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Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2015 Rates; Quality Reporting Requirements for Specific Providers; Reasonable Compensation Equivalents for Physician Services in Excluded Hospitals and Certain Teaching Hospitals; Provider Administrative Appeals and Judicial Review; Enforcement Provisions for Organ Transplant Centers; and Electronic Health Record (EHR) Incentive Program

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Start Preamble Start Printed Page 49854

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems. Some of these changes implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act), the Protecting Access to Medicare Act of 2014, and other legislation. These changes are applicable to discharges occurring on or after October 1, 2014, unless otherwise specified in this final rule. We also are updating the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The updated rate-of-increase limits are effective for cost reporting periods beginning on or after October 1, 2014.

We also are updating the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and implementing certain statutory changes to the LTCH PPS under the Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 and the Protecting Access to Medicare Act of 2014. In addition, we discuss our proposals on the interruption of stay policy for LTCHs and on retiring the “5 percent” payment adjustment for co-located LTCHs. While many of the statutory mandates of the Pathway for SGR Reform Act apply to discharges occurring on or after October 1, 2014, others will not begin to apply until 2016 and beyond.

In addition, we are making a number of changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments. We are establishing new requirements or revising requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare.

We are updating policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. In addition, we are making technical corrections to the regulations governing provider administrative appeals and judicial review; updating the reasonable compensation equivalent (RCE) limits, and revising the methodology for determining such limits, for services furnished by physicians to certain teaching hospitals and hospitals excluded from the IPPS; making regulatory revisions to broaden the specified uses of Medicare Advantage (MA) risk adjustment data and to specify the conditions for release of such risk adjustment data to entities outside of CMS; and making changes to the enforcement procedures for organ transplant centers.

We are aligning the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions.

In this document, we are finalizing two interim final rules with comment period relating to criteria for disproportionate share hospital uncompensated care payments and extensions of temporary changes to the payment adjustment for low-volume hospitals and of the Medicare-Dependent, Small Rural Hospital (MDH) Program.

DATES:

Effective Date: These final rules are effective on October 1, 2014.

Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835 are applicable to appeals based on untimely contractor determinations that are pending or were filed on or after August 21, 2008, subject to the rules of administrative finality and reopening at 42 CFR 405.1807 and 405.1885. The provisions discussed in section IV.I.4.c. of the preamble of this final rule are applicable on or after July 1, 2015; and the provisions discussed in section IV.I.5.a. of the preamble of this final rule are applicable on or after January 1, 2015.

Start Further Info

FOR FURTHER INFORMATION, CONTACT:

Ing-Jye Cheng, (410) 786-4548 and Donald Thompson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions (HAC), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues.

Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590, Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG Relative Weights Issues.

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

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

Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues.

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

Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.

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

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

Kellie Shannon, (410) 786-0416, Administrative Appeals by Providers and Judicial Review Issues.

Amelia Citerone, (410) 786-3901, and Robert Kuhl (410) 786-4597, Start Printed Page 49855Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided in Providers.

Anne Calinger, (410) 786-3396, and Jennifer Harlow, (410) 786-4549, Medicare Advantage Risk Adjustment Data Issues.

Thomas Hamilton, (410) 786-6763, Organ Transplant Center Issues.

Jennifer Phillips, (410) 786-1023, 2-Midnight Rule Benchmark Issues.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

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 are available only through the Internet. The IPPS tables for this final rule are available only 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 2015 IPPS Final Rule Home Page” or “Acute Inpatient—Files for Download”. The LTCH PPS tables for this FY 2015 final rule are available only through the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​LongTermCareHospitalPPS/​index.html under the list item for Regulation Number CMS-1607-F. For complete details on the availability of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this final rule.

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

Acronyms

3M 3M Health Information System

AAMC Association of American Medical Colleges

ACGME Accreditation Council for Graduate Medical Education

ACoS American College of Surgeons

AHA American Hospital Association

AHIC American Health Information Community

AHIMA American Health Information Management Association

AHRQ Agency for Healthcare Research and Quality

AJCC American Joint Committee on Cancer

ALOS Average length of stay

ALTHA Acute Long Term Hospital Association

AMA American Medical Association

AMGA American Medical Group Association

AMI Acute myocardial infarction

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, Pub. L. 111-5

ASCA Administrative Simplification Compliance Act of 2002, Pub. L. 107-105

ASITN American Society of Interventional and Therapeutic Neuroradiology

ATRA American Taxpayer Relief Act of 2012, Pub. L. 112-240

BBA Balanced Budget Act of 1997, Pub. L. 105-33

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113

BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106-554

BLS Bureau of Labor Statistics

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 Center for Disease Control and Prevention

CERT Comprehensive error rate testing

CDI Clostridium difficile (C. difficile)

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, Pub. L. 99-272

COLA Cost-of-living adjustment

CoP [Hospital] condition of participation

COPD Chronis obstructive pulmonary disease

CPI Consumer price index

CQM Clinical quality measure

CRNA Certified registered nurse anesthetist

CY Calendar year

DACA Data Accuracy and Completeness Acknowledgement

DPP Disproportionate patient percentage

DRA Deficit Reduction Act of 2005, Pub. L. 109-171

DRG Diagnosis-related group

DSH Disproportionate share hospital

EBRT External Bean Radiotherapy

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, Pub. L. 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

HCRIS Hospital Cost Report Information System

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, Pub. L. 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

IBR Intern- and Resident-to-Bed Ratio

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

IGI IHS Global Insight, Inc.

IHS Indian Health Service

IME Indirect medical education

I-O Input-Output

IOM Institute of Medicine

IPF Inpatient psychiatric facility

IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]Start Printed Page 49856

IPPS [Acute care hospital] inpatient prospective payment system

IRF Inpatient rehabilitation facility

IQR Inpatient Quality Reporting

LAMCs Large area metropolitan counties

LOS Length of stay

LTC-DRG Long-term care diagnosis-related group

LTCH Long-term care hospital

LTCHQR Long-Term Care Hospital Quality Reporting

MA Medicare Advantage

MAC Medicare Administrative Contractor

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, Pub. L. 109-432

MIPPA Medicare Improvements for Patients and Providers Act of 2008, Pub. L. 110-275

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173

MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173

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]

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

NQF National Quality Forum

NQS National Quality Strategy

NTIS National Technical Information Service

NTTAA National Technology Transfer and Advancement Act of 1991, Pub. L. 104-113

NVHRI National Voluntary Hospital Reporting Initiative

OACT [CMS] Office of the Actuary

OBRA 86 Omnibus Budget Reconciliation Act of 1986, Pub. L. 99-509

OES Occupational employment statistics

OIG Office of the Inspector General

OMB [Executive] Office of Management and Budget

OPM [U.S.] Office of Personnel Management

OQR [Hospital] Outpatient Quality Reporting

O.R. Operating room

OSCAR Online Survey Certification and Reporting [System]

PAMA Protecting Access to Medicare Act of 2014, Pub. L. 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

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

QIG Quality Improvement Group [CMS]

QIO Quality Improvement Organization

QRDA Quality Reporting Data Architecture

RCE Reasonable compensation equivalent

RFA Regulatory Flexibility Act, Pub. L. 96-354

RHC Rural health clinic

RHQDAPU Reporting hospital quality data for annual payment update

RNHCI Religious nonmedical health care institution

RPL Rehabilitation psychiatric long-term care (hospital)

RRC Rural referral center

RSMR Risk-standardized mortality rate

RSRR 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

SCIP Surgical Care Improvement Project

SFY State fiscal year

SIC Standard Industrial Classification

SNF Skilled nursing facility

SOCs Standard occupational classifications

SOM State Operations Manual

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, Pub. L. 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, Pub. L. 110-90

TPS Total Performance Score

UHDDS Uniform hospital discharge data set

UMRA Unfunded Mandate Reform Act, Pub. L. 104-4

VBP [Hospital] Value Based Purchasing [Program]

VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Summary

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

2. Hospitals and Hospital Units Excluded From the IPPS

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

4. Critical Access Hospitals (CAHs)

5. Payments for Graduate Medical Education (GME)

C. Summary of Provisions of Recent Legislation Discussed in This Final Rule

1. Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152)

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

3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67)

4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)

D. Issuance of Notice of Proposed Rulemaking

E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS Proposed Rule

F. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the MDH Program

G. Finalization of Interim Final Rule With Comment Period Related to Changes to Certain Cost Reporting Procedures for Disproportionate Share Hospital Uncompensated Care Payments

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

A. Background

B. MS-DRG Reclassifications

C. Adoption of the MS-DRGs in FY 2008

D. FY 2015 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 Pub. L. 110-90

2. Adjustment to the Average Standardized Amounts Required by Pub. L. 110-90

a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L. 110-90

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

5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) of Pub. L. 110-90Start Printed Page 49857

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

7. Prospective Adjustment for the MS-DRG Documentation and Coding Effect Through FY 2010

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background

2. Discussion for FY 2015

F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections for FY 2015

1. Background

2. HAC Selection

3. Present on Admission (POA) Indicator Reporting

4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM and ICD-10-PCS

5. Current HACs and Previously Considered Candidate HACs

6. RTI Program Evaluation

7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines

G. Changes to Specific MS-DRG Classifications

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

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

b. Basis for FY 2015 MS-DRG Updates

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

a. Intracerebral Therapies: Gliadel® Wafer

b. Endovascular Embolization or Occlusion of Head and Neck

3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System

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

a. Exclusion of Left Atrial Appendage

b. Transcatheter Mitral Valve Repair: MitraClip®

c. Endovascular Cardiac Valve Replacement Procedures

d. Abdominal Aorta Graft

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

a. Shoulder Replacement Procedures

b. Ankle Replacement Procedures

c. Back and Neck Procedures

6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyria Metabolism

7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period)

8. Medicare Code Editor (MCE) Changes

9. Changes to Surgical Hierarchies

10. Changes to the MS-DRG Diagnosis Codes for FY 2015

a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CCs) Severity Levels for FY 2015

b. Coronary Atherosclerosis Due to Calcified Coronary Lesion

11. Complications or Comorbidity (CC) Exclusions List

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

b. CC Exclusions List for FY 2015

12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 Through 986, and 987 Through 989

a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 Through 989 Into MDCs

b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 Through 986, and 987 Through 989

c. Adding Diagnosis or Procedure Codes to MDCs

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

a. ICD-10 Coordination and Maintenance Committee

b. Code Freeze

14. Public Comments on Issues Not Addressed in the Proposed Rule

a. Request for Review and MS-DRG Assignment for ICD-9-CM Diagnosis Code 784.7 Reported with Procedure Code 39.75

b. Coding for Extracorporeal Membrane Oxygenation (ECMO) Procedures

c. Adding Severity Levels to MS-DRGs 245 Through 251

H. Recalibration of the FY 2015 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights

2. Methodology for Calculation of the Relative Weights

3. Development of National Average CCRs

4. Bundled Payments for Care Improvement (BPCI) Initiative

I. 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. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments

a. Glucarpidase (Trade Brand Voraxaze®)

b. DIFICIDTM (Fidaxomicin) Tablets

c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft

d. KcentraTM

e. Argus® II Retinal Prosthesis System

f. Zilver® PTX® Drug Eluting Stent

4. FY 2015 Applications for New Technology Add-On Payments

a. Dalbavancin (Durata Therapeutics, Inc.)

b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.)

c. CardioMEMSTM HF (Heart Failure) System

d. MitraClip® System

f. Responsive Neurostimulator (RNS®) System

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

A. Background

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

1. Background

2. Implementation of New Labor Market Area Delineations

a. Micropolitan Statistical Areas

b. Urban Counties That Became Rural Under the New OMB Delineations

c. Rural Counties That Became Urban Under the New OMB Delineations

d. Urban Counties That Moved to a Different Urban CBSA Under the New OMB Delineations

e. Transition Period

C. Worksheet S-3 Wage Data for the FY 2015 Wage Index

1. Included Categories of Costs

2. Excluded Categories of Costs

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

D. Verification of Worksheet S-3 Wage Data

E. Method for Computing the FY 2015 Unadjusted Wage Index

F. Occupational Mix Adjustment to the FY 2015 Wage Index

1. Development of Data for the FY 2015 Occupational Mix Adjustment Based on the 2010 Occupational Mix Survey

2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index

3. Calculation of the Occupational Mix Adjustment for FY 2015

G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2015 Occupational Mix Adjusted Wage Index

1. Analysis of the Occupational Mix Adjustment and the Occupational Mix Adjusted Wage Index

2. Application of the Rural, Imputed, and Frontier Floors

a. Rural Floor

b. Imputed Floor and Alternative, Temporary Methodology for Computing the Rural Floor for FY 2015

c. Frontier Floor

3. FY 2015 Wage Index Tables

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

1. General Policies and Effects of Reclassification and Redesignation

2. FY 2015 MGCRB Reclassifications

a. FY 2015 Reclassification Requirements and Approvals

b. Effects of Implementation of New OMB Labor Market Area Delineations on Reclassified Hospitals

c. Applications for Reclassifications for FY 2016

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

a. New Lugar Areas for FY 2015

b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act Seeking Reclassification by the MGCRB

c. Rural Counties No Longer Meeting the Criteria to be Redesignated as Lugar

4. Waiving Lugar Redesignation for the Out-Migration Adjustment

5. Update of Application of Urban to Rural Reclassification Criteria

I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees

J. Process for Requests for Wage Index Data Corrections

K. Notice of Change to Wage Index Development Timetable

L. Labor-Related Share for the FY 2015 Wage Index

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

A. Changes to MS-DRGs Subject to the Postacute Care Transfer Policy (§ 412.4)Start Printed Page 49858

B. Changes in the Inpatient Hospital Updates for FY 2015 (§§ 412.64(d) and 412.211(c))

1. FY 2015 Inpatient Hospital Update

2. FY 2015 Puerto Rico Hospital Update

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

1. Case-Mix Index (CMI)

2. Discharges

D. Payment Adjustment for Low-Volume Hospitals (§ 412.101)

1. Background

2. Provisions of the Protecting Access to Medicare Act of 2014

3. Low-Volume Hospital Definition and Payment Adjustment for FY 2015

E. Indirect Medical Education (IME) Payment Adjustment (§ 412.105)

1. IME Adjustment Factor for FY 2015

2. IME Add-On Payments for Medicare Part C Discharges to Sole Community Hospitals (SCHs) That Are Paid According to Their Hospital-Specific Rates and Change in Methodology in Determining Payment to SCHs

3. Other Policy Changes Affecting IME

F. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106)

1. Background

2. Impact on Medicare DSH Payment Adjustment of Implementation of New OMB Labor Market Area Delineations

3. Payment Adjustment Methodology for Medicare Disproportionate Share Hospitals (DSHs) under Section 3133 of the Affordable Care Act (§ 412.106)

a. General Discussion

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

c. Empirically Justified Medicare DSH Payments

d. Uncompensated Care Payments

e. Limitations on Review

G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108) and Sole Community Hospitals § 412.92)

1. Background for the MDH Program

2. PAMA of 2014 Provisions for FY 2015

3. Expiration of the MDH Program

4. Effects on MDHs of Adoption of New OMB Delineations

5. Effects on SCHs of Adoption of New OMB Delineations

H. Hospital Readmissions Reduction Program: Changes for FY 2015 Through FY 2017 (§§ 412.150 Through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program

2. Regulatory Background

3. Overview of Policies for the FY 2015 Hospital Readmissions Reduction Program

4. Refinement of the Readmissions Measures and Related Methodology for FY 2015 and Subsequent Years Payment Determinations

a. Refinement of Planned Readmission Algorithm for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measures

b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort

c. Anticipated Effect of Refinements on Measures

5. No Expansion of the Applicable Conditions for FY 2016

6. Expansion of the Applicable Conditions for FY 2017 To Include Patients Readmitted Following Coronary Artery Bypass Graft (CABG) Surgery Measure

a. Background

b. Overview of the CABG Readmissions Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery

c. Methodology for the CABG Measure: Hospital-Level, 30-Day, All-Cause, Unplanned Readmission Following Coronary Artery Bypass Graft (CABG) Surgery

7. Maintenance of Technical Specifications for Quality Measures

8. Waiver From the Hospital Readmissions Reduction Program for Hospitals Formerly Paid under Section 1814(b)(3) of the Act (§ 412.152 and § 412.154(d))

9. Floor Adjustment Factor for FY 2015 (§ 412.154(c)(2))

10. Applicable Period for FY 2015

11. Inclusion of THA/TKA and COPD Readmissions Measures to Calculate Aggregate Payments for Excess Readmissions Beginning in FY 2015

12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions

I. Hospital Value-Based Purchasing (VBP) Program

1. Statutory Background

2. Overview of Previous Hospital VBP Program Rulemaking

3. FY 2015 Payment Details

a. Payment Adjustments

b. Base Operating DRG Payment Amount Definition for Medicare-Dependent, Small Rural Hospitals (MDHs)

4. Measures for the FY 2017 Hospital VBP Program

a. Measures Previously Adopted

b. Changes Affecting Topped-Out Measures

c. New Measures for the FY 2017 Hospital VBP Program

d. Adoption of the Current CLABSI Measure (NQF #0139) for the FY 2017 Hospital VBP Program

e. Summary of Previously Adopted and New Measures for the FY 2017 Hospital VBP Program

5. Additional Measures for the FY 2019 Hospital VBP Program

a. Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA)

b. PSI-90 Measure

6. Possible Measure Topics for Future Program Years

a. Care Transition Measure (CTM-3) Items for HCAHPS Survey

b. Possible Future Efficiency and Cost Reduction Domain Measure Topics

7. Previously Adopted and Final Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program

a. Background

b. Previously Adopted Baseline and Performance Periods for the FY 2017 Hospital VBP Program

c. Clinical Care—Process Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program

d. Patient and Caregiver-Centered Experience of Care/Care Coordination Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program

e. Performance Period and Baseline Period for NHSN Measures in the Safwety Domain for the FY 2017 Hospital VBP Program

f. Efficiency and Cost Reduction Domain Performance Period and Baseline Period for the FY 2017 Hospital VBP Program

g. Summary of Previously Adopted and Finalized Performance Periods and Baseline Periods for the FY 2017 Hospital VBP Program

8. Previously Adopted and Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program

a. Previously Adopted and Finalized Performance Period and Baseline Period for the FY 2019 Hospital VBP Program for Clinical Care—Outcomes Domain Measures

b. Performance Period and Baseline Period for the PSI-90 Safety Domain Measure for the FY 2019 Hospital VBP Program

c. Summary of Previously Adopted and Finalized Performance Periods and Baseline Periods for Certain Measures for the FY 2019 Hospital VBP Program

9. Performance Period and Baseline Period for the Clinical Care—Outcomes Domain for the FY 2020 Hospital VBP Program

10. Performance Standards for the Hospital VBP Program

a. Background

b. Performance Standards for the FY 2016 Hospital VBP Program

c. Previously Adopted Performance Standards for the FY 2017, FY 2018, and FY 2019 Hospital VBP Programs

d. Additional Performance Standards for the FY 2017 Hospital VBP Program

e. Performance Standards for the FY 2019 and FY 2020 Hospital VBP Programs

f. Technical Updates Policy for Performance Standards

g. Solicitation of Public Comments on ICD-10-CM/PCS Transition

11. FY 2017 Hospital VBP Program Scoring Methodology

a. General Hospital VBP Program Scoring Methodology

b. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals That Receive a Score on All Domains

c. Domain Weighting for the FY 2017 Hospital VBP Program for Hospitals Receiving Scores on Fewer Than Four Domains

12. Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program's Quality DomainsStart Printed Page 49859

a. Previously Adopted Minimum Numbers of Cases and FY 2016 Minimum Numbers of Cases

b. Minimum Number of Measures—Safety Domain

c. Minimum Number of Measures—Clinical Care Domain

d. Minimum Number of Measures—Efficiency and Cost Reduction Domain

e. Minimum Number of Measures—Patient and Caregiver Centered Experience of Care/Care Coordination (PEC/CC) Domain

13. Applicability of the Hospital VBP Program to Maryland Hospitals

14. Disaster/Extraordinary Circumstance Exception under the Hospital VBP Program

J. Hospital-Acquired Condition (HAC) Reduction Program

1. Background

2. Statutory Basis for the HAC Reduction Program

3. Implementation of the HAC Reduction Program for FY 2015

a. Overview

b. Payment Adjustment Under the HAC Reduction Program, Including Exemptions

c. Measure Selection and Conditions, Including Risk Adjustment Scoring Methodology

d. Criteria for Applicable Hospitals and Performance Scoring Policy

e. Reporting Hospital-Specific Information, Including the Review and Correction of Information

f. Limitation on Administrative and Judicial Review

4. Maintenance of Technical Specifications for Quality Measures

5. Extraordinary Circumstances Exceptions/Exemptions

6. Implementation of the HAC Reduction Program for FY 2016

a. Measure Selection and Conditions, including a Risk-Adjustment Scoring Methodology

b. Measure Risk Adjustment

c. Measure Calculation

d. Applicable Time Period

e. Criteria for Applicable Hospitals and Performance Scoring

f. Rules To calculate the Total HAC Score for FY 2016

7. Future Consideration for the Use of Electronically Specified Measures

K. Payments for Indirect and Direct Graduate Medical Education (GME) Costs (§§ 412.105 and 413.75 through 413.83)

1. Background

2. Changes in the Effective Date of the FTE Resident Cap, 3-Year Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for New Programs in Teaching Hospitals

3. Changes to IME and Direct GME Policies as a Result of New OMB Labor Market Area Delineations

a. New Program FTE Cap Adjustment for Rural Hospitals Redesignated as Urban

b. Participation of Redesignated Hospitals in Rural Training Track

4. Clarification of Policies on Counting Resident Time in Nonprovider Settings Under Section 5504 of the Affordable Care Act

5. Changes to the Review and Award Process for Resident Slots Under Section 5506 of the Affordable Care Act

a. Effective Date of Slots Awarded Under Section 5506 of the Affordable Care Act

b. Removal of Seamless Requirement

c. Revisions to Ranking Criteria One, Seven, and Eight for Applications Under Section 5506

d. Clarification to Ranking Criterion Two Regarding Emergency Medicare GME Affiliation Agreements

6. Regulatory Clarification Applicable To Direct GME Payments to Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for Training Residents in Approved Programs

L. Rural Community Hospital Demonstration Program

1. Background

2. FY 2015 Budget Neutrality Offset Amount

M. Requirement for Transparency of Hospital Charges Under the Affordable Care Act

1. Overview

2. Transparency Requirement Under the Affordable Care Act

N. Medicare Payment for Short Inpatient Hospital Stays

O. Suggested Exceptions to the 2-Midnight Benchmark

P. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges Through March 31, 2014

1. Background

2. Summary of the Provisions of the Interim Final Rule With Comment Period

Q. Finalization of Interim Final Rule With Comment Period on Changes to Certain Cost Reporting Procedures Related to Disproportionate Share Hospital Uncompensated Care Payments

V. Changes to the IPPS for Capital-Related Costs

A. Overview

B. Additional Provisions

1. Exception Payments

2. New Hospitals

3. Hospitals Located in Puerto Rico

C. Annual Update for FY 2015

VI. Changes for Hospitals Excluded From the IPPS

A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2015

B. Report on Adjustment (Exception) Payments

C. Updates to the Reasonable Compensation Equivalent (RCE) Limits on Compensation for Physician Services Provided in Providers (§ 415.70)

1. Background

2. Overview of the Current RCE Limits

a. Application of the RCE Limits

b. Exceptions to the RCE Limits

c. Methodology for Establishing the RCE Limits

3. Changes to the RCE Limits

D. Critical Access Hospitals (CAHs

1. Background

2. Proposed and Final Policy Changes Related to Reclassifications as Rural for CAHs

3. Revision of the Requirements for Physician Certification of CAH Inpatient Services

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

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority

2. Criteria for Classification as an LTCH

a. Classification as an LTCH

b. Hospitals Excluded From the LTCH PPS

3. Limitation on Charges to Beneficiaries

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

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2015

1. Background

2. Patient Classifications into MS-LTC-DRGs

a. Background

b. Changes to the MS-LTC-DRGs for FY 2015

3. Development of the FY 2015 MS-LTC-DRG Relative Weights

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

b. Development of the MS-LTC-DRG Relative Weights for FY 2015

c. Data

d. Hospital-Specific Relative Value (HSRV) Methodology

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

f. Low-Volume MS-LTC-DRGs

g. Steps for Determining the FY 2015 MS-LTC-DRG Relative Weights

C. LTCH PPS Payment Rates for FY 2015

1. Overview of Development of the LTCH Payment Rates

2. FY 2015 LTCH PPS Annual Market Basket Update

a. Overview

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

c. Adjustment to the Annual Update to the LTCH PPS Standard Federal Rate Under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program

1. Background

2. Reduction to the Annual Update to the LTCH PPS Standard Federal Rate under the LTCHQR Program

d. Market Basket Under the LTCH PPS for FY 2015

e. Annual Market Basket Update for LTCHs for FY 2015

3. Adjustment for the Final Year of the Phase-In of the One-Time Prospective Adjustment to the Standard Federal Rate under § 412.523(d)(3)

D. Revision of LTCH PPS Geographic Classifications

1. Background

2. Use of New OMB Labor Market Area Delineations (“New OMB Delineations”)

a. Micropolitan Statistical AreasStart Printed Page 49860

b. Urban Counties That Became Rural Under the New OMB Labor Market Area Delineations

c. Rural Counties That Became Urban Under the New OMB Labor Market Area Delineations

d. Urban Counties That Moved to a Different Urban CBSA Under the New OMB Labor Market Area Delineations

e. Transition Period

E. Reinstatement and Extension of Certain Payment Rules for LTCH Services—The 25-Percent Threshold Payment Adjustment

1. Background

2. Implementation of Section 1206(b)(1) of Pub. L. 113-67

F. Discussion of the “Greater Than 3-Day Interruption of Stay” Policy and the Transfer to Onsite Providers Policies Under the LTCH PPS

G. Moratoria on the Establishment of LTCHs and LTCH Satellite Facilities and on the Increase in the Number of Beds in Existing LTCHs or LTCH Satellite Facilities

H. Evaluation and Treatment of LTCHs Classified Under Section 1886(d)(1)(B)(iv)(II) of the Act

I. Description of Statutory Framework for Patient-Level Criteria-Based Payment Adjustment Under the LTCH PPS Under Pub. L. 113-67

1. Overview

2. Additional LTCH PPS Issues

J. Technical Change

VIII. Administrative Appeals by Providers and Judicial Review

A. Proposed and Final Changes Regarding the Claims Required in Provider Cost Reports and for Provider Administrative Appeals

B. Proposed and Final Changes to Conform Terminology From “Intermediary” to “Contractor”

C. Technical Correction to § 405.1835 of the Regulations and Corresponding Amendment to § 405.1811 of the Regulations

1. Background and Technical Correction to §§ 405.1811 and 405.1835 of the Regulations

2. Waiver of Notice of Proposed Rulemaking

3. Effective Date and Applicability Date; Finality and Reopening

IX. Quality Data Reporting Requirements for Specific Providers and Suppliers

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background

a. History of the Hospital IQR Program

b. Maintenance of Technical Specifications for Quality Measures

c. Public Display of Quality Measures

2. Removal and Suspension of Hospital IQR Program Measures

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

b. Removal of Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years

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

4. Additional Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program

5. Previously Adopted Hospital IQR Program Measures for the FY 2016 Payment Determination and Subsequent Years

6. Refinements and Clarification to Existing Measures in the Hospital IQR Program

a. Refinement of Planned Readmission Algorithm for 30-Day Readmission Measures

b. Refinement of Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures

c. Anticipated Effect of Refinements to Existing Measures

d. Clarification Regarding Influenza Vaccination for Healthcare Personnel

7. Additional Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years

a. Hospital 30-day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery

b. Hospital 30-day, All-Cause, Risk-standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery

c. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care Payment Measure for Pneumonia

d. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care Payment Measure for Heart Failure

e. Severe Sepsis and Septic Shock: Management Bundle Measure (NQF #0500)

f. Electronic Health Record-Based Voluntary Measures

g. Readoption of Measures as Voluntarily Reported Electronic Clinical Quality Measures

h. Electronic Clinical Quality Measures

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

a. Mandatory Electronic Clinical Quality Measure Reporting for FY 2018 Payment Determination

b. Possible Future Electronic Clinical Quality Measures

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

a. Background

b. Procedural Requirements for the FY 2017 Payment Determination and Subsequent Years

c. Data Submission Requirements for Chart-Abstracted Measures

d. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines

e. Sampling and Case Thresholds for the FY 2017 Payment Determination and Subsequent Years

f. HCAHPS Requirements for the FY 2017 Payment Determination and Subsequent Years

g. Data Submission Requirements for Structural Measures for the FY 2017 Payment Determination and Subsequent Years

h. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN

10. Submission and Access of HAI Measures Data Through the CDC's NHSN Web Site

11. Modifications to the Existing Processes for Validation of Chart-Abstracted Hospital IQR Program Data

a. Eligibility Criteria for Hospitals Selected for Validation

b. Number of Charts To Be Submitted per Hospital for Validation

c. Combining Scores for HAI and Clinical Process of Care Topic Areas

d. Processes To Submit Patient Medical Records for Chart-Abstracted Measures

e. Plans To Validate Electronic Clinical Quality Measure Data

f. Data Submission Requirements for Quality Measures That May Be Voluntarily Electronically Reported for the FY 2017 Payment Determination

12. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2017 Payment Determination and Subsequent Years

13. Public Display Requirements for the FY 2017 Payment Determination and Subsequent Years

14. Reconsideration and Appeal Procedures for the FY 2017 Payment Determination and Subsequent Years

15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions

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

1. Statutory Authority

2. Covered Entities

3. Previously Finalized PCHQR Program Quality Measures

4. Update to the Clinical Process/Oncology Care Measures Beginning With the 2016 Program

5. New Quality Measures Beginning With the FY 2017 Program

a. Considerations in the Selection of Quality Measures

b. New Quality Measure Beginning With the FY 2017 Program

6. Possible New Quality Measure Topics for Future Years

7. Maintenance of Technical Specifications for Quality Measures

8. Public Display Requirements Beginning With the FY 2014 Program

9. Form, Manner, and Timing of Data Submission Beginning With the FY 2017 Program

a. Background

b. Reporting Requirements for the Proposed New Measure: External Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning With the FY 2017 Program

c. Reporting Options for the Clinical Process/Cancer Specific Treatment Measures Beginning With the FY 2015 Program and the SCIP and Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program

d. New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning With the FY 2016 ProgramStart Printed Page 49861

10. Exceptions From Program Requirements

C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program

1. Background

2. General Considerations Used for Selection of Quality Measures for the LTCHQR Program

3. Policy for Retention of LTCHQR Program Measures Adopted for Previous Payment Determinations

4. Policy for Adopting Changes to LTCHQR Program Measures

5. Previously Adopted Quality Measures

a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 Payment Determinations and Subsequent Years

b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 Payment Determinations and Subsequent Years

6. Revision to Data Collection Timelines and Submission Deadlines for Previously Adopted Quality Measures

a. Revisions to Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680)

b. Revisions to Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674)

7. New LTCHQR Program Quality Measures for the FY 2018 Payment Determination and Subsequent Years

a. New LTCHQR Program Functional Status Quality Measures for the FY 2018 Payment Determination and Subsequent Years

b. Quality Measure: National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure

8. LTCHQR Program Quality Measures and Concepts Under Consideration for Future Years

9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 Payment Determinations and Subsequent Years

a. Background

b. Finalized Timeline for Data Submission Under the LTCHQR Program for the FY 2016 and FY 2017 Payment Determinations (Except NQF #0680 and NQF #0431)

c. Revision to the Previously Adopted Data Collection Timelines and Submission Deadlines for Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF #680) for the FY 2016 Payment Determination and Subsequent Years

d. Data Submission Mechanisms for the FY 2018 Payment Determination and Subsequent Years for New LTCHQR Program Quality Measures and for Revision to Previously Adopted Quality Measure

e. Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2018 Payment Determination

f. Data Collection Timelines and Submission Deadlines for the Application of Percent of Residents Experiencing One or More Falls With Major Injury (Long Stay) (NQF #0674) Measure for the FY 2018 Payment Determination and Subsequent Years

g. Data Collection Timelines and Submission Deadlines Under the LTCHQR Program for the FY 2019 Payment Determination

10. LTCHQR Program Data Completion Threshold for the FY 2016 Payment Adjustment and Subsequent Years

a. Overview

b. LTCHQR Program Data Completion Threshold for the Required LTCH CARE Data Set (LCDS) Data Items

c. LTCHQR Program Data Completion Threshold for Measures Submitted Using the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN)

d. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Completion Thresholds

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

a. Data Validation Process

b. Application of the 2 Percentage Point Reduction for LTCHs That Fail To Meet the Data Accuracy Threshold

12. Public Display of Quality Measure Data for the LTCHQR Program

13. LTCHQR Program Submission Exception and Extension Requirements for the FY 2017 Payment Determination and Subsequent Years

14. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years

a. Previously Finalized LTCHQR Program Reconsideration and Appeals Procedures for the FY 2014 and FY 2015 Payment Determinations

b. LTCHQR Program Reconsideration and Appeals Procedures for the FY 2016 Payment Determination and Subsequent Years

15. Electronic Health Records (EHR) and Health Information Exchange (HIE)

D. Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU)

1. Background

2. Alignment of the Medicare EHR Incentive Program Reporting and Submission Timelines for Clinical Quality Measures With Hospital IQR Program Reporting and Submission Timelines

3. Quality Reporting Data Architecture Category III (QRDA-III) Option in 2015

4. Electronically Specified Clinical Quality Measures (CQMs) Reporting for 2015

5. Clarification Regarding Reporting Zero Denominators

X. Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data

A. Background

B. Regulatory Changes

1. Expansion of Uses and Reasons for Disclosure of Risk Adjustment Data

2. Conditions for CMS Release of Data

3. Technical Change

XI. Changes to Enforcement Provisions for Organ Transplant Centers

A. Background

B. Basis for Changes

1. Expansion of Mitigating Factors Based on CMS' Experience

2. Coordination With Efforts of the Organ Procurement and Transplantation Network (OPTN) and Health Resources and Services Administration

C. Provisions of the Proposed and Final Regulations

1. Expansion of Mitigating Factors List, Content, and Timeframe

2. Content and Timeframe for Mitigating Factors Requests

3. System Improvement Agreements (SIAs)

a. Purpose and Intent of an SIA

b. Description and Contents of an SIA

c. Effective Period for an SIA

XII. MedPAC Recommendations

XIII. Other Required Information

A. Requests for Data from the Public

B. 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 FY 2015 Wage Index (Hospital Wage Index Occupational Mix Survey)

4. Hospital Applications for Geographic Reclassifications by the MGCRB

5. ICRs for Application for GME Resident Slots

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 (LTCHQR) Program

10. ICR Regarding Electronic Health Record (EHR) Incentive Program and Meaningful Use (MU)

11. ICR Regarding Revision of Regulations Governing Use and Release of Medicare Advantage (MA) Risk Adjustment Data (§ 422.310(f))

Regulation Text

Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective with Cost Reporting Periods Beginning on or After October 1, 2014 and Payment Rates for LTCHs Effective With Discharges Occurring on or After October 1, 2014

I. Summary and Background

II. Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2015

A. Calculation of the Adjusted Standardized Amount

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

C. Calculation of the Prospective Payment Rates

III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2015

A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate UpdateStart Printed Page 49862

B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2015

C. Capital Input Price Index

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2015

V. Updates to the Payment Rates for the LTCH PPS for FY 2015

A. LTCH PPS Standard Federal Rate for FY 2015

1. Background

2. Development of the FY 2015 LTCH PPS Standard Federal Rate

B. Adjustment for Area Wage Levels under the LTCH PPS for FY 2015

1. Background

2. Geographic Classifications Based on the New OMB Delineations

3. LTCH PPS Labor-Related Share

4. LTCH PPS Wage Index for FY 2015

5. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment

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

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

1. Background

2. Determining LTCH CCRs Under the LTCH PPS

3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2015

4. Application of the Outlier Policy to SSO Cases

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

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2015

VI. Tables Referenced in This Final Rule and Available Through the Internet on the CMS Web site

Appendix A—Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

B. Need

C. Objectives of the IPPS

D. Limitations of Our Analysis

E. Hospitals Included in and Excluded From the IPPS

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

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

1. Basis and Methodology of Estimates

2. Analysis of Table I

3. Impact Analysis of Table II

H. Effects of Other Policy Changes

1. Effects of Policy on MS-DRGs for Preventable HACs, Including Infections

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

3. Effects of Changes to List of MS-DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy

4. Effects of Payment Adjustment for Low-Volume Hospitals for FY 2015

5. Effects of Policy Changes Related to IME Medicare Part C Add-On Payments to SCHs Paid According to Their Hospital-Specific Rates

6. Effects of the Extension of the MDH Program for the First Half of FY 2015

7. Effects of Changes Under the FY 2015 Hospital Value-Based Purchasing (VBP) Program

8. Effects of the Changes to the HAC Reduction Program for FY 2015

9. Effects of Policy Changes Relating to Payments for Direct GME and IME

10. Effects of Implementation of Rural Community Hospital Demonstration Program

11. Effects of Changes Related to Reclassifications as Rural for CAHs

12. Effects of Revision of the Requirements for Physician Certification of CAH Inpatient Services

13. Effects of Changes Relating to Administrative Appeals by Providers and Judicial Review for Appropriate Claims in Provider Cost Reports

I. Effects of Changes to Updates to the Reasonable Compensation Equivalent (RCE) Limits for Physician Services Provided to Providers

J. Effects of Changes in the Capital IPPS

1. General Considerations

2. Results

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

1. Introduction and General Considerations

2. Impact on Rural Hospitals

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

4. Effect on the Medicare Program

5. Effect on Medicare Beneficiaries

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

M. Effects of Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program for FY 2015

N. Effects of Requirements for the LTCH Quality Reporting (LTCHQR) Program for FY 2015 Through FY 2019

O. Effects of Policy Changes Regarding Electronic Health Record (EHR) Incentive Program and Hospital IQR Program

P. Effects of Revision of Regulations Governing Use and Release of Medicare Advantage Risk Adjustment Data

Q. Effects of Changes to Enforcement Provisions for Organ Transplant Centers

II. Alternatives Considered

III. Overall Conclusion

A. Acute Care Hospitals

B. LTCHs

IV. Accounting Statements and Tables

A. Acute Care Hospitals

B. LTCHs

V. Regulatory Flexibility Act (RFA) Analysis

VI. Impact on Small Rural Hospitals

VII. Unfunded Mandate Reform Act (UMRA) Analysis

VIII. 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 2015

A. FY 2015 Inpatient Hospital Update

B. Update for SCHs for FY 2015

C. FY 2015 Puerto Rico Hospital Update

D. Update for Hospitals Excluded From the IPPS for FY 2015

E. Update for LTCHs for FY 2015

III. Secretary's Recommendation

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

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

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

Under various statutory authorities, we are making changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2015 and subsequent fiscal years. These statutory authorities include, but are not limited to, the following:

  • Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS).
  • Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; cancer hospitals; and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.
  • Sections 123(a) and (c) of Pub. L. 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.Start Printed Page 49863
  • 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(d)(4)(D) of the Act, which addresses certain hospital-acquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) are high cost, high volume, or both; (b) are assigned to a higher paying MS-DRG when present as a secondary diagnosis (that is, conditions under the MS-DRG system that are complications or comorbidities (CCs) or major complications or comorbidities (MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS-DRG if a selected condition is not POA.
  • 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. A payment for indirect medical education (IME) is made under section 1886(d)(5)(B) 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 an adjustment to hospital payments for hospital-acquired conditions (HACs), or 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 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 now requires that, for “fiscal year 2014 and each subsequent fiscal year,” “subsection (d) hospitals” that would otherwise receive a “disproportionate share hospital payment . . . made under subsection (d)(5)(F)” will receive two separate payments: (1) 25 percent of the amount they previously would have received under subsection (d)(5)(F) 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 subsection (d)(5)(F); (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, which provided for the establishment of patient criteria for payment under the LTCH PPS for implementation beginning in FY 2016.
  • Section 1206(b)(1) of the Pathway for SGR Reform Act of 2013, which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, by retroactively reestablishing and extending the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for “grandfathered” hospital-within-hospitals (HwHs), which are permanently exempt from this policy); and section 1206(b)(2) (as amended by section 112(b) of Pub. L. 113-93), which together further amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish a new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities beginning January 1, 2015 and ending on September 30, 2017; and section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings.
  • 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, no later than October 1, 2015, of a functional status quality measure under the LTCHQR Program for change in mobility among inpatients requiring ventilator support.

In this final rule, we are making technical and conforming changes and nomenclature changes to the regulations regarding the claims required in provider cost reports and for provider administrative appeals to conform terminology from “intermediary” to “contractor”

We are aligning the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program for eligible hospitals and critical access hospitals (CAHs) with the reporting and submission timelines for the Hospital IQR Program. In addition, we provide guidance and clarification of certain policies for eligible hospitals and CAHs such as our Start Printed Page 49864policy for reporting zero denominators on clinical quality measures and our policy for case threshold exemptions.

In addition, this final rule contains several provisions that are not directly related to these Medicare payment systems, such as regulatory revisions to broaden the specified uses and reasons for disclosure of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS and changes to the enforcement procedures for organ transplant centers. The specific statutory authority for these other provisions is discussed in the relevant sections below.

2. Summary of the Major Provisions

a. 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 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. 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. We are making an additional -0.8 percent recoupment adjustment to the standardized amount in FY 2015.

b. Reduction of Hospital Payments for Excess Readmissions

We are making changes in policies to 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. 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 FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we established additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also established additional readmissions measures, Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be used in the Hospital Readmissions Reduction Program for FY 2015 and future years. We are expanding the readmissions measures for FY 2017 and future years by adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery. We also are refining the readmission measures and related methodology for FY 2015 and subsequent years payment determinations. In addition, we are providing that the readmissions payment adjustment factors for FY 2015 can be no more than a 3-percent reduction in accordance with the statute. We also are revising the calculation of aggregate payments for excess readmissions to include THA/TKA and COPD readmissions measures beginning in FY 2015.

c. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act 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. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary.

In this final rule, we are adopting quality measures for the FY 2017, FY 2019, and FY 2020 Hospital VBP Program years and establishing performance periods and performance standards for measures we are adopting for those fiscal years. We are also adopting additional policies related to performance standards and revising the domain weighting previously adopted for the FY 2017 Hospital VBP Program.

d. Hospital-Acquired Condition (HAC) Reduction Program

In this final rule, we are making a change in the scoring methodology with the addition of a previously finalized measure for the FY 2016 payment adjustment under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges beginning on October 1, 2014 and for subsequent program years. 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. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable.

e. DSH Payment Adjustment and Additional Payment for Uncompensated Care

Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs 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 hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period. In this final rule, we are updating the uncompensated care amount to be distributed for FY 2015, and we are making changes to the methodology for calculating the uncompensated care payment amounts such that we will combine uncompensated care data for hospitals that have merged in order to calculate the relative share of uncompensated care for the surviving hospital.

f. 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 past rules, we Start Printed Page 49865have established measures for reporting and the process for submittal and validation of the data.

We are finalizing a total of 63 measures (47 required and 16 voluntary electronic clinical quality measures) in the Hospital IQR Program measure set for the FY 2017 payment determination and subsequent years. In this final rule, we are finalizing 11 new measures (1 chart-abstracted, 4 claims-based, and 6 voluntary electronic clinical quality measures). We proposed to remove 20 measures, but are only finalizing the removal of 19. The SCIP-INF-4 measure was proposed for removal, but will be retained as it was recently retooled for the 2014 collection period. Ten of these 19 measures are topped-out, chart-abstracted measures that are being retained as voluntary electronic clinical quality measures.

While we are finalizing our proposal to align the reporting and submission timelines of the Medicare EHR Incentive Program with those of the Hospital IQR Program on the calendar year for CQMs that are reported electronically for 2015, we are not finalizing the proposal to require quarterly submission of CQM data. Hospitals can voluntarily submit one calendar year (CY) quarter of data for Q 1, Q 2, or Q3 of 2015 by November 30, 2015, in order to partially fulfill requirements for both programs for CY 2015. In addition, we are finalizing a number of new policies related to the administration of the program, including access to specific NHSN data, updates to validation, and an electronic clinical quality measures validation pilot test.

g. Changes to the LTCH PPS

Section 1206(b) of the Pathway for SGR Reform Act provides for the retroactive reinstatement and extension, for an additional 4 years, of the moratorium on the full implementation of the 25-percent threshold payment adjustment under the LTCH PPS established under section 114(c) of the MMSEA, as further amended by subsequent legislation. In keeping with this mandate, we are reinstating this payment adjustment retroactively for LTCH cost reporting periods beginning on or after July 1, 2013, or October 1, 2013.

Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, provides for new statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities (subject to certain defined exceptions) and a new statutory moratorium on bed increases in existing LTCHs effective for the period beginning April 1, 2014 and ending September 30, 2017.

In accordance with section 1206(d) of the Pathway for SGR Reform Act of 2013, we are applying a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that will result in payments to this type of LTCH resembling reasonable cost payments under the TEFRA payment system model.

We also discuss our proposed changes to the LTCH interruption of stay policy, which is a payment adjustment that is applied when, during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by readmittance to the same LTCH. In addition, we are finalizing our proposal to remove the 5-percent payment threshold policy for patient transfers between LTCHs and onsite providers.

3. Summary of Costs and Benefits

  • Adjustment for MS-DRG Documentation and Coding Changes. We are making a −0.8 percent recoupment adjustment to the standardized amount for FY 2015 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. Therefore, consistent with the policies that we have adopted in many similar cases and the adjustment we made for FY 2014, we are making a −0.8 percent recoupment adjustment to the standardized amount in FY 2015. We estimated that this level of adjustment, combined with leaving the −0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017.

  • Reduction to Hospital Payments for Excess Readmissions. The provisions of section 1886(q) of the Act which establishes the Hospital Readmissions Reduction Program are not budget neutral. For FY 2015, a hospital's readmissions payment adjustment factor is the higher of a ratio of a hospital's aggregate payments for excess readmissions to its aggregate payments for all discharges, or 0.97 (that is, or a 3-percent reduction). In this final rule, we estimate that the reduction to a hospital's base operating DRG payment amount to account for excess readmissions of selected applicable conditions under the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease in payments to hospitals for FY 2015 relative to FY 2014.
  • Value-Based Incentive Payments under the Hospital Value-Based Purchasing (VBP) Program. We estimate that there will be no net financial impact to the Hospital VBP Program for FY 2015 in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given fiscal year must be equal to the total amount of base operating DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating DRG payment amount reductions for FY 2015 and, therefore, the estimated amount available for value-based incentive payments for FY 2015 discharges is approximately $1.4 billion. We believe that the program's benefits will be seen in improved patient outcomes, safety, and in the patient's experience of care. However, we cannot estimate these benefits in actual dollar and patient terms.
  • Payment Adjustment under the HAC Reduction Program for FY 2015. Under section 1886(p) of the Act, (as added by section 3008 of the Affordable Care Act), the incentive to reduce hospital-acquired conditions with a payment adjustment to applicable hospitals under the HAC Reduction Program is made beginning FY 2015. We estimate that, under this provision, overall payments will decrease approximately 0.3 percent or $369 million.
  • Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share hospital payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment is made to eligible hospitals beginning in FY 2014. Hospitals that receive Medicare DSH Start Printed Page 49866payments 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 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 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 2015, we are providing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 76.19 percent of the amount for changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, our estimate of Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act is adjusted to approximately 57.1 percent (the product of 75 percent and 76.19 percent) and the resulting payment amount is used to create an additional payment to hospitals for their relative share of the total amount of uncompensated care. We project that Medicare DSH payments and additional payments for uncompensated care made for FY 2015 will reduce payments overall by 1.3 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2014. 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 final payment amount is not tied to a hospital's discharges.

  • Hospital Inpatient Quality Reporting (IQR) Program. In this final rule, we are finalizing 11 new measures (1 chart-abstracted, 4 claims-based, and 6 voluntary electronic clinical quality measures). We proposed to remove 20 measures, but are only finalizing the removal of 19. The SCIP-INF-4 measure was proposed for removal, but will be retained as it was recently retooled for the 2014 collection period. 10 of these 19 measures are topped-out, chart-abstracted measures that are being retained as voluntary electronic clinical quality measures. We estimate that the adoption and removal of these measures will decrease hospital costs by $39.8 million.
  • Update to the LTCH PPS Standard Federal Rate and Other Payment Factors. Based on the best available data for the 423 LTCHs in our database, we estimate that the changes to the payment rates and factors we are presenting in the preamble and Addendum of this final rule, including the update to the standard Federal rate for FY 2015, the changes to the area wage adjustment for FY 2015, and the expected changes to short-stay outliers and high-cost outliers, will result in an increase in estimated payments from FY 2014 of approximately $62 million (or 1.1 percent). In addition, we estimate that net effect of the projected impact of certain other LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the “25 percent threshold” payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the revocation of onsite discharges and readmissions policy; and the payment adjustment for “subclause (II)” LTCHs) is estimated to result in an increase in LTCH PPS payments of approximately $116 million.

The impact analysis of the payment rates and factors presented in this final rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other LTCH PPS policy changes will result in a net increase of $178 million to LTCH providers. Additionally, we estimate that the costs to LTCHs associated with the completion of the data for the LTCHQR Program to be approximately $4.7 million more than FY 2014.

B. Summary

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

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

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

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

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

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

The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any 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 Start Printed Page 49867rate 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. Through and including FY 2006, a Medicare-dependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before April 1, 2015, an MDH will receive 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. (We note that the statutory provision for payments to MDHs expires on March 31, 2015, under current law.) SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries 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. 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). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries.

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: Rehabilitation hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; certain cancer hospitals; and short-term acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), 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, certain cancer hospitals, short-term acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs, as updated annually by the percentage increase in the IPPS operating market basket.

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 section 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. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with FY 2009, annual updates to the LTCH PPS are published 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 Part 413.

5. Payments for Graduate Medical Education (GME)

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

C. Summary of Provisions of Recent Legislation Discussed in This Final Rule

The Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010, made a number of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as the “Affordable Care Act.”) A number of the provisions of the Affordable Care Act affect the updates to the IPPS and the LTCH PPS and providers and Start Printed Page 49868suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010 Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51476).

The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), enacted on January 2, 2013, also made a number of changes that affect the IPPS. We announced changes related to certain IPPS provisions for FY 2013 in accordance with sections 605 and 606 of Public Law 112-240 in a document that appeared in the Federal Register on March 7, 2013 (78 FR 14689).

The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on December 26, 2013, also made a number of changes that affect the IPPS and the LTCH PPS. We implemented changes related to the low-volume hospital payment adjustment and MDH provisions for FY 2014 in accordance with sections 1105 and 1106 of Public Law 113-67 in an interim final rule with comment period that appeared in the Federal Register on March 18, 2014 (79 FR 15022).

The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), enacted on April 1, 2014, also made a number of changes that affect the IPPS and LTCH PPS.

1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152)

In this final rule, we are making policy changes to implement (or, as applicable, continue to implement in FY 2015) the following provisions (or portions of the following provisions) of the Affordable Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt cancer hospitals for FY 2015:

  • Section 3001(a) of Public Law 111-148, which requires the establishment of a hospital inpatient value-based purchasing program under which value-based incentive payments are made in a fiscal year to hospitals that meet performance standards for the performance period for that fiscal year.
  • Section 3004 of Public Law 111-148, which provides for the submission of quality data by LTCHs in order for them to receive the full annual update to the payment rates beginning with the FY 2014 rate year.
  • Section 3005 of Public Law 111-148, which provides for the establishment of a quality reporting program for PPS-exempt cancer hospitals beginning with FY 2014, and for subsequent program years.
  • Section 3008 of Public Law 111-148, which establishes the Hospital-Acquired Condition (HAC) Reduction Program and requires the Secretary to make an adjustment to hospital payments for applicable hospitals, effective for discharges beginning on October 1, 2014, and for subsequent program years.
  • Section 3025 of Public Law 111-148, which establishes a hospital readmissions reduction program and requires the Secretary to reduce payments to applicable hospitals with excess readmissions effective for discharges beginning on or after October 1, 2012.
  • Section 3133 of Public Law 111-148, as amended by section 10316 of Public Law 111-148 and section 1104 of Public Law 111-152, which modifies the methodologies for determining Medicare DSH payments and creates a new additional payment for uncompensated care effective for discharges beginning on or after October 1, 2013.
  • Section 3401 of Public Law 111-148, which provides for the incorporation of productivity adjustments into the market basket updates for IPPS hospitals and LTCHs.
  • Section 10324 of Public Law 111-148, which provides for a wage adjustment for hospitals located in frontier States.
  • Sections 3401 and 10319 of Public Law 111-148 and section 1105 of Public Law 111-152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2015.
  • Section 5506 of Public Law 111-148, which added a provision to the Act that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital's FTE resident caps.

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

In this final rule, we are making 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).

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

In this final rule, we are making policy changes to implement, or discuss the need for future policy changes, to carry out provisions under section 1206 of the Pathway for SGR Reform Act of 2013. These include:

  • Section 1206(a), which provides the establishment of patient criteria for “site neutral” payment rates under the LTCH PPS, portions of which will begin to be implemented in FY 2016.
  • Section 1206(b)(1), which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act by retroactively reestablishing, and extending, the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for grandfathered hospitals-within-hospitals (HwHs), which are permanently exempt from this policy).
  • Section 1206(b)(2), which amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities.
  • Section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings.

4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)

In this final rule, we are making policy changes to implement, or making conforming changes to regulations in accordance with, the following provisions (or portions of the following provisions) of the Protecting Access to Medicare Act of 2014 that are applicable to the IPPS and the LTCH PPS for FY 2015:

  • Section 105, which extends the temporary changes to the Medicare inpatient hospital payment adjustment for low-volume subsection (d) hospitals through March 31, 2015.Start Printed Page 49869
  • Section 106, which extends the MDH program through March 31, 2015.
  • Section 112, which makes certain changes to Medicare LTCH provisions, including modifications to the statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities.
  • Section 212, which prohibits the Secretary from requiring implementation of ICD-10 code sets before October 1, 2015.

D. Issuance of Notice of Proposed Rulemaking

Earlier this year, we published a proposed rule that set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals for FY 2015. The proposed rule appeared in the Federal Register on May 15, 2014 (79 FR 27978). In the proposed rule, we also set forth proposed changes relating to payments for IME and GME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in the proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015.

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

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

In section II. of the preamble of the proposed rule, we included—

  • Proposed changes to MS-DRG classifications based on our yearly review, including a discussion of the conversion of MS-DRGs to ICD-10 and the status of the implementation of the ICD-10-CM and ICD-10-PCS systems.
  • Proposed application of the documentation and coding adjustment for FY 2015 resulting from implementation of the MS-DRG system.
  • Proposed recalibrations of the MS-DRG relative weights.
  • Proposed changes to hospital-acquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS-DRG payments for FY 2015.
  • A discussion of the FY 2015 status of new technologies approved for add-on payments for FY 2014 and a presentation of our evaluation and analysis of the FY 2015 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108-173, obtained in a town hall meeting).

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

In section III. of the preamble to the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed included the following:

  • Proposed changes in CBSAs as a result of new OMB labor market area delineations and proposed policies related to the proposed changes in CBSAs.
  • The proposed FY 2015 wage index update using wage data from cost reporting periods beginning in FY 2011.
  • Analysis and implementation of the proposed FY 2015 occupational mix adjustment to the wage index for acute care hospitals, including the proposed application of the rural floor, the proposed imputed rural floor, and the proposed frontier State floor.
  • Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications.
  • The proposed adjustment to the wage index for acute care hospitals for FY 2015 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.
  • The timetable for reviewing and verifying the wage data used to compute the proposed FY 2015 hospital wage index and proposed revisions to that timetable.
  • Determination of the labor-related share for the proposed FY 2015 wage index.

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

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

  • Proposed changes in postacute care transfer policies as a result of proposed new MS-DRGs.
  • Proposed changes to the inpatient hospital updates for FY 2015, including incorporation of the adjustment for hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.
  • The 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 2015.
  • The statutorily required IME adjustment factor for FY 2015 and proposed IME add-on payments for Medicare Part C discharges to SCHs that are paid according to their hospital-specific rates.
  • Effect of expiration of the MDH program on April 1, 2015.
  • Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care.
  • Proposed changes to the measures and payment adjustments under the Hospital Readmissions Reduction Program.
  • Proposed changes to the requirements and provision of value-based incentive payments under the Hospital Value-Based Purchasing Program.
  • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2015.
  • Proposed IME and direct GME policy changes regarding the effective date of the FTE resident cap, 3-year rolling average, and IRB ratio cap in new programs in teaching hospitals; effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas; clarification of effective date of provisions on counting resident time in nonprovider settings; proposed changes to the process for reviewing applications for and awarding slots made available under section 5506 of the Affordable Care Act by teaching hospitals that close; and clarification regarding direct GME payment to FQHCs and RHCs that train residents in approved programs.
  • Discussion of the Rural Community Hospital Demonstration Program and a proposal for making a budget neutrality adjustment for the demonstration program.
  • Discussion of the requirements for transparency of hospital charges under the Affordable Care Act.
  • Discussion of and solicitation of comments on an alternative payment methodology under the Medicare program for short inpatient hospital stays.
  • Discussion of the process for submitting suggested exceptions to the 2-midnight benchmark.

4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs

In section V. of the preamble to the proposed rule, we discussed the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2015 and other related proposed policy changes.Start Printed Page 49870

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

In section VI. of the preamble of the proposed rule, we discussed—

  • Proposed changes to payments to certain excluded hospitals for FY 2015.
  • Proposed updates to the RCE limits and proposed changes to the methodology for determining such limits for services furnished by physicians to IPPS-excluded hospitals and certain teaching hospitals.
  • Proposed CAH related changes regarding reclassifications as rural.
  • Proposed changes to the physician certification requirements for services furnished in CAHs.

6. Proposed Changes to the LTCH PPS

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

  • Proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015.
  • Proposed revisions to the LTCH PPS geographic classifications based on the new OMB delineations.
  • Proposals to implement section 1206(b)(1) of the Pathway for SGR Reform Act, which provides for the retroactive reinstatement and extension, for an additional 4 years, of the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment established under section 114(c) of the MMSEA, as further amended by subsequent legislation.
  • Proposals to implement section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by section 112(b) of the Protecting Access to Medicare Act of 2014, which provides for moratoria (subject to certain defined exceptions) on the establishment of new LTCHs and LTCH satellite facilities and a moratorium on bed increases in LTCHs effective for the period beginning April 1, 2014, and ending September 30, 2017.
  • Proposed changes to the LTCH interruption of stay policy by revising the fixed-day thresholds under the “greater than 3-day interruption of stay policy” to apply a uniform 30-day threshold as an “acceptable standard” for determining a linkage between an index discharge and a readmission.
  • Proposal to remove the discharge and readmission requirement, “Special Payment Provisions for Patients Who are Transferred to Onsite Providers and Readmitted to an LTCH” (the “5 percent payment threshold”) beginning in FY 2015.
  • Proposal to apply a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling reasonable cost payment under the TEFRA payment system model, consistent with the provisions of section 1206(d) of the Pathway for SGR Reform Act of 2013.

7. Proposed Changes to Regulations Governing Administrative Appeals by Providers and Judicial Review of Provider Claims

In section VIII. of the preamble of the proposed rule, we set forth proposals to revise the regulations governing administrative appeals and judicial review of provider claims in Medicare cost reports.

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

In section IX. of the preamble of the proposed rule, we addressed—

  • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program 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 (LTCHQR) Program.

9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data

In section X. of the preamble of the proposed rule, we set forth proposed regulatory revisions to broaden the specified uses of Medicare Advantage (MA) risk adjustment data and to specify the conditions for release of such risk adjustment data to entities outside of CMS.

10. Proposed Changes to Enforcement Provisions for Organ Transplant Centers

In section XI. of the preamble of the proposed rule, we proposed to revise the regulations governing organ transplant centers that request approval, based on mitigating factors for initial approval and re-approval, for participation in Medicare when the centers have not met one or more of the conditions of participation.

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

In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We also proposed to establish the threshold amounts for outlier cases. In addition, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2015 for certain hospitals excluded from the IPPS.

12. Determining Prospective Payment Rates for LTCHs

In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2015 LTCH PPS standard Federal rate. We proposed to establish the adjustments for wage levels (including proposed changes to the LTCH PPS labor market area delineations based on the new OMB delineations), the labor-related share, the cost-of-living adjustment, and high-cost outliers, including the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.

13. Impact Analysis

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

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

In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2015 for the following:

  • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs).
  • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.
  • The standard Federal rate for hospital inpatient services furnished by LTCHs.

15. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2014 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and Start Printed Page 49871capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2014 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.

E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS Proposed Rule

We received approximately 653 timely pieces of correspondence containing multiple comments on the FY 2015 IPPS/LTCH PPS proposed rule. We note that some of these public comments were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed in the policy responses in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate headings.

F. Finalization of Interim Final Rule With Comment Period on Extension of Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges Through March 31, 2014

In an interim final rule with comment period (CMS-1599-IFC2) that appeared in the Federal Register on March 18, 2014, we implemented the extension of the temporary changes to the payment adjustment for low-volume hospitals and the MDH program under the IPPS for FY 2014 (through March 31, 2014) in accordance with sections 1105 and 1106, respectively, of the Pathway for SGR Reform Act of 2013 (79 FR 15022 through 15030). We received four timely pieces of correspondence on this interim final rule with comment period. In section IV.P. of the preamble of this final rule, we summarize the provisions of the interim final rule, summarize and respond to the public comments received, and finalize the provisions of the interim final rule with comment period.

G. Finalization of Interim Final Rule With Comment Period on Changes to Certain Cost Reporting Procedures Related to Disproportionate Share Hospital Uncompensated Care Payments

In an interim final rule with comment period (CMS-1599-IFC) that appeared in the Federal Register on October 13, 2013 (78 FR 61191), we revised certain operational considerations for hospitals with Medicare cost reporting periods that span more than one Federal fiscal year and also made chnges to the data that will be used in the uncompensated care payment calculation in order to ensure that data from Indian Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of that calculation (78 FR 61191 through 61197). We received 12 timely pieces of correspondence in response to this interim final rule with comment period. In section IV.Q. of the preamble of this final rule, we summarize the provisions of the interim final rule with comment period, summarize and respond to the public comments received, and finalize the provisions of the interim final rule with comment period.

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

A. Background

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

Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources.

B. MS-DRG Reclassifications

For general information about the MS-DRG system, including yearly reviews and changes to the MS-DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766), 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), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50512).

C. Adoption of the MS-DRGs in FY 2008

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

D. FY 2015 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 Pub. L. 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. (In FY 2014, there are 751 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 Start Printed Page 49872Assistance], 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 Pub. L. 110-90

a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L. 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.

b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Section 7(b)(1)(B) Pub. L. 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 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 recommended 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 Pub. L. 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 Start Printed Page 49873effect 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 Pub. L. 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 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. 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, any adjustment made to reduce payment rates in one year would eventually be offset by a positive adjustment, once the necessary amount of overpayment is recovered.

As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 Start Printed Page 49874through 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. In addition, we again noted that this −0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized.

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 proposed rule (79 FR 27997 through 27998), we proposed an additional −0.8 percent recoupment adjustment to the standardized amount for FY 2015. We estimated that this level of adjustment, combined with leaving the −0.8 percent adjustment made for FY 2014 in place, would recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this would leave approximately $8 billion remaining to be recovered by FY 2017.

Comment: Several commenters restated their previous position, as set forth in comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS overstated the impact of documentation and coding effects for prior years. Commenters cited potential deficiencies in the CMS methodology and disagreed that the congressionally mandated adjustment is warranted. However, the majority of these commenters conceded that CMS is required by section 631 of the ATRA to recover $11 billion by FY 2017, and supported CMS' policy to phase in the adjustments over a 4-year period.

Response: We appreciate the commenters' support. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for our response to the commenters' position that CMS overstated the impact of documentation and coding effects.

After consideration of the public comments we received, we are finalizing the proposal to make an additional −0.8 percent adjustment to the standardized amount for FY 2015. Considering the −0.8 percent adjustment made in FY 2014, we expect the combined impact of these adjustments will be to recover $2 billion dollars in overpayments in FY 2015. Combined with the estimated $1 billion adjustment made in FY 2014, we estimate that $3 billion of the $11 billion in overpayments required to be recovered by section 631 of the ATRA will be accounted for.

We continue to believe that if adjustments of approximately −0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As we explained in the FY 2014 IPPS/LTCH PPS final rule, estimates of any future adjustments are subject to slight variations in total savings. Therefore, we have not yet addressed specific adjustments for FY 2016 and FY 2017. We continue to believe that the −0.8 percent adjustment for FY 2015 is a reasonable and fair approach that will help satisfy the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again note that this −0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized.

7. Prospective Adjustment for the MS-DRG Documentation and Coding Effect Through FY 2010

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517), we discussed the possibility of applying an additional prospective adjustment to account for the cumulative MS-DRG documentation and coding effect through FY 2010. In that final rule, we stated that if we were to apply such an adjustment, we believed the most appropriate additional adjustment was −0.55 percent. However, we decided not to apply such an adjustment in FY 2014, in light of the need to make the retrospective adjustments required by the ATRA. We continue to believe that if we were to apply an additional prospective adjustment for the cumulative MS-DRG documentation and coding effect through FY 2010, the most appropriate additional adjustment is −0.55 percent. However, we did not propose such an adjustment for FY 2015, in light of the ongoing recoupment required by the ATRA. We will consider whether such an additional adjustment is appropriate in future years' rulemaking.

Comment: Commenters reiterated their concern, as set forth in comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS overstated the adjustment factor for documentation and coding, including the revised −0.55 percent factor to adjust for documentation and coding that occurred in FY 2010. Commenters believed that adjustments related to FY 2010 documentation and coding are not required under section 631 of the ATRA. Commenters urged CMS to not consider additional adjustments, other than those required by section 631 of the ATRA.

Response: We appreciate the commenters' concerns. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for our response to the commenters' position that CMS overstated the impact of documentation and coding effects. We did not propose to make any additional prospective adjustment to address the cumulative documentation and coding effect through FY 2010 for FY 2015. We will consider these comments in future years' rulemaking.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background

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

As we implemented cost-based relative weights, some public Start Printed Page 49875commenters 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 should 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 also 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 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 Start Printed Page 49876creating 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 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 (78 FR 27509).

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 calculated 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 2015

As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 27999), to calculate the MS-DRG relative weights for FY 2015, we used two data sources: the MedPAR file as the claims data source and the HCRIS as the cost report data source. We adjusted the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the 19 CCRs and the MS-DRG relative weights for FY 2015 is included in section II.H. of the preamble of this final rule.

Comment: One commenter supported CMS' plans to continue to use data from the implantable devices cost center to create a distinct CCR for implantable devices in the calculation of the FY 2015 relative weights. The commenter also urged CMS to promote transparency by making detailed data from the implantable device cost center available to the public so that hospitals could evaluate these costs in the context of overall hospital charges.

Response: We did not propose any changes to the methodology or data sources for the FY 2015 CCRs and relative weights. Regarding the commenter's request to make data from the implantable devices cost center available to the public, we note that hospital cost report data, via HCRIS, are available to the public. For more information, we refer to readers to the CMS Web site at: http://www.cms.gov/​Research-Statistics-Data-and-Systems/​Files-for-Order/​CostReports/​index.html?​redirect=​/​costReports.

F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions (HACs), Including Infections for FY 2015

1. Background

Section 1886(d)(4)(D) of the Act addresses certain hospital-acquired conditions (HACs), including infections. This provision is part of an array of Medicare tools that we are using to promote increased quality and efficiency of care. Under the IPPS, hospitals are encouraged to treat patients efficiently because they receive the same DRG payment for stays that vary in length and in the services provided, which gives hospitals an incentive to avoid unnecessary costs in the delivery of care. In some cases, conditions acquired in the hospital do not generate higher payments than the hospital would otherwise receive for cases without these conditions. To this extent, the IPPS encourages hospitals to avoid complications.

However, the treatment of these conditions can generate higher Medicare payments in two ways. First, if a hospital incurs exceptionally high costs treating a patient, the hospital stay may generate an outlier payment. Because the outlier payment methodology requires that hospitals experience large losses on outlier cases before outlier payments are made, hospitals have an incentive to prevent outliers. Second, under the MS-DRG system that took effect in FY 2008 and that has been refined through rulemaking in subsequent years, certain conditions can generate higher payments even if the outlier payment requirements are not met. Under the MS-DRG system, there are currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups based on the presence or absence of a complication or comorbidity (CC) or a major complication or comorbidity (MCC). The presence of a CC or an MCC generally results in a higher payment.

Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS-DRG when present as a secondary diagnosis (that is, conditions under the MS-DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with the CDC, from time to time as long as the list contains at least two conditions.

Effective for discharges occurring on or after October 1, 2008, under the authority of section 1886(d)(4)(D) of the Act, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS-DRG if a selected condition is not present on admission (POA). Thus, if a selected condition that was not POA manifests during the hospital stay, it is considered a HAC and the case is paid as though the secondary diagnosis was not present. However, even if a HAC manifests during the hospital stay, if any nonselected CC or MCC appears on the claim, the claim will be paid at the higher MS-DRG rate. In addition, Medicare continues to assign a discharge to a higher paying MS-DRG if a selected condition is POA. When a HAC is not POA, payment can be affected in a manner shown in the diagram below

Start Printed Page 49877

2. HAC Selection

Beginning in FY 2007, we have set forth proposals, and solicited and responded to public comments, to implement section 1886(d)(4)(D) of the Act through the IPPS annual rulemaking process. For specific policies addressed in each rulemaking cycle, including a detailed discussion of the collaborative interdepartmental process and public input regarding selected and potential candidate HACs, we refer readers to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR 24716 through 24726) and final rule with comment period (72 FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 through 53303); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and final rule (78 FR 50523 through 50527). A complete list of the 11 current categories of HACs is included on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​Hospital-Acquired_​Conditions.html.

3. Present on Admission (POA) Indicator Reporting

Collection of POA indicator data is necessary to identify which conditions were acquired during hospitalization for the HAC payment provision as well as for broader public health uses of Medicare data. In previous rulemaking, we provided both CMS and CDC Web site resources that are available to hospitals for assistance in this reporting effort. For detailed information regarding these sites and materials, including the application and use of POA indicators, we refer the reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 51507).

Currently, as we have discussed in the prior rulemaking cited under section II.I.2. of the preamble of this final rule, the POA indicator reporting requirement only applies to IPPS hospitals because they are subject to this HAC provision. Non-IPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals, RNHCIs, and the Department of Veterans Affairs/Department of Defense hospitals, are exempt from POA reporting.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50524 through 50525), we noted that hospitals in Maryland operating under a statutory waiver were not paid under the IPPS, but rather were paid under the provisions of section 1814(b)(3) of the Act, and therefore prior to FY 2014 these hospitals were exempt from reporting POA indicators. However, we believed it was appropriate to require them to use POA indicator reporting on their claims so that we could include their data and have as complete a dataset as possible when we analyze trends and make further payment policy determinations, such as those authorized under section 1886(p) of the Act. Therefore, in the FY 2014 IPPS/LTCH PPS final rule, we finalized our policy that hospitals in Maryland that formerly operated under section 1814(b)(3) of the Act were no longer exempted from the POA indicator reporting requirement beginning with claims submitted on or after October 1, 2013, including all claims for discharges on or after October 1, 2013. We noted that, while this requirement was not effective until October 1, 2013, hospitals in Maryland could submit data with POA indicators before that date with the expectation that these data would be accepted by Medicare's claims processing systems. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50712) for a discussion of our FY 2014 final policies to implement section 1886(p) of the Act that are applicable to Maryland hospitals.)

Subsequent to our FY 2014 rulemaking, the State of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS' new Maryland All-Payer Model, a 5-year hospital payment model. This model is being implemented under section 1115A of the Act, as added by section 3021 of the Affordable Care Act, which authorizes the testing of innovative payment and service delivery models, including models that allow States to “test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.” Section 1115A of the Act Start Printed Page 49878authorizes the Secretary to waive such requirements of titles XI and XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models.

Under the agreement with CMS, Maryland will limit per capita total hospital cost growth for all payers, including Medicare. In order to implement the new model, effective January 1, 2014, Maryland elected to no longer have Medicare make payments to Maryland hospitals in accordance with section 1814(b)(3) of the Act. Maryland also represented that it is no longer in continuous operation of a demonstration project reimbursement system since July 1, 1977, as specified under section 1814(b)(3) of the Act. Because Maryland hospitals are no longer paid under section 1814(b)(3) of the Act, they are no longer subject to those provisions of the Act and related implementing regulations that are specific to section 1814(b)(3) hospitals. Although CMS has waived certain provisions of the Act for Maryland hospitals, as set forth in the agreement between CMS and Maryland and subject to Maryland's compliance with the terms of the agreement, CMS has not waived the POA indicator reporting requirement. In other words, the changes to the status of Maryland hospitals under section 1814(b)(3) of the Act as described above do not in any way change the POA indicator reporting requirement for Maryland hospitals.

There are currently four POA indicator reporting options, “Y”, “W”, “N”, and “U”, as defined by the ICD-9-CM Official Guidelines for Coding and Reporting. We note that prior to January 1, 2011, we also used a POA indicator reporting option “1”. However, beginning on or after January 1, 2011, hospitals were required to begin reporting POA indicators using the 5010 electronic transmittal standards format. The 5010 format removes the need to report a POA indicator of “1” for codes that are exempt from POA reporting. We issued CMS instructions on this reporting change as a One-Time Notification, Pub. No. 100-20, Transmittal No. 756, Change Request 7024, effective on August 13, 2010, which can be located at the following link on the CMS Web site: http://www.cms.gov/​manuals/​downloads/​Pub100_​20.pdf.) The current POA indicators and their descriptors are shown in the chart below:

IndicatorDescriptor
YIndicates that the condition was present on admission.
WAffirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the onset of the condition occurred.
NIndicates that the condition was not present on admission.
UIndicates that the documentation is insufficient to determine if the condition was present at the time of admission.

Under the HAC payment policy, we treat HACs coded with “Y” and “W” indicators as POA and allow the condition on its own to cause an increased payment at the CC and MCC level. We treat HACs coded with “N” and “U” indicators as Not Present on Admission (NPOA) and do not allow the condition on its own to cause an increased payment at the CC and MCC level. We refer readers to the following rules for a detailed discussion of POA indicator reporting: the FY 2009 IPPS proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525).

In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53324), the 5010 format allows the reporting and, effective January 1, 2011, the processing of up to 25 diagnoses and 25 procedure codes. As such, it is necessary to report a valid POA indicator for each diagnosis code, including the principal diagnosis and all secondary diagnoses up to 25.

4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM and ICD-10-PCS

In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in preparation for the transition to the ICD-10-CM and ICD-10-PCS code sets, we indicated that further information regarding the use of the POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they pertain to the HAC policy would be discussed in future rulemaking.

At the March 5, 2012 and the September 19, 2012 meetings of the ICD-9-CM Coordination and Maintenance Committee, an announcement was made with regard to the availability of the ICD-9-CM HAC list translation to ICD-10-CM and ICD-10-PCS code sets. Participants were informed that the list of the ICD-9-CM selected HACs has been translated into codes using the ICD-10-CM and ICD-10-PCS classification system. It was recommended that the public review this list of ICD-10-CM/ICD-10-PCS code translations of the selected HACs available on the CMS Web site at: http://www.cms.gov/​Medicare/​Coding/​ICD10/​ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under the link titled “ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of Contents—Full Titles—HTML Version in Appendix I—Hospital-Acquired Conditions (HACs).” This CMS Web site regarding the ICD-10-MS-DRG Conversion Project is also available on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​icd10_​hacs.html. We encouraged the public to submit comments on these translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC Translation Feedback Mailbox that was set up for this purpose under the Related Links section titled “CMS HAC Feedback.”

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-PCS would be subject to formal rulemaking. We encouraged readers to review the educational materials and draft code sets available for ICD-10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/​ICD10/​. In addition, we stated that the draft ICD-10-CM/ICD-10-PCS Coding Guidelines could be viewed on the CDC Web site at: http://www.cdc.gov/​nchs/​icd/​icd10cm.htm.

The HACs code translation list from ICM-9-CM to ICD-10-CM/ICD-10-PCS is available to the public on the CMS Web site at: http://www.cms.gov/​Medicare/​Coding/​ICD10/​ICD-10-MS-Start Printed Page 49879DRG-Conversion-Project.html. We note that Appendix I of the ICD-10-CM/PCS MS-DRG V31R Definitions Manual Table of Contents—Full Titles files (available in both text and HTML formats) are posted on the Web site and contain the DRA HACs translated to ICD-10.

We note that section 212 of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), enacted on April 1, 2014, provides that the Secretary may not adopt ICD-10 prior to October 1, 2015. This effectively delayed the transition from ICD-9-CM to ICD-10. The Secretary expects to release a final rule in the near future that will include a new compliance date for use of ICD-10.

5. Current HACs and Previously Considered Candidate HACs

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28002), we did not propose to add or remove categories of the HACs. However, we indicated that we continue to encourage public dialogue about refinements to the HAC list by written stakeholder comments about both previously selected and potential candidate HACs. We refer readers to section II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for detailed discussion supporting our determination regarding each of these conditions. We also refer readers to section II.F.5. of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013, and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50523 through 50527) for the HAC policy for FY 2014.

Comment: Some commenters stated they were pleased the CMS did not propose to expand the list of categories or conditions subject to the Deficit Reduction Act of 2005 provisions that would reduce payment for HACs not present on admission. However, one commenter suggested that CMS remove “falls and trauma” from the categories of conditions to which the HAC policy applies. Another believed that iatrogenic pneumothorax with thoracentesis and accidental puncture/bleeding with paracentesis are two conditions that meet the HAC criteria for inclusion and urged CMS to expand the HAC program in FY 2015 to include them.

Response: We value and appreciate these public comments, and we will take the comments and suggestions into consideration in future rulemaking.

Comment: One commenter recognized the importance of targeting HACs, but stated that the DRA HAC program does not recognize that certain conditions are not 100 percent preventable, despite adherence to evidence-based practices. The commenter noted that facilities that treat patients with greater comorbidities and complex conditions are at a greater risk for penalties. Specifically, the commenter reiterates concerns about the inclusion of Surgical Site Infections (SSI) Following Cardiac Implantable Electronic Device (CIED) as a HAC category. The commenter stated that there are many variables that may contribute to the risk of CIED-related infections and that the implanting physician may not be able to control all circumstances (for example, pre-operative white blood cell count, fever within 24 hours, and timing of perioperative antibiotic administration).

Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51510 through 51511), we addressed commenters' concerns regarding the preventability of DRA HACs and noted that the statute does not require that a condition be “always preventable” in order to qualify as an HAC. We stated that the statute indicated that the condition be “reasonably preventable,” which necessarily implies something less than 100 percent.

Comment: One commenter recommended that CMS address the question that its hospital customers have posed regarding the effect of the DRA HAC policy when a patient is discharged from a hospital and then returns to a hospital to have a foreign object removed. Specifically, the commenter stated that hospitals need to be better informed about how Medicare payment changes if the hospital removing the foreign object is the same hospital at which the foreign object was left or is a different hospital, and if the foreign object is removed during an outpatient procedure or during an inpatient procedure.

Response: Questions related to payment for HACs are dependent upon how the conditions are coded and reported with ICD-9-CM and the corresponding POA indicator. The American Hospital Association (AHA) Central OfficeTM is the national clearinghouse for medical coding advice. Coding inquiries can be directed to the following AHA Web site: http://www.CodingClinicAdvisor.com. Instructions for how to assign the correct POA indicator can be found in the ICD-9-CM Official Guidelines for Coding and Reporting located at the CDC Web site: http://www.cdc.gov/​nchs/​icd/​icd9cm_​addenda_​guidelines.htm. Also, illustrations of how to assign POA indicators are included in the Present on Admission (POA) Indicator Reporting by Acute Inpatient Prospective Payment System (IPPS) Hospitals Fact Sheet located on the CMS Hospital-Acquired Conditions Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​EducationalResources.html in the “Downloads” section. Table 1: CMS POA Indicator Reporting Options, Description, and Payment contains an explanation of when payment for a condition is made or not made, based on the POA indicator assigned, as shown below.

POA indicatorDescriptionMedicare payment
YDiagnosis was present at time of inpatient admissionPayment made for condition by Medicare, when an HAC is present.
NDiagnosis was not present at time of inpatient admissionNo payment made for condition by Medicare, when an HAC is present.
UDocumentation insufficient to determine if condition was present at the time of inpatient admissionNo payment made for condition by Medicare, when an HAC is present.
WClinically undetermined. Provider unable to clinically determine whether the condition was present at the time of inpatient admissionPayment made for condition by Medicare, when an HAC is present.
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6. RTI Program Evaluation

On September 30, 2009, a contract was awarded to RTI to evaluate the impact of the Hospital-Acquired Condition-Present on Admission (HAC-POA) provisions on the changes in the incidence of selected conditions, effects on Medicare payments, impacts on coding accuracy, unintended consequences, and infection and event rates. This was an intra-agency project with funding and technical support from CMS, OPHS, AHRQ, and CDC. The evaluation also examined the implementation of the program and evaluated additional conditions for future selection. The contract with RTI ended on November 30, 2012. Summary reports of RTI's analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-POA program evaluation were included in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292 through 53302). Summary and detailed data also were made publicly available on the CMS Web site at: http://www.cms.gov/​HospitalAcqCond/​01_​Overview.asp and the RTI Web site at: http://www.rti.org/​reports/​cms/​.

In addition to the evaluation of HAC and POA MedPAR claims data, RTI also conducted analyses on readmissions due to HACs, the incremental costs of HACs to the health care system, a study of spillover effects and unintended consequences, as well as an updated analysis of the evidence-based guidelines for selected and previously considered HACs. Reports on these analyses have been made publicly available on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​index.html.

7. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines

The RTI program evaluation includes a report that provides references for all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. Guidelines were primarily identified using the AHRQ National Guidelines Clearing House (NGCH) and the CDC, along with relevant professional societies. Guidelines published in the United States were used, if available. In the absence of U.S. guidelines for a specific condition, international guidelines were included.

Evidence-based guidelines that included specific recommendations for the prevention of the condition were identified for each of the selected conditions. In addition, evidence-based guidelines also were found for the previously considered candidate conditions. RTI prepared a final report to summarize its findings regarding evidence-based guidelines. This report can be found on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​Downloads/​Evidence-Based-Guidelines.pdf.

Subsequent to this final report, RTI was awarded an FY 2014 Evidence-Based Guidelines Monitoring contract. Under the contract, RTI was to provide a summary report of all evidence-based guidelines available for each of the selected and previously considered candidate HACs that provide recommendations for the prevention of the corresponding conditions. This report is usually delivered to CMS annually in a May/June timeframe. We received the updated 2014 report and have made it available to the public on the CMS Hospital-Acquired Conditions Web page in the “Downloads” section at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalAcqCond/​index.html?​redirect=​/​HospitalAcqCond/​.

G. Changes to Specific MS-DRG Classifications

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

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

Providers use the code sets under the ICD-9-CM coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system. A later coding edition, 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 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. Section 212 of Public Law 113-93, titled “Delay in Transition from ICD-9 to ICD-10 Code Sets,” provides that “[t]he Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD-10 code sets as the standard for code sets under section 1173(c) of Act. On May 1, 2014, the Secretary announced plans to release an interim final rule in the near future that will include a new compliance date to require the use of ICD-10 beginning October 1, 2015. The rule will also require 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, which will 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 Start Printed Page 49881also 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 26.0. 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 28.0 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 page. 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 29.0, 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 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 28.0 to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0 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 30.0 based on the FY 2013 MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a document that describes changes made from Version 29.0 to Version 30.0 to facilitate a review. We produced mainframe and computer software for Version 30.0, 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 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 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 27.0.

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 30.0 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 31.0 based on the FY 2014 MS-DRGs (Version 31.0) 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 31.0 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 30.0 to Version 31.0 to facilitate a review. We Start Printed Page 49882produced mainframe and computer software for Version 31.0, 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 31.0.

We reviewed comments received and developed an update of ICD-10 MS-DRGs Version 31.0, which we called ICD-10 MS-DRGs Version 31.0-R. We have posted a Definitions Manual of the ICD-10 MS-DRGs Version 31.0-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 31.0 to Version 31.0-R to facilitate a review. We will continue to share ICD-10-MS-DRG conversion activities with the public through this Web site.

b. Basis for FY 2015 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 in FY 2016, comments and suggestions should be submitted by December 7, 2014. The comments that were submitted in a timely manner for FY 2015 are discussed below in this section.

Following are the changes we proposed to the MS-DRGs for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28004), we invited public comment on each of the MS-DRG classification proposed changes described below, as well as our proposals to maintain certain existing MS-DRG classifications, which also are discussed below. In some cases, we proposed changes to the MS-DRG classifications based on our analysis of claims data. In other cases, we proposed to maintain the existing MS-DRG classification based on our analysis of claims data. For the FY 2015 proposed rule, our MS-DRG analysis was based on claims data from the December 2013 update of the FY 2013 MedPAR file, which contains hospital bills received through September 30, 2013, for discharges occurring through September 30, 2013. In our discussion of the proposed MS-DRG reclassification changes that follows, we refer to our analysis of claims data from the “December 2013 update of the FY 2013 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 considered 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 evaluated patient care costs using average costs and lengths of stay and relied 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 considered both the absolute and percentage differences in average costs between the cases we selected for review and the remainder of cases in the MS-DRG. We also considered variation in costs within these groups; that is, whether observed average differences were consistent across patients or attributable to cases that were extreme in terms of costs or length of stay, or both. Further, we considered the number of patients who will have a given set of characteristics and generally preferred not to create a new MS-DRG unless it would include a substantial number of cases.

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

a. Intracerebral Therapies: Gliadel® Wafer

During the comment period for the FY 2014 IPPS/LTCH PPS proposed rule, we received a public comment that we considered to be outside the scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The commenter requested that a new MS-DRG be created for intracerebral therapies, including implantation of chemotherapeutic agents. Specifically, the commenter referred to the Gliadel® Wafer for the treatment of High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors originating in the brain.

The Gliadel® Wafer has been discussed in prior rulemaking, including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule (68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005 IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR 48957 through 48971); and the FY 2008 IPPS/LTCH PPS final rule (72 FR 47252 through 47253). We refer readers to these prior discussions for further background information regarding the Gliadel® Wafer.

Effective October 1, 2002, ICD-9-CM procedure code 00.10 (Implantation of chemotherapeutic agent) was created to identify and describe insertion of the Gliadel® Wafer. This procedure code is assigned to MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in MDC 1. According to the commenter, this current MS-DRG assignment does not compensate providers adequately for the expenses incurred to perform the surgery and implantation of the wafer device. The commenter noted that MS-DRG 023 has a national average payment rate of approximately $28,016. However, the commenter stated, “the acquisition cost for 1 box of the Gliadel® Wafer alone (typical utilization per procedure is 8 wafers or 1 box) is $29,035.”

We conducted an analysis using claims data from the December 2013 update of the FY 2013 MedPAR file. Our findings are shown in the table below.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 023—All cases5,38310.98$36,982
MS-DRG 023—Cases with procedure code 00.101587.034,027
Start Printed Page 49883

As shown in the table above, there were a total of 5,383 cases in MS-DRG 023 with an average length of stay of 10.98 days and average costs of $36,982. The number of cases reporting procedure code 00.10 in MS-DRG 023 totaled 158, with an average length of stay of 7.0 days and average costs of $34,027.

The data clearly demonstrate that the volume of cases reporting procedure code 00.10 within MS-DRG 023 have a shorter average length of stay and are lower in average costs in comparison to all the cases in the MS-DRG. As we stated in the proposed rule, given the low volume of cases, shorter average length of stay, and lower average costs, the data do not support the creation of a new MS-DRG for cases utilizing the Gliadel® Wafer. In addition, our clinical advisors determined that cases reporting procedure code 00.10 are appropriately assigned within MS-DRG 023.

As discussed in the FY 2005 IPPS final rule (69 FR 48959), Gliadel® Wafer cases were assigned to a new DRG that was clinically coherent and reflected the resources used to treat those cases, which appropriately addressed the concerns of commenters who raised questions regarding DRG assignment for those cases at that time. Subsequently, with the adoption of the MS-DRGs, in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47252 through 47253), we assigned all cases utilizing the Gliadel® Wafer technology to MS-DRG 023, the higher severity level, and revised the title of this MS-DRG in recognition of the complexity and costs associated with the implantation. Our clinical advisors continue to support this assignment for these same reasons. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to create a new MS-DRG for FY 2015 for cases where ICD-9-CM procedure code 00.10 is reported. We invited public comments on our proposal to maintain the current MS-DRG structure.

Comment: Several commenters supported CMS' proposal to maintain cases reporting procedure code 00.10 in MS-DRG 23, stating it was reasonable given the data and information provided.

Response: We appreciate the commenters' support.

Comment: Some commenters believed that MS-DRG 23 does not provide adequate payment to hospitals that perform craniotomies with insertion of the Gliadel® Wafer. These commenters suggested the MedPAR data are flawed for a number of reasons. The commenters indicated that, upon conducting their own analysis of FY 2012 MedPAR data, there appears to be confusion among providers on how to accurately report procedure code 00.10. The commenters reported that, during their analysis, they encountered claims where procedure code 00.10 was reported for diagnoses of several other types of cancers (small and large bowel, pancreatic, and liver) that were completely unrelated to the brain. One commenter suggested that several providers who have reported procedure code 00.10 did not ever purchase the Gliadel® Wafer product. This commenter noted that it is unclear if the product should be classified as an implant or a drug within the revenue codes and that this uncertainty results in additional confusion. The same commenter urged CMS to consider more input from the professional community and Medicare beneficiaries, as well as data sources other than the MedPAR file when evaluating MS-DRG assignments for low volume procedures so as not to restrict access to care for patients in need of this intracerebral therapy.

Response: We acknowledge the commenters' concerns. With regard to confusion on how to accurately report procedure code 00.10 and concern that the code is being reported for other types of cancers besides brain cancer, we point out that the AHA's Coding Clinic for ICD-9-CM has provided coding instruction and examples for how to appropriately assign and report this code. Specifically, Coding Clinic Fourth Quarter, 2002, explains how the chemotherapy wafer is utilized in brain cancer and that chemotherapy wafers also have been used to treat the liver and bladder as well as other sites. We also note that the terms associated with procedure code 00.10 within ICD-9-CM are not restricted solely for use of the Gliadel® Wafer product. The ICD-9-CM coding classification system is not device specific.

With respect to the comment that providers are confused as to assigning an implant or drug revenue code to the Gliadel® Wafer product, we note that where explicit instructions are not provided, providers should report their charges under the revenue code that will result in the charges being assigned to the same cost center to which the cost of those services are assigned in the cost report. We appreciate the commenter's suggestion to obtain additional input from the professional community.

Comment: One commenter recommended that a new MS-DRG be created specifically for the Gliadel® Wafer product. The commenter stated that it is unacceptable for CMS to state there are too few cases to do so.

Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our analysis of the claims data and our clinical advisors did not support creation of a new MS-DRG. Furthermore, the MS-DRGs are a classification system intended to group together those diagnoses and procedures with similar clinical characteristics and utilization of resources. Basing a new MS-DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS-DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. Moreover, our clinical advisors have examined this issue and continue to advise us that the procedure code 00.10 cases are appropriately classified within MS-DRG 23 because they are clinically similar based on both the craniotomy and the insertion of the device, among other reasons. Our advisors reaffirmed their assessment that the groupings were not overly broad or heterogeneous, reiterating that the clinical flexibility of both physicians and hospitals is maximized when larger cohorts of clinically similar patients are grouped and the costs averaged. They note that many factors are considered when comparing groups of patients, including such factors as length of stay, cost of specific devices, type of device, type of procedure, and anatomical location, among others, and stated that the commenter did not identify any factors that would necessitate an atypical small, separate grouping when these cases are categorized. Our clinical advisors do not support creating a new MS DRG for such a small number of cases but would not support creating a separate DRG even if the volume of cases was large.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current structure for MS-DRG 23 for FY 2015.

b. Endovascular Embolization or Occlusion of Head and Neck

We received a request to change the MS-DRG assignment for the following three ICD-9-CM procedure codes representing endovascular embolization or occlusion procedures of the head and neck:

  • 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).Start Printed Page 49884

These three procedure codes are currently assigned to the following eight MS-DRGs under MDC 1. Cases assigned to MS-DRGs 020, 021, and 022 require a principal diagnosis of hemorrhage. Cases 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 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.

  • 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 & Endovascular Intracranial Procedures with MCC)
  • MS-DRG 026 (Craniotomy & Endovascular Intracranial Procedures with CC)
  • MS-DRG 027 (Craniotomy & Endovascular Intracranial Procedures without CC/MCC)

The requestor recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved from MS-DRGs 025, 026, and 027 to MS-DRGs 023 and 024, even when there is no reported acute complex CNS principal diagnosis or a major device implant. The requestor stated that unruptured aneurysms can be treated by a minimally invasive technique utilizing endovascular coiling. The requester noted that a microcatheter is inserted into a groin artery and navigated through the vascular system to the location of the aneurysm. The coils are inserted through the microcatheter into the aneurysm in order to occlude (fill) the aneurysm from inside the blood vessel. Once the coils are implanted, the blood flow pattern within the aneurysm is altered. The requestor stated that these cases do not have a principal diagnosis of hemorrhage because the treatment is for an unruptured aneurysm which has not hemorrhaged. Furthermore, the requestor stated that only a few of these cases without hemorrhage have a complex CNS principal diagnosis. Therefore, the requester believed that most of the cases should be assigned to MS-DRGs 025, 026, and 027.

The requestor stated that the average costs of coil cases captured by procedure codes 39.72, 39.75, and 39.76 are significantly higher than other cases within MS-DRGs 025, 026, and 027 where most of the coil cases are assigned. As stated earlier, the requester recommended that cases with procedure codes 39.72, 39.75, and 39.76 be moved to MS-DRGs 023 and 024, even when there is not an acute complex CNS principal diagnosis or a major device implant reported.

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular embolization or occlusion of head and neck. The table below shows our findings. For MS-DRGs 025, 026, and 027, the cases identified by procedure code 39.72, 39.75, or 39.76 (endovascular embolization or occlusion of head and neck) have higher average costs and shorter lengths of stay in comparison to all the cases within each of those respective MS-DRGs. The average costs of cases in MS-DRG 024 are $4,049 higher than the average costs of the 1,731 endovascular embolization or occlusion of head and neck procedures cases in MS-DRG 027 ($26,250 versus $22,201). The findings also show that the 524 cases with procedure code 39.72, 39.75, or 39.76 with average costs of $41,030 in MS-DRG 025 are closer to the average costs of $36,982 for cases in MS-DRG 023. Lastly, we found that the 721 endovascular embolization or occlusion of head and neck procedure cases in MS-DRG 026 have average costs of $27,998 compared to average costs of $26,250 for cases in MS-DRG 024.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 23—All cases5,38310.98$36,982
MS-DRG 24—All cases1,7456.3026,250
MS-DRG 25—All cases15,9379.6829,722
MS-DRG 25—Cases with procedure code 39.72, 39.75, or 39.765247.9741,030
MS-DRG 26—All cases8,5206.1621,194
MS-DRG 26—Cases with procedure code 39.72, 39.75, or 39.767213.1427,998
MS-DRG 27—All cases10,3263.3016,389
MS-DRG 27—Cases with procedure code 39.72, 39.75, or 39.761,7311.6622,201

Our clinical advisors reviewed the results of our examination and determined that the endovascular embolization or occlusion of head and neck procedures are appropriately classified within MS-DRGs 025, 026, and 027 because they do not have an acute complex CNS principal diagnosis or a major device implant which would add to their clinical complexity. Cases in MS-DRG 024 have average costs that are $4,049 higher than cases in MS-DRG 027 with procedure code 39.72, 39.75, or 39.76. We acknowledge that the 1,245 cases with procedure code 39.72, 39.75, or 39.76 in MS-DRGs 025 and 026 have average costs that are closer to those in MS-DRGs 023 and 024. However, these cases are 1,245 of the total 2,976 cases that would be involved if we moved all MS-DRGs 025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to MS-DRGs 023 and 024, even if they did not have an acute complex CNS principal diagnosis or a major device implant. Based on these findings and the recommendations from our clinical advisors, we determined that proposing to move endovascular embolization or occlusion of head and neck procedures from MS-DRGs 025, 026, and 027 to MS-DRGs 023 and 024 was not warranted. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to maintain the current MS-DRG assignments for endovascular embolization or occlusion of head and neck procedures. We invited public comments on our proposal.

Comment: A number of commenters supported CMS' proposal to maintain the current MS-DRG assignment for codes 39.72, 39.75, or 39.76 in MS-DRGs 025, 026, and 027. The commenters stated this was reasonable, given the data and information provided.Start Printed Page 49885

A number of commenters objected to the proposal to maintain the current MS-DRG assignments for endovascular embolizations captured in codes 39.72, 39.75 and 39.76. The commenters recommended that CMS move the three codes to MS-DRGs 023 and 024. The commenters stated that the coils used in the endovascular embolizations are expensive and the endovascular procedures require substantial additional resources. The commenters stated that their hospitals are significantly underpaid for these cases. The commenters recommended that endovascular embolization codes 39.72, 39.75 and 39.76 be classified a “Major Device Implants” and therefore assigned to MS-DRGs 023 and 024.

Several commenters recommended that CMS create new severity subgroups within MS-DRG 024 to indicate cases with CC and cases without CC/MCC. The commenters recommended a three-level severity split as follows:

  • 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 with CC); and
  • MS-DRG XXX (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without CC/MCC)

The commenters recommended that endovascular embolizations captured in codes 39.72, 39.75 and 39.76 be added to these three recommended MS-DRGs as part of the Major Device Implant group.

One of the commenters recommended the creation of a new set of MS-DRGs to capture intracranial endovascular embolization procedures if CMS decided not to modify the current MS-DRGs by moving codes 39.72, 39.75, and 39.76 to MS-DRGs 023 and 024. The commenter suggested the following titles for the recommended new MS-DRGs:

  • Recommended new MS-DRG 043 (Intracranial Endovascular Embolization Procedures with MCC)
  • Recommended new MS-DRG 044 (Intracranial Endovascular Embolization Procedures with CC)
  • Recommended new MS-DRG 045 (Intracranial Endovascular Embolization Procedures with Device Implant without CC/MCC).

The commenter acknowledged that there were a limited number of other intracranial endovascular procedures that could also be considered for inclusion in the new base MS-DRG with this new option. The commenter supported including any additional intracranial endovascular embolization procedures that CMS deemed to be clinically appropriate.

Response: We appreciate the commenters' support of our proposal to maintain the current MS-DRG assignment. We examined the commenters' recommendation of subdividing MS-DRG 024 by adding an additional severity level (with CC and without CC/MCC). The findings from the examination of the claims data in the December 2013 update of the FY 2013 MedPAR file on endovascular embolization or occlusion of head and neck procedures are shown in the first table below. We applied the following criteria established in FY 2008 (72 FR 47169) to determine if the creation of a new CC or MCC subgroup within a base MS-DRG was 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 different 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.

Endovascular Embolization or Occlusion of Head and Neck Procedures

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 23—All cases5,38310.98$36,982
MS-DRG 24—All cases1,7456.3026,250

The following table shows the number of cases that would be within each of the new requested three MS-DRGs, including the two proposed severity levels.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 23 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant)5,38310.98$36,982
Proposed MS-DRG 24 (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with CC or Chemo Implant)1,2117.6527,360
Proposed MS-DRG XX (Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without CC/MCC or Chemo Implant)5343.2523,733

We determined that the requested new severity subdivision of with CC and without CC/MCC would meet only four of the five criteria. The requested new with CC and without CC/MCC severity levels do not meet the criterion that there is at least a 20 percent difference in average costs between subgroups.

Because the requested new severity level does not meet all five criteria, we are not modifying MS-DRG 024 to create severity levels for cases with CC and cases without CC/MCC.

We also evaluated the request to add endovascular embolizations captured by codes 39.72, 39.75 and 39.76 to the group labeled “Major Device Implants” within MS-DRGs 023 and 024. Major Device Implants within MS-DRGs 023 and 024 include the following three sets Start Printed Page 49886of intracranial neurostimulator procedures. Each of the three is composed of the implantation of an intracranial neurostimulator pulse generator which is implanted in the patient, as well as the insertion of a neurostimulator lead which is inserted through a burr hole in the skull into the patient's brain.

  • 01.20 (Cranial implantation or replacement of neurostimulator pulse generator) and 02.93 (Implantation or replacement of intracranial neurostimulator lead(s))
  • 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) and 86.95 (Insertion or replacement of multiple array neurostimulator pulse generator, not specified as rechargeable)
  • 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) and 86.98 (Insertion or replacement of multiple array (two or more) rechargeable neurostimulator pulse generator)

Our clinical advisors reviewed this issue and advised us not to classify endovascular embolization procedures in the same manner as patients who receive intracranial neurostimulators. They advised against classifying endovascular embolizations as Major Device Implants for several reasons. First, the endovascular embolization device itself is a simple mechanical device, such as a wire, not a complex electronic device. The work involved in configuring the neurostimulator device to the patient, both before and after insertion, is significantly different from that of the endovascular embolizations. Second, endovascular embolizations are not devices implanted through an open procedure as are intracranial neurostimulator pulse generators and neurostimulator leads. Our clinical advisors stated that open procedures, including open procedures to implant the generator but especially including open skull procedures, from a clinical standpoint are significantly different than endovascular procedures, both in terms of the work, the facilities, the risks, and recovery rates (length of stay). Our clinical advisors specifically stated that the insertion of coils through an endovascular approach is not similar to the insertion of a complex electronic device. Endovascular embolizations do not match the clinical complexity and severity of the intracranial neurostimulators which have greater lengths of stay. Our clinical advisors stated that care of patients who receive endovascular embolizations is not at the same severity level as for those patients who have a major device implant such as an intracranial neurostimulator or those patients with an acute complex central nervous system principal diagnosis. Therefore, our clinical advisors recommended not moving endovascular embolizations to MS-DRGs 023 or 024. They recommended maintaining their current assignments in MS-DRGs 025, 026, and 027.

We evaluated the request to create a new set of MS-DRGs to capture intracranial endovascular embolization procedures. The requestor recommended including codes 39.72, 39.75, and 39.76 and any other procedures which CMS deemed appropriate. Our clinical advisors stated that codes 39.72, 39.75, and 39.76 were appropriately assigned to MS-DRGs 025, 026, and 027 because they are clinically similar to other cases in MS-DRGs 025, 026, and 027. In addition, as stated earlier, these cases do not match the clinical complexity and severity of the intracranial neurostimulators within MS-DRGs 023 and 024. For these reasons, our clinical advisors did not support creating a new set of MS-DRG for these codes and any additional intracranial endovascular embolization procedures.

After consideration of public comments we received, we are finalizing our proposal to maintain the current MS-DRG assignments for codes 39.72, 39.75 and 39.76 in MS-DRGs 025, 026, and 027.

3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): Avery Breathing Pacemaker System

We received a request to create a new MS-DRG for the Avery Breathing Pacemaker System. This system is also called a diaphragmatic pacemaker and is captured by ICD-9-CM procedure code 34.85 (Implantation of diaphragmatic pacemaker). The requestor stated that the diaphragmatic pacemaker is indicated for adult and pediatric patients with chronic respiratory insufficiency that would otherwise be dependent on ventilator support. The procedure consists of surgically implanted receivers and electrodes mated to an external transmitter by antennas worn over the implanted receivers. The external transmitter and antennas send radiofrequency energy to the implanted receivers under the skin. The receivers then convert the radio waves into stimulating pulses sent down the electrodes to the phrenic nerves, causing the diaphragm to contract. The requestor stated that this normal pattern is superior to mechanical ventilators that force air into the chest. The requestor also stated that the system is expensive; the device cost is approximately $57,000. According to the requestor, given the cost of the device, hospitals are reluctant to use it. The requestor did not make a specific MS-DRG reassignment request.

When used for a respiratory failure patient, procedure code 34.85 is assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively).

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for diaphragmatic pacemaker cases. The following table shows our findings.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 163—All cases11,76613.13$34,308
MS-DRG 163—Cases with procedure code 34.85132.23$29,406
MS-DRG 164—All cases16,0876.58$18,352
MS-DRG 164—Cases with procedure code 34.85341.71$23,406
MS-DRG 165—All cases9,2073.91$13,081
MS-DRG 165—Cases with procedure code 34.8511.00$22,977

There were only 48 cases of diaphragmatic pacemakers within MS-DRGs 163, 164, and 165. The average costs of these diaphragmatic pacemaker cases ranged from $22,977 for the single case in MS-DRG 165 to $29,406 for the cases in MS-DRG 163, compared to the average costs for all cases in MS-DRGs 163, 164, and 165, which range from $13,081 to $34,308. The average cost for diaphragmatic pacemaker cases in MS-DRG 163 was lower than that for all cases in MS-DRG 163, $29,406 compared to $34,308 for all cases. The average cost for diaphragmatic Start Printed Page 49887pacemaker cases was higher for MS-DRG 164, $23,406 compared to $18,352 for all cases. While the average cost for the single diaphragmatic pacemaker case was significantly higher for MS-DRG 165, $22,977 compared to $13,081, we were unable to determine if additional factors might have impacted the higher cost for this single case.

We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, given the small number of diaphragmatic pacemaker cases that we found, we did not believe that there was justification for creating a new MS-DRG. Basing a new MS-DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS-DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. We noted that, as discussed in section II.G.4.c. of the preamble of the proposed rule, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS-DRG is whether there are at least 500 cases in the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS-DRG, applying it here suggests that creating a new MS-DRG for only 48 cases would not be appropriate. Although the average costs of these diaphragmatic pacemaker cases are higher than the average costs of all cases in MS-DRG 164, the average costs are lower than all cases in MS-DRG 163. We believe the current MS-DRG assignment is appropriate and that the data do not support creating an MS-DRG because there are so few cases.

Our clinical advisors reviewed this issue and determined that the diaphragmatic pacemaker cases are appropriately classified within MS-DRGs 163, 164, and 165 because they are clinically similar to other cases of patients with major chest procedures within MS-DRGs 163, 164, and 165. Our clinical advisors did not support creating a new MS-DRG for such a small number of cases.

Based on the results of the examination of the claims data, the recommendations from our clinical advisors, and the small number of diaphragmatic pacemaker cases, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to create a new MS-DRG for diaphragmatic pacemaker cases for FY 2015. We proposed to maintain the current MS-DRG assignments for diaphragmatic pacemaker cases. We invited public comments on our proposal.

Comment: A number of commenters supported CMS' proposal to maintain the current MS-DRG assignment for diaphragmatic pacemakers. The commenters stated that the proposal was reasonable given the data and information presented.

Another commenter expressed appreciation for the analysis performed on this issue, but disagreed with the conclusion to leave diaphragmatic pacemakers in MS-DRGs 163, 164, and 165. The commenter stated that, although the number of cases identified (48) is small, they are unique in both their costs and their length of stay. The commenter stated that these cases do not represent the full universe of Medicare beneficiaries who would be good candidates for the diaphragmatic pacemaker. The commenter expressed surprise at the average cost data presented in the table in the proposed rule. The commenter stated that it sells this system directly to hospitals and does not know what insurance plan covers the procedure. However, in investigating systems hospitals reported with code 34.85, the commenter stated that it discovered that this code covers systems provided by other manufacturers and that the cost of devices by other manufacturers is lower than the Avery system and is closer to the costs in CMS' claims data. The commenter stated that the Avery system is fully implantable, whereas other systems are not. The commenter asserted that one other system has percutaneous lead wires that leave the patients; therefore, the other system is not totally implantable. The commenter made inquiries of hospitals and found that a majority of those hospitals contacted were using a lower priced system. The commenter stated that by grouping multiple manufacturers' devices into the same MS-DRG, with the same payment rate, CMS was limiting physician and patient choice of a device. The commenter recommended that MS-DRG payments be made based on the equipment provided and allow hospitals to recoup the costs of each system used.

The commenter stated that inadequate payment discourages hospitals from offering the service to patients. The commenter also stated that these cases are anomalies in the current MS-DRGs to which they are assigned and should be classified into a single, unique MS-DRG that would be clinically and financially coherent. The commenter believed that such a correction could increase the number of eligible Medicare beneficiaries who would benefit from use of the device, allowing them to stop using mechanical ventilation, which would greatly improve their overall health and quality of life.

The commenter also stated that the average costs for 35 of the cases with procedure code 34.85 exceed the average costs of the other cases in the MS-DRG to which they are assigned. The commenter stated that it found the average length of stay for all 48 cases to be substantially less than the average length of stay for all of the other cases. Therefore, the commenter stated that the costs for the hospital are related primarily to the device and not to the direct hospital care provided to the patients. The commenter stated that the small number of diaphragmatic pacemaker cases compared to the large volume of other cases in each MS-DRG means that the unique cost factors of most of the pacemaker cases will never be reflected in the payment for these MS-DRGs. The commenter stated that hospitals have no incentive to make the service available to patients who could use the system. The commenter stated that the number of individuals who can use the pacemaker is small because of the comparatively small volume of individuals who suffer from the conditions that make the pacemaker necessary, but there are more than 48 Medicare beneficiaries who could benefit from the device.

The commenter further questioned the rationale for not basing a new MS-DRG on such a small number of cases. The commenter questioned the reference to the use of 500 cases, which is one of the criteria for a severity level, when the requestor did not want a severity level, but instead was requesting a new MS-DRG for these Avery Diaphragmatic Pacemaker cases.

In conclusion, the commenter urged CMS to create a new MS-DRG for procedure code 34.85.

Response: We appreciate the commenters' support for our proposal not to change the MS-DRG for diaphragmatic pacemakers. As noted by one commenter, the ICD-9-CM procedure codes capture the procedure performed, in this case the implantation of a diaphragmatic pacemaker. The codes are not manufacturer specific. This is the case for all types of implanted devices such as cardiac pacemakers, defibrillators, and orthopedic devices. The procedure codes are grouped into clinically appropriate MS-DRGs. MS-DRGs were not created to capture a device by a single manufacturer. It is assumed that hospitals and their physician staff will select the appropriate devices. CMS makes Medicare payments to hospitals for groups of similar patients within Start Printed Page 49888each MS-DRG. The average costs provided in the tables above were based on Medicare patients reported to have received a diaphragmatic pacemaker. Hospitals have been receiving payments by diagnosis-related groups for several decades and are aware that average payments will exceed the costs of some cases and be less than the costs of other cases. They are aware that the selection of a particular manufacturer, or a particular device made by one manufacturer, should be consistent with the needs of the patient. Our data do not identify which manufacturer's devices the hospitals and physicians chose to utilize.

As stated earlier, given the small number of diaphragmatic pacemaker cases, we do not believe there is justification for creating a new MS-DRG. Basing a new MS-DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS-DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS DRG provides greater stability for annual updates to the relative payment weights.

Our clinical advisors reviewed this issue and the public comments received and continue to advise that that the diaphragmatic pacemaker cases are appropriately classified within MS-DRGs 163, 164, and 165 because they are clinically similar to other cases of patients with major chest procedures within MS-DRGs 163, 164, and 165. They stated that the clinical flexibility of both physicians and hospitals is maximized when larger cohorts of clinically similar patients are grouped and the costs averaged. Our clinical advisors note that many factors are considered when comparing groups of patients, including such factors as length of stay, cost of specific devices, type of device, type of procedure, and anatomical location, among others. They stated that the commenter did not identify any factors that they had failed to consider when categorizing these cases. Our clinical advisors do not support creating a new MS DRG for such a small number of cases.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG assignments for diaphragmatic pacemaker cases within MS-DRGs 163, 164, and 165.

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

a. Exclusion of Left Atrial Appendage

We received a request to move the exclusion of the left atrial appendage procedure, which is a non-O.R. procedure and captured by ICD-9-CM procedure code 37.36 (Excision, destruction or exclusion of left atrial appendage (LAA)), from MS-DRGs 250 (Percutaneous Cardiovascular without Coronary Artery Stent with MCC) and 251 (Percutaneous Cardiovascular without Coronary Artery Stent without MCC) to MS-DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC). The requestor stated that the exclusion of the left atrial appendage procedure code 37.36 is not clinically coherent with the other procedures in MS-DRGs 250 and 251 and that this current assignment to MS-DRGs 250 and 251 does not compensate providers adequately for the expenses incurred to perform this procedure and placement of the device.

The exclusion of the left atrial appendage procedure involves a percutaneous placement of a snare/suture around the left atrial appendage to close it off. The exclusion of the left atrial appendage procedure takes place in the cardiac catheterization laboratory under general anesthesia and is a catheter based closed-chest procedure instead of an open heart surgical technique to treat the same clinical condition, with the same intended results. The procedure can be performed by either an interventional cardiologist or an electrophysiologist.

We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS-DRGs 250 and 251 and MS-DRGs 237 and 238. Our findings are shown in the table below.

MS-DRGNumber of  casesAverage  length of stayAverage  costs
MS-DRG 250—All cases9,1746.90$21,319
MS-DRG 250—Cases with procedure code 37.36617.2129,637
MS-DRG 251—All cases26,3313.0114,614
MS-DRG 251—Cases with procedure code 37.363413.0118,298
MS-DRG 237—All cases17,8139.6635,642
MS-DRG 238—All cases33,6443.7324,511

The data in the table above show that, while the average costs of the atrial appendage exclusion procedures are higher ($29,637) than those for all cases ($21,319) within MS-DRG 250 and are higher ($18,298) than for all cases ($14,614) within MS-DRG 251, they are lower than those in MS-DRGs 237 ($35,642) and 238 ($24,511). Our clinical advisors reviewed this issue and recommended not moving these stand-alone percutaneous cases to MS-DRGs 237 and 238 because they do not consider them to be major cardiovascular procedures. Our clinical advisors stated that cases reporting ICD-9-CM procedure code 37.36 are appropriately assigned within MS-DRG 250 and 251 because they are percutaneous cardiovascular procedures and are clinically similar to other procedures within the MS-DRG. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to reassign exclusion of atrial appendage procedure cases from MS-DRGs 250 and 251 to MS-DRGs 237 and 238 for FY 2015. We invited public comments on our proposal to maintain the current MS-DRG structure for the exclusion of the left atrial appendage.

Comment: Several commenters supported CMS' proposal to maintain the current MS-DRGs 250 and 251 assignment for exclusion of the left atrial appendage. Several commenters disagreed with the proposal and recommended that CMS assign exclusion of the left atrial appendage to MS-DRG 237 and 238 because the procedure can be performed as a standalone percutaneous procedure or in combination with an open chest procedure such as cardiac bypass surgery. The commenters stated that when the procedure is performed in conjunction with an open chest procedure, the procedure is performed in a surgical suite. Therefore, the commenters recommended that exclusion of the left atrial appendage be assigned to MS-DRGs 237 and 238 when it is a standalone procedure.

Response: We appreciate the commenters' support for our proposal to maintain the current MS-DRG assignment for the exclusion of atrial Start Printed Page 49889appendage procedures. We are not accepting the commenters' recommendation to move the cases to MS-DRGs 237 and 238. Our clinical advisors reviewed these public comments and continue to maintain that cases reporting ICD-9-CM procedure code 37.36 are appropriately assigned within MS-DRG 250 and 251 because they are percutaneous cardiovascular procedures and are clinically similar to other procedures within the MS-DRGs. They also stated that when performed with an open chest procedure, these procedures would map to a clinically appropriate open chest MS-DRG under the current MS-DRG logic. Our clinical advisors confirmed that although these are not insignificant procedures, the procedures are not considered to be major cardiovascular procedures on the same scale and with similar characteristics as cases grouped together in MS-DRGs 237 and 238.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG assignment for exclusion of atrial appendage in MS-DRGs 250 and 251 for FY 2015.

b. Transcatheter Mitral Valve Repair: MitraClip®

The MitraClip® System (hereafter referred to as MitraClip®) for transcatheter mitral valve repair has been discussed in extensive detail in previous rulemaking, 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, in 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 MitraClip® was unable to be considered further due to lack of FDA approval by the July 1, 2013 deadline.

Subsequently, on October 24, 2013, MitraClip® received FDA approval. As a result, the manufacturer has submitted new requests for both an MS-DRG reclassification and new technology add-on payment for FY 2015. We refer readers to section II.I. of the preamble of the proposed rule and this final rule for a discussion regarding the application for MitraClip® under the new technology add-on payment policy. Below we discuss the MS-DRG reclassification request.

The manufacturer's request for MS-DRG reclassification involves two components. The first component consists of reassigning cases reporting a transcatheter mitral valve repair using the MitraClip® from MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent with MCC and without MCC, respectively) 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 second component of the manufacturer's request was for CMS to examine the creation of a new base MS-DRG for transcatheter valve therapies.

Effective October 1, 2010, ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with implant) was created to identify and describe the MitraClip® technology.

To address the first component of the manufacturer's request, we conducted an analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS-DRGs 250 and 251. The table below shows our findings.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 250—All cases9,1746.90$21,319
MS-DRG 250—Cases with procedure code 35.97678.4839,103
MS-DRG 251—All cases26,3313.0114,614
MS-DRG 251—Cases with procedure code 35.971273.9425,635

As displayed in the table above, the data demonstrate that, for MS-DRG 250, there were a total of 9,174 cases with an average length of stay of 6.90 days and average costs of $21,319. The number of cases reporting the ICD-9-CM procedure code 35.97 in MS-DRG 250 totaled 67 with an average length of stay of 8.48 days and average costs of $39,103. For MS-DRG 251, there were a total of 26,331 cases with an average length of stay of 3.01 days and average costs of $14,614. There were 127 cases found in MS-DRG 251 reporting the procedure code 35.97 with an average length of stay of 3.94 days and average costs of $25,635. We recognize that the cases reporting procedure code 35.97 have a longer length of stay and higher average costs in comparison to all the cases within MS-DRGs 250 and 251. However, as stated in prior rulemaking (77 FR 53309), it is a fundamental principle of an averaged payment system that half of the procedures in a group will have above average costs. It is expected that there will be higher cost and lower cost subsets, especially when a subset has low numbers.

We also evaluated the claims data from the December 2013 update of the FY 2013 MedPAR file for MS-DRGs 216 through 221. Our findings are shown in the table below.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 216—All cases10,13115.41$65,478
MS-DRG 217—All cases5,3749.5144,695
MS-DRG 218—All cases8826.8839,470
MS-DRG 219—All cases17,85611.6354,590
MS-DRG 220—All cases21,0597.1338,137
Start Printed Page 49890
MS-DRG 221—All cases4,5865.3234,310

The data in our findings did not warrant reassignment of cases reporting use of the MitraClip®. We stated in the proposed rule that if we were to propose reassignment of cases reporting procedure code 35.97 to MS-DRGs 216 through 221, they would be significantly overpaid, as the average costs range from $34,310 to $65,478 for those MS-DRGs. In addition, our clinical advisors did not support reassigning these cases. They noted that the current MS-DRG assignment is appropriate for the reasons stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53309). To reiterate, our clinical advisors noted that the current MS-DRG assignment is reasonable because the operating room resource utilizations of percutaneous procedures, such as those found in MS-DRGs 250 and 251, tend to group together, and are generally less costly than open procedures, such as those found in MS-DRGs 216 through 221. Percutaneous procedures by organ system represent groups that are reasonably clinically coherent. More significantly, our clinical advisors stated that postoperative resource utilization is significantly higher for open procedures with much greater morbidity and consequent recovery needs. Because the equipment, technique, staff, patient populations, and physician specialty all tend to group by type of procedure (percutaneous or open), separately grouping percutaneous procedures and open procedures is more clinically consistent. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to modify the current MS-DRG assignment for cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 216 through 221 for FY 2015. We invited public comments on our proposal to not make any modifications to the current MS-DRG logic for these cases.

Comment: Several commenters supported the proposal to maintain cases reporting procedure code 35.97 in MS-DRGs 250 and 251, stating it was reasonable given the data and information provided.

Response: We acknowledge and appreciate the commenters' support.

Comment: Some commenters suggested that cases utilizing the MitraClip® should be compensated similarly to mitral valve procedures that are performed with an open approach due to the time, staff and resources involved. Commenters reported that this novel technology has improved the quality of life for patients suffering from congestive heart failure. However, the commenters indicated that due to inadequate payment, their respective facilities are not able to offer the MitraClip® to the entire population that is eligible for it. The commenters also indicated that patients do not have access to this life-saving technology not only due to the lack of adequate payment to providers but also due to the cost of the device. Another commenter reported that “the price of the device should be reduced to a level that is feasible for both sponsor and hospital.” Commenters also suggested that congestive heart failure readmissions would be reduced if patients could be treated with the MitraClip®.

Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our clinical advisors believe that the current MS-DRG assignment for the MitraClip® is reasonable because the operating room resource utilizations of percutaneous procedures, such as those found in MS-DRGs 250 and 251, tend to group together, and are generally less costly than open procedures. In addition, the data do not support reassignment. We stated in the proposed rule that if we were to propose reassignment of cases reporting procedure code 35.97 to MS-DRGs 216 through 221, they would be significantly overpaid, as the average costs range from $34,310 to $65,478 for those MS-DRGs and the average costs for cases reporting procedure code 35.97 are $30,286 for MS-DRGs 250 and 251.

Comment: One commenter suggested an alternative option regarding MS-DRG reassignment for the MitraClip® and requested that CMS reassign cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively) with concurrent approval of the new technology add-on payment application. The commenter stated that this would allow the MitraClip® to be recognized in MS-DRGs involving a major cardiovascular procedure with an implantable device.

Response: We did not propose to reassign cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 237 and 238. Therefore, we consider this comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. We note that, as referenced in section II.G.1.b. of the preamble of this final rule, we encourage input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014.

We note that the MitraClip® technology is discussed in section II.I. of the preamble of this final rule under the new technology add-on payment policy.

After consideration of the public comments we received, we are finalizing our proposal to not modify the current MS-DRG assignment for cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 216 through 221 for FY 2015.

As indicated above, the second component of the manufacturer's request involved the creation of a new base MS-DRG for transcatheter valve therapies. We also received a similar request from another manufacturer recommending that CMS create a new MS-DRG for procedures referred to as endovascular cardiac valve replacement procedures. We reviewed each of these requests using the same data analysis, as set forth below. The discussion for endovascular cardiac valve replacement procedures is included in section II.G.4.c. of the preamble of this final rule and includes findings from the analysis and our proposals and final policies for each of these similar, but distinct requests.

c. Endovascular Cardiac Valve Replacement Procedures

As noted in the previous section related to the MitraClip® technology, we received two requests to create a new base MS-DRG for what was referred to as “transcatheter valve therapies” by one manufacturer and “endovascular cardiac valve replacement” procedures by another manufacturer. Below we summarize the details of each request and review results of the data analysis that was performed.

Transcatheter Valve Therapies

The request related to transcatheter valve therapies consisted of creating a new MS-DRG that would include the MitraClip® technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with implant)), along Start Printed Page 49891with the following list of ICD-9-CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique:

  • 35.05 (Endovascular replacement of aortic valve);
  • 35.06 (Transapical replacement of aortic valve);
  • 35.07 (Endovascular replacement of pulmonary valve);
  • 35.08 (Transapical replacement of pulmonary valve); and
  • 35.09 (Endovascular replacement of unspecified valve).

We performed analysis of claims data from the December 2013 update of the FY 2013 MedPAR file for both the percutaneous mitral valve repair and the transcatheter/endovascular cardiac valve replacement codes in their respective MS-DRGs. The percutaneous mitral valve repair with implant (MitraClip®) procedure code is currently assigned to MS-DRGs 250 and 251, while the transcatheter/endovascular cardiac valve replacement procedure codes are currently assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. As illustrated in the table below, the data demonstrate that, for MS-DRGs 250 and 251, there were a total of 194 cases reporting procedure code 35.97, with an average length of stay of 5.5 days and average costs of $30,286.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 250 through 251—Cases with procedure code 35.971945.5$30,286

Upon analysis of cases in MS-DRGs 216 through 221 reporting the cardiac valve replacement procedure codes, we found a total of 7,287 cases with an average length of stay of 8.1 days and average costs of $53,802, as shown in the table below.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.097,2878.1$53,802
MS-DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.0952,60110.147,177

The data clearly demonstrate that the volume of cases for the transcatheter/endovascular cardiac valve replacement procedures is much higher in comparison to the volume of cases for the percutaneous mitral valve repair (MitraClip®) procedure (7,287 compared to 194). In addition, the average costs of the transcatheter/endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair with implant ($53,802 compared to $30,286).

Our clinical advisors did not support grouping a percutaneous valve repair procedure with transcatheter/endovascular valve replacement procedures. They do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClip® technology identified by procedure code 35.97 is utilized for a percutaneous mitral valve repair, while the other technologies, identified by procedure codes 35.05 through 35.09, are utilized for transcatheter/endovascular cardiac valve replacements. Consequently, the data analysis and our clinical advisors did not support the creation of a new MS-DRG. Therefore, for FY 2015, we did not propose to create a new MS-DRG to group cases reporting the percutaneous mitral valve repair (MitraClip®) procedure with transcatheter/endovascular cardiac valve replacement procedures. We invited public comments on our proposal.

Comment: One commenter recommended reassignment of procedure code 35.97 to a more appropriate MS-DRG. However, the commenter did not offer a specific recommendation as to which MS-DRG would be more appropriate.

Response: We appreciate the commenter's recommendation. However, as the commenter did not provide a specific MS-DRG to which procedure code 35.97 should be reassigned, we were unable to evaluate the recommendation. As we noted earlier, and as referenced in section II.G.1.b. of the preamble of this final rule, we encourage input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December 7 of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2016, comments and suggestions should be submitted by December 7, 2014.

Comment: One commenter urged CMS to reassign procedure code 35.97 from its current assignment in MS-DRGs 250 and 251 to a more appropriate MS-DRG that would better recognize case complexity as a major cardiovascular procedure with a permanent implant. This commenter specifically recommended the inclusion of transcatheter mitral valve repair (TMVR) within the newly proposed MS-DRGs 266 and 267, and to subsequently retitle these MS-DRGs, “Endovascular Transcatheter Valve Therapy with Implant.”

Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule, our analysis did not support including cases reporting procedure code 35.97 for percutaneous mitral valve repair procedures together with transcatheter/endovascular cardiac valve replacement procedures in a new MS-DRG. The average costs of the transcatheter/endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair procedures with implant ($53,802 compared to $30,286).

In addition, our clinical advisors did not support grouping a percutaneous valve repair procedure with transcatheter/endovascular valve replacement procedures. They do not believe that these procedures are clinically coherent or similar in terms of resource consumption because the MitraClip® technology identified by procedure code 35.97 is utilized for a percutaneous mitral valve repair, while the other technologies, identified by procedure codes 35.05 through 35.09, are utilized for transcatheter/endovascular cardiac valve replacements. Start Printed Page 49892

Comment: One commenter disagreed with the CMS analysis that transcatheter mitral valve repair (TMVR) is significantly different than transcatheter aortic valve replacement (TAVR). The commenter asserted that “unlike alternative open repair and replacement procedures, a heart valve prosthesis is being manipulated/modified from a Transcatheter approach; whether the prosthesis serves to `replace' or `repair' an existing valve is irrelevant in regards to resource consumption.” The commenter urged CMS to consider all transcatheter valve procedures equally with respect to DRG assignment.

Response: We disagree with the commenter that TMVR and TAVR are not significantly different. As explained in the FY 2015 IPPS/LTCH PPS proposed rule, our analysis of the claims data and the recommendation from our clinical advisors do not support treating TMVR and all transcatheter valve procedures equally with respect to MS-DRG assignment. As noted previously, the average costs of the transcatheter/endovascular cardiac valve replacement procedures are significantly higher than the average costs of the percutaneous mitral valve repair procedures with implant ($53,802 compared to $30,286).

After consideration of the public comments we received, we are finalizing our proposal to not create a new MS-DRG to group cases reporting the percutaneous mitral valve repair (MitraClip®) procedure with transcatheter/endovascular cardiac valve replacement procedures.

Endovascular Cardiac Valve Replacement

The similar but separate request relating to endovascular cardiac valve replacement procedures consisted of creating a new MS-DRG that would only include the various types of cardiac valve replacements performed by an endovascular or transcatheter technique. In other words, this request specifically did not include the MitraClip® technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with implant)) and only included the list of ICD-9-CM procedure codes that identify the various types of valve replacements performed by an endovascular or transcatheter technique (ICD-9-CM procedure codes 35.05 through 35.09) as described earlier in this section.

The human heart contains four major valves—the aortic, mitral, pulmonary, and tricuspid valves. These valves function to keep blood flowing through the heart. When conditions such as stenosis or insufficiency/regurgitation occur in one or more of these valves, valvular heart disease may result. Cardiac valve replacement surgery is performed in an effort to correct these diseased or damaged heart valves. The endovascular or transcatheter technique presents a viable option for high-risk patients who are not candidates for the traditional open surgical approach.

We reviewed the claims data from the December 2013 update of the FY 2013 MedPAR file for cases in MS-DRGs 216 through 221. Our findings are shown in the chart below. The data analysis shows that cardiac valve replacements performed by an endovascular or transcatheter technique represent a total of 7,287 of the cases in MS-DRGs 216 through 221, with an average length of stay of 8.1 days and higher average costs ($53,802 compared to $47,177) in comparison to all of the cases in MS-DRGs 216 through 221.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRGs 216 through 221—Cases with procedure codes 35.05, 35.06, 35.07, 35.08 and 35.097,2878.1$53,802
MS-DRGs 216 through 221—Cases without procedure codes 35.05, 35.06, 35.07, 35.08 and 35.0952,60110.147,177

As the data appear to indicate support for the creation of a new base MS-DRG, based on our evaluation of resource consumption, patient characteristics, volume, and costs between the cardiac valve replacements performed by an endovascular or transcatheter technique and the open surgical technique, we then applied our established criteria to determine if these cases would meet the requirements to create subgroups. We use five criteria established in the FY 2008 IPPS final rule (72 FR 47169) to review requests involving the creation of a new CC or an MCC subgroup within a base MS-DRG. As outlined in the FY 2012 IPPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS-DRG, this subgroup must meet all of the following five criteria:

  • 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 the MCC subgroup.
  • At least 500 cases are in the CC or the 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 applying the five criteria, we found that the data support the creation of a new MS-DRG subdivided into two severity levels. We also consulted with our clinical advisors. Our clinical advisors stated that patients receiving endovascular cardiac valve replacements are significantly different from those patients who undergo an open chest cardiac valve replacement. They noted that patients receiving endovascular cardiac valve replacements are not eligible for open chest cardiac valve procedures because of a variety of health constraints. This highlights the fact that peri-operative complications and post-operative morbidity have significantly different profiles for open chest procedures compared with endovascular interventions. This is also substantiated by the different average lengths of stay demonstrated by the two cohorts. Our clinical advisors further noted that separately grouping these endovascular valve replacement procedures provides greater clinical cohesion for this subset of high-risk patients.

In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create the following MS-DRGs for endovascular cardiac valve replacements:

  • Proposed new MS-DRG 266 (Endovascular Cardiac Valve Replacement with MCC); and
  • Proposed new MS-DRG 267 (Endovascular Cardiac Valve Replacement without MCC).Start Printed Page 49893
Proposed new MS-DRGs for endovascular cardiac valve replacementNumber of casesAverage length of stayAverage costs
Proposed New MS-DRG 266 with MCC3,51610.6$61,891
Proposed New MS-DRG 267 without MCC3,7715.746,259

We invited public comments on our proposal to create these new MS-DRGs for FY 2015.

Comment: Several commenters supported the proposal to create new MS-DRGs for endovascular cardiac valve replacement procedures. One commenter noted that “the endovascular or transcatheter approach presents a viable option for high-risk patients who are not candidates for the traditional open chest surgical approach. The proposed MS-DRGs better align the more extensive cardiac valve procedures based on clinical coherence and similar resource costs.” Another commenter stated that, by establishing these new MS-DRGs, “CMS will continue to be able to collect the necessary information that will help assure appropriate payment in the future as these technologies evolve.” Other commenters supported creation of the new MS-DRGs, noting it was reasonable given the data and information provided. Another commenter applauded CMS for proposing the two new MS-DRGs, noting that “this decision will allow patients, particularly women, to have increased access to innovative therapies that will ease their suffering from the debilitating effects of severe aortic stenosis.”

Response: We appreciate the commenters' support.

Comment: One commenter commended CMS for proposing new MS-DRGs to identify endovascular/transcatheter valve procedures. However, the commenter suggested that CMS reconsider the title of the proposed MS-DRGs. The commenter noted that the accepted nomenclature is “transcatheter” and not “endovascular”.

Response: We acknowledge that many individuals prefer the use of the term “transcatheter”, such as occurs in the frequently used acronym TAVR (transcatheter aortic valve replacement). However, we note that this nomenclature is by no means universal. “Endovascular” is also used to describe these procedures. The current ICD-9-CM procedure code for TAVR, for example, is 35.05 (Endovascular replacement of aortic valve). Recognizing that universal agreement on medical nomenclature is still an unachievable goal at the present time, we have elected to retain the term “endovascular” to maintain consistency with the current ICD-9-CM terminology.

After consideration of the public comments we received, we are finalizing our proposal to create new MS-DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and MS-DRG 267 (Endovascular Cardiac Valve Replacement without MCC).

d. Abdominal Aorta Graft

We received a request that we change the MS-DRG assignment for procedure code 39.71 (Endovascular implantation of other graft in abdominal aorta), which is assigned to MS-DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and without MCC, respectively). The requestor asked that we reassign procedure code 39.71 to MS-DRGs 228, 229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC, respectively). The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is significantly higher than other cases in MS-DRGs 237 and 238. The requestor stated that the average cost of endovascular abdominal aorta graft implantation cases is closer to those in MS-DRGs 228, 229, and 230.

The requestor stated that the goal of endovascular repair for abdominal aneurysm is to isolate the diseased, aneurismal portion of the aorta and common iliac arteries from continued exposure to systemic blood pressure. The procedure involves the delivery and deployment of endovascular prostheses, also referred to as a graft, as required to isolate the aneurysm above and below the extent of the disease. The requestor stated that this significantly reduces patient morbidity and death caused by leakage and/or sudden rupture of an untreated aneurysm.

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for cases of endovascular abdominal aorta graft implantations. The following table shows our findings.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 237—All cases17,8139.66$35,642
MS-DRG 237—Cases with procedure code 39.712,0938.3044,898
MS-DRG 238—All cases33,6443.7324,511
MS-DRG 238—Cases with procedure code 39.7115,4832.3028,484
MS-DRG 228—All cases1,54313.4852,315
MS-DRG 229—All cases2,0037.4732,070
MS-DRG 230—All cases4934.9529,281

As this table shows, endovascular abdominal aorta graft implantation cases have higher average costs and shorter lengths of stay than all cases within MS-DRGs 237 and 238. The average cost for endovascular abdominal aorta graft implantation cases in MS-DRG 237 is $9,256 greater than that for all cases in MS-DRG 237 ($44,898 compared to $35,642). The average cost for endovascular abdominal aorta graft implantation cases in MS-DRG 238 is $3,973 higher than that for all cases in MS-DRG 238 ($28,484 compared to $24,511). Cases in MS-DRG 228 have average costs that are $7,417 higher than the endovascular abdominal aorta graft implantation cases in MS-DRG 237 ($52,315 compared to $44,898). MS-DRG 228 and MS-DRG 237 both contain cases with MCCs. Cases in MS-DRG 229, which contain a CC, have average costs that are $3,586 higher than average costs of the endovascular abdominal aorta graft implantation cases in MS-DRG 238, which do not contain an MCC ($32,070 compared to $28,484). Cases in MS-DRG 230, which have neither an MCC nor a CC, have average costs that are $797 higher than the endovascular abdominal aorta graft implantation cases in MS-DRG 238 ($29,281 compared to $28,484). While the average costs were Start Printed Page 49894higher for endovascular abdominal aorta graft implantation cases compared to all cases within MS-DRGs 237 and 238, each MS-DRG has some cases that are higher and some cases that are lower than the average costs for the entire MS-DRG. MS-DRGs were developed to capture cases that are clinically consistent with similar overall average resource requirements. This results in some cases within an MS-DRG having costs that are higher than the overall average and other cases having costs that are lower than the overall average. This may be due to specific types of cases included within the MS-DRGs or to the fact that some cases will simply require additional resources on a specific admission. However, taken as a whole, the hospital will be paid an appropriate amount for the group of cases that are assigned to the MS-DRG. We believe the endovascular abdominal aorta graft implantation cases are appropriately grouped with other procedures within MS-DRGs 237 and 238.

Our clinical advisors reviewed this issue and determined that the endovascular abdominal aorta graft implantation cases are appropriately classified within MS-DRGs 237 and 238 because they are clinically similar to the other procedures in MS-DRGs 237 and 238, which include other procedures on the aorta. While the endovascular abdominal aorta graft implantation cases have higher average costs than the average for all cases within MS-DRGs 237 and 238, our clinical advisors do not believe this justifies moving the cases to MS-DRGs 228, 229 and 230, which involve a different set of cardiothoracic surgeries.

As we stated in the FY 2015 IPPS/LTCH PPS proposed rule, based on the results of examination of the claims data and the recommendations of our clinical advisors, we did not believe that proposing to reclassify endovascular abdominal aorta graft implantation cases from MS-DRGs 237 and 238 was warranted. We proposed to maintain the current MS-DRG assignments for endovascular abdominal aorta graft implantation cases. We invited public comments on our proposal.

Comment: A number of commenters supported CMS' proposal to maintain the current MS-DRG assignments for endovascular abdominal aorta graft implantation cases. The commenters stated that the proposal was reasonable given the data and information provided. One commenter disagreed with the proposal and stated that endovascular abdominal aorta graft implantation cases should be reassigned to MS-DRGs 228, 229, and 230. The commenter stated that neither MS-DRGs 237 and 238 nor MS-DRGs 228, 229, and 230 have absolute clinical coherence and that there are a mix of procedures in both set of MS-DRGs. The commenter also expressed concern that CMS was prioritizing clinical coherence over total resource cost in deciding not to approve this request to assign procedure code 39.71 to MS-DRGs 228, 229, and 230. The commenter stated that if CMS is concerned about the perception regarding clinical coherence of the MS-DRG assignment for procedures represented by code 39.71, CMS should change the titles for these five MS-DRGs to accommodate the evolution of these procedures while also allowing for new indications of various types of grafts in the aorta and its branches. The commenter did not suggest specific new MS-DRG titles for MS-DRGs 228, 229, 230, 237, and 238.

Response: We appreciate the commenters' support for our proposal to maintain the current assignments for endovascular abdominal aorta graft implantation cases in MS-DRGs 237 and 238. We are not accepting the commenter's suggestion that we modify the titles of MS-DRGs 228, 229, 230, 237, and 238 in order to justify the reassignment of abdominal aorta graft procedures to MS-DRGs 228, 229, and 230. Our clinical advisors reviewed this issue and disagree with the commenters' statement that CMS puts too high a priority on the clinical coherence of the MS-DRGs. MS-DRGs were developed based on clinical similarities of groups of medical and surgical patients. We also consider average costs of these patients in evaluating the need to make modifications to the MS-DRGs. However, for the reasons described previously, we do not believe that the higher average costs for the endovascular abdominal aorta graft implantation cases as compared to the average for all cases within MS-DRGs 237 and 238 warrant reassigning these cases to MS-DRGs 228, 229, and 230. We will continue to evaluate the need to make updates to the MS-DRGs to better capture procedures of the aorta and its branches. We welcome any specific recommendations for refinements to better capture changes in medical treatment. Any requests for MS-DRG updates must be received by December 7, 2014, in order to be considered for the FY 2016 proposed rule.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current assignments for endovascular abdominal aorta graft implantation cases in MS-DRGs 237 and 238.

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

a. Shoulder Replacement Procedures

We received a request to change the MS-DRG assignment for shoulder replacement procedures. This request involved the following two procedure codes:

  • 81.88 (Reverse total shoulder replacement); and
  • 81.97 (Revision of joint replacement of upper extremity).

With respect to procedure code 81.88, the requestor asked that reverse total shoulder replacements be reassigned from MS-DRGs 483 and 484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC and without CC/MCC, respectively) to MS-DRG 483 only. The reassignment of procedure code 81.88 from MS-DRGs 483 and 484 was discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536). The result of reassigning reverse shoulder replacements from MS-DRGs 483 and 484 to MS-DRG 483 only would be that this procedure would be assigned to MS-DRG 483 whether or not the case had a CC or an MCC. The requestor stated that reverse shoulder replacement procedures are more clinically cohesive with higher severity MS-DRGs due to the complexity and resource consumption of these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50534 through 50536) for a discussion of the reverse total shoulder replacement.

The requestor also recommended that we reassign what it described as another shoulder procedure involving procedure code 81.97, which is assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively), to MS-DRG 483. We point out that MS-DRG 483 contains upper joint replacements, including shoulder replacements. MS-DRG 483 does not contain any joint revision procedures. Similar to the request for reassignment of procedure code 81.88, this would mean that procedure code 81.97 would be assigned to MS-DRG 483 whether or not the case had a CC or an MCC. If CMS did not support this recommendation for moving procedure code 81.97 to MS-DRG 483, the requestor recommended an alternative reassignment to MS-DRG 515 (Other Musculoskeletal System and Connective Tissue O.R. procedures with MCC) even if the case had no MCC.

We point out that, while the requestor refers to procedure code 81.97 as a Start Printed Page 49895shoulder procedure, the code description actually includes revisions of joint replacements of a variety of upper extremity joints, including those in the elbow, hand, shoulder, and wrist.

As stated earlier, reverse shoulder replacements are assigned to MS-DRGs 483 and 484. Revisions of upper joint replacements are assigned to MS-DRGs 515, 516, and 517. We examined claims data from the December 2013 update of the FY 2013 MedPAR file for MS-DRGs 483 and 484. The following table shows our findings of cases of reverse shoulder replacement.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 483—All cases14,2203.20$18,807
MS-DRG 483—Cases with procedure code 81.887,0863.1920,699
MS-DRG 484—All cases23,1831.9516,354
MS-DRG 484—Cases with procedure code 81.889,6332.0318,719
Proposed Revised MS-DRG 483 with all severity levels included37,4032.417,287

As the above table shows, MS-DRG 484 reverse shoulder replacement cases have similar average costs to those in MS-DRG 483 ($18,719 for reverse shoulder replacements in MS-DRG 484 compared to $18,807 for all cases in MS-DRG 483). However, in reviewing the data, we observed that the claims data no longer support two severity levels for MS-DRGs 483 and 484.

We use the five criteria established in FY 2008 (72 FR 47169) to review requests involving the creation of a new CC or MCC subgroup within a base MS-DRG. As outlined in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25819), the original criteria were based on average charges but were later converted to average costs. In order to warrant creation of a CC or an MCC subgroup within a base MS-DRG, the subgroup must meet all of the following five criteria:

  • 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.

We found through our examination of the claims data from the December 2013 update of the FY 2013 MedPAR file that the two severity subgroups of MS-DRG 483 and 484 no longer meet the fourth criterion of at least a 20-percent difference in average costs between subgroups. We found that there is a $2,453 difference in average costs between MS-DRG 483 and MS-DRG 484. The difference in average costs would need to be $3,761 to meet the fourth criterion. Therefore, our claims data support collapsing MS-DRGs 483 and 484 into a single MS-DRG. Our clinical advisors reviewed this issue and agreed that there is no longer enough difference between the two severity levels to justify separate severity subgroups for MS-DRGs 483 and 484, which include a variety of upper joint replacements. Therefore, our clinical advisors supported our recommendation to collapse MS-DRGs 483 and 484 into a single MS-DRG.

In the FY 2015 IPPS/LTCH PPS proposed rule, based on the results of examination of the claims data and the advice of our clinical advisors, we proposed to collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 483 to read “Major Joint/Limb Reattachment Procedure of Upper Extremities”.

The following table shows our findings of cases of revisions of upper joint replacement from the December 2013 update of the FY 2013 MedPAR file.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 515—All cases3,4079.22$22,191
MS-DRG 515—Cases with procedure code 81.97885.6622,085
MS-DRG 516—All cases8,5025.3414,356
MS-DRG 516—Cases with procedure code 81.977992.8418,214
MS-DRG 517—All cases5,7943.2812,172
MS-DRG 517—Cases with procedure code 81.971,2562.0715,920
MS-DRG 483—All cases14,2203.2018,807

Cases identified by code 81.97 in MS-DRGs 515, 516, and 517 have lower average costs and shorter lengths of stay than all cases in MS-DRG 515. The average costs of cases in MS-DRG 515 are $3,977 higher than the average costs of the cases with procedure code 81.97 in MS-DRG 516 ($22,191 compared to $18,214). The average costs of cases in MS-DRG 515 are $6,271 higher than cases with procedure code 81.97 in MS-DRG 517 ($22,191 compared to $15,920).

The table above shows that the average costs of cases in MS-DRG 483 are $3,278 lower than the average costs of cases with procedure code 81.97 in MS-DRG 515 ($18,807 compared to $22,085). The average costs of cases in MS-DRG 483 are $593 higher than the average costs of cases with procedure code 81.97 in MS-DRG 516 ($18,807 compared to $18,214). The average costs of cases in MS-DRG 483 are $2,887 higher than the average costs of cases with procedure code 81.97 in MS-DRG 517 ($18,807 compared to $15,920).

The claims data did not support moving all procedure code 81.97 cases to MS-DRG 515 or MS-DRG 483, whether or not there is a CC or an MCC. We also pointed out once again that procedure code 81.97 is a nonspecific code that captures revisions to not only the shoulder, but also a variety of upper extremity joints including those in the elbow, hand, shoulder, and wrist. Therefore, we have no way of determining how many cases reporting procedure code 81.97 were actually shoulder procedures as opposed to procedures on the elbow, hand, or wrist.

Our clinical advisors reviewed this issue and determined that the revisions of upper joint replacement procedures Start Printed Page 49896are appropriately classified within MS-DRGs 515, 516, and 517, which include other joint revision procedures. They did not support moving revisions of upper joint replacement procedures to MS-DRG 515, whether or not there is an MCC. They supported the current classification, which bases the severity level on the presence of a CC or an MCC. They also did not support moving revisions of upper joint replacement procedures to MS-DRG 483, whether or not there is a CC or an MCC, because these revisions are not joint replacements. Based on the results of our examination and the advice of our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose moving revisions of upper joint replacement procedures to MS-DRG 515 or MS-DRG 483, whether or not there is a CC or an MCC.

In summation, we proposed to collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 483 to read “Major Joint/Limb Reattachment Procedure of Upper Extremities”. We proposed to maintain the current MS-DRG assignments for revisions of upper joint replacement procedures in MS DRGs 515, 516, and 517. We invited public comments on our proposals.

Comment: A number of commenters supported the proposal to collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 483 to read “Major Joint/Limb Reattachment Procedure of Upper Extremities.” The commenters stated that the proposal was reasonable given the data and information provided.

One commenter stated that collapsing the two MS-DRGs is supported by claims data indicating little cost difference between cases in the current two severity levels. Several commenters stated that the new, single MS-DRG represented clinically cohesive procedures with similar complexity and resource consumption.

Response: We appreciate the commenters' support for our proposal to collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 483 to read “Major Joint/Limb Reattachment Procedure of Upper Extremities”.

After consideration of the public comments we received, we are adopting as final, without modification, our proposal to collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 483 to read “Major Joint/Limb Reattachment Procedure of Upper Extremities”.

Comment: A number of commenters supported the proposal to maintain the MS-DRG assignment for code 81.97 in MS-DRGs 515, 516, and 517. The commenters stated that the recommendation was reasonable give the data and information provided. One commenter disagreed with the proposal and stated that code 81.97 would be more accurately classified in MS-DRG 483 (Major Joint/Limb Reattachment of Upper Extremities with CC/MCC) because MS-DRG 483 includes upper extremity procedures.

Response: We appreciate the commenters' support for our proposal to maintain the current MS-DRG assignment for code 81.97 in MS-DRGs 515, 516, and 517. We disagree with the commenter that code 81.97 is similar to other procedures currently assigned to MS-DRG 483. MS-DRG 483 contains replacements, not revisions, of the wrist, shoulder, and elbow as well as reattachments of the forearm. Revision of the joint could include a variety of procedures to joints of the upper extremity. Procedure code 81.97 is a nonspecific code that captures revisions to not only the shoulder, but also a variety of upper extremity joints including those in the elbow, hand, shoulder, and wrist. Therefore, we have no way of determining how many cases reporting procedure code 81.97 were actually shoulder procedures as opposed to procedures on the elbow, hand, or wrist.

Our clinical advisors reviewed this issue and continue to advise that code 81.97 not be reassigned to MS-DRG 483 because the procedure is neither a replacement nor a reattachment procedure as are the current procedures within MS-DRG 483. In addition, the code captures a variety of joint revisions of the upper extremities and is not clinically similar to the replacements and reattachment procedures in MS-DRG 483. Our clinical advisors recommend that code 81.97 continue to be assigned to MS-DRG 515, 516, and 517.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current assignment of code 81.97 in MS-DRG 515, 516, and 517.

b. Ankle Replacement Procedures

We received a request to change the MS-DRG assignment for two ankle replacement procedures. The request involved the following two procedure codes:

  • 81.56 (Total ankle replacement); and
  • 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified).

The reassignment of procedure code 81.56 from MS-DRGs 469 and 470 (Major Joint Replacement or Reattachment of Lower Extremity with MCC and without MCC, respectively) to a new MS-DRG or, alternatively, to MS-DRG 469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50536 through 50537). We refer readers to this final rule for a discussion of ankle replacement procedures. The requestor asked that we again evaluate reassigning total ankle replacement procedures. The requestor also asked that we reassign what it referred to as another ankle replacement revision procedure captured by procedure code 81.59 (Revision of joint replacement of lower extremity, not elsewhere classified), which is assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

The requestor asked that we reassign procedure code 81.56 from MS-DRGs 469 and 470 to MS-DRG 483 (Major Joint/Limb Reattachment Procedure of Upper Extremities with CC/MCC) and rename the MS-DRG to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS-DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the case did not have a CC or an MCC. If CMS did not find this acceptable, the requestor made an alternative recommendation of assigning procedure code 81.56 to MS-DRG 469 and renaming the MS-DRG to better capture the additional cases. Cases would be assigned to the highest severity level whether or not the case had an MCC.

The requestor also recommended that procedure code 81.59, which is assigned to MS-DRGs 515, 516, and 517, be reassigned to MS-DRG 483 and that the MS-DRG be given a new title to better capture the additional lower extremity cases. The requestor stated that the result would be assignment of lower joint procedures to an MS-DRG that currently captures only upper extremity cases and assignment to the highest severity level even if the patient did not have a CC or an MCC. If CMS did not support this recommendation, the requestor suggested two additional recommendations. One involves moving procedure code 81.59 to MS-DRG 515 even when the case had no MCC. The other recommendation was to move Start Printed Page 49897procedure code 81.59 to MS-DRG 469, whether or not the case had a MCC.

We point out that while the requestor refers to procedure code 81.59 as a revision of an ankle replacement, the code actually includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe.

The following table shows the number of total ankle replacement cases, average length of stay, and average costs for procedure code 81.56 in MS-DRGs 469 and 470 found in claims data from the December 2013 update of the FY 2013 MedPAR file compared to all cases within MS-DRGs 469, 470, and 483.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 469—All cases25,9167.22$22,548
MS-DRG 469—Cases with procedure code 81.56326.1927,419
MS-DRG 470—All cases406,3443.2515,119
MS-DRG 470—Cases with procedure code 81.561,3792.1319,332
MS-DRG 48314,2203.2018,807

In summary, the requestor asked us to reassign procedure code 81.56 in MS-DRGs 469 and 470 to one of the following two options: MS-DRG 483 (highest severity level); or MS-DRG 469 (highest severity level).

As the table for total ankle replacement above shows, the average cost of cases with procedure code 81.56 in MS-DRG 469 is $27,419 and $19,332 in MS-DRG 470. This compares with the average costs of all cases in MS-DRGs 469 and 470 of $22,548 and $15,119, respectively. While the average cost of cases reporting procedure code 81.56 in MS-DRG 469 is $4,871 higher than the average cost for all cases in MS-DRG 469, we point out that there were only 32 cases. The relatively small number of cases may have been impacted by other factors such as complications or comorbidities. Several expensive cases could impact the average costs for a very small number of patients. The average cost of cases reporting procedure code 81.56 in MS-DRG 470 is $4,213 higher than the average cost for all cases in MS-DRG 470. While the average costs are higher, within all MS-DRGs, some cases have higher and some cases have lower average costs. 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.

MS-DRG 469 ankle replacement cases have average costs that are $8,612 higher than the average costs of all cases in MS-DRG 483 ($27,419 compared to $18,807). Moving these cases (procedure code 81.56) to MS-DRG 483 would result in payment below average costs compared to the current MS-DRG assignment in MS-DRG 469. Furthermore, as noted earlier, moving total ankle replacement cases to MS-DRG 483 would result in a lower extremity procedure being added to what is now an upper extremity MS-DRG. This would significantly disrupt the clinical cohesion of MS-DRG 483.

The average costs of all cases in MS-DRG 469 are $3,216 higher than the average costs of those cases with procedure code 81.56 in MS-DRG 470 ($22,548 compared to $19,332). The data did not support moving procedure code 81.56 cases to MS-DRG 483 or 469 because it would not result in payments that more accurately reflect their current average costs. Our clinical advisors reviewed this issue and determined that the ankle replacement cases are appropriately classified within MS-DRGs 469 and 470 with the severity level leading to the MS-DRG assignment. They did not support moving these cases to MS-DRG 483 because ankle replacements, which are lower joint procedures, are not clinically similar to upper joint replacement procedures. Based on the results of examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to move total ankle procedures to MS-DRG 483 or MS-DRG 469 when there is no MCC. We proposed to maintain the current MS-DRG assignments for ankle replacement cases. We invited public comments on our proposal.

Comment: A number of commenters supported the proposal to maintain the current MS-DRG assignments for ankle replacement cases. The commenters stated the proposal was reasonable given the data and information provided. Several other commenters urged CMS to reconsider its decision and to create a new MS-DRG for total ankle replacements for FY 2015 that is more appropriate both in terms of resource utilization and clinical cohesiveness, and reassign ICD-9-CM procedure code 81.56 to the new MS-DRG. The commenters stated that, despite evidence that the current Medicare assignment results in payments to hospitals below the average costs for total ankle replacement procedures, and the greater clinical complexity of total ankle replacements relative to other procedures that map to these same MS-DRGs, CMS proposed to maintain the current MS-DRG assignment for total ankle replacement procedures. The commenters stated that total ankle replacement is a complex surgical procedure involving the replacement of the damaged parts of three bones (talus, tibia, and fibula) that make up the articulations of the ankle, as compared to two bones in most other total joint replacement procedures, including hips and knees. The commenters stated that the resources involved with total ankle replacement procedures are not comparable to other procedures in the major joint MS-DRG and that failure to establish a new MS-DRG that more appropriately reflects the higher cost will likely comprise patient access to this procedure.

One commenter acknowledged that there are a relatively small volume of total ankle replacement procedures compared to total hip and total knee replacements. However, the commenter suggested that this imbalance in case volume of total ankle replacements compared to total hip and knee replacements dampens the influence of actual hospital cost data for the total ankle replacements. The commenter recommended that all total ankle replacements be assigned to MS-DRG 469 even if the case does not have a MCC. This commenter acknowledged that the average cost of cases with procedure code 81.56 in MS-DRG 470 is $19,332 compared to average cost of $22,548 for all cases in MS-DRG of 469. However, the commenter suggested that moving all total ankle replacements to MS-DRG 469 was more appropriate than having cases assigned to MS-DRGs 469 and 470 based on the presence of an MCC. The commenter also acknowledged CMS' statement that under the MS-DRG system in general, some cases will have average costs Start Printed Page 49898higher than the overall average costs for the MS-DRG, while other cases will have lower average costs. However, the commenter stated that this was an insufficient rationale to apply to total ankle replacements. The commenter disagreed with the determination of the CMS clinical advisors that ankle replacement cases are appropriately classified within MS-DRGs 469 and 470, based on severity level. The commenter stated that total ankle replacement is a complicated surgery that involves the replacement of the damaged parts of the three bones that make up the ankle joint, as compared to two bones in hip and knee replacement procedures. The commenter stated that this surgery required a specialized skill set, operative technique, and level of operating room resource utilization that is vastly dissimilar from that of total hip and total knee replacements. The commenter recommended that CMS create a new MS-DRG for total ankle replacements or move all total ankle replacements to MS-DRG 469.

Response: We appreciate the commenters' support for our proposal to maintain the current MS-DRG assignment for total ankle replacements. We are not accepting the commenter's recommendation to create a new MS-DRG for total ankle replacements or to move all cases to MS-DRG 469. We point out that there were only 1,411 total ankle replacements with 32 cases in MS-DRG 469 and 1,379 cases in MS-DRG 470. Creating a new MS-DRG for this single procedure would not be appropriate. MS-DRGs were created to provide payment to hospitals for groups of clinically similar conditions and procedures. MS-DRGs were not created to provide payment for each single procedure. MS-DRGs 469 and 470 contain replacement and reattachment procedures of the lower extremity, including those of the hip, knee, ankle, foot, lower leg, and thigh. Within each MS-DRG, there will be cases with costs higher than the average costs and others with costs below the average costs. Basing a new MS-DRG on a small number of cases could lead to distortions in the relative payment weights for the MS DRG because several expensive cases could impact the overall relative payment weight. Having larger clinically cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. We also point out that combining total ankle replacements into a single new MS-DRG would result in the same payment for cases with an MCC as those without an MCC. As indicated above, total ankle replacements with MCCs have average costs of $27,419 and those without MCCs have average costs of $19,332. Combining all total ankle replacements into a single, newly created MS-DRG would reduce the payment accuracy of cases with different severity levels.

We also disagree with the recommendation to move all total ankle replacement to MS-DRG 469. As stated earlier, total ankle replacements with MCCs have average costs of $27,419 and those without MCCs have average costs of $19,332. The average cost of all cases in MS-DRG 469 (which includes cases with MCCs) is $22,548. We point out again that, under the MS-DRGs, some cases will have average costs higher than the overall average costs for the MS-DRG while other cases will have lower average costs. The total ankle replacements are appropriately assigned to MS-DRGs 469 and 470 based on the presence of a MCC.

Our clinical advisors reviewed the public comments and clinical data and continue to support maintaining the current MS-DRG assignment for total ankle replacements. They advised that total ankle replacements are appropriately assigned to MS-DRGs 469 and 470 along with other major joint replacement and reattachment procedures of the lower extremities because they are all replacement and reattachment procedures of the lower extremities. Our clinical advisors noted that, whereas they consider average cost as one element of the decision, they expect the average cost of any subset to be different than the average cost of the MS-DRG, as that is inherent in a system of averages. They note that average length of stay, another metric of resource usage, is lower than the MS-DRG average for this subgroup. Even more importantly, they further noted that leaving these procedures in a MS-DRG with other lower extremity procedures promotes greater clinical consistency than could be achieved by moving the ankle procedures into an upper extremity DRG. They noted that, for the inpatient prospective system, clinical consistency includes not just technical considerations of the surgery or device costs but also consideration of pre- and post-operative patient care needs, medications, and care for common comorbid conditions, among other factors. Finally, our clinical advisors also pointed out that creating a new MS-DRG for total ankle replacements would result in combining cases with average length of stay of 6.19 days for cases with MCC and 2.13 days for cases without MCC. The cases are more appropriately assigned to MS-DRGs 469 and 470 with the two severity levels. Our clinical advisors do not support creating a new MS-DRG which would contain only total ankle replacements.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG assignment for total ankle replacements in MS-DRGs 469 and 470.

The following table shows our findings from examination of the claims data from the December 2013 update of the FY 2013 MedPAR file for the number of cases reporting procedure code 81.59 in MS-DRGs 515, 516, and 517 (revision of joint replacement of lower extremity) and their average length of stay and average costs as compared to all cases within MS-DRGs 515, 516, and 517 (where procedure code 81.59 is currently assigned), as well as data for MS-DRGs 469 and 483.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 515—All cases3,4079.22$22,191
MS-DRG 515—Cases with procedure code 81.5956.0016,988
MS-DRG 516—All cases8,5025.3414,356
MS-DRG 516—Cases with procedure code 81.59163.0016,998
MS-DRG 517—All cases5,7943.2812,172
MS-DRG 517—Cases with procedure code 81.59401.8013,704
MS-DRG 483—All cases25,91672222,548
MS-DRG 469—All cases14,2203.2018,807
Start Printed Page 49899

The requestor asked that all cases with procedure code 81.59 in MS-DRGs 515, 516, and 517 be assigned to one of the following three choices:

  • MS-DRG 483 (highest severity level);
  • MS-DRG 515 (highest severity level) whether or not there is an MCC; or
  • MS-DRG 469 (highest severity level).

Our review of data from the above revision of joint replacement of lower extremity table shows that cases in MS-DRG 483 have average costs that are $5,560 higher than the average costs of cases with procedure code 81.59 in MS-DRG 515; $5,550 greater than those in MS-DRG 516; and $8,844 greater than those in MS-DRG 517 ($22,548 compared to $16,988; $22,548 compared to $16,998, and $22,548 compared to $13,704, respectively). As mentioned earlier, MS-DRG 483 is currently composed of only upper extremity procedures. Moving lower extremity procedures into this MS-DRG would disrupt the clinical cohesiveness of MS-DRG 483.

The average costs of all cases in MS-DRG 469 are $18,807, compared to average costs of $16,988, $16,998, and $13,703 for procedure code 81.59 cases in MS-DRGs 515, 516, and 517, respectively. The data did not support moving all procedure code 81.59 cases to MS-DRG 469 even when there is no MCC. We also point out that moving cases with procedure code 81.59 to MS-DRG 469 would disrupt the clinical cohesiveness of MS-DRG 469, which currently captures major joint replacement or reattachment procedures of the lower extremity. Procedure code 81.59 includes revisions of joint replacements of a variety of lower extremity joints including the ankle, foot, and toe. This nonspecific code would not be considered a major joint procedure. The code captures revisions of an ankle replacement as well as a more minor revision of the toe.

Our clinical advisors reviewed this issue and determined that the revision of joint replacement of lower extremity cases are appropriately classified within MS-DRGs 515, 516, and 517 where revisions of other joint replacements are captured. They supported the current severity levels in MS-DRGs 515, 516, and 517, which allow the presence of a CC or an MCC to determine the severity level assignment. They did not support moving these cases to MS-DRG 483, which is applied to upper extremity procedures because these procedures are not clinically consistent with revisions of lower joint procedures. They also did not support moving these cases to MS-DRG 469 when there is no MCC because these procedures are not joint replacement procedures. Based on the findings of our examination of the claims data, the issue of clinical cohesion, and the recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to move the revision of joint replacement of lower extremity cases to MS-DRGs 483 or 469, whether or not there is an MCC. We proposed to maintain the current MS-DRG assignments for revision of joint replacement of lower extremity cases.

In summary, we proposed to maintain the current MS-DRG assignment for total ankle replacements in MS-DRGs 469 and 470 and revision of joint replacement of lower extremity procedures in MS-DRGs 515, 516, and 517. We invited public comments on our proposals.

Comment: A number of commenters supported the proposal to maintain the current MS-DRG assignment for code 81.59. One commenter agreed with this proposal given the lack of specificity for this code which does not identify the specific joint being revised. The commenter recommended that CMS create the following new ICD-9-CM procedure code: 81.58 (Revision of ankle replacement, not otherwise specified). Once this code is created, the commenter recommended that this new code be assigned to MS-DRGs 466, 467, and 468 and that these MS-DRGs be renamed Revision of Hip, Knee or Ankle (with MCC, with CC, and without CC/MCC, respectively).

Response: We appreciate the commenters' support for our proposal not to change the MS-DRG assignment for code 81.59. We agree with the commenter who pointed out that code 81.59 does not identify the joint being revised and, therefore, code 81.59 should continue to be assigned to MS-DRGs 515, 516, and 517. ICD-10-PCS codes provide greater detail than do ICD-9-CM codes and provide the ability to identify the joint being revised. As mentioned earlier, the Secretary announced plans to release an interim final rule in the near future that will include a new compliance date to require the use of ICD-10 beginning October 1, 2015. The interim final rule will also require HIPAA covered entities to continue to use ICD-9-CM through September 30, 2015. Given this timeline, it will not be possible to create a new ICD-9-CM procedure code for the next annual update on October 1, 2015 because ICD-10 will be implemented on that date. However, ICD-10-PCS will provide the necessary level of detail.

After consideration of the public comments we received, we are finalizing our proposal to maintain the current MS-DRG assignment for total ankle replacements in MS-DRGs 469 and 470 and revision of joint replacement of lower extremity procedures in MS-DRGs 515, 516, and 517.

c. Back and Neck Procedures

We received a request to reassign cases identified with a complication or comorbidity (CC) in MS-DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) to MS-DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/Neurostimulator). The requester suggested that we create a new MS-DRG that would be subdivided based solely on the “with MCC or Disc Device/Neurostimulator” and the “without MCC” (and no device) criteria.

For the FY 2008 rulemaking cycle, we performed a comprehensive analysis of all the spinal DRGs as we proposed (72 FR 24731 through 24735) and finalized (72 FR 47226 through 47232) adoption of the MS-DRGs. With the revised spinal MS-DRGs, we were better able to identify a patient's level of severity, complexity of service, and utilization of resources. This was primarily attributed to the new structure for the severity level designations of “with MCC,” “with CC,” and “non-CC” (or without CC/MCC). Another contributing factor was that we incorporated specific procedures and technologies into the GROUPER logic for some of those spinal MS-DRGs. Specifically, as noted above, in the title of MS-DRG 490, we accounted for disc devices and neurostimulators because the data demonstrated that the procedures utilizing those technologies were more complex and required greater utilization of resources.

According to the requester, since that time, concerns have been expressed in the provider community regarding inadequate payment for MS-DRG 490 when these technologies are utilized. An analysis conducted by the requester alleged that the subset of patients identified in the “with MCC or disc device/neurostimulator” group are different with regard to resource use from the “without CC/MCC” (and no device) patient group.

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for MS-DRGs 490 and 491. The table below shows our findings.Start Printed Page 49900

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 490—All cases16,9304.53$13,727
MS-DRG 491—All cases25,7782.208,151

As shown in the table above, there were a total of 16,930 cases in MS-DRG 490 with an average length of stay of 4.53 days and average costs of $13,727. For MS-DRG 491, there were a total of 25,778 cases with an average length of stay of 2.20 days and average costs of $8,151.

We then analyzed the data for MS-DRGs 490 and 491 by subdividing cases based on the “with MCC or Disc Device/Neurostimulator” and the “without MCC” (and no device) criteria. We found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493 in the “with MCC or Disc Device/Neurostimulator” group and a total of 39,329 cases with an average length of stay of 2.8 days and average costs of $9,405 in the “without MCC” and no device group. Due to the wide range in the volume of cases, length of stay, and average costs between these two subgroups, we concluded that further analysis of the data using a separate “with CC” (and no device) subset of patients was warranted.

Therefore, we evaluated the data using a three-way severity level split that consisted of the three subgroups shown in the table below.

Additional Analysis for Back & Neck Procedures Except Spinal Fusion: Disc Device/Neurostimulator

Severity level splitNumber of casesAverage length of stayAverage costs
—With MCC or disc device/neurostimulator3,3796.6$21,493
—With CC13,5513.911,791
—Without CC/MCC25,7782.28,151

For the first subgroup, “with MCC or Disc Device/Neurostimulator,” we found a total of 3,379 cases with an average length of stay of 6.6 days and average costs of $21,493. In the second subgroup, “with CC” (no device), we found a total of 13,551 cases with an average length of stay of 3.9 days and average costs of $11,791. In the third subgroup, “without CC/MCC” (no device), we found a total of 25,778 cases with an average length of stay of 2.2 days and average costs of $8,151.

The results of this additional data analysis demonstrate a better distribution of cases with regard to length of stay and average costs. Our clinical advisors agreed that a patient's severity of illness is captured more appropriately with this subdivision. The data also meet the established criteria for creating subgroups within a base MS-DRG as discussed earlier.

As the subdivision of the claims data based on these subgroups better captures a patient's severity level and utilization of resources and is supported by our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create three new MS-DRGs and to delete MS-DRGs 490 and 491. We proposed that these proposed new MS-DRGs would be titled as follows and would be effective as of October 1, 2014:

  • Proposed new MS-DRG 518 (Back & Neck Procedures Except Spinal Fusion with MCC or Disc Device/Neurostimulator);
  • Proposed new MS-DRG 519 (Back & Neck Procedures Except Spinal Fusion with CC); and
  • Proposed new MS-DRG 520 (Back & Neck Procedures Except Spinal Fusion without CC/MCC).

We invited public comments on our proposal to create these proposed new MS-DRGs for FY 2015.

Comment: Several commenters supported the proposal to delete MS-DRGs 490 and 491 and to create three new MS-DRGs that better account for a patient's severity of illness and utilization of resources when disc devices and neurostimulators are involved. One commenter stated that the new MS-DRGs would enable CMS to assess utilization of resources for these services and ensure that “important innovation in device dependent neurosurgical procedures is adequately accounted for and reimbursed appropriately.” Another commenter expressed its appreciation for CMS' careful data analysis that resulted in the development of the proposal. This commenter noted “that the data presented by CMS make a compelling case for the proposed three subdivisions, because it would more appropriately compensate hospitals for the costs associated with implantation of a disc device or neurostimulator than the current two-division framework.” Another commenter applauded CMS' past efforts to assure MS-DRGs 490 and 491 reflect the most appropriate payment amounts for these procedures. This commenter stated “the proposed three-way split of cases in current MS-DRGs 490 and 491 demonstrates a better distribution of cases with regard to resource use. CMS should proceed with its proposed change to this MS-DRG category to improve the accuracy of the payments, consistent with its criteria for establishing severity levels within the MS-DRGs.” Another commenter noted that “subdividing the code set into three distinct MS-DRGs is not only a more accurate representation of the clinical condition experienced by the patient, but also better categorizes the resources expended by the facility, as evidenced by the supporting claims data.”

Response: We thank the commenters for their support. As noted in the FY 2015 IPPS/LTCH PPS proposed rule, the additional data analysis demonstrated a better distribution of cases with regard to length of stay and average costs. Our clinical advisors also agreed that a patient's severity of illness is captured more appropriately with this subdivision. Lastly, the data also meet the established criteria for creating subgroups within a base MS-DRG as discussed earlier.

After consideration of the public comments we received, for FY 2015 we are adopting as final our proposal to create new MS-DRG 518 (Back & Neck Procedures Except Spinal Fusion with MCC or Disc Device/Neurostimulator); MS-DRG 519 (Back & Neck Procedures Except Spinal Fusion with CC); and MS-DRG 520 (Back & Neck Procedures Except Spinal Fusion without CC/MCC).Start Printed Page 49901

6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders): Disorders of Porphyrin Metabolism

We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule that we considered out of scope for the proposed rule. We stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider this issue in future rulemaking as part of our annual review process. The request was for the creation of a new MS-DRG to better identify cases where patients with disorders of porphyrin metabolism exist, to recognize the resource requirements in caring for these patients, to ensure appropriate payment for these cases, and to preserve patient access to necessary treatments. This issue has been discussed previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and 27905) and final rule (77 FR 53311 through 53313).

Porphyria is defined as a group of rare disorders (“porphyrias”) that interfere with the production of hemoglobin that is needed for red blood cells. While some of these disorders are genetic (inborn) and others can be acquired, they all result in the abnormal accumulation of hemoglobin building blocks, called porphyrins, which can be deposited in the tissues where they particularly interfere with the functioning of the nervous system and the skin. Treatment for patients suffering from disorders of porphyrin metabolism consists of an intravenous injection of Panhematin® (hemin for injection). In 1984, this pharmaceutical agent became the first approved drug for a rare disease to be designated under the Orphan Drug Act. The requestor stated that it is the only FDA-approved prescription treatment for acute intermittent porphyria. ICD-9-CM diagnosis code 277.1 (Disorders of porphyrin metabolism) describes these cases, which are currently assigned to MS-DRG 642 (Inborn and Other Disorders of Metabolism).

We analyzed claims data from the December 2013 update of the FY 2013 MedPAR file for cases assigned to MS-DRG 642. Our findings are shown in the table below.

MS-DRGNumber of casesAverage length of stayAverage costs
MS-DRG 642—All cases1,4864.61$8,151
MS-DRG 642—Cases with principal diagnosis code 277.12995.9813,303

As shown in the table above, we found a total of 1,486 cases in MS-DRG 642, with an average length of stay of 4.61 days and average costs of $8,151. We then analyzed the data for cases reporting diagnosis code 277.1 as the principal diagnosis in this same MS-DRG. We found a total of 299 cases, with an average length of stay of 5.98 days and average costs of $13,303.

While the data show that the average costs for the 299 cases reporting a principal diagnosis code of 277.1 were higher than the average costs for all cases in MS-DRG 642 ($13,303 compared to $8,151), the number of cases is small. In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that, given the small number of porphyria cases, we did not believe there is justification for creating a new MS-DRG. Basing a new MS-DRG on such a small number of cases could lead to distortions in the relative payment weights for the MS-DRG because several expensive cases could impact the overall relative payment weight. Having larger clinical cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. In addition, as discussed earlier, one of the criteria we apply in evaluating whether to create new severity subgroups within an MS-DRG is whether there are at least 500 cases in the CC or MCC subgroup. While this criterion is used to evaluate whether to create a severity subgroup within an MS-DRG, applying it here suggests that creating a new MS-DRG for cases reporting a principal diagnosis of code 277.1 would not be appropriate. Our clinical advisors reviewed this issue and recommended no MS-DRG change for porphyria cases because they fit clinically within MS-DRG 642.

In summary, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to create a new MS-DRG for porphyria cases. We invited public comments on our proposal to maintain porphyria cases in MS-DRG 642.

Comment: Several commenters supported the proposal to maintain porphyria cases in MS-DRG 642 and to not create a new MS-DRG for these cases.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to maintain porphyria cases in MS-DRG 642 and to not create a new MS-DRG for these cases.

7. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period)

We received a request to evaluate the MS-DRG assignment of seven ICD-9-CM diagnosis codes in MS-DRG 794 (Neonate with Other Significant Problems) under MDC 15. The requestor stated that these codes have no bearing on the infant, and are not representative of a neonate with a significant problem. The requestor recommended that we change the MS-DRG logic so that the following seven ICD-9-CM codes would not lead to assignment of MS-DRG 794. The requestor recommended that the diagnoses be added to the “only secondary diagnosis” list under MS-DRG 795 (Normal newborn) so that the case would be assigned to MS-DRG 795 (Normal newborn).

  • V17.0 (Family history of psychiatric condition)
  • V17.2 (Family history of other neurological Diseases)
  • V17.49 (Family history of other cardiovascular diseases)
  • V18.0 (Family history of diabetes mellitus)
  • V18.19 (Family history of other endocrine and metabolic diseases)
  • V18.8 (Family history of infectious and parasitic diseases)
  • V50.3 (Ear piercing)

In the case of a newborn with one of these diagnosis codes reported as a secondary diagnosis, the case would be assigned to MS-DRG 794. The commenter believed that any of these seven diagnosis codes (noted above), when reported as a secondary diagnosis for a newborn case, should be assigned to MS-DRG 795 instead of MS-DRG 794.

Our clinical advisors reviewed this request and concurred with the commenter that the seven ICD-9-CM diagnosis codes noted above should not continue to be assigned to MS-DRG 794, as there is no clinically usable information reported in those codes identifying significant problems. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28017), we proposed to reassign these following seven diagnoses to the “only secondary diagnosis list” under MS-DRG 795 so that the case would be assigned to MS-DRG 795.

Start Printed Page 49902
  • V17.0 (Family history of psychiatric condition)
  • V17.2 (Family history of other neurological diseases)
  • V17.49 (Family history of other cardiovascular diseases)
  • V18.0 (Family history of diabetes mellitus)
  • V18.19 (Family history of other endocrine and metabolic diseases)
  • V18.8 (Family history of infectious and parasitic diseases)
  • V50.3 (Ear piercing)

We invited public comments on this proposal.

Comment: Several commenters supported the proposal to reassign the identified seven diagnoses to the “only secondary diagnosis” list under MS-DRG 795 so that the case would be assigned to MS-DRG 795.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to reassign the following seven diagnoses to the “only secondary diagnosis list” under MS-DRG 795 so that the case would be assigned to MS-DRG 795:

  • V17.0 (Family history of psychiatric condition)
  • V17.2 (Family history of other neurological diseases)
  • V17.49 (Family history of other cardiovascular diseases)
  • V18.0 (Family history of diabetes mellitus)
  • V18.19 (Family history of other endocrine and metabolic diseases)
  • V18.8 (Family history of infectious and parasitic diseases)
  • V50.3 (Ear piercing)

8. 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.

As discussed in section II.G.1.a. of the preamble of this final rule, we developed an ICD-10 version of the current MS-DRGs, which are based on ICD-9-CM codes. We refer to this version of the MS-DRGs as the ICD-10 MS-DRGs Version 31.0-R. In November 2013, we also posted a Definitions of Medicare Code Edits Manual of the ICD-10 MCE Version 31.0 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 produced mainframe and computer software for Version 31.0 of the MS-DRG GROUPER with Medicare Code Editor, 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://www.cms.hhs.gov/​Medicare/​Coding/​ICD10/​ICD-10-MS-DRG-Conversion-Project.html under the “Related Links” section. This ICD-10 MS-DRG GROUPER with Medicare Code Editor 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-DRG GROUPER and MCE did not accurately reflect the logic and edits found in the ICD-9-CM MS-DRG GROUPER and MCE Version 31.0.

We also have posted an ICD-10 version of the current MCE, which is based on ICD-9-CM codes, and refer to that version of the MCE as the ICD-10 MCE Version 31.0-R. Both of these documents are posted on our 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 will continue to share ICD-10 MS-DRG and MCE conversion activities with the public through this Web site.

In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we proposed to remove extracranial-intracranial (EC-IC) bypass surgery from the “Noncovered Procedure” edit code list for Version 32.0 of the MCE. This procedure is identified by ICD-9-CM procedure code 39.28 (Extracranial-intracranial (EC-IC) vascular bypass).

Because of the complexity of appropriately classifying the circumstances under which the EC-IC bypass surgery may, or may not, be considered reasonable and necessary for certain conditions, we proposed to remove the MCE “Noncovered Procedure” edit for EC-IC bypass surgery from the “Noncovered Procedure” edit code list for Version 32.0 of the MCE. We invited public comments on this proposal.

Comment: Several commenters supported the proposal to remove the MCE “Noncovered Procedure” edit for EC-IC bypass surgery (procedure code 39.28) from the “Noncovered Procedure” edit code list for Version 32.0 of the MCE. The commenters stated that the proposal was reasonable given the information that was provided. Commenters also agreed that because of the complexity of appropriately classifying the circumstances under which the EC-IC bypass surgery may be considered reasonable and necessary for certain conditions, the Medicare noncovered procedure edit for EC-IC bypass surgery should be removed.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal to remove procedure code 39.28 (Extracranial-intracranial (EC-IC) vascular bypass) from the noncovered procedure edit effective FY 2015.

9. 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 2015, 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-Start Printed Page 49903DRG 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 below.

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 proposed to make for FY 2015, as discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the preamble of the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to revise the surgical hierarchy for MDC 5 (Diseases and Disorders of the Circulatory System) and MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) as follows:

In MDC 5, we proposed to sequence proposed new MS-DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and proposed new MS-DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS-DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC).

In MDC 8, we proposed to delete MS-DRGs 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and MS-DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/Neurostimulator) from the surgical hierarchy. We proposed to sequence proposed new MS-DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator), proposed new MS-DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), and proposed new MS-DRG 520 (Back & Neck Procedure Except Spinal Fusion without CC/MCC) above MS-DRG 492 (Lower Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC).

We invited public comments on our proposals.

Comment: We did not receive any public comments opposing our proposals for the surgical hierarchy. Commenters expressed general support for the proposals, noting they were reasonable given the information that was provided.

Response: We appreciate the commenters' support.

After consideration of the public comments we received, we are finalizing our proposal for MDC 5 to sequence new MS-DRG 266 (Endovascular Cardiac Valve Replacement with MCC) and new MS-DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS-DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC). We also are finalizing our proposal for MDC 8 to delete MS-DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and MS-DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or Disc Device/Neurostimulator) from the surgical hierarchy. We are sequencing new MS-DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc Device/Neurostimulator), new MS-DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), and new MS-DRG 520 (Back & Neck Procedure Except Spinal Fusion without CC/MCC) above MS-DRG 492 (Lower Extremity and Humerus Procedure Except Hip, Foot, Femur with MCC), effective FY 2015.

10. Changes to the MS-DRG Diagnosis Codes for FY 2015

a. Major Complications or Comorbidities (MCCs) and Complications or Comorbidities (CC) Severity Levels for FY 2015

A complete updated MCC, CC, and Non-CC Exclusion List is 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 (Complete MCC list);
  • Table 6J (Complete CC list); and
  • Table 6K (Complete list of CC Exclusions).

b. Coronary Atherosclerosis Due to Calcified Coronary Lesion

We received a request that we change the severity level for ICD-9-CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified coronary lesion) from a non-CC to an MCC. This issue was previously discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50542).

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for ICD-9-CM diagnosis code 414.4. The following chart shows our findings.

CodeDiagnosis descriptionCC levelCnt 1  Cnt 1 impactCnt 2  Cnt 2 impactCnt 3  Cnt 3 impact
414.4Coronary atherosclerosis due to calcified lesionNon-CC1,7961.163,0562.182,8353.01
Start Printed Page 49904

We ran the above data as described in the FY 2008 IPPS final rule with comment period (72 FR 47158 through 47161). The C1 value reflects a patient with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 value reflects a patient with at least one other secondary diagnosis that is a CC, but none that is an MCC. The C3 value reflects a patient with at least one other secondary diagnosis that is an MCC.

The chart above shows that the C1 finding is 1.16. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.18. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.16 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As stated earlier, a value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not support reclassifying this diagnosis code to an MCC. Our clinical advisors reviewed the data and evaluated this condition. They recommended that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. They did not believe that this diagnosis would increase the severity level of patients. They pointed out that a similar code, diagnosis code 414.2 (Chronic total occlusion of coronary artery), is a non-CC. Our clinical advisors believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2. Considering the C1 and C2 ratings of diagnosis code 414.4 and the input from our clinical advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose to reclassify diagnosis code 414.4 to an MCC; the diagnosis code would continue to be considered a non-CC.

Therefore, based on the data and clinical analysis, we proposed to maintain diagnosis code 414.4 as a non-CC. We invited public comments on our proposal.

Comment: Several commenters supported the proposal to keep diagnosis code 414.4 as a non-CC. One commenter requested that diagnosis code 414.4, when present as a secondary diagnosis, be included on the MCC list. The commenter believed that treating calcified coronary lesions with atherectomy is underpaid by the Medicare program for patients requiring percutaneous coronary intervention when calcified coronary lesions prevent successful angioplasty and placement of coronary stents. The commenter further stated that treating coronary calcification is significantly more difficult to treat, requires more time and equipment, and has clinical outcomes that are much worse compared to treating noncalcified or mildly calcified coronary obstructions. Consequently, the commenter believed it costs hospitals more to treat patients with calcified coronary lesions and that hospitals should be compensated for their expense to treat coronary atherosclerosis in Medicare beneficiaries. The commenter recognized the opinion of our clinical advisors that patients with a code 414.4 diagnosis are less severe than those with a code 414.2 diagnosis, but disagreed with that opinion. The commenter believed that both disease states add substantial treatment time and costs to the providers, health care systems, and society and both are worthy of classification as an MCC.

Response: We appreciate the commenters' support for our proposal to maintain code 414.4 as a non-CC. We are not accepting the commenter's recommendation to change this code to an MCC because our clinical data do not support such a change. The data continue to support keeping diagnosis code 414.4 as a non-CC and do not support changing the code to an MCC, for the reasons described above.

We examined claims data from the December 2013 update of the FY 2013 MedPAR file for ICD-9-CM diagnosis code 414.2. The following chart shows our findings.

CodeDiagnosis descriptionCC levelCnt 1  Cnt 1 impactCnt 2  Cnt 2 impactCnt 3  Cnt 3 impact
414.2Chronic total occlusion of coronary arteryNon-CC15,8141.2521,4832.0919,9553.04

The chart above for diagnosis code 414.2 shows that the C1 finding is 1.25. A value close to 1.0 in the C1 field suggests that the diagnosis produces the same expected value as a non-CC. A value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC. A value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding was 2.09. A C2 value close to 2.0 suggests the condition is more like a CC than a non-CC, but not as significant in resource usage as an MCC when there is at least one other secondary diagnosis that is a CC but none that is an MCC. While the C1 value of 1.25 is above the 1.0 value for a non-CC, it does not support reclassification to an MCC. As stated earlier, a value close to 3.0 suggests the condition is expected to consume resources more similar to an MCC than a CC or a non-CC. The C2 finding of 2.09 also does not support reclassifying this diagnosis code to an MCC.

Our clinical advisors reviewed the data and evaluated the severity level for both diagnosis code 414.4 and 414.2. They continue to recommend that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. Furthermore, they recommend that we not change the severity level for diagnosis code 414.2. They do not believe that the diagnosis represented by either code would increase the severity level of patients. After reviewing the commenter's justification for changing diagnosis code 414.4 from a non-CC to an MCC, our clinical advisors continue to recommend that we not change the severity level of diagnosis code 414.4 from a non-CC to an MCC. They again pointed out that diagnosis code 414.2 is a similar code and is a non-CC. As noted, they also recommend maintaining diagnosis code 414.2 as a non-CC. Our clinical advisors continue to believe that diagnosis code 414.4 represents patients who are less severe than diagnosis code 414.2.

After consideration of the public comments we received, the C1 and C2 ratings in our claims data, and the input from our clinical advisors, we are finalizing our proposal to not reclassify diagnosis code 414.4 from a non-CC to an MCC; the diagnosis code will continue to be considered a non-CC.Start Printed Page 49905

11. Complications or Comorbidity (CC) Exclusions List

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

Under the IPPS MS-DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (non-CC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 (72 FR 47152 through 47171).

b. CC Exclusions List for FY 2015

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 we indicated above, 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 have 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.[1]

In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we did not propose any changes to the CC Exclusion List. Therefore, we did not develop or publish Tables 6G (Additions to the CC Exclusion List) or Table 6H (Deletions from the CC Exclusion List). We developed Table 6K (Complete List of CC Exclusions), which is available only 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 Table 6K, we are not publishing it in the Addendum to this final rule. Each of these principal diagnosis codes for which there is a CC exclusion is shown 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.

A complete updated MCC, CC, and Non-CC Exclusions List 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 there were no proposed new, revised, or deleted diagnosis or procedure codes for FY 2015, we have not developed Table 6A (New Diagnosis Codes), Table 6B (New Procedure Codes), Table 6C (Invalid Diagnosis Codes), Table 6D (Invalid Procedure Codes), Table 6E (Revised Diagnosis Code Titles), and Table 6F (Revised Procedure Codes) to the final rule and they are not published as part of this final rule.

We did not propose any additions or deletions to the MS-DRG MCC List for FY 2015 nor any additions or deletions to the MS-DRG CC List for FY 2015. Therefore, as we proposed, for this final rule, we have not developed Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions to the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions to the CC List), and they are not published as part of this final rule.

Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current MS-DRG Definitions Manual, Version 31.0, is available on a CD for $225.00. This manual may be obtained by writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, CT 06492; or by calling (203) 949-0303, or by obtaining an order form at the Web site: http://www.3MHIS.com. Please specify the revision or revisions requested. Version 32.0 of this manual, which includes the final FY 2015 MS-DRG changes, is available on a CD for Start Printed Page 49906$225.00. This manual may be obtained by writing 3M/HIS at the address provided above; or by calling (203) 949-0303; or by obtaining an order form at the Web site at: http://www/​3MHIS.com. Please specify the revision or revisions requested.

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

Each year, we review cases assigned to former CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS-DRGs that we adopted for FY 2008, CMS DRG 468 was split three ways and became MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively).

MS-DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These MS-DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS-DRGs 984 through 986 (previously CMS DRG 476) 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).

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.[2]

Our review of MedPAR claims data showed that there were no cases that merited movement or should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we did not propose to change the procedures assigned among these MS-DRGs.

We did not receive any public comments on our proposal. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS-DRGs 981 through 983, MS-DRGs 984 through 986, and MS-DRGs 987 through 989 for FY 2015.

a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 Through 989 Into MDCs

We annually conduct a review of procedures producing assignment to MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS-DRGs into one of the surgical MS-DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC.

We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS-DRGs for the MDC in which the diagnosis falls. As noted above, there were no cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2015, we did not propose to remove any procedures from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the MDC into which the principal diagnosis is assigned.

We did not receive any public comments on our proposal. Therefore, as we proposed, we are not removing any procedures from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs into which the principal diagnosis is assigned for FY 2015.

b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 Through 986, and 987 Through 989

We also annually review the list of ICD-9-CM procedures that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R. procedure unrelated to principal diagnosis with MCC, with CC, or without CC/MCC, respectively), and 987 through 989, to ascertain whether any of those procedures should be reassigned from one of these three MS-DRGs to another of the three MS-DRGs based on average costs and the length of stay. We look at the data for Start Printed Page 49907trends 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 were 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 2015, we did not propose to move any procedure codes among these MS-DRGs.

We did not receive any public comments on our proposal. Therefore, as we proposed, we are not moving any procedure codes among these MS-DRGs for FY 2015.

c. Adding Diagnosis or Procedure Codes to MDCs

Based on the review of cases in the MDCs, as described above in sections II.G.2. through 7. of the preamble of this final rule, we did not propose to add any diagnosis or procedure codes to MDCs for FY 2015. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not adding any diagnosis or procedure codes to MDCs for FY 2015.

13. Changes to the ICD-9-CM System

a. 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 will address updates to the ICD-10-CM, ICD-10-PCS, and ICD-9-CM 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 above 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 2015 at a public meeting held on September 18-19, 2013, and finalized the coding changes after consideration of comments received at the meetings and in writing by November 15, 2013.

The Committee held its 2014 meeting on March 19-20, 2014. 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 2014 would be included in the October 1, 2014 update to ICD-10-CM/ICD-10-PCS. For FY 2015, there are no new, revised, or deleted ICD-10-CM diagnosis codes or ICD-10-PCS procedure codes, and no new, revised, or deleted ICD-9-CM diagnosis or procedure codes.

Copies of the minutes of the procedure codes discussions at the Committee's September 18-19, 2013 meeting and March 19-20, 2014 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 diagnosis codes discussions at the September 18-19, 2013 meeting and March 19-20, 2014 meeting are found at: http://www.cdc.gov/​nchs/​icd/​icd9cm.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: dfp4@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: patricia.brooks2@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 ICD-9-CM 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 Start Printed Page 49908be 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. The public decides whether or not to attend the meeting based on the topics listed on the agenda. 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, 2014 implementation of a code at the September 18-19, 2013 Committee meeting. Therefore, there were no new codes implemented on April 1, 2014.

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/​icd10cm.html. 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-9-CM coding changes to its Medicare contractors for use in updating their systems and providing education to providers.

The code titles are adopted as part of the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee process. Therefore, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules.

b. 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 Start Printed Page 49909be 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 May 1, 2014, the Department announced that it expects to release a interim final rule in the near future that will include a new compliance date to require the use of ICD-10 beginning October 1, 2015. The rule will also require HIPAA covered entities to continue to use ICD-9-CM through September 30, 2015. Accordingly, the updated schedule for the partial code freeze is 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 will be 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 has 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 codesICD-10-CM and ICD-10-PCS codes
Fiscal yearNo.ChangeFiscal yearNo.Change
FY 2009 (October 1, 2008):FY 2009:
Diagnoses14,025348ICD-10-CM68,069+5
Procedures3,82456ICD-10-PCS72,589−14,327
FY 2010 (October 1, 2009):FY 2010:
Diagnoses14,315290ICD-10-CM69,099+1,030
Procedures3,83814ICD-10-PCS71,957−632
FY 2011 (October 1, 2010):
Diagnoses14,432117ICD-10-CM69,368+269
Procedures3,85921ICD-10-PCS72,081+124
FY 2012 (October 1, 2011):FY 2012:
Diagnoses14,567135ICD-10-CM69,833+465
Procedures3,87718ICD-10-PCS71,918−163
FY 2013 (October 1, 2012):FY 2013:
Diagnoses14,5670ICD-10-CM69,832−1
Procedures3,8781ICD-10-PCS71,920+2
FY 2014 (October 1, 2013):FY 2014:
Diagnoses14,5670ICD-10-CM69,823−9
Procedures3,8824ICD-10-PCS71,924+4
FY 2015 (October 1, 2014):FY 2015:
Diagnoses14,5670ICD-10-CM69,8230
Procedures3,8820ICD-10-PCS71,9240

As mentioned earlier, 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 data shown above. 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 18-19, 2013 and March 19-20, 2014 Committee meetings, we discussed any requests we had received for new ICD-10-CM diagnosis and ICD-10-PCS procedure codes that were to be implemented on October 1, 2014. We did not discuss ICD-9-CM codes. The public was given the opportunity 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. The public was to use the criteria as to whether codes were needed to capture new diagnoses or new technologies. If the codes do not meet those criteria for implementation during the partial code freeze, consideration was to be given as to whether the codes should be created after the partial code freeze ends one year after the implementation of ICD-10-CM/PCS. We invited public Start Printed Page 49910comments on any code requests discussed at the September 18-19, 2013 and March 19-20, 2014 Committee meetings for implementation as part of the October 1, 2014 update. The deadline for commenting on code proposals discussed at the September 18-19, 2013 Committee meeting was November 15, 2013. The deadline for commenting on code proposals discussed at the March 19-20, 2014 Committee meeting was April 18, 2014.

14. Public Comments on Issues Not Addressed in the Proposed Rule

We received three public comments regarding MS-DRG issues that were outside of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS proposed rule. Below we summarize these public comments. However, because we consider these public comments to be outside of the scope of the proposed rule, we are not responding to them in this final rule. As stated in section II.G.1.b. of the preamble of this final rule, we encourage individuals with comments about MS-DRG classifications to submit these comments no later than December 7 of each year so they can be considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. We will consider these public comments for possible proposals in future rulemaking as part of our annual review process.

a. Request for Review and MS-DRG Reassignment for ICD-9-CM Diagnosis Code 784.7 Reported With Procedure Codes 39.75 and 39.76

One commenter expressed concern regarding specific procedure codes that are assigned to MS-DRGs 981 through 983; 984 through 986; and 987 through 989 in relation to our discussion of the annual review of these MS-DRGs in section II.G.12. of the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28020). The commenter noted that the endovascular embolization of the arteries of the branches of the internal maxillary artery is frequently performed for intractable posterior epistaxis. The commenter stated that, currently, diagnosis code 784.7 (Epistaxis) reported with procedure codes 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) groups to MS-DRG 981(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC), MS-DRG 982 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with CC), and MS-DRG 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis without CC/MCC). The commenter indicated that it also found this grouping with ICD-10 diagnosis code R04.0 (Epistaxis) reported with artery occlusion procedure codes. The commenter requested that CMS review these groupings and consider the possibility of reassigning these procedure codes into a more specific MS-DRG.

We consider this public comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule and therefore are not addressing it in this final rule. However, we will consider this public comment for possible proposals in future rulemaking as part of our annual review process.

b. Coding for Extracorporeal Membrane Oxygenation Procedures (ECMO)

Several commenters expressed concern that hospitals may not be correctly reporting extracorporeal membrane oxygenation (ECMO) and percutaneous cardiopulmonary bypass procedures. The commenters requested that CMS inform hospitals that they should appropriately code each procedure separately because each code captures different procedures.

We consider this coding issue to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. We refer commenters to the American Hospital Association's Central Office on Coding, which has responsibility for providing coding advice on such specific coding issues through its publication Coding Clinic.

c. Adding Severity Levels to MS-DRGs 245 through 251

One commenter recommended including additional severity levels under MS-DRG 245 (AICD Generator Procedures); MS-DRG 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-DRG 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without MCC); MS-DRG 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without MCC); MS-DRG 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent with MCC); and MS-DRG 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent without MCC).

We consider this public comment to be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule, and therefore are not addressing it in this final rule. However, we will consider the comment for possible proposals in future rulemaking as part of our annual review process.

H. Recalibration of the FY 2015 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights

In developing the FY 2015 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 2013 MedPAR data used in this final rule include discharges occurring on October 1, 2012, through September 30, 2013, based on bills received by CMS through March 31, 2014, 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 under section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in calculating the relative weights includes data for approximately 10,090,385 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR “GHO Paid” indicator field on the claim record is equal to “1” or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR “Indirect Medical Education (IME)” payment field, indicating that the claim was an “IME only” claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the March 31, 2014 update of the FY 2013 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called “claim type.” Claim type “60” indicates that the claim was an inpatient claim paid as fee-for-service. Claim types “61,” “62,” “63,” and “64” relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the relative weights for FY 2015 also excludes claims with claim type values not equal to “60.” The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. We note that the FY 2015 relative weights are based on the ICD-9-CM diagnoses and procedures codes from the MedPAR Start Printed Page 49911claims data, grouped through the ICD-9-CM version of the FY 2015 GROUPER (Version 32). The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the HCRIS. Normally, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, we used cost report data from the March 31, 2014 update of the FY 2012 HCRIS for calculating the FY 2015 cost-based relative weights.

2. Methodology for Calculation of the Relative Weights

As we explain in section II.E.2. of the preamble of this final rule, we are calculating the FY 2015 relative weights based on 19 CCRs, as we did for FY 2014. The methodology we used to calculate the FY 2015 MS-DRG cost-based relative weights based on claims data in the FY 2013 MedPAR file and data from the FY 2012 Medicare cost reports is as follows:

  • To the extent possible, all the claims were regrouped using the FY 2015 MS-DRG classifications discussed in sections II.B. and II.G. of the preamble of this final rule.
  • The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicare-approved transplant centers that have cases in the FY 2012 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, 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 92.2 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50551) for the edit threshold related to FY 2014 and prior fiscal years).
  • 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.

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 2012 cost report data.

The 19 cost centers that we used in the relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center CCRs.Start Printed Page 49912

Cost center group name (19 total)MedPAR charge fieldRevenue codes contained in MedPAR charge fieldCost report line descriptionCost from HCRIS (Worksheet C, Part 1, Column 5 and line number) Form CMS-2552-10Charges from HCRIS (Worksheet C, Part 1, Column 6 & 7 and line number) Form CMS-2552-10Medicare charges from HCRIS (Worksheet D-3, Column & line number) Form CMS-2552-10
Routine DaysPrivate Room Charges011X and 014XAdults & Pediatrics (General Routine Care)C_1_C5_30C_1_C6_30D3_HOS_C2_30
Semi-Private Room Charges012X, 013X and 016X-019X
Ward Charges015X
Intensive DaysIntensive Care Charges020XIntensive Care UnitC_1_C5_31C_1_C6_31D3_HOS_C2_31
Coronary Care Charges021XCoronary Care UnitC_1_C5_32C_1_C6_32D3_HOS_C2_32
Burn Intensive Care UnitC_1_C5_33C_1_C6_33D3_HOS_C2_33
Surgical Intensive Care UnitC_1_C5_34C_1_C6_34D3_HOS_C2_34
Other Special Care UnitC_1_C5_35C_1_C6_35D3_HOS_C2_35
DrugsPharmacy Charges025X, 026X and 063XIntravenous TherapyC_1_C5_64C_1_C6_64D3_HOS_C2_64
C_1_C7_64
Drugs Charged To PatientC_1_C5_73C_1_C6_73D3_HOS_C2_73
C_1_C7_73
Supplies and EquipmentMedical/Surgical Supply Charges0270, 0271, 0272, 0273, 0274, 0277, 0279, and 0621, 0622, 0623Medical Supplies Charged to PatientsC_1_C5_71C_1_C6_71D3_HOS_C2_71
C_1_C7_71
Durable Medical Equipment Charges0290, 0291, 0292 and 0294-0299DME-RentedC_1_C5_96C_1_C6_96D3_HOS_C2_96
C_1_C7_96
Used Durable Medical Charges0293DME-SoldC_1_C5_97C_1_C6_97D3_HOS_C2_97
C_1_C7_97
Implantable Devices0275, 0276, 0278, 0624Implantable Devices Charged to PatientsC_1_C5_72C_1_C6_72D3_HOS_C2_72
C_1_C7_72
Therapy ServicesPhysical Therapy Charges042XPhysical TherapyC_1_C5_66C_1_C6_66D3_HOS_C2_66
C_1_C7_66
Occupational Therapy Charges043XOccupational TherapyC_1_C5_67C_1_C6_67D3_HOS_C2_67
C_1_C7_67
Speech Pathology Charges044X and 047XSpeech PathologyC_1_C5_68C_1_C6_68D3_HOS_C2_68
C_1_C7_68
Inhalation TherapyInhalation Therapy Charges041X and 046XRespiratory TherapyC_1_C5_65C_1_C6_65D3_HOS_C2_65
C_1_C7_65
Operating RoomOperating Room Charges036XOperating RoomC_1_C5_50C_1_C6_50D3_HOS_C2_50
C_1_C7_50
071XRecovery RoomC_1_C5_51C_1_C6_51D3_HOS_C2_51
C_1_C7_51
Labor & DeliveryOperating Room Charges072XDelivery Room and Labor RoomC_1_C5_52C_1_C6_52D3_HOS_C2_52
C_1_C7_52
AnesthesiaAnesthesia Charges037XAnesthesiologyC_1_C5_53C_1_C6_53D3_HOS_C2_53
C_1_C7_53
CardiologyCardiology Charges048X and 073XElectro-cardiologyC_1_C5_69C_1_C6_69D3_HOS_C2_69
C_1_C7_69
Cardiac Catheterization0481Cardiac CatheterizationC_1_C5_59C_1_C6_59D3_HOS_C2_59
C_1_C7_59
LaboratoryLaboratory Charges030X, 031X, and 075XLaboratoryC_1_C5_60C_1_C6_60D3_HOS_C2_60
Start Printed Page 49913
C_1_C7_60
PBP Clinic Laboratory ServicesC_1_C5_61C_1_C6_61D3_HOS_C2_61
C_1_C7_61
074X, 086XElectro-EncephalographyC_1_C5_70C_1_C6_70D3_HOS_C2_70
C_1_C7_70
RadiologyRadiology Charges032X, 040XRadiology—DiagnosticC_1_C5_54C_1_C6_54D3_HOS_C2_54
C_1_C7_54
028x, 0331, 0332, 0333, 0335, 0339, 0342Radiology—TherapeuticC_1_C5_55C_1_C6_55D3_HOS_C2_55
0343 and 344RadioisotopeC_1_C5_56C_1_C6_56D3_HOS_C2_56
C_1_C7_56
Computed Tomography (CT) ScanCT Scan Charges035XComputed Tomography (CT) ScanC_1_C5_57C_1_C6_57D3_HOS_C2_57
C_1_C7_57
Magnetic Resonance Imaging (MRI)MRI Charges061XMagnetic Resonance Imaging (MRI)C_1_C5_58C_1_C6_58D3_HOS_C2_58
C_1_C7_58
Emergency RoomEmergency Room Charges045xEmergencyC_1_C5_91C_1_C6_91D3_HOS_C2_91
C_1_C7_91
Blood and Blood ProductsBlood Charges038xWhole Blood & Packed Red Blood CellsC_1_C5_62C_1_C6_62 C_1_C7_62D3_HOS_C2_62
Blood Storage/Processing039xBlood Storing, Processing, & TransfusingC_1_C5_63C_1_C6_63 C_1_C7_63D3_HOS_C2_63
Other ServicesOther Service Charge0002-0099, 022X, 023X, 024X, 052X, 053X
055X-060X, 064X-070X, 076X-078X, 090X-095X and 099X
Renal Dialysis0800XRenal DialysisC_1_C5_74C_1_C6_74D3_HOS_C2_74
ESRD Revenue Setting Charges080X and 082X-088XC_1_C7_74
Home Program DialysisC_1_C5_94C_1_C6_94D3_HOS_C2_94
C_1_C7_94
Outpatient Service Charges049XASC (Non Distinct Part)C_1_C5_75C_1_C6_75D3_HOS_C2_75
Lithotripsy Charge079XC_1_C7_75
Other AncillaryC_1_C5_76C_1_C6_76D3_HOS_C2_76
C_1_C7_76
Clinic Visit Charges051XClinicC_1_C5_90C_1_C6_90D3_HOS_C2_90
C_1_C7_90
Observation bedsC_1_C5_92.01C_1_C6_92.01D3_HOS_C2_92.01
C_1_C7_92.01
Professional Fees Charges096X, 097X, and 098XOther Outpatient ServicesC_1_C5_93C_1_C6_93D3_HOS_C2_93
C_1_C7_93
Ambulance Charges054XAmbulanceC_1_C5_95C_1_C6_95D3_HOS_C2_95
C_1_C7_95
Rural Health ClinicC_1_C5_88C_1_C6_88D3_HOS_C2_88
C_1_C7_88
FQHCC_1_C5_89C_1_C6_89D3_HOS_C2_89
C_1_C7_89
Start Printed Page 49914

We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48462) for a discussion on the revenue codes included in the Supplies and Equipment and Implantable Devices CCRs, respectively.

3. Development of National Average CCRs

We developed the national average CCRs as follows:

Using the FY 2012 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 FY 2015 cost-based relative weights were then normalized by an adjustment factor of 1.645837 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.

The 19 national average CCRs for FY 2015 are as follows:

GroupCCR
Routine Days0.489
Intensive Days0.407
Drugs0.192
Supplies & Equipment0.292
Implantable Devices0.349
Therapy Services0.344
Laboratory0.128
Operating Room0.212
Cardiology0.123
Cardiac Catheterization0.133
Radiology0.165
MRIs0.087
CT Scans0.043
Emergency Room0.195
Blood and Blood Products0.360
Other Services0.405
Labor & Delivery0.398
Inhalation Therapy0.181
Anesthesia0.114

Since FY 2009, the relative weights have been based on 100 percent cost weights based on our MS-DRG grouping system.

When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to use that same case threshold in recalibrating the MS-DRG relative weights for FY 2015. Using data from the FY 2013 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 below are for newborns. In FY 2015, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS-DRGs, we proposed to compute relative weights for the low-volume MS-DRGs by adjusting their final FY 2014 relative weights by the percentage change in the average weight of the cases in other MS-DRGs. The crosswalk table is shown below:

Low-volume MS-DRGMS-DRG titleCrosswalk to MS-DRG
768Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&CFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
789Neonates, Died or Transferred to Another Acute Care FacilityFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
790Extreme Immaturity or Respiratory Distress Syndrome, NeonateFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
791Prematurity with Major ProblemsFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
792Prematurity without Major ProblemsFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
793Full-Term Neonate with Major ProblemsFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
Start Printed Page 49915
794Neonate with Other Significant ProblemsFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).
795Normal NewbornFinal FY 2014 relative weight (adjusted by percent change in average weight of the cases in other MS-DRGs).

We did not receive any public comments on this proposal and, therefore, are finalizing it for FY 2015 as proposed.

4. Bundled Payments for Care Improvement (BPCI) Initiative

The Bundled Payments for Care Improvement (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. On January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative. 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) for a discussion on the BPCI initiative.

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 BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to a hospital's participation within these bundled payment models (that is, as if a hospital were not participating in those models under the BPCI initiative). Therefore, for FY 2015, we proposed 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.

Comment: One commenter was concerned about the policy to treat all providers that participate in the BPCI initiative the same as prior fiscal years for the IPPS payment modeling and ratesetting process without regard to a hospital's participation within these bundled payment models. The commenter stated that while it is unlikely to have a demonstrable effect in FY 2015, the BPCI initiative has just begun and has few participants compared to the total number of PPS hospitals. The commenter further stated that the cohort is expected to expand dramatically, given the additional round of applications, and it expected participants to focus their cost reduction activities in select MS-DRGs, which could skew specific weights and inappropriately shift payments to other MS-DRGs. The commenter added that providers that are not part of the initiative cannot be expected to reach the same performance levels without the same tools available within the BPCI. The commenter recommended that CMS reconsider removing BPCI participants from the IPPS relative weight setting process.

Response: As the commenter stated, the BPCI initiative is unlikely to have a demonstrable effect for FY 2015. Accordingly, we are finalizing our proposal 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 for FY 2015. However, we will monitor the possible impact that hospitals enrolled in the BPCI initiative may have on the MS-DRG relative weights in future fiscal years.

I. Add-On Payments for New Services and Technologies

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 § 412.87(b)(2), a specific medical service or technology will be considered “new” for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS-DRG weights through recalibration. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a technology receives a new FDA approval, 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 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our policy regarding substantial similarity in detail.

Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for Start Printed Page 49916new 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, 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 2014 IPPS/LTCH PPS final rule contains the final thresholds that we use to evaluate applications for new technology add-on payments for FY 2015. We refer readers to the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​FY2014-IPPS-Final-Rule-Home-Page.html for a complete viewing of Table 10 from the FY 2014 IPPS/LTCH PPS final rule.

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 technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on this issue.

Under the third criterion, § 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents “an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.” For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule for a more detailed discussion of this criterion (66 FR 46902).)

The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, if the costs of the discharge (determined by applying cost-to-charge ratios (CCRs) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology 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.

Section 503(d)(2) of Public Law 108-173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of Public Law 108-173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality.

In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance for their new medical service or technology by July 1 of 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 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 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 August 2008 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 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 2016 must submit a Start Printed Page 49917formal 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 2016, 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 2015 prior to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published a document in the Federal Register on November 29, 2013 (78 FR 71555 through 71557), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 12, 2014. In the announcement notice for the meeting, we stated that the opinions and alternatives 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 2015 new medical service and technology add-on payment applications before the publication of the FY 2015 proposed rule.

Approximately 91 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: http://www.youtube.com/​watch?​v=​WXyR_​TILfKo&​list=​TLiu1B_​AxXsinTW6EEn4BVUdR4iEM61eV4. 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 January 21, 2014, in our evaluation of the new technology add-on payment applications for FY 2015 in the proposed rule.

In response to the published document and the New Technology Town Hall meeting, we received written comments regarding the applications for FY 2015 new technology add-on payments. We summarized these comments in the preamble of the proposed rule or, if applicable, indicated that there were no comments received, at the end of each discussion of the individual applications in the proposed rule.

A number of attendees at the New Technology Town Hall meeting provided comments that were unrelated to the “substantial clinical improvement” criterion. As explained above and in the Federal Register document announcing the New Technology Town Hall meeting (78 FR 71555 through 71557), the purpose of the meeting was specifically to discuss the substantial clinical improvement criterion in regard to pending new technology add-on payment applications for FY 2015. Therefore, we did not summarize those comments in the proposed rule. Commenters were informed that they were welcome to resubmit these comments during the comment period in response to proposals presented in the proposed rule. We summarize and respond to these comments under the applicable discussions within this final rule.

We also received public comments in response to the proposed rule relating to topics such as marginal cost factors for new technology add-on payments, mapping new technologies to the appropriate MS-DRG, deeming a new technology a substantial clinical improvement if it receives HDE approval from the FDA, and the use of external data in determining the cost threshold. Because we did not request public comments nor propose to make any changes to any of the issues above, we are not summarizing these public comments nor responding to them in this final rule.

Another commenter asked CMS to consider the implications of the new technology add-on payment policy on antibiotics that fall under the current IPPS and, in particular, the Hospital VBP Program for which the inclusion of the MRSA bacteremia measure and the C-difficile measure are proposed. The commenter was concerned that current payment policy will be inadequate and place further financial pressure on hospitals. The commenter stated that CMS must consider the evolving payment paradigm facing inpatient facilities (IQR, HAC, and VBP) and ensure that these various policies do not have competing goals. Although we agree with the commenter that CMS should consider the evolving payment paradigm facing inpatient facilities regarding payment reductions under the Hospital IQR Program, the HAC Reduction Program, and the Hospital VBP Program and ensure that these various policies do not have competing goals, we are not providing a detailed response because we did not present any policy proposals concerning these issues.

Comment: One commenter expressed concern that services identified as appropriate for new technology add-on payments do not receive the new technology add-on payment even when the claims for these services are correctly submitted to the Medicare administrative contractors (MACs). The commenter stated that the MACs are often unable to explain the reason for the failure to include the new technology add-on payment or answer inquiries regarding this issue. The commenter recommended that CMS provide additional education to the MACs regarding CMS regulations related to services available for new technology add-on payments.

Response: We encourage providers to work with their MACs to ensure that the Start Printed Page 49918new technology add-on payments are accurately and appropriately made. If MACs are having any issues, they can contact the CMS Central Office for further assistance. Also, the regulations at § 412.88 explain how the new technology add-on payments are made. We note that, under certain conditions, even if an approved new technology was billed on the claim, a new technology add-on payment may not be made, such as if the total payment for the claim without the new technology add-on payment exceeds the costs of the case. In addition, each year after the final rule, CMS issues a transmittal to the MACs listing the eligibility and maximum add-on payment for each approved new technology.

3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments

a. Glucarpidase (Trade Brand Voraxaze®)

BTG International, Inc. submitted an application for new technology add-on payments for Glucarpidase (trade brand Voraxaze®) for FY 2013. Glucarpidase is used in the treatment of patients who have been diagnosed with toxic methotrexate (MTX) concentrations as of result of renal impairment. The administration of Glucarpidase causes a rapid and sustained reduction of toxic MTX concentrations.

Voraxaze® was approved by the FDA on January 17, 2012. Beginning in 1993, certain patients could obtain expanded access for treatment use to Voraxaze® as an investigational drug. Since 2007, the applicant has been authorized to recover the costs of making Voraxaze® available through its expanded access program. We describe expanded access for treatment use of investigational drugs and authorization to recover certain costs of investigational drugs in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). Voraxaze® was available on the market in the United States as a commercial product to the larger population as of April 30, 2012. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we expressed concerns about whether Voraxaze® could be considered new for FY 2013. After consideration of all of the public comments received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we considered Voraxaze® to be “new” as of April 30, 2012, which is the date of market availability.

After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for Voraxaze® and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze® for new technology add-on payments for FY 2013. Cases of Voraxaze® are identified with ICD-9-CM procedure code 00.95 (Injection or infusion of glucarpidase). The cost of Voraxaze® is $22,500 per vial. The applicant stated that an average of four vials is used per Medicare beneficiary. Therefore, the average cost per case for Voraxaze® is $90,000 ($22,500 × 4). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for Voraxaze® is $45,000 per case.

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 (§ 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 Voraxaze®, as stated above, we consider the beginning of the newness period to commence when Voraxaze® was first available on the market on April 30, 2012. Because the 3-year anniversary date for Voraxaze® will occur in the latter half of FY 2015 (April 30, 2015), we proposed to continue new technology add-on payments for this technology for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: Several public commenters supported the proposal to continue new technology add-on payments for Voraxaze® for FY 2015.

Response: We appreciate the commenters' support. Because the 3-year anniversary date for Voraxaze® will occur in the latter half of FY 2015 (April 30, 2015), we are finalizing our proposal to continue to make new technology add-on payments for Voraxaze® for FY 2015.

b. DIFICIDTM (Fidaxomicin) Tablets

Optimer Pharmaceuticals, Inc. submitted an application for new technology add-on payments for FY 2013 for the use of DIFICIDTM tablets. As indicated on the labeling submitted to the FDA, the applicant noted that Fidaxomicin is taken twice a day as a daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The applicant asserted that Fidaxomicin provides potent bactericidal activity against C. Diff., and moderate bactericidal activity against certain other gram-positive organisms, such as enterococcus and staphylococcus. Unlike other antibiotics used to treat CDAD, the applicant noted that the effects of Fidaxomicin preserve bacteroides organisms in the fecal flora. These are markers of normal anaerobic microflora. The applicant asserted that this helps prevent pathogen introduction or persistence, which potentially inhibits the re-emergence of C. Diff., and reduces the likelihood of overgrowths as a result of vancomycin-resistant Enterococcus (VRE). Because of this narrow spectrum of activity, the applicant asserted that Fidaxomicin does not alter this native intestinal microflora.

In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through 27941), we expressed concern that DIFICIDTM may not be eligible for new technology add-on payments because eligibility is limited to new technologies associated with procedures described by ICD-9-CM codes. We further stated that drugs that are only taken orally (such as DIFICIDTM) may not be eligible for consideration for new technology add-on payments because there is no procedure associated with these drugs and, therefore, no ICD-9-CM code(s). In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after consideration of the public comments received, we revised our policy to allow the use of National Drug Codes (NDCs) to identify oral medications that have no inpatient procedure for the purposes of new technology add-on payments. The revised policy is effective for payments for discharges occurring on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on this issue.

With regard to the newness criterion, Fidaxomicin was approved by the FDA on May 27, 2011, for the treatment of CDAD in adult patients, 18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we established that the beginning of the newness period for this technology is its FDA approval date of May 27, 2011.Start Printed Page 49919

After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for DIFICIDTM and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICIDTM for new technology add-on payments for FY 2013. Cases of DIFICIDTM are identified with ICD-9-CM diagnosis code 008.45 (Intestinal infection due to Clostridium difficile) in combination with NDC code 52015-0080-01. Providers must report the NDC on the 837i Health Care Claim Institutional form (in combination with ICD-9-CM diagnosis code 008.45) in order to receive the new technology add-on payment. According to the applicant, the cost of DIFICIDTM is $2,800 for a 10-day dosage. The average cost per day for DIFICIDTM is $280 ($2,800/10). Cases of DIFICIDTM within the inpatient setting typically incur an average dosage of 6.2 days, which results in an average cost per case for DIFICIDTM of $1,736 ($280 × 6.2). Under § 412.88(a)(2), new technology add-on payments are limited to the lesser of 50 percent of the average cost of the technology or 50 percent of the costs in excess of the MS-DRG payment for the case. As a result, the maximum new technology add-on payment for DIFICIDTM is $868.

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 (§ 412.87(b)(2)).

The manufacturer commented through a letter to CMS, prior to the publication of the proposed rule, requesting that CMS extend the eligibility for a third year of new technology add-on payments for DIFICIDTM in FY 2015. The manufacturer maintained that the technology still meets all three criteria for new technology add-on payments. Regarding the substantial clinical improvement criterion, the applicant stated that DIFICIDTM continues to remain the only FDA-approved treatment to demonstrate substantial clinical improvement over existing therapies. No new treatments for CDAD have been approved by the FDA since DIFICIDTM. The applicant further stated that a third year of new technology add-on payments for DIFICIDTM would continue to reduce access barriers in the acute care hospital inpatient setting, which would support the appropriate use of DIFICIDTM, a treatment that offers a substantial clinical improvement over existing therapies.

With respect to the cost criterion, the applicant stated that DIFICIDTM continues to meet the cost criterion. Using claims data from the FY 2012 MedPAR file, the applicant provided updated data from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), and demonstrated that the average case-weighted standardized charge per case exceeded the average case-weighted thresholds under both analyses. The applicant stated that the new technology add-on payment is intended to offer additional payments to support patient access and appropriate use of new technologies for a period of time until the MS-DRGs are adjusted to reflect the cost of the new technology. The applicant believed that the analyses conducted with the most recent MedPAR claims data available demonstrate that the MS-DRG recalibrations are insufficient to accommodate the cost associated with CDAD and new technologies to treat CDAD under the IPPS within the allotted timeframe of 2 years. According to the applicant, these payment amounts remain an obstacle for the appropriate use of new technologies for CDAD that demonstrate substantial clinical improvement over existing treatments, such as DIFICIDTM. The applicant concluded that a third year of new technology add-on payments for DIFICIDTM is needed to allow sufficient data for future MS-DRG recalibration analyses.

With regard to newness criterion, the manufacturer commented that it believed that the technology still meets the newness criterion for the following reason: § 412.87(b)(2) states that “A medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). After CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered `new' under the criterion of this section.” The manufacturer noted that DIFICIDTM was not assigned an ICD-9-CM procedure code and DIFICIDTM is the first product for which no inpatient procedure is associated to receive a new technology add-on payment since the implementation of the new technology add-on payment policy.

The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule (77 FR 53352), which indicated that “Hospitals currently code and report procedures and more invasive services such as surgeries, infusion of drugs, and specialized procedures such as cardiac catheterizations. Hospitals neither code nor report self-administered drugs.” Therefore, the manufacturer contended that, as an oral therapy, neither DIFICIDTM nor its administration was assigned an ICD-9-CM procedure code and, therefore, the technology should still be eligible for the new technology add-on payments.

The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS final rule, because an ICD-9-CM procedure code for the administration of an oral medication did not exist and hospitals had no other mechanism to report the use of DIFICIDTM, for FY 2013, CMS instructed hospitals to report the DIFICIDTM NDC on hospital inpatient claims to receive the new technology add-on payment for DIFICIDTM. Prior to October 1, 2012, hospitals did not use NDCs on hospital inpatient claims, which prevented CMS from isolating DIFICIDTM cases and their associated costs. The manufacturer further stated that the NDC methodology was a bold change in policy and inpatient billing processes, and it stands to reason that, because of hospitals unfamiliarity with reporting NDCs on inpatient claims, hospitals' use of the DIFICIDTM NDC would greatly lag behind the traditional use of ICD-9-CM procedure codes. As such, the manufacturer reasoned that any lag in hospital reporting would directly impact CMS' ability to track and analyze the cost data associated with DIFICIDTM cases.

The manufacturer also noted that on August 31, 2012, CMS issued Transmittal 2539, which is a change request for MACs concerning updates for the upcoming fiscal year. The manufacturer stated that because the new technology add-on heading was omitted in the transmittal, this change request did not highlight the NDC billing approach to ensure that hospitals recognized the important change, which may have caused hospitals to overlook the claim reporting instructions for DIFICIDTM.

The manufacturer added that Transmittal 2539 and a Medicare Learning Network® Matters (MLN) article were rescinded and replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted that among CMS' reasons for replacing the transmittal was to insert the omitted Start Printed Page 49920new technology add-on section heading. The manufacturer stated that, although the original transmittal further supports that collection of DIFICIDTM-specific data did not begin until at least October 1, 2012, CMS' reissuance of the claims processing instructions, and the missing header in the initial instructions, effectively delayed implementation of the new technology add-on payments for 3 months past the October 2012 beginning date. The manufacturer also believed that the need to replace the transmittal underlies hospitals' difficulties instituting claims' reporting instructions to receive new technology add-on payments for DIFICIDTM at the hospital level.

The manufacturer noted that anecdotal feedback from hospitals, which was shared with CMS during a meeting in June 2013, suggests that some hospitals faced challenges implementing the appropriate billing and coding processes. The manufacturer was concerned that that these challenges were, in part, caused by the missing header, and that these challenges may have impacted whether eligible cases were properly billed and coded to receive the new technology add-on payment for DIFICIDTM. The manufacturer was further concerned that the effects of any lag or delay caused by unfamiliarity with reporting NDCs and the missing header would also impact the data available to CMS to recalibrate the MS-DRGs and, separately, to evaluate the impact of the new technology add-on payment for DIFICIDTM. The manufacturer further explained that, while DIFICIDTM was available to hospitals after its launch in July 2011, hospitals had no experience reporting NDCs until October 2012, and may not have recognized the opportunity to, or understood the mechanism for doing so, until after January 2013. For the purposes of inpatient data collection and ratesetting, the manufacturer believed that this meant that 2 complete years of DIFICIDTM costs would not be fully reflected in the Medicare claims data for the FY 2015 MS-DRG recalibrations.

The manufacturer also analyzed the 100 percent sample of the Standard Analytical File (SAF) for CY 2012, which contained first quarter claims data for FY 2013, the first 3 months that DIFICIDTM was eligible for the new technology add-on payments. The manufacturer found a total of 43,608 cases with a diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38 cases across 26 hospitals that reported new technology add-on payments for DIFICIDTM on submitted claims. The manufacturer stated that this preliminary data suggests that the number of cases available for MS-DRG recalibrations for FY 2015 is limited. The manufacturer stated that it is currently attempting to secure FY 2013 MedPAR claims data and that it will likely provide further insights on these issues.

In addition, the manufacturer noted that prior new technology add-on payment application approvals have involved technologies with much narrower patient populations compared to DIFICIDTM, allowing the costs of those technologies to influence the MS-DRG relative payment weights for the small number of MS-DRGs with which they are associated. The manufacturer explained that, unlike other technologies approved for new technology add on payments, the DIFICIDTM therapeutic value, while limited to patients with CDAD, is used in patients across a wide range of MS-DRGs due to it being reported as a secondary diagnosis in two-thirds of the cases compared to other technologies, which are assigned to a relatively small number of MS-DRGs. For example, cases involving the Spiration IBV® Valve System, which was granted approval for new technology add-on payments in FY 2010, primarily mapped to three MS-DRGs: 163 (Major Chest Procedures with MCC); 164 (Major Chest Procedures with CC); and 165 (Major Chest Procedures without CC/MCC). In its analysis of the FY 2012 MedPAR data for the cost criterion, the manufacturer found cases using DIFICIDTM mapped to 544 unique MS-DRGs. Under the 100 percent sample of the SAF for CY 2012, the 38 cases mentioned above mapped to 20 different MS-DRGs. The manufacturer maintained that because of the diffuse nature of the DIFICIDTM cases mapping to many MS-DRGs, it believed an extension of the newness period is required for the costs to be adequately reflected in the MS-DRG relative payment weights. In the unique case of DIFICIDTM for the treatment of CDAD, the manufacturer stated that 2 years of new technology add-on payments is insufficient to allow the 544 MS-DRGs to be recalibrated to sufficiently reflect the cost of the use of DIFICIDTM, a treatment that offers significant clinical improvement over existing therapies.

In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28032 through 28033), we responded to the comments above. Specifically, with regard to the technology's newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. Section 412.87(b)(2) clearly states that a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD-9-CM code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology become available for DRG recalibration). Section 412.87(b)(2) also states that after CMS has recalibrated the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered “new” under the criterion of this section. Therefore, regardless of whether a technology can be individually identified by a separate ICD-9-CM code or whether it can only be identified using a NDC code, if the costs of the technology are included in the charge data, and the MS-DRGs have been recalibrated using that data, then the technology can no longer be considered “new” for the purposes of this provision. We further stated in that final rule that the period of newness does not necessarily start with the approval date for the medical service or technology, and does not necessarily start with the issuance of a distinct code. Instead, it begins with availability of the product on the U.S. market, which is when data become available. We have consistently applied this standard, and believe that it is most consistent with the purpose of new technology add-on payments.

In addition, similar to our discussion in the FY 2006 IPPS final rule (70 FR 47349), we do not believe that case volume is a relevant consideration for making the determination as to whether a product is “new.” Consistent with the statute, a technology no longer qualifies as “new” once it is more than 2 to 3 years old, irrespective of how frequently it has been used in the Medicare population. Similarly, this same determination is applicable no matter how many MS-DRGs the technology is spread across. Therefore, if a product is more than 2 to 3 years old, we consider its costs to be included in the MS-DRG relative weights whether its use in the Medicare population has been frequent or infrequent. We recognize that using an NDC was a novel billing practice under the IPPS. Nevertheless, even though hospitals may not have coded all uses of DIFICIDTM with the NDC, hospital bills would still include charges for all items and services furnished to a Medicare patient, including use of DIFICIDTM. Therefore, even though we may be not be able to Start Printed Page 49921identify all uses of DIFICIDTM in the Medicare charge data, hospital charges for the MS-DRGs would continue to reflect use of this technology.

With respect to the Transmittal 2539 omitting the header referenced above, as noted above, CMS corrected this issue as soon as possible by rescinding and reissuing this transmittal. Additionally, as noted by the manufacturer, this transmittal was meant for MACs and not hospitals. We believe the guidance issued in Transmittal 2539 clearly described to MACs how hospitals were to report the NDC on the inpatient claim in order to identify cases using DIFICIDTM for purposes of new technology add-on payments. Additionally, the MLN article that the manufacturer referred to above (MLN articles are typically a summary of transmittals for the general public) clearly indicated that DIFICIDTM was new for FY 2013 new technology add-on payments and clearly described how to properly code DIFICIDTM on the inpatient bill in order to receive the new technology add-on payment for FY 2013. The MLN article can be downloaded from the CMS Web site at: http://www.cms.gov/​Outreach-and-Education/​Medicare-Learning-Network-MLN/​MLNMattersArticles/​downloads/​MM8041.pdf.

After considering the manufacturer's comments above, as we explained in the FY 2015 IPPS/LTCH PPS proposed rule, we continue to consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. Because the 3-year anniversary date of the product's entry on the U.S. market occurred in the second half of the fiscal year (after April 1, 2014), we continued new technology add-on payments for DIFICIDTM for FY 2014. However, for FY 2015, the 3-year anniversary date of the product's entry on the U.S. market occurred on May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we proposed to discontinue new technology add-on payments for DIFICIDTM for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: One commenter stated that CMS has the authority to grant a third year of new technology add-on payments for DIFICIDTM. The commenter stated that if Congress intended for the Secretary to begin the data collection period described in the statute based on the date of FDA approval, Congress would have done so. The commenter added that it agrees that, as a threshold matter, a product must be “new.” Specifically, the commenter reasoned that Congress did not intend to make available the new technology add-on payment for technologies that have been approved for years and received a unique code years later. The commenter believed that once a product is deemed “new,” the statute requires that data are to be collected for 2 to 3 years from the date of the ICD-9-CM code assignment. The commenter believed that CMS has the authority to first deem a product new and then collect data two to three years from the date of the inpatient code assignment. The commenter explained that sections 1886(d)(5)(K)(i) and 1886(d)(5)(K)(ii) of the Act mandate two separate legal requirements. The commenter further stated that this policy would mitigate the effect of older technologies that receive ICD-9-CM codes many years after their FDA approval date being eligible for new technology add-on payments. Therefore, the commenter stated that, under this policy, DIFICIDTM is eligible for a third year of new technology add-on payments.

The commenter also quoted the FY 2005 IPPS final rule (69 FR 49002 through 49003) where CMS stated the following: “Using the ICD-9-CM code alone is not an appropriate test of newness because technologies that are new to the market are automatically placed into the closest ICD-9-CM category when they first come on the market, unless the manufacturer requests the assignment of a new ICD-9-CM code because existing codes do not adequately reflect or describe the medical service or device. The services and technologies that have been placed into existing ICD-9-CM codes have been paid for using those descriptors.” The commenter believed that this policy is not relevant to oral drugs because hospitals do not typically code for oral medications. Therefore, the commenter stated that CMS must make a special exception for oral drugs and rely on the statutory authority to measure the length of time for data collection for new technology add-on payments based on the date of the “hospital inpatient code.”

Response: As discussed above, and as we stated in the FY 2005 IPPS final rule (69 FR 49003), the timeframe that a new technology can be eligible to receive new technology add-on payments begins when data become available. We have consistently applied this standard, and believe that it is most consistent with the purpose of new technology add-on payments. We refer readers to the discussion above and the FY 2005 IPPS final rule (69 FR 49002 through 49003) for further details regarding this issue. For these reasons, we disagree with the commenter that DIFICIDTM is eligible for a third year of new technology add-on payments.

With respect to the second comment, while oral drugs are not typically coded by hospitals, we maintain what we stated in the FY 2005 IPPS final rule that the services and technologies that have been assigned existing ICD-9-CM codes have been paid for using those descriptors. Although DIFICIDTM did not receive a specific ICD-9-CM code, it can be described or identified through additional ICD-9-CM procedure or diagnosis codes (such as diagnosis code 008.45, Intestinal infection due to Clostridium difficile). Moreover, as we noted above and in the proposed rule, hospital charges would include charges for all items and services furnished to a Medicare beneficiary, including use of DIFICIDTM. Therefore, we disagree with the commenter and continue to believe that DIFICIDTM is no longer new nor is any special exception warranted.

Comment: Several commenters reiterated the arguments made by the manufacturer as explained above and in the proposed rule that DIFICIDTM should be eligible for new technology add-on payments in FY 2015.

Response: After considering these comments, for the reasons stated above and in the proposed rule, we consider the beginning of the newness period to commence when DIFICIDTM was first approved by the FDA on May 27, 2011. The 3-year anniversary date of the product's entry on the U.S. market occurred on May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we are finalizing our proposal to discontinue new technology add-on payments for DIFICIDTM for FY 2015.

c. Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft

Cook® Medical submitted an application for new technology add-on payments for the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft (Zenith® F. Graft) for FY 2013. The applicant stated that the current treatment for patients who have had an AAA is an endovascular graft. The applicant explained that the Zenith® F. Graft is an implantable device designed to treat patients who have an AAA and who are anatomically unsuitable for treatment with currently approved AAA endovascular grafts because of the length of the infrarenal aortic neck. The applicant noted that, currently, an AAA is treated through an open surgical repair or medical management for those patients not Start Printed Page 49922eligible for currently approved AAA endovascular grafts.

With respect to newness, the applicant stated that FDA approval for the use of the Zenith® F. Graft was granted on April 4, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we stated that because the Zenith® F. Graft was approved by the FDA on April 4, 2012, we believed that the Zenith® F. Graft met the newness criterion as of that date.

After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the Zenith® F. Graft and consideration of the public comments we received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we approved the Zenith® F. Graft for new technology add-on payments for FY 2013. Cases involving the Zenith® F. Graft that are eligible for new technology add-on payments are identified by ICD-9-CM procedure code 39.78 (Endovascular implantation of branching or fenestrated graft(s) in aorta). In the application, the applicant provided a breakdown of the costs of the Zenith® F. Graft. The total cost of the Zenith® F. Graft utilizing bare metal (renal) alignment stents was $17,264. Of the $17,264 in costs for the Zenith® F. Graft, $921 is for components that are used in a standard Zenith AAA Endovascular Graft procedure. Because the costs for these components are already reflected within the MS-DRGs (and are no longer “new”), in the FY 2013 IPPS/LTCH PPS final rule, we stated that we do not believe it is appropriate to include these costs in our calculation of the maximum cost to determine the maximum add-on payment for the Zenith® F. Graft. Therefore, the total maximum cost for the Zenith® F. Graft is $16,343 ($17,264—$921). Under § 412.88(a)(2), new technology add-on payments are limited 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 Zenith® F. Graft is $8,171.50.

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” (§ 412.87(b)(2)). With regard to the newness criterion for the Zenith® F. Graft, as stated above, we consider the beginning of the newness period to commence when the Zenith® F. Graft was approved by the FDA on April 4, 2012. Because the 3-year anniversary date of the entry of the Zenith® F. Graft on the U.S. market will occur in the second half of the fiscal year (April 4, 2015), we proposed to continue new technology add-on payments for this technology for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: Several commenters supported the proposal to continue new technology add-on payments for the Zenith® F. Graft ® for FY 2015.

Response: We appreciate the commenters' support. Because the 3-year anniversary date for Zenith® F. Graft will occur in the latter half of FY 2015 (April 4, 2015), we are finalizing our proposal to continue to make new technology add-on payments for the Zenith® F. Graft for FY 2015.

d. 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. In the FY 2014 IPPS/LTCH PPS final rule, we approved new ICD-9-CM procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate) which uniquely identifies KcentraTM.

In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted that we were concerned that KcentraTM may be substantially similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS final rule, in response to comments submitted by the manufacturer, we stated that we agree that KcentraTM may be used in a patient population that is experiencing an acquired coagulation factor deficiency due to Warfarin and who are experiencing a severe bleed currently but are ineligible for FFP, particularly for use by IgA deficient patients and other patient populations that have no other treatment option to resolve severe bleeding in the context of an acquired Vitamin K deficiency. In addition, FFP is limited because it requires special storage conditions while KcentraTM is stable for up to 36 months at room temperature thus allowing hospitals that otherwise would not have access to FFP (for example, small rural hospitals as discussed by the applicant in its comments) to keep a supply of KcentraTM and treat patients who would possibly have no access to FFP. We noted that FFP is considered perishable and can be scarce by nature (due to production and other market limitations) thus making some hospitals unable to store FFP, which limits access to certain patient populations in certain locations. Therefore, we stated that we believe that KcentraTM provides a therapeutic option for a new patient population and is not substantially similar to FFP. Also, we gave credence to the information presented by the manufacturer that KcentraTM provides a simple and rapid repletion relative to FFP and reduces the risk of a transfusion reaction relative to FFP because it does not contain ABO antibodies and does not require ABO typing. As a result, we concluded that KcentraTM is not substantially similar to FFP, and that it meets the newness criterion.

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). Cases involving KcentraTM that are eligible for new technology add-on payments are identified by ICD-9-CM procedure code 00.96. 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 § 412.88(a)(2), new technology add-on payments are limited 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 Start Printed Page 49923case of KcentraTM is $1,587.50 for FY 2014.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that new technology add-on payments for KcentraTM would not be available with respect to discharges for which the hospital received an add-on payment for a blood clotting factor administered to a Medicare beneficiary with hemophilia who is a hospital inpatient. Under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is “the amount of the payment with respect to the operating costs of inpatient hospital services (as defined in subsection (a)(4) of this section)” for discharges on or after April 1, 1988. Section 1886(a)(4) of the Act excludes from the term “operating costs of inpatient hospital services” the costs with respect to administering blood clotting factors to individuals with hemophilia. The costs of administering a blood clotting factor to a Medicare beneficiary who has hemophilia and is a hospital inpatient are paid separately from the IPPS. (For information on how the blood clotting factor add-on payment is made, we refer readers to Section 20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which can be downloaded from the CMS Web site at: http://cms.gov/​Regulations-and-Guidance/​Guidance/​Manuals/​Downloads/​clm104c03.pdf.) In addition, we stated that if KcentraTM is approved by the FDA as a blood clotting factor, we believed that it may be eligible for blood clotting factor add-on payments when administered to Medicare beneficiaries with hemophilia. We make an add-on payment for KcentraTM for such discharges in accordance with our policy for payment of a blood clotting factor, and the costs would be excluded from the operating costs of inpatient hospital services as set forth in section 1886(a)(4) of the Act.

Section 1886(d)(5)(K)(i) of the Act requires the Secretary to “establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under this subsection” beginning with discharges on or after October 1, 2001. We believe that it is reasonable to interpret this requirement to mean that the payment mechanism established by the Secretary recognizes only costs for those items that would otherwise be paid based on the prospective payment system (that is, “the payment system established under this subsection”). As noted above, under section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective payment rate is the amount of payment for the operating costs of inpatient hospital services, as defined in section 1886(a)(4) of the Act, for discharges on or after April 1, 1988. We understand this to mean that a new medical service or technology must be an operating cost of inpatient hospital services paid based on the prospective payment system, and not excluded from such costs, in order to be eligible for the new technology add-on payment. We pointed out that new technology add-on payments are based on the operating costs per case relative to the prospective payment rate as described in § 412.88. Therefore, we believe that new technology add-on payments are appropriate only when the new technology is an operating cost of inpatient hospital services and are not appropriate when the new technology is excluded from such costs.

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated that we believe that hospitals may only receive new technology add-on payments for discharges where KcentraTM is an operating cost of inpatient hospital services. In other words, a hospital would not be eligible to receive the new technology add-on payment when it is administering KcentraTM in treating a Medicare beneficiary who has hemophilia. In those instances, KcentraTM is specifically excluded from the operating costs of inpatient hospital services in accordance with section 1886(a)(4) of the Act and paid separately from the IPPS. However, when a hospital administers KcentraTM to a Medicare beneficiary who does not have hemophilia, the hospital would be eligible for a new technology add-on payment because KcentraTM would not be excluded from the operating costs of inpatient hospital services. Therefore, discharges where the hospital receives a blood clotting factor add-on payment are not eligible for a new technology add-on payment for the blood clotting factor. We refer readers to Chapter Three, Section 20.7.3 of the Medicare Claims Processing Manual for a complete discussion on when a blood clotting factor add-on payment is made. The manual can be downloaded from the CMS Web site at: http://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Manuals/​Downloads/​clm104c03.pdf.

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 (§ 412.87(b)(2)). With regard to the newness criterion for KcentraTM, as stated above, we consider the beginning of the newness period to commence when KcentraTM was approved by the FDA on April 29, 2013. Because KcentraTM is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: Several commenters supported the proposal to continue new technology add-on payments for KcentraTM for FY 2015.

Response: We appreciate the commenters' support. Because the 3-year anniversary date for KcentraTM will occur in the second half of FY 2016 (April 29, 2016), we are finalizing our proposal to continue to make new technology add-on payments for KcentraTM FY 2015.

e. Argus® II Retinal Prosthesis System

Second Sight Medical Products, Inc. submitted an application for new technology add-on payments for the Argus® II Retinal Prosthesis System (Argus® II System) for FY 2014. The Argus® 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 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 Argus® 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.

The Argus® II System consists of three primary components: (1) An implant which is an epiretinal prosthesis that is fully implanted on and in the eye (that is, there are no percutaneous leads); (2) external components worn by the user; and (3) a “fitting” system for the clinician that is periodically used to perform diagnostic tests with the system and to custom-program the external unit for use by the patient. We describe these components more fully below.

  • Implant: The retinal prosthesis implant is responsible for receiving information from the external components of the system and electrically stimulating the retina to induce visual perception. The retinal Start Printed Page 49924implant consists of: (a) A receiving coil for receiving information and power from the external components of the Argus® II System; (b) electronics to drive stimulation of the electrodes; and (c) an electrode array. The receiving coil and electronics are secured to the outside of the eye using a standard scleral band and sutures, while the electrode array is secured to the surface of the retina inside the eye by a retinal tack. A cable, which passes through the eye wall, connects the electronics to the electrode array. A pericardial graft is placed over the extra-ocular portion on the outside of the eye.
  • External Components: The implant receives power and data commands wirelessly from an external unit of components, which include the Argus II Glasses and Video Processing Unit (VPU). A small lightweight video camera and transmitting coil are mounted on the glasses. The telemetry coils and radio-frequency system are mounted on the temple arm of the glasses for transmitting data from the VPU to the implant. The glasses are connected to the VPU by a cable. This VPU is worn by the patient, typically on a belt or a strap, and is used to process the images from the video camera and convert the images into electrical stimulation commands, which are transmitted wirelessly to the implant.
  • “Fitting System”: To be able to use the Argus® II System, a patient's VPU needs to be custom-programmed. This process, which the applicant called “fitting”, occurs in the hospital/clinic shortly after the implant surgery and then periodically thereafter as needed. The clinician/physician also uses the “Fitting System” to run diagnostic tests (for example, to obtain electrode and impedance waveform measurements or to check the radio-frequency link between the implant and external unit). This “Fitting System” can also be connected to a “Psychophysical Test System” to evaluate patients' performance with the Argus® II System on an ongoing basis.

These three components work together to stimulate the retina and allow a patient to perceive phosphenes (spots of light), which they then need to learn to interpret. While using the Argus® II System, the video camera on the patient-worn glasses captures a video image. The video camera signal is sent to the VPU, which processes the video camera image and transforms it into electrical stimulation patterns. The electrical stimulation data are then sent to a transmitter coil mounted on the glasses. The transmitter coil sends both data and power via radio-frequency (RF) telemetry to the implanted retinal prosthesis. The implant receives the RF commands and delivers stimulation to the retina via an array of electrodes that is secured to the retina with a retinal tack.

In patients with RP, the photoreceptor cells in the retina, which normally transduce incoming light into an electro-chemical signal, have lost most of their function. The stimulation pulses delivered to the retina via the electrode array of the Argus® II System are intended to mimic the function of these degenerated photoreceptors cells. These pulses induce cellular responses in the remaining, viable retinal nerve cells that travel through the optic nerve to the visual cortex where they are perceived as phosphenes (spots of light). Patients learn to interpret the visual patterns produced by these phosphenes.

With respect to the newness criterion, according to the applicant, the FDA designated the Argus® II System a Humanitarian Use Device in May 2009 (HUD designation #09-0216). The applicant submitted a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA in May 2011 to obtain market approval for the Argus® II System. The HDE was referred to the Ophthalmic Devices Panel of the FDA's Medical Devices Advisory Committee for review and recommendation. At the Panel's meeting held on September 28, 2012, the Panel voted 19 to 0 that the probable benefits of the Argus® II System outweigh the risks of the system for the proposed indication for use. The applicant received the HDE approval from the FDA on February 14, 2013. Currently there are no other approved treatments for patients with severe to profound RP. The Argus® II System has an IDE number of G050001 and is a Class III device. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50580 through 50583), we approved new ICD-9-CM procedure code 14.81 (Implantation of Epiretinal Visual Prosthesis), which uniquely identifies the Argus® II System. The other two codes approved by CMS are for removal, revision, or replacement of the device. More information on these codes can be found on the CMS Web site at: http://cms.gov/​Medicare/​Coding/​ICD9ProviderDiagnosticCodes/​ICD-9-CM-C-and-M-Meeting-Materials-Items/​2013-03-05-MeetingMaterials.html.

After evaluation of the new technology add-on payment application and consideration of public comments received, we concluded that the Argus® II System met all of the new technology add-on payment policy criteria. Therefore, we approved the Argus® II System for new technology add-on payments in FY 2014 (78 FR 50580 through 50583). Cases involving the Argus® II System that are eligible for new technology add-on payments are identified by ICD-9-CM procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act, which makes no mention of any add-on payments for a new medical service or technology. Therefore, it is not appropriate to include capital costs in the add-on payments for a new medical service or technology. In the application, the applicant provided a breakdown of the costs of the Argus® II System. The total operating cost of the Argus® II System is $144,057.50. Under § 412.88(a)(2), new technology add-on payments are limited 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 Argus® II System for FY 2014 is $72,028.75.

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 (§ 412.87(b)(2)). With regard to the newness criterion for the Argus® II System, as stated above, we consider the beginning of the newness period to commence when the Argus® II System was approved by the FDA on February 14, 2013. Because the Argus® II System is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: Several commenters supported the proposal to continue new technology add-on payments for the Argus® II System for FY 2015. Some commenters noted that, while the Argus® II System received FDA approval on February 14, 2013, it was not available on the U.S. market until December 20, 2013. The commenters explained that as part of this lengthy process, the manufacturer first had to submit a request to the Federal Communications Commission (FCC) for a waiver of section 15.209(a) of the FCC Start Printed Page 49925rules to allow the manufacturer to then apply for FCC authorization to utilize this specific RF band. The FCC granted the request for a waiver of the rules on November 30, 2011. After receiving the FCC waiver of section 15.209(a), the manufacturer was required to obtain a Grant of Equipment Authorization to utilize the specific RF band, which the FCC issued on December 20, 2013. Therefore, the commenters stated that the date the Argus® II System first became available for commercial sale in the United States was December 20, 2013.

Response: We appreciate the commenters' input and support. We agree with the commenters that due to the delay described above, the date of newness for the Argus® II System is now December 20, 2013, instead of February 14, 2013. Because the 3-year anniversary date for the Argus® II System will occur in the first half of FY 2017 (December 20, 2016), we are finalizing our proposal to continue to make new technology add-on payments for the Argus® II System for FY 2015.

f. Zilver® PTX® Drug Eluting Peripheral Stent

Cook® Medical submitted an application for new technology add-on payments for the Zilver® PTX® Drug Eluting Peripheral Stent (Zilver® PTX®) for FY 2014. The Zilver® PTX® is intended for use in the treatment of peripheral artery disease (PAD) of the above-the-knee femoropopliteal arteries (superficial femoral arteries). According to the applicant, the stent is percutaneously inserted into the artery(s), usually by accessing the common femoral artery in the groin. The applicant stated that an introducer catheter is inserted over the wire guide and into the target vessel where the lesion will first be treated with an angioplasty balloon to prepare the vessel for stenting. The applicant indicated that the stent is self-expanding, made of nitinol (nickel titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug approved for use as an anticancer agent and for use with coronary stents to reduce the risk of renarrowing of the coronary arteries after stenting procedures.

The applicant received FDA approval on November 15, 2012, for the Zilver® PTX®. The applicant maintains that the Zilver® PTX® is the first drug-eluting stent used for superficial femoral arteries. The technology is currently described by ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of the superficial femoral artery).

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 50585), after evaluation of the new technology add-on payment application and consideration of the public comments received, we approved the Zilver® PTX® for new technology add-on payments in FY 2014. Cases involving the Zilver® PTX® that are eligible for new technology add-on payments are identified by ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH PPS final rule, to determine the amount of Zilver® PTX® stents per case, instead of using the amount of stents used per case based on the ICD-9-CM codes, the applicant used an average of 1.9 stents per case based on the Zilver® PTX® Global Registry Clinical Study. The applicant stated in its application that the anticipated cost per stent is approximately $1,795. Therefore, cases of the Zilver® PTX® would incur an average cost per case of $3,410.50 ($1,795 × 1.9). Under § 412.88(a)(2), new technology add-on payments are limited 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 of the Zilver® PTX® is $1,705.25 for FY 2014.

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” (§ 412.87(b)(2)). With regard to the newness criterion for the Zilver® PTX®, as stated above, we consider the beginning of the newness period to commence when the Zilver® PTX® was approved by the FDA on November 15, 2012. Because the Zilver® PTX® is still within the 3-year newness period, we proposed to continue new technology add-on payments for this technology for FY 2015.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on this proposal.

Comment: Several commenters supported the proposal to continue new technology add-on payments for the Zilver® PTX® for FY 2015.

Response: We appreciate the commenters' support. Because the 3-year anniversary date for the Zilver® PTX® will occur in the first half of FY 2016 (November 12, 2015), we are finalizing our proposal to continue to make new technology add-on payments for the Zilver® PTX® FY 2015.

4. FY 2015 Applications for New Technology Add-On Payments

We received seven applications for new technology add-on payments for FY 2015, three of which were applications resubmitted from FY 2014. However, one applicant withdrew its application prior to the publication of the proposed rule. In addition, the applicant for the Watchman® System withdrew its application prior to the publication of this final rule. In accordance with the regulations under § 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. A discussion of the five remaining applications is presented below.

Comment: One commenter stated that CMS was critical of evidence presented by the applicants to support their claims that the new technology represents a substantial clinical improvement. The commenter explained that CMS finds fault with peer-reviewed literature, registry data, meta-analysis of clinical trials, lack of long-term outcome data, age of clinical trial participants below the age of Medicare beneficiaries, single arm studies, non-inferiority studies, and weak primary efficacy results. The commenter urged CMS to avoid blanket judgments on what types of evidence are considered adequate and to carefully consider the totality of the circumstances associated with a particular product. The applicant concluded that, given the list of evidence cited by CMS, it would appear that only head to head trials are sufficient to show substantial clinical improvement over standard of care, but it is important to note that in the case of first in class products, such trials are not feasible.

Another commenter shared similar concerns and stated that a study may be designed to measure noninferiority when compared to conventional treatment, but the results of the study may demonstrate superiority in terms of other measures, such as reduced pain, decreased recovery time or shorter hospitalizations. In addition, the commenter stated that study data that provide information regarding patient outcomes may be more important than whether the study was designed as a superiority trial or a noninferiority trial. The commenter concluded that a policy to require superiority studies, or at least to question noninferiority studies, could have negative results, including delaying patient access to innovative treatments, improved care outcomes, curtailing innovation, and discouraging competition. The commenter stated that CMS should give great weight to the totality of the evidence, including non-inferiority studies and other methodological approaches, as it Start Printed Page 49926considers approval of applications for new technology add-on payments.

Some commenters stated that CMS has a precedent of accepting noninferiority studies to evaluate technologies under the substantial clinical improvement criterion. In particular, these commenters indicated that CMS approved new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350-53358) and KcentraTM in FY 2014 (78 FR 50575-50580) and that both of these technologies submitted data from clinical trials demonstrating non-inferiority. One commenter stated that CMS' approval of Fidaxomicin for new technology add-on payments establishes a precedent for approval for a technology that shows non-inferiority for a primary end point in addition to the acceptance of other clinically important secondary analysis, and that precedent should be used to approve all technologies. Another commenter stated that CMS' approval of KcentraTM for new technology add-on payments is an example of how a technology can use data from randomized controlled trials demonstrating noninferiority to show that the technology represents a substantial clinical improvement.

One commenter stated that non-inferiority trials are a well-established and appropriately accepted standard, and noninferiority designs are the only affordable and ethical option for drug developers in researching acute bacterial skin and skin structure infections. The commenter also stated that primary focus for developing new agents targeted for acute bacterial skin and skin structure infection patients is not to improve clinical cure rates, but to “enhance the efficiency and cost effectiveness of achieving clinical cures, ease therapeutic administration (and, therefore, improve compliance) and limit avoidable exposure to healthcare acquired infections (which, when they occur, significantly increase costs and create patient safety risks).” The commenter urged CMS to clarify that it has not suggested or proposed to adopt a blanket judgment approach against technologies studied on a noninferiority basis.

Response: We appreciate the commenters' input and support. CMS always considers the totality of the clinical evidence whenever it makes a substantial clinical improvement determination. We agree with the commenters that we approved new technology add-on payments for Fidaxomicin and KcentraTM by determining that both of these technologies not only met the newness and cost criteria for new technology add-on payments, but also represented a substantial clinical improvement in the treatment options available for Medicare beneficiaries. We also appreciate that the commenter reviewed the policies we established in FY 2002 (66 FR 46902) with regard to the substantial clinical improvement criterion and clarified in FY 2008 (72 FR 47301). We continue to believe, as we did in FY 2008, that it is a reasonable concern that establishing specific data standards may make it more difficult for an applicant to qualify for a new technology add-on payment because such standards cannot account for the various types of new technologies that may become available in the future and the types of requirements that those novel technologies may or may not be able to meet. In other words, we clarify that we did not propose to establish nor are we establishing a blanket judgment approach against technologies studied on a non-inferiority basis. As we stated in the final rule that appeared in the Federal Register on September 7, 2001 (referred to hereinafter as the Inpatient New Technology Add-on Payment Final Rule), one of the ways to determine if a technology meets the substantial clinical improvement criterion is for the applicant to demonstrate that use of the technology significantly improves clinical outcomes for a patient population as compared with currently available treatments (66 FR 46914). In that rule, we finalized the policy that we would require applicants to submit evidence to demonstrate this. For the purposes of seeking additional payment from Medicare under the IPPS, we believe that it is preferable, when possible, for applicants to submit evidence that demonstrates superiority of the applicant technology as compared with currently available treatments. We note that this superiority can be derived, extrapolated, or inferred from noninferiority studies in which the results demonstrate a far greater delta than proposed in the power analysis. This belief is based on earlier experiences, which we described in the FY 2002 final rule: “[W]e would point out that various new technologies introduced over the years have been demonstrated to have been less effective than initially thought, or in some cases even potentially harmful. We believe it is in the best interest of Medicare beneficiaries to proceed very carefully with respect to the incentives created to quickly adopt new technology” (66 FR 46913). However, we point out that in that same rule, we provide two additional ways for an applicant technology to demonstrate substantial clinical improvement: if the device offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments; or if the device offers the ability to diagnose a medical condition in a patient population where that medical condition is currently undetectable or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods. There must also be evidence that the use of the device to make a diagnosis affects the management of the patient's care. (We refer readers to the Inpatient New Technology Add-on Payment Final Rule (66 FR 46914).) Similarly, for these two additional ways to meet the substantial clinical improvement criterion, we continue to believe that it is appropriate to require that applicants submit evidence that the technology in fact meets the criterion through one of these two ways. We do not require an applicant to meet the criterion in more than one of these ways, but emphasize that we require evidence to support an applicant's claim. If an applicant chooses to demonstrate that use of its technology significantly improves clinical outcomes, we believe that it is appropriate for CMS to consider all of the evidence presented in determining whether there is sufficient objective clinical evidence to determine if a new technology meets the substantial clinical improvement criterion.

a. Dalbavancin (Durata Therapeutics, Inc.)

Durata Therapeutics, Inc. submitted an application for new technology add-on payments for FY 2015 for the use of Dalbavancin. Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic administered as a once-weekly 30-minute infusion via a peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. According to the applicant, Dalbavancin's unique pharmacokinetic profile demonstrates rapid bactericidal activity that is potent and sustained against serious gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA).

With respect to the newness criterion, the applicant stated that Dalbavancin's once-weekly dosing, a simpler regimen than the current standard of care (Vancomycin) of daily or multiple-times daily intravenous dosing, allows for the discontinuation of IV access with its attendant risks of line-related thrombosis and infection. The applicant submitted a New Drug Approval Application (NDA) on September 26, Start Printed Page 499272013, and as stated in the FY 2015 IPPS/LTCH PPS proposed rule, anticipated FDA approval of Dalbavancin sometime in May of 2014. The applicant also applied for a new ICD-10-PCS code to describe the administration of Dalbavancin, which was presented at the March 19-20, 2014 ICD-10 Coordination and Maintenance Committee meeting. To date, no ICD-10-PCS code specifically describes the administration of Dalbavancin. However, if approved, the new ICD-10-PCS code will be effective on October 1, 2014. We also note in section II.G. of the preamble of this final rule that, per section 212 of the PAMA (Pub. L. 113-93), the Secretary announced plans to establish a new compliance date for ICD-10. We also discuss in that section the requests for ICD-10-PCS codes for FY 2015. We refer readers to section II.G. of the preamble of this final rule for a complete discussion of these issues.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments on whether the technology meets the newness criterion. However, we did not receive any public comments regarding whether the technology meets the newness criterion. After the publication of the FY 2015 IPPS/LTCH PPS proposed rule, we were informed that the applicant received FDA approval for the use of the technology on May 23, 2014. Therefore, for purposes of consideration for FY 2015 IPPS new technology add-on payments, we believe that the technology should be considered “new” as of May 23, 2014, when the technology received FDA approval.

We note that 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 the criteria above, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments.

In evaluating the first criterion, the applicant stated that Dalbavancin's mechanism of action is unique compared to other antibiotics as it involves the interruption of cell wall synthesis resulting in bacterial cell death. Furthermore, the applicant cited Dalbavancin's long half-life as the factor that differentiates itself from existing antibacterial agents active against MRSA. With respect to the second criterion, as we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28036), we believe that cases of ABSSSI that use Dalbavancin or other antibiotics for treatment would be assigned to the same MS-DRGs. Finally, with respect to the third criterion, we believe that Dalbavancin and other antibiotics used to treat cases of ABSSSI treat the same disease and patient population. Based on evaluation of the substantially similarity criteria, we stated in the FY 2015 IPPS/LTCH PPS proposed rule, it appears that Dalbavancin is not substantially similar to other antibiotics for the treatment of ABSSSI because it does not use the same or a similar mechanism of action to achieve a therapeutic outcome.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments regarding whether Dalbavancin is substantially similar to existing antibiotics and whether Dalbavancin meets the newness criterion. However, we did not receive any public comments discussing whether Dalbavancin is substantially similar to existing antibiotics in the context of the newness criterion. After further evaluation of the new technology add-on payment application, we believe that Dalbavancin is not substantially similar to other antibiotics for the treatment of ABSSSI because it does not use the same or a similar mechanism of action to achieve a therapeutic outcome.

According to the applicant, Dalbavancin is indicated to treat gram-positive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These conditions may be a primary diagnosis, but are often secondary to an underlying condition such as diabetes, heart failure, and pressure ulcers, among others. Therefore, the technology is eligible to be used across all MS-DRGs. To demonstrate that it meets the cost criterion, the applicant searched the FY 2012 MedPAR file (across all MS-DRGs) for cases where at least one ABSSSI ICD-9-CM code was present on the claim, including those where MRSA was present on a claim with an ABSSSI diagnosis. Specifically, the applicant searched for cases with one of the following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and paronychia of finger); 681.10 (Cellulitis and abscess of toe, unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis and abscess of unspecified digit); 682.0-682.9 (Other cellulitis and abscess of face, neck, trunk, upper arm and forearm, hand except fingers and thumb, buttock, leg except foot, foot except toes, specified sites, unspecified sites); 686.00 (Pyoderma, unspecified); 686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic granuloma of skin and subcutaneous tissue); 686.8 (Other specified local infections of skin and subcutaneous tissue); 686.9 (Unspecified local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic wound infection not elsewhere classified); 998.51 (Infected postoperative seroma); and 998.59 (Other postoperative infection). The applicant believed that these cases represent potential cases eligible for the administration of Dalbavancin.

The applicant found 570,698 cases across 682 MS-DRGs and noted that almost 25 percent of the total number of cases would map to MS-DRGs 603 (Cellulitis without MCC), while the top 10 MS-DRGs accounted for almost half (or 49 percent) of the total number of cases. Of the 682 MS-DRGs, only 90 of these MS-DRGs accounted for 1,000 cases or more. The applicant standardized the charges for all 570,698 cases, which equated to an average case-weighted standardized charge per case of $46,138. We note that the applicant did not inflate the charges nor did it include charges for Dalbavancin in the average case-weighted standardized charge per case. The applicant calculated an average case-weighted threshold of $44,255 across all MS-DRGs. Therefore, the applicant asserted the average case-weighted standardized charge per case (without inflating and including charges for Dalbavancin) exceeds the average case-weighted threshold of $44,255 (as indicated in Table 10 of the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant maintained that Dalbavancin meets the cost criterion.

In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public comments regarding whether Dalbavancin meets the cost criterion, particularly with regard to the assumptions and methodology used in the applicant's analysis.

Comment: The applicant submitted a public comment maintaining that Dalbavancin meets the cost criterion requirement because the cost of the target cases exceeds the average case-weighted cost threshold requirement prior to accounting for an inflation factor, or including the costs of Dalbavancin. The applicant further stated that it also included the “costs of Dalbavancin in its analysis to further Start Printed Page 49928demonstrate that Dalbavancin exceeds the established NTAP cost threshold.”

Response: We appreciate the applicant's response. We reviewed the applicant's analysis. We note that, while the applicant's analysis included the charges associated with Dalbavancin in their final cost estimate, the applicant did not remove the charges for the current therapy for treating acute bacterial skin and skin structure infections. We agree that the applicant's analysis using data from all 570,698 cases across 682 MS-DRGs showed that Dalbavancin exceeds the average case-weighted threshold prior to the inclusion of inflation factors and charges associated with Dalbavancin.

We note that it is unclear to what degree Dalbavancin would be used in each of these cases across the specific MS-DRGs, in part, because a procedure code has not been established to identify the technology's use in the claims data. Therefore, we reviewed the additional analyses using the claims data submitted by the applicant to substantiate that the technology meets the cost criterion. For example, in the data submitted by the applicant, the top 10 MS-DRGs ranked by case volume constitute roughly half of the cases with at least one ICD-9-CM code associated with acute bacterial skin infections. These 10 MS-DRGs include: MS-DRG 0603 (Cellulitics Without MCC); MS-DRG 0602 (Cellulitics With MCC); MS-DRG 0871 (Septicemia or Severe Sepsis Without MV 96+ Hours With MCC); MS-DRG 0863 (Postoperative & Post-Traumatic Infections Without MCC); MS-DRG 0872 (Septicemia or Severe Sepsis Without MV 96+ Hours Without MCC); MS-DRG 0300 (Peripheral Vascular Disorders With CC); MS-DRG 0292 (Heart Failure & Shock with CC); MS-DRG 0862 (Postoperative & Post-Traumatic Infections With MCC); MS-DRG 0857 (Postoperative or Post-Traumatic Infections With O.R. Procedure With CC); and MS-DRG 0853 (Infectious and Parasitic Diseases With O.R. Procedure With MCC). An average case-weighted threshold and standardized charges could be calculated using these MS-DRGs and compared to determine if the standardized charges exceed the average case-weighted threshold for these top 10 MS-DRGs.

In summary, we agree with the applicant that the technology meets the cost criterion.

With regard to substantial clinical improvement, as previously stated by the applicant, Dalbavancin is a new intravenous (IV) lipoglycopeptide antibiotic administered as a once-weekly 30 minute infusion via a peripheral line for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI. The applicant noted that, in the setting of continuing emergence of resistance among gram-positive pathogens worldwide, there is an increasing medical need for new antibacterial agents with enhanced gram-positive activity. The applicant cited the Infectious Diseases Society of America (IDSA),[3] stating the need for a multi-pronged approach to address the impact of antibiotic resistance. In addition, the applicant stated the FDA has also designated MRSA as a pathogen of special interest which allows an antibiotic effective against this organism to be designated as a “Qualified Infectious Disease Product,” recognizing the medical need for drugs to treat infections caused by this pathogen. The applicant believed that having a medicinal agent with clinical efficacy against gram-positive pathogens, including MRSA and CA-MRSA, a favorable benefit/risk ratio, and a favorable pharmacokinetics profile allowing convenient dosing in inpatients and outpatients with the potential for minimizing patient noncompliance would be a valuable addition to the antibacterial armamentarium for the treatment of ABSSSI. The applicant also noted that, when taking Dalbavancin, there is no need for oral step-down therapy.

The applicant suggested that Dalbavancin offers treatment advantages over other available options for therapy for skin infections as a result of the following:

  • Improved potency against key bacterial pathogens with the concentration of Dalbavancin required to kill key target pathogens lower relative to other antibiotics commonly used to treat such pathogens;
  • Retained activity against staphylococcus aureus resistant to other antibiotics;
  • Improved safety profile as Dalbavancin exhibits more favorable tolerability and safety than alternative approved antibacterial drugs in areas such as no evidence of thrombocytopenia as seen with linezolid and tedezolid, superior infusion related tolerability relative to other antibiotics, an absence or reduction of drug specific toxicities, and once a week dosing of IV Dalbavancin avoids pitfalls of patient noncompliance with an oral medication;
  • Lack of drug interactions due to metabolic profile which minimizes risk of unexpected adverse events when co-administered with other compounds as seen with linezolid and quinupristin/dalfopristin;
  • Decreased requirement for therapeutic interventions, specifically the need for an intravenous catheter as Dalbavancin is administered once a week, thus reducing catheter related infection as well;
  • Reduced time to patient defined recovery;
  • Reduced mortality rate as demonstrated in the combined phase of the Discover 1 and Discover 2 clinical trials;
  • The potential for avoidance of admission to the hospital as Dalbavancin allows the utilization of a weekly treatment regimen, thus potentially increasing the convenience of outpatient therapy for patients.

The applicant conducted three phase three randomized, controlled, double blinded clinical trials. The first was the pivotal VER001-9 study with a total of 873 patients with ABSSSIs, which compared the safety and efficacy of IV Dalbavancin with possible switch to oral placebo to IV Linezolid with possible switch to oral Linezolid. According to the applicant, the primary efficacy endpoint of clinical response at test of 14 days with a plus or minus of 2 days after completion of therapy demonstrated comparable clinical efficacy to linezolid and met the requirement of statistical demonstration of non-inferiority. In the clinically evaluable population, 88.9 percent of patients who received Dalbavancin compared to 91.2 percent of patients who received vancomycin/linezolid were clinical successes. The applicant also noted that Dalbavancin had an improved safety profile compared to Linezolid as the overall incidence and percentage of adverse events and deaths were lower in the Dalbavancin group, which was statistically significant.

The second and third clinical trials were the Discover 1 and Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI and compared IV Dalbavancin with IV placebo every 12 hours to match Vancomycin with possible switch to oral Vancomycin to IV Vancomycin with IV placebo to match IV Dalbavancin with possible switch to oral Linezolid. The applicant reported that in both studies, the primary efficacy outcome measure was clinical response in 48 to 72 hours post-study drug initiation and a secondary outcome measure was clinical status at the end of treatment visit (day 14) in the Intent to Treat (ITT) and clinically evaluable at End of Treatment populations. Clinical status was also Start Printed Page 49929determined at the short-term follow-up and long-term follow-up visits.

According to the applicant, the Discover 1 trial demonstrated that 83.3 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 81.8 percent of patients who received Vancomycin/Linezolid. The applicant also noted that Dalbavancin was non-inferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): −4.6 percent; 7.9 percent).

The applicant further noted that the Discover 2 trial showed similar results to the Discover 1 trial. Specifically, the trial demonstrated that 76.8 percent of patients in the ITT population who received Dalbavancin were responders at 48 to 72 hours after the start of therapy compared to 78.3 percent of patients who received Vancomycin/Linezolid. The applicant again noted that Dalbavancin was non-inferior to Vancomycin/Linezolid (Absolute Difference in Success Rates (95 percent confidence interval): −7.4 percent; 4.6 percent).

The applicant found Dalbavancin to be effective against MRSA and other gram-positive bacteria associated with ABSSSI. The applicant stated that 25 percent of patients in the study were treated without an inpatient admission.

We stated in the FY 2015 IPPS/LTCH PPS proposed rule that we are concerned with the details of the trial design and the primary efficacy endpoints used within those trials that were used to provide the clinical data supplied by the applicant. All of the trials were noninferiority studies, which prevent any determination as to substantial clinical improvement from the trial data. The primary efficacy endpoint was defined as having no increase in lesion size, and no fever 48 to 72 hours after drug initiation. The secondary endpoint was a >20 percent reduction in infection area at defined points in time. At neither endpoint is the patient oriented endpoint of resolution of infection increased. With these limitations in using efficacy data to establish substantial clinical improvement, the applicant suggested that the outpatient treatment, elimination of central lines and avoidance of hospitalization all may improve safety, avoid treatment-associated infections and improve patient satisfaction, and that these factors demonstrate substantial clinical improvement. While the factors mentioned may be true, the applicant did not present any evidence to support its assertions.

We invited public comments on whether Dalbavancin meets the substantial clinical improvement criterion, including public comments in response to our concern that the applicant has only provided efficacy data of noninferiority, and no data for the other suggested benefits.

Comment: Several commenters stated that Dalbavancin meets the substantial clinical improvement criteria and, therefore, CMS should approve the application for new technology add-on payments in FY 2015.

Response: We appreciate the commenters' input. We considered these public comments in our determination of whether this technology represents a substantial clinical improvement in the treatment options currently available to Medicare beneficiaries.

Comment: As previously summarized, some of the commenters stated that CMS has a precedent of accepting noninferiority studies to evaluate technologies under the substantial clinical improvement criterion. In particular, these commenters indicated that CMS approved new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350 through 53358) and KcentraTM in FY 2014 (78 FR 50575 through 50580), and both of these technologies submitted data from clinical trials demonstrating non-inferiority. One commenter stated that CMS' approval of Fidaxomicin for new technology add-on payments establishes a precedent for approval for a technology that shows noninferiority for a primary end point in addition to the acceptance of other clinically important secondary analysis. The commenters believed that precedent should be used to approve the application for new technology add-on payments for Dalbavancin. Another commenter stated that CMS' approval of KcentraTM for new technology add-on payments is an example of how a technology can use data from randomized controlled trials demonstrating noninferiority to show that technology represents a substantial clinical improvement.

The applicant also provided additional data from its clinical trials on the degree to which patients who were improving were permitted to stop their treatment after 10 days. The data showed that patients randomized to Dalbavancin were more likely to stop therapy at 10 days, and less likely to continue treatment through 14 days. The applicant stated that by day 10 most patients were being treated on an outpatient basis on oral therapy (either with an oral placebo or oral linezolid), and that treatment was discontinued at the patient's discretion. The applicant further stated that “the implication of this finding is that, from the patient's perspective, resolution of the underlying infection was occurring more rapidly for those randomized to Dalbavancin.”

Response: We refer readers to section II.I.4. of the preamble of this final rule for our detailed response to commenters' concerns regarding noninferiority trials.

We believe that our preliminary assessment (and final determination described later in this section) with regard to Dalbavancin is consistent with prior determinations made with regard to other approved technologies, including the two technologies identified by the commenters, Fidaxomicin and KcentraTM. With regard to Fidaxomicin, we note that we stated that we believed that it represented a treatment option with the potential to decrease utilization, reduce the recurrence of clostridium-difficile associated disease (CDAD), and improve quality of life. We also note that we considered the information the applicant provided with regard to the endpoints in its clinical trial, which as the commenters point out, were indeed to demonstrate that the effects of administering Fidaxomicin were non-inferior to administering Vancomycin. (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53357 through 53358).) Similarly, with regard to KcentraTM, we note that we stated that we believed that it provided a rapid beneficial resolution of the patient's blood clotting factor deficiency, decreases the risk of exposure to blood borne pathogens, and reduces the rate of transfusion-associated complications. These conclusions also were based on information the applicant provided with regard to the endpoints in its clinical trial. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50578 through 50579).) However, we note that in their clinical trials, these applicants were able to show a wider margin of difference between the treatment and control groups. The small margin of difference between the groups in this study leads us to conclude that any additional analysis of the trial data would be unlikely to demonstrate superiority of the treatment group.

With regard to the additional data the applicant provided regarding days of therapy, it is our understanding that most patients in both groups were on oral therapy by day 10 and that patients in both groups were allowed to discontinue their therapy at their discretion. The treatment group was more likely to discontinue use of Start Printed Page 49930Dalbavancin by day 10. We believe that it is difficult to assess the degree to which this implied that resolution of the underlying infection was occurring more rapidly, or would meet our definition of substantial clinical improvement. However, in light of the data from the applicant's non-inferiority trial, which did not show a wide margin of difference between the treatment and control groups, we do not believe that this is sufficient objective evidence to determine that Dalbavancin is a substantial clinical improvement in the treatment options available for Medicare beneficiaries.

Comment: Many commenters described how they believed that Dalbavancin's administration would improve patient safety and reduce adverse events, improve medication compliance, and reduce potential additional health care utilization.

With regard to patient safety and adverse events, many commenters asserted that using Dalbavancin does not require an indwelling IV access, unlike treatments using Vancomycin and, therefore, it is self-evident that the potential for catheter-associated infections is eliminated. Some of these commenters emphasized the importance of reducing catheter-associated infections, and noted that Dalbavancin could help achieve this goal.

In addition, with regard to patient safety and adverse events, the applicant provided references discussing the frequency of central venous catheter complications nationally. The applicant also provided data from their pivotal clinical trial showing the number and proportion of patients who died and those with adverse events, including drug-related adverse events and treatment-related serious adverse events. The applicant asserted that the data showed that fewer patients randomized to Dalbavancin died relative to the standard of care, showing that one patient (0.2 percent) treated with Dalbavancin died while 7 patients (1.1 percent) treated with Vancomycin/Linezolid died. Notably, while these data showed with a p value of 0.05 that 33 percent of patients treated with Dalbavancin had an adverse event compared to 38 percent of patients treated with Vancomycin or Linezolid, the data also showed that it was difficult to distinguish between the two groups in terms of drug-related adverse events and treatment-related serious adverse event. The data showed that 12 percent of patients treated with Dalbavancin experienced a drug-related adverse event compared to 14 percent of patients treated with Vancomycin/Linezolid with a p value of 0.45. The data also showed that 0.3 percent of patients treated with Dalbavancin experienced a treatment-related serious adverse event compared to 0.6 percent of patients treated with Vancomycin/Linezolid with a p value of 0.41. In addition to these data, the applicant also presented data collected in their clinical program that compared the infusion-related adverse events of patients receiving Dalbavancin to those of patients receiving commonly used alternative agents. These data showed that 2.2 percent of patients treated with Dalbavancin experienced an infusion-related adverse event, while 3.1 of comparator agent patients experienced an infusion-related adverse event.

One commenter, having reviewed the applicant's clinical trial data, concluded that while the safety profile to date of Dalbavancin appears similar to Vancomycin, the ultimate determination of safety must await broader clinical use. The commenter noted that future clinical trials are needed to define the safety profile of Dalbavancin.

Response: We appreciate commenters' input and the additional data submitted by the applicant.

We disagree with commenters that it is self-evident that the technology eliminates the potential for catheter-associated infections, particularly with respect to indwelling catheters. It is not clear if these patients already would have had indwelling catheters in place, whether for antibiotic administration or other purposes. Therefore, it is not evident that simply having the option of an antibiotic that does not require an indwelling catheter would eliminate the potential for catheter-associated infections. We agree with the commenters that the administration of Dalbavancin could reduce the potential for these infections in patients that otherwise would not have an indwelling catheter, but note that it was not possible to discern the degree to which this potential reduction occurs based on the data and comments provided.

As previously stated, we appreciate the applicant's submission of additional data from its trials regarding safety and adverse events. We agree with the applicant that Dalbavancin appears to be associated with fewer infusion-associated adverse events and patient deaths relative to the comparator group. We note that the applicant's data showed that drug-related and treatment-related serious adverse events appeared to be less frequent for patients treated with Dalbavancin relative to the comparator group, but that it was not clear to what degree the groups actually differed because the p values were in excess of 0.4. We also agree with the commenter that stated that it would appear that more clinical use and data should be gathered to more fully develop Dalbavancin's safety profile.

Comment: Many commenters stated that they believed that Dalbavancin would improve medication compliance and reduce potential additional health care utilization. Some commenters noted that patients diagnosed with acute bacterial skin and skin structure infections are often treated as inpatients. One commenter noted that the rate of these skin and skin structure infections are higher than they have ever historically been. One commenter described these hospitalizations as unnecessary. Another commenter stated that while Dalbavancin is not more efficacious than Vancomycin, it is easier to administer. The commenter concluded that Dalbavancin would make it possible to treat patients with complicated skin and skin structure infections that might otherwise require hospitalization on an outpatient basis without compromising efficacy and without the need for either laboratory monitoring or an indwelling intravenous catheter. Several commenters noted that less pharmacist monitoring time was required for the administration of Dalbavancin relative to Vancomycin. Several commenters stated that no additional data beyond the pivotal trials are needed to show that a single infusion involves fewer administrations and requires less health care resources than a course of therapy that lasts a week or more. One commenter described the importance of medication compliance in the context of treating a patient population that faces socioeconomic hardships. Specifically, the commenter noted that noncompliant patients are more likely to present to the emergency department with worsening infections and that Dalbavancin's dosing profile reduces the risk of noncompliance that is typically associated with oral therapy.

Response: We appreciate the commenters' input. We agree with the commenters that there is the possibility that Dalbavancin could make it possible for certain patients to be treated on an outpatient basis rather than as inpatients of a hospital. We further agree with commenters that there is the potential for treatment benefits for Medicare beneficiaries that would help avoid hospitalizations, including avoiding potential future iatrogenic events. However, we are concerned that neither the applicant, nor any of the commenters, provided specific information or data regarding the reduced resource use that they believe would occur. It is common that benefits Start Printed Page 49931from events that appear to be “self-evident,” as suggested by the commenters, prove to not be beneficial events when subjected to the rigors of a clinical trial.

After consideration of the public comments we received, we do not believe that Dalbavancin meets the substantial clinical improvement criterion to qualify the technology for new technology add-on payments under the IPPS in FY 2015. In particular, we do not believe there is sufficient objective clinical evidence to determine that Dalbavancin significantly improves clinical outcomes for Medicare beneficiaries in order for the technology to qualify for new technology add-on payments. While we recognize that Dalbavancin has met FDA standards for safety and effectiveness, the new technology add-on payment application process and approval requires a demonstration of a substantial clinical improvement, which is not inherent in the FDA's regulatory process. We recognize that the technology is the first drug designated as a Qualified Infectious Disease Product (QIDP) to receive FDA approval and was granted QIDP designation because it is an antibacterial or antifungal human drug intended to treat serious or life-threatening infections. We are equally committed to encouraging increased development and approval of new antibacterial drugs, providing physicians and patients with important new treatment options and will support this endeavor by providing payment for Dalbavancin through our prospective payment processes. However, in the case of this application, we do not believe that the technology meets the substantial clinical improvement criterion. Therefore, we are not approving new technology add-on payments for Dalbavancin for FY 2015.

b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.)

The Heli-FXTM EndoAnchor System is indicated for use in the treatment of patients whose endovascular grafts during treatment of aortic aneurysms have exhibited migrations or endoleaks, or in the treatment of patients who are at risk of such complications, and in whom augmented radial fixation and/or sealing is required to regain or maintain adequate aneurysm exclusion.

The Heli-FXTM EndoAnchor System is comprised of the following three components: (1) The EndoAnchor Implant; (2) the Heli-FXTM Applier; and (3) the Heli-FXTM Guide with Obturator. The Heli-FXTM EndoAnchor System is a mechanical fastening device that is designed to enhance the long-term durability and reduce the risk of repeat interventions in endovascular aneurysm repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By deploying a small helical screw (the Heli-FXTM EndoAnchors) to connect the endograft to the aorta, the Heli-FXTM System seeks to provide a permanent seal and fixation, similar to the stability achieved with an open surgical anastomosis.

The original Heli-FXTM EndoAnchor System, designed for treating abdominal aortic aneurysms (AAA), was cleared by the FDA through the “de novo” 510(k) process on November 21, 2011 (reference K102333). The Heli-FXTM Thoracic System, which allows the expanded use of the Heli-FXTM EndoAnchor System technology to the treatment of thoracic aortic aneurysms (TAA), was cleared by the FDA on August 14, 2012 (reference K121168).

The applicant submitted two applications for approval for new technology add-on payment in FY 2015: one for the treatment of AAAs and the other for the treatment of TAA repair. We note that, as stated in the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915), two applications are necessary in this instance, because patients 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 using the new technology under the second indication. Specifically, patients who have endovascular grafts implanted for the treatment of AAA map to MS-DRGs 237 (Major Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular Procedures without MCC), while patients who have endovascular grafts implanted for the treatment of TAA map to MS-DRGs 219 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other Major Cardiothoracic Procedure without Cardiac Catheter without CC/MCC). Each indication/application must also meet the cost criterion and the substantial clinical improvement criterion in order to be eligible fo