# Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-19637 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** September 18, 2020 - **Citation:** 85 FR 58432 ## Text 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-F] RIN 0938-AU11 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final 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: Final rule. SUMMARY: We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2021 and to implement certain recent legislation. We are also making 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 updating the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) for FY 2021. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing changes to the new technology add-on payment pathway for certain antimicrobial products and other changes to new technology add-on payment policies, and the collection of market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021 and finalizing the adoption of a market-based MS-DRG relative weight methodology beginning in FY 2024. We are establishing new requirements or revising existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals. We also established new requirements and revised existing requirements for eligible hospitals and critical access hospitals (CAHs) participating in the Medicare and Medicaid Promoting Interoperability Programs. We are also establishing performance standards for the Hospital Value-Based Purchasing (VBP) Program, and updating policies for the Hospital Readmissions Reduction Program and the Hospital-Acquired Condition (HAC) Reduction Program. DATES: Effective date: This final rule is effective October 1, 2020. Applicability dates: The amendments at § 413.89(b)(1)(i), (c)(1), (e)(2)(i)(A)( 2 ) are applicable to cost reporting periods before October 1, 2020. The amendments at § 413.89(e)(2)(i)(A)( 1 ), ( 4 ) through ( 6 ), (i)(B), (iii), and (f) are applicable to cost reporting periods before, on, and after October 1, 2020. The amendments at § 413.89(b)(1)(ii), (c)(2), (e)(2)(i)(A)( 3 ) and (e)(2)(ii) are applicable to cost reporting periods beginning on or after October 1, 2020. 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 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. Vinitha Meyyur, (410) 786-8819, Hospital Readmissions Reduction Program—Readmissions—Measures Issues. Lang Le, (410) 786-5693, 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, Hospital Inpatient Quality Reporting Program—Administration Issues Mihir Patel, (410) 786-2815 and Grace Snyder, (410) 786-0700, Hospital Quality Reporting Program Validation and Reconsideration Issues. Julia Venanzi, (410) 786-1471and Pamela Brown (410) 786-3940, Hospital Value-Based Purchasing Program—Administration Issues 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 Katrina Hoadley, (410) 786-8490, 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: Electronic Access This Federal Register document is available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at: http://www.gpo.gov/fdsys. Tables Available Through the Internet on the CMS Website The IPPS tables for this FY 2021 final 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 Final rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2021 final 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-F. For further details on the contents of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this FY 2021 IPPS/LTCH PPS final 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. Table of Contents I. Executive Summary and Background A. Executive Summary B. Background Summary C. Summary of Provisions of Recent Legislation Implemented in This Final Rule D. Issuance of Notice of Proposed Rulemaking E. Advancing Health Information Exchange II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) Classifications and Relative Weights A. Background B. Adoption of the MS-DRGs and MS-DRG Reclassifications C. FY 2021 MS-DRG Documentation and Coding Adjustment D. Changes to Specific MS-DRG Classifications E. Recalibration of the FY 2021 MS-DRG Relative Weights F. Add-On Payments for New Services and Technologies for FY 2021 III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Worksheet S-3 Wage Data for the FY 2021 Wage Index C. Verification of Worksheet S-3 Wage Data D. Method for Computing the FY 2021 Unadjusted Wage Index E. Occupational Mix Adjustment to the FY 2021 Wage Index F. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2021 Occupational Mix Adjusted Wage Index G. Application of the Rural Floor, Application of the State Frontier Floor, and Continuation of the Low Wage Index Hospital Policy H. FY 2021 Wage Index Tables I. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications J. Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103 L. Process for Requests for Wage Index Data Corrections M. Labor-Related Share for the FY 2021 Wage Index IV. Other Decisions and Changes to the IPPS for Operating System A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-DRG Special Payments Policies (§ 412.4) B. Changes in the Inpatient Hospital Updates for FY 2021 (§ 412.64(d)) C. Amendment To Address Short Cost Reporting Periods During Applicable Timeframe for Establishment of Service Area for Sole Community Hospitals Under § 412.92(c)(3) D. Rural Referral Centers (RRCs)—Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96) E. Payment Adjustment for Low-Volume Hospitals (§ 412.101) F. Indirect Medical Education (IME) Payment Adjustment Factor (§ 412.105) G. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2021 (§ 412.106) H. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs (§ 412.113) I. Payment Adjustment for CAR T-cell Clinical Trial Cases (§§ 412.85 and 412.312) J. Changes for Hospitals With High Percentage of End Stage Renal Disease (ESRD) Discharges (§ 412.104) K. Hospital Readmissions Reduction Program: Updates and Changes (§§  412.150 Through 412.154) L. Hospital Value-Based Purchasing (VBP) Program: Updates M. Hospital-Acquired Conditions (HAC) Reduction Program: Updates and Changes (§ 412.170) N. Payments for Indirect and Direct Graduate Medical Education Costs (§§ 412.105 and 413.75 Through 413.83) O. Rural Commuity Hospital Demonstration Program P. Market-Based MS-DRG Relative Weight Data Collection and Potential Change in Methodology for Calculating MS-DRG Relative Weights V. Changes to the IPPS for Capital-Related Costs A. Overview B. Additional Provisions C. Annual Update for FY 2021 VI. Changes for Hospitals Excluded From the IPPS A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2021 B. Report on Adjustment (Exception) Payment C. Critical Access Hospitals (CAHs) VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2021 A. Background of the LTCH PPS B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2021 C. Changes to the LTCH PPS Payment Rates and Other Changes to the LTCH PPS for FY 2021 D. Rebasing and Revising of the LTCH Market Basket VIII. Quality Data Reporting Requirements for Specific Providers and Suppliers A. Hospital Inpatient Quality Reporting (IQR) Program B. Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP) D. Changes to the Medicare and Medicaid Promoting Interoperability Programs IX. Changes for Hospitals and Other Providers A. Changes in the Submission of Electronic Patient Records to Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs) B. Revised Regulations To Prepare for Implementation of Mandatory PRRB Electronic Filing (42 CFR Part 405, Subpart R) C. Revisions of Medicare Bad Debt Policy X. MedPAC Recommendations XI. Other Required Information A. Publicly Available Data B. Collection of Information Requirements C. Waiver of the 60-day Delay in Effective Date for the Final Rule Regulation Text Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or after October 1, 2020 and Payment Rates for LTCHs Effective for Discharges Occurring on or after October 1, 2020 I. Summary and Background II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2021 A. Calculation of the Adjusted Standardized Amount B. Adjustments for Area Wage Levels and Cost-of-Living C. Calculation of the Prospective Payment Rates III. Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2021 A. Determination of the Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update for FY 2021 B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2021 C. Capital Input Price Index IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2021 V. Changes to the Payment Rates for the LTCH PPS for FY 2021 A. LTCH PPS Standard Federal Payment Rate for FY 2021 B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2021 C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases E. Update to the IPPS Comparable/Equivalent Amounts To Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2021 VI. Tables Referenced in This Final Rule Generally Available Through the Internet on the CMS Website Appendix A—Economic Analyses I. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Objectives of the IPPS and the LTCH PPS D. Limitations of Our Analysis E. Hospitals Included in and Excluded From the IPPS F. Effects on Hospitals and Hospital Units Excluded From the IPPS G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs H. Effects of Other Policy Changes I. Effects of Changes in the Capital IPPS J. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS K. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program L. Effects of Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program M. Effects of Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP) N. Effects of Requirements Regarding the Promoting Interoperability Program O. Alternatives Considered P. Reducing Regulation and Controlling Regulatory Costs Q. Overall Conclusion R. Regulatory Review Costs II. Accounting Statements and Tables A. Acute Care Hospitals B. LTCHs III. Regulatory Flexibility Act (RFA) Analysis IV. Impact on Small Rural Hospitals V. Unfunded Mandate Reform Act (UMRA) Analysis VI. Executive Order 13175 VII. Executive Order 12866 Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2021 A. FY 2021 Inpatient Hospital Update B. Update for SCHs and MDHs for FY 2021 C. FY 2021 Puerto Rico Hospital Update D. Update for Hospitals Excluded From the IPPS for FY 2021 E. Update for LTCHs for FY 2021 III. Secretary's Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority This FY 2021 IPPS/LTCH PPS final rule makes payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This final rule also makes policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2021 final rule, we are continuing policies to address wage index disparities impacting low wage index hospitals; and including policies related to new technology add-on payments for certain antimicrobial products, other policies related to new technology add-on payments, collecting market-based rate information on the Medicare cost report for cost reporting periods ending on or after January 1, 2021, and finalizing the adoption of a market-based MS-DRG relative weight methodology beginning in FY 2024. We are establishing new requirements and revising existing requirements for quality reporting by acute care hospitals and PPS-exempt cancer hospitals that participate in Medicare. We are also establishing new requirements and revising existing requirements for eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs. We are establishing performance standards for the Hospital Value-Based Purchasing (VBP) Program and updating 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 making 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, for the reasons discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32889 through 32890) and as also discussed in section XI.D. of the preamble of this final rule, we are hereby waiving the 60-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 final rule. In general, these major provisions are 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 that were included in the FY 2021 IPPS/LTCH PPS proposed rule is presented in section I.D. of the preamble of this final rule. a. MS-DRG Documentation and Coding Adjustment Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS- DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments represented the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110 90. Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.) Therefore, for FY 2021, we are making an adjustment of + 0.5 percent to the standardized amount. b. 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 the proposed rule, 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 proposed 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 final rule, after consideration of public comments, we are finalizing our proposal 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 policy, 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 final rule, after consideration of public comments, we are finalizing our proposal to provide for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA approval 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 policy, 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 applying an adjustment to the standardized amounts. d. 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 final rule, we have updated our estimates of the three factors used to determine uncompensated care payments for FY 2021. We 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; however, given the unprecedented effects on health insurance enrollment as a result of the public health emergency for the COVID-19 pandemic, OACT has updated the NHEA-based projection of the FY 2021 rate of uninsurance using more recently available unemployment data. In addition, we are using 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 continuing to use the low-income insured days proxy to calculate Factor 3 for these hospitals. Furthermore, we are establishing that to calculate Factor 3 for FY 2022 and all subsequent fiscal years for all eligible hospitals, except IHS and Tribal hospitals and Puerto Rico hospitals, we will use the most recent available single year of audited Worksheet S-10 data. We are also making other methodological changes for purposes of calculating Factor 3. e. Reduction of Hospital Payments for Excess Readmissions We are finalizing our proposal 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 final rule, we are finalizing 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 policy. 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 final rule, we are providing 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. h. 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 final rule, we are finalizing 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 measure validation policies finalized in this rule; and (3) to update the definition of applicable period at 42 CFR 412.170 to align with the policy to automatically adopt applicable periods. g. 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 final rule, we are finalizing proposals related to the reporting, submission, and public display requirements for eCQMs. These policies are: (1) Progressively increasing the numbers of quarters of eCQM data reported, from one self-selected quarter of data to four quarters of data over a three-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) beginning public display of eCQM data starting with data reported by hospitals for the CY 2021 reporting period/FY 2023 payment determination and for subsequent years. The eCQM-related policies are in alignment with proposals under the Promoting Interoperability Program. We also are finalizing our proposal 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 finalizing proposals to streamline the validation processes under the Hospital IQR Program. We are finalizing proposals to: (1) Update the quarters of data required for validation for both chart-abstracted measures and eCQMs; (2) expand targeting criteria to include hospital selection for eCQMs; (3) change the validation pool from 800 hospitals to 400 hospitals; (4) remove the current exclusions for eCQM validation selection, (5) require electronic file submissions for chart-abstracted measure data; (6) align the eCQM and chart-abstracted measure scoring processes; and (7) update the educational review process to address eCQM 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 final rule, we are finalizing our proposal 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's (CDC) that calculates rates using updated HAI baseline data that are further stratified by patient location. 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 finalizing several changes to the Medicare Promoting Interoperability Program. Specifically, these policies include: (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 three year period. Specifically, we finalized proposals to require: (a) Two self-selected calendar quarters of data for the CY 2021 reporting period; (b) three self-selected calendar quarters of data for the CY 2022 reporting period; and (c) four calendar quarters of data beginning with the CY 2023 reporting period, where the submission period for the Medicare Promoting Interoperability Program will be the 2 months following the close of the respective calendar year; (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 Office of the National Coordinator for Health Information Technology (ONC) certification criteria. We are amending our regulation texts as necessary to incorporate these finalized changes. j. Market-Based MS-DRG Relative Weight Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights As discussed in section IV.P. of the preamble of this final rule, in order to reduce the Medicare program's reliance on the hospital chargemaster and to support the development of a market-based approach to payment under the Medicare FFS system, we are finalizing our proposal, with modification, to require that hospitals report certain market-based payment rate information on their Medicare cost report for cost reporting periods ending on or after January 1, 2021. Specifically, we are finalizing that hospitals would report on the Medicare cost report 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. The market-based rate information we are finalizing for collection 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. 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 finalizing the market-based MS-DRG relative weight methodology as described in the FY 2021 IPPS/LTCH PPS proposed rule, which would incorporate this market-based rate information, beginning in FY 2024. 4. Summary of Costs and Benefits • Adjustment for MS-DRG Documentation and Coding Changes. Section 414 of the MACRA replaced the single positive adjustment we intended to make in FY 2018 once the recoupment required by section 631 of the ATRA was complete with a 0.5 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 making an adjustment of +0.5 percentage point to the standardized amount consistent with the MACRA. • 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, in this final rule we are making changes to the new technology add-on payment policy for certain antimicrobials for FY 2021. We are expanding 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 policy, 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 providing for conditional new technology add-on payment approval for products designated as QIDPs that do not receive FDA approval 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 policy, 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 finalized policy 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 final policy is a cost, but that cost is not estimable. Therefore, it is not possible to quantify the impact of these policies. • Wage Index Disparities Between High and Low Wage Index Hospitals. As discussed in section III.G.3. of the preamble of this final 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 applying a budget neutrality adjustment to the standardized amount so that increase is implemented in a budget neutral manner. • Medicare DSH Payment Adjustment and Additional Payment for Uncompensated Care. For FY 2021, we are updating our estimates of the three factors used to determine uncompensated care payments. To calculate Factor 2, we are using uninsured estimates produced by OACT as part of the development of the NHEA in conjunction with more recently available data that take into consideration the effects of COVID-19. We are using a single year of data on uncompensated care costs from Worksheet S-10 for FY 2017 to determine Factor 3 for FY 2021 for all hospitals with the exception of Puerto Rico hospitals and Indian Health Service and Tribal hospitals. 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 continuing 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 will decrease by approximately $60 million, as compared to our estimate of the uncompensated care payments that will be distributed in FY 2020. The uncompensated care 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. • Update to the LTCH PPS Payment Rates and Other Payment Policies. Based on the best available data for the 363 LTCHs in our database, we estimate that the changes to the payment rates and factors that we present in the preamble of and Addendum to this final rule, which reflect the end of the transition of the statutory application of the site neutral payment rate and the 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 $40 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. We estimate that 2,545 hospitals will have their base operating DRG payments reduced by their FY 2021 hospital-specific payment adjustment factors. As a result, we estimate that the Hospital Readmissions Reduction Program will save approximately $553 million in FY 2021. • 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 changes for the Hospital IQR Program in this final rule would result in a total information collection burden increase of 6,533 hours associated with our policies and updated burden estimates and a total cost increase of approximately $253,480, across a four-year period from the CY 2021 reporting period/FY 2023 payment determination through the CY 2024 reporting period/FY 2026 payment determination, compared to our previously approved information collection burden estimates. • Changes to the Medicare and Medicaid Promoting Interoperability Programs. With these finalized proposals, we do not estimate any net change in burden hours or total cost for the Medicare Promoting Interoperability Program for CY 2021, given that there are no substantive change in current measures or data requirements for eligible hospitals and CAHs that would affect previously-approved burden. Unrelated to any of this rule's Promoting Interoperability changes, an 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, result in an estimated increase of $24,073 for the annual information collection burden (total cost) in FY 2021. Therefore, multiplying the total annual burden of 21,4950 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 Data Collection and Change in Methodology for Calculating MS-DRG Relative Weights. In section IV.P.4. of the preamble of this final rule, we are finalizing a methodology for estimating the MS-DRG relative weights beginning in FY 2024 which utilizes the median payer-specific negotiated charge information we are finalizing to collect on the Medicare cost report. We estimate total annual burden hours for this data collection are as follows: 3,189 hospitals times 20 hours per hospital equals 63,780 annual burden hours and $4,315,993. We refer readers to section XI.B.11. of the preamble of this final rule for further analysis of this assessment. B. Background Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of 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 for fiscal years beginning on or after 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 Implemented in This Final 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). We did not make 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. Issuance of Notice of Proposed Rulemaking In the FY 2021 IPPS/LTCH PPS proposed rule that appeared in the May 29, 2020 Federal Register (84 FR 32460), 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 proposed to make. 1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of the proposed rule, we included— • Proposed changes to MS-DRG classifications based on our yearly review 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 the proposed rule we proposed to make revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed included, but were 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 the 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 methodology for determining Medicare DSH for uncompensated care payments. • 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 proposed changes 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 stated 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 the proposed rule, we discussed 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 the proposed rule, we discussed— • 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 the proposed rule, we set forth— • Proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 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 the proposed rule, we addressed— • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program. • Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program). • Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare and Medicaid Promoting Interoperability Programs. 8. Other Proposed Changes Section IX. of the preamble to the proposed rule included the following: • 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 the Proposed Rule Section X. of the preamble to the proposed rule included our discussion of the MedPAC Recommendations. Section XI. of the preamble to the proposed rule included 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 proposed to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum to the proposed rule, we addressed 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 proposed 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 the 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 provided 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 addressed these recommendations in Appendix B of the 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. 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. 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. Adjustment for FY 2021 Consistent with the requirements of section 414 of the MACRA, we proposed to implement a 0.5 percentage point positive adjustment to the standardized amount for FY 2021. We indicated that this would constitute a permanent adjustment to payment rates. We stated in the proposed rule that we plan to propose future adjustments required under section 414 of the MACRA for FYs 2022 through 2023 in future rulemaking. Comment: Commenters stated that in order to comply with ATRA requirements, CMS anticipated that a cumulative −3.2 percentage point adjustment to the standardized amount would achieve the mandated $11 billion recoupment. A commenter stated that by retaining the −0.7 percentage point adjustment made in FY 2017, CMS has miscalculated the directives issued by Congress, and has contravened Congress' clear instructions and intent. The commenter contends that when Section 15005 of the 21st Century Cures Act (Pub. L. 114-255) altered the positive adjustment for FY 2018 from 0.5 percentage points to 0.4588 percentage points, Congress recognized that this difference would not be restored. According to the commenter, Congress thus assumed that the 0.7 percentage point adjustment would be returned as part of the restoration process; otherwise, it would have updated the “baseline” to reflect CMS' revised total negative adjustment of 3.9%. A commenter asserted that the additional −0.7 percentage point adjustment made in FY 2017 has been improperly continued in FY 2018, FY 2019, and FY 2020, and failure to restore the additional 0.7 percentage point adjustment will cause hospitals to experience a significant cut in their reimbursement for FY 2021 (in addition to the losses already incurred for FYs 2018, 2019, and 2020). Other commenters urged CMS to use its exceptions and adjustments authority under section 1886(d)(5)(I) by FY 2024, to restore an additional 0.7 percentage point payment adjustment to restore payment equity to hospitals and comply with what they asserted was Congressional intent. Another commenter suggested CMS implement an approximate positive adjustment of 1.0 percentage point by FY 2024 to fully and permanently restore the entire −3.9 percentage point recoupment adjustment to IPPS rates. Response: As we discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32471), and in response to similar comments in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42057), we believe section 414 of the MACRA and section 15005 of the 21st Century Cures Act set forth the levels of positive adjustments for FYs 2018 through 2023. We are not convinced that the adjustments prescribed by MACRA were predicated on a specific adjustment level estimated or implemented by CMS in previous rulemaking. While we had anticipated making a positive adjustment in FY 2018 to offset the reductions required to recoup the $11 billion under section 631 of the ATRA, section 414 of the MACRA required that we implement a 0.5 percentage point positive adjustment for each of FYs 2018 through 2023, and not the single positive adjustment we intended to make in FY 2018. As discussed in the FY 2017 IPPS/LTCH PPS final rule, by phasing in a total positive adjustment of only 3.0 percentage points, section 414 of the MACRA would not fully restore even the 3.2 percentage point adjustment originally estimated by CMS in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515). Moreover, as discussed in the FY 2018 IPPS/LTCH PPS final rule, Public Law 114-255, which further reduced the positive adjustment required for FY 2018 from 0.5 percentage point to 0.4588 percentage point, was enacted on December 13, 2016, after CMS had proposed and finalized the final negative − 1.5 percentage point adjustment required under section 631 of the ATRA. We see no evidence that Congress enacted these adjustments with the intent that CMS would make an additional +0.7 percentage point adjustment in FY 2018 to compensate for the higher than expected final ATRA adjustment made in FY 2017, nor are we persuaded that it would be appropriate to use the Secretary's exceptions and adjustments authority under section 1886(d)(5)(I) of the Act to adjust payments in FY 2021 to restore any additional amount of the original 3.9 percentage point reduction, given Congress' prescriptive adjustment levels under section 414 of the MACRA and section 15005 of the 21st Century Cures Act. We intend to address adjustments for FY 2022 and later years in future rulemaking. After consideration of the public comments we received, we are finalizing our proposal to implement a 0.5 percentage point adjustment to the standardized amount for FY 2021. D. Changes to Specific MS-DRG Classifications 1. Discussion of Changes to Coding System and Basis for 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 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 final 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. We stated in the proposed rule that 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 updates. Therefore, we stated that 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 updates. We stated that 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 . Comment: A commenter expressed concern that changing the deadline to submit requested changes to the MS-DRGs from November 1st to October 20th will shorten the amount of time that hospitals have to review the final rule each year and determine how changes may impact MS-DRG recommendations for the following year. The commenter opposed the change in date stating hospitals should be given more time to evaluate impacts of the MS-DRG changes. We also received comments urging CMS to consider the impact of the COVID-19 pandemic on the FY 2020 MedPAR data in evaluating potential MS-DRG changes for FY 2022. Commenters noted that the volume for MS-DRGs unrelated to COVID-19 hospitalizations may not be typical as a result of the postponement or cancellation of elective surgeries. Response: We believe that a change in the deadline from November 1st to October 20th will continue to provide hospitals sufficient time to assess potential impacts and inform future MS-DRG recommendations. As noted later in this section, in response to prior public comments, we provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 38 containing the proposed GROUPER logic for FY 2021 in connection with the proposed rule, allowing providers to build case examples reflecting the proposed MS-DRG changes. Therefore, we believe providers have sufficient time to assess potential impacts. However, because of the unique circumstance for this final rule for which we are waiving the delayed effective date (as discussed in section I.A.2 of this preamble), we are maintaining the deadline of November 1, 2020 for FY 2022 MS-DRG classification change requests, and expect to reconsider a change in the deadline beginning with comments and suggestions submitted for FY 2023. In response to the public comments received expressing concerns about evaluating potential MS-DRG changes for FY 2022 using the FY 2020 MedPAR claims data, which may reflect various impacts as a result of the COVID-19 pandemic, we will consider these concerns in developing FY 2022 proposals. Accordingly, interested parties should submit any comments and suggestions for FY 2022 by November 1, 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 provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 38, in connection with the FY 2021 IPPS/LTCH PPS proposed rule so that the public could better analyze and understand the impact of the proposals included in the proposed rule. We noted 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 that were associated with the 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 that was associated with the proposed rule. We also noted that there were not any procedure codes that had been designated as invalid for FY 2021 at the time of the development of the proposed rule. Those tables were not published in the Addendum to the 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 the proposed rule. Because the diagnosis codes no longer valid for FY 2021 are not reflected in the test software, we made 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 had access to the test software allowing them to build case examples that reflect the proposals that were included in the proposed rule. In addition, users were 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 proposed to the MS-DRGs for FY 2021. We invited 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 the proposed rule. In some cases, we proposed changes to the MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. In other cases, we proposed to maintain the existing MS-DRG classifications based on our analysis of claims data and consultation with our clinical advisors. For the 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 referred to these claims data as the “September 2019 update of the FY 2019 MedPAR file.” In this FY 2021 IPPS/LTCH PPS final rule, we summarize the public comments we received on our proposals, present our responses, and state our final policies. For this FY 2021 final rule, we generally did not perform any further MS-DRG analysis of claims data. Therefore, our MS-DRG analysis is 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, except as otherwise noted. 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. In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand the previously listed criteria to also include the NonCC subgroup. We explained that 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 provided 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 the FY 2021 proposed rule. We also stated we had revised the order in which the criteria are presented for illustrative purposes. ER18SE20.000 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 the FY 2021 IPPS/LTCH PPS proposed rule and this final rule, our MS-DRG analysis is 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. Comment: A commenter acknowledged CMS's proposal to expand the previously listed criteria to create subgroups to also include the NonCC subgroup. This commenter expressed concern that the proposed principles are limited and restrictive and more applicable to MCCs than CCs. Response: It is not clear to us from the limited discussion in the comment why the commenter believes the principles are limited and restrictive and more applicable to MCCs than CCs, as the commenter did not provide further information or examples of this, nor suggest alternative approaches. We note that the criteria to create subgroups within the MS-DRGs as discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32472 through 32473) are separate from the guiding principles we discussed in the context of the comprehensive CC/MCC analysis of diagnosis codes when reported as a secondary diagnosis (85 FR 32550). However, the commenter did not provide any further information, alternative suggestions or recommendations with respect to either analysis. Comment: A commenter noted that in CMS's analysis of the MS-DRG classification requests for FY 2021, the proposed expanded criteria were applied to each of the MCC, CC and NonCC subgroups and it questioned the appropriateness of applying the proposed subgroup criteria to include the NonCC subgroup for FY 2021 prior to it being finalized. This commenter also requested that CMS clarify how it will apply the proposed expansion of the subgroup criteria going forward. The commenter stated that if CMS were to apply the NonCC subgroup criteria retroactively in future rulemaking there are concerns with implications on the MS-DRG groupings and relative weights. The commenter conducted its own preliminary analysis using the FY 2018 MedPAR data and noted that some MS-DRGs with three subgroups would have two subgroups under the new framework and it was not clear how this may impact the relative weights of those MS-DRGs. Response: In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand the existing criteria to create subgroups within a base MS-DRG to include the NonCC subgroup (85 FR 32472 through 32473). We noted that in our analysis of the MS-DRG classification requests for FY 2021, we applied the proposed criteria to each of the MCC, CC and NonCC subgroups. In response to the commenter's concern about the appropriateness of applying the proposed subgroup criteria for MS-DRG classification requests in FY 2021 prior to it being finalized, we note that we proposed and requested comments on the expansion of these criteria to the NonCC subgroup as part of this rulemaking and before finalization of this approach for FY 2021 MS-DRG changes. We also note that in the absence of applying the proposed criteria to include the NonCC subgroup, the MS-DRG related proposals for FY 2021 involving such requests to create subgroups would have similar results. However, to better illustrate for the reader the criteria that were established in FY 2008 (72 FR 47169) to determine if the creation of a new CC or MCC subgroup within a base MS-DRG is warranted, we have provided this table. ER18SE20.001 As shown in the table, under column number two (Three-Way Split), the first criterion requires “500+ cases for MCC group; and 500+ cases for CC group” and the second criterion requires “5%+ cases for MCC group; and 5%+ cases for CC group”. We note that there is no volume or percentage of cases requirement for the NonCC group under the first and second criterion for this type of severity level split under the existing criteria. We further note that the proposed expansion of the criteria to include the NonCC subgroup, as discussed in the proposed rule, is only applicable for a three-way split because as previously illustrated in the table, the criteria for the NonCC subgroup already exists in each of the options for a two-way split. As stated previously, in the absence of applying the proposed criteria to include the NonCC subgroup, the MS-DRG related proposals for FY 2021 involving such requests to create subgroups would have similar results. For example, in response to the request under the Pre-MDC category to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity levels, based on the presence of a MCC, we discussed our application of the criteria to create subgroups for each of the two-way severity level splits. We noted that the criterion that there be at least 500 cases for each subgroup (with MCC and without MCC) failed due to low volume, for both years analyzed. The analysis did not specifically rely on application of the proposed expansion of the criteria for the NonCC subgroup since the request was not for a three-way severity split and we noted there was already an insufficient volume of cases (less than 500) in the CC subgroup (CC+NonCC group). Another example under the Pre-MDC category is for the proposed new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), for which we received public comments regarding CC subgroups and is discussed in further detail in section II.E.2.b. of the preamble of this final rule. We take this opportunity to clarify that there are no plans to apply the proposed expansion of the criteria to the NonCC subgroup retroactively in future rulemaking. The commenter is correct that application of the proposed NonCC subgroup criteria going forward may result in modifications to certain MS-DRGs that are currently split into three severity levels and result in MS-DRGs that are split into two severity levels under the proposed new framework. Any proposed modifications to the MS-DRGs would be addressed in future rulemaking consistent with our annual process and reflected in the Table 5—Proposed List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay for the applicable fiscal year. After consideration of the public comments we received, we are finalizing our proposal to expand the previously listed criteria to also include the NonCC subgroup. We are making the FY 2021 ICD-10 MS-DRG GROUPER and Medicare Code Editor (MCE) Software Version 38, the ICD-10 MS-DRG Definitions Manual files Version 38 and the Definitions of Medicare Code Edits Manual Version 38 available to the public on our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software . 2. Pre-MDC a. Bone Marrow Transplants As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32473 through 32475), 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. As noted in the proposed rule, 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 proposed 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. We stated in the proposed rule that 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. ER18SE20.002 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 proposed 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 discussed in the proposed rule and 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 noted in the proposed rule that 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. As stated in the proposed rule, consistent with our established process, we conducted an analysis of MS-DRG 014 to determine if the criteria to create subgrou [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-19637. Public record. Not legal advice.