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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488

[CMS-1607-P] RIN 0938-AS11

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

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

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

We also are proposing to update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and to implement certain statutory changes to the LTCH PPS under the Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 and the Protecting Access to Medicare Act of 2014. In addition we are proposing to revise the interruption of stay policy for LTCHs and to retire the “5 percent” payment adjustment for co-located LTCHs. While many of the statutory mandates of the Pathway for SGR Reform Act will apply to discharges occurring on or after October 1, 2014, others will not begin to apply until 2016 and beyond. However, in light of the degree of forthcoming change, we discuss changes infra and request public feedback to inform our proposals for FY 2016 in this proposed rule as well.

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

We are proposing to update policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. In addition, we are proposing changes to the regulations governing provider administrative appeals and judicial review relating to appropriate claims in provider cost reports; updates to the reasonable compensation equivalent (RCE) limits for services furnished by physicians to teaching hospitals excluded from the IPPS; regulatory revisions to broaden the specified uses of risk adjustment data and to specify the conditions for release of risk adjustment data to entities outside of CMS; and changes to the enforcement procedures for organ transplant centers.

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

DATES:

Comment Period:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. EDT on June 30, 2014.

ADDRESSES:

In commenting, please refer to file code CMS-1607-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

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

1.

Electronically.

You may (and we encourage you to) submit electronic comments on this regulation to

http://www.regulations.gov

. Follow the instructions under the “submit a comment” tab.

2.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1607-P, P.O. Box 8011, Baltimore, MD 21244-1850.

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

3.

By express or overnight mail.

You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1607-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4.

By hand or courier.

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

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

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

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

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

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

For information on viewing public comments, we refer readers to the

beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Donald Thompson, (410) 786-4487, and Tiffany Swygert, (410) 786-4465, Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions (HAC), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues.

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

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

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

Karen Nakano, (410) 786-6889, Hospital Inpatient Quality Reporting—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues.

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

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

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

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

Kellie Shannon, (410) 786-0416, Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review Issues.

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

Ann Hornsby, (410) 786-1181, and Jennifer Harlow, (410) 786-4549, Medicare Advantage Encounter Data Issues.

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

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

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All public comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all public comments received before the close of the comment period on the following Web site as soon as possible after they have been received:

http://www.regulations.gov

. Follow the search instructions on that Web site to view public comments.

Electronic Access

This

Federal Register

document is also available from the

Federal Register

online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the Internet at:

http://www.gpo.gov/fdsys

.

Tables Available Only Through the Internet on the CMS Web Site

In the past, a majority of the tables referred to throughout this preamble and in the Addendum to the proposed rule and the final rule were published in the

Federal Register

as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables are no longer published in the

Federal Register

. Instead, these tables are available only through the Internet. The IPPS tables for this proposed rule are available only through the Internet on the CMS Web site at:

http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html

. Click on the link on the left side of the screen titled, “FY 2015 IPPS Proposed Rule Home Page” or “Acute Inpatient—Files for Download”. The LTCH PPS tables for this FY 2015 proposed rule are available only through the Internet on the CMS Web site at:

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html

under the list item for Regulation Number CMS-1607-P. For complete details on the availability of the tables referenced in this proposed rule, we refer readers to section VI. of the Addendum to this proposed rule.

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

Acronyms

3M 3M Health Information System

AAMC Association of American Medical Colleges

ACGME Accreditation Council for Graduate Medical Education

ACoS American College of Surgeons

AHA American Hospital Association

AHIC American Health Information Community

AHIMA American Health Information Management Association

AHRQ Agency for Healthcare Research and Quality

AJCC American Joint Committee on Cancer

ALOS Average length of stay

ALTHA Acute Long Term Hospital Association

AMA American Medical Association

AMGA American Medical Group Association

AMI Acute myocardial infarction

AOA American Osteopathic Association

APR DRG All Patient Refined Diagnosis Related Group System

APRN Advanced practice registered nurse

ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-5

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

ASITN American Society of Interventional and Therapeutic Neuroradiology

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

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

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

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

BLS Bureau of Labor Statistics

CABG Coronary artery bypass graft [surgery]

CAH Critical access hospital

CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument]

CART CMS Abstraction & Reporting Tool

CAUTI Catheter-associated urinary tract infection

CBSAs Core-based statistical areas

CC Complication or comorbidity

CCN CMS Certification Number

CCR Cost-to-charge ratio

CDAC [Medicare] Clinical Data Abstraction Center

CDAD

Clostridium difficile

-associated disease

CDC Center for Disease Control and Prevention

CERT Comprehensive error rate testing

CDI

Clostridium difficile

(C. difficile)

CFR Code of Federal Regulations

CLABSI Central line-associated bloodstream infection

CIPI Capital input price index

CMI Case-mix index

CMS Centers for Medicare & Medicaid Services

CMSA Consolidated Metropolitan Statistical Area

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

COLA Cost-of-living adjustment

CoP [Hospital] condition of participation

COPD Chronis obstructive pulmonary disease

CPI Consumer price index

CQM Clinical quality measure

CRNA Certified registered nurse anesthetist

CY Calendar year

DACA Data Accuracy and Completeness Acknowledgement

DPP Disproportionate patient percentage

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

DRG Diagnosis-related group

DSH Disproportionate share hospital

EBRT External Bean Radiotherapy

ECI Employment cost index

eCQM Electronic clinical quality measure

EDB [Medicare] Enrollment Database

EHR Electronic health record

EMR Electronic medical record

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

EP Eligible professional

FAH Federation of American Hospitals

FDA Food and Drug Administration

FFY Federal fiscal year

FPL Federal poverty line

FQHC Federally qualified health center

FR

Federal Register

FTE Full-time equivalent

FY Fiscal year

GAF Geographic Adjustment Factor

GME Graduate medical education

HAC Hospital-acquired condition

HAI Healthcare-associated infection

HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

HCFA Health Care Financing Administration

HCO High-cost outlier

HCRIS Hospital Cost Report Information System

HHA Home health agency

HHS Department of Health and Human Services

HICAN Health Insurance Claims Account Number

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

HIPC Health Information Policy Council

HIS Health information system

HIT Health information technology

HMO Health maintenance organization

HPMP Hospital Payment Monitoring Program

HSA Health savings account

HSCRC [Maryland] Health Services Cost Review Commission

HSRV Hospital-specific relative value

HSRVcc Hospital-specific relative value cost center

HQA Hospital Quality Alliance

HQI Hospital Quality Initiative

IBR Intern- and Resident-to-Bed Ratio

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

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

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

ICR Information collection requirement

IGI IHS Global Insight, Inc.

IHS Indian Health Service

IME Indirect medical education

I-O Input-Output

IOM Institute of Medicine

IPF Inpatient psychiatric facility

IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]

IPPS [Acute care hospital] inpatient prospective payment system

IRF Inpatient rehabilitation facility

IQR Inpatient Quality Reporting

LAMCs Large area metropolitan counties

LOS Length of stay

LTC-DRG Long-term care diagnosis-related group

LTCH Long-term care hospital

LTCHQR Long-Term Care Hospital Quality Reporting

MA Medicare Advantage

MAC Medicare Administrative Contractor

MAP Measure Application Partnership

MCC Major complication or comorbidity

MCE Medicare Code Editor

MCO Managed care organization

MDC Major diagnostic category

MDH Medicare-dependent, small rural hospital

MedPAC Medicare Payment Advisory Commission

MedPAR Medicare Provider Analysis and Review File

MEI Medicare Economic Index

MGCRB Medicare Geographic Classification Review Board

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

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

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

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

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

MRHFP Medicare Rural Hospital Flexibility Program

MRSA Methicillin-resistant

Staphylococcus aureus

MSA Metropolitan Statistical Area

MS-DRG Medicare severity diagnosis-related group

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

MU Meaningful Use [EHR Incentive Program]

NAICS North American Industrial Classification System

NALTH National Association of Long Term Hospitals

NCD National coverage determination

NCHS National Center for Health Statistics

NCQA National Committee for Quality Assurance

NCVHS National Committee on Vital and Health Statistics

NECMA New England County Metropolitan Areas

NHSN National Healthcare Safety Network

NOP Notice of Participation

NQF National Quality Forum

NQS National Quality Strategy

NTIS National Technical Information Service

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

NVHRI National Voluntary Hospital Reporting Initiative

OACT [CMS] Office of the Actuary

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

OES Occupational employment statistics

OIG Office of the Inspector General

OMB [Executive] Office of Management and Budget

OPM [U.S.] Office of Personnel Management

OQR [Hospital] Outpatient Quality Reporting

O.R. Operating room

OSCAR Online Survey Certification and Reporting [System]

PCH PPS-exempt cancer hospital

PCHQR PPS-exempt cancer hospital quality reporting

PMSAs Primary metropolitan statistical areas

POA Present on admission

PPI Producer price index

PPS Prospective payment system

PRM Provider Reimbursement Manual

ProPAC Prospective Payment Assessment Commission

PRRB Provider Reimbursement Review Board

PRTFs Psychiatric residential treatment facilities

PSF Provider-Specific File

PSI Patient safety indicator

PS&R Provider Statistical and Reimbursement [System]

PQRS Physician Quality Reporting System

QIG Quality Improvement Group [CMS]

QIO Quality Improvement Organization

QRDA Quality Reporting Data Architecture

RCE Reasonable compensation equivalent

RFA Regulatory Flexibility Act, Public Law 96-354

RHC Rural health clinic

RHQDAPU Reporting hospital quality data for annual payment update

RNHCI Religious nonmedical health care institution

RPL Rehabilitation psychiatric long-term care (hospital)

RRC Rural referral center

RSMR Risk-standardized mortality rate

RSRR Risk-standard readmission rate

RTI Research Triangle Institute, International

RUCAs Rural-urban commuting area codes

RY Rate year

SAF Standard Analytic File

SCH Sole community hospital

SCIP Surgical Care Improvement Project

SFY State fiscal year

SIC Standard Industrial Classification

SNF Skilled nursing facility

SOCs Standard occupational classifications

SOM State Operations Manual

SSI Surgical site infection

SSI Supplemental Security Income

SSO Short-stay outlier

SUD Substance use disorder

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

TEP Technical expert panel

THA/TKA Total hip arthroplasty/Total knee arthroplasty

TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI

[Qualifying Individuals] Programs Extension Act of 2007, Public Law 110-90

TPS Total Performance Score

UHDDS Uniform hospital discharge data set

UMRA Unfunded Mandate Reform Act, Public Law 104-4

VBP [Hospital] Value Based Purchasing [Program]

VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

2. Summary of the Major Provisions

3. Summary of Costs and Benefits

B. Summary

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

2. Hospitals and Hospital Units Excluded From the IPPS

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

4. Critical Access Hospitals (CAHs)

5. Payments for Graduate Medical Education (GME)

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

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

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

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

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

D. Summary of the Provisions of This Proposed Rule

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

A. Background

B. MS-DRG Reclassifications

C. Adoption of the MS-DRGs in FY 2008

D. Proposed FY 2015 MS-DRG Documentation and Coding Adjustment

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

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

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

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

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

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

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

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

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

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background

2. Discussion for FY 2015

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

1. Background

2. HAC Selection

3. Present on Admission (POA) Indicator Reporting

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

5. Proposal Regarding Current HACs and Previously Considered Candidate HACs

6. RTI Program Evaluation

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

G. Proposed Changes to Specific MS-DRG Classifications

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

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

b. Basis for FY 2015 MS-DRG Updates

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

a. Intracerebral Therapies: Gliadel® Wafer

b. Endovascular Embolization or Occlusion of Head and Neck

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

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

a. Exclusion of Left Atrial Appendage

b. Transcatheter Mitral Valve Repair: MitraClip®

c. Endovascular Cardiac Valve Replacement Procedures

d. Abdominal Aorta Graft

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

a. Shoulder Replacement Procedures

b. Ankle Replacement Procedures

c. Back and Neck Procedures

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

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

8. Proposed Medicare Code Editor (MCE) Changes

9. Proposed Changes to Surgical Hierarchies

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

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

b. Coronary Atherosclerosis Due to Calcified Coronary Lesion

11. Complications or Comorbidity (CC) Exclusions List

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

b. Proposed CC Exclusions List for FY 2015

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

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

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

c. Adding Diagnosis or Procedure Codes to MDCs

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

a. ICD-10 Coordination and Maintenance Committee

b. Code Freeze

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

1. Data Sources for Developing the Proposed Relative Weights

2. Methodology for Calculation of the Proposed Relative Weights

3. Development of National Average CCRs

4. Bundled Payments for Care Improvement (BPCI) Initiative

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

1. Background

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

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

a. Glucarpidase (Trade Brand Voraxaze®)

b. DIFICID

TM

(Fidaxomicin) Tablets

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

d. Kcentra

TM

e. Argus® II Retinal Prosthesis System

f. Zilver® PTX® Drug Eluting Stent

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

a. Dalbavancin (Durata Therapeutics, Inc.)

b. Heli-FX

TM

EndoAnchor System (Aptus Endosystems, Inc.)

c. WATCHMAN® Left Atrial Appendage Closure Technology

d. CardioMEMS

TM

HF (Heart Failure) System

e. MitraClip® System

f. Responsive Neurostimulator (RNS®) System

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

A. Background

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

1. Background

2. Proposed Implementation of New Labor Market Area Delineations

a. Micropolitan Statistical Areas

b. Urban Counties That Would Become Rural Under the New OMB Delineations

c. Rural Counties That Would Become Urban Under the New OMB Delineations

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

e. Proposed Transition Period

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

1. Included Categories of Costs

2. Excluded Categories of Costs

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

D. Verification of Worksheet S-3 Wage Data

E. Method for Computing the Proposed FY 2015 Unadjusted Wage Index

F. Proposed Occupational Mix Adjustment to the Proposed FY 2015 Wage Index

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

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

3. Calculation of the Proposed Occupational Mix Adjustment for FY 2015

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

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

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

a. Proposed Rural Floor

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

c. Proposed Frontier Floor

3. Proposed FY 2015 Wage Index Tables

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

1. General Policies and Effects of Reclassification and Redesignation

2. FY 2015 MGCRB Reclassifications

a. FY 2015 Reclassification Requirements and Approvals

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

c. Applications for Reclassifications for FY 2016

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

a. Proposed New Lugar Areas for FY 2015

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

c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as Lugar

4. Waiving Lugar Redesignation for the Out-Migration Adjustment

5. Update of Application of Urban to Rural Reclassification Criteria

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

J. Process for Requests for Wage Index Data Corrections

K. Notice of Change to Wage Index Development Timetable

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

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

A. Proposed Changes to MS-DRGs Subject to the Postacute Care Transfer Policy (§ 412.4)

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

1. Proposed FY 2015 Inpatient Hospital Update

2. Proposed FY 2015 Puerto Rico Hospital Update

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

1. Case-Mix Index (CMI)

2. Discharges

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

1. Background

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

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

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

1. IME Adjustment Factor for FY 2015

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

3. Other Proposed Policy Changes Affecting IME

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

1. Background

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

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

a. General Discussion

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

c. Empirically Justified Medicare DSH Payments

d. Uncompensated Care Payments

e. Limitations on Review

G. Medicare-Dependent, Small Rural Hospital (MDH) Program (§ 412.108)

1. Background

2. Provisions of Public Law 113-93 for FY 2015

3. Expiration of the MDH Program

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

1. Statutory Basis for the Hospital Readmissions Reduction Program

2. Regulatory Background

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

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

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

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

c. Anticipated Effect of Proposed Refinements on Measures

5. No Proposed Expansion of the Applicable Conditions for FY 2016

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

a. Background

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

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

7. Maintenance of Technical Specifications for Quality Measures

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

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

10. Applicable Period for FY 2015

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

12. Hospital Readmissions Reduction Program Extraordinary Circumstances Exceptions

I. Hospital Value-Based Purchasing (VBP) Program

1. Statutory Background

2. Overview of Previous Hospital VBP Program Rulemaking

3. FY 2015 Payment Details

a. Payment Adjustments

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

4. Measures for the FY 2017 Hospital VBP Program

a. Measures Previously Adopted

b. Proposed Changes Affecting Topped-Out Measures

c. Proposed New Measures for the FY 2017 Hospital VBP Program

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

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

5. Proposed Additional Measures for the FY 2019 Hospital VBP Program

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

b. PSI-90 Measure

6. Possible Measure Topics for Future Program Years

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

b. Possible Future Efficiency and Cost Reduction Domain Measure Topics

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

a. Background

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

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

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

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

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

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

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

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

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

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

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

10. Proposed Performance Standards for the Hospital VBP Program

a. Background

b. Performance Standards for the FY 2016 Hospital VBP Program

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

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

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

f. Proposed Technical Updates Policy for Performance Standards

g. Request for Public Comments on ICD-10-CM/PCS Transition

11. Proposed FY 2017 Hospital VBP Program Scoring Methodology

a. Proposed General Hospital VBP Program Scoring Methodology

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

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

12. Proposed Minimum Numbers of Cases and Measures for the FY 2016 and FY 2017 Hospital VBP Program's Quality Domains

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

b. Proposed Minimum Number of Measures—Safety Domain

c. Proposed Minimum Number of Measures—Clinical Care Domain

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

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

13. Applicability of the Hospital VBP Program to Maryland Hospitals

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

J. Hospital-Acquired Condition (HAC) Reduction Program

1. Background

2. Statutory Basis for the HAC Reduction Program

3. Implementation of the HAC Reduction Program for FY 2015

a. Overview

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

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

d. Criteria for Applicable Hospitals and Performance Scoring Policy

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

f. Limitation on Administrative and Judicial Review

4. Proposed Maintenance of Technical Specifications for Quality Measures

5. Extraordinary Circumstances Exceptions/Exemptions

6. Implementation of the HAC Reduction Program for FY 2016

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

b. Criteria for Applicable Hospitals and Performance Scoring

7. Future Consideration for the Use of Electronically Specified Measures

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

1. Background

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

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

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

b. Participation of Redesignated Hospitals in Rural Training Track

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

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

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

b. Proposal To Remove Seamless Requirement

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

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

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

L. Rural Community Hospital Demonstration Program

1. Background

2. Proposed FY 2015 Budget Neutrality Offset Amount

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

1. Overview

2. Transparency Requirement Under the Affordable Care Act

N. Medicare Payment for Short Inpatient Hospital Stays

O. Suggested Exceptions to the 2-Midnight Benchmark

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

A. Overview

B. Additional Provisions

1. Exception Payments

2. New Hospitals

3. Hospitals Located in Puerto Rico

C. Proposed Annual Update for FY 2015

VI. Proposed Changes for Hospitals Excluded From the IPPS

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

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

1. Background

2. Overview of the Current RCE Limits

a. Application of the RCE Limits

b. Exceptions to the RCE Limits

c. Methodology for Establishing the RCE Limits

3. Proposed Changes to the RCE Limits

C. Critical Access Hospitals (CAHs

1. Background

2. Proposed Changes Related to Reclassifications as Rural for CAHs

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

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

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority

2. Criteria for Classification as an LTCH

a. Classification as an LTCH

b. Hospitals Excluded From the LTCH PPS

3. Limitation on Charges to Beneficiaries

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

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

1. Background

2. Patient Classifications Into MS-LTC-DRGs

a. Background

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

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

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

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

c. Data

d. Hospital-Specific Relative Value (HSRV) Methodology

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

f. Proposed Low-Volume MS-LTC-DRGs

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

C. Proposed LTCH PPS Payment Rates for FY 2015

1. Overview of Development of the LTCH Payment Rates

2. Proposed FY 2015 LTCH PPS Annual Market Basket Update

a. Overview

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

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

1. Background

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

d. Proposed Market Basket Under the LTCH PPS for FY 2015

e. Proposed Annual Market Basket Update for LTCHs for FY 2015

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

D. Proposed Revision of LTCH PPS Geographic Classifications

1. Background

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

a. Micropolitan Statistical Areas

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

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

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

e. Proposed Transition Period

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

1. Background

2. Proposed Implementation of Section 1206(b)(1) of Public Law 113-67

F. Proposed Changes to the Fixed-Day Thresholds Under the Greater Than 3-Day Interruption of Stay Policy Under the LTCH PPS

1. Background

2. Thresholds Used in Recent Statutory Programs

3. Proposed Changes to the Greater Than 3-Day Interruption of Stay Policy

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

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

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

1. Overview

2. Provisions of Section 1206(a) of Public Law 113-67

3. Additional LTCH PPS Issues

J. Proposed Technical Change

VIII. Appropriate Claims in Provider Cost Reports; Administrative Appeals by Providers and Judicial Review

A. Background

1. Payment and Cost Reporting Requirements

2. Administrative Appeals by Providers and Judicial Review

3. Appropriate Claims in Provider Cost Reports

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

1. Proposed Addition to the Cost Reporting Regulations of the Substantive Reimbursement Requirement of an Appropriate Cost Report Claim

2. Proposed Revisions to the Provider Reimbursement Appeal Regulations

C. Proposed Conforming Changes to the Board Appeal Regulations and Corresponding Revisions to the Contractor Hearing Regulations

1. Technical Corrections and Conforming Changes to §§ 405.1801 and 405.1803

2. Technical Corrections and Conforming Changes to §§ 405.1811, 405.1813, and 405.1814

3. Proposed New § 405.1832

4. Proposed Revisions to § 405.1834

5. Technical Corrections and Conforming Changes to §§ 405.1836, 405.1837, and 405.1839

6. Technical Corrections to 42 CFR Part 405, Subpart R and All Subparts of 42 CFR Part 413

IX. Quality Data Reporting Requirements for Specific Providers and Suppliers

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background

a. History of the Hospital IQR Program

b. Maintenance of Technical Specifications for Quality Measures

c. Public Display of Quality Measures

2. Removal and Suspension of Hospital IQR Program Measures

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

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

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

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

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

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

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

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

c. Anticipated Effect of Proposed Refinements to Existing Measures

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

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

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

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

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

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

f. Electronic Health Record-Based Voluntary Measures

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

h. Electronic Clinical Quality Measures

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

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

b. Possible Future Electronic Clinical Quality Measures

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

a. Background

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

c. Data Submission Requirements for Chart-Abstracted Measures

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

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

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

g. Data Submission Requirements for Structural Measures for the FY 2017

Payment Determination and Subsequent Years

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

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

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

a. Eligibility Criteria for Hospitals Selected for Validation

b. Number of Charts to be Submitted per Hospital for Validation

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

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

e. Plans To Validate Electronic Clinical Quality Measure Data

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

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

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

15. Hospital IQR Program Extraordinary Circumstances Extensions or Exemptions

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

1. Statutory Authority

2. Covered Entities

3. Previously Finalized PCHQR Program Quality Measures

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

5. Proposed New Quality Measures Beginning With the FY 2017 Program

a. Considerations in the Selection of Quality Measures

b. Proposed New Quality Measure Beginning With the FY 2017 Program

6. Possible New Quality Measure Topics for Future Years

7. Maintenance of Technical Specifications for Quality Measures

8. Public Display Requirements Beginning With the FY 2014 Program

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

a. Background

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

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

d. Proposed New Sampling Methodology for the Clinical Process/Oncology Care Measures Beginning With the FY 2016 Program

10. Exceptions From Program Requirements

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

1. Background

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

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

4. Policy for Adopting Changes to LTCHQR Program Measures

5. Previously Adopted Quality Measures

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

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

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

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

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

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

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

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

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

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

a. Background

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

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

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

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

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

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

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

a. Overview

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

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

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

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

a. Proposed Data Validation Process

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

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

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

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

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

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

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

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

1. Background

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

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

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

5. Clarification Regarding Reporting Zero Denominators

6. Case Threshold Exemption Policy; Clarification for 2014 and Proposed Change for 2015

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

A. Background

B. Proposed Regulatory Changes

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

2. Proposed Conditions for CMS Release of Data

3. Proposed Technical Change

XI. Proposed Changes to Enforcement Provisions for Organ Transplant Centers

A. Background

B. Basis for Proposals in This Proposed Rule

1. Proposed Expansion of Mitigating Factors Based on CMS' Experience

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

C. Provisions of the Proposed Changes

1. Proposed Expansion of Mitigating Factors List

2. Content and Timeframe for Mitigating Factors Requests

3. System Improvement Agreements (SIAs)

a. Purpose and Intent of an SIA

b. Description and Contents of an SIA

c. Effective Period for an SIA

XII. MedPAC Recommendations

XIII. Other Required Information

A. Requests for Data From the Public

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments

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

3. ICRs for the Occupational Mix Adjustment to the Proposed FY 2015 Wage Index (Hospital Wage Index Occupational Mix Survey)

4. Hospital Applications for Geographic Reclassifications by the MGCRB

5. ICRs for Application for GME Resident Slots

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

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

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

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

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

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

Regulation Text

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

I. Summary and Background

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

A. Calculation of the Adjusted Standardized Amount

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

C. Calculation of the Prospective Payment Rates

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

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

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

C. Capital Input Price Index

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

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

A. Proposed LTCH PPS Standard Federal Rate for FY 2015

1. Background

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

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

1. Background

2. Proposed Geographic Classifications Based on the New OMB Delineations

3. Proposed LTCH PPS Labor-Related Share

4. Proposed LTCH PPS Wage Index for FY 2015

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

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

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

1. Background

2. Determining LTCH CCRs Under the LTCH PPS

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

4. Application of the Outlier Policy to SSO Cases

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

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

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

Appendix A—Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

B. Need

C. Objectives of the IPPS

D. Limitations of Our Analysis

E. Hospitals Included in and Excluded From the IPPS

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

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

1. Basis and Methodology of Estimates

2. Analysis of Table I

3. Impact Analysis of Table II

H. Effects of Other Proposed Policy Changes

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

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

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

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

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

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

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

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

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

10. Effects of Implementation of Rural Community Hospital Demonstration Program

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

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

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

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

J. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

2. Results

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

1. Introduction and General Considerations

2. Impact on Rural Hospitals

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

4. Effect on the Medicare Program

5. Effect on Medicare Beneficiaries

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

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

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

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

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

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

II. Alternatives Considered

III. Overall Conclusion

A. Acute Care Hospitals

B. LTCHs

IV. Accounting Statements and Tables

A. Acute Care Hospitals

B. LTCHs

V. Regulatory Flexibility Act (RFA) Analysis

VI. Impact on Small Rural Hospitals

VII. Unfunded Mandate Reform Act (UMRA) Analysis

VIII. Executive Order 12866

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

I. Background

II. Inpatient Hospital Update for FY 2015

A. Proposed FY 2015 Inpatient Hospital Update

B. Proposed Update for SCHs for FY 2015

C. Proposed FY 2015 Puerto Rico Hospital Update

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

E. Proposed Update for LTCHs for FY 2015

III. Secretary's Recommendation

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

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

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

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

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

• Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; cancer hospitals; and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.

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

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

• Section 1866(k) of the Act, as added by section 3005 of the Affordable Care Act, which establishes a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as “PPS-Exempt Cancer Hospitals.”

• Section 1886(d)(4)(D) of the Act, which addresses certain hospital-acquired conditions (HACs), including infections. Section 1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the Secretary was required to select, in consultation with the Centers for Disease Control and Prevention (CDC), at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS-DRG when present as a secondary diagnosis (that is, conditions under the MS-DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidence-based guidelines. Section 1886(d)(4)(D) of the Act also specifies that the list of conditions may be revised, again in consultation with CDC, from time to time as long as the list contains at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires that hospitals, effective with discharges occurring on or after October 1, 2007, submit information on Medicare claims specifying whether diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of the Act specifies that effective for discharges occurring on or after October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS-DRG if a selected condition is not POA.

• Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. A payment for indirect medical education (IME) is made under section 1886(d)(5)(B) of the Act.

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

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

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

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

• Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act now requires that, for “fiscal year 2014 and each subsequent fiscal year,” “subsection (d) hospitals” that would otherwise receive a “disproportionate share payment . . . made under subsection (d)(5)(F)” will receive two separate payments: (1) 25 percent of the amount they previously would have received under subsection (d)(5)(F) for DSH (“the empirically justified amount”), and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75

percent of the payments that would otherwise be made under subsection (d)(5)(F); (2) 1 minus the percent change in the percent of individuals under the age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, and minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.

• Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for SGR Reform Act of 2013, which provided for the establishment of patient criteria for payment under the LTCH PPS for implementation beginning in FY 2016.

• Section 1206(b)(1) of the Pathway for SGR Reform Act of 2013, which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act, by retroactively reestablishing and extending the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for “grandfathered” hospital-within-hospitals (HwHs), which are permanently exempt from this policy); and section 1206(b)(2) (as amended by section 112(b) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)), which together further amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish a new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities beginning January 1, 2015 and ending on September 30, 2017; and section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings.

• Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206(c) of the Pathway for SGR Reform Act of 2013, which provides for the establishment, no later than October 1, 2015, of a functional status quality measure under the LTCHQR Program for change in mobility among inpatients requiring ventilator support.

To conform regulations to the statutory requirements of the Provider Reimbursement Review Board (Board) appeals based on untimely determinations of the Medicare Administrative Contractor (MAC), in this proposed rule, we are proposing to amend the regulations to eliminate the provider dissatisfaction requirement as a condition for Board jurisdiction over such appeals. We are proposing a similar amendment to the regulations for appeals to MAC hearing officers, to maintain consistency between the regulations for MAC and Board appeals. We also are proposing to codify in the cost reporting regulations our existing policy, implemented in section 115 of the Provider Reimbursement Manual, requiring providers to include an appropriate claim for an item in its cost report. In addition, we are proposing that providers' failure to include an appropriate claim for an item in its cost report will result in foreclosure of payment in the notice of program reimbursement and in any decision or order issued by a reviewing entity in an administrative appeal filed by the provider.

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

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

2. Summary of the Major Provisions

a. MS-DRG Documentation and Coding Adjustment

Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS-DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

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

b. Reduction of Hospital Payments for Excess Readmissions

We are proposing changes in policies to the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions are acute myocardial infarction, heart failure, and pneumonia. For FY 2014, we established additional exclusions to the three existing readmission measures (that is, the excess readmission ratio) to account for additional planned readmissions. We also established additional readmissions measures, Chronic Obstructive Pulmonary Disease (COPD), and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be used in the Hospital Readmissions Reduction Program for FY 2015 and future years. We are proposing to expand the readmissions measures for FY 2017 and future years by adding a measure of patients readmitted following coronary artery bypass graft (CABG) surgery. We also are proposing to refine the readmission measures and related methodology for FY 2015 and subsequent years payment determinations. In addition, we are proposing that the readmissions payment adjustment factors for FY 2015

can be no more than a 3-percent reduction in accordance with the statute. We also are proposing to revise the calculation of aggregate payments for excess readmissions to include THA/TKA and COPD readmissions measures beginning in FY 2015.

c. Hospital Value-Based Purchasing (VBP) Program

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

In this proposed rule, we are proposing to adopt quality measures for the FY 2017, FY 2019, and FY 2020 Hospital VBP Program years and to establish performance periods and performance standards for measures to be adopted for those fiscal years. We also are proposing to adopt additional policies related to performance standards and to revise the domain weighting previously adopted for the FY 2017 Hospital VBP Program.

d. Hospital-Acquired Condition (HAC) Reduction Program

In this proposed rule, we are proposing a change in the scoring methodology with the addition of a previously finalized measure for the FY 2016 payment adjustment under the HAC Reduction Program. Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an adjustment to hospital payments for HACs, or a HAC Reduction program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce HACs, effective for discharges beginning on October 1, 2014 and for subsequent program years. This 1-percent payment reduction applies to a hospital whose ranking is in the top quartile (25 percent) of all applicable hospitals, relative to the national average, of conditions acquired during the applicable period and on all of the hospital's discharges for the specified fiscal year. The amount of payment shall be equal to 99 percent of the amount of payment that would otherwise apply to such discharges under section 1886(d) or 1814(b)(3) of the Act, as applicable.

e. Proposed Changes to the DSH Payment Adjustment and the Provision of Additional Payment for Uncompensated Care

Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remaining amount, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period. In this proposed rule, we are proposing updates to the uncompensated care amount to be distributed for FY 2015, and we are proposing changes to the methodology to calculate the uncompensated care payment amounts to be distributed such that we combine uncompensated care data for hospitals that have underwent a merger in order to calculate their relative share of uncompensated care.

f. Hospital Inpatient Quality Reporting (IQR) Program

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

In this proposed rule, we are proposing to add nine new measures for the Hospital IQR Program for the FY 2017 payment determination and subsequent years. We are proposing to remove five measures for the FY 2016 payment determination and subsequent years. We also are proposing to remove 15 chart-abstracted measures from the FY 2016 payment determination's measure set. However, we are proposing to retain an electronic clinical quality measure version of 10 of those chart-abstracted measures for the program.

g. Proposed Changes to the LTCH PPS

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

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

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

We also are proposing to make changes to the LTCH interruption of stay policy, which is a payment adjustment that is applied when, during the course of an LTCH hospitalization, a patient is discharged to an inpatient acute care hospital, an IRF, or a SNF for treatment or services not available at the LTCH for a specified period followed by readmittance to the same LTCH.

3. Summary of Costs and Benefits

• Proposed Adjustment for MS-DRG Documentation and Coding Changes. We are proposing a −0.8 percent recoupment adjustment to the standardized amount for FY 2015 to implement, in part, the requirement of section 631 of the ATRA that the Secretary make an adjustment totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This recoupment adjustment represent the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110-90.

While our actuaries estimated that a −9.3 percent recoupment adjustment to the standardized amount would be necessary if CMS were to fully recover the $11 billion recoupment required by

section 631 of the ATRA in FY 2014, it is often our practice to delay or phase in rate adjustments over more than one year, in order to moderate the effects on rates in any one year. Therefore, consistent with the policies that we have adopted in many similar cases and the adjustment we made for FY 2014, we are proposing to make a −0.8 percent recoupment adjustment to the standardized amount in FY 2015. We estimated that this level of adjustment, combined with leaving the −0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017.

• Reduction to Hospital Payments for Excess Readmissions. The provisions of section 1886(q) of the Act which establishes the Hospital Readmissions Reduction Program are not budget neutral. For FY 2015, a hospital's readmissions payment adjustment factor is the higher of a ratio of a hospital's aggregate payments for excess readmissions to its aggregate payments for all discharges, or 0.97 (that is, or a 3-percent reduction). In this proposed rule, we estimate that the reduction to a hospital's base operating DRG payment amount to account for excess readmissions of selected applicable conditions under the Hospital Readmissions Reduction Program will result in a 0.2 percent decrease in payments to hospitals for FY 2015 relative to FY 2014.

• Value-Based Incentive Payments Under the Hospital Value-Based Purchasing (VBP) Program. We estimate that there will be no net financial impact to the Hospital VBP Program for FY 2015 in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given fiscal year must be equal to the total amount of base operating DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating DRG payment amount reductions for FY 2015, and therefore the estimated amount available for value-based incentive payments for FY 2015 discharges, is approximately $1.4 billion. We believe that the program's benefits will be seen in improved patient outcomes, safety, and in the patient's experience of care. However, we cannot estimate these benefits in actual dollar and patient terms.

• Proposed Payment Adjustment Under the HAC Reduction Program for FY 2015. Under section 1886(p) of the Act, (as added by section 3008 of the Affordable Care Act), the incentive to reduce hospital-acquired conditions with a payment adjustment to applicable hospitals under the HAC Reduction Program is made beginning FY 2015. We estimate that, under this proposal, 753 hospitals would be subject to the 1-percent reduction, and that overall payments will decrease approximately 0.3 percent or $330 million.

• Proposed Changes Relating to the Medicare DSH Payment Adjustment and Provision of Additional Payment for Uncompensated Care. Under section 1886(r) of the Act (as added by section 3313 of the Affordable Care Act), disproportionate share payments to hospitals under section 1886(d)(5)(F) of the Act are reduced and an additional payment to eligible hospitals is made beginning in FY 2014. Hospitals that receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH payments, will be the basis for additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured and additional statutory adjustments. Each hospital that receives Medicare DSH payments will receive an additional payment based on its share of the total uncompensated care amount reported by Medicare DSHs. The reduction to Medicare DSH payments is not budget neutral.

For FY 2015, we are proposing that the 75 percent of what otherwise would have been paid for Medicare DSH is adjusted to approximately 80.4 percent of the amount for changes in the percentage of individuals that are uninsured and additional statutory adjustments. In other words, Medicare DSH payments prior to the application of section 3133 of the Affordable Care Act are adjusted to approximately 60.3 percent (the product of 75 percent and 80.4 percent) and that resulting payment amount is used to create an additional payment for a hospital's relative uncompensated care. As a result, we project that the proposed reduction of Medicare DSH payments and the inclusion of the additional payments for uncompensated care will reduced payments overall by 1.1 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2014. The proposed additional payments have redistributive effects based on a hospital's uncompensated care amount relative to the uncompensated care amount to all hospitals that are estimated to receive Medicare DSH payments, and the payment amount is not tied to a hospital's discharges.

• Hospital Inpatient Quality Reporting (IQR) Program. In this proposed rule, we are proposing to add nine new measures for the FY 2017 payment determination and subsequent years. We are proposing to remove five measures from the hospital IQR Program for the FY 2016 payment determination and subsequent years. We also are proposing to remove 15 chart-abstracted from the FY 2016 payment determination's measure set, but we are proposing to retain an electronic clinical quality measure version of 10 of those measures for the program. We estimate that our proposals for the adoption and removal of measures will decrease hospital costs by $39.8 million.

• Proposed Update to the LTCH PPS Standard Federal Rate and Other Payment Factors. Based on the best available data for the 423 LTCHs in our database, we estimate that the proposed changes to the payment rates and factors we are presenting in the preamble and Addendum of this proposed rule, including the proposed update to the standard Federal rate for FY 2015, the proposed changes to the area wage adjustment for FY 2015, and the expected changes to short-stay outliers and high-cost outliers, would result in an increase in estimated payments from FY 2014 of approximately $44 million (or 0.8 percent). In addition, we estimate that net effect of the projected impact of certain other proposed LTCH PPS policy changes (that is, the reinstatement of the moratorium on the full implementation of the “25 percent threshold” payment adjustment; the reinstatement of the moratorium on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds; the proposed revision of the “greater than 3-day interruption of stay” policy; the proposed revocation of onsite discharges and readmissions policy; and the proposed payment adjustment for “subclause (II)” LTCHs) is estimated to result in a reduction in LTCH PPS payments of approximately $14 million.

The impact analysis of the proposed payment rates and factors presented in this proposed rule under the LTCH PPS, in conjunction with the estimated payment impacts of certain other proposed LTCH PPS policy changes would result in a net increase of $30 million to LTCH providers. Additionally, we estimate that the costs to LTCHs associated with the completion of the proposed data for the LTCHQR Program at $3.96 million or approximately $1 million more than FY 2014.

B. Summary

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

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

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

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

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

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

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

Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. Through and including FY 2006, a Medicare-dependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before April 1, 2015, an MDH will receive the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the statutory provision for payments to MDHs expires on March 31, 2015, under current law.) SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries.

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

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

2. Hospitals and Hospital Units Excluded From the IPPS

Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; certain cancer hospitals; and short-tern acute care hospitals located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are now included as part of the IPPS annual update document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, certain cancer hospitals, short-tern acute care hospitals

located in Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-of-increase ceiling on inpatient operating costs, as updated annually by the percentage increase in the IPPS operating market basket.

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

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

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of section 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH's payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with FY 2009, annual updates to the LTCH PPS are published in the same documents that update the IPPS (73 FR 26797 through 26798).

4. Critical Access Hospitals (CAHs)

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

5. Payments for Graduate Medical Education (GME)

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

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

The Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010, made a number of changes that affect the IPPS and the LTCH PPS. (Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as the “Affordable Care Act.”) A number of the provisions of the Affordable Care Act affect the updates to the IPPS and the LTCH PPS and providers and suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010

Federal Register

notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51476).

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

Federal Register

on March 7, 2013 (78 FR 14689).

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

Federal Register

on March 18, 2014 (79 FR 15022).

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

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

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

• Section 3001(a) of Public Law 111-148, which requires the establishment of a hospital inpatient value-based purchasing program under which value-based incentive payments are made in a fiscal year to hospitals that meet performance standards for the performance period for that fiscal year.

• Section 3004 of Public Law 111-148, which provides for the submission of quality data by LTCHs in order for them to receive the full annual update to the payment rates beginning with the FY 2014 rate year.

• Section 3005 of Public Law 111-148, which provides for the establishment of a quality reporting program for PPS-exempt cancer hospitals beginning with FY 2014, and for subsequent program years.

• Section 3008 of Public Law 111-148, which establishes the Hospital-Acquired Condition (HAC) Reduction Program and requires the Secretary to make an adjustment to hospital payments for applicable hospitals, effective for discharges beginning on October 1, 2014, and for subsequent program years.

• Section 3025 of Public Law 111-148, which establishes a hospital readmissions reduction program and requires the Secretary to reduce payments to applicable hospitals with excess readmissions effective for discharges beginning on or after October 1, 2012.

• Section 3133 of Public Law 111-148, as amended by section 10316 of Public Law 111-148 and section 1104 of Public Law 111-152, which modifies the methodologies for determining Medicare DSH payments and creates a new additional payment for uncompensated care effective for discharges beginning on or after October 1, 2013.

• Section 3401 of Public Law 111-148, which provides for the incorporation of productivity adjustments into the market basket updates for IPPS hospitals and LTCHs.

• Section 10324 of Public Law 111-148, which provides for a wage adjustment for hospitals located in frontier States.

• Sections 3401 and 10319 of Public Law 111-148 and section 1105 of Public Law 111-152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2015.

• Section 5506 of Public Law 111-148, which added a provision to the Act that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital's FTE resident caps.

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

In this proposed rule, we are proposing policy changes to implement section 631 of the American Taxpayer Relief Act of 2012 that are applicable to the IPPS for FY 2015, which amended section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary's estimates for discharges occurring in FY 2014 through FY 2017 to fully offset $11 billion (which represents the amount of the increase in aggregate payments from FYs 2008 through 2013 for which an adjustment was not previously applied).

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

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

• Section 1206(a), which provides the establishment of patient criteria for “site neutral” payment rates under the LTCH PPS, portions of which will begin to be implemented in FY 2016.

• Section 1206(b)(1), which further amended section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act by retroactively reestablishing, and extending, the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment policy under the LTCH PPS so that the policy will be in effect for 9 years (except for grandfathered HwHs, which are permanently exempt from this policy).

• Section 1206(b)(2), which amended section 114(d) of the MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the Affordable Care Act to establish new moratoria (subject to certain defined exceptions) on the development of new LTCHs and LTCH satellite facilities and a new moratorium on increases in the number of beds in existing LTCHs and LTCH satellite facilities.

• Section 1206(d), which instructs the Secretary to evaluate payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS, as appropriate, based upon the evaluation findings.

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

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

• Section 105, which extends the temporary changes to the Medicare inpatient hospital payment adjustment for low-volume subsection (d) hospitals through March 31, 2015.

• Section 106, which extends the MDH program through March 31, 2015.

• Section 112, which makes certain changes to Medicare LTCH provisions, including modifications to the statutory moratoria on the establishment of new LTCHs and LTCH satellite facilities and on increases in bed size in LTCH and LTCH satellite facilities.

• Section 212, which prohibits the Secretary from requiring implementation of ICD-10 code sets before October 1, 2015.

D. Summary of the Provisions of This Proposed Rule

In this proposed rule, we are setting forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals for FY 2015. We also are setting forth proposed changes relating to payments for IME and GME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, in this proposed rule, we are setting forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015.

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

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

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

• Proposed changes to MS-DRG classifications based on our yearly review, including a discussion of the conversion of MS-DRGs to ICD-10 and the status of the implementation of the ICD-10-CM and ICD-10-PCS systems.

• Proposed application of the documentation and coding adjustment for FY 2015 resulting from implementation of the MS-DRG system.

• Proposed recalibrations of the MS-DRG relative weights.

• Proposed changes to hospital-acquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required adjustment in MS-DRG payments for FY 2015.

• A discussion of the FY 2015 status of new technologies approved for add-on payments for FY 2014 and a presentation of our evaluation and analysis of the FY 2015 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108-173, obtained in a town hall meeting).

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

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

• Proposed changes in CBSAs as a result of new OMB labor market area delineations and proposed policies related to the proposed changes in CBSAs.

• The proposed FY 2015 wage index update using wage data from cost reporting periods beginning in FY 2011.

• Analysis and implementation of the proposed FY 2015 occupational mix adjustment to the wage index for acute care hospitals, including the proposed application of the rural floor, the proposed imputed rural floor, and the proposed frontier State floor.

• Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications.

• The proposed adjustment to the wage index for acute care hospitals for FY 2015 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

• The timetable for reviewing and verifying the wage data used to compute the proposed FY 2015 hospital wage index and proposed revisions to that timetable.

• Determination of the labor-related share for the proposed FY 2015 wage index.

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

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

• Proposed changes in postacute care transfer policies as a result of proposed new MS-DRGs.

• Proposed changes to the inpatient hospital updates for FY 2015, including incorporation of the adjustment for hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.

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

• Proposed payment adjustment for low-volume hospitals for FY 2015.

• The statutorily required IME adjustment factor for FY 2015 and proposed IME Medicare Part C payments to SCHs that are paid according to their hospital-specific rates.

• Effect of expiration of the MDH program on April 1, 2015.

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

• Proposed changes to the measures and payment adjustments under the Hospital Readmissions Reduction Program.

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

• Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2015.

• Proposed IME and direct GME policy changes regarding the effective date of the FTE resident cap, 3-year rolling average, and IRB ratio cap in new programs in teaching hospitals; effect of new OMB labor market area delineations on certain teaching hospitals training residents in rural areas; clarification of effective date of provisions on counting resident time in nonprovider settings; proposed changes to the process for reviewing applications for and awarding slots made available under section 5506 of the Affordable Care Act by teaching hospitals that close; and clarification regarding direct GME payment to FQHCs and RHCs that train residents in approved programs.

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

• Discussion of the requirements for transparency of hospital charges under the Affordable Care Act.

• Discussion of and solicitation of comments on an alternative payment methodology under the Medicare program for short inpatient hospital stays.

• Discussion of the process for submitting suggested exceptions to the 2-midnight benchmark.

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

In section V. of the preamble to this proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2015 and other related proposed policy changes.

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

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

• Proposed changes to payments to certain excluded hospitals for FY 2015.

• Proposed updates to the RCE limits for services furnished by physicians to excluded hospitals.

• Proposed CAH related changes regarding reclassifications as rural.

• Proposed changes to the physician certification requirements for services furnished in CAHs.

6. Proposed Changes to the LTCH PPS

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

• Proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2015.

• Proposed revisions to the LTCH PPS geographic classifications based on the new OMB delineations.

• Proposals to implement section 1206(b)(1) of the Pathway for SGR Reform Act, which provides for the retroactive reinstatement and extension, for an additional 4 years, of the statutory moratorium on the full implementation of the 25-percent threshold payment adjustment established under section 114(c) of the MMSEA, as further amended by subsequent legislation.

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

• Proposed changes to the LTCH interruption of stay policy by revising the fixed-day thresholds under the “greater than 3-day interruption of stay policy” to apply a uniform 30-day threshold as an “acceptable standard” for determining a linkage between an index discharge and a readmission.

• Proposal to remove the discharge and readmission requirement, “Special Payment Provisions for Patients Who Are Transferred to Onsite Providers and Readmitted to an LTCH” (the “5 percent payment threshold”) beginning in FY 2015.

• Proposal to apply a payment adjustment under the LTCH PPS to subclause (II) LTCHs beginning in FY 2015 that would result in payments to this type of LTCH resembling reasonable cost payment under the TEFRA payment system model, consistent with the provisions of section 1206(d) of the Pathway for SGR Reform Act of 2013.

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

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

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

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

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

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

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

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

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

10. Proposed Changes to Enforcement Provisions for Organ Transplant Centers

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

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

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

12. Determining Prospective Payment Rates for LTCHs

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

13. Impact Analysis

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

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

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

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

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

• The standard Federal rate for hospital inpatient services furnished by LTCHs.

15. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2014 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We address these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2014 report or to obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit MedPAC's Web site at:

http://www.medpac.gov

.

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

A. Background

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

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

B. MS-DRG Reclassifications

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

C. Adoption of the MS-DRGs in FY 2008

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

D. Proposed FY 2015 MS-DRG Documentation and Coding Adjustment

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

In the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189), we adopted the MS-DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS-DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008. (In FY 2014, there are 751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking into account patient severity of illness in Medicare payment rates for acute care hospitals, MS-DRGs encourage hospitals to improve their documentation and coding of patient diagnoses.

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

estimated that maintaining budget neutrality required an adjustment of −4.8 percent to the national standardized amount. We provided for phasing in this −4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of −1.2 percent for FY 2008, −1.8 percent for FY 2009, and −1.8 percent for FY 2010.

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

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

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

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

Section 7(b)(1)(A) of Public Law 110-90 requires that, if the Secretary determines that implementation of the MS-DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110-90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years.

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

If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS-DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110-90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110-90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 matched the changes that occurred in those years. Public Law 110-90 requires that the Secretary only make these recoupment or repayment adjustments for discharges occurring during FYs 2010, 2011, and 2012.

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

In order to implement the requirements of section 7 of Public Law 110-90, we performed a retrospective evaluation of the FY 2008 data for claims paid through December 2008 using the methodology first described in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 through 43772). We performed the same analysis for FY 2009 claims data using the same methodology as we did for FY 2008 claims (75 FR 50057 through 50068). The results of the analysis for the FY 2011 IPPS/LTCH PPS proposed and final rules, and subsequent evaluations in FY 2012, supported that the 5.4 percent estimate accurately reflected the FY 2009 increases in documentation and coding under the MS-DRG system. We were persuaded by both MedPAC's analysis (as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own review of the methodologies recommended by various commenters that the methodology we employed to determine the required documentation and coding adjustments was sound.

As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files are available to the public to allow independent analysis of the FY 2008 and FY 2009 documentation and coding effects. Interested individuals may still order these files through the CMS Web site at:

http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/

by clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This CMS Web page describes the file and provides directions and further detailed instructions for how to order.

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

Mailing address if using the U.S. Postal Service: Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207-0520.

Mailing address if using express mail: Centers for Medicare & Medicaid Services, OFM/Division of Accounting—RDDC, 7500 Security Boulevard, C3-07-11, Baltimore, MD 21244-1850.

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

In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777), we opted to delay the implementation of any documentation and coding adjustment until a full analysis of case-mix changes based on FY 2009 claims data could be completed. We refer readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through

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

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

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

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

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

Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make an adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2008 and FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110-90. This determination must be based on a retrospective evaluation of claims data. Our actuaries estimated that there was a 5.8 percentage point difference resulting in an increase in aggregate payments of approximately $6.9 billion. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined that an aggregate adjustment of −5.8 percent in FYs 2011 and 2012 would be necessary in order to meet the requirements of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of the increase in aggregate payments (including interest) in FYs 2008 and 2009.

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

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

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

Similar to the adjustments authorized under section 7(b)(1)(B) of Public Law 110-90, the adjustment required under section 631 of the ATRA is a one-time recoupment of a prior overpayment, not

a permanent reduction to payment rates. Therefore, any adjustment made to reduce payment rates in one year would eventually be offset by a positive adjustment, once the necessary amount of overpayment is recovered.

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

Consistent with the approach discussed in the FY 2014 rulemaking for recouping the $11 billion required by section 631 of the ATRA, we are proposing an additional −0.8 percent recoupment adjustment to the standardized amount for FY 2015. We estimated that this level of adjustment, combined with leaving the −0.8 percent adjustment made for FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into account the approximately $1 billion recovered in FY 2014, this will leave approximately $8 billion remaining to be recovered by FY 2017. We continue to believe that if adjustments of approximately −0.8 percent are implemented in FYs 2014, 2015, 2016, and 2017, using standard inflation factors, the entire $11 billion will be accounted for by the end of the statutory 4-year timeline. As we explained in the FY 2014 rulemaking, estimates of any future adjustments are subject to slight variations in total savings; therefore, we are not proposing specific adjustments for FY 2016 and FY 2017 at this time. We continue to believe that our proposed −0.8 percent adjustment for FY 2015 is a reasonable and fair approach that will help satisfy the requirements of the statute while mitigating extreme annual fluctuations in payment rates. In addition, we again note that this −0.8 percent recoupment adjustment, and future adjustments under this authority, will be eventually offset by an equivalent positive adjustment once the full $11 billion recoupment requirement has been realized.

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

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

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background

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

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

http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf

).

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

Patients” cost centers. Accordingly, a new subscripted line for “Implantable Devices Charged to Patients” was created in July 2009. This new subscripted cost center has been available for use for cost reporting periods beginning on or after May 1, 2009.

As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527), in addition to the findings regarding implantable devices, RTI also found that the costs and charges of computed tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI also concluded that both the IPPS and the OPPS relative weights would better estimate the costs of those services if CMS were to add standard cost centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRIs, and cardiac catheterization, and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed discussion of the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization.) The new standard cost centers for CT scans, MRIs, and cardiac catheterization are effective for cost reporting periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

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

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

At the time of the development of the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27506 through 27507), we had a substantial number of hospitals completing all, or some, of these new cost centers on the FY 2011 Medicare cost reports, compared to prior years. We stated that we believed that the analytic findings described using the FY 2011 cost report data and FY 2012 claims data supported our original decision to break out and create new cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we saw no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in FY 2014, we proposed to calculate the MS-DRG relative weights using 19 CCRs, creating distinct CCRs from cost report data for implantable devices, MRIs, CT scans, and cardiac catheterization (78 FR 27509).

We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507 through 27509) and final rule (78 FR 50518 through 50523) in which we presented data analyses using distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/LTCH PPS final rule also set forth our responses to public comments we received on our proposal to implement these CCRs. As explained in more detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our proposal to use 19 CCRs to calculate MS-DRG relative weights beginning in FY 2014—the then existing 15 cost centers and the 4 new CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization. Therefore, beginning in FY 2014, we calculated the IPPS MS-DRG relative weights using 19 CCRs, creating distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization.

2. Discussion for FY 2015

To calculate the proposed MS-DRG relative weights for FY 2015, we use two data sources: the MedPAR file as the

claims data source and the HCRIS as the cost report data source. We adjust the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the proposed 19 CCRs and the proposed MS-DRG relative weights for FY 2015 is included in section II.H. of the preamble of this proposed rule.

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

1. Background

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

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

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

Effective for discharges occurring on or after October 1, 2008, under the authority of section 1886(d)(4)(D) of the Act, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS-DRG if a selected condition is not present on admission (POA). Thus, if a selected condition that was not POA manifests during the hospital stay, it is considered a HAC and the case

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