# Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Rates and Costs of Graduate Medical Education: Fiscal Year 2002 Rates; Provisions of the Balanced Budget Refinement Act of 1999; and Provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000

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URL: https://www.frixlaw.com/law-library/documents/fr%3A01-18868

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** August 1, 2001
- **Citation:** 66 FR 39828

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 410, 412, 413, 482, 485, and 486
[CMS 1131-F, CMS 1158-F, and CMS 1178-F]
RINs 0938-AK20; 0938-AK73; and 0938-AK74
Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Rates and Costs of Graduate Medical Education: Fiscal Year 2002 Rates; Provisions of the Balanced Budget Refinement Act of 1999; and Provisions of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000

AGENCY:

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

ACTION:

Final rules.

SUMMARY:

We are revising the Medicare hospital inpatient prospective payment systems for operating and capital costs to: implement applicable statutory requirements, including a number of provisions of the Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Benefits Improvement and Protection Act of 2000 (Public Law 106-554); and implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes apply to discharges occurring on or after October 1, 2001. We also set forth the rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the prospective payment systems.

We are making changes to the policies governing payments to hospitals for the direct costs of graduate medical education and critical access hospitals.

Lastly, we are responding to public comments received on the following two related interim final rules that we published in the
Federal Register
and finalizing those interim rules:

• An August 1, 2000 interim final rule with comment period (65 FR 47026, HCFA-1131-IFC) that implemented, or conformed the regulations to, certain statutory provisions relating to Medicare payments to hospitals for inpatient services that were contained in the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (Public Law 106-113), and that were effective during FY 2000. These provisions related to reclassification of hospitals from urban to rural status, reclassification of certain hospitals for purposes of payment during fiscal year 2000, critical access hospitals, payments to hospitals excluded from the prospective payment system, and payments for indirect and direct graduate medical education costs.

• A June 13, 2001 interim final rule with comment period (66 FR 32172, HCFA-1178-IFC) that implemented, or conformed the regulations to, certain statutory provisions relating to Medicare payments to hospitals for inpatient services that were contained in Public Law 106-554, and that were effective prior to passage of Public Law 106-554 on December 21, 2000; on April 1, 2001; or on July 1, 2001. Many of the provisions of Public Law 106-554 modified changes to the Social Security Act made by Public Law 106-113 or the Balanced Budget Act of 1997 (Public Law 105-33), or both.

EFFECTIVE DATE:

The provisions of this final rule are effective October 1, 2001. This rule is a major rule as defined in 5 U.S.C. 804(2). Pursuant to 5 U.S.C. 801(a)(1)(A), we are submitting a report to Congress on this rule on August 1, 2001.

FOR FURTHER INFORMATION CONTACT:

Stephen Phillips, (410) 786-4548, Operating Prospective Payment, Diagnosis-Related Groups (DRGs), Wage Index, Hospital Geographic Reclassifications, Sole Community Hospitals, Disproportionate Share Hospitals, and Medicare-Dependent, Small Rural Hospitals Issues; Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded Hospitals, Graduate Medical Education and Critical Access Hospitals Issues.

SUPPLEMENTARY INFORMATION:

Availability of Copies and Electronic Access

Copies:
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Federal Register
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I. Background

A. Summary

Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system. Under these prospective payment systems, 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). Each DRG has a payment weight assigned to it, based on the average resources used to treat Medicare patients in that DRG.

Under section 1886(d)(1)(B) of the Act in effect without consideration of the amendments made by Public Law 105-33, Public Law 106-113, and Public Law 106-554, certain specialty hospitals are excluded from the hospital inpatient prospective payment system: psychiatric hospitals and units, rehabilitation hospitals and units, children's hospitals, long-term care hospitals, and cancer hospitals. For these hospitals and units, Medicare payment for operating costs is based on reasonable costs subject to a hospital-specific annual limit, until the payment provisions of Public Laws 105-33, 106-113, and 106-554 that are applicable to three classes of these hospitals are implemented, as discussed below.

Various sections of Public Laws 105-33, 106-113, and 106-554 provide for the transition of rehabilitation hospitals and units, psychiatric hospitals and units, and long-term care hospitals from being paid on an excluded hospital basis to being paid on an individual prospective payment system basis. These provisions are as follows:

• Rehabilitation Hospitals and Units. Section 1886(j) of the Act, as added by section 4421 of Public Law 105-33 and amended by section 125 of Public Law 106-113 and section 305 of Public Law 106-554, authorizes the implementation of a prospective payment system for inpatient hospital services furnished by rehabilitation hospitals and units. Section 4421 of Public Law 105-33 amended the Act by adding section 1886(j). Section 1886(j) of the Act provides for a fully implemented prospective payment system for inpatient rehabilitation hospitals and rehabilitation units, effective for cost reporting periods beginning during or after October 2002, with payment provisions during a transitional period based on target amounts specified in section 1886(b) of the Act. Section 125 of Public Law 106-113 amended section 1886(j) of the Act to require the Secretary to use a discharge as the payment unit for inpatient rehabilitation services under the prospective payment system and to establish classes of patient discharges by functional-related groups. Section 305 of Public Law 106-554 further amended section 1886(j) of the Act to allow hospitals to elect to be paid the full Federal prospective payment rather than the transitional period payments specified in the Act. A final rule implementing the prospective payment system for inpatient rehabilitation hospitals will be published in the
Federal Register
shortly.

• Psychiatric Hospitals and Units. Sections 124(a) and (c) of Public Law 106-113 provide for the development of a per diem prospective payment system for payment for inpatient hospital services of psychiatric hospitals and units under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. This system must include an adequate patient classification system that reflects the differences in patient resource use and costs among these hospitals and must maintain budget neutrality. We are in the process of developing a proposed rule, to be followed by a final rule, to implement the prospective payment system for psychiatric hospitals and units, effective for October 1, 2002.

• Long-Term Care Hospitals. Sections 123(a) and (c) of Public Law 106-113 provide for the development of a per discharge prospective payment system for payment for inpatient hospital services furnished by long-term care hospitals under the Medicare program, effective for cost reporting periods beginning on or after October 1, 2002. Section 307(b)(1) of Public Law 106-554 provides that payments under the long-term care prospective payment system will be made on a prospective payment basis rather than a cost basis. The long-term care hospital prospective payment system must include a patient classification system that reflects the differences in patient resource use and costs, and must maintain budget neutrality. We are planning to develop a proposed rule, to be followed by a final rule, to implement the prospective payment system for long-term care hospitals, effective for October 1, 2002. Section 307 of Public Law 106-554 provides that if the Secretary is unable to develop a prospective payment system for long-term care hospitals that can be implemented by October 1, 2002, the Secretary must implement a prospective payment system that bases payment under the system using the existing acute hospital DRGs, modified where feasible to account for resource use of long-term care hospital patients using the most recently available hospital discharge data for long-term care services.

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

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 regulations governing the acute care hospital inpatient prospective payment system are located in 42 CFR part 412. The regulations governing excluded hospitals and hospital units are located in Parts 412 and 413. The regulations governing GME payments are located in Part 413. The regulations governing CAHs are located in Parts 413 and 485.

This final rule implements amendments enacted by Public Law 106-554 relating to updates to FY 2002 payments for hospital inpatient services, hospitals' geographic reclassifications and wage indexes, GME costs, the payment adjustment for disproportionate share hospitals (DSHs), the indirect medical education (IME) adjustment for teaching hospitals, and CAHs. It also implements other changes affecting DRG classifications and relative weights, annual updates to the data used to calculate the wage index, sole community hospitals (SCHs), payments under the inpatient capital prospective payment system, and policies related to hospitals and units excluded from the prospective payment system. These changes are addressed in sections II., III., IV., and VI. of this preamble.

Section 533 of Public Law 106-554 requires the Secretary to establish a mechanism to recognize the costs of new medical services and technologies by October 1, 2001. We proposed a mechanism in the May 4, 2001 proposed rule. We received 61 comments on our proposed criteria to qualify for this special payment and on the proposed mechanism to pay for qualifying new technologies. Due to this large number of comments, we will publish a separate final rule to respond to comments received on our proposal, and to establish a mechanism, by October 1, 2001.

Although we intend to establish the mechanism by October 1, 2001, we will not make additional payments under the mechanism for cases involving new technology during FY 2002 because it is not feasible. This is due to the timing of the enactment of Public Law 106-554 on December 21, 2000, the requirement that we establish the mechanism through notice and an opportunity for public comment, and the requirement that the payments be implemented in a budget neutral manner. That is, it was not feasible to establish the criteria by which new technologies would qualify through a proposed rule with opportunity for public comment as part of the May 4, 2001 proposed rule, finalize those criteria in response to public comments, allow technologies to qualify under those criteria, and implement payments for any qualified technologies in a budget neutral manner. This is because making the special payments in a budget neutral manner requires an adjustment to the standardized amounts (which must be published in final by August 1 each year).

Representatives of new technologies seeking to qualify for special payments under this provision for FY 2003 should proceed with their application by contacting us at the telephone numbers listed in the “For Further Information Contact” section of this preamble. As indicated previously, a final rule containing the specific qualifying criteria and payment mechanism will be published shortly.

This final rule also responds to public comments on, and finalizes implementation of, provisions of Public Law 106-113 that relate to Medicare payments to hospitals for FY 2001 that were addressed in a separate interim final rule with comment period (HCFA-1131-IFC), published in the
Federal Register
on August 1, 2000 (65 FR 47026).

Lastly, this final rule responds to public comments on, and finalizes implementation of, other provisions of Public Law 106-554 that relate to Medicare payments to hospitals effective prior to October 1, 2001 (that is, for FY 2001 or for the period between April l, 2001 and September 30, 2001) that were addressed in a separate interim final rule with comment period (HCFA-1178-IFC), published in the
Federal Register
on June 13, 2001 (66 FR 32172).

In summary, this final rule responds to public comments on, and finalizes, three documents published in the
Federal Register:
The August 1, 2000 interim final rule with comment period, the May 4, 2001 proposed rule (HCFA-1158-P), and the June 13, 2001 interim final rule with comment period, as discussed below.

The charts below specify the effective dates of the various provisions of Public Law 106-113 and Public Law 106-554.

Effective Dates of the Provisions of Public Law 106-113 Included in This Final Rule

Section No.
Title
Effective date

111
Indirect Medical Education Adjustment Formula
10/01/1999.

121
Wage Adjustment to Caps on Target Amounts for Excluded Hospitals and Units
10/01/1999.

152(a)
Reclassified Hospitals in Certain Designated Counties
10/01/1999.

153
Calculation of Wage Index for Hattiesburg, Mississippi
10/01/1999.

154
Calculation of Wage Index for Allentown-Bethlehem-Easton, Pennsylvania MSA
10/01/1999.

312
Initial Residency Period for Child Neurology Residency Programs
7/01/2000, for residency programs that began before, on, or after 11/29/1999.

401(a)
Reclassification of Certain Urban Hospitals to Rural
01/01/2000.

401(b)(2)
Application of Reclassifications under Section 401(a) to Critical Access Hospitals
01/01/2000.

403(a)
Length of Stay Restrictions on Inpatient Stays in Critical Access Hospitals
11/29/1999.

403(b)
Qualifications of For-Profit Hospitals for Critical Access Hospital Status
11/29/1999.

403(c)
Qualification of Closed Hospitals or Hospitals Downsized to Health Clinics for Critical Access Hospital Designation
11/29/1999 for hospitals that closed after 11/29/1989; 11/29/1999 for hospitals that downsized to health clinics.

403(e)
Elimination of Medicare Part B Deductible and Coinsurance for Clinical Diagnostic Laboratory Tests Furnished in Critical Access Hospitals
11/29/1999.

403(f)
Provisions on Swing-Beds in Critical Access Hospitals
11/29/1999.

404
Extension of Medicare-Dependent, Small Rural Hospital Program
10/01/2002 through 9/30/2006.

407(a)
Residents on Approved Leaves of Absence—GME and IME
11/29/1999.

407(b)
Expansion of Number of Unweighted Residents in Rural Hospitals—GME and IME
04/01/2000.

407(c)
Urban Hospitals with Rural Training Tracks or Integrated Rural Tracks—GME and IME
04/01/2000.

407(d)
Residents Training at Certain Veterans Hospitals—GME and IME
10/01/1997

408(a)
Swing Beds for Skilled Nursing Facility Level of Care Patients
07/01/1998 through the end of the facility's third cost reporting period after this date.

408(b)
Elimination of Constraints on Length of Stay in Swing Beds in Rural Hospitals
07/01/1998 through the end of the facility's third cost reporting period after this date.

541
Additional Payments to Hospitals for Approved Nursing and Allied Health Education to Reflect Utilization of Medicare+Choice Enrollees
01/01/2000.

Effective Dates of the Provisions of Public Law 106-113 Included in This Final Rule

Section No.
Title
Effective date

201
Clarification of No Beneficiary Cost-Sharing for Clinical Diagnostic Laboratory Tests Furnished by Critical Access Hospitals
11/29/1999.

202
Assistance with Fee Schedule Payment for Professional Services under All-Inclusive Rate
07/01/2001.

211
Threshold for Disproportionate Share Hospitals
04/01/2001.

212
Option to Base Eligibility for Medicare-Dependent, Small Rural Hospital Program on Discharges during Two of the Three Most Recently Audited Cost Reporting Periods
04/01/2001.

213
Extension of Option to use Rebased Target Amounts to All Sole Community Hospitals
10/01/2000.

301
Revision of Acute Care Hospital Payment Update for 2001
04/01/2001.

302
Additional Modification in Transition for Indirect Medical Education Adjustment
04/01/2001.

303
Decrease in Reductions for Disproportionate Share Hospitals
04/01/2001.

304(a)
Three-Year Wage Index Reclassifications; Use of 3 Years of Wage Data for Evaluating Reclassifications
10/01/2001.

304(b)
Statewide Wage Index for Reclassifications
10/01/2001 for reclassification beginning 10/01/2002.

304(c)
Collection of Occupational Case Mix Data
09/30/2003 for application 10/1/2004.

306
Payment for Inpatient Services of Psychiatric Hospitals
10/01/2000.

307
Payment for Inpatient Services of Long-Term Care Hospitals
10/01/2000.

511
Increase in Floor for Payments for Direct Costs of Graduate Medical Education
10/01/2001.

512
Change in Distribution Formula for Medicare+Choice-Related Nursing and Allied Health Education Costs
01/01/2001.

541
Increase in Reimbursement for Bad Debt
10/01/2000.

B. Summary of the Provisions of the May 4, 2001 Proposed Rule

On May 4, 2001, we published a proposed rule in the
Federal Register
(66 FR 22646) that set forth proposed changes to the Medicare hospital inpatient prospective payment system for operating and capital-related costs for FY 2002. We set forth proposed changes to the amounts and factors used in determining the rates for these costs. In addition, we proposed changes relating to payments for GME costs and payments to excluded hospitals and units, SCHs, and CAHs.

The following is a summary of the major changes that we proposed and the issues we addressed in the May 4, 2001 proposed rule:

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

As required by section 1886(d)(4)(C) of the Act, we proposed annual adjustments to the DRG classifications and relative weights. Based on analyses of Medicare claims data, we proposed to establish a number of new DRGs and make changes to the designation of diagnosis and procedure codes under other existing DRGs for FY 2002.

We also addressed the provisions of section 533 of Public Law 106-544 regarding development of a mechanism for increased payment for new medical services and technologies and the required report to Congress on expeditiously introducing new medical services and technology into the DRGs.

2. Changes to the Hospital Wage Index

We proposed to use wage data taken from hospitals' FY 1998 cost reports in the calculation of the FY 2002 wage index. We also proposed to implement the third year of the phaseout of wage costs related to GME or Part A certified registered nurse anesthetists (CRNA) from the FY 2002 wage index calculation.

We proposed several changes to the wage index methodology that would apply in calculating the FY 2003 wage index, and addressed new procedures for requesting wage data corrections and a modification of the process and timetable for updating the wage index.

• We also discussed the collection of hospital occupational mix data as required by section 304(c) of Public Law 106-554.

• In addition, we discussed revisions to the wage index based on hospital redesignations and reclassifications for purposes of the wage index, including changes to reflect the provisions of sections 304(a) and (b) of Public Law 106-554 relating to 3-year wage index reclassifications by the MGCRB, the use of 3 years of wage data for evaluating reclassification requests for FYs 2003 and later, and the application of a statewide wage index for reclassifications beginning in FY 2003.

3. Other Decisions and Changes to the Prospective Payment System for Inpatient Operating and Graduate Medical Education Costs

We discussed several provisions of the regulations in 42 CFR parts 412 and 413 and set forth certain proposed changes concerning SCHs; rural referral centers; changes relating to the IME adjustment as a result of section 302 of Public Law 106-554; changes relating to the DSH adjustment as a result of section 303 of Public Law 106-554; the establishment of policies relating to the 3-year application of wage index reclassifications by the MGCRB, the use of 3 years of wage data in evaluating reclassification requests to the MGCRB for FYs 2003 and later, and the use of a statewide wage index for reclassifications beginning in FY 2003, as required by sections 304(a) and (b) of Public Law 106-554.

We discussed proposed requirements for qualifying for additional payments for new medical services and technology, as required by section 533(b) of Public Law 106-554.

Lastly, we proposed changes relating to payment for the direct costs of GME, including changes as a result of section 511 of Public Law 106-554.

4. Prospective Payment System for Capital-Related Costs

We proposed payment requirements for capital-related costs, including the special exceptions payment, beginning October 1, 2001.

5. Proposed Changes for Hospitals and Hospital Units Excluded from the Prospective Payment Systems

We discussed the following proposals concerning excluded hospitals and hospital units and CAHs:

• Limits on and adjustments to the proposed target amounts for FY 2002.

• Revision of the methodology for wage neutralizing the hospital-specific target amounts using preclassified wage data.

• Updated caps for new excluded hospitals and units as well as changes

in the effective date of classifications of excluded hospitals and units.

• The prospective payment system for inpatient rehabilitation hospitals and units.

• Payments to CAHs, including exclusion from the payment window requirements; the availability of CRNA pass-through payments; payment for emergency room on-call physicians; treatment of ambulance services; the use of certain qualified practitioners for preanesthesia and postanesthesia evaluations; and clarification of location requirements for CAHs.

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

In the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the FY 2002 prospective payment rates for operating costs and capital-related costs. We also proposed threshold amounts for outlier cases. In addition, we proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2002 for hospitals and hospital units excluded from the prospective payment system.

7. Impact Analysis

In Appendix A, we set forth an analysis of the impact of the proposed changes on affected entities.

8. Capital Acquisition Model

In Appendix B of the proposed rule, we set forth the technical appendix on the proposed FY 2002 capital cost model.

9. Report to Congress on the Update Factor for Hospitals under the Prospective Payment System and Hospitals and Units Excluded From the Prospective Payment System

In Appendix C of the proposed rule, as required by section 1886(e)(3) of the Act, we set forth our report to Congress on our initial estimate of a recommended update factor for FY 2002 for payments to hospitals included in the prospective payment systems, and hospitals excluded from the prospective payment systems.

10. Recommendation of Update Factor for Hospital Inpatient Operating Costs

In Appendix D, as required by sections 1886(e)(4) and (e)(5) of the Act, we included our recommendation of the appropriate percentage change for FY 2002 for the following:

• Large urban area and other area average standardized amounts (and hospital-specific rates applicable to SCHs and Medicare-dependent, small rural hospitals) for hospital inpatient services paid for under the prospective payment system for operating costs.

• Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by hospitals and hospital units excluded from the prospective payment system.

11. Discussion of Medicare Payment Advisory Commission Recommendations

In the proposed rule, we discussed recommendations by the Medicare Payment Advisory Commission (MedPAC) concerning hospital inpatient payment policies and presented our responses to those recommendations. Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, not later than March 1 of each year, that reviews and makes recommendations on Medicare payment policies. We respond to those recommendations in section VII. of this preamble. For further information relating specifically to the MedPAC March 1 report or to obtain a copy of the report, contact MedPAC at (202) 653-7220 or visit MedPAC's website at:
www.medpac.gov.

12. Public Comments Received in Response to the May 4, 2001 Proposed Rule

We received a total of 232 timely items of correspondence containing multiple comments on the proposed rule. Major issues addressed by the commenters included: additional payments for new medical services and technologies, geographic reclassifications of hospitals for purposes of the wage index, DRG reclassifications, payments for GME, and payments to CAHs.

Summaries of the public comments received and our responses to those comments are set forth below under the appropriate heading, with the exception of comments and responses pertaining to specific payments for new technologies under section 533 of Public Law 106-554. As described previously, this provision will be implemented through a separate final rule.

C. Summary of the Provisions of the August 1, 2000 Interim Final Rule with Comment Period

On August 1, 2000, we published in the
Federal Register
(65 FR 47026) an interim final rule with comment period that implemented, or conformed the regulations to, certain statutory provisions relating to Medicare payments to hospitals for inpatient services that were contained in Public Law 106-113, that were effective for FY 2000. The following is a summary of the policy changes we implemented as a result of Public Law 106-113:

1. Changes Relating to Payments for Operating Costs Under the Hospital Inpatient Prospective Payment System

•
Reclassification of Certain Counties.
We implemented the provisions of section 152(a) of Public Law 106-113 that reclassified hospitals in certain designated counties for purposes of making payments to affected hospitals under section 1886(d) of the Act for FY 2000. The counties affected by this provision are identified under section III. of this preamble.

•
Wage Index.
We implemented sections 153 and 154 of Public Law 106-113 that contain provisions affecting the wage indexes of specific Metropolitan Statistical Areas (MSA). Under section 153, the Hattiesburg, Mississippi FY 2000 wage index was calculated including wage data from Wesley Medical Center. Under section 154, the Allentown-Bethlehem-Easton, Pennsylvania MSA FY 2000 wage index was calculated including wage data for Lehigh Valley Hospital.

•
Reclassification of Certain Urban Hospitals as Rural Hospitals.
We implemented section 401 of Public Law 106-113 which directed the Secretary to treat certain hospitals located in urban areas as being located in rural areas of their State if the hospital meets statutory criteria and files an application with HCFA. This provision was effective on January 1, 2000.

•
IME Adjustment.
We implemented section 111 of Public Law 106-113 which provided for an additional payment to teaching hospitals equal to the additional amount the hospitals would have been paid for FY 2000 if the IME adjustment formula (which reflects the higher indirect operating costs associated with GME) for FY 2000 had remained the same as for FY 1999.

•
Extension of the MDH Provision.
We implemented section 404 of Public Law 106-113 which extended the MDH program and its current payment methodology for an additional 5 years, from FY 2002 through FY 2006.

2. Additional Changes Relating to Direct GME and IME

•
Initial Residency Period for Child Neurology Residency Programs.
We implemented section 312 of Public Law 106-113 which provides that in determining the number of residents for purposes of GME and IME payments, the period of board eligibility and the initial residency period for child neurology is the period of board

eligibility for pediatrics plus 2 years. This provision is effective on or after July 1, 2000, for residency programs that began before, on, or after November 29, 1999.

•
Residents on Approved Leaves of Absence.
We implemented section 407(a) of Public Law 106-113 which provides that, for purposes of determining a hospital's full-time equivalent (FTE) cap for direct GME payments and the IME adjustment, a hospital may count an individual to the extent that the individual would have been counted as a primary care resident for purposes of the FTE cap but for the fact that the individual was on maternity or disability leave or a similar approved leave of absence. The provision relating to direct GME was effective with cost reporting periods beginning on or after November 29, 1999. The provision relating to the IME adjustment applied to discharges occurring in cost reporting periods beginning on or after November 29, 1999.

•
Expansion of Number of Unweighted Residents in Rural Hospitals.
We implemented section 407(b) of Public Law 106-113 which provides that a rural hospital's resident FTE count for direct GME and IME may not exceed 130 percent of the number of unweighted residents that the rural hospital counted in its most recent cost reporting period ending on or before December 31, 1996. The provision relating to direct GME applied to cost reporting periods beginning on or after April 1, 2000. The provision relating to the IME adjustment applied to discharges occurring on or after April 1, 2000.

•
Urban Hospitals with Rural Training Tracks or Integrated Rural Tracks.
We implemented section 407(c) of Public Law 106-113 which allows an urban hospital that establishes separately accredited approved medical residency training programs (or rural training tracks) in a rural area or has an accredited training program with an integrated rural track to receive an FTE cap adjustment for purposes of direct GME and IME. The provision was effective with cost reporting periods beginning on or after April 1, 2000, for direct GME, and with discharges occurring on or after April 1, 2000, for IME.

•
Residents Training at Certain Veterans Affairs Hospitals.
We implemented section 407(d) of Public Law 106-113 which provides that a non-Veterans Affairs (VA) hospital may receive a temporary adjustment to its FTE cap to reflect residents who were training at a VA hospital and were transferred on or after January 1, 1997, and before July 31, 1998, to the non-VA hospital because the program at the VA hospital would lose its accreditation by the Accreditation Council on Graduate Medical Education if the residents continued to train at the facility. This provision applies as if it was included in the enactment of Public Law 105-33, that is, for direct GME, with cost reporting periods beginning on or after October 1, 1997, and for IME, for discharges occurring on or after October 1, 1997. If a hospital is owed payments as a result of this provision, payments must be made immediately.

3. Payments for Nursing and Allied Health Education: Utilization of Medicare+Choice Enrollees

We implemented section 541 of Public Law 106-113 which provides an additional payment to hospitals that receive payments under section 1861(v) of the Act for approved nursing and allied health education programs associated with services to Medicare+Choice enrollees. This provision is effective for portions of cost reporting periods occurring on or after January 1, 2000.

4. Changes Relating to Hospitals and Hospital Units Excluded From the Prospective Payment System

We implemented section 121 of Public Law 106-113 which amended section 1886(b)(3)(H) of the Act to direct the Secretary to provide for an appropriate wage adjustment to the caps on the target amounts for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals for cost reporting periods beginning on or after October 1, 1999.

5. Changes Relating to CAHs

We implemented—

• Section 401(b) of Public Law 106-113, which contained conforming changes to incorporate the reclassifications made by section 401(a) of Public Law 106-113 to the CAH statute (section 1820(c)(2)(B)(i) of the Act). This provision is effective beginning on January 1, 2000.

• Section 403(a) of Public Law 106-113, which deleted the 96-hour length of stay restriction on inpatient care in a CAH and authorized a period of stay that does not exceed, on an annual, average basis, 96 hours per patient. This provision is effective beginning on November 29, 1999.

• Section 403(b) of Public Law 106-113, which allows for-profit hospitals to qualify for CAH status. This provision is effective beginning on November 29, 1999.

• Section 403(c) of Public Law 106-113, which allows hospitals that have closed within 10 years prior to November 29, 1999, or hospitals that downsized to a health clinic or health center, to be designated as CAHs if they satisfy the established criteria for designation, other than the requirement for existing hospital status.

• Section 403(e) of Public Law 106-113, which eliminated the Medicare Part B deductible and coinsurance for clinical diagnostic laboratory tests furnished by a CAH on an outpatient basis. This provision is effective with respect to services furnished on or after November 29, 1999.

• Section 403(f) of Public Law 106-113, entitled “Participation in Swing Bed Program,” which amended sections 1883(a)(1) and (c) of the Act.

6. Changes Relating Hospital to Swing Bed Program

We implemented section 408(a) of Public Law 106-113 which eliminated the requirement for a hospital to obtain a certification of need to use acute care beds as swing beds for skilled nursing facility (SNF) level of care patients; and section 408(b) of Public Law 106-113 which eliminates constraints on the length of stay in swing beds for rural hospitals with 50 to 100 beds. These provisions were effective on the first day after the expiration of the transition period for prospective payments for covered SNF services under the Medicare program (that is, at the end of the transition period for the SNF prospective payments system that began with the facility's first cost reporting period beginning on or after July 1, 1998 and extend through the end of the facility's third cost reporting period after this date).

We received a total of eight timely items of correspondence containing multiple comments on the August 1, 2000 interim final rule with comment period. Summaries of the public comments received and our responses to those comments are set forth below under the appropriate section headings of this final rule.

D. Summary of the Provisions of the June 13, 2001 Interim Final Rule With Comment Period

On June 13, 2001, we published an interim final rule with comment period in the
Federal Register
(66 FR 32172) that implemented changes to the Act affecting Medicare payments to hospitals for inpatient services that were made by Public Law 106-554. Some of these changes were effective before the December 21, 2000 date of enactment of Public Law 106-554, on April 1, 2001,

or on July 1, 2001. The changes, on which we requested public comment, are as follows:

1. Changes Relating to Payments for Operating Costs Under the Hospital Inpatient Prospective Payment System

•
Treatment of Rural and Small Urban Disproportionate Share Hospitals (DSHs)
. We implemented the provisions of section 211 of Public Law 106-554 which lowered thresholds by which certain classes of hospitals qualify for DSH payments, with respect to discharges occurring on or after April 1, 2001.

•
Decrease in Reductions for DSH Payments
. We implemented section 303 of Public Law 106-554 which modified the previous reduction in the DSH payment to be 2 percent in FY 2001 and 3 percent in FY 2002.

•
Medicare-Dependent, Small Rural Hospitals (MDHs)
. We implemented section 212 of Public Law 106-554 which provided an option to base eligibility for MDH status on discharges during two of the three most recently audited cost reporting periods, effective with cost reporting periods beginning on or after April 1, 2001.

•
Revision of Prospective Payment System Standardized Amounts.
We implemented section 301 of Public Law 106-554 which revised the update factor increase for the inpatient prospective payment rates for FY 2001.

•
Indirect Medical Education Adjustment (IME).
We implemented section 302 of Public Law 106-554 which provided that for the purposes of making the IME payment for discharges occurring on or after April 1, 2001 and before October 1, 2001, the adjustment will be determined as if the adjustment equaled a 6.75 percent increase in payment for every 10 percent increase in the resident-to-bed ratio, rather than a 6.25 percent increase.

•
SCHs
. We implemented section 213 of Public Law 106-554 which further extended the 1996 rebasing option, for hospital cost reporting periods beginning October 1, 2000, to all SCHs and provides that this extension is effective as if it had been included in section 405 of Public Law 106-113.

2. Payments for Nursing and Allied Health Education: Utilization of Medicare+Choice Enrollees

We implemented section 512 of Public Law 106-554 which revised the formula for determining the additional payment amounts to hospitals for Medicare+Choice nursing and allied health education costs to specifically account for each hospital's Medicare+Choice utilization.

3. Changes Relating to Payments for Capital-Related Costs Under the Hospital Inpatient Prospective Payment System

As a result of implementing section 301 of Public Law 106-554, which provided increased inpatient operating payment rates, we recalculated the unified outlier threshold for inpatient operating and inpatient capital-related costs. Therefore, we revised the capital outlier offset which also required us to revise the capital-related rates.

4. Changes Relating to Hospitals and Hospital Units Excluded From the Prospective Payment System

•
Increase in the Incentive Payment for Excluded Psychiatric Hospitals and Units
. We implemented section 306 of Public Law 106-554, which provided that for cost reporting periods beginning on or after October 1, 2000, for psychiatric hospitals and units, if the allowable net inpatient operating costs do not exceed the hospital's ceiling, payment is the lower of: (1) net inpatient operating costs plus 15 percent of the difference between inpatient operating costs and the ceiling; or, (2) net inpatient costs plus 3 percent of the ceiling.

•
Increase in the Wage Adjusted 75th Percentile Cap on the Target Amounts for Long-Term Care Hospitals
. We implemented section 307(a) of Public Law 106-554, which provided a 2-percent increase to the wage-adjusted 75th percentile cap on the target amount for long-term care hospitals, effective for cost reporting periods beginning during FY 2001.

•
Increase in the Target Amounts for Long-Term Care Hospitals
. We implemented section 307(a) Public Law 106-554, which provided a 25 percent increase to the target amounts for long-term care hospitals for cost reporting periods beginning in FY 2001, up to the cap on target amounts.

5. Changes Relating to CAHs

•
Elimination of Coinsurance for Clinical Diagnostic Laboratory Tests Furnished by a CAH
. We implemented section 201(a) of Public Law 106-554, which amended section 1834(g) of the Act to state that there will be no collection of coinsurance, deductible, copayments, or any other type of cost sharing from Medicare beneficiaries with respect to outpatient clinical diagnostic laboratory services furnished as outpatient CAH services and that those services will be paid for on a reasonable cost basis.

•
Assistance with Fee Schedule Payment for Professional Services under All-Inclusive Rate
. We implemented section 202 of Public Law 106-554, which amended section 1834(g)(2)(B) of the Act to provide that when a CAH elects to be paid for Medicare outpatient services under the reasonable costs for facility services plus fee schedule amounts for professional services method, Medicare will pay 115 percent of the amount it otherwise pays for the professional services.

•
Condition of Participation with Hospital Requirements at the Time of Application for CAH Designation (§ 485.612)
. We implemented a conforming change to correct § 485.612 to reflect that certain entities are not required to have a provider agreement prior to CAH designation.

6. Other Inpatient Costs

•
Increase in Reimbursement for Bad Debts.
We implemented section 541 of Public Law 106-554 which provided a 30 percent decrease of allowable hospital bad debt reimbursement for cost reporting periods beginning during FY 2001 and all subsequent fiscal years. This section modified section 4451 of Public Law 105-33 that reduced the total allowable bad debt reimbursement for hospitals by 45 percent.

We received a total of 13 timely pieces of correspondence containing comments on the June 13, 2001 interim final rule with comment period. A summary of these public comments and our responses to them are set forth under sections IV. and VI. of this final rule.

II. Changes to DRG Classifications and Relative Weights

A. Background

Under the prospective payment system, we pay for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG relative to the average resources used to treat cases in all DRGS.

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

in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Changes to the DRG classification system and the recalibration of the DRG weights for discharges occurring on or after October 1, 2001 are discussed below.

B. DRG Reclassification

1. General

Cases are classified into DRGs for payment under the prospective payment system based on the principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay, as well as age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM). Medicare fiscal intermediaries enter the information into their claims processing systems and subject it to a series of automated screens called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before classification into a DRG.

After screening through the MCE and any further development of the claims, cases are classified into the appropriate DRG by the Medicare GROUPER software program. The GROUPER program was developed as a means of classifying each case into a DRG on the basis of the diagnosis and procedure codes and demographic information (that is, sex, age, and discharge status). It is used both to classify past cases in order to measure relative hospital resource consumption to establish the DRG weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible DRG classification changes and to recalibrate the DRG weights.

In version 18 of the GROUPER (used for FY 2001), cases are assigned to one of 499 DRGs (including one DRG (469) for a diagnosis that is invalid as a discharge diagnosis and one DRG (470) for ungroupable diagnoses) in 25 major diagnostic categories (MDCs). Most MDCs are based on a particular organ system of the body. For example, MDC 6 is Diseases and Disorders of the Digestive System. However, some MDCs are not constructed on this basis because they involve multiple organ systems (for example, MDC 22 (Burns)).

In general, cases are assigned to an MDC, based on the principal diagnosis, before assignment to a DRG. However, there are six DRGs to which cases are directly assigned on the basis of procedure codes. These are the DRGs for heart, liver, bone marrow, and lung transplants (DRGs 103, 480, 481, and 495, respectively) and the two DRGs for tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs before classification to an MDC.

Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are based on a hierarchy that orders individual procedures or groups of procedures by resource intensity. Medical DRGs generally are differentiated on the basis of diagnosis and age. Some surgical and medical DRGs are further differentiated based on the presence or absence of complications or comorbidities (CC).

Generally, the GROUPER does not consider other procedures. That is, nonsurgical procedures or minor surgical procedures generally not performed in an operating room are not listed as operating room (OR) procedures in the GROUPER decision tables. However, there are a few non-OR procedures that do affect DRG assignment for certain principal diagnoses, such as extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones.

We proposed numerous changes to the DRG classification system for FY 2002. The proposed changes, the public comments we received concerning them, and the final DRG changes are set forth below. Unless otherwise noted, the changes we are implementing will be effective in the revised GROUPER software (Version 19.0) to be implemented for discharges on or after October 1, 2001. Unless noted otherwise, we are relying on the data analysis in the proposed rule for the changes discussed here.

Chart 1 lists the changes we are making by adding new DRGs or removing old DRGs. Chart 2 summarizes the changes we are making with respect to the reassignment of procedure codes. Chart 3 presents the changes we are making to the titles of existing DRGs.

In Chart 2 of the proposed rule, several procedure codes were erroneously included in the “Removed from DRG” column of the chart (66 FR 22650). The 11 affected codes are 37.21, 37.22, 37.23, 37.26, 88.52, 88.53, 88.54, 88.55, 88.56, 88.57, and 88.58. Inclusion of these codes in this chart made it appear as if the codes were being deleted from DRG 104. In fact, they are being additionally assigned to DRG 514. We have corrected Chart 2 in this final rule.

Chart 1.—Summary of Changes in DRG Assignments

Diagnosis related groups (DRGs)
Added as new
Removed

Pre-MDC:

DRG 512 (Simultaneous Pancreas/Kidney Transplant)
X

DRG 513 (Pancreas Transplants)
X

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

DRG 112 (Percutaneous Cardiovascular Procedures)

X

DRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization)
X

DRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization)
X

DRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI))
X

DRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent Implant
X

DRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent Implant
X

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

DRG 519 (Cervical Spinal Fusion with CC)
X

DRG 520 (Cervical Spinal Fusion without CC)
X

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

DRG 434 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment with CC)

X

DRG 435 (Alcohol/Drug Abuse or Dependency, Detoxification or Other Symptomatic Treatment without CC)

X

DRG 436 (Alcohol/Drug Dependence with Rehabilitation Therapy)

X

DRG 437 (Alcohol/Drug Dependence, Combined Rehabilitation and Detoxification Therapy)

X

DRG 521 (Alcohol/Drug Abuse or Dependence with CC)
X

DRG 522 (Alcohol/Drug Abuse or Dependence without CC, with Rehabilitation Therapy)
X

DRG 523 (Alcohol/Drug Abuse or Dependence without CC, without Rehabilitation Therapy)
X

Chart 2.—Summary of Assignment or Reassignment of Diagnosis or Procedure Codes in Existing DRGs

Diagnosis/procedure codes
Removed from DRG
Reassigned to DRG

MDC 5 (Diseases and Disorders of the Circulatory System)

Principal Diagnosis Code:

410.01 Acute myocardial infarction of anterolateral wall, initial episode of care
116
516.

410.11 Acute myocardial infarction of other anterior wall, initial episode of care
116
516.

410.21 Acute myocardial infarction of inferolateral wall, initial episode of care
116
516.

410.31 Acute myocardial infarction of inferoposterior wall, initial episode of care
116
516.

410.41 Acute myocardial infarction of other inferior wall, initial episode of care
116
516.

410.51 Acute myocardial infarction of other lateral wall, initial episode of care
116
516.

410.61 True posterior wall infarction, initial episode of care
116
516.

410.71 Subendocardial infarction, initial episode of care
116
516.

410.81 Acute myocardial infarction of other specified sites, initial episode of care
116
516.

410.91 Acute myocardial infarction of unspecified site, initial episode of care
116
516

Procedure Codes:

37.94 Implantation or replacement of automatic cardioverter/defibrillation, total system (AICD)
104, 105
514, 515.

37.95 Implantation of automatic cardioverter/defibrillator lead(s) only
104, 105
514, 515.

37.96 Implantation of automatic cardioverter/defibrillator pulse generator only
104, 105
514, 515.

37.97 Raplacement of automatic cardioverter/defibrilator lead(s) only;
104, 105
514, 515.

37.98 Replacement of automatic cardioverter/defibrillator pulse generator only
104, 105
514, 515.

Operating Room Procedures:

35.96 Percutaneous valvuloplasty
112, 116
516, 517, 518.

36.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thrombolytic agent
112, 116
516, 517, 518.

36.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agent
112, 116
516, 517, 518.

36.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent
112, 116
516, 517, 518.

36.09 Other removal of coronary artery obstruction
112, 116
516, 517, 518.

37.34 Catheter ablation of lesion or tissues of heart
112, 116
516, 517, 518.

92.27 Implantation or insertion of radioactive elements
non-OR in MDC-5
517

Nonoperating Room Procedures:

36.06 Insertion of coronary artery stent(s)
116
517.

37.26 Cardiac electrophysiologic stimulation and recording studies
112
514, 516, 517, 518.

37.27 Cardiac mapping
112
516, 517, 518.

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

Procedure Codes:

81.02 Other cervical fusion, anterior technique
497, 498
519, 520.

81.03 Other cervical fusion, posterior technique
497, 498
519, 520.

MDC 15 (Newborns and Other Neonates with Conditions Originating in the Perinatal Period)

Diagnosis Codes:

770.7 Chronic respiratory disease arising in the perinatal period
387, 389
92, 93.

773.0 Hemolytic disease due to RH isoimmunization
387, 389
390.

773.1 Hemolytic disease due to ABO isoimmunization
387, 389
390.

Secondary Diagnosis Codes:

478.1 Other diseases of nasal cavity and sinuses
390
391.

520.6 Disturbances in tooth eruption
390
391.

623.8 Other specified noninflammatory disorders of vagina
390
391.

709.00 Dyschromia, unspecified
390
391.

709.01 Vitiglio
390
391.

709.09 Dyschromia, Other
390
391.

744.1 Accessory Auricle
390
391.

754.61 Congenital pes planus
390
391.

757.33 Congenital pigmentary anomalies of skin
390
391.

757.39 Other specified anomaly of skin
390
391.

764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams
390
391.

764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams
390
391.

772.6 Cutaneous hemorrhage
390
391.

779.3 Feeding problems in newborns
390
391

794.15 Abnormal and auditory function studies
390
391.

796.4 Other abnormal clinical findings
390
391.

V20.2 Routine infant or child health check
390
391.

V72.1 Examination of ears and hearing
390
391.

Chart 3.—Summary of Retitled DRGs

MDC
DRG No.
Current name
New name

MDC 5
DRG 116
Other Permanent Cardiac Pacemaker Implantation, or PTCA, with Coronary Artery Stent Implant
Other Cardiac Pacemaker Implantation.

MDC 8
DRG 497
Spinal Fusion with CC
Spinal Fusion except Cervical with CC.

MDC 8
DRG 498
Spinal Fusion without CC
Spinal Fusion except Cervical with CC.

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

a. Removal of Defibrillator Cases from DRGs 104 and 105

DRGs 104 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization) and 105 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization) include the replacement or open repair of one or more of the four heart valves. These valves may be diseased or damaged, resulting in either leakage or restriction of blood flow to the heart, compromising the ability of the heart to pump blood. This procedure requires the use of a heart-lung bypass machine, as the heart must be stilled and opened to repair or replace the valve.

Cardiac defibrillators are implanted to correct episodes of fibrillation (very fast heart rate) caused by malfunction of the conduction mechanism of the heart. Through implanted cardiac leads, the defibrillator mechanism senses changes in heart rhythm. When very fast heart rates occur, the defibrillator produces a burst of electric current through the leads to restore the normal heart rate. An implanted defibrillator constantly monitors heart rhythm. The implantation of this device does not require the use of a heart-lung bypass machine, and would be expected to be very different in terms of resource usage, although both procedures currently group to DRGs 104 and 105.

For the proposed rule, as part of our ongoing review of DRGs, we examined Medicare claims data on DRG 104 and DRG 105. We reviewed 100 percent of the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, for discharges in FY 2000, and found that the average charges across all cases in DRG 104 were $84,060, while the average charges across all cases in DRG 105 were $66,348. Carving out code 37.94 (Implantation or replacement of automatic cardioverter/defibrillator, total system [AICD]) from DRGs 104 and 105 increased those average charges to $91,366 for DRG 104 and $67,323 for DRG 105. We identified 11,021 defibrillator cases in DRG 104 (out of 25,112 total cases), with average charges of $74,719, and 2,434 defibrillator cases in DRG 105 (out of 20,094 total cases), with average charges of $59,267.

We performed additional review on cases containing code 37.95 (Implantation of automatic cardioverter/defibrillator lead(s) only) with code 37.96 (Implantation of automatic cardioverter/defibrillator pulse generator only) and on cases containing code 37.97 (Replacement of automatic cardioverter/defibrillator lead(s) only) with code 37.98 (Replacement of automatic cardioverter/defibrillator pulse generator only). This subgrouping contained only 56 patients. The average charges for the 18 patients in DRG 104 were $58,847. The average charges for the 38 patients in DRG 105 were $54,891.

In the proposed rule, because we believed the defibrillator cases are significantly different from other cases in DRGs 104 and 105, we proposed two new DRGs: DRG 514 (Cardiac Defibrillator Implant with Cardiac Catheterization) and DRG 515 (Cardiac Defibrillator Implant without Cardiac Catheterization).

We also proposed the removal of procedure codes 37.94, 37.95 and 37.96, and 37.97 and 37.98 from DRGs 104 and 105 to form the new DRGs 514 and 515.

We received 58 comments on this proposal.

Comment:
Many commenters noted that implanted cardioverter defibrillators (ICDs) or AICDs are lifesaving devices that demonstrate state-of-the-art technology for the treatment of cardiac arrhythmias by continuously monitoring, analyzing, and, if needed, restoring a patient's normal heart rhythm.

One commenter described the technology. Similar to the size of a pacemaker, the ICD is placed under the skin of the upper chest. It has the capacity to continuously monitor and analyze a patient's heart rhythm. If the ICD detects an arrhythmia, it can terminate the abnormal rhythm with either a pacemaker function or the delivery of a low-energy electrical shock to restore normal heart rhythm.

Response:
We agree that ICDs and AICDs are an important addition to the treatment of cardiac disease. The creation of DRGs 514 and 515 is not meant to effect a judgement call about the efficacy or importance of this treatment, but simply to attempt to improve the accuracy of payments within MDC 5, based on the actual charge data associated with these cases.

Comment:
A vast majority of the commenters expressed concern that payments associated with defibrillators will decrease for FY 2002 as a result of this change, with some commenters noting that an ICD or AICD may cost the hospital between $22,000 and $25,000 per device. The commenters stated that if this is the case, there is a limited amount for the remainder of the hospital care (for example, operating room, supplies, nursing staff salary, and typically a 7-day stay in an intensive care unit). Most commenters called for

additional analysis prior to implementation of DRGs 514 and 515.

Response:
As we described in the proposed rule and above, DRGs 104 and 105 currently include many different procedures, with a range of costs associated with these different procedures. We proposed to change the assignment of cardiac defibrillators to new DRGs 514 and 515 to more accurately pay for the more expensive procedures remaining in DRGs 104 and 105, as well as to improve the payment accuracy for cardiac defibrillators. In fact, the relative weight of DRG 104 increases from FY 2001 to FY 2002 by 9.1 percent.

Comment:
Many commenters argued that using hospital charges to determine DRG relative weights can give a distorted picture of the costs of a procedure. The commenters referred to an unspecified national database indicating that the average mark-up of charges over cost for ICDs is lower than the mark-up applied to other components of care. Other commenters referred to the March 2001 Report to Congress by the MedPAC, which, in the context of evaluating available data for setting accurate relative values, stated that hospitals' billed charges “give a distorted picture of relative costliness across DRGs because they reflect systematic differences among hospitals in the average mark-up of charges over costs” (page 11).

Several commenters stated that about 66 percent of hospitals are losing $5,000 or more per case for these procedures. These commenters did not understand why payment would be reduced even further in light of those losses.

Response:
Hospital charges have been the basis for recalibrating the DRG relative weights since FY 1986 (see 50 FR 24372 and 50 FR 35652). To the extent that the mark-up of charges over costs varies from one particular device or procedure to another, the relative weights will be impacted. However, due to the relativity of the DRG weights, a low mark-up associated with one device or procedure will be offset by relatively higher mark-ups associated with another device or procedure, leading to higher relative weights, and thus higher payments, for the latter device or procedure. The prospective payment system is an average-based payment methodology, where hospitals are expected to offset any losses they may incur from any individual or group of cases with payment gains incurred from other cases.

Furthermore, hospital charges are determined by each hospital on an item-by-item basis. It is not possible to account for these individual management decisions in the process of developing a national payment system based on prospectively determined average payment rates.

As demonstrated in the impact analysis in Appendix A to this final rule, hospital payments would rise (prior to the budget neutrality adjustment) by 0.3 percent as a result of all of the DRG changes we are implementing in this final rule, including this change. In addition, we note that the latest analysis by MedPAC indicates the average hospital Medicare inpatient operating margin during FY 1999 (the latest year available) was 12.0 percent (Report to the Congress: Medicare Payment Policy, page 64). Therefore, we believe that hospitals will be able to adequately adjust to these payment changes in both the short and the long term.

Comment:
One commenter noted that the adjustment to DRGs 104 and 105 as reflected in Table 5, “List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean Length of Stay,” in the Addendum of the proposed rule, does not reflect the resource consumption as discussed above. The commenter recommended that we increase the relative weights to reflect the resource consumption of DRGs 104 and 105.

Response:
In this final rule, the relative weight for DRG 104 is 7.8411 for FY 2002, an increase of 9.1 percent from FY 2001. The relative weight for DRG 105 in this final rule is 5.6796 for FY 2002, a 0.4 percent increase from FY 2001. These percentage changes are very similar to the percent change in average charges in DRGs 104 and 105 after removing ICD and AICD charges, as described above. We note that the final relative weight values are based on 100 percent of FY 2000 discharges in the MedPAR database as of March 2001. The analysis using average charges described above was based on an earlier sample of cases; therefore, the percentage changes do not match exactly.

Comment:
Other commenters noted that this change, and the resulting increase in payments for procedures remaining in DRGs 104 and 105, is a positive step to improving the payment for heart assist devices. However, the commenters were disappointed that we did not take the opportunity to make a similar revision for cases involving mechanical heart assist devices.

Response:
As described above, removing the ICDs/AICDs from DRGs 104 and 105 will have the net effect of increasing the relative weights for both DRGs, so payment for the remaining cases will increase. We will continue to evaluate our options for improving the accuracy of our payments for heart assist technologies.

After carefully reviewing all of the comments submitted, we have decided to proceed with the creation of two new DRGs to capture cases involving the implantation of cardiac defibrillators. The new DRGs 514 and 515 include principal diagnosis codes and procedure codes as reflected in Chart 4 below:

Chart 4.—Composition of New DRGs 514 and 515 in MDC 5

Diagnosis and procedure codes
Included in DRG 514
Included in DRG 515

Principal Diagnosis Codes:

All of the principal diagnosis codes assigned to MDC-5
X
X

Principal or Secondary Procedure Code:

37.94 Implantation or replacement of automatic cardioverter/defibrillator, total system (AICD)
X
X

Combination Operating Procedure Codes:

37.95 Implantation of automatic cardioverter/defibrillator lead(s) only;

Plus

37.96 Implantation of automatic cardioverter/defibrillator pulse generator only;
X
X

Or

37.97 Replacement of automatic cardioverter/defibrillator lead(s) only;

Plus

37.98 Replacement of automatic cardioverter/defibrillator pulse generator only
X
X

Plus:
One of the Following Nonoperating Room Procedure Codes:

37.21 Right heart cardiac catheterization
X

37.22 Left heart cardiac catheterization
X

37.23 Combined right and left heart cardiac catheterization
X

37.26 Cardiac electrophysiologic stimulation and recording studies
X

88.52 Angiocardiography of right heart structures
X

88.53 Angiocardiography of left heart structures
X

88.54 Combined right and left heart angiocardiography
X

88.55 Coronary arteriography using a single catheter
X

88.56 Coronary arteriography using two catheters
X

88.57 Other and unspecified coronary arteriography
X

88.58 Negative-contrast cardiac roentgenography
X

b. Percutaneous Cardiovascular Procedures

In the May 4 proposed rule, we indicated that we had reviewed other DRGs within MDC 5 in order to determine if there were also logic changes that could be made to these DRGs. The data were arrayed in a variety of ways displaying myriad permutations, resulting in the following proposed changes.

A percutaneous transluminal coronary angioplasty (PTCA) is an acute intervention intended to minimize cardiac damage by restarting circulation to the heart. Some patients with an acute myocardial infarction (AMI) are now treated by performing a PTCA during the hospitalization for the AMI. Currently, PTCAs with a coronary stent implant are assigned to DRG 116 (Other Permanent Cardiac Pacemaker Implantation, or PTCA with Coronary Artery Stent Implant), along with pacemaker implants. The remaining percutaneous cardiovascular procedures are assigned to DRG 112 (Percutaneous Cardiovascular Procedures).

The volume of percutaneous cardiovascular procedures has grown dramatically, with 186,669 cases identified in the FY 2000 MedPAR file containing hospital bills submitted through May 31, 2000. Because of the high volume, we decided to review the DRG for percutaneous cardiovascular procedures. As a first step in the evaluation, we combined the percutaneous cardiovascular procedures from DRGs 112 and 116. We then subdivided the combined percutaneous cardiovascular procedure group into two groups based on the principal diagnosis (Pdx) of AMI.

Group
Count

Average
charge

With Pdx of AMI
50,442
$31,722

Without Pdx of AMI
136,227
23,989

Each of these groups was further evaluated by subdividing them based on whether a coronary stent was implanted. The vast majority of patients with an AMI had a coronary stent implanted. Patients without an AMI were subdivided into two groups based on whether a coronary stent was implemented.

Group
Count
Average charge

Without Pdx of AMI with stent
111,441
$24,745

Without Pdx of AMI without stent
24,786
20,589

In the proposed rule, based on this analysis, we proposed the removal of PTCAs with coronary artery stent from DRG 116, thus limiting DRG 116 to permanent cardiac pacemaker implantation. This removal would leave approximately 68,000 non-PTCA cases in DRG 116.

In conjunction with this evaluation, we considered a new technology, intravascular brachytherapy, that is being used to treat coronary in-stent stenosis. A gamma-radiation-impregnated tape is threaded through the affected vessel for a specified amount of dwell time, and then the tape is removed. Intravascular brachytherapy was approved by the Food and Drug Administration in November 2000.

Intravascular brachytherapy is assigned to procedure code 92.27 (Implantation or insert of radioactive elements). With the use of angioplasty, these cases are currently assigned to DRG 112 (Percutaneous Cardiovascular Procedures). Therefore, cases involving this new technology will be implicated by these changes.

Also in the proposed rule, we proposed to retitle DRG 116 “Other Cardiac Pacemaker Implantation,” remove DRG 112, and create three new DRGs: DRG 516 (Percutaneous Cardiovascular Procedures with Acute Myocardial Infarction (AMI)); DRG 517 (Percutaneous Cardiovascular Procedures without AMI, with Coronary Artery Stent Implant); and DRG 518 (Percutaneous Cardiovascular Procedures without AMI, without Coronary Artery Stent Implant). In order to be assigned to new DRG 516, cases must contain one of the principal diagnoses
plus
the operating room procedures listed in Chart 5. Because DRG 516 contains acute myocardial infarction, which is hierarchically ordered before DRGs 517 and 518, any AMI cases also containing codes 92.27 or 36.06 (Insertion of coronary artery stents(s)) would automatically be assigned to DRG 516. We also proposed the assignment of patients with a percutaneous cardiovascular procedure and intravascular radiation treatment to new DRG 517. As more data become available, we will reassess the assignment of intravascular radiation treatment to DRG 517. New DRG 518 would contain the same operating room and nonoperating room procedures as new DRG 517, with the exception of codes 92.27 and 36.06. We received 10 comments on this proposal.

Comment:
Several commenters supported the reclassification of percutaneous vascular procedures to DRGs within this MDC. Other commenters, however, stated the proposed changes would be inappropriate because they would reduce payment overall for percutaneous cardiovascular procedures. These commenters noted that new technologies associated with these procedures are, in fact, more costly rather than less costly. In addition, commenters expressed concern that payment for pacemakers under DRG 116 would be reduced from FY 2001 levels.

Response:
Based on 100 percent of FY 2000 discharges on file through March 2001, we estimate the case-weighted average relative weight for DRGs 116, 516, 517 and 518 to be 2.2236, a 4.5 percent decline from the case-weighted average relative weight for DRGs 112 and 116 for FY 2001 (2.3280). As discussed above in relation to the new DRGs 514 and 515, the calculation of

the relative weights reflects the charges submitted by hospitals for these cases.

Comment:
Five commenters addressed only the inclusion of code 92.27 (Implantation or insertion of radioactive elements, also known as brachytherapy) in new DRG 517 in cases without presence of AMI (these cases would go to DRG 516 if AMI were present). Four of the five expressed appreciation for this change, citing its clinical appropriateness and increased payment, which is close to the additional facility costs for performing the procedure.

One commenter, while commending the decision to assign these cases to DRG 517, requested clarification about our decisionmaking process in assigning this technology to the same DRG as coronary stents. The commenter requested that we outline the specific criteria we applied or the process we followed to evaluate the adequacy of the external data submitted.

Response:
Although we received external data from a manufacturer of this technology, they were not the basis for our decision, as we were unable to verify the data because the data were submitted too late in the process of preparing the FY 2002 proposed rule. When we proposed to restructure DRGs 112 and 116, our decision was based on the clinical coherence of the DRGs. Intravascular radiation treatment is an invasive procedure that requires an additional 35 to 45 minutes, and requires the services of both a radiation (nuclear) physicist and a radiation safety officer in the operating room, as well as specifically trained operating room personnel, such as an ultrasound specialist.

Comment:
One commenter wrote that these changes fail to account for the use of GP IIB-IIIA inhibitors for cases with acute coronary syndromes. The commenter was concerned whether the DRG assignment for these cases under the proposed DRGs would be appropriate.

Response:
The administration of GP IIB-IIIA inhibitors is through intravenous infusion, and is assigned to code 99.20 (Injection or infusion of platelet inhibitor). The GROUPER does not recognize code 99.20 as a procedure and, therefore, its presence does not affect DRG assignment. As described above, the DRG assignment for these cases under the newly configured DRGs 116, 516, 517, and 518 would be determined by the presence of AMI and the presence of other procedures that would cause the case to group to one of the other DRGs besides 518. Our analysis of FY 2000 MedPAR data indicates that, among cases with code 99.20 currently assigned to either DRGs 112 or 116 for FY 2000, the majority of these cases are currently assigned to DRG 116 (317,108 discharges compared to 52,945). Therefore, the majority of these cases involve procedures that do affect DRG assignment. We will continue to evaluate these cases, however, to determine whether further revisions would be appropriate.

Comment:
One commenter indicated that codes 37.27 (Cardiac mapping) and 37.34 (Catheter ablation of lesion or tissues of heart) would now be grouped to new DRGs 516, 517, and 518. Because these procedures are not usually used on patients with AMI or patients who receive a stent, the commenter indicated the cases would most likely be grouped to DRG 518. The commenter believed that we were unaware that certain procedures, such as the two previously mentioned, have greater resource utilization than other percutaneous cardiovascular procedures that do not involve AMI or stents. The commenter asserted that this is an inadvertently inappropriate classification. The commenter recommended that CMS either create a separate DRG for cardiac mapping and ablation procedures, or else assign codes 37.27 and 37.34 to DRG 516 after retitling the DRG appropriately.

Response:
These cases previously were assigned to either DRG 112 or 116, depending upon whether they involved the insertion of a stent or the implantation of a pacemaker. This GROUPER assignment logic did not change, although the presence or absence of AMI is now a factor as well. We believe this is an appropriate clinical categorization. However, we will consider this issue as we continue to evaluate these DRGs.

The principal diagnosis codes and operating room and nonoperating room procedure codes that are included in the new DRGs 516, 517, and 518 are reflected in Chart 5.

Chart 5.—Composition of New DRGs 516, 517, and 518 in MDC 5

Diagnosis and procedure codes

Included in
DRG 516

Included in
DRG 517

Included in
DRG 518

Principal Diagnosis Codes:

410.01 Acute myocardial infarction of anterolateral wall, initial episode of care
X

410.11 Acute myocardial infarction of other anterior wall, initial episode of care
X

410.21 Acute myocardial infarction of inferolateral wall, initial episode of care
X

410.31 Acute myocardial infarction of inferoposterior wall, initial episode of care
X

410.41 Acute myocardial infarction of other inferior wall, initial episode of care
X

410.51 Acute myocardial infarction of other lateral wall, initial episode of care
X

410.61 True posterior wall infarction, initial episode of care
X

410.71 Subendocardial infarction, initial episode of care
X

410.81 Acute myocardial infarction of other specified sites, initial episode of care
X

410.91 Acute myocardial infarction of unspecified site, initial episode of care
X

Plus:

Operating Room Procedures:

35.96 Percutaneous valvuloplasty
X
X
X

And

36.01 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy without mention of thrombolytic agent
X
X
X

Or

36.02 Single vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy with mention of thrombolytic agent
X
X
X

Or

36.05 Multiple vessel percutaneous transluminal coronary angioplasty (PTCA) or coronary atherectomy performed during the same operation, with or without mention of thrombolytic agent
X
X
X

And

36.09 Other removal of coronary artery obstruction
X
X
X

And

37.34 Catheter ablation of lesion or tissues of heart
X
X
X

92.27 Implantation or insertion of radioactive elements

X

Or:

Nonoperating Room Procedures:

36.06 Insertion of coronary artery stent(s)

X

37.26 Cardiac electrophysiologic stimulation and recording studies
X
X
X

37.27 Cardiac mapping
X
X
X

DRG 121 (Circulatory Disorders with AMI and Major Complication, Discharged Alive), DRG 122 (Circulatory Disorders with AMI without Major Complication, Discharged Alive), and DRG 123 (Circulatory Disorders with AMI, Expired) are not affected by these changes.

c. Removal of Heart Assist Systems

The ICD-9-CM Coordination and Maintenance Committee considered the nonoperative removal of heart assist systems at its November 17, 2000 meeting. A device called the intra-aortic balloon pump (IABP) is one of the most common types of ventricular assist systems. A balloon catheter is placed into the patient's descending thoracic aorta, and inflates and deflates with each heartbeat. This device is timed with the patient's own heart rhythm, and inflates and circulates blood to the heart and other organs. This allows the heart to rest and recover. The IABP may be used preoperatively, intraoperatively, or postoperatively. It supports the patient from a few hours to several days.

Code 37.64 (Removal of heart assist system) already exists, and it is considered by the GROUPER to be an operative procedure. However, the nonoperative removal of a heart assist system can be done at the patient's bedside, is noninvasive, and requires no anesthesia. Therefore, the Committee created code 97.44 (Nonoperative removal of heart assist system) for use with discharges beginning on or after October 1, 2001.

In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. In the proposed rule, we explained that if this practice were to be followed, we would have proposed that code 97.44 be assigned to MDC 5, DRGs 478 (Other Vascular Procedures with CC) and 479 (Other Vascular Procedures without CC). After hospital charge data became available, we would have considered moving it to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires a more expeditious technique of recognizing new medical services or technology for the hospital inpatient prospective payment system, we will reconsider this longstanding practice when possible. Therefore, as code 97.44 was designed to capture heart assist system removal that is clearly nonoperative, we did not propose to designate 97.44 as a code which the GROUPER recognizes as a procedure. The GROUPER will assign these cases to a medical DRG based on the principal diagnosis, or to a surgical DRG if a surgical procedure recognized by the GROUPER is performed. This assignment can be found in Table 6B, New Procedure Codes, in the Addendum to this rule.

We received no comments on this proposal. However, we did receive comments on another issue in MDC 5, relating to DRGs 110 and 111 (Major Cardiovascular Procedures with and without CC).

Comment:
One commenter submitted a case study on stent technology, noting that Medicare payments in their facility were 31.4 percent lower than total costs. This commenter made no recommendations, but stated that often surgeons must use additional stent segments to repair aneurysms, increasing total costs by thousands of dollars.

Response:
We do not have a clear understanding of the commenter's statement that often surgeons must use additional stent segments to repair aneurysms, thereby increasing total costs. We are unclear because the device presented to us for new ICD-9-CM code consideration was proposed as a single device, custom-fitted to the patient's needs. We will continue to monitor this technology and the new code (used for discharges on or after October 1, 2001).

Comment:
One commenter noted that aortic endografts are assigned to DRGs 110 and 111, and the cost of the device alone is greater than the entire payment for DRG 111. The commenter noted that this is a straightforward issue, and recommended that these cases be assigned specifically to DRG 110.

Response:
DRGs 110 and 111 are what we refer to as paired DRGs. Paired DRGs are exactly the same as each other with regard to the principal diagnosis and procedure codes in most cases. However, other aspects of the patient's case have a bearing on DRG assignment, such as the patient's age or the secondary diagnoses (which determine comorbidities or complications in appropriate DRGs). In this case, DRGs 110 and 111 are divided based on the presence or absence of secondary diagnosis codes. If there are no secondary diagnosis codes present, the case will be assigned to DRG 111. It has been our experience that patients not having secondary diagnoses are less expensive for the hospital to treat, thereby resulting in a lower weighted DRG assignment.

Hospitals should code their records completely, recording and submitting all relevant diagnosis and procedure codes having a bearing on the current admission. As noted previously, payment for each DRG is based on the average charges for cases assigned to that DRG as submitted to us by hospitals.

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

a. Refusions

We have received questions from correspondents regarding the appropriateness of the spinal fusion DRGs: DRG 496 (Combined Anterior/Posterior Spinal Fusion); DRG 497 (Spinal Fusion with CC); and DRG 498 (Spinal Fusion without CC). Several correspondents expressed concern about the inclusion of all refusions of the spine into one procedure code, 81.09 (Refusion of spine, any level or technique). The correspondents pointed out that because all refusions using any technique or level are in this one code,

all of these cases are assigned to DRG 497 and DRG 498. They also pointed out that fusion cases involving both an anterior and posterior technique are assigned to DRG 496. Although cases with the refusion code that involve anterior and posterior techniques would appear to be more appropriately assigned to DRG 496, this is not the case.

We recognized this limitation in the refusion codes and further acknowledged that this limitation in the ICD-9-CM coding system creates DRG problems by preventing the assignment to DRG 496 even when both anterior and posterior techniques are used for refusion cases. Therefore, we referred the issue to the ICD-9-CM Coordination and Maintenance Committee and requested the Committee to consider code revisions for the refusions of the spine during its year 2000 public meetings.

After its deliberations, the Committee approved a series of new procedure codes for refusion of the spine that could lead to improvements within DRGs 497 and 498. These new codes, listed below, go into effect on October 1, 2001.

81.30 Refusion of spine, not otherwise specified

81.31 Refusion of atlas-axis spine

81.32 Refusion of other cervical spine, anterior technique

81.33 Refusion of other cervical spine, posterior technique

81.34 Refusion of dorsal and dorsolumbar spine, anterior technique

81.35 Refusion of dorsal and dorsolumbar spine, posterior technique

81.36 Refusion of lumbar and lumbosacral spine, anterior technique

81.37 Refusion of lumbar and lumbosacral spine, lateral transverse process technique

81.38 Refusion of lumbar and lumbosacral spine, posterior technique

81.39 Refusion of spine, not elsewhere classified

As previously stated, all refusions of the spine and corrections of the pseudarthrosis of the spine are assigned to code 81.09. Code 81.09, which is always assigned to DRG 497 or DRG 498, includes refusions at any level of the spine using any technique. With the creation of the new procedure codes listed above, it will be possible to determine the level of the spine at which the refusion is performed, as well as the technique used, and assign the case to a more appropriate DRG.

These new procedure codes should greatly improve our ability to determine the level and technique used in the refusion.

In the past, we have assigned new ICD-9-CM codes to the same DRG to which the predecessor code was assigned. In the proposed rule, we explained that if this practice were followed, these new codes would have been assigned to DRG 497 and 498 as they are currently. After data became available, we would have considered moving them to other DRGs. However, in accordance with section 533(a) of Public Law 106-554, which requires more expeditious methods of recognizing new medical services or technology under the inpatient hospital prospective payment system, we will reconsider this longstanding practice when possible. Since the new codes clearly allow us to identify cases where the technique was either anterior or posterior and these cases are clinically similar and, therefore, should be handled in the same fashion, we proposed to immediately assign these cases on the same basis as the fusion codes (81.00 through 81.09). We would not wait for actual claims data before making this change. These assignments are reflected in Chart 6 and also can be found in Table 6B, in section V. of the Addendum to this final rule.

Comment:
One commenter supported the creation of the ICD-9-CM codes for refusions as well as their proposed DRG assignments.

Response:
We appreciate the support of the commenter and are adopting the proposed DRG assignments for refusions of spine as final.

b. Fusion of Cervical Spine

In the proposed rule we discussed an inquiry concerning the spinal DRGs that focused on fusions of the cervical spine. The inquirer stated that there was a significant difference between inpatients who undergo anterior cervical spinal fusion and other types of spinal fusion in regard to treatment, recovery time, costs, and risk of complications. Anterior cervical spinal fusions are assigned to procedure code 81.02 (Other cervical fusion, anterior technique). The inquirer pointed out that anterior cervical fusions differ significantly from anterior techniques at other levels since the anatomic approach is far less invasive. Thoracic anterior techniques require working around the cardiac and respiratory systems in the chest cavity, while lumbar anterior techniques require working around bowel and digestive system and the abdominal muscles. The inquirer recommended that code 81.02 be removed from DRGs 497 and 498 and grouped separately.

We analyzed claims data from the FY 2000 MedPAR file containing hospital bills received through May 31, 2000, and confirmed that charges are lower for fusions of the cervical spine than fusions of the thoracic and lumbar spine. This was true for both anterior and posterior cervical fusions of the spine. Our medical consultants agree that the data and their clinical analysis support the creation of new DRGs for cervical fusions of the spine. We proposed to remove procedure codes 81.02 and 81.03 from the spinal fusion DRGs (currently, DRGs 497 and 498) and assign them to new DRGs for cervical spinal fusion with and without CC. We also proposed four groupings for fusion DRGs. The net effect of this change is an increase in the weights for DRGs 497 and 498, since the lower charges for the cervical fusions would be removed. The average standardized charge for all spinal fusions with CCs was $26,957. For all spinal fusions without CCs, the average charge was $16,492. The table below also shows average standardized charges for these types of cases before and after the revisions.

Revised spinal fusion DRGs

Average
charge before revisions

Average charge after revisions

DRG 497 Spinal Fusion Except Cervical with CC
$26,957
$36,821

DRG 498 Spinal Fusion Except Cervical without CC
17,492
26,297

DRG 519 Cervical Spinal Fusion with CC

26,957

DRG 520 Cervical Spinal Fusion without CC

16,492

Based on the groupings, we proposed the creation of two new DRGs: DRG 519 (Cervical Spinal Fusion with CC); and DRG 520 (Cervical Spinal Fusion without CC). The procedure codes that would be included in the DRGs 519 and 520 are reflected in Chart 6 below.

We also proposed to add the new ICD-9-CM procedure codes for refusion of the cervical spine (81.32 and 81.33) to the new cervical spine fusion DRGs because they are clinically similar.

In addition, we proposed to retitle DRG 497 “Spinal Fusion Except Cervical with CC” and DRG 498 “Spinal Fusion Except Cervical without CC.” The retitled DRGs 497 and 498 would retain fusion codes 81.00, 81.01, and 81.04 through 81.08 and include the new refusion codes 81.30, 81.31, and 81.34 through 81.39, as reflected in Chart 6 below.

Comment:
One commenter commended the creation of the new ICD-9-CM codes for spinal refusions and the development of the new DRGs for cervical fusions. This commenter, a manufacturer of devices used for spinal fusions, agreed that cervical fusions on average cost less than lumbar and thoracic fusions. Another commenter who supported the creation of the new DRGs mentioned that this classification would more appropriately reflect the resources used in the varying cases.

Two commenters asserted that DRGs 497 and 498 fail to take into account the cost variations when multi-level spinal fusions are performed. The commenters stated that the cost and complexity of a discharge varies substantially depending on the number of levels performed as part of a fusion procedure. Commenters recommended that new ICD-9-CM procedure codes be created for multi-level spine procedures to track and measure costs. The current ICD-9-CM codes do not differentiate between the number of levels that are fused. The commenter defined multi-level as three or more vertebral segments, either anterior or posterior, or both. In addition, the commenter recommended that these new multi-level fusion codes be assigned to the higher weighted DRG 496. The commenter recommended that DRG 496 be renamed “Multi-Level Spine Procedure Anterior and/or Posterior for Stabilization and/or Correction and/or Refusion.”

Response:
We agree that the current ICD-9-CM procedure codes do not differentiate between the number of levels fused. This proposal will be addressed by the ICD-9-CM Coordination and Maintenance Committee at its November 1, 2001 meeting. A potential problem with this recommendation will be the need to avoid overlapping codes. The current fusion codes are based on an axis of the level of the fusion (cervical or lumbar) and an additional axis of the approach (anterior, posterior, or lateral transverse). Devising a modified or additional scheme that utilizes an additional axis of the number of disks fused may be quite challenging. If this scheme requires the use of a set of codes from the new Chapter 17, we could quickly use up these currently empty codes. As far as the recommendation to include these new multi-level fusion codes in DRG 496, this issue will be deferred until after the coding issue is addressed. If new codes are created, they will be included in an upcoming proposed rule along with their proposed DRG assignment.

Since there was support for the proposed changes to the spinal DRGs, these will be implemented as final changes effective October 1, 2001.

c. Posterior Spinal Fusion

We received other correspondence regarding the current DRG assignment for code 81.07, Lumbar and lumbosacral fusion, lateral transverse process technique. The correspondent stated that physicians consider code 81.07 to be a posterior procedure. The patient is placed prone on the operating table and the spine is exposed through a vertical midline incision. The correspondent pointed out that code 81.07 is not classified as a posterior procedure within DRG 496 (Combined Anterior/Posterior Spinal Fusion). Therefore, when 81.07 is reported with one of the anterior techniques fusion codes, it is not assigned to DRG 496. The correspondent recommended that code 81.07 be added to the list of posterior spinal fusion codes for use in determining assignment to DRG 496.

In the proposed rule, we indicated that we consulted with our clinical advisors and they agreed that this addition should be made. Since we proposed to handle the new refusion codes in the same manner as the fusion codes, we also proposed to assign DRG 496 when 81.37 is used with one of the anterior technique fusion or refusion codes. This would be similar to the manner in which code 81.07 is classified. For assignment to DRG 496, we would consider codes 81.02, 81.04, 81.06, 81.32, 81.34, and 81.36 to be anterior techniques and codes 81.03, 81.05, 81.07, 81.08, 81.33, 81.35, and 81.38 to be posterior techniques.

Chart 6.—Revised Composition of DRGS 496, 497, and 498 and Composition of DRG 519 and 520 in MDC 8

Diagnosis and procedure codes
Existing DRG 496

Assigned as
anterior
techniques

Assigned as
posterior
techniques

Retained in
or Added to
existing
DRG 497

Retained in
or Added to
existing
DRG 498

Included in
DRG 519
included in
DRG 520

Principal or Secondary Procedure Codes:

81.00 Spinal fusion, not otherwise specified

X
X

81.01 Atlas-axis fusion

X
X

81.02 Other cervical fusion, anterior technique
X

X
X

81.03 Other cervical fusion, posterior technique

X

X
X

81.04 Lumbar and lumbosacral fusion, anterior technique
X

X
X

81.05 Lumbar and lumbosacral fusion, posterior technique

X
X
X

81.06 Lumbar and lumbosacral fusion, anterior technique
X

X
X

81.07 Lumbar and lumbosacral fusion, lateral transverse process technique

X
X
X

81.08 Lumbar and lumbosacral fusion, posterior technique

X
X
X

81.30 Refusion of spine, not otherwise specified

X
X

81.31 Refusion of atlas-axis spine

X
X

81.32 Refusion of other cervical spine, anterior technique
X

X
X

81.33 Refusion of other cervical spine, posterior technique

X

X
X

81.34 Refusion of dorsal and dorsolumbar spine, anterior technique
X

X
X

81.35 Refusion of dorsal and dorsolumbar spine, posterior technique

X
X
X

81.36 Refusion of lumbar and lumbosacral spine, anterior technique
X

X
X

81.37 Refusion of lumbar and lumbosacral spine, posterior technique

X
X
X

81.38 Refusion of lumbar and lumbosacral spine, posterior technique

X
X
X

81.39 Refusion of spine, not elsewhere classified

X
X

There was no opposition expressed to the changes proposed for posterior spinal fusions; therefore, we are adopting the proposed changes as final.

d. Spinal Surgery

The California Division of Workers' Compensation notified us of a possible problem with the following spinal DRGs:

DRG 496 (Combined Anterior/Posterior Spinal Fusion)

DRG 497 (Spinal Fusion with CC)

DRG 498 (Spinal Fusion without CC)

DRG 499 (Back & Neck Procedures except Spinal Fusion with CC)

DRG 500 (Back & Neck Procedures except Spinal Fusion without CC)

The Division of Workers' Compensation uses the DRG categories developed by CMS to classify types of hospital care. However, instead of using CMS' weights for determining reimbursement for inpatient services, the Division sets a global fee for all inpatient medical services not otherwise exempted. This fee is established by multiplying the product of the DRG weight (or revised DRG weight for a small number of categories) and the health facility's composite factor by 1.20 to get the maximum amount for worker compensation admissions.

The Division of Workers' Compensation has received reports that the formula it uses for reimbursing cases may be providing inadequate reimbursement. California hospitals and orthopedists have reported that certain spinal surgery DRGs (DRGs 496 through 500) may involve different types of care and/or technologies than those in use at the time these groups were formulated. Health care providers in California report “recent increased use of the new implantation devices, hardware, and instrumentation, coupled with requirements for intensive hospital services accompanying use of new procedures, has led to inadequate reimbursement in these DRGs.” As a short-term response to these concerns, the California Division of Workers' Compensation is exempting the costs of hardware and instrumentation from the global fee of the fee schedule for DRGs 496 through 500. The Division also requested that CMS examine these DRGs for any potential problem under the Medicare reimbursement system.

The ICD-9-CM coding system does not capture specific types of implantation devices, hardware, and instrumentation. Therefore, we were not able to verify the claim that these new devices have led to increased costs in specific cases. We believe that the adoption of a more detailed coding system, such as ICD-10-PCS, would supply greater amounts of detail on these items. However, in the short term, it is not possible to identify a specific problem that involves implantation devices, hardware, and instrumentation.

Comment:
As previously stated, we received support for the proposed changes to the spinal fusion DRGs. As was also stated, one commenter pointed out that the current ICD-9-CM codes do not specify the number of levels fused, nor do they specify the types of devices used.

One commenter, who manufactures spinal fusion devices, commended the new ICD-9-CM codes for refusions and the new DRGs for cervical fusions. This commenter also requested new codes specifying the number of levels fused. The commenter stated that typically two devices are used per level and therefore, with increased levels, there would be an increase in the number of infusion devices. The commenter recommended new codes for multi-level spinal fusions, but did not recommend new codes that would specify particular types of devices.

Responses:
This coding issue will be addressed at future meetings of the ICD-9-CM Coordination and Maintenance Committee. If new codes are created, their DRG assignment would be addressed in a subsequent proposed rule.

4. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)

We have received correspondence from a manufacturer of an implantable vascular device requesting that code 86.07 (Insertion of totally implantable vascular access device [VAD]) be assigned as an operative procedure in MDC 11, to DRG 315 (Other Kidney & Urinary Tract O.R. Procedures). This request was inadvertently omitted from the May 4, 2001 proposed rule. Therefore, we are taking this opportunity to discuss possible designation of this procedure code as a code affecting DRG assignment in MDC 11.

Procedure code 86.07 describes the implantation of a VAD into the chest wall and blood vessels of a patient's upper body. Patients requiring this particular device have been diagnosed with renal (kidney) failure. Insertion of a VAD allows access to the patient's blood for dialysis purposes when other sites for hemodialysis have been exhausted. According to representatives from the manufacturer of one particular VAD used for hemodialysis, this device costs the hospitals $1,750, and is usually inserted in the outpatient setting as opposed to admission for insertion of the device.

The GROUPER program does not recognize code 86.07 as a procedure in other than MDC 9 (Disease and Disorders of the Skin, Subcutaneous Tissue and Breast), in DRGs 269 and 270 (Other Skin, Subcutaneous Tissue & Breast Procedure, with and without CC). Therefore, its presence in any other MDC does not affect DRG assignment. Patients who are admitted with renal failure and who have a VAD inserted will be assigned to DRG 316 (Renal Failure), absent any other surgical procedures. DRG 316 is a medical DRG with a lower relative weight than cases in the surgical DRGs within the same MDC.

We extensively reviewed the MedPAR data. We found that code 86.07 appeared in 358 different DRGs. Of these 358 DRGs, 173 include additional procedures recognized by GROUPER and are therefore considered surgical, while 185 are medical. Because of the space limitations of the ICD-9-CM, code 86.07 is used to describe VAD devices used for other purposes than hemodialysis.

We looked specifically at the cases within DRGs 315 and 316 as shown in the two tables below:

DRG 315 (Surgical)

With code 86.07

Without
code 86.07

Number of Cases
421
19,815.

Average Length of Stay
12.5 days
6.8 days.

Average Charges
$39,946
$23,061.

DRG 316 (Medical)

With code 86.07
Without code 86.07

Number of Cases
1,020
19,815.

Average Length of Stay
10.2 days
6.6 days.

Average Charges
$27,730
$15,045.

Cases containing code 86.07 have higher average lengths of stay as well as higher average charges than cases not containing this code. We further examined the total number of reported procedures, as well as the range of average charges across both DRGs, for cases containing code 86.07. Both DRGs contain a significant number of additional procedures. The nature of these procedures varies widely, including such divergent procedures as X-rays and scans, injections, dental extraction, cardiac catheterization, aneurysm repair, and laparoscopic cholecystectomy. We also identified 24 cases in DRG 315 and 28 cases in DRG 316 with multiple insertions of the VAD. We believe those instances where the VAD is inserted as an inpatient procedure involve cases where other complications exist, leading to the higher average charges noted above. We are not assigning code 86.07 to DRG 315 as a surgical procedure, but will continue to consider possible alternative specifications of these DRGs.

Additionally, we take this opportunity to clarify correct coding practice. It has come to our attention that a brochure is being distributed with the product that advocates coding insertion of the Lifesite® Hemodialysis Access System using ICD-9-CM procedure code 86.07 in addition to code 39.93 (Insertion of vessel-to-vessel cannula). Inclusion of code 39.93 will force these cases into DRG 315, the higher weighted surgical DRG. Our data review showed 33 such cases of double coding. We would caution hospitals that the use of code 39.93, in the absence of the actual procedure, is erroneous. According to our vascular surgeon consultant, the LifeSite® Hemodialysis Access System as presented to us is not a vessel-to-vessel cannula. It is a device inserted into a vessel. Therefore, providers submitting code 39.93 without the actual procedure having been performed are at risk for review of fraudulent coding practice and DRG upcoding.

This same product brochure contains the name and telephone number of a nationally recognized coding specialist. The addition of this specialist's name and number was included without her knowledge or consent. We take this opportunity to reiterate that LifeSite® Hemodialysis Access System is correctly coded using 86.07 alone.

5. MDC 12 (Diseases and Disorders of the Male Reproductive System)

At its May 11, 2000 public meeting, the ICD-9-CM Coordination and Maintenance Committee considered a request from a manufacturer to create a unique code for the procedure Penile plethysmography with nerve stimulation in DRG 334 (Major Male Pelvic Procedures with CC). The penile plethysmography is a test that can be performed during a radical prostatectomy procedure. During the course of the procedure, the physician places a probe within an area where the prostatic nerves are thought to be located and is able to detect minor changes in penile tumescence or detumescence. This reaction tells the physician that the nerve bundles have been located, which may aid the physician in performing a nerve-sparing radical prostatectomy procedure with precision. The nerve bundles can also be restimulated at the conclusion of the procedure, providing immediate feedback as to whether erectile function will be restored after surgery.

After a presentation on the nerve identifying procedure and review of existing ICD-9-CM codes, the ICD-9-CM Coordination and Maintenance Committee determined that the existing

code 89.58 (Plethysmogram) adequately describes this test.

Radical prostatectomies for patients with cancer of the prostate are grouped in either DRG 334 (Major Male Pelvic Procedures with CC) or DRG 335 (Major Male Pelvic Procedures without CC). We have received a request from a manufacturer of a nerve-identifying device to assign cases containing code 89.58 into DRG 334 only, not into DRG 335. DRG 334 results in higher payments to hospitals. For FY 2002, DRG 334 has a relative weight of 1.5177, and DRG 335 has a relative weight of 1.1047. The manufacturer requested that we designate code 89.58 as an operating room procedure code that would be recognized by the GROUPER software, and make that code applicable only to DRG 334. The manufacturer believed that this would serve to take any cases of nerve sparing out of the lower paying DRG 335, and would make the technology more attractive to hospitals. As paired DRGs 334 and 335 are currently structured, they differ only in whether or not a secondary diagnosis identified as a CC is recorded.

We examined those cases in DRG 334 to which the procedure code for prostatectomy was assigned. Of the total 7,241 cases in DRG 334 identified, 5,611 of these cases contained procedure code 60.5 (Radical prostatectomy). Only three of the prostatectomy cases included code 89.58. There are not a sufficient number of cases on which to base an assessment of the payment for this procedure. Therefore, we did not propose to modify the assignment of code 89.58.

We received one comment on this proposal.

Comment:
The commenter argued that the analysis conducted on the procedure code assignment of 89.58 was incomplete, as it did not include evaluation of DRG 335 in the calculations. The commenter added that DRG also includes radical prostatectomies for patients with cancer of the prostate.

Response:
We apologize for the omission. Our review of data on DRG 335 showed that the DRG contained 8,125 total cases. There were 8,117 cases that did not contain procedure code 89.58; these cases had average total charges of $12,808. There were 8 cases in this group containing code 89.58. These 8 cases had average total charges of $16,366. We found a subset of 7,050 cases containing procedure code 60.5; these cases had average total charges of $12,772. Within this subset, only 7 cases were reported containing codes 60.5 and 89.58. These 7 cases had average total charges of $16,593.

Even including these additional cases, we identified very few cases in our analysis. Therefore, we are adopting as final our original proposed decision not to modify the assignment of code 89.58 by assigning it exclusively to DRG 334 within MDC 12. However, we will continue to monitor this procedure to determine whether a change in DRG assignment is warranted in the future.

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

DRG 390 (Neonate with Other Significant Problems) contains newborn or neonate cases with other significant problems not assigned to DRGs 385 through 389, DRG 391, or DRG 469. To be assigned to DRG 389 (Full Term Neonate with Major Problems), the neonate must have one of the principal or secondary diagnosis listed under this DRG. A neonate is assigned to DRG 390 when the neonate has a principal or secondary diagnosis of newborn or neonate with other significant problems that are not assigned to DRG 385 through 389, 391, or 469.

We have received correspondence suggesting a number of changes to be made to DRGs 398 and 391. These changes involve removing two codes from DRG 389 and adding 17 codes to DRG 391, as described below.

a. DRG 389 (Full Term Neonate with Major Problems)

The correspondent suggested removing the following codes from DRG 389 and assigning them to DRG 390:

773.0 Hemolytic disease due to RH isoimmunization

773.1 Hemolytic disease due to ABO isoimmunization

The correspondent stated that hemolytic disease due to RH isoimmunization or due to ABO isoimmunization should not be considered a major problem. The correspondent recommended that these two conditions be classified as significant problems instead and thus assigned to DRG 390.

Our medical consultants sought additional advice from the National Association of Children's Hospitals and Related Institutions (NACHRI). (CMS contracts with the 3M Health Information Systems to maintain the DRG system. The medical experts at 3M evaluate proposed DRG changes from a clinical perspective. These medical consultants assist CMS in evaluating alternative proposals.) NACHRI and our medical consultants agree that it is appropriate to remove codes 773.0 and 773.1 from DRG 389. Therefore, we proposed to remove 773.0 and 773.1 from DRG 389 so that neonates with these conditions are assigned to DRG 390.

Comment:
Several commenters supported the proposed revisions for newborns within MDC 15. One commenter stated that the code assignments mentioned in the proposed rule are more appropriately classified based on their clinical attributes. Another commenter agreed with the proposed changes, but requested that an additional code be added to those being moved to DRG 391 (Normal Newborn). Specifically, the commenter requested that code 779.3, Feeding problems in newborns, be listed under DRG 391. Currently, when this code is listed as a secondary code, it results in the assignment of the neonate to DRG 390. The commenter stated that this condition and its resource consumption should not cause the neonate to be classified under DRG 390.

Response:
We discussed this additional issue with our medical consultants and they agreed that code 779.3 should also be listed under DRG 391. They concurred that the addition of this code as a secondary diagnosis should not lead to the newborn being classified as having a significant problem. Therefore, code 779.3 will be included among the codes being moved to DRG 391 as of October 1, 2001.

Comment:
One commenter suggested that codes 773.0 and 773.1 be removed from DRG 387 (Prematurity with major problems) in addition to DRG 389. The list of major problems in DRGs 389 and 387 mirror each other. The only difference is that DRG 387 includes premature newborns. The commenter asked us to consider codes 773.0 and 773.1 as significant problems for newborns and classify them into DRG 390, which would make them applicable for premature and full-term newborns.

Response:
We agree with the commenter. We are removing codes 773.0 and 773.1 from DRG 389 as well as DRG 387. This removal will result in these cases being assigned to DRG 390 (Neonate with Other Significant Problems).

b. DRG 391 (Normal Newborn)

We also have received correspondence with recommendations for changes to DRG 391. The correspondent pointed out that the following secondary codes currently lead to the assignment of the neonate to DRG 390 (Neonate with Other Significant Problems). The correspondent believed that the conditions described by these codes

should not cause the neonate to be classified under DRG 390 when reported as a secondary diagnosis. The correspondent recommended that these conditions be listed under DRG 391 (Normal Newborn).

478.1 Other diseases of nasal cavity and sinuses

520.6 Disturbances in tooth eruption

623.8 Other specified noninflammatory disorders of vagina

709.00 Dyschromia, unspecified

709.01 Vitiglio

709.09 Dyschromia, Other

744.1 Accessory auricle

754.61 Congenital pes planus

757.33 Congenital pigmentary anomalies of skin

757.39 Other specified anomaly of skin

764.08 “Light for dates” without mention of fetal malnutrition, 2,000-2,499 grams

764.98 Fetal growth retardation, unspecified, 2,000-2,499 grams

772.6 Cutaneous hemorrhage

794.15 Abnormal and auditory function studies

796.4 Other abnormal clinical findings

V20.2 Routine infant or child health check

V72.1 Examination of ears and hearing

Our medical consultants also sought the advice of NACHRI on this recommendation. NACHRI reviewed the list of codes and agreed that none of these conditions should be considered to be a significant problem for a neonate. NACHRI concurred that neonates with these secondary diagnoses should be classified as normal newborns. Therefore, we proposed to add the codes listed above to DRG 391 and not classify them to DRG 390 when reported as a secondary diagnosis.

Comment:
One commenter expressed concern that the weights assigned to five newborn DRGs (DRGs 385, 368, 387, 388, and 389) are undervalued. The commenter pointed out that legislation mandating Early Hearing Detection and Intervention (EHDI) has been passed in 35 States plus the District of Columbia. In these States, hearing screening must be performed prior to the newborn's discharge from the hospital unless prevented by medical complications. The cost per screening ranges from $15 to $30, which includes personnel, supplies, and equipment costs which are amortized over 3 years. The screening also includes costs for babies that require diagnostic evaluation.

The commenter requested that data from States that have not implemented EHDI programs be deleted from the Medicare supplemental database for, at a minimum, DRG 391 (Normal Newborn). The commenter stated that non-Medicare data used for developing the weights for the five newborn DRGs do not represent average costs if some of the 19 States that supply supplemental non-Medicare data are States that perform hearing screenings on less than 90 percent of newborns. The commenter further requested that we use data only from States that have EHDI programs that are operational at the 90 percent level. The commenter provided a list of States that meet these criteria.

Response:
While we appreciate the commenter's furnishing us with information on the costs of providing services such as hearing screenings, it would be inappropriate for us to use this one service to determine whether or not to include a State's data because the State does not provide the service at a 90-percent level. The DRG weights are based on averages. As hospitals elect to include or exclude services, the weights will change over time. Therefore, we are not developing a criterion to exclude hospital data from States that do not have a 90-percent compliance level with EHDI.

Comment:
One commenter noted that new procedure code 75.38, Fetal pulse osimetry, was classified as a nonoperative procedure code in Table 6B of the Addendum of the proposed rule. As a nonoperative procedure, it was not assigned to an MDC or to specific DRGs. The commenter requested that we assign code 75.38 to MDC 14 (Pregnancy, Childbirth and Puerperium), and the following DRGs:

DRG 370—(Caesarean Section with CC)

DRG 371—(Caesarean Section without CC)

DRG 372—(Vaginal Delivery with Complicating Diagnosis)

DRG 373—(Vaginal Delivery without CC)

The commenter believed it was critical that the clinical benefits and use of fetal pulse oximetry be closely tracked in order to monitor clinical outcomes and to recognize potential economic advantages. The commenter acknowledged that most labor and delivery patients are not Medicare beneficiaries. However, other third party payers benchmark hospital inpatient payment rates from Medicare DRGs. The commenter stated that if code 75.38 does not contribute or link to a DRG, it is often simply not coded. The commenter further stated that fetal oximetry is an exciting and significant emerging technology and that much knowledge can be gained by understanding its usage in the context of labor and delivery services.

Response:
The commenter requested that 75.38 be assigned to the DRGs for deliveries (DRG 370 through 373). However, these DRGs are currently assigned based on the procedure codes for the specific type of delivery (caesarian or vaginal). Adding the procedure code 75.38 to these delivery DRGs would not affect the DRG assignment. The cases would still be assigned to the appropriate DRG based on the type of delivery, not whether the baby received fetal pulse oximetry. If the commenter is suggesting that the fetal pulse oximetry code, on its own, should lead to the DRG assignment, this option is not workable. Without knowing that the mother actually delivered, and the type of delivery, one would not be able to assign the case to one of the delivery DRGs. Once one knew through the procedure codes that the mother delivered, and the type of delivery, the addition of 75.38 would not add to the DRG assignment.

The commenter did not make an argument as to why 75.38 was incorrectly classified as a nonoperating room procedure. While we appreciate the commenter's desire that this new procedure code be used, assigning the code to existing DRGs is not consistent with the structure of DRGs. Procedure codes are only assigned to DRGs when they effect the DRG assignment logic. Therefore, we are not changing the operating room status of code 75.38, nor are we adding it to the delivery DRGs. Code 75.38 will be considered a nonoperative procedure.

c. Medicare Code Editor Changes

The Medicare Code Editor (MCE) is a front-end software program that detects and reports errors in the coding of claims data. The age conflict edit detects inconsistencies between a patient's age and any dia

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A01-18868. Public record. Not legal advice.