devices map to different MS-DRGs. As discussed in the Inpatient New Technology Add-On Payment Final Rule (66 FR 46915), two separate reviews and evaluations of the technologies are necessary in this instance because cases representing patients receiving treatment for diagnoses associated with lumbar procedures that may be eligible for use of the technology under the first indication are not expected to be assigned to the same MS-DRGs as patients receiving treatment for diagnoses associated with cervical procedures using the technology under the second indication. Specifically, cases representing patients who have been diagnosed with lumbar DDD and received treatment that involved implanting a lumbar device map to MS-

    DRGs 028 (Spinal Procedures with MCC), 029 (Spinal Procedures with CC or Spinal Neurostimulators), 030 (Spinal Procedures without CC/MCC), 453 (Combined Anterior/Posterior Spinal Fusion with MCC), 454 (Combined Anterior/Posterior Spinal Fusion with CC), 455 (Combined Anterior/

    Posterior Spinal Fusion without CC/MCC), 456 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions with MCC), 457 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusion without MCC), 458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or Infection or Extensive Fusions without CC/MCC), 459 (Spinal Fusion Except Cervical with MCC), and 460 (Spinal Fusion Except Cervical without MCC), while cases representing patients who have been diagnosed with cervical DDD and received treatment that involved implanting a cervical interbody device map to MS-DRGs 471 (Cervical Spinal Fusion with MCC), 472 (Cervical Spinal Fusion with CC), and 473 (Cervical Spinal Fusion without CC/MCC). Procedures involving the lumbar and cervical interbody devices are assigned to separate MS-DRGs. Therefore, the devices categorized as lumbar devices and the devices categorized as cervical devices must distinctively (each category) meet the cost criterion and the substantial clinical improvement criterion in order to be eligible for new technology add-on payments beginning in FY 2017. We discuss application of these criteria following discussion of the newness criterion.

    As discussed previously in this section, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for the purposes of new technology add-on payments. We note that the substantial similarity discussion is applicable to both the lumbar and the cervical devices

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    because all of the devices use the Titan Spine nanLOCKTM technology.

    With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant stated that, for both interbody devices (the lumbar and the cervical interbody device), the Titan Spine nanoLOCKTM's surface stimulates osteogenic cellular response to assist in bone formation during fusion. During the manufacturing process, the surface produces macro, micro, and nano-surface textures. The applicant believed that this unique combination and use of these surface topographies represents a new approach to stimulating osteogenic cellular response. The applicant asserted that the macro-scale textured features are important for initial implant fixation. The micro-scale textured features mimic an osteoclastic pit for supporting bone growth. The nano-scale textured features interface with the integrins on the outside of the cellular membrane, which generates the osteogenic and angiogenic (mRNA) responses necessary to promote healthy bone growth and fusion. The applicant provided the results from in vitro studies, using human mesenchymal cells (MSCs), which showed positive effects on bone growth related to cellular signaling achieved by using the device's surface, and osteoblasts exhibited a more differentiated phenotype and increased bone morphogenetic protein (BMP) production using titanium alloy substrates as opposed to poly-ether-ether-ketone (PEEK) substrates. The applicant stated that Titan Spine's proprietary and unique surface technology, the Titan Spine nanoLOCKTM interbody devices, contain optimized nano-surface characteristics, which generate the distinct cellular responses necessary for improved bone growth, fusion, and stability. The applicant further stated that the Titan Spine nanoLOCKTM's surface engages with the strongest portion of the endplate, which enables better resistance to subsidence because a unique dual acid-etched titanium surface promotes earlier bone in-growth. The Titan Spine nanoLOCKTM's surface is created by using a reductive process of the titanium itself. The applicant asserted that use of the Titan Spine nanoLOCKTM significantly reduces the potential for debris generated during impaction when compared to treatments using PEEK-based implants coated with titanium. According to the results of an in vitro study \10\ provided by the applicant, which compared angiogenic factor production using PEEK-based versus titanium alloy surfaces, osteogenic production levels were greater with the use of rough titanium alloy surfaces than the levels produced using smooth titanium alloy surfaces. The results of an additional study \11\ provided by the applicant examined whether inflammatory microenvironment generated by cells as a result of use of titanium aluminum-vanadium (Ti-alloy, TiAlV) surfaces is effected by surface microtexture, and whether it differs from the effects generated by PEEK-based substrates. The applicant noted that the use of microtextured surfaces has demonstrated greater promotion of osteoblast differentiation when compared to use of PEEK-based surfaces.

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    \10\ Olivares-Navarrete R, Hyzy S, Gittens R. Titanium Alloys Regulate Osteoblast Production of Angiogenic Factors. The Spine Journal, 2013, ep.13. 1563-1570.

    \11\ Olivares-Navrrete R, Hyzy s, Slosar P, et al. Implant Materials Generate Different Peri-implant Inflammatory Factors. SPINE. 2015: 40:6:339-404.

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    With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, cases that may be eligible for treatment involving the Titan Spine nanoLOCKTM map to the same MS-DRGs as other (lumbar and cervical) interbody devices currently available to Medicare beneficiaries and also are used for the treatment of patients who have been diagnosed with DDD (lumbar or cervical).

    With regard to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant stated that the Titan Spine nanoLOCKTM can be used in the treatment of patients diagnosed with similar types of diseases, such as DDD, and for a similar patient population receiving treatment involving both lumbar and cervical interbody devices.

    In summary, the applicant maintained that the Titan Spine nanoLOCKTM technology has a different mechanism of action when compared to other spinal fusion devices. Therefore, the applicant did not believe that the Titan Spine nanoLOCKTM technology is substantially similar to existing technologies.

    After reviewing the applicant's statements regarding nonsubstantial similarity of its technology with other existing technologies, we are still concerned that there are other titanium surfaced devices currently available on the U.S. market. While these devices do not use the Titan Spine nanoLOCKTM technology, their surfaces also are made of titanium. Therefore, we believe that the Titan Spine nanoLOCKTM interbody devices may be substantially similar to currently available titanium interbody devices.

    We are seeking public comments on whether the Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Devices are substantially similar to existing technologies and whether these devices meet the newness criterion.

    (1) Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device for Lumbar DDD

    As previously mentioned, the Titan Spine nanoLOCKTM received FDA approval for the use of five lumbar interbody devices on October 27, 2014. To demonstrate that the Titan Spine nanoLOCKTM for Lumbar DDD technology meets the cost criterion, the applicant researched claims data in the FY 2014 MedPAR file for cases assigned to MS-DRGs 028, 029, 030, 453, 454, and 455 reporting any of the ICD-9-CM procedure codes within the code series 81.xx (Repair and plastic operations on joint structures) or code series 084.6x (Replacement of spinal disk), excluding cases reporting the following ICD-9-CM procedure codes describing cervical fusion: 81.01 (Atlas-axis spinal fusion), 81.02 (Other cervical fusion, anterior technique), 81.03 (Other cervical fusion, posterior technique), 81.31 (Refusion of atlas-axis spine), 81.32 (Refusion of other cervical spine, anterior technique), or 81.33 (Refusion of other cervical spine, posterior technique). As a result, the applicant found that all cases potentially eligible for treatment using the technology mapped to MS-DRGs 456, 457, 458, 459, and 460. However, the applicant focused its analyses on MS-DRGs 028 through 030, 453 through 455, and 456 through 460 because these are the MS-DRGs to which cases treated with interbody fusion devices for degenerative disc disease would most likely be assigned. The applicant applied CMS' relative weight filtering process as described in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49424) to ensure the correct claim types were used and the charge details across the cost centers were appropriate.

    According to the applicant, 78.03 percent of the 96,281 cases found in the FY 2014 MedPAR file mapped to MS-DRG 460, while the remaining 21.97 percent of cases mapped to MS-DRGs 028 through 030, 453 through 455, and 456 through 459. This resulted in an average case-weighted charge per case of $127,082. The applicant then removed $15,766 for associated charges for other previously used spinal devices. The

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    applicant determined the associated charges to be removed for other previously used devices based on current Titan Spine sales data for the Titan Spine nanolockTM for Lumbar DDD various sizes. The applicant computed the associated charges by multiplying the weighted sales mix by the average sales price for each product in the Titan Spine nanoLOCKTM for Lumbar DDD product line. After the charges for other previously used technologies were removed, the applicant standardized the charges for all cases using the FY 2014 standardizing file posted on the CMS Web site. The applicant excluded all cases without standardized charges, resulting in a total of 96,281 cases. The applicant then inflated the average standardized case-

    weighted charges from 2014 to 2016 by applying a 2-year rate of inflation factor of 7.7 percent, which is the same inflation factor used by CMS to update the FY 2016 outlier threshold (80 FR 49784).

    To calculate the appropriate charges for the Titan Spine nanoLOCKTM for Lumbar DDD, the applicant used a case-

    weighted charge because the devices implanted are produced and made available in different sizes. To calculate the case-weighted charge for different lumbar device sizes, the applicant determined the average cost to the hospital per device and divided that amount by the national average CCR for implantable devices (0.337) published in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49429). Based on sales data, the applicant then applied a factor of 1.5 per patient to the case-weighted charge by dividing the total number of products sold in the United States by the total invoices generated; with one invoice being the equivalent to one patient and a single surgery. The applicant then added the device-related charges to the inflated average standardized charge per case, which resulted in an inflated average standardized case-weighted charge per case of $167,197. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount was $112,825 (all calculations above were performed using unrounded numbers). Because the final inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

    We are inviting public comments on whether the Titan Spine nanoLOCKTM for Lumbar DDD meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant's analyses.

    (2) Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device for Cervical DDD

    As previously mentioned, Titan Spine received FDA approval for the use of the nanoLOCKTM TC-Sterile Packaged Cervical Interbody Fusion Device with nanoLOCKTM surface on October 27, 2014, and the nanoLOCKTM TCS-Sterile Package Cervical Interbody Fusion Device with nanoLOCKTM surface on December 14, 2015. To demonstrate that the Titan Spine nanoLOCKTM for Cervical DDD meets the cost criterion, the applicant researched claims data in the FY 2014 MedPAR file for cases assigned to MS-DRGs 028, 029, 030, 453, 454, and 455 reporting any of the following ICD-9-CM cervical fusion procedure codes: 81.01, 81.02, 81.03, 81.32, 81.33. The applicant found that all of the cases mapped to MS-DRGs 471, 472, and 473. However, the applicant focused its analysis on MS-DRGs 028 through 030, 453 through 455, and 471 through 473 because these are the MS-DRGs to which cases treated with the implantation of cervical spinal devices for degenerative disc disease would most likely be assigned. Similar to the sensitivity analysis submitted for the Titan Spine nanoLOCKTM for Lumbar DDD, the applicant applied CMS' relative weight filtering process as described in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49424) to ensure the correct claim types were used and the charge details across the cost centers were appropriate.

    According to the applicant, 59.47 percent of the 48,187 cases mapped to MS-DRG 473 and 25.65 percent of the cases mapped to MS-DRG 472, while the remaining 14.88 percent of the cases mapped to MS-DRGs 028 through 030, 453 through 455, and 471. This resulted in an average case-weighted charge per case of $83,841. Using the same methodology described above, the applicant removed $4,423 for associated charges for other previously used technologies from the average case-weighted charge per case using current Titan Spine sales data for cervical device sizes and then standardized the charges. The applicant then inflated the average standardized case-weighted charges from 2014 to 2016 by applying the same 2-year rate of inflation factor used above (7.7 percent). Similar to the methodology described above, the applicant calculated $36,023 for associated device related charges for the Titan Spine nanoLOCKTM for Cervical DDD and added this amount to the inflated average standardized case-weighted charge per case, which resulted in a final inflated average standardized case-

    weighted charge per case of $114,472. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount was $79,827 (all calculations above were performed using unrounded numbers). Because the final inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

    We are inviting public comments on whether the Titan Spine nanoLOCKTM for Cervical DDD meets the cost criterion.

    With regard to the substantial clinical improvement criterion for the Titan Spine Endoskeletonsupreg nanoLOCKTM Interbody Device for Lumbar and Cervical DDD, the applicant asserted that the Titan Spine nanoLOCKTM substantially improves the treatment of Medicare beneficiaries who have been diagnosed with and receive treatment for serious spinal pathologies, such as DDD, compared to the currently available technologies and treatment options, especially in terms of improved fusion, decreased pain, greater stability, faster recovery times, and lower rates of interbody device related complications, such as debris and inflammation.

    The applicant noted that the cellular process that occurs after implantation of the Titan Spine nanoLOCKTM induces the body to produce and regulate its own bone morphogenetic proteins (BMP), which help stimulate bone growth naturally in the human body. According to the applicant, this result supports new bone growth without requiring use of exogenous BMP. The applicant explained that exogenous rhBMPs trigger a significant cytokine related anti-inflammatory reaction that has resulted in adverse side effects. The applicant stated that the Titan Spine nanoLOCKTM's proprietary surface and use promotes endogenous production of osteogenic growth factors, such as BMP-2, BMP-4, BMP-7, and TGF-beta1.2, which produce only the physiologic amounts necessary for bone production without the concomitant cytokine related to anti-inflammatory reaction.

    The applicant also stated that the unique surface of the TitanSpine nanoLOCKTM differentiates the technology from existing interbody devices, which use materials such as PEEK-based or ceramic surfaces. The applicant explained that these materials cause stem cells to flatten on the surface of the implant and primarily differentiate into fibroblasts (fiber-producing cells). This result is avoided by using the Titan Spine nanoLOCKTM because the nano-textured surface

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    promotes differentiation of osteoblasts (bone-forming cells), which increases bone production around the implant site and increases the potential for a faster and more robust fusion. The applicant further stated that use of titanium and titanium alloy surfaces with rough microtopography demonstrate greater bone apposition, but use of macrotextured titanium and titanium alloy surfaces, such as the Titan Spine nanoLOCKTM, promotes osteoblast differentiation and productions of factors that favor bone formation, whereas PEEK-based surfaces do not.

    As previously noted, the applicant provided results from in vitro studies, using human MSCs, which showed positive effects on bone growth related to cellular signaling achieved from use of the device's surface, and osteoblasts exhibited a more differentiated phenotype and increased bone morphogenetic protein BMP production using titanium alloy substrates as opposed to PEEK-based substrates. The applicant believed that the Titan Spine nanoLOCKTM substantially improves the treatment of Medicare beneficiaries diagnosed with and receiving treatment for serious spinal pathologies, such as DDD, compared to currently available technologies and treatment options for Medicare beneficiaries, especially in terms of improved fusion, decreased pain, greater stability, faster recovery times, and lower rates of interbody device related complications, such as debris and inflammation.

    We are concerned that the results of the in vitro studies may not necessarily correlate with the clinical results specified by the applicant. Specifically, because the applicant has only conducted in vitro studies without obtaining any clinical data from live subjects during a specific clinical trial, we are unable to substantiate the clinical results that the applicant believed the technology achieved from a clinical standpoint based on the results of the studies provided. As a result, we are concerned that the results of the studies provided by the applicant do not demonstrate that the Titan Spine nanoLOCKTM technologies meet the substantial clinical improvement criterion. We are inviting public comments on whether the Titan Spine nanoLOCKTM technologies meet the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  249. Andexanet Alfa

    Portola Pharmaceuticals, Inc. (Portola) submitted an application for new technology add-on payments for FY 2017 for use of Andexanet Alfa, an antidote used to treat patients who are receiving treatment with an oral Factor Xa inhibitor who suffer a major bleeding episode and require urgent reversal of direct and indirect Factor Xa anticoagulation. Patients at high risk for thrombosis, including those who have been diagnosed with atrial fibrillation (AF) and venous thrombosis (VTE), typically receive treatment using long-term oral anticoagulation agents, such as Warfarin. Factor Xa inhibitors are included in a new class of anticoagulants. Factor Xa inhibitors are oral anticoagulants used to prevent stroke and systemic embolism in patients who have been diagnosed with AF. These oral anticoagulants are also used to treat patients diagnosed with deep-vein thrombosis (DVT) and its complications, pulmonary embolism (PE), and patients who have undergone knee, hip, or abdominal surgery. Rivarobaxan (Xareltosupreg), apixaban (Eliqissupreg), and edoxaban (Savaysasupreg) also are included in the new class of Factor Xa inhibitors, and are often referred to as ``novel oral anticoagulants'' (NOACs) or ``non-vitamin K antagonist oral anticoagulants.'' Although these anticoagulants have been commercially available since 2010, there is no FDA-approved therapy used for the urgent reversal of any Factor Xa inhibitor as a result of serious bleeding episodes.

    Andexanet Alfa has not received FDA approval at the time of the development of this proposed rule. The applicant anticipates receiving FDA approval for use of the technology in approximately June of 2016. Currently, there are no ICD-10-PCS procedure codes that uniquely identify the use of and administration of Andexanet Alfa. We note that the applicant submitted a request for unique ICD-10-PCS procedure codes that was presented at the March 2016 ICD-10 Coordination and Maintenance Committee meeting. If approved, the procedure codes would become effective on October 1, 2016 (FY 2017). More information on this request can be found on the CMS Web site located at: http://www.cms.gov/Medicare/Coding/ICD10ProviderDiagnosticCodes/ICD-10-CM-C-and-M-Meeting-Materials.html.

    As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments.

    The applicant believed that, if approved, Andexanet Alfa would be the first and only antidote available used to treat patients receiving treatment with an oral Factor Xa inhibitor who suffer a major bleeding episode and require urgent reversal of direct and indirect Factor Xa anticoagulation. Therefore, the applicant asserted that the technology is not substantially similar to any other currently approved and available treatment options for Medicare beneficiaries.

    With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, Andexanet Alfa, if approved, would be the first reversal agent that binds to direct Factor Xa inhibitors with high affinity, sequestering the inhibitors, and consequently rapidly reducing free plasma concentration of Factor Xa inhibitors and neutralizing the inhibitors' anticoagulant effect, which allows for the restoration of normal hemostasis. Andexanet Alfa also binds to and sequesters antithrombin III molecules that are complexed with indirect inhibitor molecules, disrupting the capacity of the antithrombin complex to bind to native Factor Xa inhibitors. According to the applicant, Andexanet Alfa represents a significant therapeutic advance by providing rapid reversal of anticoagulation therapy in the event of a serious bleeding episode. Other reversal agents, such as KcentraTM and Idarucizumab, do not reverse the effects of Factor Xa inhibitors.

    With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, Andexanet Alfa would be the first FDA approved reversal agent for Factor Xa inhibitors. Therefore, the MS-DRGs do not contain cases representing patients that have been treated with any reversal agents for Factor Xa inhibitors.

    With regard to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, Andexanet Alfa, if approved, would be the only reversal agent available for treating patients receiving direct or indirect Factor Xa therapy who experience serious, uncontrolled bleeding events or who require emergency surgery. Therefore, Andexanet Alfa would be the first type of treatment option available to this patient population, As a result, it appears that Andexanet Alfa is not substantially similar to any existing technologies. We are inviting public comments on whether Andexanet Alfa

    Page 25050

    meets the substantial similarity criteria and whether Andexanet Alfa meets the newness criterion.

    With regard to the cost criterion, the applicant researched the FY 2014 MedPAR claims data file for cases that may be eligible for treatment using Andexanet Alfa. The applicant used three sets of ICD-9-

    CM codes to identify these cases: (1) Codes identifying cases of patients who were treated with an anticoagulant and, therefore, are at risk of bleeding; (2) Codes identifying cases of patients with a history of conditions that were treated with Factor Xa inhibitors; and (3) codes identifying cases of patients who experienced bleeding episodes as the reason for the current admission. The applicant included with its application the following table displaying a complete list of ICD-9-CM codes that met its selection criteria:

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

    ICD-9-CM codes applicable Applicable ICD-9-CM code description

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

    V12.50................... Personal history of unspecified circulatory

    disease.

    V12.51................... Personal history of venous thrombosis and

    embolism.

    V12.52................... Personal history of thrombophlebitis.

    V12.54................... Personal history of transient ischemic attack

    (TIA), and cerebral infarction without

    residual deficits.

    V12.55................... Personal history of pulmonary embolism.

    V12.59................... Personal history of other diseases of

    circulatory system.

    V43.64................... Hip joint replacement.

    V43.65................... Knee joint replacement.

    V58.43................... Aftercare following surgery for injury and

    trauma.

    V58.49................... Other specified aftercare following surgery.

    V58.73................... Aftercare following surgery of the

    circulatory system, NEC.

    V58.75................... Aftercare following surgery of the teeth,

    oral cavity and digestive system, NEC.

    V58.61................... Long-term (current) use of anticoagulants.

    E934.2................... Anticoagulants causing adverse effects in

    therapeutic use.

    99.00.................... Perioperative autologous transfusion of whole

    blood or blood components.

    99.01.................... Exchange transfusion.

    99.02.................... Transfusion of previously collected

    autologous blood.

    99.03.................... Other transfusion of whole blood.

    99.04.................... Transfusion of packed cells.

    99.05.................... Transfusion of platelets.

    99.06.................... Transfusion of coagulation factors.

    99.07.................... Transfusion of other serum.

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

    The applicant identified a total of 54,200 cases that mapped to 680 MS-DRGs, resulting in an average case-weighted charge per case of $67,197. The applicant also provided an analysis limited to 80 percent of all cases (47,273 cases), which mapped to the top 147 MS-DRGs. Under this analysis, the average case-weighted charge per case was $64,095. Under each of these two analyses, the applicant also provided sensitivity analyses based on variables representing two areas of uncertainty: (1) Whether to remove 40 percent or 60 percent of blood and blood administration charges; and (2) whether to remove pharmacy charges based on the ceiling price of factor eight inhibitor bypass activity (FEIBA), a branded anti-inhibitor coagulant complex, or on the pharmacy indicator 5 (PI5) in the MedPAR data file, which correlates to cases utilizing generic coagulation factors. Overall, the applicant conducted eight sensitivity analyses, and provided the following rationales:

    The applicant chose to remove 40 percent and 60 percent of blood and blood administration charges because patients who require Andexanet Alfa for Factor Xa reversal may still require blood and blood products to treat other conditions. Therefore, it would be inappropriate to remove all of the charges associated with blood and blood administration because all of the charges cannot be attributed to Factor Xa reversal. The applicant maintained that the amounts of blood and blood products required for treatment vary according to the severity of the bleeding. Therefore, the use of Andexanet Alfa may replace 60 percent of blood and blood product administration charges for cases with less severity of bleeding, but only 40 percent of charges for cases with more severe bleeding.

    The applicant maintained that FEIBA is the highest priced clotting factor used for Factor Xa inhibitor reversal, and it is unlikely that pharmacy charges for Factor Xa reversal would exceed the FEIBA ceiling price of $10,570. Therefore, the applicant capped the charges to be removed at $10,570, which in many cases removed 100 percent of the pharmacy charges. The applicant also considered an alternative scenario in which charges associated with pharmacy indicator 5 (PI5) were removed from the costs of cases that included this indicator in the MedPAR data. On average, charges removed from the costs of cases utilizing generic coagulation factors were much lower than the total pharmacy charges.

    The applicant noted that, in all eight scenarios, the average standardized case-weighted charge per case for cases eligible for treatment using Andexanet Alfa would exceed the average case-weighted threshold amounts in Table 10 of the FY 2016 IPPS/LTCH PPS final rule by approximately $3,247 to $7,844, depending on the results determined by using the combination of variables of the two areas of uncertainty and the number of MS-DRGs analyzed.

    The applicant's order of operations used for each analysis follows: (1) Removing 60 percent or 40 percent of blood and blood administration charges and up to 100 percent of pharmacy charges for PI5 or FEIBA from the average unstandardized case-weighted charge per case; (2) standardizing the charges per cases using the Impact File published with the FY 2014 IPPS/LTCH PPS final rule. After removing the charges for the prior technology and standardizing charges, the applicant applied an inflation factor of 1.076647, which is the 2-year inflation factor in the FY 2016 IPPS/LTCH final rule (80 FR 49784) to update the charges from FY 2014 to FY 2016. The applicant noted that it did not add charges for Andexanet Alfa and related services. Under each scenario, the applicant stated that the inflated average standardized case-weighted charge per case exceeded the average case-weighted threshold (based on the FY 2016 IPPS Table 10 thresholds). Below

    Page 25051

    we provide a table for all eight scenarios that the applicant indicated demonstrate that the technology meets the cost criterion.

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

    Inflated

    average

    standardized Average

    Scenario case-weighted casedashweighted

    charge per threshold amount

    case

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

    100 Percent of Cases, FEIBA, 60 $60,231 $55,799

    Percent Removal of Blood and Blood

    Administration Costs...............

    100 Percent of Cases, PI5, 60 63,643 55,799

    Percent Removal of Blood and Blood

    Administration Costs...............

    100 Percent of Cases, FEIBA, 40 61,651 55,799

    Percent Removal of Blood and Blood

    Administration Costs...............

    100 Percent of Cases, PI5, 40 64,203 55,799

    Percent Removal of Blood and Blood

    Administration Costs...............

    80 Percent of Cases, FEIBA, 60 57,686 54,413

    Percent Removal of Blood and Blood

    Administration Costs...............

    80 Percent of Cases, PI5, 60 Percent 60,994 54,413

    Removal of Blood and Blood

    Administration Costs...............

    80 Percent of Cases, FEIBA, 40 59,096 54,413

    Percent Removal of Blood and Blood

    Administration Costs...............

    80 Percent of Cases, PI5, 40 Percent 61,558 54,413

    Removal of Blood and Blood

    Administration Costs...............

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

    The applicant noted that 25 percent of the total volume of cases map to the following 10 MS-DRGs: MS-DRG 378 (Gastrointestinal Hemorrhage with CC), 7.56 percent of all cases; MS-DRG 812 (Red Blood Cell Disorders without MCC), 3.13 percent of all cases; MS-DRG 377 (Gastrointestinal Hemorrhage with MCC), 2.68 percent of all cases; MS-

    DRG 470 (Major Joint Replacement or Reattachment of Lower Extremity without MCC), 2.32 percent of all cases); MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation >96 hours with MCC), 2.26 percent of all cases; MS-DRG 481 (Hip & Femur Procedures, Except Major Joint with CC), 2.08 percent of all cases; MS-DRG 811 (Red Blood Cell Disorders with MCC), 1.70 percent of all cases; MS-DRG 291 (Heart Failure and Shock with MCC), 1.22 percent of all cases; MS-DRG 379 (Gastro intestinal Hemorrhage without CC/MCC), 1.12 percent of all cases; and MS-DRG 683 (Renal Failure with CC), 1.06 percent of all cases. We are concerned that the applicant did not include sensitivity analyses for this subset of cases.

    We are inviting public comments on whether Andexanet Alfa meets the cost criterion, including with regard to the concern we have raised.

    With regard to the substantial clinical improvement criterion, the applicant asserted that Andexanet Alfa represents a substantial clinical improvement for the treatment of patients receiving direct or indirect Factor Xa therapy who experience serious, uncontrolled bleeding events or who require emergency surgery because it addresses an unmet medical need for a universal antidote to direct and indirect Factor Xa inhibitors; if approved, would be the only agent shown in prospective clinical trials to rapidly (within 2-5 minutes) and sustainably reverse the anticoagulation activity of Factor Xa inhibitors; is potentially non-thrombogenic, as no serious adverse effects of thrombosis were observed in clinical trials; and could supplant current treatments for bleeding from anti-Factor Xa treatment, which have not been shown to be effective in the treatment of all patients.

    With regard to addressing an unmet need for a universal antidote to direct and indirect Factor Xa inhibitors, the applicant asserted that the use of any anticoagulant is associated with an increased risk of bleeding, and bleeding complications can be life-threatening. Bleeding is especially concerning in patients treated with Factor Xa inhibitors because there are currently no antidotes to Factor Xa inhibitors available. The applicant stated that Andexanet Alfa has a unique mechanism of action and represents a new biological approach to the treatment of patients who have been diagnosed with acute severe bleeding who require immediate reversal of the Factor Xa inhibitor therapy. The applicant explained that although Andexanet Alfa is structurally very similar to native Factor Xa inhibitors, it has undergone several modifications that restrict its biological activity to reversing the effects of Factor Xa inhibitors by binding with and sequestering direct or indirect Factor Xa inhibitors, which allows native Factor Xa inhibitors to dictate the normal coagulation and hemostasis process. As a result, the applicant maintained that Andexanet Alfa represents a safe and effective therapy for the management of bleeding in a fragile patient population and a substantial clinical improvement over existing technologies and reversal strategies.

    The applicant noted the following: On average, patients with a bleeding complication were hospitalized for 6.3 to 7.4 days; the most common therapies currently used to manage bleeding events in patients undergoing anticoagulant treatment are blood transfusions, most frequently with packed red blood cells or fresh frozen plasma; and Vitamin K therapy was used only in 1 percent of Medicare beneficiaries who were receiving treatment with the indirect Factor Xa inhibitor enoxaparin.

    The applicant asserted that laboratory studies have failed to provide consistent evidence of ``reversal'' of the anticoagulant effect of Factor Xa inhibitors across a range of different PCC products and concentrations. Results of thrombin generation assays have varied depending on the format of the assay. Despite years of experience with low molecular weight heparins and pentasaccharide anticoagulants, neither PCCs nor factor eight inhibitor bypassing activity are recognized as safe and effective reversal agents for these Factor Xa inhibitors. Unlike patients taking Vitamin K antagonists, patients receiving treatment with oral Factor Xa inhibitor drugs have normal levels of clotting factors. Therefore, a strategy based on ``repleting'' factor levels is of uncertain foundation and could result in supra-normal levels of coagulation factors after rapid metabolism and clearance of the oral anticoagulant.

    The applicant provided results from two Phase III studies 12 13 in which older healthy volunteers pretreated with direct or indirect Factor Xa inhibitors (apixaban, edoxaban, rivaroxaban, and enoxaparin) demonstrated the following: Rapid and sustainable reversal of anticoagulation; reduced Factor Xa inhibitor free plasma levels by at least 80 percent below a calculated no-effect level; and reduced anti-Factor Xa activity to the lowest level of detection within 2 to 5 minutes of

    Page 25052

    infusion. The applicant noted that decreased Factor Xa inhibitor levels have been shown to correspond to decreased bleeding complications, reconstitution of activity of coagulation factors, and correction of coagulation.

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

    \12\ Conners, J.M. Antidote for Factor Xa Anticoagulants. N Engl J Med. 2015 Nov 13.

    \13\ Siegal DM, Curnutte JT, Connolly SJ, et al. Andexanet Alfa for the Reversal of Factor Xa Inhibitor Activity. N Engl J Med. 2015 Nov 11.

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

    The applicant stated that the results from the two Phase III studies and previous proof-of-concept Phase II dose-finding studies \2\ showed that use of Andexanet Alfa can rapidly reverse anticoagulation activity of Factor Xa inhibitors and sustain that reversal. Therefore, the applicant asserted that Andexanet Alfa has the potential to successfully treat patients who only need short-duration reversal of the Factor Xa inhibitor anticoagulant, as well as patients who require longer-duration reversal, such as patients experiencing a severe intracranial hemorrhage or requiring emergency surgery. Furthermore, the applicant noted that its technology's duration of action allows for a gradual return of Factor Xa inhibitor concentrations to placebo control levels within 2 hours following the end of infusion.

    With regard to Andexanet Alfa's non-thrombogenic nature, as no serious adverse effects of thrombosis were observed in clinical trials, the applicant provided clinical trial data which revealed participants in Phase II and Phase III trials had no thrombotic events and there were no serious or severe adverse events reported. Results also showed that use of Andexanet Alfa has a much lower risk of thrombosis than typical procoagulants because it lacks the region responsible for inducing coagulation. Furthermore, the applicant asserted that Andexanet Alfa is not associated with the known complications seen with red blood cell transfusions.

    The applicant asserted that, while the Phase II and Phase III trials and studies measured physiological hallmarks of reversal of NOACs, it is expected that the availability of a safe and reliable Factor Xa reversal will result in an overall better prognosis for patients--potentially leading to a reduction in length of hospital stay, fewer complications, and decreased mortality associated with unexpected bleeding episodes.

    The applicant also stated that use of Andexanet Alfa can supplant currently available treatments used for reversing bleeding from anti-

    Factor Xa treatments, which have not been shown to be effective in the treatment of all patients. With regard to PCCs, NOACs, and FFP, the applicant stated that there is a lack of clinical evidence available for patients taking Factor Xa inhibitors that experience bleeding events. The applicant noted that the case reports provide a snapshot of emergent treatment of these often medically complex anti-Factor Xa-

    treated patients with major bleeds. However, the applicant stated that these analyses reveal the inconsistent approach in assessing the degree of anticoagulation in the patient and the variability in treatment strategy. The applicant explained that little or no assessment of efficacy in restoring coagulation in the patients was performed, and the major outcomes measures were bleeding cessation or mortality. The applicant concluded that overall, there is very little evidence for the efficacy suggested in some guidelines, and the evidence is insufficient to draw any conclusions.

    We are inviting public comments on whether Andexanet Alfa meets the substantial clinical improvement criterion.

    Below is a summary of the written comments we received on the Andexanet Alfa application in response to the February 2016 New Technology Town Hall meeting and our response:

    Comment: Two commenters supported the approval of new technology add-on payments for Andexanet Alfa. According to the commenters, Andexanet Alfa is a significant clinical improvement over existing therapies used to reverse major bleeding in patients receiving treatment using Factor Xa inhibitors. One commenter stated that Andexanet Alfa would be the first and only antidote to treat patients receiving an oral Factor Xa inhibitor who have suffered a major bleeding episode and require urgent reversal of Factor Xa anticoagulation. Based on professional experience as a first line clinician charged with stabilizing and treating patients with bleeding events or trauma such as assaults and motor vehicle accidents, the commenter stated that patients on anticoagulation therapy present a difficult scenario and they often have comorbidities, which complicate the effectiveness of medical care and put them at risk for complications. The commenter stated that major bleeding is observed in approximately five percent of patients receiving treatment using Factor Xa inhibitors, but only a small subset of those patients require urgent reversal of anti-Factor Xa activity. The commenter believed that, in spite of oral Factor Xa inhibitor's short half-life (7 to 9 hours) and similar or even lower bleeding rates than with warfarin or low molecular weight heparin, the lack of a targeted antidote that is safe for Factor Xa inhibitors is believed to limit these anticoagulants, which do not have a monitoring requirement, nor any dietary restrictions. The commenter believed that a significant disadvantage of Factor Xa inhibitors is the lack of an effective strategy to rapidly reverse the anticoagulant effects in patients requiring emergency surgery or presenting with an emergent bleed. There is currently no agent indicated or proven to be effective for the treatment of patients with Factor Xa inhibitor related bleeding. The commenter believed that Andexanet Alfa would provide clinicians and their patients the ability to restore homeostasis in critical emergency settings for the broad range of bleeds experienced by patients receiving treatment using Factor Xa inhibitors. The commenter compared Andexanet Alfa to KcentraTM and FEIBA, and noted that both work upstream in the coagulation cascade and thus cannot overcome the effects of the Factor Xa inhibitors. The commenter further stated that human plasma-

    derived clotting factors were not designed to reverse Factor Xa inhibitors. The commenter also believed that it is well recognized among clinicians that there is a critical need for a reversal agent for the new oral anticoagulants (NOAC) that will rapidly restore normal coagulation, and stated that Andexanet Alfa represents a significant clinical improvement over existing therapies that should be approved for the new technology add-on payments.

    Another commenter also believed that Andexanet Alfa represents a significant clinical improvement over existing therapies. The commenter stated that, in the dire moment that a patient presents a critical care team with a life-threatening bleed, reversing coagulation immediately provides the foundation for stabilizing the patient, which is needed to prevent further morbidity and mortality. The commenter also noted KcentraTM's and FEIBA's inability to affect Factor Xa inhibitors because they act on upstream coagulation cascade factors. The commenter further believed that Andexanet Alfa's mechanism of action is different from the mechanism of action of existing treatments.

    Response: We appreciate the commenters' input. We will take these comments into consideration when deciding whether to approve new technology add-on payments for Andexanet Alfa for FY 2017.

  250. Defiteliosupreg (Defibrotide)

    Jazz Pharmaceuticals submitted an application for new technology add-on payments for FY 2017 for Defibrotide (Defiteliosupreg), a treatment for patients diagnosed with hepatic veno-occlusive disease (VOD) with evidence of multi-organ dysfunction. VOD is a potentially

    Page 25053

    life-threatening complication resulting from hematopoietic stem cell transplantation (HSCT), with an incidence rate of 8 percent to 15 percent of patients experiencing its effects after HSCT. Diagnoses of VOD range in severity from what has been classically defined as a disease limited to the liver (mild) and reversible, to a severe syndrome associated with multi-organ dysfunction or failure and death. Patients treated with HSCT who develop VOD with evidence of multi-organ dysfunction face an immediate risk of death, with a mortality rate of more than 80 percent when only supportive care is used.

    VOD is believed to be the result of endothelial cell damage and hepatocellular injury from high-dose conditioning regimens administered prior to receiving treatment with HSCT. Preclinical data suggest that Defiteliosupreg stabilizes endothelial cells by reducing endothelial cell activation and by protecting endothelial cells from further damage. Defiteliosupreg is administered as a 2-hour intravenous infusion every 6 hours. The recommended dosage is 6.25 mg/kg body weight (25mg/kg/day). Defiteliosupreg should be administered for a minimum of 21 days. If after 21 days the signs and symptoms associated with hepatic VOD are not resolved, the administration of Defiteliosupreg should be continued until clinical resolution.

    With regard to the newness criterion, according to the manufacturer, Defiteliosupreg received FDA approval in March 30, 2016 and is expected to be commercially available on the U.S. market on April 6, 2016. At this time, the applicant has not submitted any specific information to establish that the technology was not available on the U.S. market as of the FDA approval date or to describe the reasons for a delay of availability until the first week of April 2016. Therefore, we believe the newness period for Defiteliosupreg would begin on March 30, 2016, the date of FDA approval.

    There are currently no ICD-10-PCS codes to uniquely identify the intravenous administration of Defiteliosupreg. The applicant submitted an application for the March 9-10, 2016 meeting of the ICD-10 Coordination and Maintenance Committee for a unique ICD-10-PCS procedure code to identify the use of Defitelio. If approved, the procedure code would become effective on October 1, 2016 (FY 2017). More information on this request can be found on the CMS Web site located at: http://www.cms.gov/Medicare/Coding/ICD10ProviderDiagnosticCodes/ICD-10-CM-C-and-M-Meeting-Materials.html.

    As discussed earlier, if a technology meets all three of the criteria for substantial similarity, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments.

    With regard to the first criterion, whether the product uses the same or similar mechanism of action to achieve a therapeutic outcome, the applicant maintained that Defiteliosupreg has a unique mechanism of action that is not shared by any other drug on the market used to treat patients diagnosed with VOD with evidence of multi-organ failure. According to the applicant, there are no FDA-approved treatments for VOD other than supportive care. Anticoagulants such as heparin, antithrombin, and tissue plasminogen factor have been used to treat patients diagnosed with VOD, but there is a lack of conclusive evidence that these treatments are effective and they also present a high risk of bleeding. The applicant maintained that Defiteliosupreg addresses the underlying pathology of VOD with evidence of multi-organ failure and its use is effective as a treatment for this form of the disease. According to the applicant, it is speculated that the mechanism of action of the Defiteliosupreg revolves around the stabilization of endothelial cells because endothelial cell damage is believed to be a major contributing factor to the development of VOD. However, we are concerned that this mechanism of action is not well understood by the manufacturer and we are unable to determine whether Defiteliosupreg is substantially similar to the other drugs on the market without full understanding of its distinct mechanism of action.

    With regard to the second criterion, whether a product is assigned to the same or a different MS-DRG, the applicant maintained that cases potentially eligible for treatment using Defiteliosupreg and representing the target patient population mainly group to two MS-DRGs: MS-DRG 014 (Allogeneic Bone Marrow Transplant) and MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC). We believe that these are the same MS-DRGs that identify cases of patients treated with supportive care for VOD with multi-organ failure.

    With regard to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, the applicant asserted that there are no FDA-approved treatments for VOD other than supportive care, such as dialysis or ventilation. In addition, the applicant stated that poor outcomes have been reported for patients treated with nonapproved pharmacological treatments for VOD. These treatments have largely been discontinued because of the high incidence of hemorrhagic complications, particularly among patients diagnosed with multi-organ failure. According to the applicant, Defiteliosupreg would be the first and only FDA-approved treatment for VOD with evidence of multi-organ failure. However, we are concerned that the applicant did not include in its application data comparing the outcomes of patients treated with Defiteliosupreg to outcomes of patients treated only for supportive care. We are concerned that Defiteliosupreg may not produce outcomes that are significantly different than the outcomes of patients treated with supportive care.

    We are inviting public comments on whether Defiteliosupreg is substantially similar to existing technologies and whether it meets the newness criterion.

    With regard to the cost criterion, the applicant conducted sensitivity analyses using claims data from 2012 through 2014 and determined the results in aggregate and by year. The applicant researched 100 percent of the 2012 through 2014 Inpatient Standard Analytic Files (SAFs) for cases eligible for Defiteliosupreg. Because an ICD-9-CM code specific to treatment for VOD does not exist, the applicant used an algorithm to identify cases to use in its sensitivity analyses. The most appropriate ICD-9-CM diagnosis codes were identified based on clinical criteria used to diagnose VOD and were used to identify cohorts of patients diagnosed with VOD and VOD with multi-

    organ dysfunction. The applicant first identified claims with an ICD-9-

    CM procedure code indicating an HSCT (Group A) within a 30-day window; VOD most commonly occurs after receipt of HSCT. The applicant then looked for cases with ICD-9-CM diagnosis codes related to liver injury (Group B) or clinical evidence of suspected VOD symptoms based on at least two relevant ICD-9 diagnosis codes (Group C). Lastly, the applicant filtered out cases that did not show clinical evidence of multi-organ dysfunction based on at least one relevant ICD-9-CM code (Group D).

    The applicant submitted the following table indicating the ICD-9-CM codes used for each category of the algorithm.

    Page 25054

    Table 12--ICD-9 Codes Used for the Premier VOD Algorithm

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

    Group Title ICD-9-CM Code Description

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

    A...................... Hematopoietic Stem Cell 41.00 Bone marrow transplant, not otherwise

    Transplant (HSCT) (at 41.01 specified.

    least one code). 41.02 Autologous bone marrow transplant without

    purging.

    Allogeneic bone marrow transplant with

    purging.

    41.03 Allogeneic bone marrow transplant without

    purging.

    41.04 Autologous hematopoietic stem cell

    transplant without purging.

    41.05 Allogeneic hematopoietic stem cell

    transplant without purging.

    41.06 Cord blood stem cell transplant.

    41.07 Autologous hematopoietic stem cell

    transplant with purging.

    41.08 Allogeneic hematopoietic stem cell

    transplant.

    41.09 Autologous bone marrow transplant with

    purging.

    B...................... Liver Injury (at least one 453.xx Other venous embolism and thrombosis.

    code). 570.xx Acute and subacute necrosis of liver.

    573.8 Other specified disorders of liver.

    573.9 Unspecified disorder of liver.

    459.89 Other specified disorders of the

    circulatory system.

    277.4 Disorders of bilirubin excretion.

    C...................... VOD Symptoms (at least two 782.4 Hyperbilirubinemia.

    codes). 789.1 Hepatomegaly.

    783.1 Abnormal weight gain.

    789.5 Ascites.

    D...................... Multi-Organ Dysfunction (at 518.8x Acute/Chronic Respiratory Failure.

    least one code). 786.09 Other respiratory abnormalities

    (respiratory distress, except that

    associated with trauma/surgery in adults,

    or with RDS in newborns).

    799.02 Hypoxemia.

    518.81 Acute respiratory failure.

    V46.2 Other dependence on machines, supplemental

    oxygen.

    96.7x Other continuous invasive mechanical

    ventilation.

    93.90, 93.91, Non-invasive mechanical ventilation.

    93.93, 93.99

    584.X Acute renal failure.

    586.X Renal failure unspecified.

    593.9 Renal Failure.

    39.27, 39.42, Dialysis, including hemodialysis,

    39.95, 54.98 peritoneal dialysis, hemofiltration.

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

    Using the above algorithm, the applicant identified a total of 267 patient cases of VOD with multi-organ dysfunction in the 2012-2014 Inpatient SAFs, with 78 patient cases in 2012, 102 patient cases in 2013, and 87 patient cases in 2014, or an average annual patient case volume of 89. The applicant determined that these cases grouped mainly into two MS-DRGs: 014 and 016. The applicant noted that there were no cases in the data from MS-DRG 017 (Autologous Bone Marrow Transplant without CC/MCC). The applicant further noted that there were no cases from MS-DRG 017 because the ICD-9-CM codes identifying VOD with multi-

    organ dysfunction include serious medical conditions that are listed on the MCC and CC lists. In total, 38 MS-DRGs were represented in the patient cohort, with 27 percent of cases mapping to MS-DRG 014 and 42 percent of cases mapping to MS-DRG 016. The remaining cases mapped to 1 of the 36 remaining MS-DRGs with fewer than 11 cases.

    For results in the aggregate, the applicant calculated an average case-weighted charge per case of $427,440 across 267 cases representing diagnoses of VOD with multi-organ dysfunction from 2012 through 2014. The applicant assumed there would be a reduction in the use of selected drugs as a result of using Defiteliosupreg and removed 50 percent of the estimated charges for heparin, furosemide, and spironolactone. The charges for these drugs were estimated based on pricing taken from the Medispan PriceRx database, whose costs were marked up according to the inverse of CCRs from cost center 073 (Drugs Charged to Patients) obtained from providers' 2012, 2013, and 2014 cost reports. The applicant matched these CCRs with the provider numbers on each claim. The applicant removed an average of $2,631 in charges for these drugs from the overall unstandardized charges for Defiteliosupreg.

    The applicant then standardized the charges and calculated an average standardized case-weighted charge per case of $310,651. To update the charge data to the current fiscal year, the applicant inflated the charges based on the charge inflation factor of 1.048116 in the FY 2016 IPPS/LTCH final rule (80 FR 49779). The 1-year inflation factor was applied four times to FY 2012 claims, three times to FY 2013 claims, and twice to FY 2014 claims to inflate all charges to 2016. The applicant computed an inflated average standardized case-weighted charge per case of $356,015. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount was $157,951 (all calculations above were performed using unrounded numbers). Because the inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion. The applicant noted that it did not include charges for Defiteliosupreg in the inflated average standardized case-weighted charge per case because the inflated average standardized case-weighted charge per case exceeded the average case-weighted threshold amount without charges for Defiteliosupreg.

    The applicant provided a similar analysis for each individual year of the SAF data rather than combining all the data from all 3 years into one analysis. Under the other three analyses, the applicant noted that the average standardized case-weighted charge per case exceeded the average case-

    Page 25055

    weighted threshold amount (as shown in the table below) without inflating the charges and without adding any charges for Defiteliosupreg. We are inviting public comments on whether Defiteliosupreg meets the cost criterion.

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

    Average

    Average standardized

    SAF year casedashweighted case-weighted

    threshold amount charge per

    case

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

    2012................................ $161,469 $347,910

    2013................................ 150,585 326,445

    2014................................ 163,434 404,883

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

    With regard to the substantial clinical improvement criterion, the applicant maintained that Defiteliosupreg is an effective treatment for VOD as an early onset cause of mortality following HSCT. According to the applicant, patients treated with Defiteliosupreg have improved survival and efficacy rates compared to patients who were not treated with Defiteliosupreg. In increasing the chances of post-HSCT survival, Defiteliosupreg affords the transplant patient the opportunity for engraftment, which could be a potential cure for the underlying disease that required HSCT.

    The applicant supported these assertions with clinical evidence from pivotal trial 2005-01, a Phase III historical control study in which patients with VOD with multi-organ failure were given Defiteliosupreg in doses of 25/mg/kg/day for the recommended minimum treatment duration of 21 days. Patients in the historical control group were selected by an independent medical review committee (MRC) from a pool of 6,867 medical charts of patients receiving HSCT that were hospitalized from January 1995 through November 2007. The trial consisted of 102 patients in the Defiteliosupreg treated group and 32 patients in the historical control group. The trial used the survival rate and rate of Complete Response (CR) at Day+100 as clinical endpoints. The observed survival rate at Day+100 in the Defiteliosupreg treated group was 38.2 percent compared to 25 percent in the historical control group. Moreover, the rate of CR by Day+100 post-HSCT for the Defiteliosupreg treated group was 25.5 percent compared to 12.5 percent in the historical control group. The applicant conducted additional analyses that showed improvements in survival outcomes among subgroups of patients with baseline prognostic factors related to worse outcomes.

    According to the applicant, running a controlled, blinded, and randomized trial in a patient population with high mortality rates would be unethical. We are concerned that there are limitations to the historical control group used in pivotal trial 2005-01. We believe that the discrepancy between the size of the treatment group (N=102) and the historical control group (N=32) may skew the trial results in favor of the treatment group. We also are uncertain, given the small sample size and historical data used, whether the historical control group is representative of patients with VOD with multi-organ failure. According to the applicant, patients in the historical control group were hospitalized between January 1995 and November 2007. Because of advancements in medicine within this timeframe, we are concerned that the patients in the historical control group cannot be appropriately compared to patients in the treatment group. Moreover, we believe that it is difficult to attribute improved survival and CR rates only to Defiteliosupreg treatment.

    We are inviting public comments on whether Defiteliosupreg meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  251. EDWARDS INTUITY EliteTM Valve System

    Edwards Lifesciences submitted an application for new technology add-on payments for the EDWARDS INTUITY EliteTM Valve System (INTUITY) for FY 2017. The device uses a rapid deployment valve system and serves as a prosthetic aortic valve, which is inserted using surgical aortic valve replacement (AVR). The device replaces the diseased native valve in patients with aortic valve disease, including aortic stenosis. The components of the device are: (1) A bovine pericardial aortic bioprosthetic valve; (2) a balloon expandable stainless steel frame; and (3) a textured sealing cloth. The INTUITY valve shares many basic features with other tissue, bioprosthetic valves. The leaflets are made of bovine pericardium, rather than porcine valve tissue, or purely mechanical elements.

    With regard to the newness criterion, the applicant submitted an application to the FDA for pre-market approval of the INTUITY valve and anticipates FDA approval prior to July 1, 2016. The applicant indicated that the device would be available on the market shortly after approval. The applicant submitted a request for a unique ICD-10-PCS code for consideration at the March 2016 ICD-10 Coordination and Maintenance Committee meeting. If approved, the codes will be effective on October 1, 2016 (FY 2017). More information on this request can be found on the CMS Web site located at: http://www.cms.gov/Medicare/Coding/ICD10ProviderDiagnosticCodes/ICD-10-CM-C-and-M-Meeting-Materials.html.

    As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments.

    With regard to the first criterion, whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant described three aspects of the valve system that are unique relative to existing devices. First, the valve system has a deployment mechanism that allows for rapid deployment and only requires 3 sutures, as opposed to 12 to 18 sutures used in standard valve replacement procedures. Second, the flexible deployment arm allows improved surgical access and visualization, making the surgery less challenging for the surgeon, which improves the likelihood that the surgeon can use a minimally invasive approach. Third, the assembly of the device only allows the correct valve size to be fitted, which ensures that the valve does not slip or migrate, which prevents paravalvular leaks and patient prosthetic mismatch. The applicant maintained that the INTUITY has a different mechanism of action than other prosthetic aortic valves and, therefore, is not substantially similar to those used in standard aortic valve replacement procedures.

    With regard to the second and third criteria, the device is used in the same

    Page 25056

    patient population and would be assigned to the same MS-DRGs as cases involving other prosthetic aortic valves. We also received information about the Perceval aortic valve (LivaNova), which received FDA approval in January 2016 and which appears to be a substantially similar aortic valve. If the INTUITY valve were to receive approval for new technology add-on payments, we would consider whether the INTUITY valve is substantially similar to the device that has already received FDA approval. If we determine that it is substantially similar, we note that the start date for determining the duration of new technology add-

    on payments would be the date of FDA approval for the Perceval aortic valve.

    After reviewing the information provided by the applicant with regard to the substantial similarity criteria discussed above, we have the following concerns. First, it appears that this device uses a similar mechanism of action as standard aortic valves; the differences described in the application, with respect to how the valve is placed and secured, and the number of sutures required, do not readily distinguish the mechanism of action from other aortic valves. Second, the MS-DRGs to which cases using the INTUITY would be assigned, as indicated in the application, are the same MS-DRGs to which cases involving standard aortic valves would be assigned. Third, the device is used to treat the same disease and patient population as standard aortic valves. In light of these concerns, we believe that this device appears to be substantially similar to other valves used in aortic valve replacement. We are inviting public comments on whether the INTUITY meets the newness criterion.

    With regard to the cost criterion, the applicant researched the FY 2014 MedPAR claims data file to identify cases of patients who represent potential recipients of treatment using the INTUITY. The applicant identified claims that had an ICD-9-CM diagnosis code of 424.1 (Aortic valve disorder) in combination with an ICD-9-CM procedure code of 35.21 (Replacement of aortic valve with tissue) or 35.22 (Open and other replacement of aortic valve). The applicant also identified cases with or without a coronary artery bypass graft (CABG) using the ICD-9-CM procedure codes in the table below.

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

    ICD-9-CM code Code description

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

    36.10............................. Aortocoronary bypass for heart

    revascularization, not otherwise

    specified.

    36.11............................. (Aorto)coronary bypass of one

    coronary artery.

    36.12............................. (Aorto)coronary bypass of two

    coronary arteries.

    36.13............................. (Aorto)coronary bypass of three

    coronary arteries.

    36.14............................. (Aorto)coronary bypass of four or

    more coronary arteries.

    36.15............................. Single internal mammary-coronary

    artery bypass.

    36.16............................. Double internal mammary-coronary

    artery bypass.

    36.17............................. Abdominal-coronary artery bypass.

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

    The applicant identified a total of 15,291 cases that mapped to MS-

    DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/

    MCC). The applicant calculated an average unstandardized charge per case of $178,608 for all cases. The applicant then removed 100 percent of the charges for pacemakers, investigational devices, and other implants that would not be required for patients receiving treatment using the INTUITY.

    The applicant standardized the charges and then applied an inflation factor of 1.076647, which is the 2-year inflation factor in the FY 2016 IPPS/LTCH final rule (80 FR 49784), to update the charges from FY 2014 to FY 2016. Because the price of the INTUITY has yet to be determined, the applicant calculated the average expected charge using the same price as charged in the recent IDE trial. Although the applicant submitted data that related to the estimated clinical trial cost of the INTUITY, the applicant noted that the cost of the technology was proprietary information. To add charges for the new technology, the applicant assumed a hospital mark-up of approximately 3.0 percent, based on the current average CCR for implantable devices (0.337) as reported in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49429). Based on the FY 2016 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted threshold amount was $163,173. The applicant computed an inflated average standardized case-weighted charge per case of $185,982, which is $22,809 above the average case-weighted threshold amount. Because the inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

    We are concerned that the number of individual cases that were identified and provided by the applicant indicated a total of 26,520 cases that would be eligible for treatment using the INTUITY, but the applicant only included 15,291 cases in the final sensitivity analysis. We would like more information from the applicant regarding how it decided upon which cases to include in the sensitivity analysis, as well as further details about how and on what basis the applicant weighted CABG and non-CABG cases. We are inviting public comments on whether the INTUITY meets the cost criterion, including with regard to the concerns we have raised.

    With regard to the substantial clinical improvement criterion, the applicant stated that the device improves clinical outcomes for patients undergoing minimally invasive AVR and full-sternotomy AVR. The applicant also stated that the rapid deployment technology enables reduced operative time, specifically cross-clamp time, thereby reducing the period of myocardial ischemia. The applicant also indicated that the flexible deployment arm increases the likelihood that a minimally invasive approach can be used. In addition, the applicant suggested that the device offers a reduction in operative time for full-

    sternotomy AVR. The applicant noted that clinical results demonstrated significant patient outcome and utilization improvements, including improved patient satisfaction, faster return to normal activity, decreased post-operative pain, reduced mortality and decreased complications, including

    Page 25057

    need for reoperation due to bleeding, reduced recovery time, and reduced length of stay.

    According to the applicant, the valve has been tested clinically in several programs. In the TRITON trial (Kocher et al., 2013 \14\), 287 patients with aortic stenosis underwent surgery in 1 of 6 European centers. The first 149 patients received the first generation Model 8300A valve, and the next 138 patients received the second generation Model 8300AB. The average age of the patients was 75.7 years. Early, 30-day mortality was 1.7 percent (5/287), the post-operative valve gradient was low, and 75 percent of the patients improved functionally. A total of four valves were explanted in the final 30 days due to bleeding, and three were explanted later for paravalvular leak, endocarditis, and aortic root aneurysms. Follow-up extended to 3 years (mean 1.8 years).

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

    \14\ Kocher AA, Laufer G, Haverich A, et al. One-year outcomes of the surgical treatment of aortic stenosis with a next generation surgical aortic valve (TRITON) trial: A prospective multicenter study of rapid-deployment aortic valve replacement with the EDWARDS INTUITY valve system. J Thorac Cardiovasc Surg. 2013; 145:110-116.

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

    Implantation of the INTUITY using minimally invasive surgery was compared with conventional aortic valve replacement in the CADENCE-MIS randomized trial (Borger et al., 2015 \15\) of 100 patients treated in 1 of 5 centers in Germany (3). Aortic cross-clamp time was reduced from 54.0 to 41.3 minutes (p17 18 19 as well as some abstracts of other case series. These publications describe the procedural results of using the device, with angiographic endpoints, and demonstrate the feasibility of insertion. The applicant also indicated that other treatment approaches, including open surgery, are done infrequently, while other approaches are not approved for this purpose. Therefore, the applicant indicated that it would be impractical to conduct comparative studies.

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

    \17\ DeRubertis BG, Quinones-Baldrich WJ, Greenberg JI, Jimenez JC, Lee JT. Results of a double-barrel technique with commercially available devices for hypogastric preservation during aortoilac endovascular abdominal aortic aneurysm repair. J Vasc Surg 2012;56:1252-1259.

    \18\ Ferrer C, De Crescenzo F, Coscarella C, Cao P. Early experience with the Excluder(R) iliac branch endoprosthesis. J Cardiovasc Surg 2014;55:679-683.

    \19\ Schoumlnhofer S, Mansour R, Ghotbi R. Initial results of the management of aortoiliac aneurysms with GORE(R) Excluder(R) iliac branched endoprosthesis. J Cardiovasc Surg 2015;56:883-888.

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

    After reviewing the information provided by the applicant, we have the following concerns: We are concerned about the lack of clinical studies comparing the GORE IBE device with alternative methods of treatment, and note that the application did not provide data that supported its assertions that the GORE IBE device is associated with reduced procedure time, reduced fluoroscopy time, reduced reintervention rates, reduced incidence of aneurysm enlargement, and improved patency rates. We also note that the applicant's assertions about decreased rates of complications appear to compare a small number of published cases of the use of the GORE IBE device with complication rates cited in the literature, which does not indicate whether there is a valid basis for comparison. We are inviting public comments on whether the GORE IBE device meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

  252. VistogardTM (Uridine Triacetate)

    BTG International Inc., submitted an application for new technology add-on payments for the VistogardTM for FY 2017. VistogardTM (Uridine Triacetate) was developed as an antidote to Fluorouracil toxicity. Chemotherapeutic agent 5-

    fluorouracil (5-FU) is used to treat specific solid tumors. It acts upon deoxyribonucleic acid (DNA) and ribonucleic acid (RNA) in the body, as uracil is a naturally occurring building block for genetic material. Fluorouracil is a fluorinated pyrimidine. As a chemotherapy agent, Fluorouracil is absorbed up by cells and causes the cell to metabolize into byproducts that are toxic and used to destroy cancerous cells. The byproducts fluorodoxyuridine monophosphate (F-dUMP) and floxuridine triphosphate (FUTP) are believed to do the following: Reduce DNA synthesis, lead to DNA fragmentation, and disrupt RNA synthesis. Fluorouracil is used to treat a variety of solid tumors such as colorectal, head and neck, breast, and ovarian cancer. With different tumor treatments, different dosages, and different dosing schedules, there is a risk for toxicity in these patients.

    Patients may suffer from fluorouracil toxicity/death if 5-FU is delivered in slight excess or at faster infusion rates than prescribed. The cause of overdose can happen for a variety of reasons including: Pump malfunction, incorrect pump programming or miscalculated doses, and accidental or intentional ingestion.

    According to the applicant, current treatment for fluorouracil toxicity is supportive care, including discontinuation of the drug, hydration, filgrastim for neutropenia, as well as antibiotics, antiemetics, and treatments that are required for potential gastrointestinal and cardiovascular compromise. VistogardTM is an antidote to Fluorouracil toxicity and is a pro-drug of uridine. Once the drug is metabolized into uridine, it competes with the toxic byproduct FUTP in binding to RNA, thus reducing the impact FUTP has on cell death.

    With regard to the newness criterion, VistogardTM received FDA approval on December 11, 2015. The applicant noted that VistogardTM is the first FDA approved antidote used to reverse fluorouracil toxicity. Currently, there

    Page 25060

    are no ICD-10-CM procedure codes that uniquely identify the use of VistogardTM. The applicant presented an application at the March 9-10, 2016 meeting of the ICD-10 Coordination and Maintenance Committee for a unique ICD-10-PCS procedure code to identify the use of VistogardTM. If approved, the code will be effective on October 1, 2016 (FY 2017). More information on this request can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10ProviderDiagnosticCodes/ICD-10-CM-C-and-M-Meeting-Materials.html.

    As discussed earlier, if a technology meets all three of the substantial similarity criteria, it would be considered substantially similar to an existing technology and would not be considered ``new'' for purposes of new technology add-on payments.

    With regard to the first criterion, whether the product uses the same or a similar mechanism of action to achieve a therapeutic outcome, the applicant stated that VistogardTM is the first FDA-

    approved antidote used to reverse fluorouracil toxicity. The applicant maintained that VistogardTM has a unique mechanism of action that is not comparable to any other drug's mechanism of action that is currently available on the U.S. market. The applicant described in technical detail how the novel and unique mechanism of action provides bioavailable uridine, a direct biochemical antagonist of 5-FU toxicity; quickly absorbs into the gastrointestinal tract due to its lipophilic nature; in normal cells, stops the process of cell damage and cell destruction caused by 5-FU and counteracts the effects of 5-FU toxicity; protects normal cells and allows recovery from damage caused by 5-FU, without interfering with the primary antitumor mechanism of 5-

    FU; and uses uridine derived from VistogardTM to convert it into uridine triphosphate (UTP), which competes with FUTP for incorporation into RNA, preventing further cell destruction and dose-

    limiting toxicities.

    With regard to the second criterion, whether the product is assigned to the same or a different MS-DRG, the applicant noted that Xuriden (uridine triacetate) was also approved by the FDA on September 8, 2015, as a pyrimidine analog for uridine replacement indicated for the treatment of hereditary orotic aciduria (HOA). According to the applicant, HOA is a rare, potentially life-threatening, genetic disorder in which patients (primarily pediatric patients) lack the ability to synthesize adequate amounts of uridine and consequently can suffer from hematologic abnormalities, failure to thrive, a range of developmental delays, and episodes of crystalluria leading to obstructive uropathy. The applicant stated that, although Xuriden is approved as a chronic, once daily medication (not to exceed 8 grams) that is administered orally in the patient's home and also used to replace uridine, Xuriden is not administered in a hospital setting and cases involving the use of Xuriden would not be assigned to the same MS-DRGs associated with the use of VistogardTM in the treatment of patients experiencing 5-FU overdose or severe toxicity. Therefore, the applicant maintained that no other technology similar to VistogardTM would map to the same MS-DRGs as cases involving the use of VistogardTM.

    With regard to the third criterion, whether the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population, similar to above, the applicant maintained that VistogardTM is the first FDA approved antidote to reverse fluorouracil toxicity and, therefore, no other technology treats this disease or patient population to reverse fluorouracil toxicity. Therefore, the applicant believed that VistogardTM is not substantially similar to any other currently approved technology. We are inviting public comments on whether VistogardTM is substantially similar to existing technologies and whether it meets the newness criterion.

    With regard to the cost criterion, the applicant searched the claims data from the 2013 and 2014 Inpatient SAFs for cases that may be eligible for treatment involving VistogardTM. Specifically, the applicant searched for cases reporting a primary ICD-9-CM diagnosis code for colorectal cancer, head and neck cancer, gastric cancers and pancreatic cancer. The applicant further narrowed the potential target patient population by identifying cases reporting toxicity due to an antineoplastic. In order to include only patients diagnosed with severe toxicity that would be eligible for treatment using VistogardTM, using revenue center codes and ICD-9-CM V codes, the applicant included an additional cohort of cases representing patients admitted from the emergency department, an observation unit, another short-term, acute care hospital, or who have received chemotherapy treatment during the inpatient stay included on the claim. Because 5-FU toxicity is associated with a high mortality rate, the applicant identified a subgroup of patients diagnosed with chemotherapy toxicity who expired during their inpatient visit or within 7 days of discharge. The applicant provided two analyses to determine that the technology meets the cost criterion: One analysis of patients that experienced toxicity with mortality and a second analysis using the broader chemotherapy toxicity cohort, which includes patients who did not expire. The table below provides the diagnosis codes and information the applicant used to identify cases for both of these analyses.

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

    Criterion ICD-9 code Description

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

    Colorectal, head and neck, 153.x............... Malignant neoplasm

    gastric, or pancreatic 154.x............... of colon.

    cancer (at least one code). Malignant neoplasm

    of rectum,

    rectosigmoid

    junction, and anus.

    171.0............... Malignant neoplasm

    of head, face, and

    neck.

    151.x............... Malignant neoplasm

    of stomach.

    157.x............... Malignant neoplasm

    of pancreas.

    Toxicity due to an 963.1............... Poisoning by

    antineoplastic (at least antineoplastic and

    one code). immunosuppressive

    drugs.

    E933.1.............. Antineoplastic and

    immunosuppressive

    drugs causing

    adverse effects in

    therapeutic use.

    Admission to Inpatient Revenue Center...... Revenue Center Codes

    Setting Admitted from ED. 450, 451, 452, 456,

    459.

    or observation unit..... Revenue Center...... Revenue Center Codes

    760, 761, 762, 769.

    or short-term, acute N/A................. Source of admission

    care hospital. code = ``4''

    ``Transfer from

    hospital (Different

    facility)''.

    or received chemotherapy V58.0............... Encounter or

    during inpatient stay. admission for

    radiation.

    V58.11.............. Encounter for

    antineoplastic

    chemotherapy.

    V58.12.............. Encounter for

    antineoplastic

    immunotherapy (Must

    be primary

    diagnosis on the

    claim).

    Page 25061

    Expired during inpatient N/A................. Determined by

    stay or within seven days N/A................. patient discharge

    of discharge (at least one status code.

    code) \a\. If date of death in

    100 percent

    Denominator File

    pertaining to the

    year of the claim

    was within 7 days

    of claim discharge

    date.

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

    \a\ Required only for toxicity with mortality cohort.

    Source: KNG Health analysis of 2013-2014 100% Inpatient Standard

    Analytic Files and 2013-2014 100% Denominator Files.

    Under the first analysis, the applicant found 76 cases with 18.42 percent of those cases mapping to MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation > 96 hours with MCC), and the remaining number of cases mapping to MS-DRGs with less than 11 cases. According to the applicant, the results of the analysis of the MS-DRGs with less than 11 cases could not be discussed separately because of the small sample sizes. The applicant believed that it was unnecessary to remove any charges for other previously used technologies because although VistogardTM is singular in its ability to treat 5-

    FU toxicity, the associated charges for palliative care would continue to be necessary to treat the symptoms of the toxicity, even though it is possible that the use of VistogardTM may reduce a patient's hospital length of stay. To update the charge data to the current fiscal year, the applicant inflated the charges based on the charge inflation factor of 1.048116 in the FY 2016 IPPS/LTCH proposed rule (80 FR 24632). A 1-year inflation factor was applied three times for FY 2013 claims and two times for FY 2014 claims, inflating all claims to FY 2016. This resulted in an inflated average standardized case-weighted charge per case of $51,451. Using the FY 2016 IPPS Table 10 thresholds, the average case-weighted threshold amount was $46,233 (all calculations above were performed using unrounded numbers). The applicant noted that the inflated average standardized case-weighted charge per case exceeded the average case-weighted threshold amount without including charges for VistogardTM. Therefore, because the inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology meets the cost criterion.

    Under the second analysis, the applicant used the same methodology it used in its first analysis, except that the analysis included cases representing patients who did not expire. The applicant found 879 cases with 8.53 percent of those cases mapping to MS-DRG 392 (Esophagitis, Gastroenteritis and Miscellaneous Digestive System Disorders without MCC), and the remaining number of cases spread across several MS-DRGs. The inflated average standardized case-weighted charge per case was $42,708. Using the FY 2016 IPPS Table 10 thresholds, the average case-

    weighted threshold amount was $42,377 (all calculations above were performed using unrounded numbers). Similar to the results of the first analysis, the applicant noted that the inflated average standardized case-weighted charge per case exceeded the average case-weighted threshold amount without including charges for VistogardTM. Therefore, because the inflated average standardized case-weighted charge per case exceeds the average case-weighted threshold amount, the applicant maintained that the technology also meets the cost criterion under the second analysis.

    We note that the applicant used the inflation factor of 1.048116 from the FY 2016 IPPS/LTCH proposed rule instead of the inflation factor of 1.037616 from the FY 2016 IPPS/LTCH final rule (80 FR 49784). We believe that the applicant should use the most recent data available, which is the inflation factor from the final rule. The inflation factor from the FY 2016 IPPS/LTCH final rule is lower than the inflation factor from the proposed rule. However, the difference between these two factors is marginal. Also, as the applicant noted, it did not include charges for VistogardTM in its analysis. Therefore, we believe that it is likely that the applicant would still meet the cost criterion under both analyses even if it used the lower inflation factor from the FY 2016 final rule. We are inviting public comments on whether VistogardTM meets the cost criterion under both analyses.

    With regard to substantial clinical improvement, the applicant maintained that VistogardTM represents a substantial clinical improvement. The applicant noted that VistogardTM is the first and only antidote indicated to treat adult and pediatric patients following a fluorouracil overdose, regardless of the presence of symptoms or whether a patient exhibits early-onset, severe or life-

    threatening toxicity within 96 hours following the conclusion of fluorouracil or capecitabine administration. The applicant provided data from two studies (Study 1, an open-label, single arm, multi-center expanded access study and Study 2, an open-label, single arm, multi-

    center emergency use study), which combined enrolled 135 patients. The applicant noted that 130 patients treated with VistogardTM survived through the 30-day treatment and observation period (95 percent Confidence Interval: 0.92, 0.99). Of the 135 patients, 30 percent were 65 years old and older, including 11 percent of patients who were 75 years old and older.

    According to the applicant, the studies' results demonstrate that VistogardTM reduced the incidence, severity and virulence of toxicities associated with 5-FU toxicity due to overdose or rapid onset. Specifically, the applicant noted the following results:

    VistogardTM ameliorated the progression of mucositis, leukopenia and thrombocytopenia; leukopenia and thrombocytopenia were resolved in almost all patients by the 4th week, indicating recovery of the hematopoietic system; mucositis also was resolved in almost all patients within the 30-day observation period with the incidence of serious (Grade 3 or 4) mucositis being very low; and no grade 4 mucositis was observed in any patients who received treatment using VistogardTM within 96 hours after 5-FU.

    Thirty-eight percent of patients who experienced 5-FU overdose were able to resume chemotherapy treatment in less than 30 days after 5-FU toxicity, with the majority of these patients resuming treatment within 21 days. According to the applicant, 21 percent of the patients who presented with rapid onset of serious toxicities resumed chemotherapy treatment (typically with a different agent than 5-FU) in less than 30 days, with an overall median time to resumption of chemotherapy of 19 days.

    The safety and tolerability profile of VistogardTM is consistent with what would be expected for patients diagnosed with cancer following 5-FU chemotherapy treatment, but is generally less in severity and incidence when compared to what would be expected with patients who experience a 5-FU overdose. Specifically, during Study 1, there were no patients that

    Page 25062

    discontinued uridine triacetate treatment as a result of adverse events, and during Study 2, three patients discontinued uridine triacetate treatment as a result of adverse events, one of which was considered possibly related to uridine triacetate (nausea and vomiting).

    We are inviting public comments on whether VistogardTM meets the substantial clinical improvement criterion.

    We did not receive any written public comments in response to the February 2016 New Technology Town Hall meeting regarding this application for new technology add-on payments.

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

    1. Background

      1. Legislative Authority

      Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the proposed FY 2017 hospital wage index based on the statistical areas appears under sections III.A.2. and G. of the preamble of this proposed rule.

      Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. (CMS collects these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-

      3, Parts II, III, and IV. The OMB control number for approved collection of this information is 0938-0050.) This provision also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The proposed adjustment for FY 2017 is discussed in section II.B. of the Addendum to this proposed rule.

      As discussed in section III.J. of the preamble of this proposed rule, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The proposed budget neutrality adjustment for FY 2017 is discussed in section II.A.4.b. of the Addendum to this proposed rule.

      Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-

      term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are proposing to apply to the FY 2017 wage index, appears under sections III.E.3. and F. of the preamble of this proposed rule.

      2. Core-Based Statistical Areas (CBSAs) Revisions for the Proposed FY 2017 Hospital Wage Index

      The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate hospital labor market areas based on OMB-established Core-Based Statistical Areas (CBSAs). The current statistical areas (which were implemented beginning with FY 2015) are based on revised OMB delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. OMB Bulletin No. 13-01 established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas in the United States and Puerto Rico based on the 2010 Census, and provided guidance on the use of the delineations of these statistical areas using standards published on June 28, 2010 in the Federal Register (75 FR 37246 through 37252). We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full discussion of our implementation of the new OMB labor market area delineations beginning with the FY 2015 wage index.

      Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to and supersedes OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provides detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2012 and July 1, 2013. The complete list of statistical areas incorporating these changes is provided in the attachment to OMB Bulletin No. 15-01. According to OMB, ``this bulletin establishes revised delineations for the Nation's Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas. The bulletin also provides delineations of Metropolitan Divisions as well as delineations of New England City and Town Areas.'' A copy of this bulletin may be obtained on the Web site at: https://www.whitehouse.gov/omb/bulletins_default.

      OMB Bulletin No. 15-01 made the following changes that are relevant to the IPPS wage index:

      Garfield County, OK, with principal city Enid, OK, which was a Micropolitan (geographically rural) area, now qualifies as an urban new CBSA 21420 called Enid, OK.

      The county of Bedford City, VA, a component of the Lynchburg, VA CBSA 31340, changed to town status and is added to Bedford County. Therefore, the county of Bedford City (SSA State county code 49088, FIPS State County Code 51515) is now part of the county of Bedford, VA (SSA State county code 49090, FIPS State County Code 51019). However, the CBSA remains Lynchburg, VA, 31340.

      The name of Macon, GA, CBSA 31420, as well as a principal city of the Macon-Warner Robins, GA combined statistical area, is now Macon-Bibb County, GA. The CBSA code remains as 31420.

      We believe that it is important for the IPPS to use the latest labor market area delineations available as soon as is reasonably possible in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions (79 FR 28055). Therefore, we are proposing to implement these revisions, effective October 1, 2016, beginning with the FY 2017 wage indexes. We are proposing to use these new definitions to calculate area wage indexes in a manner that is generally consistent with the CBSA-based methodologies finalized in the FY 2005 and the FY 2015 IPPS final rules. For FY

      Page 25063

      2017, Tables 2 and 3 for this proposed rule and the County to CBSA Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care Hospitals File posted on the CMS Web site reflect these CBSA changes. We are inviting public comments on these proposals.

    2. Worksheet S-3 Wage Data for the Proposed FY 2017 Wage Index

      The proposed FY 2017 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2013 (the FY 2016 wage indexes were based on data from cost reporting periods beginning during FY 2012).

      1. Included Categories of Costs

      The proposed FY 2017 wage index includes all of the following categories of data associated with costs paid under the IPPS (as well as outpatient costs):

      Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty);

      Home office costs and hours;

      Certain contract labor costs and hours, which include direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315 through 47317)); and

      Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590)) and other deferred compensation costs.

      2. Excluded Categories of Costs

      Consistent with the wage index methodology for FY 2016, the proposed wage index for FY 2017 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as skilled nursing facility (SNF) services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The proposed FY 2017 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398).

      3. Use of Wage Index Data by Suppliers and Providers Other Than Acute Care Hospitals Under the IPPS

      Data collected for the IPPS wage index also are currently used to calculate wage indexes applicable to suppliers and other providers, such as SNFs, home health agencies (HHAs), ambulatory surgical centers (ASCs), and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indexes of any supplier or provider except IPPS providers and LTCHs. Such comments should be made in response to separate proposed rules for those suppliers and providers.

    3. Verification of Worksheet S-3 Wage Data

      The wage data for the proposed FY 2017 wage index were obtained from Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-2552-10, OMB control number 0938-0050) for cost reporting periods beginning on or after October 1, 2012, and before October 1, 2013. For wage index purposes, we refer to cost reports during this period as the ``FY 2013 cost report,'' the ``FY 2013 wage data,'' or the ``FY 2013 data.'' Instructions for completing the wage index sections of Worksheet S-3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 40, Sections 4005.2 through 4005.4. The data file used to construct the proposed FY 2017 wage index includes FY 2013 data submitted to us as of February 29, 2016. As in past years, we performed an extensive review of the wage data, mostly through the use of edits for reasonableness designed to identify aberrant data.

      We asked our MACs to revise or verify data elements that result in specific edit failures. For the proposed FY 2017 wage index, we identified and excluded 62 providers with aberrant data that should not be included in the proposed wage index. Of these 62 providers that we excluded from the proposed wage index, 47 have data that we do not expect to change such that the data would be included in the final wage index (for example, among the reasons these providers were excluded is they are low Medicare utilization providers, they closed and failed edits for reasonableness, or they have extremely high or low average hourly wages that are atypical for their CBSAs). If data elements for some of these providers are corrected, we intend to include those providers in the calculation of the final FY 2017 wage index. We also adjusted certain aberrant data and included these data in the proposed wage index. For example, in situations where a hospital did not have documentable salaries, wages, and hours for housekeeping and dietary services, we imputed estimates, in accordance with policies established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967).

      In constructing the proposed FY 2017 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2013, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believed that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area's current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398). For the this proposed rule, we removed 3 hospitals that converted to CAH status on or after February 5, 2015, the cut-off date for CAH exclusion from the FY 2016 wage index, and through and including January 22, 2016, the cut-off date for CAH exclusion from the FY 2017 wage index. After removing hospitals that converted to CAH status, we calculated the proposed FY 2017 wage index based on 3,345 hospitals.

      For the proposed FY 2017 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located in the same manner that we allotted such hospitals' data in the FY 2016 wage index (80 FR 49489 through 49491). Table 2, which contains the proposed FY 2017 wage index associated with proposed rule (available via the Internet on the CMS Web site), includes separate wage data for the campuses of 9 multicampus hospitals.

    4. Method for Computing the Proposed FY 2017 Unadjusted Wage Index

      The method used to compute the proposed FY 2017 wage index without an occupational mix adjustment follows the same methodology that we used to compute the FY 2012, FY 2013, FY 2014, FY 2015, and FY 2016 final wage indexes without an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366 through 53367, 78 FR 50587 through 50588, 79 FR 49967 and

      Page 25064

      80 FR 49491 through 49492, respectively).

      As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 5,'' for each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2012, through April 15, 2014, for private industry hospital workers from the BLS' Compensation and Working Conditions. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we are not proposing any changes to the usage for FY 2017. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated in the following table.

      Midpoint of Cost Reporting Period

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

      After Before Adjustment factor

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

      10/14/2012...................... 11/15/2012........ 1.02321

      11/14/2012...................... 12/15/2012........ 1.02183

      12/14/2012...................... 01/15/2013........ 1.02040

      01/14/2013...................... 02/15/2013........ 1.01894

      02/14/2013...................... 03/15/2013........ 1.01743

      03/14/2013...................... 04/15/2013........ 1.01592

      04/14/2013...................... 05/15/2013........ 1.01443

      05/14/2013...................... 06/15/2013........ 1.01297

      06/14/2013...................... 07/15/2013........ 1.01152

      07/14/2013...................... 08/15/2013........ 1.01006

      08/14/2013...................... 09/15/2013........ 1.00859

      09/14/2013...................... 10/15/2013........ 1.00711

      10/14/2013...................... 11/15/2013........ 1.00561

      11/14/2013...................... 12/15/2013........ 1.00408

      12/14/2013...................... 01/15/2014........ 1.00260

      01/14/2014...................... 02/15/2014........ 1.00124

      02/14/2014...................... 03/15/2014........ 1.00000

      03/14/2014...................... 04/15/2014........ 0.99878

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

      For example, the midpoint of a cost reporting period beginning January 1, 2013, and ending December 31, 2013, is June 30, 2013. An adjustment factor of 1.01152 would be applied to the wages of a hospital with such a cost reporting period.

      Using the data as previously described, the proposed FY 2017 national average hourly wage (unadjusted for occupational mix) is $41.1026.

      Previously, we would also provide a Puerto Rico overall average hourly wage. As discussed in section IV.A. of the preamble of this proposed rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we calculated a Puerto Rico-specific wage index that was applied to the labor share of the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015, amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need to calculate a Puerto Rico-specific average hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national average hourly wage (unadjusted for occupational mix) (which would be $41.1026 for this FY 2017 proposed rule) and the national wage index, which is applied to the national labor share of the national standardized amount. Accordingly, for FY 2017, we are not proposing a Puerto Rico-specific overall average hourly wage or wage index.

    5. Proposed Occupational Mix Adjustment to the FY 2017 Wage Index

      As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals' employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor.

      1. Use of 2013 Occupational Mix Survey for the FY 2017 Proposed Wage Index

      Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We collected data in 2013 to compute the occupational mix adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A new measurement of occupational mix is required for FY 2019.

      The 2013 survey included the same data elements and definitions as the previous 2010 survey and provided for the collection of hospital-

      specific wages and hours data for nursing employees for calendar year 2013 (that is, payroll periods ending between January 1, 2013 and December 31, 2013). We published the 2013 survey in the Federal Register on February 28, 2013 (78 FR 13679 through 13680). This survey was approved by OMB on May 14, 2013, and is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079 for the Wage Index Beginning FY 2016 (in Excel format) is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. Hospitals were required to submit their completed 2013 surveys to their MACs by July 1, 2014. The preliminary, unaudited 2013 survey data were posted on the CMS Web site on July 11, 2014. As with the Worksheet S-3, Parts II and III cost report wage data, we asked our MACs to revise or verify data elements in hospitals' occupational mix surveys that result in certain edit failures.

      2. Development of the 2016 Medicare Wage Index Occupational Mix Survey for the FY 2019 Wage Index

      As stated earlier, section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. We collected data in 2013 to compute the occupational mix adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A new measurement of occupational mix is required for FY 2019. The FY 2019 occupational mix adjustment will be based on a new calendar year (CY) 2016 survey. The CY 2016 survey (CMS Form CMS-10079) is currently awaiting approval by OMB,

      Page 25065

      and can be accessed at http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201512-0938-011.

      3. Calculation of the Proposed Occupational Mix Adjustment for FY 2017

      For FY 2017, we are proposing to calculate the occupational mix adjustment factor using the same methodology that we used for the FY 2012, FY 2013, FY 2014, FY 2015, and FY 2016 wage indexes (76 FR 51582 through 51586, 77 FR 53367 through 53368, 78 FR 50588 through 50589, 79 FR 49968, and 80 FR 49492 through 49493, respectively) and to apply the occupational mix adjustment to 100 percent of the FY 2017 wage index. Because the statute requires that the Secretary measure the earnings and paid hours of employment by occupational category not less than once every 3 years, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2017 wage index. For the FY 2017 wage index, we are using the Worksheet S-3, Parts II and III wage data of 3,345 hospitals, and we are using the occupational mix surveys of 3,143 hospitals for which we also have Worksheet S-3 wage data, which represents a ``response'' rate of 94 percent (3,143/3,345). For the proposed FY 2017 wage index in this proposed rule, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586).

    6. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2017 Occupational Mix Adjusted Wage Index

      1. Analysis of the Occupational Mix Adjustment and the Occupational Mix Adjusted Wage Index

      As discussed in section III.E. of the preamble of this proposed rule, for FY 2017, we are proposing to apply the occupational mix adjustment to 100 percent of the FY 2017 wage index. We calculated the proposed occupational mix adjustment using data from the 2013 occupational mix survey data, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586).

      Using the occupational mix survey data and applying the occupational mix adjustment to 100 percent of the FY 2017 wage index results in a proposed national average hourly wage of $41.0651. Previously, we would also provide a Puerto Rico overall average hourly wage. As discussed in section IV.A. of the preamble of this proposed rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we calculated a Puerto Rico-specific wage index that was applied to the labor-related share of the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015, amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016 under section 1886(d)(9)(E) of the Act, as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need to calculate a Puerto Rico-specific average hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national average hourly wage (adjusted for occupational mix) (which would be $41.0651 for this FY 2017 IPPS proposed rule) and the national wage index, which is applied to the national labor share of the national standardized amount. Accordingly, for FY 2017, we are not proposing a Puerto Rico-specific overall average hourly wage or wage index.

      The proposed FY 2017 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows:

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

      Average hourly

      Occupational mix nursing subcategory wage

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

      National RN........................................... $38.814164598

      National LPN and Surgical Technician.................. 22.733613839

      National Nurse Aide, Orderly, and Attendant........... 15.94875556

      National Medical Assistant............................ 18.058859076

      National Nurse Category............................... 32.844074591

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

      The proposed national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $32.844074591. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0.

      Based on the 2013 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the nurse category is 42.6 percent, and the national percentage of hospital employees in the all other occupations category is 57.4 percent. At the CBSA level, the percentage of hospital employees in the nurse category ranged from a low of 25.6 percent in one CBSA to a high of 80.5 percent in another CBSA.

      We compared the proposed FY 2017 occupational mix adjusted wage indexes for each CBSA to the proposed unadjusted wage indexes for each CBSA. As a result of applying the occupational mix adjustment to the wage data, the proposed wage index values for 221 (54.2 percent) urban areas and 24 (51.1 percent) rural areas would increase. One hundred and three (25.2 percent) urban areas would increase by greater than or equal to 1 percent but less than 5 percent, and 6 (1.5 percent) urban areas would increase by 5 percent or more. Nine (19.1 percent) rural areas would increase by greater than or equal to 1 percent but less than 5 percent, and no rural areas would increase by 5 percent or more. However, the proposed

      Page 25066

      wage index values for 185 (45.3 percent) urban areas and 23 (48.9 percent) rural areas would decrease. Eighty-nine (21.8 percent) urban areas would decrease by greater than or equal to 1 percent but less than 5 percent, and no urban area would decrease by 5 percent or more. Seven (14.9 percent) rural areas would decrease by greater than or equal to 1 percent and less than 5 percent, and no rural areas would decrease by 5 percent or more. The largest positive impacts would be 17.4 percent for an urban area and 2.9 percent for a rural area. The largest negative impacts would be 4.9 percent for an urban area and 2.1 percent for a rural area. Two urban areas' wage indexes, but no rural area wage indexes, would remain unchanged by application of the proposed occupational mix adjustment. These results indicate that a larger percentage of urban areas (54.2 percent) would benefit from the proposed occupational mix adjustment than would rural areas (51.1 percent).

    7. Transitional Wage Indexes

      1. Background

      In the FY 2015 IPPS/LTCH PPS proposed rule and final rule (79 FR 28060 and 49957, respectively), we stated that, overall, we believed implementing the new OMB labor market area delineations would result in wage index values being more representative of the actual costs of labor in a given area. However, we recognized that some hospitals would experience decreases in wage index values as a result of the implementation of these new OMB labor market area delineations. We also realized that some hospitals would have higher wage index values due to the implementation of the new OMB labor market area delineations.

      The FY 2015 IPPS/LTCH PPS final rule (79 FR 49957) explained the methodology utilized in implementing prior transition periods when adopting changes that have significant payment implications, particularly large negative impacts. Specifically, for FY 2005, in the FY 2005 IPPS final rule (69 FR 49032 through 49034), we provided transitional wage indexes when the OMB definitions were implemented after the 2000 Census. The FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 through 49962) established similar transition methodologies to mitigate any negative payment impacts experienced by hospitals due to our adoption of the new OMB labor market area delineations for FY 2015.

      As finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 through 49960) and as discussed below, for FY 2017, we will be in the third and final year of two 3-year transition periods for wage index (1) for hospitals that, for FY 2014, were located in an urban county that became rural under the new OMB delineations, and had no form of wage index reclassification or redesignation in place for FY 2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the Act, redesignations under section 1886(d)(8)(B) of the Act, or rural reclassifications under section 1886(d)(8)(E) of the Act); and (2) for hospitals deemed urban under section 1886(d)(8)(B) of the Act where the urban area became rural under the new OMB delineations.

      2. Transition for Hospitals in Urban Areas That Became Rural

      In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 through 49959), for hospitals that, for FY 2014, were located in an urban county that became rural under the new OMB delineations, and had no form of wage index reclassification or redesignation in place for FY 2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the Act, redesignations under section 1886(d)(8)(B) of the Act, or rural reclassifications under section 1886(d)(8)(E) of the Act), we adopted a policy to assign them the urban wage index value of the CBSA in which they were physically located for FY 2014 for a period of 3 fiscal years (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied to the area wage index). FY 2017 will be the third year of this transition policy, and we are not proposing any changes to this policy in this proposed rule. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49495), we stated our belief that it is appropriate to apply a 3-year transition period for hospitals located in urban counties that would become rural under the new OMB delineations, given the potentially significant payment impacts for these hospitals. We continue to believe that assigning the wage index of the hospitals' FY 2014 area for a 3-year transition is the simplest and most effective method for mitigating negative payment impacts due to the adoption of the new OMB delineations.

      In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49959), we noted that there were situations where a hospital could not be assigned the wage index value of the CBSA in which it geographically was located in FY 2014 because that CBSA split and no longer exists and some or all of the constituent counties were added to another urban labor market area under the new OMB delineations. If the hospital could not be assigned the wage index value of the CBSA in which it was geographically located in FY 2014 because that CBSA split apart and no longer exists, and some or all of its constituent counties were added to another urban labor market area under the new OMB delineations, we established that hospitals located in such counties that became rural under the new OMB delineations were assigned the wage index of the urban labor market area that contained the urban county in their FY 2014 CBSA to which they were closest (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). Any such assignment made in FY 2015 and continued in FY 2016 will continue for FY 2017, except as discussed later in this section. We continue to believe this approach minimizes the negative effects of the change in the OMB delineations.

      Under the policy adopted in the FY 2015 IPPS/LTCH PPS final rule, if a hospital for FY 2014 was located in an urban county that became rural for FY 2015 under the new OMB delineations and such hospital sought and was granted reclassification or redesignation for FY 2015 or FY 2016, or such hospital seeks and is granted any reclassification or redesignation for FY 2017, the hospital will permanently lose its 3-

      year transitional assigned wage index status, and will not be eligible to reinstate it. We established the transition policy to assist hospitals if they experience a negative payment impact specifically due to the adoption of the new OMB delineations in FY 2015. If a hospital chooses to forego this transition adjustment by obtaining some form of reclassification or redesignation, we do not believe reinstatement of this transition adjustment would be appropriate. The purpose of the transition adjustment policy is to assist hospitals that may be negatively impacted by the new OMB delineations in transitioning to a wage index based on these delineations. By obtaining a reclassification or redesignation, we believe that the hospital has made the determination that the transition adjustment is not necessary because it has other viable options for mitigating the impact of the transition to the new OMB delineations.

      As we did for FY 2015 (79 FR 49959) and FY 2016 (80 FR 49495), with respect to the wage index computation for FY 2017, we will follow our existing policy regarding the inclusion of a hospital's wage index data in the CBSA in which it is geographically located (we

      Page 25067

      refer readers to Step 6 of the method for computing the unadjusted wage index in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592)). Accordingly, for FY 2017, the wage data of all hospitals receiving this type of 3-year transition adjustment will be included in the statewide rural area in which they are geographically located under the new OMB labor market area delineations. After the 3-year transition period, beginning in FY 2018, these formerly urban hospitals will receive their statewide rural wage index, absent any reclassification or redesignation.

      In addition, we established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49959) that the hospitals receiving this 3-year transition because they are in counties that were urban under the FY 2014 CBSA definitions, but are rural under the new OMB delineations, will not be considered urban hospitals. Rather, they will maintain their status as rural hospitals for other payment considerations. This is because our application of a 3-year transitional wage index for these newly rural hospitals only applies for the purpose of calculating the wage index under our adoption of the new OMB delineations.

      3. Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) of the Act Where the Urban Area Became Rural Under the New OMB Delineations

      As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49959 through 49960) and FY 2016 IPPS/LTCH PPS final rule (80 FR 49495 through 49496), there were some hospitals that, for FY 2014, were geographically located in rural areas but were deemed to be urban under section 1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals redesignated under section 1886(d)(8)(B) of the Act were no longer eligible for deemed urban status under the new OMB delineations, as discussed in detail in section III.H.3. of the preamble of the FY 2015 IPPS/LTCH PPS final rule. Similar to the policy implemented in the FY 2005 IPPS final rule (69 FR 49059), and consistent with the FY 2015 policy we established for other hospitals in counties that were urban and became rural under the new OMB delineations, we finalized a policy to apply a 3-year transition to these hospitals redesignated to urban areas under section 1886(d)(8)(B) of the Act for FY 2014 that are no longer deemed urban under the new OMB delineations and revert to being rural.

      For FY 2017, we are not proposing any changes to this policy and will continue the third and final year of the implementation of our policy to provide a 3-year transition adjustment to hospitals that are deemed urban under section 1886(d)(8)(B) of the Act under the FY 2014 labor market area delineations, but are considered rural under the new OMB delineations, assuming no other form of wage index reclassification or redesignation is granted. We assign these hospitals the area wage index value of hospitals reclassified to the urban CBSA (that is, the attaching wage index) to which they were redesignated in FY 2014 (with the rural and imputed floors applied and with the rural floor budget neutrality adjustment applied). If the hospital cannot be assigned the reclassified wage index value of the CBSA to which it was redesignated in FY 2014 because that CBSA was split apart and no longer exists, and some or all of its constituent counties were added to another urban labor market area under the new OMB delineations, such hospitals are assigned the wage index of the hospitals reclassified to the urban labor market area that contained the urban county in their FY 2014 redesignated CBSA to which they were closest. We assign these hospitals the area wage index of hospitals reclassified to a CBSA because hospitals deemed urban under section 1886(d)(8)(B) of the Act are treated as reclassified under current policy, under which such hospitals receive an area wage index that includes wage data of all hospitals reclassified to the area. This wage index assignment will be forfeited if the hospital obtains any form of wage index reclassification or redesignation.

      4. Budget Neutrality

      In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50372 through 50373), for FY 2015, and in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49496), for FY 2016, we applied the 3-year transition wage index adjustments in a budget neutral manner. For FY 2017, we are proposing to apply the 3-year transition adjustments in a budget neutral manner. We are proposing to make an adjustment to the standardized amount to ensure that the total payments, including the effect of the transition provisions, would equal what payments would have been if we would not be providing for any transitional wage indexes under the new OMB delineations. For a complete discussion on the proposed budget neutrality adjustment for FY 2017, we refer readers to section II.A.4.b. of the Addendum to this proposed rule.

    8. Proposed Application of the Proposed Rural, Imputed, and Frontier Floors

      1. Proposed Rural Floor

      Section 4410(a) of Public Law 105-33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the ``rural floor.'' Section 3141 of Public Law 111-148 also requires that a national budget neutrality adjustment be applied in implementing the rural floor. Based on the proposed FY 2017 wage index associated with this proposed rule (which is available via the Internet on the CMS Web site), we estimated that 371 hospitals would receive an increase in their FY 2017 proposed wage index due to the application of the rural floor.

      2. Proposed Imputed Floor for FY 2017

      In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the ``imputed floor'' policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that have argued that they are disadvantaged by the absence of rural hospitals to set a wage index floor for those States. Since its initial implementation, we have extended the imputed floor policy six times, the last of which was adopted in the FY 2016 IPPS/LTCH PPS final rule and is set to expire on September 30, 2016. (We refer readers to further discussions of the imputed floor in the FY 2014, FY 2015, and FY 2016 IPPS/LTCH PPS final rules (78 FR 50589 through 50590, 79 FR 49969 through 49970, and 80 FR 49497 through 49498, respectively) and to the regulations at 42 CFR 412.64(h)(4).) Currently, there are three all-urban States--Delaware, New Jersey, and Rhode Island--with a range of wage indexes assigned to hospitals in these States, including through reclassification or redesignation. (We refer readers to discussions of geographic reclassifications and redesignations in section III.J. of the preamble of this proposed rule.)

      In computing the imputed floor for an all-urban State under the original methodology, which was established beginning in FY 2005, we calculated the ratio of the lowest-to-highest CBSA wage index for each all-urban State as well as the average of the ratios of lowest-to-

      highest CBSA wage indexes of those all-urban States. We then compared the State's own ratio to the average ratio for all-urban States and whichever is higher is multiplied by the

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      highest CBSA wage index value in the State--the product of which established the imputed floor for the State. As of FY 2012, there were only two all-urban States--New Jersey and Rhode Island--and only New Jersey benefitted under this methodology. Under the previous OMB labor market area delineations, Rhode Island had only one CBSA (Providence-

      New Bedford-Fall River, RI-MA) and New Jersey had 10 CBSAs. Therefore, under the original methodology, Rhode Island's own ratio equaled 1.0, and its imputed floor was equal to its original CBSA wage index value. However, because the average ratio of New Jersey and Rhode Island was higher than New Jersey's own ratio, this methodology provided a benefit for New Jersey, but not for Rhode Island.

      In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 53369), we retained the imputed floor calculated under the original methodology as discussed above, and established an alternative methodology for computing the imputed floor wage index to address the concern that the original imputed floor methodology guaranteed a benefit for one all-urban State with multiple wage indexes (New Jersey) but could not benefit the other all-urban State (Rhode Island). The alternative methodology for calculating the imputed floor was established using data from the application of the rural floor policy for FY 2013. Under the alternative methodology, we first determined the average percentage difference between the post-reclassified, pre-floor area wage index and the post-reclassified, rural floor wage index (without rural floor budget neutrality applied) for all CBSAs receiving the rural floor. (Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which is available via the Internet on the CMS Web site) included the CBSAs receiving a State's rural floor wage index.) The lowest post-reclassified wage index assigned to a hospital in an all-

      urban State having a range of such values then is increased by this factor, the result of which establishes the State's alternative imputed floor. We amended Sec. 412.64(h)(4) of the regulations to add new paragraphs to incorporate the finalized alternative methodology, and to make reference and date changes. In summary, for the FY 2013 wage index, we did not make any changes to the original imputed floor methodology at Sec. 412.64(h)(4) and, therefore, made no changes to the New Jersey imputed floor computation for FY 2013. Instead, for FY 2013, we adopted a second, alternative methodology for use in cases where an all-urban State has a range of wage indexes assigned to its hospitals, but the State cannot benefit under the original methodology.

      In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 50590), we extended the imputed floor policy (both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2014, while we continued to explore potential wage index reforms.

      In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49969 through 49970), for FY 2015, we adopted a policy to extend the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015, as we continued to explore potential wage index reforms. In that final rule, we revised the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect the 1-year extension of the imputed floor.

      As discussed in section III.B. of the preamble of that FY 2015 final rule, we adopted the new OMB labor market area delineations beginning in FY 2015. Under the new OMB delineations, Delaware became an all-urban State, along with New Jersey and Rhode Island. Under the new OMB delineations, Delaware has three CBSAs, New Jersey has seven CBSAs, and Rhode Island continues to have only one CBSA (Providence-

      Warwick, RI-MA). We refer readers to a detailed discussion of our adoption of the new OMB labor market area delineations in section III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule. Therefore, under the adopted new OMB delineations discussed in section III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule, Delaware became an all-urban State and was subject to an imputed floor as well for FY 2015.

      In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49497 through 49498), for FY 2016, we extended the imputed floor policy (under both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2016. In that final rule, we revised the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect this additional 1-year extension.

      For FY 2017, we are proposing to extend the imputed floor policy (under both the original methodology and the alternative methodology) for 1 additional year, through September 30, 2017, while we continue to explore potential wage index reforms. We are proposing to revise the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect this proposed additional 1-year extension. We are inviting public comments on the proposed additional 1-year extension of the imputed floor through September 30, 2017. The wage index and impact tables associated with this FY 2017 IPPS/LTCH PPS proposed rule (which are available on the Internet via the CMS Web site) reflect the proposed continued application of the imputed floor policy at Sec. 412.64(h)(4) and a proposed national budget neutrality adjustment for the imputed floor for FY 2017. There are 20 providers in New Jersey that would receive an increase in their proposed FY 2017 wage index due to the proposed continued application of the imputed floor policy under the original methodology, and 10 hospitals in Rhode Island that would benefit under the alternative methodology. No providers in Delaware would benefit under the original methodology or the alternative methodology.

      3. Proposed State Frontier Floor for FY 2017

      Section 10324 of Public Law 111-148 requires that hospitals in frontier States cannot be assigned a wage index of less than 1.0000 (we refer readers to regulations at 42 CFR 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 through 50161)). Fifty hospitals would receive the frontier floor value of 1.0000 for their FY 2017 wage index in this proposed rule. These hospitals are located in Montana, Nevada, North Dakota, South Dakota, and Wyoming.

      We are not proposing any changes to the frontier floor policy for FY 2017.

      The areas affected by the proposed rural, imputed, and frontier floor policies for the proposed FY 2017 wage index are identified in Table 2 associated with this proposed rule, which is available via the Internet on the CMS Web site.

      I. Proposed FY 2017 Wage Index Tables

      In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807 through 49808), we finalized a proposal to streamline and consolidate the wage index tables associated with the IPPS proposed and final rules for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the Internet on the CMS Web site. Effective beginning FY 2016, with the exception of Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). We refer readers to section VI. of the Addendum to this proposed rule for a discussion of

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      the proposed wage index tables for FY 2017.

    9. Proposed Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications

      1. General Policies and Effects of Reclassification and Redesignation

      Under section 1886(d)(10) of the Act, the Medicare Geographic Classification Review Board (MGCRB) considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (usually by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations that we are proposing for FY 2017, and the policies for the effects of hospitals' reclassifications and redesignations on the wage index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596). In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under 42 CFR 412.103. Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of 42 CFR 412.103.

      2. MGCRB Reclassification and Redesignation Issues for FY 2017

  253. FY 2017 Reclassification Requirements and Approvals

    Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280.

    At the time this proposed rule was constructed, the MGCRB had completed its review of FY 2017 reclassification requests. Based on such reviews, there are 299 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2017. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2017, hospitals reclassified beginning in FY 2015 or FY 2016 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications for the remainder of their 3-year period. There were 302 hospitals approved for wage index reclassifications in FY 2015 that will continue for FY 2017, and 266 hospitals approved for wage index reclassifications in FY 2016 that will continue for FY 2017. Of all the hospitals approved for reclassification for FY 2015, FY 2016, and FY 2017, based upon the review at the time of this proposed rule, 867 hospitals are in a reclassification status for FY 2017.

    Under the regulations at 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of a proposed rule. For information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations, and clarifications regarding reinstating reclassifications and ``fallback'' reclassifications, were included in the FY 2008 IPPS final rule (72 FR 47333).

    Changes to the wage index that result from withdrawals of requests for reclassification, terminations, wage index corrections, appeals, and the Administrator's review process for FY 2017 will be incorporated into the wage index values published in the FY 2017 IPPS/LTCH PPS final rule. These changes affect not only the wage index value for specific geographic areas, but also the wage index value that redesignated/

    reclassified hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated/reclassified hospitals. Further, the wage index value for the area from which the hospitals are redesignated/

    reclassified may be affected.

  254. Requirements for FY 2018 Applications and Proposed Revisions Regarding Paper Application Requirements

    Applications for FY 2018 reclassifications are due to the MGCRB by September 1, 2016 (the first working day of September 2016). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). Applications and other information about MGCRB reclassifications may be obtained, beginning in mid-July 2016, via the Internet on the CMS Web site at https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, or by calling the MGCRB at (410) 786-1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670.

    Under existing regulations at 42 CFR 412.256(a)(1), applications for reclassification must be mailed or delivered to the MGCRB, with a copy to CMS, and may not be submitted through the facsimile (FAX) process or by other electronic means. While existing regulations exclusively require paper applications, we believe this policy to be outdated and overly restrictive. Therefore, to promote ease of application for FY 2018 and subsequent years, we are proposing to revise this policy to require applications and supporting documentation to be submitted via the method prescribed in instructions by the MGCRB, with an electronic copy to CMS. Therefore, we are proposing to revise Sec. 412.256(a)(1) to specify that an application must be submitted to the MGCRB according to the method prescribed by the MGCRB, with an electronic copy of the application sent to CMS. We are specifying that CMS copies should be sent via email to wageindex@cms.hhs.gov. We are inviting public comments on this proposal.

  255. Other Policy Regarding Reclassifications for Terminated Hospitals

    Under longstanding CMS policy, if a hospital that has an approved reclassification by the MGCRB terminates its CMS certification number (CCN), we terminate the reclassification status for that hospital when calculating the wage index, because the CCN is no longer active, and because the MGCRB makes its reclassification decisions based on CCNs. We believe this policy results in more accurate reclassifications when compiling CBSA labor market wage data, as it is often the case that

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    hospitals that have terminated their CCNs have also terminated operations, and can no longer make timely and informed decisions regarding reclassification statuses, which could have ramifications for various wage index floors and labor market values.

    However, as discussed in response to a comment in the FY 2016 IPPS/

    LTCH PPS final rule (80 FR 49499 through 49500), in the case of a merger or acquisition where the acquiring hospital accepted the Medicare provider agreement of the acquired hospital located in a different market area that has an existing MGCRB reclassification, we do believe that the acquiring hospital should be able to make determinations regarding the reclassification status of the subordinate campus. While the original CCN for the acquired hospital would be considered terminated or ``tied out'' by CMS, in the specific situations where a hospital merges with or acquires another hospital located in a different labor market area to create a ``multicampus'' hospital and accepts the Medicare provider agreement of the acquired hospital, the reclassification status of the subordinate campus remains in effect. The acquired campus (that is, the hospital whose CCN is no longer active) may continue to receive its previously approved reclassification status, and the acquiring hospital is authorized to make timely requests to terminate, withdraw, or reinstate any reclassification for the subordinate campus for any remaining years of the reclassification. We believe this policy is consistent with existing regulations regarding reclassification status of ``multicampus'' hospitals at Sec. 412.230(d)(2)(v). Hospitals should take care to review their status on Table 2 associated with this proposed rule (which is available via the Internet on the CMS Web site) and notify CMS if they believe a reclassification for a hospital was mistakenly terminated by CMS.

    3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act

    Section 1886(d)(8)(B)(i) of the Act requires the Secretary to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the urban MSA to which the greatest number of workers in the county commute if certain adjacency and commuting criteria are met. The criteria utilize standards for designating MSAs published in the Federal Register by the Director of the Office of Management and Budget (OMB) based on the most recently available decennial population data. Effective beginning FY 2015, we use the OMB delineations based on the 2010 Decennial Census data to identify counties in which hospitals qualify under section 1886(d)(8)(B) of the Act to receive the wage index of the urban area. Hospitals located in these counties are referred to as ``Lugar'' hospitals and the counties themselves are often referred to as ``Lugar'' counties. The chart for this FY 2017 proposed rule with the listing of the rural counties containing the hospitals designated as urban under section 1886(d)(8)(B) of the Act is available via the Internet on the CMS Web site.

    In an interim final rule with comment period (IFC) (CMS-1664-IFC) that appeared elsewhere in this issue of the Federal Register, CMS made regulatory changes in order to implement the decisions in Geisinger Community Medical Center v. Secretary, United States Department of Health and Human Services, 794 F.3d 383 (3d Cir. 2015) and Lawrence + Memorial Hospital v. Burwell, No. 15-164, 2016 WL 423702 (2d Cir. Feb. 4, 2015) in a nationally consistent manner. Specifically, the IFC revises the regulations at Sec. 412.230(a)(5)(ii) and removes the regulatory provision at Sec. 412.230(a)(5)(iii) to allow hospitals nationwide to reclassify based on their acquired rural status, effective with reclassifications beginning with FY 2018. The IFC also gives hospitals with an existing MGCRB reclassification the opportunity to seek rural reclassification for IPPS payment and other purposes under Sec. 412.103 and keep their existing MGCRB reclassification.

    As a consequence of the regulatory changes in the IFC that allow a hospital to have more than one reclassification simultaneously, we are clarifying in this proposed rule that a hospital with Lugar status may simultaneously receive an urban to rural reclassification under Sec. 412.103. The IFC provides that when there is both a Sec. 412.103 reclassification and an MGCRB reclassification, the MGCRB reclassification controls for wage index calculation and payment purposes (the IFC can be downloaded from the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/IPPS-Regulations-and-Notices.html). Similarly, in this proposed rule, we are clarifying that we are treating the wage data of hospitals with simultaneous Lugar status and Sec. 412.103 reclassification as Lugar for wage index calculation and wage index payment purposes. We believe it is appropriate to apply a similar policy for simultaneous MGCRB reclassification and Sec. 412.103 reclassifications, and simultaneous Lugar and Sec. 412.103 reclassifications, because CMS treats Lugar status as a reclassification for purposes of calculating the wage index in accordance with section 1886(d)(8)(C)(iii) of the Act. (Section 1886(d)(8)(C)(iii) of the Act states that the application of section 1886(d)(8)(B) of the Act or a decision of the MGCRB or the Secretary under section 1886(d)(10) of the Act may not result in the reduction of any county's wage index to a level below the wage index for rural areas in the State in which the county is located.) The wage index associated with the Lugar status, and not the wage index associated with the Sec. 412.103 reclassification, is reflected accordingly in Table 2 associated with this proposed rule (which is available via the Internet on the CMS Web site). We note that, for payment purposes other than the wage index, a hospital with simultaneous Sec. 412.103 status and Lugar reclassification receives payment as a rural hospital.

    4. Waiving Lugar Redesignation for the Out-Migration Adjustment

    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status in order to receive the out-

    migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the DSH payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. (We refer readers to a discussion of DSH payment adjustment under section IV.F. of the preamble of this proposed rule.)

    In addition, we adopted a minor procedural change in that rule that allows a Lugar hospital that qualifies for and accepts the out-

    migration adjustment (through written notification to CMS within 45 days from the publication of the proposed rule) to waive its urban status for the full 3-year period for which its out-migration adjustment is effective. By doing so, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the out-migration adjustment. Therefore, under the procedural change, a Lugar hospital that requests to waive its urban status in order to receive the rural wage index in addition to the out-migration adjustment would be deemed to have accepted the out-migration adjustment and agrees to be treated as rural for the duration of its 3-year eligibility period, unless, prior to its second or third year

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    of eligibility, the hospital explicitly notifies CMS in writing, within the required period (generally 45 days from the publication of the proposed rule), that it instead elects to return to its deemed urban status and no longer wishes to accept the out-migration adjustment. If the hospital does notify CMS that it is electing to return to its deemed urban status, it would again be treated as urban for all IPPS payment purposes.

    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600) for a detailed discussion of the policy and process for waiving Lugar status for the out-migration adjustment.

    1. Proposed Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees for FY 2017

      In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the ``out-

      migration'' adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index.

      Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. When the provision of section 1886(d)(13) of the Act was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau that were derived from a special tabulation of the 2000 Census journey-to-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the ``long-form'' survey, which the Census Bureau used at the time and which contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was ``short form'' only; information on where residents in each county worked was not collected as part of the 2010 Census. The Census Bureau worked with CMS to provide an alternative dataset based on the latest available data on where residents in each county worked in 2010, for use in developing a new out-migration adjustment based on new commuting patterns developed from the 2010 Census data beginning with FY 2016.

      To determine the out-migration adjustments and applicable counties for FY 2016, we analyzed commuting data compiled by the Census Bureau that were derived from a custom tabulation of the American Community Survey (ACS), an official Census Bureau survey, utilizing 2008 through 2012 (5-Year) Microdata. The data were compiled from responses to the ACS questions regarding the county where workers reside and the county to which workers commute. As we discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49501), the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment were applicable for FY 2016, and we are proposing to use them again for FY 2017. We have applied the same policies, procedures, and computations since FY 2012, and we believe they continue to be appropriate for FY 2017. We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49500 through 49502) for a full explanation of the revised data source.

      For FY 2017, until such time that CMS finalizes out-migration adjustments based on the next Census, the out-migration adjustment continues to be based on the data derived from the custom tabulation of the ACS utilizing 2008 through 2012 (5-Year) Microdata. For FY 2017, we are not proposing any changes to the methodology or data source that we used for FY 2016. (We refer readers to a full discussion of the out-

      migration adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) Table 2 associated with this proposed rule (which is available via the Internet on the CMS Web site) includes the proposed out-migration adjustments for the FY 2017 wage index.

      L. Notification Regarding Proposed CMS ``Lock-In'' Date for Urban to Rural Reclassifications Under Sec. 412.103

      Under section 1886(d)(8)(E) of the Act, a qualifying prospective payment hospital located in an urban area may apply for rural status for payment purposes separate from reclassification through the MGCRB. Specifically, section 1886(d)(8)(E) of the Act provides that, not later than 60 days after the receipt of an application (in a form and manner determined by the Secretary) from a subsection (d) hospital that satisfies certain criteria, the Secretary shall treat the hospital as being located in the rural area (as defined in paragraph (2)(D)) of the State in which the hospital is located. We refer readers to the regulations at 42 CFR 412.103 for the general criteria and application requirements for a subsection (d) hospital to reclassify from urban to rural status in accordance with section 1886(d)(8)(E) of the Act. The FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes our policies regarding the effect of wage data from reclassified or redesignated hospitals.

      Hospitals must meet the criteria to be reclassified from urban to rural status under Sec. 412.103, as well as fulfill the requirements for the application process. However, under existing Sec. 412.103(b), there is no timeframe requirement as to when hospitals must apply for the urban to rural reclassification. Therefore, a hospital can apply for the urban to rural reclassification at any time, and under Sec. 412.103(d), the effective date of the hospital's rural status, once approved, is the filing date of the application.

      There may be one or more reasons that a hospital applies for the urban to rural reclassification, and the timeframe that a hospital submits an application is often dependent on those reason(s). Because there are no timeframes for when a hospital must submit its application under Sec. 412.103, it is the hospital's prerogative as to when it files the application with the CMS Regional Office. Because the wage index is part of the methodology for determining the prospective payments to hospitals for each fiscal year, we believe there should be a definitive timeframe within which a hospital should apply for rural status in order for the reclassification to be reflected in the next Federal fiscal year's wage data used for setting payment rates. As hospitals are aware, the IPPS ratesetting process that CMS undergoes each proposed and final rulemaking is complex and labor-intensive, and subject to a compressed timeframe in order to issue the final rule each year within the timeframes for publication. Accordingly, CMS must ensure that it receives, in a timely fashion, the necessary data, including, but not limited to, the list of hospitals that are reclassified from urban to rural status under Sec. 412.103, in order to calculate the wage indexes and other IPPS rates.

      Therefore, in this proposed rule, we are proposing a date by when we would ``lock in'' the list of hospitals that are reclassified from urban to rural status under Sec. 412.103 in order to include them in the upcoming Federal fiscal year's wage index calculation provided for at Sec. 412.64(h) and budget neutrality calculations provided for at

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      Sec. Sec. 412.64(e)(1)(ii), (e)(2), and (e)(4) that are part of the ratesetting process). The ratesetting process is described in the Addendum of the annual proposed and final rules and includes the budget neutrality adjustments in accordance with the regulations at Sec. Sec. 412.64(e)(1)(ii), (e)(2), and (e)(4), as well as adjustments for differences in area wage levels provided for at Sec. 412.64(h). We believe that this proposal would introduce additional transparency and predictability regarding the timing of accounting for urban or rural status in the IPPS ratesetting each Federal fiscal year. We are proposing that this date for ``locking in'' the list of hospitals with rural status achieved under Sec. 412.103 would be the second Monday in June of each year. Therefore, if a hospital is applying for an urban to rural reclassification under Sec. 412.103 for the purpose and expectation that its rural status be reflected in the wage index and budget neutrality calculations for setting payment rates for the next Federal fiscal year, the hospital would need to file its application with the CMS Regional Office not later than 70 days prior to the second Monday in June. Because, under 412.103(c), the CMS Regional Office must notify the hospital of its approval or disapproval of the application within 60 days of the hospital's filing date (the date it is received by the CMS Regional Office, in accordance with Sec. 412.103(b)(5)), we would expect that the extra 10 days would provide the CMS Regional Office with sufficient processing and administrative time to notify the CMS Central Office of the reclassification status of the applications by the second Monday in June of each year. This is the latest date that CMS would need the information in order to ensure that reclassified hospitals would be included as such in the wage index and budget neutrality calculations for setting payment rates for the next Federal fiscal year. This does not preclude a hospital from applying for reclassification under Sec. 412.103 earlier or later than the proposed deadline. Nor does the proposed deadline change the fact that the rural reclassification is effective as of its filing date, in accordance with Sec. 412.103(d). However, in order to ensure that a reclassification is reflected in the wage index and budget neutrality calculations for setting payment rates for the next Federal fiscal year, applications must be received by the CMS Regional Office (the filing date) by no later than 70 days prior to the second Monday in June of each year. If the CMS Central Office is informed of a reclassification status after the second Monday in June, for wage index and budget neutrality purposes, the reclassification would not be reflected in the payment rates until the following Federal fiscal year; that is, the Federal fiscal year following the next Federal fiscal year. We are proposing to revise Sec. 412.103(b) by adding a new paragraph (6) to incorporate this proposed policy. Proposed Sec. 412.103(b)(6) would specify that in order for a hospital to be treated as rural in the wage index and budget neutrality calculations under Sec. Sec. 412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the next Federal fiscal year, the hospital's filing date must be no later than 70 days prior to the second Monday in June of the current Federal fiscal year and the application must be approved by the CMS Regional Office in accordance with the requirements of Sec. 412.103.

    2. Process for Requests for Wage Index Data Corrections

      The preliminary, unaudited Worksheet S-3 wage data files for the proposed FY 2017 wage index were made available on May 15, 2015, and the preliminary CY 2013 occupational mix data files on May 15, 2015, through the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html.

      On January 29, 2016, we posted a public use file (PUF) at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html containing FY 2017 wage index data available as of January 28, 2016. This PUF contains a tab with the Worksheet S-3 wage data (which includes Worksheet S-3, Parts II and III wage data from cost reporting periods beginning on or after October l, 2012 through September 30, 2013; that is, FY 2013 wage data), a tab with the occupational mix data (which includes data from the CY 2013 occupational mix survey, Form CMS-10079), and new for FY 2017, a tab containing the Worksheet S-3 wage data of hospitals deleted from the January 29, 2016 wage data PUF and a tab containing the CY 2013 occupational mix data (if any) of the hospitals deleted from the January 29, 2016 wage data PUF. In a memorandum dated January 21, 2016, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the January 29, 2016 wage index data PUFs, and the process and timeframe for requesting revisions in accordance with the FY 2017 Wage Index Timetable.

      In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional PUF on our Web site that reflects the actual data that are used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule. We notify the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door Forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and about the dates of the Hospital Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.

      In a memorandum dated April 30, 2015, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed later in this section). We also instructed the MACs to advise hospitals that these data were also made available directly through their representative hospital organizations.

      If a hospital wished to request a change to its data as shown in May 15, 2015 wage data files and May 15, 2015 occupational mix data files, the hospital was to submit corrections along with complete, detailed supporting documentation to its MAC by September 2, 2015. Hospitals were notified of this deadline and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the Internet, through the letters sent to them by their MACs.

      November 4, 2015 was the date by when MACs notified State hospital associations regarding hospitals that failed to respond to issues raised during the desk reviews. The MACs notified the hospitals by mid-

      January 2016 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals' revision requests. The MACs also submitted the revised data to CMS by January 22, 2016. CMS published the proposed wage index PUFs that included hospitals' revised wage index data on January 29, 2016. Hospitals had until February 16, 2016, to submit requests to the MACs for reconsideration of adjustments made by the MACs as a result of the desk review, and to correct errors due to CMS' or the MAC's mishandling of the wage index data. Hospitals also were required to submit

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      sufficient documentation to support their requests.

      After reviewing requested changes submitted by hospitals, MACs were required to transmit to CMS any additional revisions resulting from the hospitals' reconsideration requests by March 24, 2016. The deadline for a hospital to request CMS intervention in cases where a hospital disagreed with a MAC's policy interpretation was April 5, 2016. We note that, as we did for the FY 2016 wage index, for the FY 2017 wage index, in accordance with the FY 2017 wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html, the April appeals have to be sent via mail and email. We refer readers to the wage index timeline for complete details.

      Hospitals are given the opportunity to examine Table 2, which is listed in section VI. of the Addendum to this proposed rule and available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html. Table 2 contains each hospital's proposed adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2013 data used to construct the proposed FY 2017 wage index. We note that the proposed hospital average hourly wages shown in Table 2 only reflect changes made to a hospital's data that were transmitted to CMS by late February 2016.

      We plan to post the final wage index data PUFs in late April 2016 on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html. The April 2016 PUFs are made available solely for the limited purpose of identifying any potential errors made by CMS or the MAC in the entry of the final wage index data that resulted from the correction process previously described (revisions submitted to CMS by the MACs by March 24, 2016).

      After the release of the April 2016 wage index data PUFs, changes to the wage and occupational mix data can only be made in those very limited situations involving an error by the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the MAC nor CMS will approve the following types of requests:

      Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by the MACs on or before March 24, 2016.

      Requests for correction of errors that were not, but could have been, identified during the hospital's review of the January 29, 2016 wage index PUFs.

      Requests to revisit factual determinations or policy interpretations made by the MAC or CMS during the wage index data correction process.

      If, after reviewing the April 2016 final wage index data PUFs, a hospital believes that its wage or occupational mix data were incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital is given the opportunity to notify both its MAC and CMS regarding why the hospital believes an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital is required to send its request to CMS and to the MAC no later than May 23, 2016. Similar to the April appeals, beginning with the FY 2015 wage index, in accordance with the FY 2017 wage index timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home.html, the May appeals must be sent via mail and email to CMS and the MACs. We refer readers to the wage index timeline for complete details.

      Verified corrections to the wage index data received timely by CMS and the MACs (that is, by May 23, 2016) will be incorporated into the final FY 2017 wage index, which will be effective October 1, 2016.

      We created the processes previously described to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2017 payment rates. Accordingly, hospitals that do not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the MAC's decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the PRRB, the failure of CMS to make a requested data revision. We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the parameters for appeals to the PRRB for wage index data corrections.

      Again, we believe the wage index data correction process described earlier provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC's attention. Moreover, because hospitals have access to the final wage index data PUFs by late April 2016, they have the opportunity to detect any data entry or tabulation errors made by the MAC or CMS before the development and publication of the final FY 2017 wage index by August 2016, and the implementation of the FY 2017 wage index on October 1, 2016. Given these processes, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after May 23, 2016, we retain the right to make midyear changes to the wage index under very limited circumstances.

      Specifically, in accordance with 42 CFR 412.64(k)(1) of our regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) The MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, ``before the beginning of the fiscal year'' means by the May deadline for making corrections to the wage data for the following fiscal year's wage index (for example, May 23, 2016 for the FY 2017 wage index). This provision is not available to a hospital seeking to revise another hospital's data that may be affecting the requesting hospital's wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made.

      In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) The MAC or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about

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      the error and requested that the MAC and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the May 23, 2016 deadline for the FY 2017 wage index); and (3) CMS agreed before October 1 that the MAC or CMS made an error in tabulating the hospital's wage index data and the wage index should be corrected.

      In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the May 23, 2016 deadline for the FY 2017 wage index), and CMS acknowledges that the error in the hospital's wage index data was caused by CMS' or the MAC's mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital's data. In addition, the provision cannot be used to correct prior years' wage index data; and it can only be used for the current Federal fiscal year. In situations where our policies would allow midyear corrections other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index.

      We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital's payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital's wage index data revision request.

    3. Proposed Labor Market Share for the Proposed FY 2017 Wage Index

      Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wage-related costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related and to adjust the proportion (as estimated by the Secretary from time to time) of hospitals' costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index.

      Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this would result in lower payments to a hospital than would otherwise be made. However, this provision of Public Law 108-173 did not change the legal requirement that the Secretary estimate from time to time the proportion of hospitals' costs that are attributable to wages and wage-related costs. Thus, hospitals receive payment based on either a 62-percent labor-related share, or the labor-related share estimated from time to time by the Secretary, depending on which labor-related share resulted in a higher payment.

      In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 50607), we rebased and revised the hospital market basket. We established a FY 2010-based IPPS hospital market basket to replace the FY 2006-based IPPS hospital market basket, effective October 1, 2013. In that final rule, we presented our analysis and conclusions regarding the frequency and methodology for updating the labor-related share for FY 2014. Using the FY 2010-based IPPS market basket, we finalized a labor-related share for FY 2014, FY 2015, and FY 2016 of 69.6 percent. In addition, in FY 2014, we implemented this revised and rebased labor-

      related share in a budget neutral manner (78 FR 51016). However, consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0000 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0000.

      The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. In this proposed rule, for FY 2017, we are not proposing to make any further changes to the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and facilities support services, and all other labor-related services. Therefore, for FY 2017, we are proposing to continue to use a labor-related share of 69.6 percent for discharges occurring on or after October 1, 2016.

      As discussed in section IV.A of the preamble of this proposed rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we applied the Puerto Rico-specific labor-related share percentage and nonlabor-

      related share percentage to the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need for us to calculate a Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage for application to the Puerto Rico-specific standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national labor-

      related share and nonlabor-related share percentages that are applied to the national standardized amount. Accordingly, for FY 2017, we are not proposing a Puerto Rico-specific labor-related share percentage or a nonlabor-related share percentage.

      Tables 1A and 1B, which are published in section VI. of the Addendum to this FY 2017 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site, reflect the proposed national labor-

      related share, which is also applicable to Puerto Rico hospitals. For FY 2017, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.000, for FY 2017, we are proposing to apply the wage index to a proposed labor-related share of 69.6 percent of the national standardized amount.

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    4. Solicitation of Comments on Treatment of Overhead and Home Office Costs in the Wage Index Calculation

      Section III.D. of the preamble of this proposed rule states that the method used to compute the proposed FY 2017 wage index without an occupational mix adjustment follows the same methodology that we used to compute the FY 2012, FY 2013, FY 2014, FY 2015, and FY 2016 final wage indexes without an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366 through 53367, 78 FR 50587 through 50588, 79 FR 49967, and 80 FR 49491 through 49492, respectively).

      As discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592), in ``Step 4'' of the calculation of the unadjusted wage index, for each hospital reporting both total overhead salaries and total overhead hours greater than zero, we allocate overhead costs to areas of the hospital excluded from the wage index calculation. We also compute the amounts of overhead wage-related costs to be allocated to excluded areas. Finally, we subtract the computed overhead salaries, overhead wage-related costs, and hours associated with excluded areas from the total salaries (plus allowable wage-related costs) and hours derived in ``Steps 2 and 3'' of the calculation of the unadjusted wage index. (We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51592) for a description of the calculation of the unadjusted wage index.) We first began to remove from the wage index the overhead salaries and hours allocated to excluded areas beginning with the FY 1999 wage index calculation (63 FR 40971 and 40972). Beginning with the FY 2002 wage index calculation, we estimated and removed overhead wage-related costs allocated to excluded areas in addition to removing overhead salaries and hours allocated to excluded areas (66 FR 39863 and 39864). We began to estimate and remove overhead wage-related costs associated with excluded areas because we realized that without doing so, the formula resulted in large and inappropriate increases in the average hourly wages of some hospitals, particularly hospitals with large overhead and excluded area costs. These findings led us to believe that not all hospitals were fully or consistently allocating their overhead salaries among the lines on Worksheet S-3, Part II, of the hospital cost report for allowable wage-related costs (Worksheet S-3, Part II, lines 13 and 14 on CMS Form 2552-96, and lines 17 and 18 on CMS Form 2552-10), and nonallowable wage-related costs associated with excluded areas (Worksheet S-3, Part II, line 15 on CMS Form 2552-96 and line 19 on CMS Form 2552-10). Therefore, we determined that it was necessary to estimate and remove overhead wage-related costs allocated to excluded areas, and we have been doing so in ``Step 4'' of the unadjusted wage index calculation since FY 2002.

      With the implementation of CMS Form 2552-10, Worksheet S-3, Part IV was added to the cost report on which hospitals are required to itemize their wage-related costs (formerly reported on Exhibit 6 of CMS Form-

      339). The total amount of wage-related costs reported on Worksheet S-3, Part II, lines 17 through 25 (CMS Form 2552-10) must correspond to the total core wage-related costs on Worksheet S-3, Part IV, line 24. (We refer readers to the instructions for line 17 of Worksheet S-3, Part II, which state: ``Enter the core wage-related costs from Worksheet S-

      3, Part IV, line 24.'') Hospitals report wage-related costs associated with excluded areas of the hospital on Worksheet S-3, Part II, line 19. We understand that hospitals use an allocation methodology to allocate total wage-related costs to each of lines Worksheet S-3, Part II, lines 17 through 25 respectively, typically based on the ratio of individual line costs to total wage-related costs on lines 17 through 25. Alternatively, we understand that hospitals use the ratio of full-time equivalent (FTE) hours of an individual line to total FTE hours for those lines 17 through 25. Because the wage-related costs of employees who work in overhead areas of the hospital are included in the wage-

      related costs of the hospital reported on Worksheet S-3, Part IV, and in turn, on Worksheet S-3, Part II, it is possible to conclude that hospitals' own allocation methodologies are properly allocating an accurate amount of wage-related costs for both direct cost centers and overhead areas to line 19 for the excluded areas. Accordingly, the question has been raised whether it continues to be necessary for CMS to estimate and remove the overhead wage-related costs associated with excluded areas from the unadjusted wage index calculation.

      We have tested the effect on the average hourly wages of hospitals if we would not estimate and remove the overhead wage-related costs associated with excluded areas from the unadjusted wage index calculation. The results show that the problem manifested in the formula prior to FY 2002 continues to be a concern; that is, while the average hourly wages of all hospitals with excluded areas are impacted, hospitals that have particularly large excluded areas experience large and inappropriate increases to their average hourly wages. For example, one hospital with an excluded area percentage of 95 percent that has an average hourly wage of approximately $32 under our current methodology would have an average hourly wage of $128 under the formula in effect prior to FY 2002 (that is, without removal of overhead wage-related costs). Accordingly, we believe that, at this point, there is a need for CMS to continue to estimate and remove the overhead wage-related costs associated with excluded areas from the unadjusted wage index calculation. However, in an effort to improve consistency in hospital cost reporting practices and to improve the accuracy of the wage index, we are considering the possibility of future rulemaking or cost reporting changes, or a combination of both, where hospitals would apply a single allocation methodology between Worksheet S-3, Part IV and Worksheet S-3, Part II, lines 17 through 25. For example, one possibility is the modification and expansion of Worksheet S-3, Part IV to add columns that would correspond to each line 17 through 25 of Worksheet S-3, Part II. In addition, Worksheet S-3, Part IV could employ one or two standard statistical allocation methods, facilitating a direct flow of the allocated amounts to each line 17 through 25 of Worksheet S-3, Part II. We are soliciting comments from stakeholders to gain a better understanding of the nature of hospitals' reporting of wage-related costs on Worksheet S-3, Part IV, statistical allocation methods that hospitals typically use to allocate their wage-related costs, the treatment of direct versus overhead employee wage-related costs, and suggestions for possible modifications to Worksheet S-3, Parts II and IV respectively, which would preempt the need for CMS to estimate and remove overhead wage-related costs associated with excluded areas from the unadjusted wage index.

      Another issue about which we are concerned and would like to solicit public comments relates to inconsistent reporting of home office salaries and wage-related costs. Worksheet S-2, Part I, line 140, requires hospitals to complete Worksheet A-8-1 if they have any related organization or home office costs claimed as defined in the Provider Reimbursement Manual, CMS Pub. 15-1, Chapter 10, Section 1002, and 42 CFR 413.17. Then, line 14 of Worksheet S-3, Part II instructs hospitals to enter the salaries and wage-related costs paid to

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      personnel who are affiliated with a home office and/or related organization, who provide services to the hospital, and whose salaries are not included on Worksheet A, Column 1. Because home office salaries and wage-related costs are not included on Worksheet A, Column 1, we are concerned that hospitals are not including home office costs on Worksheet A, Column 2 or Column 6 in the appropriate cost centers on lines 4 through 17, adjusted from Worksheet A-8 or Worksheet A-8-1.\20\ Another concern is a hospital's inadvertent inclusion on line 14 of the home office salaries or wage-related costs associated with excluded areas on Worksheet S-3, Part II, lines 9 or 10. In addition, we are concerned about the amalgam of personnel costs that hospitals report on line 14, particularly when another more precise line exists for those personnel costs to be reported. For example, if cafeteria services are provided through the home office, those wages and hours should not be reported on line 14, but instead should be reported on the more specific cost center for Cafeteria, Worksheet S-3, Part II, line 36 (corresponding to Cafeteria on Worksheet A, line 11 \21\). We note that, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967), we reiterated our requirement that all hospitals must document salaries, wages, and hours for the purpose of reporting this information on Worksheet S-3, Part II, lines 32, 33, 34, and/or 35 (for either directly employed housekeeping and dietary employees on lines 32 and 34, and contract labor on lines 33 and 35). We have learned of instances where housekeeping or dietary services are provided through the home office, and the hospital reported those wages and hours on line 14. This is inconsistent with other hospitals' reporting of housekeeping and dietary services on lines 32 through 35. As stated in the FY 2015 IPPS/LTCH PPS final rule, we have instructed the MACs to impute housekeeping or dietary wages and hours when hospitals have not properly completed those lines 32 through 35. Hospitals whose housekeeping or dietary services (either direct or under contract) are provided through their home office are not exempt from this requirement to report wages and hours on the specific cost centers for housekeeping and dietary. Hospitals should also take care to report housekeeping and dietary services in the appropriate cost centers on Worksheet A, lines 9 and 10 respectively. Because the nature of services provided by home office personnel are for general management or administrative services related to the provision of patient care (CMS Pub. 15-1, Chapter 21, Section 2150), and may be provided to multiple areas of the hospital, we are considering ending reporting of home office costs on line 14 of Worksheet S-3, Part II, and instead we may require reporting of home office costs as part of the overhead lines, possibly by adding lines or columns, or subscripting existing line 27 (Administrative & General), and line 28 (Administrative & General for contract labor). We are soliciting public comments to gain a better understanding of hospitals' reporting of home office salaries and wage-related costs for possible future revisions to the cost report instructions and lines.

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      \20\ CMS Pub. 15-2, Chapter 40, Section 4013, Worksheet A instructions for column 6: ``Enter on the appropriate lines in column 6 the amounts of any adjustments to expenses indicated on Worksheet A-8, column 2,'' and the note for line 12 of Worksheet A-

      8, section 4016: ``Worksheet A-8-1 represents the detail of the various cost centers on Worksheet A which must be adjusted.''

      \21\ CMS Pub. 15-2, Chapter 40, Section 4013, Worksheet A instructions under Line Descriptions: ``The trial balance of expenses is broken down into general service, inpatient routine service, ancillary service, outpatient service, other reimbursable, special purpose, and nonreimbursable cost center categories to facilitate the transfer of costs to the various worksheets. The line numbers on Worksheet A are used on subsequent worksheets. * * *'' (emphasis added).

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      IV. Other Decisions and Changes to the IPPS for Operating Costs and Direct Graduate Medical Education (GME) and Indirect Medical Education (IME) Costs

    5. Changes to Operating Payments for Subsection (d) Puerto Rico Hospitals as a Result of Section 601 of Public Law 114-113

      Prior to January 1, 2016, Puerto Rico hospitals were paid with respect to operating costs of inpatient hospital services for inpatient hospital discharges based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-

      113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. As a result of the amendment made by section 601 of Public Law 114-113, on February 4, 2016, we issued Change Request 9523 which updated the payment rates for subsection (d) Puerto Rico hospitals for discharges occurring on or after January 1, 2016. Change Request 9523 can be downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2016-Transmittals-Items/R3449CP.html.

      For operating costs for inpatient hospital discharges occurring in FY 2017 and subsequent fiscal years, consistent with the provisions of section 1886(d)(9)(E) of the Act as amended by section 601 of Public Law 114-113, subsection (d) Puerto Rico hospitals will continue to be paid based on 100 percent of the national standardized amount.

      In this proposed rule, we are proposing to make conforming changes to the regulations at 42 CFR 412.204 to reflect the current law that is effective for discharges occurring on or after January 1, 2016. Specifically, we are proposing to add a new paragraph (e) to Sec. 412.204 to reflect that, beginning January 1, 2016, subsection (d) Puerto Rico hospitals are paid based on 100 percent of the national standardized amount. We also are proposing to revise paragraph (d) of Sec. 412.204 to specify that subsection (d) Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount for discharges occurring through December 31, 2015.

    6. Proposed Changes in the Inpatient Hospital Update for FY 2017 (Sec. 412.64(d))

      1. Proposed FY 2017 Inpatient Hospital Update

      In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient hospital operating costs by a factor called the ``applicable percentage increase.'' For FY 2017, we are setting the applicable percentage increase by applying the adjustments listed in this section in the same sequence as we did for FY 2016. Specifically, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. The applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to--

      (a) A reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under

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      rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act;

      (b) A reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act;

      (c) An adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment); and

      (d) An additional reduction of 0.75 percentage point as required by section 1886(b)(3)(B)(xii) of the Act.

      Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2017 adjustment of 0.75 percentage point may result in the applicable percentage increase being less than zero.

      We note that, in compliance with section 404 of the MMA, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 50607), we replaced the FY 2006-based IPPS operating and capital market baskets with the revised and rebased FY 2010-based IPPS operating and capital market baskets for FY 2014. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49993 through 49996) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 49508 through 49511), we continued to use the FY 2010-based IPPS operating and capital market baskets for FY 2015 and FY 2016 and the labor-related share of 69.6 percent, which was based on the FY 2010-

      based IPPS market basket. For FY 2017, we are proposing to continue using the FY 2010-based IPPS operating and capital market baskets and the proposed labor-related share of 69.6 percent, which is based on the FY 2010-based IPPS market basket.

      Based on the most recent data available for this FY 2017 proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we are proposing to base the proposed FY 2017 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Insight, Inc.'s (IGI's) first quarter 2016 forecast of the FY 2010-

      based IPPS market basket rate-of-increase with historical data through fourth quarter 2015, which is estimated to be 2.8 percent. We are proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket and the MFP adjustment), we would use such data, if appropriate, to determine the FY 2017 market basket update and the MFP adjustment in the final rule.

      For FY 2017, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four possible applicable percentage increases that can be applied to the standardized amount as specified in the table that appears later in this section.

      In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. As we explained in that rule, section 1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines this productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business MFP (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). The Bureau of Labor Statistics (BLS) publishes the official measure of private nonfarm business MFP. We refer readers to the BLS Web site at http://www.bls.gov/mfp for the BLS historical published MFP data.

      MFP is derived by subtracting the contribution of labor and capital input growth from output growth. The projections of the components of MFP are currently produced by IGI, a nationally recognized economic forecasting firm with which CMS contracts to forecast the components of the market baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking cycle, the MFP adjustment is calculated using the revised series developed by IGI to proxy the aggregate capital inputs. Specifically, in order to generate a forecast of MFP, IGI forecasts BLS aggregate capital inputs using a regression model. A complete description of the MFP projection methodology is available on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. As discussed in the FY 2016 IPPS/LTCH PPS final rule, if IGI makes changes to the MFP methodology, we will announce them on our Web site rather than in the annual rulemaking.

      For FY 2017, we are proposing an MFP adjustment of 0.5 percentage point. Similar to the market basket update, for the proposed rule, we used the most recent data available to compute the MFP adjustment. As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2017 market basket update and MFP adjustment for the final rule.

      Based on the most recent data available for this proposed rule, as described previously, we have determined four proposed applicable percentage increases to the standardized amount for FY 2017, as specified in the following table:

      Proposed FY 2017 Applicable Percentage Increases for the IPPS

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

      Hospital Hospital Hospital did Hospital did

      submitted submitted NOT submit NOT submit

      quality data quality data quality data quality data

      FY 2017 and is a and is NOT a and is a and is NOT a

      meaningful EHR meaningful EHR meaningful EHR meaningful EHR

      user user user user

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

      Proposed Market Basket 2.8 2.8 2.8 2.8

      RatedashofdashIncrease.....................

      Proposed Adjustment for Failure to Submit 0.0 0.0 -0.7 -0.7

      Quality Data under Section 1886(b)(3)(B)(viii)

      of the Act.....................................

      Proposed Adjustment for Failure to be a 0.0 -2.1 0.0 -2.1

      Meaningful EHR User under Section

      1886(b)(3)(B)(ix) of the Act...................

      Proposed MFP Adjustment under Section -0.5 -0.5 -0.5 -0.5

      1886(b)(3)(B)(xi) of the Act...................

      Statutory Adjustment under Section -0.75 -0.75 -0.75 -0.75

      1886(b)(3)(B)(xii) of the Act..................

      Page 25078

      Proposed Applicable Percentage Increase Applied 1.55 -0.55 0.85 -1.25

      to Standardized Amount.........................

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

      We are proposing to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law for the FY 2017 update. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we are proposing to add a new paragraph (vii) to Sec. 412.64(d)(1) to reflect the applicable percentage increase to the FY 2017 operating standardized amount as the percentage increase in the market basket index, subject to the reductions specified under Sec. 412.64(d)(2) for a hospital that does not submit quality data and Sec. 412.64(d)(3) for a hospital that is not a meaningful EHR user, less an MFP adjustment and less an additional reduction of 0.75 percentage point.

      Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs also is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. We note that section 205 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 16, 2015) extended the MDH program (which, under previous law, was to be in effect for discharges on or before March 31, 2015 only) for discharges occurring on or after April 1, 2015, through FY 2017 (that is, for discharges occurring on or before September 30, 2017).

      For FY 2017, we are proposing the following updates to the hospital-specific rates applicable to SCHs and MDHs: A proposed update of 1.55 percent for a hospital that submits quality data and is a meaningful EHR user; a proposed update of 0.85 percent for a hospital that fails to submit quality data and is a meaningful EHR user; a proposed update of -0.55 percent for a hospital that submits quality data and is not a meaningful EHR user; and a proposed update of -1.25 percent for a hospital that fails to submit quality data and is not a meaningful EHR user. As mentioned previously, for this FY 2017 proposed rule, we are using IGI's first quarter 2016 forecast of the FY 2010-

      based IPPS market basket update with historical data through fourth quarter 2015. Similarly, we are using IGI's first quarter 2016 forecast of the MFP adjustment. We are proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the update for SCHs and MDHs in the final rule.

      2. Proposed FY 2017 Puerto Rico Hospital Update

      As discussed in section IV.A. of the preamble of this proposed rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. Section 601 of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount under the amendments to section 1886(d)(9)(E) of the Act, there is no longer a need for us to propose an update to the Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the same update to the national standardized amount discussed under section IV.B.1. of the preamble of this proposed rule. Accordingly, for FY 2017, we are proposing an applicable percentage increase of 1.55 percent to the standardized amount for hospitals located in Puerto Rico.

      We note that section 1886(b)(3)(B)(viii) of the Act, which specifies the adjustment to the applicable percentage increase for ``subsection (d)'' hospitals that do not submit quality data under the rules established by the Secretary, is not applicable to hospitals located in Puerto Rico.

      In addition, section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016, and also to apply the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not meaningful EHR users, effective FY 2022. Accordingly, because the provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable to hospitals located in Puerto Rico until FY 2022, the adjustments under this provision are not applicable for FY 2017.

    7. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix Index and Discharge Criteria (Sec. 412.96)

      Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at Sec. 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as a rural referral center (RRC). RRCs receive some special treatment under both the DSH payment adjustment and the criteria for geographic reclassification.

      Section 402 of Public Law 108-173 raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs also are not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital's average hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area in which the hospital is located.

      Section 4202(b) of Public Law 105-33 states, in part, that any hospital classified as an RRC by the Secretary for FY 1991 shall be classified as such an RRC for FY 1998 and each subsequent fiscal year. In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), we reinstated RRC status for all hospitals that lost that status due to triennial review or MGCRB

      Page 25079

      reclassification. However, we did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (Sec. 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum case-mix index (CMI) and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register (53 FR 38513) for additional discussion.) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if--

      The hospital's CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and

      The hospital's number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.

      1. Case-Mix Index (CMI)

      Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year's annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at Sec. 412.96(c)(1)(ii). The proposed national median CMI value for FY 2017 is based on the CMI values of all urban hospitals nationwide, and the proposed regional median CMI values for FY 2017 are based on the CMI values of all urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in Sec. 413.75). These proposed values are based on discharges occurring during FY 2015 (October 1, 2014 through September 30, 2015), and include bills posted to CMS' records through December 2015.

      We are proposing that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2016, they must have a CMI value for FY 2015 that is at least--

      1.6125 (national--all urban); or

      The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in Sec. 413.75) calculated by CMS for the census region in which the hospital is located.

      The proposed CMI values by region are set forth in the following table.

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

      Case-mix

      Region index value

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

      1. New England (CT, ME, MA, NH, RI, VT).................. 1.3637

      2. Middle Atlantic (PA, NJ, NY).......................... 1.4441

      3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)... 1.51235

      4. East North Central (IL, IN, MI, OH, WI)............... 1.5324

      5. East South Central (AL, KY, MS, TN)................... 1.45055

      6. West North Central (IA, KS, MN, MO, NE, ND, SD)....... 1.59535

      7. West South Central (AR, LA, OK, TX)................... 1.643

      8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............. 1.6966

      9. Pacific (AK, CA, HI, OR, WA).......................... 1.616

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

      We intend to update the preceding CMI values in the FY 2017 final rule to reflect the updated FY 2015 MedPAR file, which would contain data from additional bills received through March 2016.

      A hospital seeking to qualify as an RRC should obtain its hospital-

      specific CMI value (not transfer-adjusted) from its MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS-DRG-

      based payment.

      2. Discharges

      Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges criteria in each year's annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. For FY 2017, we are proposing to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2014 (that is, October 1, 2013 through September 30, 2014), which are the latest cost report data available at the time this proposed rule was developed.

      We are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2016, must have, as the number of discharges for its cost reporting period that began during FY 2014, at least--

      5,000 (3,000 for an osteopathic hospital); or

      The median number of discharges for urban hospitals in the census region in which the hospital is located as indicated in the following table.

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

      Number of

      Region discharges

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

      1. New England (CT, ME, MA, NH, RI, VT)................. 8,090

      2. Middle Atlantic (PA, NJ, NY)......................... 10,745

      3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 10,309

      4. East North Central (IL, IN, MI, OH, WI).............. 8,090

      5. East South Central (AL, KY, MS, TN).................. 7,457

      6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,718

      7. West South Central (AR, LA, OK, TX).................. 5,027

      8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 8,621

      9. Pacific (AK, CA, HI, OR, WA)......................... 8,509

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

      We intend to update these numbers in the FY 2017 final rule based on the latest available cost report data.

      We note that the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges. Therefore, under this proposed rule, 5,000 discharges is the minimum criterion for all hospitals, except for osteopathic hospitals for which the minimum criterion is 3,000 discharges.

      Page 25080

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

      1. Background

      Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital that is paid under IPPS beginning in FY 2005, and the low-volume hospital payment policy is set forth in the regulations at 42 CFR 412.101. Sections 3125 and 10314 of the Affordable Care Act provided for a temporary change in the low-

      volume hospital payment policy for FYs 2011 and 2012. Specifically, the provisions of the Affordable Care Act amended the qualifying criteria for low-volume hospitals to specify, for FYs 2011 and 2012, that a hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 1,600 discharges of individuals entitled to, or enrolled for, benefits under Medicare Part A during the fiscal year. In addition, the statute as amended by the Affordable Care Act, provides that the low-volume hospital payment adjustment (that is, the percentage increase) is determined using a continuous linear sliding scale ranging from 25 percent for low-volume hospitals with 200 or fewer discharges of individuals entitled to, or enrolled for, benefits under Medicare Part A in the fiscal year to 0 percent for low-volume hospitals with greater than 1,600 discharges of such individuals in the fiscal year. We revised the regulations governing the low-volume hospital payment adjustment policy at Sec. 412.101 to reflect the changes to the qualifying criteria and the calculation of the payment adjustment for low-volume hospitals according to the provisions of the Affordable Care Act in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414).

      The temporary changes to the low-volume hospital qualifying criteria and the payment adjustment originally provided for by the Affordable Care Act have been extended by subsequent legislation as follows: Through FY 2013, by the American Taxpayer Relief Act of 2012 (ATRA), Public Law 112-240; through March 31, 2014, by the Pathway for SGR Reform Act of 2013, Public Law 113- 167; through March 31, 2015, by the Protecting Access to Medicare Act of 2014 (PAMA), Public Law 113-

      93; and most recently through FY 2017, by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Public Law 114-10. For additional details on the implementation of the previous extensions of the temporary changes to the low-volume hospital qualifying criteria and payment adjustment originally provided for by the Affordable Care Act, we refer readers to the following Federal Register documents: The FY 2013 IPPS notice (78 FR 14689 through 14691); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50611 through 50612); the FY 2014 IPPS interim final rule with comment period (79 FR 15022 through 15025); the FY 2014 IPPS notice (79 FR 34444 through 34446); the FY 2015 IPPS/LTCH PPS final rule (79 FR 49998 through 50001); and the FY 2016 IPPS interim final rule with comment period (80 FR 49594 through 49595).

      2. Proposed Low-Volume Hospital Definition and Payment Adjustment for FY 2017

      Under section 1886(d)(12) of the Act, as amended by section 204 of the MACRA, the temporary changes in the low-volume hospital payment policy originally provided by the Affordable Care Act and extended through subsequent legislation, are effective through FY 2017. In this proposed rule, consistent with our historical approach, we are proposing to update the discharge data source used to identify qualifying low-volume hospitals and calculate the payment adjustment (percentage increase) for FY 2017. Under Sec. 412.101(b)(2)(ii), for the applicable fiscal years, a hospital's Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the low-volume payment adjustment in the current year and to determine the applicable low-volume percentage increase for qualifying hospitals. The applicable low-volume percentage increase for FY 2017 is determined using a continuous linear sliding scale equation that results in a low-

      volume hospital payment adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to a zero percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges. For FY 2017, consistent with our historical policy, we are proposing that qualifying low-volume hospitals and their payment adjustment would be determined using the most recently available Medicare discharge data from the December 2015 update of the FY 2015 MedPAR file, as these data are the most recent data available. Table 14 listed in the Addendum of this proposed rule (which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the ``subsection (d)'' hospitals with fewer than 1,600 Medicare discharges based on the claims data from the December 2015 update of the FY 2015 MedPAR file and their potential proposed low-volume payment adjustment for FY 2017. Consistent with past practice, we note that this list of hospitals with fewer than 1,600 Medicare discharges in Table 14 does not reflect whether or not the hospital meets the mileage criterion. Eligibility for the low-volume hospital payment adjustment for FY 2017 also is dependent upon meeting the mileage criterion specified at Sec. 412.101(b)(2)(ii); that is, the hospital must be located more than 15 road miles from any other IPPS hospital. In other words, eligibility for the low-volume hospital payment adjustment for FY 2017 also is dependent upon meeting (in the case of a hospital that did not qualify for the low-volume hospital payment adjustment in FY 2016) or continuing to meet (in the case of a hospital that did qualify for the low-volume hospital payment adjustment in FY 2016) the mileage criterion specified at Sec. 412.101(b)(2)(ii). Consistent with historical practice, we are proposing that if more recent Medicare discharge data become available, we would use that updated data to determine qualifying low-volume hospitals and their payment adjustment in the final rule, and update Table 14 to reflect that updated data.

      In order to receive a low-volume hospital payment adjustment under Sec. 412.101 for FY 2017, consistent with our previously established procedure, we are proposing that a hospital must notify and provide documentation to its MAC that it meets the discharge and mileage criteria under Sec. 412.101(b)(2)(ii). Specifically, for FY 2017, we are proposing that a hospital must make a written request for low-

      volume hospital status that is received by its MAC no later than September 1, 2016, in order for the applicable low-volume hospital payment adjustment to be applied to payments for its FY 2017 discharges occurring on or after October 1, 2016. Under this procedure, a hospital that qualified for the low-volume hospital payment adjustment in FY 2016 may continue to receive a low-volume hospital payment adjustment for FY 2017 without reapplying if it continues to meet the Medicare discharge criterion established for FY 2017 and the mileage criterion. However, the hospital must send written verification that is received by its MAC no later than September 1, 2016, stating that it continues to be located more than 15 miles from any

      Page 25081

      other subsection (d) hospital. This written verification could be a brief letter to the MAC stating that the hospital continues to meet the low-volume hospital mileage criterion as documented in a prior low-

      volume hospital status request. We also are proposing that if a hospital's written request for low-volume hospital status for FY 2017 is received after September 1, 2016, and if the MAC determines that the hospital meets the criteria to qualify as a low-volume hospital, the MAC would apply the applicable low-volume hospital payment adjustment to determine the payment for the hospital's FY 2017 discharges effective prospectively within 30 days of the date of its low-volume hospital status determination, consistent with past practice. (For additional details on our established process for the low-volume hospital payment adjustment, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50000 through 50001).)

      We note that, in the FY 2016 IPPS interim final rule with comment period (80 FR 49595), we revised the regulations at Sec. 412.101 to conform the text to the provisions of section 204 of the MACRA, which extended the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals through FY 2017 (that is, through September 30, 2017). We intend to finalize the low-volume hospital provisions (as well as the Medicare-dependent small rural hospital (MDH) provisions at Sec. 412.108) included in that FY 2016 interim final rule with comment period in the FY 2017 IPPS/LTCH PPS final rule.

    9. Indirect Medical Education (IME) Payment Adjustment Factor for FY 2017 (Sec. 412.105)

      1. IME Adjustment for FY 2017

      Under the IPPS, an additional payment amount is made to hospitals with residents in an approved graduate medical education (GME) program in order to reflect the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The payment amount is determined by use of a statutorily specified adjustment factor. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at Sec. 412.105. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of the IME adjustment and IME adjustment factor. Section 1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. Accordingly, for discharges occurring during FY 2017, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2017 IME adjustment will result in an increase in IPPS payment of 5.5 percent for every approximately 10 percent increase in the hospital's resident to bed ratio.

      2. Other Proposed Policies Related to IME

      We refer readers to section IV.I. of the preamble of this proposed rule for a discussion of the proposed policy changes relating to medical residency training programs (or rural tracks) at urban hospitals that also affect payments for IME.

    10. Proposed Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2017 and Subsequent Years (Sec. 412.106)

      1. General Discussion

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

      Because the DSH payment adjustment is part of the IPPS, the DSH statutory references (under section 1886(d)(5)(F) of the Act) to ``days'' apply only to hospital acute care inpatient days. Regulations located at Sec. 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under Sec. 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under Sec. 412.105(b).

      Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same Act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111-152), added a new section 1886(r) to the Act that modifies the methodology for computing the Medicare DSH payment adjustment. (For purposes of this proposed rule, we refer to these provisions collectively as section 3133 of the Affordable Care Act.) Beginning with discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments. This provision applies equally to hospitals that qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act.

      The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under age 65 who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year are based on the hospital's amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year.

      As provided by section 3133 of the Affordable Care Act, section 1886(r) of the Act requires that, for FY 2014 and

      Page 25082

      each subsequent fiscal year, a subsection (d) hospital that would otherwise receive DSH payments made under section 1886(d)(5)(F) of the Act receives two separately calculated payments. Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such a subsection (d) hospital (including a Pickle hospital) 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for DSH payments, which represents the empirically justified amount for such payment, as determined by the MedPAC in its March 2007 Report to the Congress. We refer to this payment as the ``empirically justified Medicare DSH payment.''

      In addition to this empirically justified Medicare DSH payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay to such subsection (d) hospital an additional amount equal to the product of three factors. The first factor is the difference between the aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if subsection (r) did not apply and the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for each fiscal year. Therefore, this factor amounts to 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act.

      The second factor is, for FYs 2014 through 2017, 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, determined by comparing the percent of such individuals who were uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment), and the percent of individuals who were uninsured in the most recent period for which data are available (as so calculated) minus 0.1 percentage point for FY 2014, and minus 0.2 percentage point for FYs 2015 through 2017. For FYs 2014 through 2017, the baseline for the estimate of the change in uninsurance is fixed by the most recent estimate of the Congressional Budget Office before the final vote on the Health Care and Education Reconciliation Act of 2010, which is contained in a March 20, 2010 letter from the Director of the Congressional Budget Office to the Speaker of the House. (The March 20, 2010 letter is available for viewing on the following Web site: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)

      For FY 2018 and subsequent fiscal years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS), and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified), minus 0.2 percentage point for FYs 2018 and 2019. Therefore, for FY 2018 and subsequent fiscal years, the statute provides some greater flexibility in the choice of the data sources to be used for the estimate of the change in the percent of uninsured individuals.

      The third factor is a percent that, for each subsection (d) hospital, represents the quotient of the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data), including the use of alternative data where the Secretary determines that alternative data are available which are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, and the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act. Therefore, this third factor represents a hospital's uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in the applicable fiscal year, expressed as a percent.

      For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment determined by these factors as the ``uncompensated care payment.''

      Section 1886(r) of the Act applies to FY 2014 and each subsequent fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647) and the FY 2014 IPPS interim final rule with comment period (78 FR 61191 through 61197), we set forth our policies for implementing the required changes to the Medicare DSH payment methodology made by section 3133 of the Affordable Care Act for FY 2014. In those rules, we noted that, because section 1886(r) of the Act modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR part 412, subpart M, which were established through the exercise of the Secretary's discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act.

      Finally, section 1886(r)(3) of the Act provides that there shall be no administrative or judicial review under section 1869, section 1878, or otherwise of any estimate of the Secretary for purposes of determining the factors described in section 1886(r)(2) of the Act or of any period selected by the Secretary for the purpose of determining those factors. Therefore, there is no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or the periods selected in order to develop such estimates.

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

      As indicated earlier, the payment methodology under section 3133 of the Affordable Care Act applies to ``subsection (d) hospitals'' that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act. Therefore, hospitals must receive empirically justified Medicare DSH payments in a fiscal year in order to receive an additional Medicare uncompensated care payment for that year. Specifically, section 1886(r)(2) of the Act states that, in addition to the payment made to a subsection (d) hospital under section 1886(r)(1) of the Act, the Secretary shall pay to such subsection (d) hospitals an additional amount. Because section 1886(r)(1) of the Act refers to empirically justified Medicare DSH payments, the additional payment under section 1886(r)(2) of the Act is limited to hospitals that receive empirically justified Medicare DSH payments in accordance with section 1886(r)(1) of the Act for the applicable fiscal year.

      In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2014 IPPS interim final rule with comment period (78 FR 61193), we provided that hospitals that are not eligible to receive empirically justified Medicare DSH payments in a fiscal year will not receive uncompensated care payments

      Page 25083

      for that year. We also specified that we would make a determination concerning eligibility for interim uncompensated care payments based on each hospital's estimated DSH status for the applicable fiscal year (using the most recent data that are available). We indicated that our final determination on the hospital's eligibility for uncompensated care payments would be based on the hospital's actual DSH status at cost report settlement for that payment year.

      In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50006), we specified our policies for several specific classes of hospitals within the scope of section 1886(r) of the Act. We refer readers to those two final rules for a detailed discussion of our policies. In summary, we specified the following:

      Subsection (d) Puerto Rico hospitals that are eligible for DSH payments also are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the new payment methodology (78 FR 50623 and 79 FR 50006).

      Maryland hospitals are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1886(r) of the Act because they are not paid under the IPPS. As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50007), effective January 1, 2014, the State of Maryland elected to no longer have Medicare pay Maryland hospitals in accordance with section 1814(b)(3) of the Act and entered into an agreement with CMS that Maryland hospitals will be paid under the Maryland All-Payer Model. However, under the Maryland All-Payer Model, Maryland hospitals still are not paid under the IPPS. Therefore, they remain ineligible to receive empirically justified Medicare DSH payments or uncompensated care payments under section 1886(r) of the Act.

      SCHs that are paid under their hospital-specific rate are not eligible for Medicare DSH payments. SCHs that are paid under the IPPS Federal rate receive interim payments based on what we estimate and project their DSH status to be prior to the beginning of the Federal fiscal year (based on the best available data at that time) subject to settlement through the cost report, and if they receive interim empirically justified Medicare DSH payments in a fiscal year, they also will receive interim uncompensated care payments for that fiscal year on a per discharge basis, subject as well to settlement through the cost report. Final eligibility determinations will be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).

      MDHs are paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rate from certain specified base years (76 FR 51684). The IPPS Federal rate used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology. Section 205 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Public Law 114-10, enacted April 16, 2015, extended the MDH program for discharges on or after April 1, 2015, through September 30, 2017. Because MDHs are paid based on the IPPS Federal rate, for FY 2017, MDHs will continue to be eligible to receive empirically justified Medicare DSH payments and uncompensated care payments if their DPP is at least 15 percent. We will apply the same process to determine MDHs' eligibility for empirically justified Medicare DSH and uncompensated care payments, as we do for all other IPPS hospitals, through September 30, 2017. Moreover, we will continue to make a determination concerning eligibility for interim uncompensated care payments based on each hospital's estimated DSH status for the applicable fiscal year (using the most recent data that are available). Our final determination on the hospital's eligibility for uncompensated care payments will be based on the hospital's actual DSH status at cost report settlement for that payment year. In addition, as we do for all IPPS hospitals, we calculate a numerator for Factor 3 for all MDHs, regardless of whether they are projected to be eligible for Medicare DSH payments during the fiscal year, but the denominator for Factor 3 will be based on the uncompensated care data from the hospitals that we have projected to be eligible for Medicare DSH payments during the fiscal year.

      IPPS hospitals that have elected to participate in the Bundled Payments for Care Improvement initiative continue to be paid under the IPPS (77 FR 53342) and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments (78 FR 50625 and 79 FR 50008).

      Hospitals participating in the Rural Community Hospital Demonstration Program under section 410A of the Medicare Modernization Act do not receive DSH payments and, therefore, are excluded from receiving empirically justified Medicare DSH payments and uncompensated care payments under the new DSH payment methodology (78 FR 50625 and 79 FR 50008). There are 14 hospitals currently participating in the program; 10 will continue to participate through the end of FY 2016, and 4 will continue to participate through the scheduled end of the program on December 31, 2016. Once a hospital's participation in the demonstration program ends, the hospital will be treated like a subsection (d) hospital and subject to the IPPS. Therefore, once their participation ends, these hospitals could be eligible to receive empirically justified Medicare DSH payments and uncompensated care payments and, if so, will be treated accordingly for interim and final payments. We will apply the same process to determining their eligibility as we do for all other IPPS hospitals, and will make interim and final DSH and uncompensated care payments accordingly.

      3. Empirically Justified Medicare DSH Payments

      As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the Medicare DSH payment that would otherwise be made under section 1886(d)(5)(F) of the Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the program to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did not believe that it was necessary to develop any new operational mechanisms for making such payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision by advising MACs to simply adjust the interim claim payments to the requisite 25 percent of what would have otherwise been paid. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments can be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the FY 2014 IPPS/

      LTCH PPS final rule that are available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.

      Page 25084

      4. Uncompensated Care Payments

      As we have discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the uncompensated care payment is the product of three factors. These three factors represent our estimate of 75 percent of the amount of Medicare DSH payments that would otherwise have been paid, an adjustment to this amount for the percent change in the national rate of uninsurance compared to the rate of uninsurance in 2013, and each eligible hospital's estimated uncompensated care amount relative to the estimated uncompensated care amount for all eligible hospitals. Below we discuss the data sources and methodologies for computing each of these factors, our final policies for FYs 2014 through 2016, and our proposed policies for FY 2017.

  256. Calculation of Proposed Factor 1 for FY 2017

    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. Section 1886(r)(2)(A) of the Act states that this factor is equal to the difference between (1) the aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year (as estimated by the Secretary); and (2) the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of the Act represents the estimated Medicare DSH payments that would have been made under section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply for such fiscal year. Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amount that would be paid for a Federal fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount, by specifying that, for each fiscal year to which the provision applies, such amount is to be estimated by the Secretary. Similarly, section 1886(r)(2)(A)(ii) of the Act represents the estimated empirically justified Medicare DSH payments to be made in a fiscal year, as prescribed under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount.

    Therefore, Factor 1 is the difference between our estimates of: (1) The amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of the new payment provision; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act. In other words, this factor represents our estimate of 75 percent (100 percent minus 25 percent) of our estimate of Medicare DSH payments that would otherwise be made, in the absence of section 1886(r) of the Act, for the fiscal year.

    As we did for FY 2016, in order to determine Factor 1 in the uncompensated care payment formula for FY 2017, we are proposing to continue the policy established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule with comment period (78 FR 61194) of determining Factor 1 by developing estimates of both the aggregate amount of Medicare DSH payments that would be made in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments to hospitals under 1886(r)(1) of the Act. These estimates will not be revised or updated after we know the final Medicare DSH payments for FY 2017.

    Therefore, in order to determine the two elements of Factor 1 for FY 2017 (Medicare DSH payments prior to the application of section 1886(r)(1) of the Act, and empirically justified Medicare DSH payments after application of section 1886(r)(1) of the Act), we used the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by CMS' Office of the Actuary using the most recently filed Medicare hospital cost report with Medicare DSH payment information and the most recent Medicare DSH patient percentages and Medicare DSH payment adjustments provided in the IPPS Impact File.

    For purposes of calculating Factor 1 and modeling the impact of this FY 2017 IPPS/LTCH PPS proposed rule, we used the Office of the Actuary's March 2016 Medicare DSH estimates, which are based on data from the December 2015 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2016 IPPS/LTCH PPS final rule IPPS Impact file, published in conjunction with the publication of the FY 2016 IPPS/LTCH PPS final rule. Because SCHs that are projected to be paid under their hospital-specific rate are excluded from the application of section 1886(r) of the Act, these hospitals also were excluded from the March 2016 Medicare DSH estimates. Furthermore, because section 1886(r) of the Act specifies that the uncompensated care payment is in addition to the empirically justified Medicare DSH payment (25 percent of DSH payments that would be made without regard to section 1886(r) of the Act), Maryland hospitals participating in the Maryland All-Payer Model that do not receive DSH payments are also excluded from the Office of the Actuary's Medicare DSH estimates. Because the Rural Community Hospital Demonstration program is scheduled to end on December 31, 2016, hospitals that are participating in the program are included in this estimate for FY 2017. However, we have excluded 25 percent of our estimate of DSH payments that would otherwise be made to the 4 hospitals whose participation in the program will continue through December 31, 2016, as these hospitals will be excluded from receiving DSH payments until that time. The estimate includes the total DSH payments that would be made to the 10 hospitals whose participation in the Rural Community Hospital Demonstration program will continue only through September 30, 2016.

    Using the data sources discussed above, the Office of the Actuary uses the most recently submitted Medicare cost report data to identify Medicare DSH payments and the most recent Medicare DSH payment adjustments provided in the IPPS Impact File, and applies inflation updates and assumptions for future changes in utilization and case-mix to estimate Medicare DSH payments for the upcoming fiscal year. The March 2016 Office of the Actuary estimate for Medicare DSH payments for FY 2017, without regard to the application of section 1886(r)(1) of the Act, is approximately $14.227 billion. This estimate excludes Maryland hospitals participating in the Maryland All-Payer Model, SCHs paid under their hospital-specific payment rate, and 25 percent of payments to the 4 hospitals whose participation in the Rural Community Hospital Demonstration program will continue through December 31, 2016. Therefore, based on the March 2016 estimate, the estimate for empirically justified Medicare DSH payments for FY 2017, with the application of section 1886(r)(1) of the Act, is approximately $3.556 billion (or 25 percent of the total amount of estimated Medicare DSH payments for

    Page 25085

    FY 2017). Under Sec. 412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between these two estimates of the Office of the Actuary. Therefore, in this proposed rule, we are proposing that Factor 1 for FY 2017 is $10,670,529,595.84, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2017 ($14,227,372,794.46 minus $3,556,843,198.62).

    The Office of the Actuary's estimates for FY 2017 begin with a baseline of $12.154 billion in Medicare DSH expenditures for FY 2013. The following table shows the factors applied to update this baseline through the current estimate for FY 2017:

    Factors Applied for FY 2014 Through FY 2017 To Estimate Medicare DSH Expenditures Using 2013 Baseline

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

    Estimated DSH

    FY Update Discharge Case-mix Other Total payment (in

    billions)

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

    2014.................................................... 1.009 0.9553 1.015 1.04795 1.025268 $12.461

    2015.................................................... 1.014 0.9894 1.005 1.0702 1.079048 13.446

    2016.................................................... 1.009 1.0078 1.005 0.9993 1.021239 13.732

    2017.................................................... 1.0005 1.0168 1.005 1.0134 1.036095 14.227

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

    In this table, the discharge column shows the increase in the number of Medicare FFS inpatient hospital discharges. The figures for FYs 2014 and 2015 are based on Medicare claims data that have been adjusted by a completion factor. The discharge figure for FY 2016 is based on preliminary data for 2016. The discharge figure for FY 2017 is an assumption based on recent trends recovering back to the long-term trend and assumptions related to how many beneficiaries will be enrolled in Medicare Advantage (MA) plans. The case-mix column shows the increase in case-mix for IPPS hospitals. The case-mix figures for FYs 2014 and 2015 are based on actual data adjusted by a completion factor. The FY 2016 and FY 2017 increases are based on the recommendation of the 2010-2011 Medicare Technical Review Panel. The ``other'' column shows the increase in other factors that contribute to the Medicare DSH estimates. These factors include the difference between the total inpatient hospital discharges and the IPPS discharges, various adjustments to the payment rates that have been included over the years but are not reflected in the other columns (such as the change in rates for the 2-midnight stay policy). In addition, the ``other'' column includes a factor for the Medicaid expansion due to the Affordable Care Act.

    The table below shows the factors that are included in the ``Update'' column of the above table:

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

    Affordable

    Market basket Care Act Multifactor Documentation Total update

    FY percentage payment productivity and coding percentage

    reductions adjustment

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

    2014............................ 2.5 -0.3 -0.5 -0.8 0.9

    2015............................ 2.9 -0.2 -0.5 -0.8 1.4

    2016............................ 2.4 -0.2 -0.5 -0.8 0.9

    2017............................ 2.8 -0.75 -0.5 -1.5 0.05

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

    Note: All numbers are based on the FY 2017 President's Budget projections.

  257. Calculation of Proposed Factor 2 for FY 2017

    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Specifically, section 1886(r)(2)(B)(i) of the Act provides that, for each of FYs 2014, 2015, 2016, and 2017, a factor equal to 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured, as determined by comparing the percent of such individuals (1) who were uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment); and (2) who are uninsured in the most recent period for which data are available (as so calculated), minus 0.1 percentage point for FY 2014 and minus 0.2 percentage point for each of FYs 2015, 2016, and 2017.

    Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the percent of individuals under 65 without insurance in 2013 must be the percent of such individuals who were uninsured in 2013, the last year before coverage expansion under the Affordable Care Act (as calculated by the Secretary based on the most recent estimates available from the Director of the Congressional Budget Office before a vote in either House on the Health Care and Education Reconciliation Act of 2010 that, if determined in the affirmative, would clear such Act for enrollment). The Health Care and Education Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It was passed in the House of Representatives on March 21, 2010, and by the Senate on March 25, 2010. Because the House of Representatives was the first House to vote on the Health Care and Education Reconciliation Act of 2010 on March 21, 2010, we have determined that the most recent estimate available from the Director of the Congressional Budget Office ``before a vote in either House on the Health Care and Education Reconciliation Act of 2010 . . .'' (emphasis added) appeared in a March 20, 2010 letter from the director of the CBO to the Speaker of the House. Therefore, we believe that only the estimates in this March 20, 2010 letter meet the statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we refer readers to the Web site at: http://

    Page 25086

    www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/

    amendreconprop.pdf.)

    In its March 20, 2010 letter to the Speaker of the House of Representatives, the CBO provided two estimates of the ``post-policy uninsured population.'' The first estimate is of the ``Insured Share of the Nonelderly Population Including All Residents'' (82 percent) and the second estimate is of the ``Insured Share of the Nonelderly Population Excluding Unauthorized Immigrants'' (83 percent). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate that includes all residents, including unauthorized immigrants. We stated that we believe this estimate is most consistent with the statute, which requires us to measure ``the percent of individuals under the age of 65 who are uninsured'' and provides no exclusions except for individuals over the age of 65. In addition, we stated that we believe that this estimate more fully reflects the levels of uninsurance in the United States that influence uncompensated care for hospitals than the estimate that reflects only legal residents. The March 20, 2010 CBO letter reports these figures as the estimated percentage of individuals with insurance. However, because section 1886(r)(2)(B)(i) of the Act requires that we compare the percent of individuals who are uninsured in the most recent period for which data are available with the percent of individuals who were uninsured in 2013, in the FY 2014 IPPS/LTCH PPS final rule, we used the CBO insurance rate figure and subtracted that amount from 100 percent (that is the total population without regard to insurance status) to estimate the 2013 baseline percent of individuals without insurance. Therefore, for FYs 2014 through 2017, our estimate of the uninsurance percentage for 2013 is 18 percent.

    Section 1886(r)(2)(B)(i) of the Act requires that we compare the baseline uninsurance rate to the percent of such individuals who are uninsured in the most recent period for which data are available (as so calculated). In the FY 2014, FY 2015, and FY 2016 IPPS/LTCH PPS final rules (78 FR 50634, 79 FR 50014, and 80 FR 49522, respectively), we used the same data source, CBO estimates, to calculate this percent of individuals without insurance. In response to public comments, we also agreed that we should normalize the CBO estimates, which are based on the calendar year, for the Federal fiscal years for which each calculation of Factor 2 is made (78 FR 50633). Therefore, for this FY 2017 IPPS/LTCH PPS proposed rule, we used the most recently available estimate of the uninsurance rate, which is based on the CBO's March 2015 estimates of the effects of the Affordable Care Act on health insurance coverage (which are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf). The CBO's March 2015 estimate of individuals under the age of 65 with insurance in CY 2016 is 89 percent. Therefore, the CBO's most recent estimate of the rate of uninsurance in CY 2016 is 11 percent (that is, 100 percent minus 89 percent). Similarly, the CBO's March 2015 estimate of individuals under the age of 65 with insurance in CY 2017 is 90 percent. Therefore, the CBO's most recent estimate of the rate of uninsurance in CY 2017 available for this proposed rule is 10 percent (that is, 100 percent minus 90 percent).

    The calculation of the proposed Factor 2 for FY 2017, employing a weighted average of the CBO projections for CY 2016 and CY 2017, is as follows:

    CY 2016 rate of insurance coverage (March 2015 CBO estimate): 89 percent.

    CY 2017 rate of insurance coverage (March 2015 CBO estimate): 90 percent.

    FY 2016 rate of insurance coverage: (89 percent * .25) + (90 percent * .75) = 89.75 percent.

    Percent of individuals without insurance for 2013 (March 2010 CBO estimate): 18 percent.

    Percent of individuals without insurance for FY 2017 (weighted average): 10.25 percent.

    1-verbar((0.1025-0.18)/0.18)verbar = 1 - 0.4306 = 0.5694 (56.94 percent)

    0.5694 (56.94 percent) - .002 (0.2 percentage points for FY 2017 under section 1886(r)(2)(B)(i) of the Act) = 0.5674 or 56.74 percent

    0.5674 = Factor 2

    Therefore, the proposed Factor 2 for FY 2017 is 56.74 percent.

    The FY 2017 Proposed Uncompensated Care Amount is: $10,670,529,595.84 x 0.5674 = $6,054,458,492.68.

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

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

    FY 2017 Proposed Uncompensated Care Total $6,054,458,492.68

    Available.....................................

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

  258. Calculation of Proposed Factor 3 for FY 2017

    Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal to the percent, for each subsection (d) hospital, that represents the quotient of (1) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (2) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period (as so estimated, based on such data).

    Therefore, Factor 3 is a hospital-specific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive Medicare DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. In order to implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary to determine: (1) The definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (that is, the estimated uncompensated care amount for an individual hospital) and the denominator (that is, the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive Medicare DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period based on appropriate data. In addition, we note that the statute permits the

    Page 25087

    Secretary to use alternative data in the case where the Secretary determines that such alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured.

    In the course of considering how to determine Factor 3 during the rulemaking process for FY 2014, we considered defining the amount of uncompensated care for a hospital as the uncompensated care costs of each hospital and determined that Worksheet S-10 of the Medicare cost report potentially provides the most complete data regarding uncompensated care costs for Medicare hospitals. However, because of concerns regarding variations in the data reported on the Worksheet S-

    10 and the completeness of these data, we did not propose to use data from the Worksheet S-10 to determine the amount of uncompensated care for FY 2014, the first year this provision was in effect, or for FY 2015 and FY 2016. We instead employed the utilization of insured low income patients, defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in Sec. 412.106(b)(4) and Sec. 412.106(b)(2)(i) of the regulations, respectively, to determine Factor 3. We believed that these alternative data, which are currently reported on the Medicare cost report, would be a better proxy for the amount of uncompensated care provided by hospitals. We also indicated that we were expecting reporting on the Worksheet S-10 to improve over time and remained convinced that the Worksheet S-10 could ultimately serve as an appropriate source of more direct data regarding uncompensated care costs for purposes of determining Factor 3. As discussed in section IV.F.3.d. of the preamble of this proposed rule, since the introduction of the uncompensated care payment in FY 2014, we believe that hospitals have been submitting more accurate and consistent data through Worksheet S-10 and that it is appropriate to begin incorporating Worksheet S-10 data for purposes of calculating Factor 3 starting in FY 2018. As discussed in greater detail in section IV.F.3.d. of the preamble of this proposed rule, we are proposing a methodology and timeline for incorporating Worksheet S-

    10 data and invite public comments on such a proposal.

    For FY 2017, we believe it remains premature to propose the use of Worksheet S-10 data for purposes of determining Factor 3 because hospitals were not on notice that Worksheet S-10 would be used for purposes of computing uncompensated care payments prior to FY 2014, which could affect the accuracy and completeness of the information reported on Worksheet S-10. As described more fully below regarding the time period of the data used to calculate Factor 3, for FY 2017, we are using data from hospital cost reports that precede FY 2014 to determine Factor 3 of the uncompensated care payments methodology. Therefore, for FY 2017, we remain concerned about the accuracy and consistency of the data reported on Worksheet S-10 and are proposing to continue to employ the utilization of insured low-income patients (defined as inpatient days of Medicaid patients plus inpatient days of Medicare SSI patients as defined in Sec. 412.106(b)(4) and Sec. 412.106(b)(2)(i), respectively) to determine Factor 3. We also are proposing to continue the policies that were finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020) to address several specific issues concerning the process and data to be employed in determining Factor 3 in the case of hospital mergers for FY 2017 and subsequent fiscal years.

    We also are proposing to make a change to the data that will be used to calculate Factor 3 for Puerto Rico hospitals. We received a comment in response to the FY 2016 IPPS/LTCH PPS proposed rule that requested CMS to create a proxy for the SSI days used in the Factor 3 calculation for Puerto Rico hospitals (80 FR 49526). Specifically, commenters were concerned that residents of Puerto Rico are not eligible for SSI benefits. Although we did not have logical outgrowth to adopt any change for FY 2016, we indicated that we planned to address this issue in the FY 2017 IPPS/LTCH PPS proposed rule if we also proposed to continue using inpatient days of Medicare SSI patients as a proxy for uncompensated care in FY 2017. Because we are proposing to continue using insured low-income patient days as a proxy for uncompensated care in FY 2017, we believe it is important to consider the commenter's request regarding the data used to calculate Factor 3 for Puerto Rico hospitals. Accordingly, we are proposing to create a proxy for SSI days for Puerto Rico hospitals for use in the Factor 3 calculation. The commenter specifically mentioned the use of inpatient days for Medicare beneficiaries receiving Medicaid as this proxy. We have examined this concept and have been unable to identify a systematic source for these data for Puerto Rico hospitals. Specifically, we note that inpatient utilization for Medicare beneficiaries entitled to Medicaid is not reported by hospitals on the Medicare cost report. Therefore, we sought an alternative method using publicly available Medicare data for determining a proxy to account for the fact that residents of Puerto Rico are not eligible for SSI, and therefore Puerto Rico hospitals have a relatively low number of Medicare SSI days in the Factor 3 computation. We believe it is appropriate to use data from the Medicare cost report to develop a Puerto Rico Medicare SSI days proxy because they are publicly available, used for payment purposes, and subject to audit. However, we acknowledge that there are other data sources that could be included to develop such a proxy, in particular the SSI ratios posted on the Medicare DSH Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html, and therefore are soliciting public comment on their use.

    To develop a Puerto Rico Medicare SSI days proxy using data from the Medicare cost report, our Office of the Actuary examined data from 2013 cost reports and analyzed the relationship between Medicare SSI days (estimated using SSI ratios on the cost report and Medicare days from the same cost report) and Medicaid days (reported by the hospitals in accordance with Sec. 412.106(b)(4)). Nationally, excluding Puerto Rico, the Office of the Actuary found that, on average and across States, for every 100 Medicaid inpatient days, hospitals had 14 Medicare SSI days. In other words, the relationship between Medicare SSI days and Medicaid days reported by hospitals in States, excluding Puerto Rico, was approximately 14 percent. We believe it would be appropriate to extrapolate this relationship to Puerto Rico hospitals to approximate how many patient days for these hospitals would be Medicare SSI days if Puerto Rico residents were eligible to receive SSI. Therefore, to calculate Factor 3 for FY 2017, we are proposing to use a proxy for Medicare SSI days for each Puerto Rico hospital equal to 14 percent (or 0.14) of its Medicaid days. In other words, for each Puerto Rico hospital, we would compute a value that is equal to 14 percent of its Medicaid days, where Medicaid days are determined in accordance with Sec. 412.106(b)(4). Because this is a proposed proxy for the Puerto Rico hospital's Medicare SSI days, this value would replace whatever value would otherwise be computed for the hospital under Sec. 412.106(b)(2)(i). Specifically, we would first remove any Medicare SSI days that a Puerto Rico hospital has from our calculation for

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    purposes of determining the numerator of Factor 3 for the hospital and, if the hospital is projected to be eligible for DSH payments in FY 2017, the denominator of Factor 3. Second, we would add the proxy to the hospital's Medicaid days for purposes of determining the numerator of Factor 3 for the hospital and, if the hospital is projected to be eligible for DSH payments in FY 2017, the denominator of Factor 3. We note that we continue to encourage Puerto Rico hospitals to report uncompensated care costs on Worksheet S-10 of the Medicare cost report completely and accurately in light of our proposal to begin incorporating data from Worksheet S-10 in the computation of hospitals' uncompensated care payments starting in FY 2018, as described in more detail in section IV.F.3.d. of the preamble of this proposed rule.

    In summary, we are inviting public comments on these proposals to continue to use insured low-income days (that is, to use data for Medicaid and Medicare SSI patient days determined in accordance with Sec. 412.106(b)(2)(i) and (b)(4) as a proxy for uncompensated care, as permitted by statute, including a proxy for Medicare SSI days for Puerto Rico hospitals), to determine Factor 3 for FY 2017. These proposals would be codified in our regulations at Sec. 412.106(g)(1)(iii)(C). We also are inviting public comments on our proposal to continue the policies concerning the process and data to be employed in determining Factor 3 in the case of hospital mergers.

    As we have done for every proposed rule beginning in FY 2014, for this FY 2017 IPPS/LTCH PPS proposed rule, we are publishing on the CMS Web site a table listing Factor 3 for all hospitals that we estimate would receive empirically justified Medicare DSH payments in FY 2017 (that is, hospitals that we project would receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) hospitals and subsection (d) Puerto Rico hospitals that have the potential of receiving a Medicare DSH payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. This table also contains a list of the mergers that we are aware of and the computed uncompensated care payment for each merged hospital. Hospitals have 60 days from the date of public display of this FY 2017 IPPS/LTCH PPS proposed rule to review this table and notify CMS in writing of any inaccuracies. Comments can be submitted to the CMS inbox at Section3133DSH@cms.hhs.gov. After the publication of the FY 2017 IPPS/

    LTCH final rule, hospitals will have until August 31, 2016, to review and submit comments on the accuracy of the table published in conjunction with the final rule. Comments can be submitted to the CMS inbox at Section3133DSH@cms.hhs.gov through August 31, 2016, and any changes to Factor 3 will be posted on the CMS Web site prior to October 1, 2016.

    The statute also allows the Secretary the discretion to determine the time periods from which we will derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as the amount of uncompensated care for such hospital for a period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that process, we also determined the time period from which to calculate the numerator and denominator of the Factor 3 quotient in a way that would be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for hospitals that we estimate will qualify for Medicare DSH payments and for those hospitals that we do not estimate will qualify for Medicare DSH payments but that may ultimately qualify for Medicare DSH payments at the time of cost report settlement.

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50018), we finalized a policy of using the most recent available full year of Medicare cost report data for determining Medicaid days and the most recently available SSI ratios to calculate Factor 3. In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49528), we held constant the cost reporting years used to determine Medicaid days in the calculation of Factor 3. That is, instead of calculating the numerator and the denominator of Factor 3 for hospitals based on the most recently available full year of Medicare cost report data with respect to a Federal fiscal year, we used data from the more recent of the cost report years (2012/2011) used to determine Medicaid days in FY 2015. We made this change in order to refine the balance between the recency and accuracy of the data used in the Factor 3 calculation. Because we make prospective determinations of the uncompensated care payment without reconciliation, we believed this change would increase the accuracy of the data used to determine Factor 3, and accordingly each eligible hospital's allocation of the overall uncompensated care amount by providing hospitals with more time to submit these data before they are used in the computation of Factor 3. As in prior years, if the more recent of the two cost reporting periods did not reflect data for a 12-

    month period, we used data from the earlier of the two periods so long as that earlier period reflected data for a period of 12 months. If neither of the two periods reflected 12 months, we used the period that reflected a longer amount of time. We also finalized a proposal to continue to extract Medicaid days from the most recent HCRIS database update and to use Medicare SSI days from the most recent SSI ratios available to us during the time of rulemaking to calculate Factor 3. We stated that, for subsequent fiscal years, if we propose and finalize a policy of using insured low-income days in computing Factor 3, we would continue to use the most recent HCRIS database extract at the time of the annual rulemaking cycle, and to use the subsequent year of cost reports (that is, to advance the 12-month cost reports by 1 year). In addition, for any subsequent fiscal years in which we finalize a policy to use insured low-income days to compute Factor 3, our intention would be to continue to use the most recently available SSI ratio data at the time of annual rulemaking to calculate Factor 3. We believed that it was appropriate to state our intentions regarding the specific data we would use in the event Factor 3 was determined on the basis of low-

    income insured days for subsequent years to provide hospitals with as much guidance as possible so they may best consider how and when to submit cost report information in the future. We noted that we would make proposals with regard to our methodology for calculating Factor 3 for subsequent fiscal years through notice-and-comment rulemaking.

    Since the publication of the FY 2016 IPPS/LTCH PPS final rule, we have learned that some members of the hospital community have been disadvantaged by our policy of using only one cost reporting period to

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    determine their share of uncompensated care. Specifically, many hospitals have reported unpredictable swings and anomalies in their low-income insured days between cost reporting periods. These hospitals expressed concern that the use of only one cost reporting period is a poor predictor of their future uncompensated care burden and results in inadequate payments. Because the data used to make uncompensated care payment determinations are not subject to reconciliation after the end of the fiscal year, we believe that it would be appropriate to expand the time period for the data used to calculate Factor 3 from one cost reporting period to three cost reporting periods. Using data from more than one cost reporting period would mitigate undue fluctuations in the amount of uncompensated care payments to hospitals from year to year and smooth over anomalies between cost reporting periods. Moreover, this policy would have the benefit of supplementing the data of hospitals that filed cost reports that are less than 12 months, such that the basis of their uncompensated care payments and those of hospitals that filed full-year 12-month cost reports would be more equitable. We believe that computing Factor 3 using data from three cost reporting periods would best stabilize hospitals' uncompensated care payments while maintaining the recency of the data used in the Factor 3 calculation. We believe that using data from two cost reporting periods would not be as stable while using data from more than three cost reporting periods could result in using overly dated information.

    Therefore, for FY 2017, we are proposing to use an average of data derived from three cost reporting periods instead of one cost reporting period to compute Factor 3. That is, we would calculate a Factor 3 for each cost reporting period and calculate the average. We would calculate their average by adding these amounts together, and dividing the sum by three, in order to calculate Factor 3 for FY 2017. Consistent with the policy adopted in the FY 2016 IPPS/LTCH PPS final rule, we would advance the most recent cost report years used to obtain Medicaid days and Medicare SSI days in FY 2017 by one year and continue to extract Medicaid days data from the most recent update of HCRIS, which for FY 2017 would be the March 2015 update of HCRIS. If the hospital does not have data for one or more of the three cost reporting periods, we compute Factor 3 for the periods available and average those. In other words, we would divide the sum of the individual Factor 3s by the number of cost reporting periods for which there are data. If a hospital has merged, we would combine data from both hospitals for the cost reporting periods in which the merger is not reflected in the surviving hospital's cost report data to compute Factor 3 for the surviving hospital. Moreover, to further reduce undue fluctuations in a hospital's uncompensated care payments, if a hospital filed multiple cost reports beginning in the same fiscal year, we are proposing to combine data from the multiple cost reports so that a hospital may have a Factor 3 calculated using more than one cost report within a cost reporting period. We are proposing to codify these changes for FY 2017 by amending the regulations at Sec. 412.106(g)(1)(iii)(C). We are inviting public comments on this proposal, which we describe more fully below.

    For the FY 2016 IPPS/LTCH PPS final rule, we used the most recent of hospitals' 12-month 2012 or 2011 cost reports and 2012 cost report data submitted to CMS by IHS hospitals to obtain the Medicaid days to calculate Factor 3. In addition, we used Medicare SSI days from the FY 2013 SSI ratios published on the following CMS Web site to calculate Factor 3: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.

    Under our proposal to calculate Factor 3 for FY 2017 using data from three cost reporting periods, we would use data from hospitals' FY 2011, FY 2012, and FY 2013 cost reporting periods extracted from the most recent update of the hospital cost report data in the HCRIS database and the FY 2011 and FY 2012 cost report data submitted to CMS by IHS hospitals to obtain the Medicaid days to calculate Factor 3. (We note that, starting with the FY 2013 cost reports, data for IHS hospitals will be included in the HCRIS database and will no longer be submitted separately.) In addition, to calculate Factor 3 for FY 2017, we anticipate that, under our proposal discussed earlier to use the most recent available 3 years of data on Medicare SSI utilization, we would obtain Medicare SSI days from the FY 2012, FY 2013, and FY 2014 SSI ratios (or, for Puerto Rico hospitals, substitute Medicare SSI days with a proxy as described earlier). We expect the FY 2014 SSI ratios to be published on the CMS Web site when available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. Under this proposal, we would calculate Factor 3 as follows:

    Step 1: Calculate Factor 3 for FY 2011 by summing a hospital's FY 2011 Medicaid days and FY 2012 SSI days and dividing by all DSH eligible hospitals' FY 2011 Medicaid days and FY 2012 SSI days.

    Step 2: Calculate Factor 3 for FY 2012 by summing a hospital's FY 2012 Medicaid days and FY 2013 SSI days and dividing by all DSH eligible hospitals' FY 2012 Medicaid days and FY 2013 SSI days.

    Step 3: Calculate Factor 3 for FY 2013 by summing a hospital's FY 2013 Medicaid days and FY 2014 SSI days and dividing by all DSH eligible hospitals' FY 2013 Medicaid days and FY 2014 SSI days.

    Step 4: Sum the Factor 3 calculated for FY 2011, FY 2012, and FY 2013 and divide by the number of cost reporting periods with data to compute an average Factor 3.

    For illustration purposes, in Table 18 associated with the FY 2017 proposed rule (which is available via the Internet on the CMS Web site), we compute Factor 3 using hospitals' FY 2011, FY 2012, and FY 2013 cost reports from the December 2015 update of HCRIS to obtain Medicaid days and the FY 2012 and FY 2013 SSI ratios published on the following CMS Web site to determine Medicare SSI days: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. Because the FY 2014 SSI ratios are not yet available, for purposes of this proposed rule, we computed Factor 3 for FY 2013 using FY 2013 Medicaid days and FY 2013 SSI days. However, we expect that the FY 2014 SSI ratios will be available to calculate Factor 3 for the FY 2017 IPPS/LTCH PPS final rule.

    For subsequent years, we are proposing to continue to use the most recent HCRIS database extract at the time of the annual rulemaking cycle and to advance the three cost reporting periods used to determine Factor 3 by 1 year as appropriate. For instance, if we were to finalize a proposal to continue using the proxy in FY 2018, we would use FY 2012, FY 2013, and FY 2014 cost reports from the most recent available extract of HCRIS for Medicaid days and FY 2013, FY 2014, and FY 2015 SSI ratios to obtain the Medicare SSI days and follow the same methodology outlined earlier to determine Factor 3. However, as discussed earlier, we believe that it is possible to begin incorporating data from Worksheet S-10 into the computation of Factor 3 starting in FY 2018 and outline a proposal for doing so using data from three cost reporting periods in the following section.

  259. Proposed Calculation of Factor 3 for FY 2018 and Subsequent Years

    (1) Background

    In response to commenters' requests for a timeline and transition for

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    introducing Worksheet S-10 data into the calculation of Factor 3, in this section, we discuss our proposed plans on how to begin incorporating hospitals' Worksheet S-10 data into the calculation of Factor 3, in order to allocate payments based on a hospital's share of overall uncompensated care costs reported on Worksheet S-10. When we first discussed using Worksheet S-10 to allocate hospitals' shares of uncompensated care costs in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we explained why we believed that it was premature to use uncompensated care costs reported on Worksheet S-10 for FY 2014. Specifically, at that time, the most recent available cost reports would have been from FYs 2010 and 2011, which were submitted on or after May 1, 2010, when the new Worksheet S-10 went into effect. We believed that ``concerns about the standardization and completeness of the Worksheet S-10 data could be more acute for data collected in the first year of the Worksheet's use'' (78 FR 50635). In addition, we believed that it would be most appropriate to use data elements that have been historically publicly available, subject to audit, and used for payment purposes (or that the public understands will be used for payment purposes) to determine the amount of uncompensated care for purposes of Factor 3 (78 FR 50635). At the time we issued the FY 2014 IPPS/LTCH PPS final rule, we did not believe that the available data regarding uncompensated care from Worksheet S-10 met these criteria and, therefore, we believed they were not reliable enough to use for determining FY 2014 uncompensated care payments. Accordingly, for FY 2014, we concluded that utilization of insured low-income patients would be a better proxy for the costs of hospitals in treating the uninsured. For FYs 2015, 2016, and 2017, the cost reports used for calculating uncompensated care payments (that is, FYs 2011, 2012, and 2013) were also submitted prior to the time that hospitals were on notice that Worksheet S-10 could be the data source for calculating uncompensated care payments. Therefore, we believe it is also appropriate to use proxy data to calculate Factor 3 for these years.

    We believe that, for FY 2018, many of these concerns would no longer be relevant. That is, as described more fully below regarding the use of Worksheet S-10 from FY 2014, hospitals were on notice as of FY 2014 that Worksheet S-10 could eventually become the data source for CMS to calculate uncompensated care payments. Hospitals' cost reports from FY 2014 have been publically available for some time now. Furthermore, MedPAC has provided analyses that found that current Worksheet S-10 data are a better proxy for predicting audited uncompensated care costs than Medicaid/Medicare SSI days. Specifically, MedPAC submitted a public comment discussed in the FY 2016 IPPS/LTCH PPS final rule that cited its 2007 analysis of data from the Government Accountability Office (GAO) and data from the American Hospital Association (AHA), which suggests that Medicaid days and low-income Medicare days are not a good proxy for uncompensated care costs (80 FR 49525). Analysis performed by MedPAC showed that the correlation between audited uncompensated care data from 2009 and the data from FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of approximately 0.50 for 2011 Medicare SSI and Medicaid days. MedPAC concluded that use of Worksheet S-10 data was already better than using Medicare SSI and Medicaid days as a proxy for uncompensated care costs, and that the data on Worksheet S-10 would improve over time as the data are actually used to make payments.

    We also have undertaken an extensive analysis of the Worksheet S-10 data, benchmarking it against the data on uncompensated care costs reported to the Internal Revenue Service (IRS) on Form 990 by not-for-

    profit hospitals. The purpose of this analysis, performed by Dobson DaVanzo & Associates, LLC, under contract to CMS, was to determine if Worksheet S-10 uncompensated care data are becoming more stable over time. (This analysis, included in a report entitled ``Improvements to Medicare Disproportionate Share Hospital (DSH) Payments Report: Benchmarking S-10 Data Using IRS Form 990 Data and Worksheet S-10 Trend Analyses,'' is available on the CMS Web site at: https://www.cms/gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html under the Downloads section.) Although we acknowledge that the analysis was limited to not-for-profit hospitals, we believe it is relevant to our assessment of the overall quality of the data reported on Worksheet S-10. Because many not-for-profit hospitals are eligible for empirically justified Medicare DSH payments and, therefore, uncompensated care payments, they represent a suitable standard of comparison. We conducted an analysis of 2010, 2011, and 2012 Worksheet S-10 data and IRS Form 990 data from the same years. Using IRS Form 990 data for tax years 2010, 2011, and 2012 (the latest available years) as a benchmark, we compared key variables derived from Worksheet S-10 and IRS Form 990 data, such as charity care and bad debt. The analysis was completed using data from hospitals that had completed both Worksheet S-10 and IRS Form 990 across all study years, yielding a sample of 788 not-for-profit hospitals (representing 668 unique Taxpayer Identification Numbers). Because Factor 3 is used to determine the Medicare uncompensated care payment amount for each hospital, we calculated the amounts for Factor 3 for the matched hospitals using charity care and bad debt, and compared the Factor 3 distributions calculated using data from IRS Form 990 and Worksheet S-10. Key findings indicate that the amounts for Factor 3 derived using the IRS Form 990 and Worksheet S-10 data are highly correlated. In addition, the correlation coefficient between the amounts for Factor 3 calculated from the IRS Form 990 and Worksheet S-10 has increased over time, from 0.71 in 2010 to 0.80 in 2012, suggesting some convergence in the data sources over time. This strong correlation indicates that Worksheet S-

    10 data would be a statistically valid source to use as part of the calculation of the uncompensated care payments in FY 2018.

    Accordingly, because hospitals have been on notice since the FY 2014 rulemaking that CMS intended eventually to use Worksheet S-10 as the data source for calculating uncompensated care payments, and in light of growing evidence that Worksheet S-10 data are improving over time, we believe it would be appropriate to use Worksheet S-10 as a data source for determining Factor 3 starting in FY 2018. We discuss our proposed methodology below for how we would begin to incorporate Worksheet S-10 data into the calculation of Factor 3 of the uncompensated care payment methodology.

    (2) Proposed Data Source and Time Period for FY 2018 and Subsequent Years, Including Methodology for Incorporating Worksheet S-10 Data

    For the reasons explained earlier, we believe that, starting with Worksheet S-10 data reported for FY 2014, it is appropriate to begin to incorporate Worksheet S-10 data into the computation of Factor 3 and the allocation of uncompensated care payments. Specifically, we are proposing to continue to use low-income insured patient days as a proxy

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    for uncompensated care for cost reporting periods before FY 2014 and to use Worksheet S-10 data for FY 2014 and subsequent fiscal years to calculate uncompensated care payments for FY 2018 and subsequent fiscal years, which, when combined with our proposal to use data from three cost reporting periods to calculate Factor 3, would have the effect of transitioning toward exclusive use of Worksheet S-10 data. Under this proposed approach, we would use only Worksheet S-10 data to calculate Factor 3 for FY 2020 and subsequent fiscal years.

    As discussed previously, for FY 2017, we are proposing to calculate a hospital's share of uncompensated care based on the proxy of its share of low-income insured days using a time period that includes three cost reports (that is, FY 2011, FY 2012, and FY 2013 cost reports). For the reasons we described earlier, we believe it would not be appropriate to use Worksheet S-10 data for periods prior to FY 2014. For cost reporting periods prior to FY 2014, we believe it would be appropriate to continue to use low-income insured days for the reasons we have previously described. Accordingly, with a time period that includes three cost reporting periods consisting of FY 2014 and two preceding periods, we are proposing to use Worksheet S-10 data for the FY 2014 cost reporting period and the low-income insured day proxy data for the two earlier cost reporting periods, drawing three sets of data from the most recently available HCRIS extract. That is, for FY 2018, to compute Factor 3, we are proposing to continue to advance the 3-year time period we are using by 1 year and therefore to use FY 2012, FY 2013, and FY 2014 cost report data from the most recent update of HCRIS. In addition, for FY 2018, we are proposing to use Medicaid days from FY 2012 and FY 2013 cost reports and FY 2014 and FY 2015 SSI ratios. We believe this approach would have a transitioning effect of incorporating data from Worksheet S-10 into the calculation of Factor 3 starting in FY 2018.

    Consistent with our proposal to determine Factor 3 using data over a period of 3 cost reporting periods, we are proposing to calculate a Factor 3 for each of the three cost reporting periods. Specifically, we are proposing to calculate Factor 3 for FY 2018 based on an average of Factor 3 calculated using low-income insured days (proxy data) determined using Medicaid days from FY 2012 and FY 2013 cost reports and FY 2014 and FY 2015 SSI ratios, and Factor 3 calculated using uncompensated care data based on FY 2014 Worksheet S-10. We are proposing to compute this average for each hospital by--

    Step 1: Calculating Factor 3 using the low-income insured days proxy based on FY 2012 cost report data and the FY 2014 SSI ratio;

    Step 2: Calculating Factor 3 using the insured low-income days proxy based on FY 2013 cost report data and the FY 2015 SSI ratio;

    Step 3: Calculating Factor 3 based on the FY 2014 Worksheet S-10 data; and

    Step 4: Averaging the Factor 3 values that are computed in Steps 1, 2, and 3; that is, adding the Factor 3 values from FY 2012, FY 2013, and FY 2014 for each hospital, and dividing that amount by the number of cost reporting periods with data to compute an average Factor 3.

    The denominator would be the sum of the averages of the FY 2012, FY 2013, and FY 2014 amounts from Step 4 for each hospital that is estimated to be eligible for Medicare DSH payments in FY 2018. For example, assuming there are only three hospitals in the IPPS and Hospitals A and B are estimated to be eligible for Medicare DSH payments in FY 2018, while Hospital C is estimated as ineligible for Medicare DSH payments in FY 2018, each hospital's proposed share of the overall amount available for uncompensated care payments would be calculated as follows:

    (Hospital A FY 2012 Factor 3 proxy) + (Hospital A FY 2013 Factor 3 proxy) + (Hospital A FY 2014 Factor 3 S-10) / 3 = X

    (Hospital B FY 2012 Factor 3 proxy) + (Hospital B FY 2013 Factor 3 proxy) + (Hospital B FY 2014 Factor 3 S-10) / 3 = Y

    (Hospital C FY 2012 Factor 3 proxy) + (Hospital C FY 2013 Factor 3 proxy) + (Hospital C FY 2014 Factor 3 S-10) / 3 = Z

    Hospital A's Factor 3 or proposed share of the overall uncompensated care amount in FY 2018 would be equal to (X) / (X+Y).

    Hospital B's Factor 3 or proposed share of the overall uncompensated care amount in FY 2018 would be equal to (Y) / (X+Y).

    Hospital C's Factor 3 or proposed share of the overall uncompensated care amount in FY 2018 would be equal to (Z) / (X+Y).

    We note that, under this proposal, the methodology for calculating Factor 3 for each subsequent year would remain unchanged (such as using all cost reports for eligible hospitals that begin during the relevant cost reporting years, including cost reporting periods that are not 12 months in length, and using a proxy for Medicare SSI days for hospitals in Puerto Rico, as described earlier for the calculation of Factor 3 for FY 2017). With regard to FY 2019 and subsequent years, we believe it would continue to be appropriate to advance the 3-year time period we are using by 1 year to compute Factor 3. Accordingly, we are proposing to use FY 2013, FY 2014, and FY 2015 cost report data from the most recent available update of HCRIS to compute Factor 3 and allocate uncompensated care payments for FY 2019. As we stated earlier, with regard to the data used to compute Factor 3, we believe that it would be appropriate to use Worksheet S-10 data from FY 2014 and subsequent periods to calculate Factor 3 and hospitals' uncompensated care payments for FY 2018 and subsequent fiscal years. Because we are proposing to use FY 2013, FY 2014, and FY 2015 cost reports to determine Factor 3 for FY 2019, we are proposing to calculate Factor 3 with a proxy calculated based on FY 2013 cost report data and FY 2015 SSI ratios and based on Worksheet S-10 uncompensated care costs from FY 2014 and FY 2015 cost reports. We are proposing to calculate Factor 3 for FY 2019 based on an average of Factor 3 amounts calculated using data from the three cost reporting periods in the manner described earlier for FY 2018. For FY 2020, we are proposing to continue to advance the three cost reports used by 1 year, and we are proposing to calculate Factor 3 using only data from the Worksheet S-10, from cost reports from FY 2014, FY 2015, and FY 2016. For FY 2021 and subsequent fiscal years, we would continue to base our estimates of the amount of hospital uncompensated care on uncompensated care costs, using three cost reporting periods from the most recently available HCRIS database, and in each fiscal year, the cost reporting periods would be advanced forward by 1 year (for example, for FY 2021, FY 2015, FY 2016, and FY 2017 cost reports would be used). We are soliciting comments on the proposed data sources, time periods, and method for calculating uncompensated care costs in FY 2018 and subsequent years.

    Although our proposal for FY 2018 is to calculate Factor 3 based on an average of the Factor 3 amounts calculated using 2 years of proxy data and 1 year of data from the FY 2014 Worksheet S-10, readers may find it useful to review a file posted on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html

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    under the Downloads section, which shows preliminary uncompensated care costs calculated by hospital using only Worksheet S-10 data from FY 2014 cost reports extracted from the December 2015 update of HCRIS. To the extent that hospitals have either not submitted a Worksheet S-10 with their FY 2014 cost report or find errors on a submitted Worksheet S-10, we encourage hospitals to work with MACs to complete and revise, as appropriate, their FY 2014 Worksheet S-10 as soon as possible.

    (3) Proposed Definition of Uncompensated Care for FY 2018 and Subsequent Fiscal Years

    In the FY 2014 IPPS/LTCH PPS rulemaking, we considered three potential definitions of uncompensated care: Charity care; charity care + bad debt; and charity care + bad debt + Medicaid shortfalls. As we explained in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634), we considered proposing to define the amount of uncompensated care for a hospital as the uncompensated care costs of that hospital and considered potential data sources for those costs. We examined the literature on uncompensated care and the concepts of uncompensated care used in various public and private programs, and considered input from stakeholders and public comments in various forums, including the national provider call that we held in January 2013. Our review of the information from these sources indicated that there is some variation in how different States, provider organizations, and Federal programs define ``uncompensated care.'' However, a common theme of almost all these definitions is that they include both ``charity care'' and ``bad debt'' as components of ``uncompensated care.'' Therefore, a definition that incorporates the most commonly used factors within uncompensated care as reported by stakeholders would include charity care costs and bad debt costs. Worksheet S-10 employs the definition of charity care plus non-Medicare bad debt. Specifically:

    GRAPHIC TIFF OMITTED TP27AP16.003

    Where:

    Cost of charity care = Cost of initial obligation of patients approved for charity care (line 21) minus partial payment by patients approved for charity care (line 22).

    Cost of non-Medicare bad debt expense = Cost to charge ratio (line 1) times non-Medicare and nonreimbursable bad debt expense (line 28).

    We believe a definition that incorporates the most commonly used factors within uncompensated care as reported by stakeholders would include charity care costs and non-Medicare bad debt costs which correlates to line 30 of Worksheet S-10. Therefore, we are proposing that, for purposes of calculating Factor 3 and uncompensated care costs beginning in FY 2018, ``uncompensated care'' would be defined as the amount on line 30 of Worksheet S-10, which is the cost of charity care and the cost of non-Medicare bad debt.

    We have received many comments and questions from hospitals and hospital associations regarding whether Medicaid payment shortfalls should be included in the definition of uncompensated care. Some stakeholders argue that such payment shortfalls are unreimbursed care for low-income patients and that the definition of uncompensated care should be consistent across Medicare and Medicaid (where the longstanding Medicaid definition of uncompensated care used for Medicaid hospital-specific DSH limits includes Medicaid payment shortfalls). Proponents of including Medicare shortfalls advance two arguments:

    Medicaid payment shortfalls represent non-covered care; therefore, hospitals have unmet costs when treating these patients.

    The goal of Medicare DSH payments is to provide partial relief from charity care that is provided to (primarily) low-income patients. Because Medicaid enrollees are low-income persons, the underpayments associated with their care are a form of charity care.

    In contrast, there are several arguments to support excluding Medicaid shortfalls from the definition of uncompensated care:

    Several government agencies and key stakeholders define uncompensated care as bad debt plus charity care, without consideration for Medicaid payment shortfalls. Specifically, MedPAC, GAO, and the AHA exclude Medicaid underpayments from the definition of uncompensated care.

    Including Medicaid shortfalls in the calculation of Medicare uncompensated care payments would represent a form of cross-

    subsidization from Medicare to cover Medicaid costs. In the past, CMS and MedPAC have not supported such action.

    Excluding Medicaid shortfalls from the uncompensated care definition allows Medicare DSH payments to better target hospitals with a disproportionate share of uncompensated care for patients with no insurance coverage.

    We believe these arguments for excluding Medicare shortfalls from the definition of uncompensated care are compelling. In addition, we believe that it is advisable to adopt a definition that is used by several government agencies and key stakeholders. Therefore, we are proposing that, for purposes of calculating Factor 3 and the amount of uncompensated care for a hospital beginning in FY 2018, ``uncompensated care'' would be defined as the cost of charity care and the cost of non-Medicare bad debt. We also are proposing to exclude Medicaid shortfalls reported on Worksheet S-10 from the definition of uncompensated care for purposes of calculating Factor 3. We are proposing to codify this definition in the regulation at Sec. 412.106(g)(1)(iii)(C) and are inviting public comment on our proposed definition. We believe that uncompensated care costs as reported on line 30 of Worksheet S-10 best reflect our proposed definition of uncompensated care at this time, but we welcome public input on this issue.

    (4) Other Methodological Considerations for FY 2018 and Subsequent Fiscal Years

    In the past several years, we also have received technical comments from stakeholders regarding the timing of reporting charity care and the CCRs used in determining uncompensated care costs. We discuss these issues and

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    how we are proposing to incorporate them into the calculation of uncompensated care costs for purposes of determining uncompensated care payments for FY 2018 and subsequent fiscal years below.

    Timing of Reporting Charity Care. The determination and write-off of charity care often happens outside of the hospital fiscal year in which the services are provided. Some commenters have requested that the charity care captured on Line 20 of Worksheet S-10 include only the charity care that was written off in the particular cost reporting year, regardless of when the services were provided, consistent with charity write-offs that hospitals report in accordance with GAAP. In addition, hospitals currently report non-Medicare bad debt without regard to when the services were provided. The current Worksheet S-10 does not follow this hospital practice, and specifies that charity care provided (not necessarily written off) during the period should to be recorded on Line 20. (Instructions for Line 20 of Worksheet S-10 of the Medicare cost report CMS-Form-2552-10, ``Enter the total initial payment obligation of patients who are given a full or partial discount based on the hospital's charity care criteria (measured at full charges), for care delivered during this cost reporting period for the entire facility . . .'' (emphasis added) are included in CMS Pub. 15-2, Chapter 40, Section 4012).) While these differences in reporting should average out over time for a hospital, consistency in reporting has been requested by some stakeholders. We acknowledge these concerns, and we intend to revise the current Worksheet S-10 cost report instructions for Line 20 concerning the timing of reporting charity care, such that charity care will be reported based on date of write-off, and not based on date of service.

    Revisions to the CCR on Line 1 of Worksheet S-10. Many commenters have requested that the CCR used to convert charges to costs should include the cost of training residents (direct GME costs). The CCR on line 1 of Worksheet S-10 currently does not include GME costs, while the charges of teaching hospitals do include charges for GME. Thus, the CCR excludes GME costs in the cost component (or numerator), but includes GME costs in the charge component (or denominator). Commenters have requested that CMS consider using the GME costs reported in Worksheet B Part I (column 24, line 118) to capture these additional costs. Unless these GME costs are included, commenters maintained that the CCRs of teaching hospitals are artificially low, not capturing true uncompensated care costs, thereby disadvantaging teaching hospitals in the calculation of their uncompensated care costs.

    Using data from FY 2011 and 2012 cost reports, we analyzed the effect on all hospitals' uncompensated care costs when GME costs are included in the numerator. Specifically, instead of calculating the CCRs as specified currently on line 1 of Worksheet S-10 (which pulls the CCR from Worksheet C, Part I, column 3, line 202/Worksheet C, column 8, line 202), we calculated the CCRs using Worksheet B, Part I, column 24, line 118/Worksheet C, Part I, column 8, line 202. As can be seen on the file posted on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html under the Downloads section, and as expected, including GME costs in the numerator of the CCR results in an increased share of uncompensated care payments being made to teaching hospitals. Of the more than 1,000 teaching hospitals included in the analysis, the CCRs of 830 hospitals increase by less than 5 percent, 178 hospitals' CCRs increase by more than 5 percent but less than 10 percent, and 71 hospitals' CCRs increase by 10 percent or more. Thirty-three hospitals experience a decrease in their CCRs, with 32 hospitals experiencing a decrease of less than 5 percent, and 1 hospital experiencing a decrease of more than 5 percent, but less than 10 percent. As we have stated previously in response to this issue, we believe that the purp