# Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2019 Rates; Proposed Quality Reporting Requirements for Specific Providers; Proposed Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (Promoting Interoperability Programs) Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Medicare Cost Reporting Requirements; and Physician Certification and Recertification of Claims

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2018-08705

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** May 7, 2018
- **Citation:** 83 FR 20164

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 424, and 495
[CMS-1694-P]
RIN 0938-AT27
Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2019 Rates; Proposed Quality Reporting Requirements for Specific Providers; Proposed Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (Promoting Interoperability Programs) Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Medicare Cost Reporting Requirements; and Physician Certification and Recertification of Claims

AGENCY:

Centers for Medicare & 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 for FY 2019. Some of these proposed changes implement certain statutory provisions contained in the 21st Century Cures Act and the Bipartisan Budget Act of 2018, and other legislation. We also are proposing to make changes relating to Medicare graduate medical education (GME) affiliation agreements for new urban teaching hospitals. In addition, we are proposing to provide the market basket update that would apply to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits for FY 2019. We are proposing to update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) for FY 2019.

In addition, we are proposing to establish new requirements or revise existing requirements for quality reporting by specific Medicare providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs). We also are proposing to establish new requirements or revise existing requirements for eligible professionals (EPs), eligible hospitals, and critical access hospitals (CAHs) participating in the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (now referred to as the Promoting Interoperability Programs). In addition, we are proposing changes to the requirements that apply to States operating Medicaid Promoting Interoperability Prrograms. We are proposing to update policies for the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program.

We also are proposing to make changes relating to the required supporting documentation for an acceptable Medicare cost report submission and the supporting information for physician certification and recertification of claims.

DATES:

Comment Period:
To be assured consideration, comments must be received at one of the addresses provided in the
ADDRESSES
section, no later than 5 p.m. on June 25, 2018.

ADDRESSES:

In commenting, please refer to file code CMS-1694-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.
Electronically.
You may submit electronic comments on this regulation to
http://www.regulations.gov
. Follow the “Submit a comment” instructions.

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-1694-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 to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1694-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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 Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Sole Community Hospitals, Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital Payment Adjustment Issues.

Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and Emily Lipkin, (410) 786-3633, 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.

Jeris Smith, (410) 786-0110, Frontier Community Health Integration Project Demonstration Issues.

Cindy Tourison, (410) 786-1093, Hospital Readmissions Reduction Program—Readmission Measures for Hospitals Issues.

James Poyer, (410) 786-2261, Hospital Readmissions Reduction Program—Administration Issues.

Elizabeth Bainger, (410) 786-0529, Hospital-Acquired Condition Reduction Program Issues.

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

Grace Snyder, (410) 786-0700 and James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing—Program Administration, Validation, and Reconsideration Issues.

Reena Duseja, (410) 786-1999 and Cindy Tourison, (410) 786-1093, Hospital Inpatient Quality Reporting—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues.

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

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

Joel Andress, (410) 786-5237 and Caitlin Cromer, (410) 786-3106, PPS-Exempt Cancer Hospital Quality Reporting Issues.

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

Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs Clinical Quality Measure Related Issues.

Kathleen Johnson, (410) 786-3295 and Steven Johnson (410) 786-3332, Promoting Interoperability Programs Nonclinical Quality Measure Related Issues.

Kellie Shannon, (410) 786-0416, Acceptable Medicare Cost Report Submissions Issues.

Thomas Kessler, (410) 786-1991, Physician Certification and Recertification of Claims.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:
All 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 comments received before the close of the comment period on the following website as soon as possible after they have been received:
http://www.regulations.gov
. Follow the search instructions on that website to view public comments.

Electronic Access

This
Federal Register
document is 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 Website

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, the majority of the IPPS tables and LTCH PPS tables are no longer published in the
Federal Register
. Instead, these tables generally will be available only through the Internet. The IPPS tables for this proposed rule are available through the Internet on the CMS website 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 2019 IPPS Proposed Rule Home Page” or “Acute Inpatient—Files for Download”. The LTCH PPS tables for this FY 2019 proposed rule are available through the Internet on the CMS website at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html
under the list item for Regulation Number CMS-1694-P. For further details on the contents of the tables referenced in this proposed rule, we refer readers to section VI. of the Addendum to this proposed rule.

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

Table of Contents

I. Executive Summary and Background

A. Executive Summary

B. Background Summary

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

D. Summary of 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 2019 MS-DRG Documentation and Coding Adjustment

E. Refinement of the MS-DRG Relative Weight Calculation

F. Proposed Changes to Specific MS-DRG Classifications

G. Recalibration of the Proposed FY 2019 MS-DRG Relative Weights

H. Proposed Add-On Payments for New Services and Technologies for FY 2019

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

A. Background

B. Worksheet S-3 Wage Data for the Proposed FY 2019 Wage Index

C. Verification of Worksheet S-3 Wage Data

D. Method for Computing the Proposed FY 2019 Unadjusted Wage Index

E. Proposed Occupational Mix Adjustment to the FY 2019 Wage Index

F. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2019 Occupational Mix Adjusted Wage Index

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

H. Proposed FY 2019 Wage Index Tables

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

J. Proposed Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
and Proposed Change to Lock-In Date

L. Process for Requests for Wage Index Data Corrections

M. Proposed Labor-Related Share for the Proposed FY 2019 Wage Index

N. Request for Public Comments on Wage Index Disparities

IV. Other Decisions and Proposed Changes to the IPPS for Operating System

A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-DRG Special Payment Policies
(§ 412.4)

B. Proposed Changes in the Inpatient Hospital Updates for FY 2019 (§ 412.64(d))

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

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

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

F. Proposed Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2019 (§ 412.106)

G. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs) (§§ 412.90, 412.92, and 412.108)

H. Hospital Readmissions Reduction Program: Proposed Updates and Changes (§§ 412.150 Through 412.154)

I. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy Changes

J. Hospital-Acquired Condition (HAC) Reduction Program

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

L. Rural Community Hospital Demonstration Program

M. Proposed Revision of Hospital Inpatient Admission Orders Documentation Requirements Under Medicare Part A

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

A. Overview

B. Additional Provisions

C. Proposed Annual Update for FY 2019

VI. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2019

B. Proposed Changes to Regulations Governing Satellite Facilities

C. Proposed Changes to Regulations Governing Excluded Units of Hospitals

D. Critical Access Hospitals (CAHs)

VII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2019

A. Background of the LTCH PPS

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2019

C. Proposed Modifications to the Application of the Site Neutral Payment Rate (§ 412.522)

D. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed Changes to the LTCH PPS for FY 2019

E. Proposed Elimination of the “25-Percent Threshold Policy” Adjustment (§ 412.538)

VIII. Quality Data Reporting Requirements for Specific Providers and Suppliers

A. Hospital Inpatient Quality Reporting (IQR) Program

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

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

D. Proposed Changes to the Medicare and Medicaid EHR Incentive Programs (Now Referred to as the Medicare and Medicaid Promoting Interoperability Programs)

IX. Proposed Revisions of the Supporting Documentation Required for Submission of an Acceptable Medicare Cost Report

X. Requirements for Hospitals To Make Public a List of Their Standard Charges via the Internet

XI. Proposed Revisions Regarding Physician Certification and Recertification of Claims

XII. Request for Information on Promoting Interoperability and Electronic Healthcare Information Exchange Through Possible Revisions to the CMS Patient Health and Safety Requirements for Hospitals and Other Medicare- and Medicaid-Participating Providers and Suppliers

XIII. MedPAC Recommendations

XIV. Other Required Information

A. Publicly Available Data

B. Collection of Information Requirements

C. Response to Public Comments

Regulation Text

Addendum—Proposed Schedule of Proposed Standardized Amounts, Update Factors, Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2018, and Payment Rates for LTCHs Effective for Discharges Occurring on or After October 1, 2018

I. Summary and Background

II. Proposed Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2019

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 2019

A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update for FY 2019

B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2019

C. Capital Input Price Index

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2019

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2019

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2019

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2019

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

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 2019

VI. Tables Referenced in This Proposed Rule Generally Available Only Through the Internet on the CMS Website

Appendix A—Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Objectives of the IPPS and the LTCH PPS

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

H. Effects of Other Proposed Policy Changes

I. Effects of Proposed Changes in the Capital IPPS

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

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

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

M. Effects of Proposed Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

N. Effects of Proposed Requirements Regarding the Promoting Interoperability Programs

O. Alternatives Considered

P. Reducing Regulation and Controlling Regulatory Costs

Q. Overall Conclusion

R. Regulatory Review Costs

II. Accounting Statements and Tables

A. Acute Care Hospitals

B. LTCHs

III. Regulatory Flexibility Act (RFA) Analysis

IV. Impact on Small Rural Hospitals

V. Unfunded Mandate Reform Act (UMRA) Analysis

VI. Executive Order 13175

VII. 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 2019

A. Proposed FY 2019 Inpatient Hospital Update

B. Proposed Update for SCHs and MDHs for FY 2019

C. Proposed FY 2019 Puerto Rico Hospital Update

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2019

E. Proposed Update for LTCHs for FY 2019

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). This proposed rule also would make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.

We are proposing to establish new requirements and revise existing requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are participating in Medicare. We also are proposing to establish new requirements and revise existing requirements for eligible professionals (EPs), eligible hospitals, and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs. We are proposing to update policies for the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program.

We also are proposing to make changes relating to the supporting documentation required for an acceptable Medicare cost report submission and the supporting information for physician certification and recertification of claims.

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 2019 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; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. 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 the BBRA (Pub. L. 106-113) and section 307(b)(1) of the BIPA (Pub. L. 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 LTCHs described in section 1886(d)(1)(B)(iv) of the Act.

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

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

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

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

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

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

• Section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act and amended by section 10309 of the Affordable Care Act and section 15002 of the 21st Century Cures Act, which establishes the “Hospital Readmissions Reduction Program.” Under the program, payments for discharges from an “applicable hospital” under section 1886(d) of the Act will be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act requires the Secretary to compare cohorts of hospitals to each other in determining the extent of excess readmissions.

• Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to disproportionate share hospital (DSH) payments under section 1886(d)(5)(F) of the Act and for a new uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, subsection (d) hospitals that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act will receive two separate payments: (1) 25 percent of the amount they previously would have received under section 1886(d)(5)(F) of the Act for DSH (“the empirically justified amount”), and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured (minus 0.2 percentage point for FY 2018 through FY 2019); 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(c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS with implementation beginning in FY 2016, and provides for a 4-year transitional blended payment rate for discharges occurring in LTCH cost reporting periods beginning in FYs 2016 through 2019. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B)(ii) by adding new clause (iv), which specifies that the IPPS comparable amount defined in subclause (I) shall be reduced by 4.6 percent for FYs 2018 through 2026.

• Section 1886(m)(6) of the Act, as amended by section 15009 of the 21st Century Cures Act (Pub. L. 114-255), which provides for a temporary exception to the application of the site neutral payment rate under the LTCH PPS for certain spinal cord specialty hospitals for discharges in cost reporting periods beginning during FYs 2018 and 2019.

• Section 1886(m)(6) of the Act, as amended by section 15010 of the 21st Century Cures Act (Pub. L. 114-255), which provides for a temporary exception to the application of the site neutral payment rate under the LTCH PPS for certain LTCHs with certain discharges with severe wounds occurring in cost reporting periods beginning during FY 2018.

• Section 1886(m)(5)(D)(iv) of the Act, as added by section 1206(c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which provides for the establishment of a functional status quality measure in the LTCH QRP for change in mobility among inpatients requiring ventilator support.

• Section 1899B of the Act, as added by section 2(a) of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act, Pub. L. 113-185), which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.

2. Improving Patient Outcomes and Reducing Burden Through Meaningful Measures

Regulatory reform and reducing regulatory burden are high priorities for CMS. To reduce the regulatory burden on the healthcare industry, lower health care costs, and enhance patient care, in October 2017, we launched the Meaningful Measures Initiative.
1

This initiative is one component of our agency-wide Patients Over Paperwork Initiative,
2

which is aimed at evaluating and streamlining regulations with a goal to reduce unnecessary cost and burden, increase efficiencies, and improve beneficiary experience. The Meaningful Measures Initiative is aimed at identifying the highest priority areas for quality measurement and quality improvement in order to assess the core quality of care issues that are most vital

to advancing our work to improve patient outcomes. The Meaningful Measures Initiative represents a new approach to quality measures that will foster operational efficiencies and will reduce costs, including collection and reporting burden while producing quality measurement that is more focused on meaningful outcomes.

1
Meaningful Measures webpage:
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html
.

2
Remarks by Administrator Seema Verma at the Health Care Payment Learning and Action Network (LAN) Fall Summit, as prepared for delivery on October 30, 2017. Available at:
https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html
.

The Meaningful Measures framework has the following objectives:

• Address high-impact measure areas that safeguard public health;

• Patient-centered and meaningful to patients;

• Outcome-based where possible;

• Fulfill each program's statutory requirements;

• Minimize the level of burden for health care providers (for example, through a preference for EHR-based measures where possible, such as electronic clinical quality measures;
3

3
Refer to section VIII.A.9.c.of the preamble of this proposed rule where we are seeking public comment on the potential future development and adoption of eCQMs.

• Significant opportunity for improvement;

• Address measure needs for population based payment through alternative payment models; and

• Align across programs and/or with other payers.

In order to achieve these objectives, we have identified 19 Meaningful Measures areas and mapped them to six overarching quality priorities as shown in the following table:

Quality priority
Meaningful measure area

Making Care Safer by Reducing Harm Caused in the Delivery of Care

Healthcare-Associated Infections
Preventable Healthcare Harm

Strengthen Person and Family Engagement as Partners in Their Care

Care is Personalized and Aligned with Patient's Goals
End of Life Care According to Preferences
Patient's Experience of Care
Patient Reported Functional Outcomes

Promote Effective Communication and Coordination of Care

Medication Management
Admissions and Readmissions to Hospitals
Transfer of Health Information and Interoperability

Promote Effective Prevention and Treatment of Chronic Disease

Preventive Care
Management of Chronic Conditions
Prevention, Treatment, and Management of Mental Health
Prevention and Treatment of Opioid and Substance Use Disorders
Risk Adjusted Mortality

Work with Communities to Promote Best Practices of Healthy Living

Equity of Care
Community Engagement

Make Care Affordable

Appropriate Use of Healthcare
Patient-focused Episode of Care
Risk Adjusted Total Cost of Care

By including Meaningful Measures in our programs, we believe that we can also address the following cross-cutting measure criteria:

• Eliminating disparities;

• Tracking measurable outcomes and impact;

• Safeguarding public health;

• Achieving cost savings;

• Improving access for rural communities; and

• Reducing burden.

We believe that the Meaningful Measures Initiative will improve outcomes for patients, their families, and health care providers while reducing burden and costs for clinicians and providers as well as promoting operational efficiencies.

3. Summary of the Major Provisions

Below we provide a summary of the major provisions in this proposed rule. In general, these major provisions are being proposed as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the proposed changes included in this proposed rule is presented below in section I.D. of this preamble.

a. MS-DRG Documentation and Coding Adjustment

Section 631 of the American Taxpayer Relief Act of 2012 (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. The FY 2014 through FY 2017 adjustments represented 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. Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.) Therefore, for FY 2019, we are proposing to make an adjustment of +0.5 percent to the standardized amount.

b. Expansion of the Postacute Care Transfer Policy

Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. Accordingly, we are proposing to make conforming amendments to § 412.4(c) of the regulation, effective for discharges on or after October 1, 2018, to specify that if a discharge is assigned to one of the MS-DRGs subject to the postacute care transfer policy and the individual is transferred to hospice care by a hospice program, the discharge would be subject to payment as a transfer case.

c. DSH Payment Adjustment and Additional Payment for Uncompensated Care

Section 3133 of the Affordable Care Act modified the Medicare

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

In this proposed rule, we are proposing to update our estimates of the three factors used to determine uncompensated care payments for FY 2019. We are continuing to use uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA) in the calculation of Factor 2. We also are continuing to incorporate data from Worksheet S-10 in the calculation of hospitals' share of the aggregate amount of uncompensated care by combining data on uncompensated care costs from Worksheet S-10 for FYs 2014 and 2015 with proxy data regarding a hospital's share of low-income insured days for FY 2013 to determine Factor 3 for FY 2019. In addition, we are proposing to use only data regarding low-income insured days for FY 2013 to determine the amount of uncompensated care payments for Puerto Rico hospitals, Indian Health Service and Tribal hospitals, and all-inclusive rate providers. For this proposed rule, we also are proposing the following policies: (1) For providers with multiple cost reports beginning in the same fiscal year, to use the longest cost report and annualize Medicaid data and uncompensated care data if a hospital's cost report does not equal 12 months of data; (2) in the rare case where a provider has multiple cost reports beginning in the same fiscal year, but one report also spans the entirety of the following fiscal year such that the hospital has no cost report for that fiscal year, the cost report that spans both fiscal years would be used for the latter fiscal year; and (3) to apply statistical trim methodologies to potentially aberrant cost-to-charge ratios (CCRs) and potentially aberrant uncompensated care costs reported on the Worksheet S-10.

d. Proposed Changes to the LTCH PPS

In this proposed rule, we set forth proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2019. In addition, we are proposing to eliminate the 25-percent threshold policy, and under this proposal we would apply a one-time permanent adjustment of approximately −0.9 percent to the LTCH PPS standard Federal payment rate to ensure this proposed elimination of the 25-percent threshold policy is budget neutral.

e. Reduction of Hospital Payments for Excess Readmissions

We are proposing to make changes to policies for the Hospital Readmissions Reduction Program, which is established under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act and further amended by section 15002 of the 21st Century Cures Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FY 2018 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG). In this proposed rule, we are proposing to establish the applicable periods for FY 2019, FY 2020, and FY 2021. We are also proposing to codify the definitions of dual-eligible patients, the proportion of dual-eligibles, and the applicable period for dual-eligibility.

f. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients, clinicians, and providers in our quality programs and the Patients Over Paperwork Initiative to reduce costs and burden and program complexity as discussed in section I.A.2. of the preamble of this proposed rule, we are proposing to remove a total of 10 measures from the Hospital VBP Program, all of which would continue to be used in the Hospital IQR Program or the HAC Reduction Program, in order to reduce the costs and complexity of tracking these measures in multiple programs. We also are proposing to adopt measure removal factors for the Hospital VBP Program. Specifically, we are proposing to remove six measures beginning with the FY 2021 program year: (1) Elective Delivery (NQF #0469) (PC-01); (2) National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138); (3) National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139); (4) American College of Surgeons-Centers for Disease Control and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure (NQF #0753); (5) National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant
Staphylococcus aureus
Bacteremia (MRSA) Outcome Measure (NQF #1716); and (6) National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset
Clostridium difficile
Infection (CDI) Outcome Measure (NQF #1717). We are also proposing to remove four measures from the Hospital VBP Program effective with the effective date of the FY 2019 IPPS/LTCH PPS final rule: (1) Patient Safety and Adverse Events (Composite) (NQF #0531) (PSI 90); (2) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) (AMI Payment); (3) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); and (4) Hospital-Level, Risk-Standardized Payment Associated With a 30-Day Episode-of-Care for Pneumonia (PN Payment) (NQF #2579). In addition, we are proposing to rename the Clinical Care domain as the Clinical Outcomes domain beginning with the FY 2020 program year; we are proposing to remove the Safety domain from the Hospital VBP Program, if our proposals to removal all of the measures in this domain are finalized, and to weight the three remaining domains as follows: Clinical Outcomes domain—50 percent; Person and Community Engagement domain—25 percent; and Efficiency and Cost Reduction domain—25 percent.

g. Hospital-Acquired Condition (HAC) Reduction Program

Section 1886(p) of the Act, as added under section 3008(a) of the Affordable Care Act, establishes an incentive to hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to make an adjustment to payments to applicable hospitals effective for discharges beginning on October 1, 2014. This 1-percent payment reduction applies to a hospital whose ranking in the worst-performing 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. As part of our agency-wide Patients over Paperwork and Meaningful Measures Initiatives, discussed in section I.A.2. of the preamble of this proposed rule, we are proposing that the measures currently included in the HAC Reduction Program should be retained because the measures address a performance gap in patient safety and reducing harm caused in the delivery of care. In this proposed rule, we are proposing to: (1) Establish administrative policies to collect, validate, and publicly report NHSN healthcare-associated infection (HAI) quality measure data that facilitate a seamless transition, independent of the Hospital IQR Program, beginning with January 1, 2019 infectious events; (2) change the scoring methodology by removing domains and assigning equal weighting to each measure for which a hospital has a measure; and (3) establish the applicable period for FY 2021. In addition, we are seeking stakeholder comment regarding the potential future inclusion of additional measures, including eCQMs.

h. Hospital Inpatient Quality Reporting (IQR) Program

Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) hospitals are required to report data on measures selected by the Secretary for a fiscal year in order to receive the full annual percentage increase that would otherwise apply to the standardized amount applicable to discharges occurring in that fiscal year.

In this proposed rule, we are proposing several changes. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients and clinicians in our quality programs and the Patients Over Paperwork initiative to reduce burden, cost, and program complexity as discussed in section I.A.2. of the preamble of this proposed rule, we are proposing to add a new measure removal factor and to remove a total of 39 measures from the Hospital IQR Program. For a full list of measures proposed for removal, we refer readers to section VIII.A.4.b. of the preamble of this proposed rule. Beginning with the CY 2018 reporting period/FY 2020 payment determination and subsequent years, we are proposing to remove 17 claims-based measures and two structural measures. Beginning with the CY 2019 reporting period/FY 2021 payment determination and subsequent years, we are proposing to remove eight chart-abstracted measures and two claims-based measures. Beginning with the CY 2020 reporting period/FY 2022 payment determination and subsequent years, we are proposing to remove one chart-abstracted measure, one claims-based measure, and seven eCQMs from the Hospital IQR Program measure set. Beginning with the CY 2021 reporting period/FY 2023 payment determination, we are proposing to remove one claims-based measure.

In addition, for the CY 2019 reporting period/FY 2021 payment determination, we are proposing to: (1) Require the same eCQM reporting requirements that were adopted for the CY 2018 reporting period/FY 2020 payment determination (82 FR 38355 through 38361), such that hospitals submit one, self-selected calendar quarter of 2019 discharge data for 4 eCQMs in the Hospital IQR Program measure set; and (2) require that hospitals use the 2015 Edition certification criteria for CEHRT. These proposals are in alignment with proposals or current established policies under the Medicare and Medicaid Promoting Interoperability Programs (previously known as the Medicare and Medicaid EHR Incentive Programs). In addition, we are seeking public comment on two measures for potential future inclusion in the Hospital IQR Program, as well as the potential future development and adoption of electronic clinical quality measures generally.

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

The LTCH QRP is authorized by section 1886(m)(5) of the Act and applies to all hospitals certified by Medicare as long-term care hospitals (LTCHs). Under the LTCH QRP, the Secretary reduces by 2 percentage points the annual update to the LTCH PPS standard Federal rate for discharges for an LTCH during a fiscal year if the LTCH fails to submit data in accordance with the LTCH QRP requirements specified for that fiscal year. As part of agency-wide efforts under the Meaningful Measures Initiative to use a parsimonious set of the most meaningful measures for patients and clinicians in our quality programs and the Patients Over Paperwork Initiative to reduce cost and burden and program complexity as discussed in section I.A.2. of the preamble of this proposed rule, we are proposing to remove three measures from the LTCH QRP. We also are proposing to adopt a new measure removal factor and are proposing to codify the measure removal factors in our regulations. In addition, we are proposing to update our regulations to change methods by which an LTCH is notified of noncompliance with the requirements of the LTCH QRP for a program year; and how CMS will notify an LTCH of a reconsideration decision.

4. Summary of Costs and Benefits

•
Adjustment for MS-DRG Documentation and Coding Changes.
Section 414 of the MACRA replaced the single positive adjustment we intended to make in FY 2018 once the recoupment required by section 631 of the ATRA was complete with a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.) For FY 2019, we are proposing to make an adjustment of +0.5 percent to the standardized amount consistent with the MACRA.

•
Expansion of the Postacute Care Transfer Policy.
Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. Accordingly, we are proposing to make conforming amendments to § 412.4(c) of the regulation to specify that, effective for discharges on or after October 1, 2018, if a discharge is assigned to one of the MS-DRGs subject to the postacute care transfer policy and the individual is transferred to hospice care by a hospice program, the discharge would be subject to payment as a transfer case. We estimate that this statutory expansion to the postacute care transfer policy will reduce Medicare payments under the IPPS by approximately $240 million in FY 2019.

•
Proposed Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care.
Under section 1886(r) of the Act (as added by section 3133 of the Affordable Care Act), DSH payments to hospitals under section

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

For FY 2019, we are proposing to update our estimates of the three factors used to determine uncompensated care payments. We are continuing to use uninsured estimates produced by OACT as part of the development of the NHEA in the calculation of Factor 2. We also are continuing to incorporate data from Worksheet S-10 in the calculation of hospitals' share of the aggregate amount of uncompensated care by combining data on uncompensated care costs from Worksheet S-10 for FY 2014 and FY 2015 with proxy data regarding a hospital's share of low-income insured days for FY 2013 to determine Factor 3 for FY 2019. To determine the amount of uncompensated care for Puerto Rico hospitals, Indian Health Service and Tribal hospitals, and all-inclusive rate providers, we are proposing to use only the data regarding low-income insured days for FY 2013. In addition, in this proposed rule, we are proposing the following policies: (1) For providers with multiple cost reports beginning in the same fiscal year, to use the longest cost report and annualize Medicaid data and uncompensated care data if a hospital's cost report does not equal 12 months of data; (2) in the rare case where a provider has multiple cost reports beginning in the same fiscal year, but one report also spans the entirety of the following fiscal year such that the hospital has no cost report for that fiscal year, the cost report that spans both fiscal years would be used for the latter fiscal year; and (3) to apply statistical trim methodologies to potentially aberrant CCRs and potentially aberrant uncompensated care costs.

We are projecting that proposed estimated Medicare DSH payments, and additional payments for uncompensated care made for FY 2019, would increase payments overall by approximately 1.3 percent as compared to the estimate of overall payments, including Medicare DSH payments and uncompensated care payments that will be distributed in FY 2018. The additional payments have redistributive effects based on a hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that are estimated to receive Medicare DSH payments, and the calculated payment amount is not directly tied to a hospital's number of discharges.

•
Proposed Update to the LTCH PPS Payment Rates and Other Payment Policies.
Based on the best available data for the 409 LTCHs in our database, we estimate that the proposed changes to the payment rates and factors that we are presenting in the preamble and Addendum of this proposed rule, which reflects the continuation of the transition of the statutory application of the site neutral payment rate, the update to the LTCH PPS standard Federal payment rate for FY 2019, and the proposed one-time permanent adjustment of approximately-0.9 percent to the LTCH PPS standard Federal payment rate to ensure this proposed elimination of the 25-percent threshold policy is budget neutral would result in an estimated decrease in payments in FY 2019 of approximately $5 million.

•
Proposed Changes to the Hospital Readmissions Reduction Program.
For FY 2019 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG). Overall, in this proposed rule, we estimate that 2,610 hospitals would have their base operating DRG payments reduced by their determined proposed proxy FY 2019 hospital-specific readmission adjustment. As a result, we estimate that the Hospital Readmissions Reduction Program would save approximately $566 million in FY 2019.

•
Value-Based Incentive Payments under the Hospital VBP Program.
We estimate that there will be no net financial impact to the Hospital VBP Program for the FY 2019 program year in the aggregate because, by law, the amount available for value-based incentive payments under the program in a given year must be equal to the total amount of base operating MS-DRG payment amount reductions for that year, as estimated by the Secretary. The estimated amount of base operating MS-DRG payment amount reductions for the FY 2019 program year and, therefore, the estimated amount available for value-based incentive payments for FY 2019 discharges is approximately $1.9 billion.

•
Proposed Changes to the HAC Reduction Program.
A hospital's Total HAC score and its ranking in comparison to other hospitals in any given year depend on several different factors. Any significant impact due to the proposed HAC Reduction Program changes for FY 2019, including which hospitals would receive the adjustment, would depend on actual experience.

The proposed removal of NHSN HAI measures from the Hospital IQR Program and the subsequent cessation of its validation processes for NHSN HAI measures and proposed creation of a validation process for the HAC Reduction program represent no net change in reporting burden across CMS hospital quality programs. However, if our proposal to remove HAI chart-abstracted measures from the Hospital IQR Program is finalized, we anticipate a total burden shift of 43,200 hours and approximately $1.6 million as a result of no longer needing to validate those HAI measures under the Hospital IQR Program and beginning the validation process under the HAC Reduction Program.

•
Proposed Changes to the Hospital Inpatient Quality Reporting (IQR) Program.
Across 3,300 IPPS hospitals, we estimate that our proposed requirements for the Hospital IQR Program would result in the following changes to costs and burdens related to information collection for this program compared to previously adopted requirements: (1) A total collection of information burden reduction of 1,046,071 hours and a total cost reduction of approximately $38.3 million for the CY 2019 reporting period/FY 2021 payment determination, due to the proposed removal of ED-1, IMM-2, and VTE-6 measures; and (2) a total collection of information burden reduction of 901,200 hours and a total cost reduction of $33 million for the CY 2020 reporting period/FY 2022 payment determination, due to: (a) The proposed removal of ED-2, and (b) validation of the NHSN HAI measures no longer being conducted under the Hospital IQR Program once the HAC Reduction Program begins validating these measures, as proposed in the preamble

of this proposed rule for the HAC Reduction Program.

Further, we anticipate that the proposed removal of 39 measures would result in a reduction in costs unrelated to information collection. For example, it may be costly for health care providers to track the confidential feedback, preview reports, and publicly reported information on a measure where we use the measure in more than one program. Also, when measures are in multiple programs, maintaining the specifications for those measures, as well as the tools we need to collect, validate, analyze, and publicly report the measure data may result in costs to CMS. In addition, beneficiaries may find it confusing to see public reporting on the same measure in different programs. We anticipate that our proposals will reduce the above-described costs.

•
Proposed Changes Related to the LTCH QRP.
In this proposed rule, we are proposing to remove three measures from the LTCH QRP, two measures beginning with the FY 2020 LTCH QRP and one measure beginning with the FY 2021 LTCH QRP. We also are proposing a new quality measure removal factor for the LTCH QRP. We estimate that the impact of these proposed changes is a reduction in costs of approximately $1,148 per LTCH annually or approximately $482,469 for all LTCHs annually.

B. Background Summary

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

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

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

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

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

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

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

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

Under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through FY 2022. Through and including FY 2006, an MDH received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate was exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. For discharges occurring on or after October 1, 2007, but before October 1, 2022, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years).

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

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

2. Hospitals and Hospital Units Excluded From the IPPS

Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, 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 IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are included along with the IPPS annual update in this document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, 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. Similarly, extended neoplastic disease care hospitals are paid on a reasonable cost basis subject to a rate-of-increase ceiling on inpatient operating costs.

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

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

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). During the 5-year (optional) transition period, a LTCH's payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for cost reporting periods beginning on or after October 1, 2006 through September 30, 2016, all LTCHs were paid 100 percent of the Federal rate. Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, based on a rolling effective date that is linked to the date on which a given LTCH's Federal FY 2016 cost reporting period begins, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS (73 FR 26797 through 26798).

4. Critical Access Hospitals (CAHs)

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

5. Payments for Graduate Medical Education (GME)

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

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

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

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

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

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

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

Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. These adjustments follow the recoupment adjustment to the standardized amounts under section 1886(d) of the Act based upon the Secretary's estimates for discharges occurring from FYs 2014 through 2017 to fully offset $11 billion, in accordance with section 631 of the ATRA. The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.

4. The 21st Century Cures Act (Pub. L. 114-255)

The 21st Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016, contained the following provision affecting payments under the Hospital Readmissions Reduction Program,

which we are proposing to continue to implement in this proposed rule:

• Section 15002, which amended section 1886(q)(3) of the Act by adding subparagraphs (D) and (E), which requires the Secretary to develop a methodology for calculating the excess readmissions adjustment factor for the Hospital Readmissions Reduction Program based on cohorts defined by the percentage of dual-eligible patients (that is, patients who are eligible for both Medicare and full-benefit Medicaid coverage) cared for by a hospital. In this proposed rule, we are proposing to continue to implement changes to the payment adjustment factor to assess penalties based on a hospital's performance relative to other hospitals treating a similar proportion of dual-eligible patients.

5. The Bipartisan Budget Act of 2018 (Pub. L. 115-123)

The Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 2018, contains provisions affecting payments under the IPPS and the LTCH PPS, which we are proposing to implement or continue to implement in this proposed rule:

• Section 50204 amended section 1886(d)(12) of the Act to provide for certain temporary changes to the low-volume hospital payment adjustment policy for FYs 2018 through 2022. For FY 2018, this provision extends the qualifying criteria and payment adjustment formula that applied for FYs 2011 through 2017. For FYs 2019 through 2022, this provision modifies the discharge criterion and payment adjustment formula. In FY 2023 and subsequent fiscal years, the qualifying criteria and payment adjustment revert to the requirements that were in effect for FYs 2005 through 2010.

• Section 50205 extends the MDH program through FY 2022. It also provides for an eligible hospital that is located in a State with no rural area to qualify for MDH status under an expanded definition if the hospital satisfies any of the statutory criteria at section 1886(d)(8)(E)(ii)(I), (II) (as of January 1, 2018), or (III) of the Act to be reclassified as rural.

• Section 51005(a) modified section 1886(m)(6) of the Act by extending the blended payment rate for site neutral payment rate LTCH discharges for cost reporting periods beginning in FY 2016 by an additional 2 years (FYs 2018 and 2019). In addition, section 51005(b) reduces the LTCH IPPS comparable per diem amount used in the site neutral payment rate for FYs 2018 through 2026 by 4.6 percent. In this proposed rule, we are proposing to make conforming changes to the existing regulations.

• Section 53109 modified section 1886(d)(5)(J) of the Act to require that, beginning in FY 2019, discharges to hospice care will also qualify as a postacute care transfer and be subject to payment adjustments.

D. Summary of the Provisions of This Proposed Rule

In this proposed rule, we are setting forth proposed payment and policy changes to the Medicare IPPS for FY 2019 operating costs and for capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we are setting forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2019.

Below is a general summary of the proposed changes included in this proposed rule.

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 for FY 2019.

• Proposed adjustment to the standardized amounts under section 1886(d) of the Act for FY 2019 in accordance with the amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 414 of the MACRA.

• Proposed recalibration of the MS-DRG relative weights.

• A discussion of the proposed FY 2019 status of new technologies approved for add-on payments for FY 2018 and a presentation of our evaluation and analysis of the FY 2019 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 to make revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following:

• The proposed FY 2019 wage index update using wage data from cost reporting periods beginning in FY 2015.

• Proposal regarding other wage-related costs in the wage index.

• Calculation of the proposed occupational mix adjustment for FY 2019 based on the 2016 Occupational Mix Survey.

• Analysis and implementation of the proposed FY 2019 occupational mix adjustment to the wage index for acute care hospitals.

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

• Proposals to codify policies regarding multicampus hospitals.

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

• The proposed adjustment to the wage index for acute care hospitals for FY 2019 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

• Determination of the labor-related share for the proposed FY 2019 wage index.

• Public comment solicitation on wage index disparities.

3. Other Decisions and Proposed Changes to the IPPS for Operating 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 to MS-DRGs subject to the postacute care transfer policy and special payment policy and implementation of the statutory changes to the postacute care transfer policy.

• Proposed changes to the inpatient hospital update for FY 2019.

• Proposed changes related to the statutory changes to the low-volume hospital payment adjustment policy.

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

• The statutorily required IME adjustment factor for FY 2019.

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

• Proposed changes to the effective date of SCH and MDH classification status determinations.

• Proposed changes related to the extension of the MDH program.

• Proposed changes to the rules for payment adjustments under the Hospital Readmissions Reduction Program based on hospital readmission

measures and the process for hospital review and correction of those rates for FY 2019.

• 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 2019.

• Proposed changes to Medicare GME affiliation agreements for new urban teaching hospitals.

• Discussion of and proposals relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2019.

• Proposed revisions of the hospital inpatient admission orders documentation requirements.

4. Proposed FY 2019 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 2019.

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 2019.

• Proposed changes to the regulations governing satellite facilities.

• Proposed changes to the regulations governing excluded units of hospitals.

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

6. Proposed Changes to the LTCH PPS

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

• Proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2019.

• Proposed changes to the blended payment rate for site neutral payment rate cases.

• Proposed elimination of the 25-percent threshold policy.

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

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

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

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

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

• Proposed changes to requirements pertaining to the clinical quality measurement for eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs.

8. Proposed Revision to the Supporting Documentation Requirements for an Acceptable Medicare Cost Report Submission

In section IX. of the preamble of this proposed rule, we set forth proposed revisions to the supporting documentation required for an acceptable Medicare cost report submission.

9. Requirements for Hospitals To Make Public List of Standard Charges

In section X. of the preamble of this proposed rule, we discuss our efforts to further improve the public accessibility of hospital standard charge information, effective January 1, 2019, in accordance with section 2718(e) of the Public Health Service Act.

10. Proposed Revisions Regarding Physician Certification and Recertification of Claims

In section XI. of the preamble of this proposed rule, we set forth proposed revisions to the requirements for supporting information used for physician certification and recertification of claims.

11. Request for Information

In section XII. of the preamble of this proposed rule, we include a request for information on possible establishment of CMS patient health and safety requirements for hospitals and other Medicare- and Medicaid-participating providers and suppliers for interoperable electronic health records and systems for electronic health care information exchange.

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

In section V. of the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2019 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We are proposing to establish the threshold amounts for outlier cases. In addition, we address the update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2019 for certain hospitals excluded from the IPPS.

13. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2019 LTCH PPS standard Federal payment rate and other factors used to determine LTCH PPS payments under both the LTCH PPS standard Federal payment rate and the site neutral payment rate in FY 2019. We are proposing to establish the adjustments for wage levels, the labor-related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates.

14. Impact Analysis

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

15. 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 provide our recommendations of the appropriate percentage changes for FY 2019 for the following:

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

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

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

16. 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 2018 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 2018 report or to obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit MedPAC's website 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.

Section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually to account for changes in resource consumption. 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) and the FYs 2011 through 2018 IPPS/LTCH PPS final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 56872; and 82 FR 38010 through 38085, respectively).

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 2019 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 and the Recoupment or Repayment Adjustment Authorized by Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)

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. 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 percentage points to the national standardized amount. We provided for phasing in this −4.8 percentage point adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of −1.2 percentage points for FY 2008, −1.8 percentage points for FY 2009, and −1.8 percentage points 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 percentage point for FY 2008 and −0.9 percentage point for FY 2009.

As discussed in prior year rulemakings, and most recently in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we implemented a series of adjustments required under sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of FY 2008 and FY 2009 claims data. We completed these adjustments in FY 2013, but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 53275) that delaying full implementation 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, and that these overpayments could not be recovered under Public Law 110-90.

In addition, as discussed in prior rulemakings and most recently in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009), 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 represented 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.

2. Adjustment Made for FY 2018 as Required Under Section 414 of Public Law 114-10 (MACRA) and Section 15005 of Public Law 114-255

As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), once the recoupment required under section 631 of the ATRA was complete, we had anticipated making a single positive adjustment in FY 2018 to offset the reductions required to recoup the $11 billion under section 631 of the ATRA. However, section 414 of the MACRA (which was enacted on April 16, 2015) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percentage point positive adjustment for each of FYs 2018 through 2023. In the FY 2017 rulemaking, we indicated that we would address the adjustments for FY 2018 and later fiscal years in future rulemaking. Section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which was enacted on December 13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section 631 of the ATRA and section 414 of the MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point to a 0.4588 percentage point. As we discussed in the FY 2018

rulemaking, we believe the directive under section 15005 of Public Law 114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38009) for FY 2018, we implemented the required +0.4588 percentage point adjustment to the standardized amount. This is a permanent adjustment to payment rates. While we did not address future adjustments required under section 414 of the MACRA and section 15005 of Public Law 114-255 at that time, we stated that we expected to propose positive 0.5 percentage point adjustments to the standardized amounts for FYs 2019 through 2023.

3. Proposed Adjustment for FY 2019

Consistent with the requirements of section 414 of the MACRA, we are proposing to implement a positive 0.5 percentage point adjustment to the standardized amount for FY 2019. This would be a permanent adjustment to payment rates. We plan to propose future adjustments required under section 414 of the MACRA for FYs 2020 through 2023 in future 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. We also refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785 through 56787) for a detailed discussion of the history of changes to the number of cost centers used in calculating the DRG relative weights. Since FY 2014, we calculate the IPPS MS-DRG relative weights using 19 CCRs, which now include distinct CCRs for implantable devices, MRIs, CT scans, and cardiac catheterization.

2. Discussion of Policy for FY 2019

Consistent with our established policy, we are calculating the proposed MS-DRG relative weights for FY 2019 using two data sources: The MedPAR file as the claims data source and the HCRIS as the cost report data source. We adjusted the charges from the claims to costs by applying the 19 national average CCRs developed from the cost reports. The description of the calculation of the proposed 19 CCRs and the proposed MS-DRG relative weights for FY 2019 is included in section II.G. of the preamble to this FY 2019 IPPS/LTCH PPS proposed rule. As we did with the FY 2018 IPPS/LTCH PPS final rule, for this proposed rule, we are providing the version of the HCRIS from which we calculated these proposed 19 CCRs on the CMS website at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Click on the link on the left side of the screen titled “FY 2019 IPPS Proposed Rule Home Page” or “Acute Inpatient Files for Download.”

F. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 2019 MS-DRG Updates

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

As of October 1, 2015, providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system instead of the ICD-9-CM coding system, which was used through September 30, 2015. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting. For a detailed discussion of the conversion of the MS-DRGs to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56789).

b. Basis for Proposed FY 2019 MS-DRG Updates

CMS has previously encouraged input from our stakeholders concerning the annual IPPS updates when that input was made available to us by December 7 of the year prior to the next annual proposed rule update. As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38010), as we work with the public to examine the ICD-10 claims data used for updates to the ICD-10 MS DRGs, we would like to examine areas where the MS-DRGs can be improved, which will require additional time for us to review requests from the public to make specific updates, analyze claims data, and consider any proposed updates. Given the need for more time to carefully evaluate requests and propose updates, we changed the deadline to request updates to the MS-DRGs to November 1 of each year. This will provide an additional 5 weeks for the data analysis and review process. Interested parties had to submit any comments and suggestions for FY 2019 by November 1, 2017, and are encouraged to submit any comments and suggestions for FY 2020 by November 1, 2018 via the CMS MS-DRG Classification Change Request Mailbox located at:
MSDRGClassificationChange@cms.hhs.gov.
The comments that were submitted in a timely manner for FY 2019 are discussed in this section of the preamble of this proposed rule.

Following are the changes that we are proposing to the MS-DRGs for FY 2019 in this FY 2019 IPPS/LTCH PPS proposed rule. We are inviting public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in this proposed rule. In some cases, we are proposing changes to the MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. In other cases, we are proposing to maintain the existing MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. For this FY 2019 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2017 update of the FY 2017 MedPAR file, which contains hospital bills received through September 30, 2017, for discharges occurring through September 30, 2017. In our discussion of the proposed MS-DRG reclassification changes, we refer to our analysis of claims data from the “September 2017 update of the FY 2017 MedPAR file.”

As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on the judgment of our clinical advisors to determine whether patients are clinically distinct or similar to other patients represented in the MS-DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average costs

between the cases we select for review and the remainder of cases in the MS-DRG. We also consider variation in costs within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of costs or length of stay, or both. Further, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS-DRG unless it would include a substantial number of cases.

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

• A reduction in variance of costs of at least 3 percent;

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

• At least 500 cases are in the CC or MCC subgroup;

• There is at least a 20-percent difference in average costs between subgroups; and

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

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

2. Pre-MDC

a. Heart Transplant or Implant of Heart Assist System

In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), we stated our intent to review the ICD-10 logic for Pre-MDC MS-DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System with and without MCC, respectively), as well as MS-DRG 215 (Other Heart Assist System Implant) and MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon with and without MCC, respectively) where procedures involving heart assist devices are currently assigned. We also encouraged the public to submit any comments on restructuring the MS-DRGs for heart assist system procedures to the CMS MS-DRG Classification Change Request Mailbox located at:
MSDRGClassificationChange@cms.hhs.gov
by November 1, 2017.

The logic for Pre-MDC MS-DRGs 001 and 002 is comprised of two lists. The first list includes procedure codes identifying a heart transplant procedure, and the second list includes procedure codes identifying the implantation of a heart assist system. The list of procedure codes identifying the implantation of a heart assist system includes the following three codes.

ICD-10-PCS
code

Code description

02HA0QZ
Insertion of implantable heart assist system into heart, open approach.

02HA3QZ
Insertion of implantable heart assist system into heart, percutaneous approach.

02HA4QZ
Insertion of implantable heart assist system into heart, percutaneous endoscopic approach.

In addition to these three procedure codes, there are also 33 pairs of code combinations or procedure code “clusters” that, when reported together, satisfy the logic for assignment to MS-DRGs 001 and 002. The code combinations are represented by two procedure codes and include either one code for the insertion of the device with one code for removal of the device or one code for the revision of the device with one code for the removal of the device. The 33 pairs of code combinations are listed below.

Code
Code description

Code
Code description

02HA0RS
Insertion of biventricular short-term external heart assist system into heart, open approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02HA0RS
Insertion of biventricular short-term external heart assist system into heart, open approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02HA0RS
Insertion of biventricular short-term external heart assist system into heart, open approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02HA0RZ
Insertion of short-term external heart assist system into heart, open approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02HA0RZ
Insertion of short-term external heart assist system into heart, open approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02HA0RZ
Insertion of short-term external heart assist system into heart, open approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02HA3RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02HA3RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02HA3RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02HA4RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02HA4RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02HA4RS
Insertion of biventricular short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02HA4RZ
Insertion of short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02HA4RZ
Insertion of short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02HA4RZ
Insertion of short-term external heart assist system into heart, percutaneous endoscopic approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA0QZ
Revision of implantable heart assist system in heart, open approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA0QZ
Revision of implantable heart assist system in heart, open approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA0QZ
Revision of implantable heart assist system in heart, open approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA0RZ
Revision of short-term external heart assist system in heart, open approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA0RZ
Revision of short-term external heart assist system in heart, open approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA0RZ
Revision of short-term external heart assist system in heart, open approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA3QZ
Revision of implantable heart assist system in heart, percutaneous approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA3QZ
Revision of implantable heart assist system in heart, percutaneous approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA3QZ
Revision of implantable heart assist system in heart, percutaneous approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA3RZ
Revision of short-term external heart assist system in heart, percutaneous approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA3RZ
Revision of short-term external heart assist system in heart, percutaneous approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA3RZ
Revision of short-term external heart assist system in heart, percutaneous approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA4QZ
Revision of implantable heart assist system in heart, percutaneous endoscopic approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA4QZ
Revision of implantable heart assist system in heart, percutaneous endoscopic approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA4QZ
Revision of implantable heart assist system in heart, percutaneous endoscopic approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

02WA4RZ
Revision of short-term external heart assist system in heart, percutaneous endoscopic approach
with
02PA0RZ
Removal of short-term external heart assist system from heart, open approach.

02WA4RZ
Revision of short-term external heart assist system in heart, percutaneous endoscopic approach
with
02PA3RZ
Removal of short-term external heart assist system from heart, percutaneous approach.

02WA4RZ
Revision of short-term external heart assist system in heart, percutaneous endoscopic approach
with
02PA4RZ
Removal of short-term external heart assist system from heart, percutaneous endoscopic approach.

In response to our solicitation for public comments on restructuring the MS-DRGs for heart assist system procedures, commenters recommended that CMS maintain the current logic under the Pre-MDC MS-DRGs 001 and 002. Similar to the discussion in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38011 through 38012) involving MS-DRG 215 (Other Heart Assist System Implant), the commenters provided examples of common clinical scenarios involving a left ventricular assist device (LVAD) and included the procedure codes that were reported under the ICD-9 based MS-DRGs in comparison to the procedure codes reported under the ICD-10 MS-DRGs, which are reflected in the following table.

Procedure

ICD-9-CM
procedure code

ICD-9
MS-DRG

ICD-10-PCS codes

ICD-10
MS-DRG

New LVAD inserted
37.66 (Insertion of implantable heart assist system)
001 or 002

02WA0QZ (Insertion of implantable heart assist system into heart, open approach)
02WA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach)
02WA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach)

001 or 002

LVAD Exchange—existing LVAD is removed and replaced with either new LVAD system or new LVAD pump
37.63 (Repair of heart assist system)
215

02PA0QZ (Removal of implantable heart assist system from heart, open approach)
02PA3QZ (Removal of implantable heart assist system from heart, percutaneous approach)
02PA4QZ (Removal of implantable heart assist system from heart, percutaneous endoscopic approach) and

001 or 002

02WA0QZ (Insertion of implantable heart assist system into heart, open approach)
02WA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach)
02WA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach)

LVAD revision and repair—existing LVAD is adjusted or repaired without removing the existing LVAD device
37.63 (Repair of heart assist system)
215

02WA0QZ (Revision of implantable heart assist system in heart, open approach)
02WA3QZ (Revision of implantable heart assist system in heart, percutaneous approach)
02WA4QZ (Revision of implantable heart assist system in heart, percutaneous endoscopic approach)

215

The commenters noted that, for Pre-MDC MS-DRGs 001 and 002, the procedures involving the insertion of an implantable heart assist system, such as the insertion of a LVAD, and the procedures involving exchange of an LVAD (where an existing LVAD is removed and replaced with either a new LVAD or a new LVAD pump) demonstrate clinical similarities and utilize similar resources. Although the commenters recommended that CMS maintain the current logic under the Pre-MDC MS-DRGs 001 and 002, they also recommended that CMS continue to monitor the data in these MS-DRGs for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of patients undergoing procedures utilizing heart assist devices. The commenters also requested that coding guidance be issued for assignment of the correct ICD-10-PCS procedure codes describing LVAD exchanges to encourage accurate reporting of these procedures.

We agree with the commenters that we should continue to monitor the data in Pre-MDC MS-DRGs 001 and 002 for future consideration of distinctions (for example, different approaches and evolving technologies) that may impact the clinical and resource use of patients undergoing procedures utilizing heart assist devices. In response to the request that coding guidance be issued for assignment of the correct ICD-10-PCS procedure codes describing LVAD exchanges to encourage accurate reporting of these procedures, as we noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), coding advice is issued independently from payment policy. We also noted that, historically, we have not provided coding advice in rulemaking with respect to policy (82 FR 38045). We collaborate with the American Hospital Association (AHA) through the Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We recommend that the requestor and other interested parties submit any questions pertaining to correct coding for these technologies to the AHA.

In response to the public comments we received on this topic, we are providing the results of our claims analysis from the September 2017 update of the FY 2017 MedPAR file for cases in Pre-MDC MS-DRGs 001 and 002. Our findings are shown in the following table.

MS-DRGs for Heart Transplant or Implant of Heart Assist System

MS-DRG

Number
of cases

Average
length
of stay

Average
costs

MS-DRG 001—All cases
1,993
35.6
$185,660

MS-DRG 002—All cases
179
18.3
99,635

As shown in this table, for MS-DRG 001, there were a total of 1,993 cases with an average length of stay of 35.6 days and average costs of $185,660. For MS-DRG 002, there were a total of 179 cases with an average length of stay of 18.3 days and average costs of $99,635.

We then examined claims data in Pre-MDC MS-DRGs 001 and 002 for cases that reported one of the three procedure codes identifying the implantation of a heart assist system such as the LVAD. Our findings are shown in the following table.

MS-DRGs for Heart Transplant or Implant of Heart Assist System

MS-DRG

Number
of cases

Average
length
of stay

Average
costs

MS-DRG 001—All cases
1,993
35.6
$185,660

MS-DRG 001—Cases with procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach)
1,260
35.5
206,663

MS-DRG 001—Cases with procedure code 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach)
1
8
33,889

MS-DRG 001—Cases with procedure code 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach)
0
0
0

MS-DRG 002—All cases
179
18.3
99,635

MS-DRG 002—Cases with procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach)
82
19.9
131,957

MS-DRG 002—Cases with procedure code 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach)
0
0
0

MS-DRG 002—Cases with procedure code 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach)
0
0
0

As shown in this table, for MS-DRG 001, there were a total of 1,260 cases reporting procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach) with an average length of stay of 35.5 days and average costs of $206,663. There was one case that reported procedure code 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach) with an average length of stay of 8 days and average costs of $33,889. There were no cases reporting procedure code 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach). For MS-DRG 002, there were a total of 82 cases reporting procedure code 02HA0QZ (Insertion of implantable heart assist system into heart, open approach) with an average length of stay of 19.9 days and average costs of $131,957. There were no cases reporting procedure codes 02HA3QZ (Insertion of implantable heart assist system into heart, percutaneous approach) or 02HA4QZ (Insertion of implantable heart assist system into heart, percutaneous endoscopic approach).

We also examined the cases in MS-DRGs 001 and 002 that reported one of the possible 33 pairs of code combinations or clusters. Our findings are shown in the following 8 tables. The first table provides the total number of cases reporting a procedure code combination (or cluster) compared to all of the cases in the respective MS-DRG, followed by additional detailed tables showing the number of cases, average length of stay, and average costs for each specific code combination that was reported in the claims data.

Heart Transplant or Implant of Heart Assist System

MS-DRG 001 and 002

Number
of cases

Average
length
of stay

Average
costs

MS-DRG 001—All cases
1,993
35.6
$185,660

MS-DRG 001—Cases with a procedure code combination (cluster)
149
28.4
179,607

MS-DRG 002—All cases
179
18.3
99,635

MS-DRG 002—Cases with a procedure code combination (cluster)
6
3.8
57,343

Procedure Code Combinations for Implant of Heart Assist System

MS-DRG 001

Number
of cases

Average
length
of stay

Average
costs

Cases with a procedure code combination of 02HA0RS (Insertion of biventricular short-term external heart assist system into heart, open approach)
with
02PA0RZ (Removal of short-term external heart assist system from heart, open approach)

3
20.3
$121,919

Cases with a procedure code combination of 02HA0RS (Insertion of biventricular short-term external heart assist system into heart, open approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

2
12
114,688

All cases reporting one or more of the above procedure code combinations in MS-DRG 001
5
17
119,027

Procedure Code Combinations for Implant of Heart Assist System

Number
of cases

Average
length
of stay

Average
costs

MS-DRG 001

Cases with a procedure code combination of 02HA0RZ (Insertion of short-term external heart assist system into heart, open approach)
with
02PA0RZ (Removal of short-term external heart assist system from heart, open approach)

30
55.6
$351,995

Cases with a procedure code combination of 02HA0RZ (Insertion of short-term external heart assist system into heart, open approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

19
29.8
191,163

All cases reporting one or more of the above procedure code combinations in MS-DRG 001
49
45.6
289,632

MS-DRG 002

Cases with a procedure code combination of 02HA0RZ (Insertion of short-term external heart assist system into heart, open approach)
with
02PA0RZ (Removal of short-term external heart assist system from heart, open approach)

1
4
48,212

Cases with a procedure code combination of 02HA0RZ (Insertion of short-term external heart assist system into heart, open approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

2
4.5
66,386

All cases reporting one or more of the above procedure code combinations in MS-DRG 002
3
4.3
60,328

All cases reporting one or more of the above procedure code combinations across both MS-DRGs 001 and 002
52
43.3
276,403

Procedure Code Combinations for Implant of Heart Assist System

Number
of cases

Average
length
of stay

Average
costs

MS-DRG 001

Cases with a procedure code combination of 02HA3RS (Insertion of biventricular short-term external heart assist system into heart, percutaneous approach)
with
02PA0RZ (Removal of short-term external heart assist system from heart, open approach)

3
43.3
$233,330

Cases with a procedure code combination of 02HA3RS (Insertion of biventricular short-term external heart assist system into heart, percutaneous approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

24
14.8
113,955

Cases with a procedure code combination of 02HA3RS (Insertion of biventricular short-term external heart assist system into heart, percutaneous approach)
with
02PA4RZ (Removal of short-term external heart assist system from heart, percutaneous endoscopic approach)

1
44
153,284

All cases reporting one or more of the above procedure code combinations in MS-DRG 001
28
18.9
128,150

MS-DRG 002

Cases with a procedure code combination of 02HA3RS (Insertion of biventricular short-term external heart assist system into heart, percutaneous approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

2
4
$30,954

All cases reporting one of the above procedure code combinations in MS-DRG 002
2
4
30,954

All cases reporting one or more of the above procedure code combinations across both MS-DRGs 001 and 002
30
17.9
121,670

Procedure Code Combinations for Implant of Heart Assist System

MS-DRG 001

Number
of cases

Average
length
of stay

Average
costs

Cases with a procedure code combination of 02HA4RZ (Insertion of short-term external heart assist system into heart, percutaneous endoscopic approach)
with
02PA3RZ (Removal of short-term external heart assist system from heart, percutaneous approach)

4
17.3
$154,885

Cases with a procedure code combination of 02HA4RZ (Insertion of short-term external heart assist system into heart, open approach)
with
02PA4RZ (Removal of short-term external heart assist system from heart, percutaneous endoscopic approach)

2

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2018-08705. Public record. Not legal advice.