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 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 417, 476, 480, 484, and 495

[CMS-1735-P]

RIN 0938-AU11

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 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals

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 2021 and to implement certain recent legislation. We also are proposing to make changes relating to Medicare graduate medical education (GME) for teaching hospitals. In addition, we are providing the market basket update that will 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 2021. 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 2021. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing changes to the new technology add-on payment pathway for certain antimicrobial products and other changes to new technology add-on payment policies, and to collect market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and requesting comment on a potential market based MS-DRG relative weight methodology beginning in FY 2024 that we may adopt in this rulemaking. We are proposing to establish new requirements or revise existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals. We also are proposing to establish new requirements and revise existing requirements for eligible hospitals and critical access hospitals (CAHs) participating in the Medicare and Medicaid Promoting Interoperability Programs. We are providing estimated and newly established performance standards for the Hospital Value-Based Purchasing (VBP) Program, and proposing updated policies for the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition (HAC) Reduction Program.

DATES:

To be assured consideration, comments must be received at one of the addresses provided in the

ADDRESSES

section, no later than 5 p.m. EDT on July 10, 2020.

ADDRESSES:

In commenting, please refer to file code CMS-1735-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 (and we encourage you to) submit electronic comments on this regulation to

http://www.regulations.gov

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

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1735-P, P.O. Box 8013, Baltimore, MD 21244-1850.

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

3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1735-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, Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital Payment Adjustment, and Critical Access Hospital (CAH) Issues.

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

Emily Forrest, (202) 205-1922, Market Based Data Collection and Potential Market Based MS-DRG Relative Weight Methodology Issues.

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

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

Erin Patton, (410) 786-2437, Hospital Readmissions Reduction Program—Administration Issues.

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

Michael Brea, (410) 786-4961, Hospital-Acquired Condition Reduction Program—Administration Issues.

Annese Abdullah-Mclaughlin, (410) 786-2995, Hospital-Acquired Condition Reduction Program—Measures Issues.

Julia Venanzi, (410) 786-1471 and Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality Reporting Program.

Julia Venanzi, (410) 786-1471 and Pamela Brown (410) 786-3940, Hospital Value-Based Purchasing Program.

Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues.

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

Erin Patton, (410) 786-2437 and Ronique Evans, (410) 786-1000, PPS-Exempt Cancer Hospital Quality Reporting Issues.

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

Dylan Podson (410) 786-5031, Jessica Warren (410) 786-7519, and Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs.

Steve Rubio, (410) 786-1782, Reimbursement for Submission of Patient Records to Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs) in Electronic Format.

Maude Shepard, (410) 786-5598, Provider Reimbursement Review Board Electronic Filing.

Kellie Shannon, (410) 786-0416 and Bob Kuhl, (443) 896-8410, Medicare Bad Debt.

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.

Tables Available Through the Internet on the CMS Website

The IPPS tables for this FY 2021 proposed rule are available through the internet on the CMS website at:

https://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 2021 IPPS Proposed Rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2021 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-1735-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 FY 2021 IPPS/LTCH PPS proposed rule.

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

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

This FY 2021 IPPS/LTCH PPS 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. In this FY 2021 proposed rule, we are continuing policies to address wage index disparities impacting low wage index hospitals; and including proposals related to new technology add-on payments for certain antimicrobial products, other proposals related to new technology add-on payments, and to collect market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and requesting comment on a potential market based MS-DRG relative weight methodology beginning in FY 2024 that we may adopt in this rulemaking.

We are proposing to establish new requirements and revise existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals that participate in Medicare. We also are proposing to establish new requirements and revise existing requirements for eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs.

We are providing estimated and newly established performance standards for the Hospital Value-Based Purchasing (VBP) Program, and proposing updated policies for the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition (HAC) Reduction Program.

Under various statutory authorities, we either discuss continued program implementation or are proposing to make changes to the Medicare IPPS, to the LTCH PPS, and to other related payment methodologies and programs for FY 2021 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 Public Law (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, which provides for the establishment of 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, 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 amended by 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 as defined under section 1886(d) of the Act will be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act directs the Secretary to compare hospitals with respect to the number of their Medicare-Medicaid dual-eligible beneficiaries (dual-eligibles) 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; and (3) a hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.

• Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for 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. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2026.

• 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. Waiver of the 60-Day Delayed Effective Date for the Final Rule

The United States is responding to an outbreak of respiratory disease caused by a novel (new) coronavirus that has now been detected in more than 190 locations internationally, including in all 50 States and the District of Columbia. The virus has been named “SARS-CoV-2” and the disease it causes has been named “coronavirus disease 2019” (abbreviated “COVID-19”).

Due to the significant devotion of resources to the COVID-19 response, as discussed and for the reasons discussed in section XI.D. of the preamble of this propose rule, we are hereby waiving the 60-day delay in the effective date of the final rule, and replacing it with a 30-day delay in the effective date of the final rule.

3. Summary of the Major Provisions

The following is 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 in this proposed rule is presented in section I.D. of the preamble of this proposed rule.

a. Proposed 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 2021, we are proposing to make an adjustment of + 0.5 percent to the standardized amount.

b. Proposed Changes to the New Technology Add-On Payment Policy for Certain Antimicrobial Products

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297), we established an alternative inpatient new technology add-on payment pathway for certain antimicrobial products in light of the significant concerns related to the ongoing public health crisis represented by antimicrobial resistance. Under this alternative pathway, if a medical product receives the FDA's Qualified Infectious Disease Product (QIDP) designation and received FDA marketing authorization, such a product will be considered new and not substantially similar to an existing technology for purposes of new technology add-on payment under the IPPS and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

In light of recent information that continues to highlight the significant concerns and impacts related to antimicrobial resistance and emphasizes the continued importance of this issue both with respect to Medicare beneficiaries and public health overall, we are proposing changes to the new technology add-on payment policy for certain antimicrobials for FY 2021.

As discussed in section II.G.9.b. of the preamble of this proposed rule, we are proposing to expand our alternative new technology add-on payment pathway for QIDPs to include products approved through FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this proposal, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial product is approved through FDA's LPAD pathway, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

Under current policy, a new technology must receive FDA marketing

authorization (for example, approval or clearance) by July 1 to be considered in the final rule in order to allow complete review and consideration of all the information to determine if the technology meets the new technology add-on payment criteria. For the reasons discussed in section II.G.9.c. of the preamble of this proposed rule, we are proposing to provide for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA marketing authorization by July 1 and products that do not receive approval through FDA's LPAD pathway by July 1 but otherwise meet the applicable add-on payment criteria. Under this proposal, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment sooner, effective for discharges the quarter after the date of FDA marketing authorization provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments.

c. Continuation of the Low Wage Index Hospital Policy

To help mitigate wage index disparities between high wage and low hospitals, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 42332), we adopted a policy to provide an opportunity for certain low wage index hospitals to increase employee compensation by increasing the wage index values for certain hospitals with low wage index values (the low wage index hospital policy). This policy was adopted in a budget neutral manner through an adjustment applied to the standardized amounts for all hospitals. We also indicated that this policy would be effective for at least 4 years, beginning in FY 2020, in order to allow employee compensation increases implemented by these hospitals sufficient time to be reflected in the wage index calculation. Therefore, for FY 2021, we are continuing the low wage index hospital policy, and also applying this policy in a budget neutral manner by proposing an adjustment to the standardized amounts.

d. Proposed 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 set forth our proposed estimates of the three factors used to determine uncompensated care payments for FY 2021. We are proposing to continue 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. In addition, we are proposing to use a single year of data on uncompensated care costs from Worksheet S-10 of the FY 2017 cost reports to calculate Factor 3 in the FY 2021 methodology for all eligible hospitals with the exception of Indian Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. For IHS and Tribal hospitals and Puerto Rico hospitals we are proposing to continue to use the low-income insured days proxy to calculate Factor 3 for these hospitals for 1 more year. Furthermore, we are proposing to calculate Factor 3 for all subsequent fiscal years for all eligible hospitals, except IHS and Tribal hospitals, using the most recent available single year of audited Worksheet S-10 data. We are also making other methodological proposals for calculating Factor 3 for FY 2021.

e. Reduction of Hospital Payments for Excess Readmissions

We are proposing to make changes to policies for the Hospital Readmissions Reduction Program, which was established under section 1886(q) of the Act, as 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 2017 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) surgery. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing the following policies: (1) To automatically adopt applicable periods beginning with the FY 2023 program year and all subsequent program years, unless otherwise specified by the Secretary; and (2) to update the definition of

applicable period

at 42 CFR 412.152 to align with this proposal.

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. In this FY 2021 IPPS/LTCH PPS proposed rule, we are providing estimated and newly established performance standards for certain measures for the FY 2023 program year, the FY 2024 program year, the FY 2025 program year, and the FY 2026 program year.

g. Hospital-Acquired Condition (HAC) Reduction Program

Section 1886(p) of the 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 hospitals that rank 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. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing the following policies: (1) To automatically adopt applicable periods beginning with the FY 2023 program year and all subsequent program years, unless otherwise specified by the secretary, (2) to make refinements to the process for validation of HAC Reduction Program measure data in alignment with the Hospital IQR Program validation proposals; and (3) to update the definition of

applicable period

at 42 CFR 412.170 to align with the proposal to automatically adopt applicable periods.

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 FY 2021 IPPS/LTCH PPS proposed rule, we are proposing reporting, submission, and public display requirements for eCQMs, including policies to: (1) Progressively increase the numbers of quarters of eCQM data reported, from one self-selected quarter of data to four quarters of data over a 3-year period, by requiring hospitals to report: (a) Two quarters of data for the CY 2021 reporting period/FY 2023 payment determination; (b) three quarters of data for the CY 2022 reporting period/FY 2024 payment determination; and (c) four quarters of data beginning with the CY 2023 reporting period/FY 2025 payment determination and for subsequent years, while continuing to allow hospitals to report: (i) Three self-selected eCQMs, and (ii) the Safe Use of Opioids eCQM; and (2) begin public display of eCQM data beginning with data reported by hospitals for the CY 2021 reporting period and for subsequent years. The eCQM-related proposals are in alignment with proposals under the Promoting Interoperability Program. We also are proposing to expand the requirement to use EHR technology certified to the 2015 Edition for submitting data on not only the previously finalized Hybrid Hospital-Wide Readmission measure, but all hybrid measures in the Hospital IQR Program.

We also are proposing to make several changes to streamline validation processes under the Hospital IQR Program. We are proposing to: (1) Require the use of electronic file submissions via a CMS-approved secure file transmission process and no longer allow the submission of paper copies of medical records or copies on digital portable media such as CD, DVD, or flash drive; (2) combine the validation processes for chart-abstracted measures and eCQMs by: (a) Aligning data submission quarters; (b) combining hospital selection, including: (i) Reducing the pool of hospitals randomly selected for chart-abstracted measure validation; and (ii) integrating and applying targeting criteria for eCQM validation; (c) removing previous exclusion criteria; and (d) combining scoring processes by providing one combined validation score for the validation of chart-abstracted measures and eCQMs with the eCQM portion of the combined score weighted at zero; and (3) formalize the process for conducting educational reviews for eCQM validation in alignment with current processes for providing feedback for chart-abstracted validation results.

h. PPS-Exempt Cancer Hospital Quality Reporting Program

Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. There is no financial impact to PCH Medicare payment if a PCH does not participate.

In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to refine two existing program measures, Catheter-associated Urinary Tract infection (CAUTI) (NQF #0138) and Central Line-associated Bloodstream Infection (CLABSI) (NQF #0139), to adopt the updated SIR calculation methodology developed by the Center for Disease Control and Prevention (CDC) that calculates rates using updated HAI baseline data that are further stratified by patient location. We are also proposing to publicly display the refined versions of the measures beginning in the fall of CY 2022.

i. Medicare and Medicaid Promoting Interoperability Programs

For purposes of an increased level of stability, reducing the burden on eligible hospitals and CAHs, and clarifying certain existing policies, we are proposing several changes to the Medicare Promoting Interoperability Program. Specifically, we are proposing: (1) An EHR reporting period of a minimum of any continuous 90-day period in CY 2022 for new and returning participants (eligible hospitals and CAHs); (2) to maintain the Electronic Prescribing Objective's Query of PDMP measure as optional and worth 5 bonus points in CY 2021; (3) to modify the name of the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure; (4) to progressively increase the number of quarters for which hospitals are required to report eCQM data, from the current requirement of one self-selected calendar quarter of data, to four calendar quarters of data, over a 3-year period. Specifically, we propose to require: (a) 2 self-selected calendar quarters of data for the CY 2021 reporting period; (b) 3 self-selected calendar quarters of data for the CY 2022 reporting period; and (c) 4 self-selected calendar quarters of data beginning with the CY 2023 reporting period, where the proposed submission period for the Medicare Promoting Interoperability Program would be the 2 months following the close of the CY 2023 (ending February 28, 2024); (5) to begin publicly reporting eCQM performance data beginning with the eCQM data reported by eligible hospitals and CAHs for the reporting period in CY 2021 on the

Hospital Compare

and/or

data.medicare.gov

websites or successor websites; (6) to correct errors and amend regulation text under 495.104(c)(5)(viii)(B) through (D) regarding transition factors under section 1886(n)(2)(E)(i) for the incentive payments for Puerto Rico eligible hospitals; and (7) to correct errors and amend regulation text under § 495.20(e)(5)(iii) and (l)(11)(ii)(C)(

1

) for regulatory citations for the ONC certification criteria. We are amending our regulation texts as necessary to incorporate these proposed changes.

j. Market-Based MS-DRG Relative Weight Proposed Data Collection and Potential Change in Methodology for Calculating MS-DRG Relative Weights

As discussed in section IV.P. of the preamble of this proposed rule, in order to reduce the Medicare program's reliance on the hospital chargemaster, thereby advancing the critical goals of Executive Orders 13813,

Promoting Healthcare Choice and Competition Across the United States

and 13890,

Protecting and Improving Medicare for Our Nation's Seniors,

and to support the development of a market-based approach to payment under the Medicare FFS system, we are proposing that hospitals would be required to report certain market-based payment rate information on their Medicare cost report for cost reporting periods ending on or after January 1, 2021, to be used in a potential change to the methodology for calculating the IPPS MS-DRG relative weights to reflect relative market-based pricing

We are specifically proposing that hospitals would report on the Medicare cost report: (1) The median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) organizations (also referred to as MA organizations) payers, by MS-DRG; and (2) the median payer-specific negotiated charge the hospital has negotiated with all of its third-party payers, which would include MA organizations, by MS-DRG. The market-based rate information we are proposing to collect on the Medicare cost report would be the median of the payer-specific negotiated charges by MS-DRG, as described previously, for a hospital's MA organization payers and all of its third party payers. The payer-

specific negotiated charges used by hospitals to calculate these medians would be the payer-specific negotiated charges for service packages that hospitals are required to make public under the requirements we finalized in the Hospital Price Transparency Final Rule (84 FR 65524) that can be cross-walked to an MS-DRG. We believe that because hospitals are already required to publically report payer-specific negotiated charges, in accordance with the Hospital Price Transparency Final Rule, that the additional calculation and reporting of the median payer-specific negotiated charge will be less burdensome for hospitals.

We are also seeking comment on a potential change to the methodology for calculating the IPPS MS-DRG relative weights to incorporate this market-based rate information, beginning in FY 2024, which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule. This potential MS-DRG relative weight methodology would utilize the proposed median payer-specific negotiated charge information, collected on the cost report, for calculating the MS-DRG relative weights.

4. Summary of Costs and Benefits

•

Proposed 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 percentage point 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 percentage point by section 15005 of the 21st Century Cures Act.) For FY 2021, we are proposing to make an adjustment of +0.5 percentage point to the standardized amount consistent with the MACRA.

• Proposed Changes to the New Technology Add-On Payment Policy for Certain Antimicrobial Products.

In light of recent information that continues to highlight the significant concerns and impacts related to antimicrobial resistance and emphasizes the continued importance of this issue both with respect to Medicare beneficiaries and public health overall, we are proposing changes to the new technology add-on payment policy for certain antimicrobials for FY 2021. We are proposing to expand our alternative new technology add-on payment pathway for QIDPs to include products approved through FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this proposal, for applications received for new technology add-on payments for FY 2022 and subsequent fiscal years, if an antimicrobial product is approved through FDA's LPAD pathway, it will be considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.

We are also proposing to provide for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA marketing authorization by July 1 and products that do not receive approval through FDA's LPAD pathway by July 1 (the current deadline for consideration in the final rule) but otherwise meet the applicable add-on payment criteria. Under this proposal, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment sooner, effective for discharges the quarter after the date of FDA marketing authorization provided that the technology receives FDA marketing authorization by July 1 of the particular fiscal year for which the applicant applied for new technology add-on payments. Given the relatively recent introduction of the FDA's LPAD pathway there have not been any drugs that were approved under the FDA's LPAD pathway that applied for a new technology add-on payment under the IPPS. If all of the future LPADs that would have applied for new technology add-on payments would have been approved under existing criteria, this proposal has no impact relative to current policy. To the extent that there are future LPADs that are the subject of applications for new technology add-on payments, and those applications would have been denied under the current new technology add-on payment criteria, this proposal is a cost, but that cost is not estimable. Therefore, it is not possible to quantify the impact of these proposed policies.

•

Wage Index Disparities Between High and Low Wage Index Hospitals.

As discussed in section III.G.3. of the preamble of this proposed rule, we are continuing to reduce the disparity between high and low wage index hospitals by increasing the wage index values for certain hospitals with low wage index values and proposing to apply a budget neutrality adjustment to the standardized amount so that increase is implemented in a budget neutral manner.

•

Proposed Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care.

For FY 2021, we are proposing to update our estimates of the three factors used to determine uncompensated care payments. We are proposing to continue to use uninsured estimates produced by OACT as part of the development of the NHEA in the calculation of Factor 2. We also are proposing to use a single year of data on uncompensated care costs from Worksheet S-10 for FY 2017 to determine Factor 3 for FY 2021. To determine the amount of uncompensated care for purposes of calculating Factor 3 for Puerto Rico hospitals and Indian Health Service and Tribal hospitals, we are proposing to continue to use only data regarding low-income insured days for FY 2013. We project that the amount available to distribute as payments for uncompensated care for FY 2021 would decrease by approximately $534 million, as compared to our estimate of the uncompensated care payments that will be distributed in FY 2020. The payments have redistributive effects, based on a hospital's uncompensated care amount relative to the uncompensated care amount for all hospitals that are projected to be eligible 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 360 LTCHs in our database, we estimate that the proposed changes to the payment rates and factors that we present in the preamble of and Addendum to this proposed rule, which reflect the end of the transition of the statutory application of the site neutral payment rate and the proposed update to the LTCH PPS standard Federal payment rate for FY 2021, would result in an estimated decrease in payments in FY 2021 of approximately $36 million.

•

Changes to the Hospital Readmissions Reduction Program.

For FY 2021 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), elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) surgery. For the proposed rule, we are not providing updated estimates based on the proxy file due to timing. Instead, we reiterate the information contained in the FY 2020 IPPS/LTCH PPS final rule, in

which we estimated that 2,583 hospitals would have their base operating DRG payments reduced by their FY 2020 hospital-specific payment adjustment factors. As a result, we estimated that the Hospital Readmissions Reduction Program will save approximately $563 million in FY 2020. We will update these estimates in the FY 2021 IPPS/LTCH PPS final rule as the data become available.

•

Value-Based Incentive Payments under the Hospital VBP Program.

We estimate that there will be no net financial impact to participating hospitals under the Hospital VBP Program for the FY 2021 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 2021 program year and, therefore, the estimated amount available for value-based incentive payments for FY 2021 discharges is approximately $1.9 billion.

•

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. We are making no changes to the scoring methodology, which will continue to use the Winsorized z-score and equal measure weights approaches to determine the worst-performing quartile of hospitals. Any significant impact due to the HAC Reduction Program changes for FY 2021, including which hospitals will receive the adjustment, will depend on the actual experience of hospitals in the Program.

•

Changes to the Hospital Inpatient Quality Reporting (IQR) Program.

Across 3,300 IPPS hospitals, we estimate that our proposed changes for the Hospital IQR Program in this proposed rule would result in a total information collection burden increase of 6,533 hours associated with our proposed policies and updated burden estimates and a total cost increase of approximately $253,480, across a 4-year period from the CY 2021 reporting period/FY 2023 payment determination through the CY 2024 reporting period/FY 2026 payment determination.

•

Changes to the Medicare and Medicaid Promoting Interoperability Programs.

If our proposals are finalized, we estimate a minor net reduction in burden hours due to correcting a previously mistaken burden calculation in last year's final rule, as well as a slight increase in total cost for the Medicare Promoting Interoperability Program for CY 2021. Unrelated to any of this rule's Promoting Interoperability Program proposals, the increased alteration to the annual information collection's total cost is due to utilizing an updated hourly wage rate for the necessary hospital staff involved in attesting to the objectives and measures under 42 CFR 495.24(e). The Bureau of Labor Statistics (BLS) recently released a 2018 wage rate which, compared to the 2017 rates used in FY 2020 IPPS/LTCH PPS final rule, would result in an estimated increase of $21,022.32 for the annual information collection burden (total cost) in FY 2021. Therefore, multiplying the total annual burden of 21,450 hours by the 2018 BLS labor cost of $69.34, we estimate the Promoting Interoperability Program's total cost to be $1,487,343 for the CY 2021 EHR reporting period (21,450 hours × $69.34).

• Market-Based MS-DRG Relative Weight Proposed Data Collection and Potential Change in Methodology for Calculating MS-DRG Relative Weights.

In section IV.P.4. of the preamble of this proposed rule, we are seeking comment on a potential methodology for estimating the MS-DRG relative weights beginning in FY 2024 based on the median payer-specific negotiated charge information we are proposing to collect on the cost report and which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule. We note that the estimated total annual burden hours for this proposal are as follows: 3,189 hospitals times 15 hours per hospital equals 47,835 annual burden hours and $3,096,838. We refer readers to section XI.B.11. of the preamble of this proposed rule for further analysis of this assessment.

B. Background Summary

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

Section 1886(d) of the 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 beginning on October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals.

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. In general, 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. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add-on payment, they 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 an 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. 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). 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, effective for LTCH's cost reporting periods beginning in FY 2016 cost reporting period, 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.

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 That Would Be Implemented in This Proposed Rule

1. 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, there are no proposals or updates to the LTCH Quality Reporting Program. We are continuing to maintain portions of section 1899B of the Act, as added by section 2(a) of the IMPACT Act, which, in part, requires LTCHs, among other post-acute care providers, to report standardized patient assessment data, data on quality measures, and data on resource use and other measures.

2. 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.

3. Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)

Section 108 of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) provides that, effective for cost reporting periods beginning on or after October 1, 2020, payment to a subsection (d) hospital that furnishes an allogeneic hematopoietic stem cell transplant for hematopoietic stem cell acquisition shall be made on a reasonable cost basis, and that the Secretary shall specify the items included in such hematopoietic stem cell acquisition in rulemaking. This statutory provision also requires that, beginning in FY 2021, the payments made based on reasonable cost for the acquisition costs of allogeneic hematopoietic stem cells be made in a budget neutral manner.

D. Summary of the Provisions of This Proposed Rule

In this proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2021 operating costs and capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we set 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 2021.

The following is a general summary of the changes that we are proposing to make 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 2021.

• Proposed adjustment to the standardized amounts under section 1886(d) of the Act for FY 2021 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 2021 status of new technologies approved for add-on payments for FY 2020, a presentation of our evaluation and analysis of the FY 2021 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) for applications not submitted under an alternative pathway, and a discussion of the proposed status of FY 2021 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products.

• Proposed revision to the new technology add-on payment policy where the coding associated with an application for new technology add-on payments or a previously approved technology that may continue to receive new technology add-on payments is proposed to be assigned to a proposed new MS-DRG.

• Proposed changes to the timing of the IPPS new technology add-on payment for certain antimicrobial products, and proposed expansion of the alternative pathway for certain antimicrobial products.

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

In section III. of the preamble of this proposed rule we propose 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:

• Proposed changes in the labor market area delineations based on revisions to the OMB Core Based Statistical Area (CBSA) delineations and proposed policies related to the proposed changes in CBSAs.

• The proposed FY 2021 wage index update using wage data from cost reporting periods beginning in FY 2017.

• Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2021 based on the 2016 Occupational Mix Survey.

• Proposed application of the rural floor and the frontier State floor, and continuation of the low wage index hospital policy.

• 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.

• Proposed change to Lugar county assignments.

• Proposed adjustment to the wage index for acute care hospitals for FY 2021 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.

• Proposed labor-related share for the proposed FY 2021 wage index.

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 post-acute care transfer policy and special payment policy.

• Proposed inpatient hospital update for FY 2021.

• Proposed amendment to address short cost reporting periods during applicable timeframe for establishment of service area for SCHs.

• Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status, and proposed amendment for hospital cost reporting periods that are longer or shorter than 12 months.

• The statutorily required IME adjustment factor for FY 2021.

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

• Proposed changes to payment for allogeneic hematopoietic stem cell acquisition costs.

• Proposed payment adjustment for chimeric antigen receptor (CAR) T-cell therapy clinical trial cases.

• Proposed requirements for payment adjustments under the Hospital Readmissions Reduction Program for FY 2021.

• The provision of estimated and newly established performance standards for the calculation 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 2021.

• Proposed policy changes related to medical residents affected by residency program or teaching hospital closure.

• Discussion of and proposals relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2021.

• Proposal to collect market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and request for comment on a potential market-based MS-DRG relative weight methodology beginning in FY 2024, that we may adopt in this rulemaking.

4. Proposed FY 2021 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 2021.

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 2021.

• 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 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 2021.

• Proposed rebasing and revising of the LTCH PPS market basket.

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

In section VIII. of the preamble of this 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).

• The FY 2021 requirements under the LTCH Quality Reporting Program (LTCH QRP).

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

8. Other Proposals Included in This Proposed Rule

Section IX. of the preamble to this proposed rule includes the following proposals:

• Proposed changes pertaining to the submission format requirements and reimbursement rates for patient records sent to the Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs).

• Proposed changes pertaining to allowing for mandatory electronic filing of Provider Reimbursement Review Board appeals.

• Proposed changes pertaining to and codification of certain longstanding Medicare Bad Debt policies.

9. Other Provisions of This Proposed Rule

Section X. of the preamble preamble to this proposed rule includes our discussion of the MedPAC Recommendations.

Section XI. of the preamble to this proposed rule includes the following:

• A descriptive listing of the public use files associated with the proposed rule.

• The collection of information requirements for entities based on our proposals.

• Information regarding our responses to public comments.

• Waiver of the 60-day delay in effective date for the final rule.

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

In sections II. and III. of the Addendum to the proposed rule, we set forth the proposed changes to the amounts and factors for determining the proposed FY 2021 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, in section IV. of the Addendum to the proposed rule, we address the update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2021 for certain hospitals excluded from the IPPS.

11. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum to the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2021 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 2021. We are proposing to establish the adjustment for wage levels, including the proposed changes in the CBSAs based on revisions to the OMB labor market area delineations and a proposed adjustment to reflect the expected increases in wages under the IPPS low wage index hospital policy. We are proposing to establish the adjustments for 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.

12. Impact Analysis

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

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

In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2021 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.

14. 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 2020 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 2020 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

.

E. Advancing Health Information Exchange

The Department of Health and Human Services (HHS) has a number of initiatives designed to encourage and support the adoption of interoperable health information technology and to promote nationwide health information exchange to improve health care and patient access to their health information. The Office of the National Coordinator for Health Information Technology (ONC) and CMS work collaboratively to advance interoperability across settings of care, including post-acute care.

To further interoperability in across all care settings, CMS continues to explore opportunities to advance electronic exchange of patient information across payers, providers and with patients, including developing systems that use nationally recognized health IT standards such as Logical Observation Identifier Names and Codes (LOINC), Systemized Nomenclature of Medicine-Clinical Terms (SNOMED), and Fast Healthcare Interoperability Recourses (FHIR). In addition, CMS and ONC are collaborating with industry stakeholders via the Post-Acute Care Interoperability Workgroup (PACIO) (to develop FHIR-based standards for post-acute care (PAC) assessment content, which could support the exchange and reuse of patient

http://pacioproject.org/

) assessment data derived from the Minimum Data Set (MDS), Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), Long Term Care Hospital Continuity Assessment Record and Evaluation Data Set (LTCH CARE data set), Outcome Assessment Information Set (OASIS) assessment tools, and other sources. The Data Element Library (DEL) (

https://del.cms.gov/DELWeb/pubHome

) continues to be updated and serves as the authoritative resource for PAC assessment data elements and their associated mappings to health IT standards. These interoperable data elements can reduce provider burden by allowing the use and exchange of healthcare data, support provider exchange of electronic health information for care coordination, person-centered care, and support real-time, data driven, clinical decision-making. Standards in the DEL (

https://del.cms.gov/

) can be referenced on the CMS website and in the ONC Interoperability Standards Advisory (ISA). The 2020 ISA is available at

https://www.healthit.gov/isa

.

In the September 30, 2019

Federal Register

, we published a final rule titled, “Medicare and Medicaid Programs; Revisions to Requirements for Discharge Planning for Hospitals, Critical Access Hospitals, and Home Health Agencies, and Hospital and Critical Access Hospital Changes to Promote Innovation, Flexibility, and Improvement in Patient Care” (84 FR 51836) (“Discharge Planning final rule”), that revises the discharge planning requirements that hospitals (including psychiatric hospitals, long-term care hospitals, and inpatient rehabilitation facilities), critical access hospitals (CAHs), and home health agencies, must meet to participate in Medicare and Medicaid programs. It also revises one provision regarding patient rights in hospitals. The rule supports our interoperability efforts by promoting the exchange of patient information between health care settings, and by ensuring that a patient's necessary medical information is transferred with the patient after discharge from a hospital, CAH, or post-acute care services provider. For more information on the discharge planning requirements, please visit the final rule at:

https://www.federalregister.gov/documents/2019/09/30/2019-20732/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals

.

We invite providers to learn more about these important developments and how they are likely to affect LTCHs and encourage the electronic exchange of health data across care settings and with patients.

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. (Beginning in FY 2008, CMS adopted the Medicare-Severity DRGs (MS-DRGs) to better recognize severity of illness and resource use based on case complexity.) 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. Adoption of the MS-DRGs and MS-DRG Reclassifications

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).

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 2020 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; 82 FR 38010 through 38085, 83 FR 41158 through 41258, and 84 FR 42058 through 42165, respectively).

C. Proposed FY 2021 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 American Taxpayer Relief Act of 2012 (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. Adjustments Made for FY 2018, FY 2019, and FY 2020 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 positive adjustment to a 0.4588 percentage point positive adjustment. 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. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41157) and in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42057), consistent with the requirements of section 414 of the MACRA, we implemented 0.5 percentage point positive adjustments to the standardized amount for FY 2019 and FY 2020, respectively. We indicated that the FY 2018, FY 2019, and FY 2020 adjustments were permanent adjustments to payment rates. We also stated that we plan to propose future adjustments required under section 414 of the MACRA for FYs 2021 through 2023 in future rulemaking.

3. Proposed Adjustment for FY 2021

Consistent with the requirements of section 414 of the MACRA, we are proposing to implement a 0.5 percentage point positive adjustment to the standardized amount for FY 2021. This would constitute a permanent adjustment to payment rates. We plan to propose future adjustments required under section 414 of the MACRA for FYs 2022 through 2023 in future rulemaking.

D. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 2021 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 2021 MS-DRG Updates

Given the need for more time to carefully evaluate requests and propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38010), we changed the deadline to request updates to the MS-DRGs to November 1 of each year, which provided an additional 5 weeks for the data analysis and review process. Interested parties had to submit any comments and suggestions for FY 2021 by November 1, 2019, and the comments that were submitted in a timely manner for FY 2021 are discussed in this section of the preamble of this proposed rule. As we discuss in the sections that follow, we may not be able to fully consider all of the requests that we receive for the upcoming fiscal year. We have found that, with the implementation of ICD-10, some types of requested changes to the MS-DRG classifications require more extensive research to identify and analyze all of the data that are relevant to evaluating the potential change. We note in the discussion that follows those topics for which further research and analysis are required, and which we will continue to consider in connection with future rulemaking.

With the continued increase in the number and complexity of the requested changes to the MS-DRG classifications since the adoption of ICD-10 MS-DRGs, and in order to consider as many requests as possible, more time is needed to carefully evaluate the requested changes, analyze claims data, and consider any proposed updates. Therefore, we are changing the deadline to request changes to the MS-DRGs to October 20th of each year to allow for additional time for the review and consideration of any proposed updates. Interested parties should submit any comments and suggestions for FY 2022 by October 20, 2020 via the CMS MS-DRG Classification Change Request Mailbox located at:

MSDRGClassificationChange@cms.hhs.gov

.

Based on public comments received in response to the FY 2020 IPPS/LTCH PPS proposed rule, we are providing a test version of the ICD-10 MS-DRG GROUPER Software, Version 38, so that the public can better analyze and understand the impact of the proposals included in this proposed rule. We note that this test software reflects the proposed GROUPER logic for FY 2021. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2021 as reflected in Table 6A.—New Diagnosis Codes—FY 2021 and Table 6B.—New Procedure Codes—FY 2021 associated with this proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2021 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2021 associated with this proposed rule. We note that there are not any procedure codes that have been designated as invalid for FY 2021 at the time of the development of this proposed rule. These tables are not published in the Addendum to this proposed rule, but are available via the internet on the CMS website at:

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html

as described in section VI. of the Addendum to this proposed rule. Because the diagnosis codes no longer valid for FY 2021 are not reflected in the test software, we are making available a supplemental file in Table 6P.1a that includes the mapped Version 38 FY 2021 ICD-10-CM codes and the deleted Version 37 FY 2020 ICD-10-CM codes that should be used for testing purposes with users' available claims data. Therefore, users will have access to the test software allowing them to build case examples that reflect the proposals included in this proposed rule. In addition, users will be able to view the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38.

The test version of the ICD-10 MS-DRG GROUPER Software, Version 38, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38, and the supplemental mapping file in Table 6P.1a of FY 2020 and FY 2021 ICD-10-CM diagnosis codes are available at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software

.

Following are the changes that we are proposing to the MS-DRGs for FY 2021. 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 2021 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2019 update of the FY 2019 MedPAR file, which contains hospital bills received through September 30, 2019, for discharges occurring through September 30, 2019. In our discussion of the proposed MS-DRG reclassification changes, we refer to these claims data as the “September 2019 update of the FY 2019 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.

Beginning with this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to expand the previously

listed criteria to also include the NonCC subgroup. We believe that applying these criteria to the NonCC subgroup would better reflect resource stratification and also promote stability in the relative weights by avoiding low volume counts for the NonCC level MS-DRGs.

Specifically, in our analysis of the MS-DRG classification requests for FY 2021 that we received by November 1, 2019, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC and NonCC subgroups, as described in the following table. We are providing the following table to better illustrate all five criteria and how they are applied for each CC subgroup, including their application to the NonCC subgroup beginning with this FY 2021 proposed rule. We have revised the order in which the criteria are presented for illustrative purposes.

EP29MY20.000

In general, once the decision has been made to propose to make further modifications to the MS-DRGs as described previously, such as creating a new base MS-DRG, or in our evaluation of a specific MS-DRG classification request to split (or subdivide) an existing base MS-DRG into severity levels, all five criteria must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. We note that in our analysis of requests to create a new MS-DRG, we evaluate the most recent year of MedPAR claims data available. For example, we stated earlier that for this FY 2021 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2019 update of the FY 2019 MedPAR file. However, in our evaluation of requests to split an existing base MS-DRG into severity levels, as noted in prior rulemaking (80 FR 49368), we analyze the most recent 2 years of data. This analysis includes 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. The first step in our process of evaluating if the creation of a new CC subgroup within a base MS-DRG is warranted is to determine if all the criteria are satisfied for a three way split. If the criteria fail, the next step is to determine if the criteria are satisfied for a two way split. If the criteria for both of the two way splits fail, then a split (or CC subgroup) would generally not be warranted for that base MS-DRG. If the three way split fails on any one of the five criteria and all five criteria for both two way splits (1_23 and 12_3) are met, we would apply the two way split with the highest R2 value. We note that if the request to split (or subdivide) an existing base MS-DRG into severity levels specifies the request is for either one of the two way splits (1_23 or 12_3), in response to the specific request, we will evaluate the criteria for both of the two way splits, however we do not also evaluate the criteria for a three way split.

2. Pre-MDC

a. Bone Marrow Transplants

We received two separate requests that involve the MS-DRGs where bone marrow transplant procedures are assigned. The first request was to redesignate MS-DRG 014 (Allogeneic Bone Marrow Transplant), MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC or T-Cell Immunotherapy), and MS-DRG 017 (Autologous Bone Marrow Transplant without CC/MCC) from surgical MS-DRGs to medical MS-DRGs. According to the requestor, bone marrow transplant procedures involve a transfusion of donor cells and do not involve a surgical procedure or require the resources of an operating room (O.R.). The second request involving bone marrow transplant procedures was to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC. In this section of this rule, we discuss each request in more detail.

With regard to the first request, the requestor noted that the logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing allogeneic bone marrow transplants that are designated as non-operating room (non-O.R.) procedures. The requestor also noted that the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants where certain

procedure codes are designated as O.R. and other procedure codes are designated as non-O.R. procedures. The requestor stated that redesignating the bone marrow transplant MS-DRGs from surgical to medical would clinically align with the resources utilized in the performance of these procedures.

The requestor is correct that bone marrow transplant procedures are currently assigned to MS-DRGs 014, 016, and 017 which are classified as surgical MS-DRGs under the Pre-MDC category for the ICD-10 MS-DRGs. The requestor is also correct that the logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing allogeneic bone marrow transplants that are designated as non-operating room (non-O.R.) procedures and that the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants where certain procedure codes are designated as O.R. procedures and other procedure codes are designated as non-O.R. procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 37 which is available via the internet on the CMS website at:

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software

for complete documentation of the GROUPER logic for MS-DRGs 014, 016, and 017.

We consulted with our clinical advisors and they agreed that bone marrow transplant procedures are similar to a blood transfusion procedure, do not utilize the resources of an operating room, and are not surgical procedures. Our clinical advisors concurred that bone marrow transplants are medical procedures and it is more accurate to designate the MS-DRGs to which these procedures are assigned as medical MS-DRGs versus surgical MS-DRGs. Therefore, we are proposing to redesignate MS-DRGs 014, 016, and 017 as medical MS-DRGs effective October 1, 2020 for FY 2021.

As noted previously, the logic for MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing autologous bone marrow transplants and related procedures where certain procedure codes are designated as O.R. and other procedure codes are designated as non-O.R. procedures. During our review of the bone marrow transplant procedures assigned to these MS-DRGs we identified the following 8 procedure codes that are currently designated as O.R procedures.

EP29MY20.001

In connection with our proposal to designate the MS-DRGs to which these procedures are assigned as medical, as well as for clinical consistency with the other procedure codes describing bone marrow transplant procedures, we are proposing to redesignate the listed ICD-10-PCS procedure codes from O.R. to non-O.R. procedures, affecting their current MS-DRG assignment for MS-DRGs 016 and 017, effective October 1, 2020 for FY 2021.

As noted earlier in this section, we also received a request to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC. For FY 2020, the requestor had requested that MS-DRG 014 be split into two new MS-DRGs according to donor source. For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19176 through 19180) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42067 through 42072), we did not propose to split MS-DRG 014 into two new MS-DRGs according to donor source. However, according to the requestor, a single (base) MS-DRG for allogeneic bone marrow and stem cell transplants continues to not be as clinically or resource homogeneous as it could be. The requestor conducted its own analysis and stated the results revealed it was appropriate to split MS-DRG 014 based on the presence of a MCC.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRG 014. There were 962 cases found in MS-DRG 014 with an average length of stay of 26.7 days and average costs of $89,586.

Consistent with our established process, we conducted an analysis of MS-DRG 014 to determine if the criteria to create subgroups were met. The process for conducting this type of analysis includes examining 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. Therefore, we reviewed the claims data for base MS-DRG 014 using the September 2018 update of the FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR file, which were used in our analysis of claims data for MS-DRG reclassification requests for FY 2020 and FY 2021. Our findings are shown in the table.

EP29MY20.002

We applied the criteria to create subgroups for each of the two-way severity level splits. As discussed in section II.D.1.b., beginning with this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to expand the previously listed criteria to also include the NonCC group. The criterion that there be at least 500 cases for each subgroup failed due to low volume, as shown in the table for both years. Specifically, for the “with MCC” and “without MCC” (CC+NonCC) split, there were only 183 (141+42) cases in the “without MCC” subgroup based on the data in the FY 2019 MedPAR file and only 175 (140+35) cases in the “without MCC” subgroup based on the data in the FY 2018 MedPAR file. For the “with CC/MCC” and “without CC/MCC” (NonCC) split, there were only 42 cases in the NonCC subgroup based on the data in the FY 2019 MedPAR file and only 35 cases in the NonCC subgroup based on the data in the FY 2018 MedPAR file. The claims data do not support a two-way severity level split for MS-DRG 014, therefore, we are proposing to maintain the current structure of MS-DRG 014 for FY 2021.

b. Chimeric Antigen Receptor (CAR)  T-Cell Therapies

We received several requests to create a new MS-DRG for procedures involving CAR T-cell therapies. The requestors stated that creation of a new MS-DRG would improve payment for CAR T-cell therapies in the inpatient setting. Some requestors noted that cases involving CAR T-cell therapies will no longer be eligible for new technology add-on payments in FY 2021 and that this would significantly reduce the overall payment for cases involving CAR T-cell therapies. Some requestors also noted that in the absence of the creation of a new MS-DRG for procedures involving CAR T-cell therapies, outlier payments for these cases would increase significantly, which would increase the share of total outlier payments that are attributable to CAR T-cell therapies.

The requestors stated that the new MS-DRG for CAR T-cell therapies should include cases that report ICD-10-PCS procedure codes XW033C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into peripheral vein, percutaneous approach, new technology group 3) or XW043C3 (Introduction of engineered autologous chimeric antigen receptor t-cell immunotherapy into central vein, percutaneous approach, new technology group 3).

Given the high cost of the CAR T-cell product, some requestors provided recommendations related to the differential treatment of cases where the CAR T-cell product was provided without cost as part of a clinical trial to ensure that the payment amount for the newly created MS-DRG for CAR T-cell therapy cases would appropriately reflect the average cost hospitals incur for providing CAR T-cell therapy outside of a clinical trial. For example, some requestors suggested that CMS make minor adjustments to its usual ratesetting methodology to exclude clinical trial claims from the calculation of the relative weight for any MS-DRG for CAR T-cell therapies. One requestor noted that these adjustments are consistent with CMS' general authority under sections 1886(d)(4)(B) and (C) of the Act. Some requestors also suggested that CMS apply an offset to the MS-DRG payment in cases where the provider does not incur the cost of the CAR T-cell therapy.

Currently, procedures involving CAR T-cell therapies are identified with ICD-10-PCS procedure codes XW033C3 and XW043C3, which became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule, we finalized our proposal to assign cases reporting these ICD-10-PCS procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to revise the title of this MS-DRG to “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy”. We refer readers to section II.F.2.d. of the preamble of the FY 2019 IPPS/LTCH PPS final rule for a complete discussion of these final policies (83 FR 41172 through 41174).

As noted, the current procedure codes for CAR T-cell therapies both became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41172 through 41174), we indicated that we believed we should collect more comprehensive clinical and cost data before considering assignment of a new MS-DRG to these therapies. We stated in the FY 2020 IPPS/LTCH PPS proposed rule that, while the September 2018 update of the FY 2018 MedPAR data file does contain some claims that include those procedure codes that identify CAR T-cell therapies, the number of cases is limited, and the submitted costs vary widely due to differences in provider billing and charging practices for this therapy. Therefore, while those claims could potentially be used to create relative weights for a new MS-DRG, we stated that we did not have the comprehensive clinical and cost data that we generally believe are needed to do so. Furthermore, we stated in the FY 2020 IPPS/LTCH PPS proposed rule that given the relative newness of CAR T-cell therapy and our proposal to continue new technology add-on payments for FY 2020 for the two CAR T-cell therapies that currently have FDA approval (KYMRIAH

TM

and YESCARTA

TM

), at the time we believed it was premature to consider creation of a new MS-DRG specifically for cases involving CAR T-cell therapy for FY 2020. We stated that in future years we would have additional data that could be used to evaluate the potential creation of a new MS-DRG specifically for cases involving CAR T-cell therapies.

We now have more data upon which to evaluate a new MS-DRG specifically for cases involving CAR T-cell therapies. We agree with the requestors it is appropriate to consider the development of a new MS-DRG using the data that is now available. We examined the claims data from the September 2019 update of the FY 2019 MedPAR data file for cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3. For purposes of this analysis, we identified clinical trial cases as claims with ICD-10-CM diagnosis code Z00.6 (Encounter for examination for normal comparison and control in clinical research program) which is reported only for clinical trial cases, or with standardized drug charges of less than $373,000, which is the average sales price of KYMRIAH and YESCARTA, which are the two CAR  T-cell medicines approved to treat relapsed/refractory diffuse large B-cell lymphoma as of the time of the

development of this proposed rule. We distinguished between clinical trial and non-clinical trial cases in this analysis because we agree with the requestors who indicated that given the high cost of the CAR T-cell product, it is appropriate to distinguish cases where the CAR T-cell product was provided without cost as part of a clinical trial so that the analysis appropriately reflects the resources required to provide CAR T-cell therapy outside of a clinical trial. We also note that we included cases that would have been identified as statistical outliers under our usual process when examined as part of MS-DRG 016 due to the extreme cost differences between the CAR T-cell therapy claims and other claims in MS-DRG 016, but would not be identified as statistical outliers when examining CAR T-cell therapy claims only. Our findings are shown in the table.

EP29MY20.003

As shown in the table, we found 2,212 cases in MS-DRG 016, with an average length of stay of 18.2 days and average costs of $55,001. Of these 2,212 cases, 262 cases reported ICD-10-PCS procedure codes XW033C3 or XW043C3; these cases had an average length of stay of 16.3 days and average costs of $127,408. Of these 262 cases, 94 were identified as non-clinical trial cases; these cases had an average length of stay of 17.2 days and average costs of $274,952. The remaining 168 cases were identified as clinical trial cases; these cases had an average length of stay of 15.8 days and average costs of $44,853.

The data indicate that the average costs for the non-clinical trial cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3 are almost five times higher than the average costs for all cases in MS-DRG 016. Our clinical advisors also believe that the cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 can be clinically differentiated from other cases that group to MS-DRG 016, which includes procedures involving autologous bone marrow transplants, once the CAR  T-cell therapy itself is taken into account in the comparison.

As described earlier in this section, in deciding whether to propose to make modifications to the MS-DRGs for particular circumstances brought to our attention, we consider a variety of factors pertaining to resource consumption and clinical characteristics. While we generally prefer not to create a new MS-DRG unless it would include a substantial number of cases, our clinical advisors believe that the vast discrepancy in resource consumption as reflected in the claims data analysis and the clinical differences warrant the creation of a new MS-DRG. We are therefore proposing to assign cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 to a proposed new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy). If additional procedure codes describing CAR-T cell therapies are approved and finalized, we would use our established process to assign these procedure codes to the most appropriate MS-DRG. Because these cases would no longer group to MS-DRG 016, we are proposing to revise the title for MS-DRG 016 from “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy” to “Autologous Bone Marrow Transplant with CC/MCC.” We refer readers to section II.E.2.b. of the preamble of this proposed rule for a discussion of the proposed relative weight calculation for the proposed new MS-DRG 018 for CAR T-cell Therapy, and to section IV.I. of the preamble of this proposed rule for a discussion of the proposed payment adjustment for CAR T-cell clinical trial cases.

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

a. Carotid Artery Stent Procedures

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42078), we finalized our proposal to reassign 96 ICD-10-PCS procedure codes describing dilation of carotid artery with an intraluminal device(s) from MS-DRGs 037, 038, and 039 (Extracranial Procedures with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 034, 035, and 036 (Carotid Artery Stent Procedures with MCC, with CC, and without CC/MCC, respectively). We received a request to review six ICD-10-PCS procedure codes describing dilation of a carotid artery (common, internal or external) with drug eluting intraluminal devices(s) using an open approach that are currently assigned to the logic for case assignment to MS-DRGs 037, 038, and 039 that were not included in the list of codes finalized for reassignment in the FY 2020 IPPS/LTCH PPS final rule. The six codes are identified in the following table.

EP29MY20.004

The logic for case assignment to MS-DRGs 034, 035, and 036 as displayed in the ICD-10 MS-DRG Version 37 Definitions Manual, available via the internet on the CMS website at:

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html

is comprised of a list of logic which includes procedure codes for operating room procedures involving dilation of a carotid artery (common, internal or external) with intraluminal device(s). All of the ICD-10-PCS procedure codes in the logic list assigned to MS-DRGs 034, 035, and 036 describe dilation of a carotid artery with an intraluminal device.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 034, 035, and 036 which only include those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device. Our findings are reported in the table.

EP29MY20.005

As shown in the table, we found a total of 1,259 cases in MS-DRG 034 with an average length of stay of 6.9 days and average costs of $28,668. We found a total of 3,367 cases in MS-DRG 035 with an average length of stay of 3.0 days and average costs of $17,114. We found a total of 4,769 cases in MS-DRG 036 with an average length of stay of 1.4 days and average costs of $13,501.

We then examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 and identified cases reporting any one of the 6 procedure codes listed in the table previously to determine the volume of cases impacted and if the average length of stay and average costs are consistent with the average length of stay and average costs for MS-DRGs 034, 035 and 036. Our finding are shown in the following table.

EP29MY20.006

As shown in the table, we found a total of 3,331 cases with an average length of stay of 7.3 days and average costs of $24,155 in MS-DRG 037. There were 6 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device using an open approach in MS-DRG 037 with an average length of stay of 7 days and average costs of $22,272. For MS-DRG 038, we found a total of 11,021 cases with an average length of stay of 3 days and average costs of $12,306. There were 33 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device in MS-DRG 038 with an average length of stay of 2.3 days and average costs of $16,777. For MS-DRG 039, we found a total of 20,854 cases with an average length of stay of 1.4 days and average costs of $8,463. There were 26 cases reporting at least one of the 6 procedure codes that describe dilation of the carotid artery with an intraluminal device in MS-DRG 039 with an average length of stay of 1.2 days and average costs of $14,981.

The data analysis shows that for the cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z, 037M04Z, or 037N04Z, the average length of stay is shorter and the average costs are higher than the average length of stay and average costs (with the exception of the average costs for the 6 cases in MS-DRG 037 which are slightly less) in the FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 respectively. The data analysis also shows for the cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z, 037M04Z, and 037N04Z the average length of stay and the average costs are in-line with the average length of stay and average costs in the FY 2019 MedPAR file for MS-DRGs 034, 035, and 036 respectively.

As noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184) and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs 034, 035 and 036 are defined to include only those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device.

Therefore, we are proposing to reassign the procedure codes listed in the table from MS-DRGs 037, 038, and 039 that describe procedures that involve dilation of the carotid artery with an intraluminal device to MS-DRGs 034, 035, and 036.

In addition to our analysis of the claims data from the September 2019 MedPAR file for MS-DRGs 037, 038, and 039, we conducted an examination of all the MS-DRGs where any one of the 6 procedure codes listed previously were also reported to determine if any one of the 6 procedure codes were included in any other MS-DRG outside of MDC 01, to further assess the current MS-DRG assignments. Our findings are shown in the following table.

EP29MY20.007

As shown in the table, we found one case reporting any one of these 6 procedure codes in each of MS-DRGs 023, 027, 035, 219, 233, 235 and 252. We note that all of the listed MS-DRGs are assigned to MDC 01 with one exception: MS-DRG 252 (Other Vascular Procedures with MCC) in MDC05 (Diseases and Disorders of the Circulatory System). As a result, we reviewed the logic list for MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 05 and found 36 ICD-10-PCS codes for procedures that describe dilation of the carotid artery with an intraluminal device with an open approach that are not currently assigned in MDC 01. The 36 ICD-10-PCS codes are listed in the following table.

BILLING CODE 4120-01-P

EP29MY20.008

EP29MY20.009

BILLING CODE 4120-01-C

We then examined the claims data to determine if there were other MS-DRGs in which one of the 36 procedure codes listed in the table were reported. We found 8 cases that grouped to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) when a principal diagnosis from MDC 01 was reported with one of the procedure codes in the table that describes dilation of a carotid artery with an intraluminal device, open approach.

As noted previously, in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184) and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs 034, 035, and 036 are defined to include those procedure codes that describe procedures that involve dilation of a carotid artery with an intraluminal device. Our clinical advisors support adding the 36 ICD-10-PCS codes identified in the table to MS-DRGs 034, 035, and 036 in MDC 01 for consistency to align with the definition of MS-DRGs 034, 035, and 036 and also to permit proper case assignment when a principal diagnosis from MDC 01 is reported with one of the procedure codes in the table that describes dilation of a carotid artery with an intraluminal device, open approach.

Therefore, for FY 2021, we are also proposing to add the 36 ICD-10-PCS codes identified in the table that are currently assigned in MDC 05 to MS-DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035, and 036 in MDC 01.

b. Epilepsy with Neurostimulator

We received a request to reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial Vascular Procedures with PDX Hemorrhage with CC) or to reassign

these cases to another MS-DRG for more appropriate payment. The Responsive Neurostimulator (RNS

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) System, a cranially implanted neurostimulator that is a treatment option for persons diagnosed with medically intractable epilepsy, is identified by the reporting of an ICD-10-PCS code combination capturing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain and cases are assigned to MS-DRG 023 when reported with a principal diagnosis of epilepsy.

As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019), we finalized our proposal to reassign all cases with a principal diagnosis of epilepsy and one of the following ICD-10-PCS code combinations capturing cases with a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) to MS-DRG 023 even if there is no MCC reported:

• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach).

• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach).

• 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H04MZ (Insertion of neurostimulator lead into brain, percutaneous endoscopic approach).

We also finalized our proposed change to the title of MS-DRG 023 from “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant” to “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator” to reflect the modifications to the MS-DRG structure.

The requestor acknowledged the refinements made to MS-DRG 023 effective for FY 2018, but stated that despite the previously-mentioned changes, cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain continue to be underpaid. The requestor performed its own analysis and stated that it found that the average costs of cases describing the insertion of the RNS

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neurostimulator were significantly higher than the average costs of all cases in their current assignment to MS-DRG 023, and as a result, cases describing the insertion of the RNS

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neurostimulator are not being adequately reimbursed. The requestor suggested the following two options for MS-DRG assignment updates: (1) Reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 to MS-DRG 021 with a change in title to “lntracranial Vascular Procedures with PDX Hemorrhage with CC or Epilepsy with Neurostimulator;” or (2) reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain to another higher paying MS-DRG that would provide adequate reimbursement. The requestor stated its belief that MS-DRG 021 is a better fit in terms of average costs and clinical coherence for reassignment of RNS

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System cases and recognized that there is likely still not enough volume to warrant the creation of new MS-DRGs for cases describing the insertion of the RNS

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neurostimulator.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for all cases in MS-DRG 023 and compared the results to cases representing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG 023. The following table shows our findings:

EP29MY20.010

As shown in the table, for MS-DRG 023, we identified a total of 11,938 cases, with an average length of stay of 9.8 days and average costs of $40,264. Of the 11,938 cases in MS-DRG 023, there were 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) that had a principal diagnosis of epilepsy with an average length of stay of 3.3 days and average costs of $52,362. Our clinical advisors reviewed these data, and agreed with the requestor that the number of cases is too small to warrant the creation of a new MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019).

We also examined the reassignment of cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) to MS-DRGs 020, 021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with MCC, with CC, and without CC/MCC, respectively). While the request was to reassign these cases to MS-DRG 021, MS-DRG 021 is specifically differentiated according to the presence of a secondary diagnosis with a severity level designation of a complication or comorbidity (CC). Cases with a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) do not always involve the presence of a secondary diagnosis with a severity level designation of a complication or comorbidity (CC), and therefore we reviewed data for all three MS-DRGs. The following table shows our findings:

EP29MY20.011

As shown in the table, for MS-DRG 020, there were a total of 1,623 cases with an average length of stay of 16.1 days and average costs of $75,668. For MS-DRG 021, there were a total of 409 cases with an average length of stay of 12.3 days and average costs of $55,123. For MS-DRG 022, there were a total of 131 cases with an average length of stay of 6.3 days and average costs of $35,599.

While the cases in MS-DRG 023 describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) and a principal diagnosis of epilepsy have average costs that are similar to the average costs of cases in MS-DRG 021 ($52,362 compared to $55,123), they have an average length of stay that is 9 days shorter (3.3 days compared to 12.3 days), similar to our findings as summarized in the FY 2018 IPPS/LTCH PPS final rule. Our clinical advisors reviewed the clinical issues and the claims data, and did not support reassigning the cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) and a principal diagnosis of epilepsy from MS-DRG 023 to MS-DRGs 020, 021 or 022. As discussed in the FY 2018 IPPS/LTCH PPS final rule, the cases in MS-DRGs 020, 021 and 022 have a principal diagnosis of a hemorrhage. The RNS

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neurostimulator generators are not used to treat patients with diagnosis of a hemorrhage. Our clinical advisors continue to believe that it is inappropriate to reassign cases representing a principal diagnosis of epilepsy to a MS-DRG that contains cases that represent the treatment of intracranial hemorrhage, as discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019). They also stated that the differences in average length of stay and average costs based on the more recent data continue to support this recommendation.

We then explored alternative options, as was requested. We noted that the 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) and a principal diagnosis of epilepsy had an average length of stay of 3.3 days and average costs of $52,362, as compared to the 11,938 cases in MS-DRG 023 that had an average length of stay of 9.8 days and average costs of $40,264. While these neurostimulator cases had average costs that were $12,098 higher than the average costs of all cases in MS-DRG 023, there were only a total of 81 cases. There may have been other factors contributing to the higher costs.

We further analyzed the data to identify those cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), with at least one other procedure designated as an O.R. procedure, and a principal diagnosis of epilepsy. This approach can be useful in determining whether resource use is truly associated with a particular procedure or whether the procedure frequently occurs in cases with other procedures with higher than average resource use. Our data findings for MS-DRG 023 demonstrate that of the 81 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) and a principal diagnosis of epilepsy, 19 reported at least one other procedure designated as an O.R. procedure, and had higher average costs ($72,995 versus $52,362) compared to the average costs of all cases in this subset of MS-DRG 023.

We also reviewed the cases reporting procedures describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), and a principal diagnosis of epilepsy to identify the secondary diagnosis CC and/or MCC conditions reported in conjunction with these procedures that also may be contributing to the higher average costs for these cases. We reviewed the claims data to identify the number (frequency) and types of principal and secondary diagnosis CC and/or MCC conditions that were reported. Our findings for the cases reporting secondary diagnosis MCC and CC conditions, followed by the top 10 secondary diagnosis MCC and secondary diagnosis CC conditions that were reported within the claims data for this subset of cases are shown in the following tables:

EP29MY20.012

EP29MY20.013

EP29MY20.267

While the results of the claims analysis as previously summarized indicate that the average costs of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), and a principal diagnosis of epilepsy are higher compared to the average costs for all cases in their assigned MS-DRG, we cannot ascertain from the claims data the resource use specifically attributable to the procedure during a hospital stay. These data show cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), and a principal diagnosis of epilepsy, can present greater treatment difficulty, and have a need for additional intervention with other O.R. procedures. When reviewing consumption of hospital resources for this subset of cases, the claims data also clearly shows that the patients typically have multiple MCC and CC conditions, and the increased costs appear to be attributable to the severity of illness of the patient.

In summary, we believe that further analysis of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), and a principal diagnosis of epilepsy is needed prior to proposing any further reassignment of these cases to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped. We expect that, in future years, we would have additional data that exhibit an increased number of cases that could be used to evaluate the potential reassignment of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator), and a principal diagnosis of epilepsy. Therefore, we are not proposing to reassign cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS

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neurostimulator) from MS-DRG 023 to MS-DRG 021. We are also not proposing to reassign Responsive Neurostimulator (RNS

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) System cases to another MS-DRG at this time.

4. MDC 3 (Diseases and Disorders of Ear, Nose and Throat): Temporomandibular Joint Replacements

We received a request to consider reassignment of ICD-10-PCS procedure codes 0RRC0JZ (Replacement of right temporomandibular joint with synthetic substitute, open approach) and 0RRD0JZ (Replacement of left temporomandibular joint with synthetic substitute, open approach) from MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with and without CC/MCC, respectively) to MS-DRGs 131 and 132 (Cranial and Facial Procedures with and without CC/MCC, respectively) in MDC 03.

The requestor stated that it is inaccurate for procedure codes 0RRC0JZ and 0RRD0JZ that identify and describe replacement of the temporomandibular joint (TMJ), which involves excision of the TMJ followed by replacement with a prosthesis, to group to MS-DRGs 133 and 134 while excision of the TMJ alone, identified by procedure codes 0RBC0ZZ (Excision of right temporomandibular joint, open approach) and 0RBD0ZZ (Excision of left temporomandibular joint, open

approach), groups to the higher weighted MS-DRGs 131 and 132. According to the requestor, reassignment of procedure codes 0RRC0JZ and 0RRD0JZ to the higher weighted MS-DRGs 131 and 132 is reasonable and the MS-DRG title of “Cranial and Facial Procedures” is more appropriate. However, the requestor also stated that the cost of the prosthesis would continue to be underpaid, despite that recommended reassignment. As an alternative option, the requestor suggested CMS analyze if there may be other higher weighted MS-DRGs that could more appropriately compensate providers for a TMJ replacement with prosthesis procedure.

In addition, the requestor recommended that we analyze all procedures involving the mandible and maxilla and consider reassignment of those procedure codes from MS-DRGs 129 (Major Head and Neck Procedures with CC/MCC or Major Device) and 130 (Major Head and Neck Procedures without CC/MCC) to MS-DRGs 131 and 132 because the codes describe procedures that are performed on facial and cranial structures. Finally, the requestor also suggested another option that included modifying the surgical hierarchy for MDC 03 by sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130, which the requestor asserted would provide for more appropriate payment to providers for the performance of multiple facial procedures.

In this section of this proposed rule, we discuss these separate but related requests that involve procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133 and 134 in MDC 03.

To analyze the request involving temporomandibular joint replacements, we first identified the ICD-10-PCS procedure codes that describe the excision or replacement of a temporomandibular joint as shown in the following table.

EP29MY20.014

The requestor is correct that procedure codes 0RRC0JZ and 0RRD0JZ that describe replacement of the right and left TMJ with a prosthesis (synthetic substitute) by an open approach group to MS-DRGs 133 and 134 and procedure codes 0RBC0ZZ and 0RBD0ZZ that describe excision of the right and left TMJ alone by an open approach group to the higher weighted MS-DRGs 131 and 132. We also note that the corresponding related codes as previously listed in the table that describe different approaches (excision procedures) or different types of tissue substitute (replacement procedures) are also assigned to the same respective MS-DRGs.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 133 and 134 to identify cases reporting ICD-10-PCS codes 0RRC0JZ or 0RRD0JZ. Our findings are shown in the following table.

EP29MY20.015

In MS-DRG 133, we found a total of 1,757 cases with an average length of stay of 5.6 days and average costs of $15,337. Of those 1,757 cases, there were 13 cases reporting ICD-10-PCS code 0RRC0JZ or 0RRD0JZ, with an average length of stay of 3.1 days and average costs of $21,677. In MS-DRG 134, we found a total of 849 cases with an average length of stay of 2.5 days and average costs of $9,512. Of those 849 cases, there were 23 cases reporting ICD-10-PCS code 0RRC0JZ or 0RRD0JZ, with an average length of stay of 2.1 days and average costs of $20,430. The analysis shows that cases reporting ICD-10-PCS procedure codes 0RRC0JZ or 0RRD0JZ in MS-DRGs 133 and 134 have higher average costs ($21,677 versus $15,337 and $20,430 versus $9,512, respectively) and shorter lengths of stay (3.1 days versus 5.6 days and 2.1 days versus 2.5 days, respectively) compared to all the cases in their assigned MS-DRG.

We also examined claims data from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 131 and 132. Our findings are shown in the following table.

EP29MY20.016

In MS-DRG 131, we found a total of 1,181 cases with an average length of stay of 5.4 days and average costs of $18,875. In MS-DRG 132, we found a total of 464 cases with an average length of stay of 2.5 days and average costs of $11,558.

Overall, the data analysis shows that the average costs for the cases reporting procedure codes 0RRC0JZ and 0RRD0JZ in MS-DRGs 133 and 134 are more aligned with the average costs for all the cases in MS-DRG 131 ($21,677 and $20,430, respectively versus $18,875) compared to MS-DRG 132 where the average costs are not significantly different than the average costs of all the cases in MS-DRG 134 ($11,558 versus $9,512). Our clinical advisors agreed that the replacement of a TMJ with prosthesis procedures (codes 0RRC0JZ or 0RRD0JZ) are more resource intensive and are clinically distinct from the cases reporting procedure codes 0RBC0ZZ and 0RBD0ZZ that involve excision of the TMJ alone. They also agreed that procedure codes 0RRC0JZ and 0RRD0JZ should be reassigned to a higher weighted MS-DRG. However, they recommended we conduct further claims analysis to identify if there are other MS-DRGs in MDC 03 where cases reporting these procedure codes may also be found and to compare that data.

As previously noted, the requestor had also recommended that we analyze all procedures involving the mandible and maxilla and consider reassignment of those procedure codes from MS-DRGs 129 and 130 to MS-DRGs 131 and 132. The requestor did not provide a specific list of the procedure codes involving the mandible and maxilla, therefore, we reviewed the list of procedure codes in MS-DRGs 129 and 130 and identified the following 26 procedure codes describing procedures performed on the mandible. There were no procedure codes describing procedures performed on the maxilla in MS-DRGs 129 and 130.

EP29MY20.017

Based on the advice of our clinical advisors as previously discussed, we conducted additional analyses for MDC 03 using the same FY 2019 MedPAR data file and found cases reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132. As discussed in section II.D.15. of this proposed rule, cases with multiple procedures are assigned to the highest surgical class in the hierarchy to which one of the procedures is assigned. For example, if procedure code 0RRC0JZ which is assigned to the logic for MS-DRGs 133 and 134 is reported on a claim with procedure code 0NSR04Z (Reposition maxilla with internal fixation device, open approach), which is assigned to the logic for MS-DRGs 131 and 132, the case will group to MS-DRG 131 or 132 (depending on the presence of a CC or MCC) when reported with a principal diagnosis from MDC 03 because MS-DRGs 131 and 132 are sequenced higher in the surgical hierarchy than MS-DRGs 133 and 134. Therefore, since MS-DRGs 129, 130, 131, and 132 are sequenced higher in the surgical hierarchy than MS-DRGs 133 and 134 in MDC 03, cases reporting procedure code 0RRC0JZ or 0RRD0JZ along with another O.R. procedure that is currently assigned to one of those MS-DRGs in the GROUPER logic results in case assignment to one of those higher surgical class MS-DRGs. We also identified cases reporting procedures performed on the mandible from the previously discussed list of procedure codes in MS-DRGs 129 and 130. Our findings are shown in the following table.

EP29MY20.018

As shown in the table, for MS-DRG 129, there was a total of 2,080 cases with average length of stay of 5.2 days and average costs of $18,091. Of these 2,080 cases, there were 3 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3 days and average costs of $33,581 and 592 cases reporting a mandible procedure with average length of stay of 6.9 days and average costs of $21,258. For MS-DRG 130, there was a total of 948 cases with average length of stay of 2.7 days and average costs of $11,092. Of these 948 cases, there were 5 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.4 days and average costs of $27,396 and 202 cases reporting a mandible procedure with average length of stay of 3.5 days and average costs of $14,712. For MS-DRG 131, there was a total of 1,181 cases with average length of stay of 5.4 days and average costs of $18,875. Of these 1,181 cases there were 4 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 7.3 days and average costs of $31,151. For MS-DRG 132, there was a total of 464 cases with average length of stay of 2.5 days and average costs of $11,558. Of these 464 cases, there were 10 cases reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.1 days and average costs of $24,099.

The data analysis demonstrates that the average costs of cases reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132 and the cases reporting procedures performed on the mandible in MS-DRGs 129 and 130 have higher average costs compared to all the cases in their assigned MS-DRGs. While the volume of the cases reporting procedure code 0RRC0JZ or 0RRD0JZ was low with a total of 22 cases across MS-DRGs 129, 130, 131, and 132, similar to the analysis results for MS-DRGs 133 and 134 described earlier, the average costs for the cases are higher ($33,581 versus $18,091; $27,396 versus $11,092; $31,151 versus $18,875; and $24,099 versus $11,558) affirming that replacement of a TMJ with prosthesis procedures are more costly. The analysis also demonstrates that the average length of stay for cases reporting procedure code 0RRC0JZ or 0RRD0JZ across MS-DRGs 130, 131, and 132 is longer (3.4 days versus 2.7 days; 7.3 days versus 5.4 days; and 3.1 days versus 2.5 days) compared to all the cases in their assigned MS-DRGs. For MS-DRG 129, we found that the average length of stay was shorter (3 days versus 5.2 days) for cases reporting procedure code 0RRC0JZ or 0RRD0JZ. The data demonstrated similar results for the cases reporting procedures performed on the mandible in MS-DRGs 129 and 130, where the average costs for the cases are higher ($21,258 versus $18,091 and $14,712 versus $11,092, respectively) and the average length of stay was longer (6.9 days versus 5.2 days and 3.5 days versus 2.7 days, respectively) compared to all the cases in their assigned MS-DRG.

The analysis of MS-DRGs 129, 130, 131, and 132 further demonstrated that the average length of stay and average costs for all cases were almost identical for each of the subgroups. For example, MS-DRG 129 is defined as “with CC/MCC or major device” and MS-DRG 131 is defined as “with CC/MCC” while MS-DRGs 130 and 132 are both defined as “without CC/MCC”. For all of the cases in MS-DRG 129, we found that the average length of stay was 5.2 days with an average cost of $18,091, and for all of the cases in MS-DRG 131, the average length of stay was 5.4 days with an average cost of $18,875. Similarly, for all of the cases in MS-DRG 130, we found that the average length of stay was 2.7 days with an average cost of $11,092, and for MS-DRG 132, we found the average length of stay was 2.5 days with an average cost of $11,558.

As a result of the data analysis performed for MS-DRGs 129, 130, 131, and 132, including the analysis of the procedures describing replacement of a TMJ with prosthesis in MS-DRGs 133 and 134, as well as considering the requestor's suggestion that we examine the appropriateness of modifying the surgical hierarchy for MDC 03 by sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130 to enable more appropriate payment for the performance of multiple facial procedures, our clinical advisors recommended evaluating all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to compare costs, complexity of service and clinical coherence to assess any potential reassignment of these procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 37, which is available via the internet on the CMS website at:

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software

, for complete documentation of the GROUPER logic for MS-DRGs 129, 130, 131, 132, 133, and 134.

We examined claims data from the September 2019 update of the FY 2019 MedPAR file for cases reporting any of the procedure codes that are currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134. We refer the reader to Table 6P.2d associated with this proposed rule (which is available via the internet on the CMS website at

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/

for the detailed analysis. We note that if a procedure code that is currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134 is not displayed it is because there were no cases found reporting that code in the assigned MS-DRG.

The data analysis shows that there is wide variation in the volume, length of stay, and average costs of cases reporting procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134. There were several instances in which only one case was found to report a procedure code from MS-DRG 129, 130, 131, 132, 133, or 134, and the average length of stay for these specific cases ranged from 1 day to 31 days. For example, in MS-DRG 131, we found one case reporting procedure code 0NB70ZZ (Excision of occipital bone, open approach) with an average length of stay of 31 days which we consider to be an outlier in comparison to all the other cases reported in that MS-DRG with an average length of stay of 5.4 days. Overall, the average costs of cases in MS-DRGs 129 and 130 range from $4,970 to $38,217, the average costs of cases in MS-DRGs 131 and 132 range from $4,022 to $69,558 and the average costs of cases in MS-DRGs 133 and 134 range from $1,089 to $87,569. As noted previously, the data demonstrate there appear to be similar utilization of hospital resources specifically for cases reported in MS-DRGs 129, 130, 131 and 132.

The highest volume of cases was reported in MS-DRGs 129 and 130 for the procedure codes describing resection of the right and left neck lymphatic. For MS-DRG 129, there was a total of 750 cases reporting procedure code 07T10ZZ (Resection of right neck lymphatic, open approach) with an average length of stay of 4.7 days and average costs of $17,155 and there was a total of 679 cases reporting procedure code 07T20ZZ (Resection of left neck lymphatic, open approach) with an average length of stay of 4.8 days and average costs of $17,857. For MS-DRG 130, there was a total of 358 cases reporting procedure code 07T10ZZ with an average length of stay of 2.6 days and average costs of $10,432 and there was

a total of 331 cases reporting procedure code 07T20ZZ with an average length of stay of 2.5 days and average costs of $10,467. For MS-DRGs 131 and 132, the highest volume of cases was reported for the procedure codes describing repositioning of the maxilla with internal fixation and repositioning of the right and left mandible with internal fixation. For MS-DRG 131, there was a total of 186 cases reporting procedure code 0NSR04Z (Reposition maxilla with internal fixation device, open approach) with an average length of stay of 5.1 days and average costs of $20,500; a total of 114 cases reporting procedure code 0NST04Z (Reposition right mandible with internal fixation device, open approach) with an average length of stay of 5.7 days and average costs of $18,710, and a total of 219 cases reporting procedure code 0NSV04Z (Reposition left mandible with internal fixation device, open approach) with an average length of stay of 6.0 days and average costs of $20,202. For MS-DRG 132, there was a total of 84 cases reporting procedure code 0NSR04Z with an average length of stay of 2.1 days and average costs of $12,991 and a total of 101 cases reporting procedure code 0NSV04Z with an average length of stay of 2.8 days and average costs of $11,386. For MS-DRGs 133 and 134, the highest volume of cases was reported for the procedure codes describing excision of the facial nerve or nasal turbinate. For MS-DRG 133, there was a total of 60 cases reporting procedure code 09BL8ZZ (Excision of nasal turbinate, via natural or artificial opening endoscopic) with an average length of stay of 6.6 days and average costs of $21,253 and for MS-DRG 134, there was a total of 50 cases reporting procedure code 00BM0ZZ (Excision of facial nerve, open approach) with an average length of stay of 1.4 days and average costs of $8,048.

Our clinical advisors reviewed the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to identify the patient attributes that currently define each of these procedures and to group them with respect to complexity of service and resource intensity. For example, procedures that we believe represent greater treatment difficulty and reflect a class of patients who are similar clinically with regard to consumption of hospital resources were grouped separately from procedures that we believe to be less complex but still reflect patients who are similar clinically with regard to consumption of hospital resources. This approach differentiated the more complex and invasive procedures, such as resection of cervical lymph nodes, repositioning of facial bones, and excision of mandible procedures from the less complex and less invasive procedures such as excisions (biopsies) of lymph nodes and facial nerves, drainage procedures of the upper respiratory system, and tonsillectomies.

After this comprehensive review of all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134, in combination with the results of the data analysis discussed previously, our clinical advisors support distinguishing the procedures currently assigned to those MS-DRGs by clinical intensity, complexity of service and resource utilization and also support restructuring of these MS-DRGs accordingly. We note that during the analysis of the procedures currently assigned to MS-DRGs 129 and 130, we recognized the special logic defined as “Major Device Implant” for MS-DRG 129 that identifies procedures describing the insertion of a cochlear implant or other hearing device. Our clinical advisors supported the removal of this special logic from the definition for assignment to any proposed modifications to the MS-DRGs, noting the costs of the device have stabilized over time and the procedures can be appropriately grouped along with other procedures involving devices in any restructured proposed MS-DRGs. We also identified 2 procedure codes currently assigned to MS-DRGs 131 and 132, 00J00ZZ (Inspection of brain, open approach) and 0WJ10ZZ (Inspection of cranial cavity, open approach), that our clinical advisors agreed should not be included in any proposed modifications to the MS-DRGs in MDC 03, stating that they are appropriately assigned to MS-DRGs in MDC 01 (Diseases and Disorders of the Nervous System). We further note that during our analysis of the procedures currently assigned to MS-DRGs 133 and 134, we found 338 procedure codes that were inadvertently included as a result of replication during our transition from the ICD-9 to ICD-10 based MS-DRGs. We refer the reader to Table 6P.2c for a detailed list of these procedure codes that describe procedures performed on various sites, such as the esophagus, stomach, intestine, skin, and thumb that, our clinical advisors agree should be removed from the definition for assignment to any proposed modifications to the MS-DRGs under MDC 03.

As a result of our review, we are proposing the deletion of MS-DRGs 129, 130, 131, 132, 133, and 134, and the creation of six new MS-DRGs. Currently, MS-DRGs 129, 131, and 133 are defined as base MS-DRGs, each of which is split by a two-way severity level subgroup. Our proposal includes the creation of two new base MS-DRGs with a three-way severity level split. Our clinical advisors suggested that based on the analysis of procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 as described previously, only 2 base MS-DRGs were needed, each divided into 3 levels according to the presence of a CC or MCC. The proposed MS-DRGs were developed consistent with the analysis to differentiate the more complex and invasive procedures from the less complex and less invasive procedures. As noted previously, our analysis of MS-DRGs 129, 130, 131, and 132 demonstrated that the average length of stay and average costs for all cases were almost identical for each of the severity level subgroups and therefore, the procedures assigned to these MS-DRGs were initially reviewed together as one clinical group and then evaluated further in comparison to the procedures currently assigned to MS-DRGs 133 and 134. The objective was to better differentiate procedures by treatment difficulty, clinical similarity, and resource use, and to propose a more appropriate restructuring. For example, based on this analysis, in some instances, we are proposing to reassign procedures described by procedure codes that are currently assigned to MS-DRGs 129 and 130 or MS-DRGs 131 and 132 to what is being defined as the less complex MS-DRGs. We believe the resulting proposed MS-DRG assignments are more clinically homogeneous, coherent and better reflect hospital resource use.

We applied the criteria to create subgroups for the three-way severity level split for the proposed new MS-DRGs and found that all five criteria were met. For the proposed new MS-DRGs, there is at least (1) 500 cases in the MCC group, the CC group and the NonCC group; (2) 5 percent of the cases in the MCC group, the CC group and the NonCC group; (3) a 20 percent difference in average costs between the MCC group, the CC group and the NonCC group; (4) a $2,000 difference in average costs between the MCC group, the CC group and the NonCC group; and (5) a 3-percent reduction in cost variance, indicating that the proposed severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the proposed MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the

IPPS payment system. The following table reflects our simulation for the proposed new MS-DRGs with a three-way severity level split. Our findings represent what we would expect under the proposed modifications and proposed new MS-DRGs, based on claims data in the FY 2019 MedPAR file.

EP29MY20.019

We are proposing to create two new base MS-DRGs, 140 and 143, with a three-way severity level split for proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, respectively) and proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).

We refer the reader to Table 6P.2a and Table 6P.2b for the list of procedure codes we are proposing for reassignment from MS-DRGs 129, 130, 131, 132, 133, and 134 to each of the proposed new MS-DRGs. As noted, we are also proposing the removal of procedure codes 00J00ZZ and 0WJ10ZZ, and the 338 procedure codes listed in Table 6P.2c from the logic for MDC 03.

We note that discussion of the surgical hierarchy for the proposed modifications is discussed in section II.D.15. of this proposed rule.

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

a. Left Atrial Appendage Closure (LAAC)

In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through 49367) we finalized our proposal to create two new MS-DRGs to classify percutaneous intracardiac procedures. Specifically, we created MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, respectfully) for cases reporting procedure codes describing cardiac ablation and other percutaneous intracardiac procedures. In that discussion, as FY 2016 was the first year of our transition from the ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs, we provided a list of the ICD-9-CM procedure codes that identify and describe the cardiac ablation procedures and other percutaneous intracardiac procedures that were the subject of that MS-DRG classification change request, one of which was ICD-9-CM procedure code 37.90 (Insertion of left atrial appendage device).

Separately, we also discussed a request we received for new technology add-on payments for the WATCHMAN

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Left Atrial Appendage Closure (LAAC) device (80 FR 49480 through 49488). In that discussion, we noted that effective October 1, 2004 (FY 2005), ICD-9-CM procedure code 37.90 (Insertion of left atrial appendage device) was created to identify and describe procedures using the WATCHMAN

TM

Left Atrial Appendage (LAA) Closure Technology and that under ICD-10-PCS, procedure code 02L73DK (Occlusion of left atrial appendage with intraluminal device, percutaneous approach) is the comparable translation. We also noted that at the time of the new technology request, under the ICD-9 based MS-DRGs, procedure code 37.90 was assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent with MCC and without MCC, respectively). We further noted that, as stated previously, we finalized our proposal to assign procedures performed within the heart chambers using intracardiac techniques, including those identified by ICD-9-CM procedure code 37.90, and its comparable ICD-10-PCS code translations (that specifically identify a percutaneous or percutaneous endoscopic approach), including 02L73DK, to new MS-DRGs 273 and 274.

For this FY 2021 IPPS/LTCH PPS proposed rule, we received two separate, but related requests involving the procedure codes that describe the technology that is utilized in the performance of LAAC procedures. The first request was to reassign ICD-10-PCS procedure code 02L73DK (Occlu

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