# Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2022 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Proposed Changes to Medicaid Provider Enrollment; and Proposed Changes to the Medicare Shared Savings Program > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2021-08888 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** May 10, 2021 - **Citation:** 86 FR 25070 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 412, 413, 425, 455, and 495 [CMS-1752-P] RIN 0938-AU44 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2022 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Proposed Changes to Medicaid Provider Enrollment; and Proposed Changes to the Medicare Shared Savings Program AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2022 and to implement certain recent legislation. In addition, we are proposing to rebase and revise the hospital market baskets for acute care hospitals, update the labor-related share, and provide the market basket update that would apply to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis, subject to these limits for FY 2022. We are also proposing policies relating to Medicare graduate medical education (GME) for teaching hospitals to implement certain recent legislation. The proposed rule would also update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) for FY 2022. In this FY 2022 IPPS/LTCH PPS proposed rule, we are proposing to extend New COVID-19 Treatments Add-on Payment (NCTAP) for certain eligible products through the end of the fiscal year in which the PHE ends and to discontinue the NCTAP for discharges on or after October 1, 2021 for a product that is approved for new technology add-on payments beginning FY 2022. We are also proposing to repeal the collection of market-based rate information on the Medicare cost report and the market-based MS-DRG relative weight methodology, as finalized in the FY 2021 IPPS/LTCH PPS final rule. We are proposing to establish new requirements and revise existing requirements for eligible hospitals and critical access hospitals (CAHs) participating in the Medicare Promoting Interoperability Program. We are also providing estimated and newly established performance standards for the Hospital Value-Based Purchasing (VBP) Program, and proposing updated policies for the Hospital Readmissions Reduction Program, Hospital Inpatient Quality Reporting (IQR) Program, Hospital VBP Program, Hospital-Acquired Condition (HAC) Reduction Program, and the PPS-Exempt Cancer Hospital Reporting (PCHQR) Program, and the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). Additionally, due to the impact of the COVID-19 PHE on measure data used in our value-based purchasing programs, we are proposing to suppress several measures in the Hospital VBP, HAC Reduction, and Hospital Readmissions Reduction Programs. In connection with our measure suppression proposals for the FY 2022 Hospital VBP Program, we are also proposing to revise the scoring and payment methodology for the FY 2022 program year such that hospitals will not be scored using quality measure data that are distorted by the effects of the COVID-19 public health emergency (PHE) and will not receive Total Performance Scores or adjustments to their payments as a result. Similarly, we are proposing to suppress affected measures for the FY 2022 HAC Reduction Program such that hospitals will not be scored using distorted quality measure data and will not receive Total HAC Scores based on those data. For the Hospital Readmissions Reduction Program, we are proposing to suppress one affected measure under the proposed measure suppression policy for the FY 2023 applicable period such that hospitals will not be assessed using distorted quality measure data and will not receive payment reductions based on those data. In addition, we are proposing to change, clarify, and codify Medicare organ acquisition payment policies relative to organ procurement organizations (OPOs), transplant hospitals, and donor community hospitals. Also, we are proposing to add regulation requiring that state Medicaid agencies accept valid enrollments from all Medicare-enrolled providers and suppliers for purposes of processing claims for Medicare cost-sharing liability for services furnished to Medicare-Medicaid dually eligible individuals in order to alleviate a long-standing problem related to claiming Medicare bad debt. Additionally, we are proposing to amend the Medicare Shared Savings Program regulations to allow eligible accountable care organizations (ACOs) participating in the BASIC track's glide path the opportunity to maintain their current level of participation for performance year (PY) 2022. DATES: To be assured consideration, comments must be received at one of the addresses provided in the ADDRESSES section, no later than 5 p.m. EDT on June 28, 2021. ADDRESSES: In commenting, please refer to file code CMS-1752-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed): 1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov . Follow the instructions under the “submit a comment” tab. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1752-P, P.O. Box 8013, Baltimore, MD 21244-1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1752-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRG Relative Weights, Wage Index, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Sole Community Hospitals (SCHs), Medicare-Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital Payment Adjustment, and Critical Access Hospital (CAH) Issues. Emily Lipkin, (410) 786-3633 and Jim Mildenberger, (410) 786-4551, 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. Allison Pompey, (410) 786-2348, New Technology Add On Payments and New COVID-19 Treatments Add-on Payments Issues. Mady Hue, (410) 786-4510, and Andrea Hazeley, (410) 786-3543, MS-DRG Classifications Issues. Mollie Knight, (410) 786-7948, and Bridget Dickensheets, (410) 786-8670, Rebasing and Revising the Hospital Market Baskets Issues. Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital Demonstration Program Issues. Jeris Smith, (410) 786-0110, Frontier Community Health Integration Project Demonstration Issues. Pamela Brown, pamela.brown@cms.hhs.gov , Hospital Readmissions Reduction Program—Administration Issues. Jim Poyer, james.poyer@cms.hhs.gov , Hospital Readmissions Reduction Program—Readmissions—Measures Issues. Jennifer Tate, jennifer.tate@cms.hhs.gov , Hospital-Acquired Condition Reduction Program—Administration Issues. Yuling Li, (410) 786-8421, Hospital-Acquired Condition Reduction Program—Measures Issues. Julia Venanzi, julia.venanzi@cms.hhs.gov , Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs—Administration Issues. Katrina Hoadley, katrina.hoadley@cms.hhs.gov , Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs—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. Annie Hollis, annie.hollis@cms.hhs.gov , PPS-Exempt Cancer Hospital Quality Reporting—Administration Issues. Katrina Hoadley, katrina.hoadley@cms.hhs.gov , PPS-Exempt Cancer Hospital Quality Reporting Program-Measure Issues. Christy Hughes, (410) 786-5662, Long-Term Care Hospital Quality Reporting Program—Data Reporting Issues. Jessica Warren, jessica.warren@cms.hhs.gov , Dylan Podson, dylan.podson3@cms.hhs.gov , and Elizabeth Holland, elizabeth.holland@cms.hhs.gov , Promoting Interoperability Programs. Candace Anderson, (410) 786-1553, Medicaid Enrollment of Medicare Providers and Suppliers for Purposes of Processing Claims for Cost-Sharing for Services Furnished to Dually Eligible Beneficiaries. Katie Lucas, (410) 786-7723, Amanda Michael, (410) 786-5834, and Kellie Shannon (410) 786-0416, Organ Acquisition Payment Issues. Naseem Tarmohamed, (410) 786-0814, or SharedSavingsProgram@cms.hhs.gov , for issues related to the Shared Savings Program. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov/ . Follow the search instructions on that website to view public comments. Tables Available Through the Internet on the CMS Website The IPPS tables for this FY 2022 proposed rule are available through the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html . Click on the link on the left side of the screen titled, “FY 2022 IPPS Proposed rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2022 proposed rule are available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1752-P. For further details on the contents of the tables referenced in this proposed rule, we refer readers to section VI. of the Addendum to this FY 2022 IPPS/LTCH PPS proposed rule. Readers who experience any problems accessing any of the tables that are posted on the CMS websites, as previously identified, should contact Michael Treitel at (410) 786-4552. Table of Contents I. Executive Summary and Background A. Executive Summary B. Background Summary C. Summary of Provisions of Recent Legislation That Would Be Implemented in This Proposed Rule D. Summary of the Provisions of This Proposed Rule E. Advancing Health Information Exchange F. Use of FY 2020 or FY 2019 Data in the FY 2022 IPPS and LTCH PPS Ratesetting II. Proposed 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. Proposed FY 2022 MS-DRG Documentation and Coding Adjustment D. Proposed Changes to Specific MS-DRG Classifications E. Recalibration of the FY 2022 MS-DRG Relative Weights F. Proposed Add-On Payments for New Services and Technologies for FY 2022 III. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Worksheet S-3 Wage Data for the Proposed FY 2022 Wage Index C. Verification of Worksheet S-3 Wage Data D. Method for Computing the Proposed FY 2022 Unadjusted Wage Index E. Proposed Occupational Mix Adjustment to the FY 2022 Wage Index F. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2022 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, and Proposed Budget Neutrality Adjustment H. Proposed FY 2022 Wage Index Tables I. Proposed Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications J. Proposed Out-Migration Adjustment Based on Commuting Patterns of Hospital Employees K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103 L. Process for Requests for Wage Index Data Corrections M. Proposed Labor-Related Share for the FY 2022 Wage Index IV. Proposed Rebasing and Revising of the Hospital Market Baskets for Acute Care Hospitals A. Background B. Rebasing and Revising the IPPS Market Basket C. Market Basket for Certain Hospitals Presently Excluded From the IPPS D. Rebasing and Revising the Capital Input Price Index (CIPI) V. Other Decisions and Changes to the IPPS for Operating System A. Proposed Changes in the Inpatient Hospital Updates for FY 2021 (§ 412.64(d)) B. Rural Referral Centers (RRCs)—Proposed Annual Updates to Case-Mix Index and Discharge Criteria (§ 412.96) C. Proposed Payment Adjustment for Low-Volume Hospitals (§ 412.101) D. Proposed Indirect Medical Education (IME) Payment Adjustment Factor (§ 412.105) E. Proposed Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2022 (§ 412.106) F. Counting Days Associated With Section 1115 Demonstration Projects in the Medicaid Fraction G. Hospital Readmissions Reduction Program: Proposed Updates and Changes (§§ 412.150 Through 412.154) H. Hospital Value-Based Purchasing (VBP) Program: Proposed Updates and Changes (§§ 412.160 Through 412.167) I. Hospital-Acquired Conditions (HAC) Reduction Program: Proposed Updates and Changes (§ 412.170) J. Proposed Payments for Indirect and Direct Graduate Medical Education Costs (§§ 412.105 and 413.75 through 413.83) K. Rural Community Hospital Demonstration Program L. Market-Based MS-DRG Relative Weight—Proposed Policy Changes (§ 413.20) M. Payment Adjustment for CAR T-cell Clinical Trial and Expanded Use for Immunotherapy Cases (§§ 412.85 and 412.312) VI. Proposed Changes to the IPPS for Capital-Related Costs A. Overview B. Additional Provisions C. Proposed Annual Update for FY 2022 VII. Proposed Changes for Hospitals Excluded From the IPPS A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2022 B. Critical Access Hospitals (CAHs) VIII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2022 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. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed Changes to the LTCH PPS for FY 2022 IX. Proposed Quality Data Reporting Requirements for Specific Providers and Suppliers A. Advancing to Digital Quality Measurement and the Use of Fast Healthcare Interoperability Resources (FHIR) in Hospital Quality Programs—Request for Information B. Closing the Health Equity Gap in CMS Hospital Quality Programs—Request For Information C. Hospital Inpatient Quality Reporting (IQR) Program D. Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program E. Long-Term Care Hospital Quality Reporting Program (LTCH QRP) F. Proposed Changes to the Medicare Promoting Interoperability Programs X. Proposed Changes for Hospitals and Other Providers and Suppliers A. Medicaid Enrollment of Medicare Providers and Suppliers for Purposes of Processing Claims for Cost-Sharing for Services Furnished to Dually Eligible Beneficiaries—Proposed Policy Changes (§ 455.410) B. Organ Acquisition Payment—Proposed Policy Changes (Part 413, Subpart L) C. Medicare Shared Savings Program—Proposed Policy Changes (§ 425.600) XI. MedPAC Recommendations XII. Other Required Information A. Publicly Available Files B. Collection of Information Requirements C. Response to Public Comments 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, 2021 and Payment Rates for LTCHs Effective for Discharges Occurring on or After October 1, 2021 I. Summary and Background II. Proposed Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2022 A. Calculation of the Proposed Adjusted Standardized Amount B. Proposed Adjustments for Area Wage Levels and Cost-of-Living C. Calculation of the Proposed Prospective Payment Rates III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2022 A. Determination of the Proposed Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update for FY 2022 B. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2022 C. Capital Input Price Index IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2022 V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2022 A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2022 B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2022 C. Proposed Cost-of-Living Adjustment (COLA) for LTCHs Located in Alaska and Hawaii D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases E. Proposed Update to the IPPS Comparable/Equivalent Amounts to Reflect the Statutory Changes to the IPPS DSH Payment Adjustment Methodology F. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for FY 2022 VI. Tables Referenced in This Proposed 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 Proposed Policy Changes I. Effects of Proposed Changes in the Capital IPPS J. Effects of Proposed Payment Rate Changes and Policy Changes Under the LTCH PPS K. Effects of Proposed Requirements for Hospital Inpatient Quality Reporting (IQR) Program L. Effects of Proposed Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program M. Effects of Proposed Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP) N. Effects of Proposed Requirements Regarding the Promoting Interoperability Program O. Alternatives Considered P. Overall Conclusion Q. 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 2022 A. Proposed FY 2022 Inpatient Hospital Update B. Proposed Update for SCHs and MDHs for FY 2022 C. Proposed FY 2022 Puerto Rico Hospital Update D. Proposed Update for Hospitals Excluded From the IPPS for FY 2022 E. Proposed Update for LTCHs for FY 2022 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 2022 IPPS/LTCH PPS proposed rule would make payment and policy changes under the Medicare inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it would make payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This proposed rule also would make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2022 proposed rule, we are continuing policies to address wage index disparities impacting low wage index hospitals; including a proposal to implement the imputed floor wage index provision of the American Rescue Plan Act of 2021; including proposals related to new technology add-on payments; and proposing to repeal the collection of market-based rate information on the Medicare cost report and the market-based MS-DRG relative weight methodology, as finalized in the FY 2021 IPPS/LTCH PPS final rule. This proposed rule also includes proposals to implement provisions of the Consolidated Appropriations Act of 2021 relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs. We are proposing to establish new requirements and revise existing requirements for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program. We are providing estimated and newly established performance standards for the Hospital Value-Based Purchasing (VBP) Program, and proposing updated policies for the Hospital Readmissions Reduction Program, Hospital Inpatient Quality Reporting (IQR) Program, Hospital VBP Program, Hospital-Acquired Condition (HAC) Reduction Program, Long Term Care Hospital Quality Reporting Program (LTCH QRP), and the PPS-Exempt Cancer Hospital Reporting (PCHQR) Program. Additionally, due to the impact of the COVID-19 PHE on measure data used in our value-based purchasing programs, we are proposing to suppress several measures in the Hospital VBP, HAC Reduction, and Hospital Readmissions Reduction Programs. As a result of these measure suppressions for the Hospital VBP Program we are also proposing a special scoring methodology for FY 2022 that results in a value-based incentive payment amount that matches the 2 percent reduction to the base operating DRG payment amount. Under various statutory authorities, we either discuss continued program implementation or are proposing to make changes to the Medicare IPPS, to the LTCH PPS, other related payment methodologies and programs for FY 2022 and subsequent fiscal years, and other policies and provisions included in this rule. 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 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 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(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)(5) of the Act, which requires the Secretary to reduce by two percentage points the annual update to the standard Federal rate for discharges for a long-term care hospital (LTCH) during the rate year for LTCHs that do not submit data in the form, manner, and at a time, specified by the Secretary. • 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. • Section 1899 of the Act which established the Medicare Shared Savings Program (Shared Savings Program) to facilitate coordination and cooperation among providers and suppliers to improve the quality of care for Medicare fee-for-service (FFS) beneficiaries and reduce the rate of growth in expenditures under Medicare Parts A and B. • Section 1902(a)(23) of the Act, which specifies Medicaid provider enrollment requirements. States may set reasonable standards relating to the qualifications of providers but may not restrict the right of beneficiaries to obtain services from any person or entity that is both qualified and willing to furnish such services. 2. Summary of the Major Provisions The following is a summary of the major provisions in this proposed rule. In general, these major provisions are being proposed as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the proposed changes in this proposed rule is presented in section I.D. of the preamble of this proposed rule. a. Proposed MS-DRG Documentation and Coding Adjustment Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112- 240) amended section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to make a recoupment adjustment to the standardized amount of Medicare payments to acute care hospitals to account for changes in MS-DRG documentation and coding that do not reflect real changes in case-mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments represented the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have been recovered under Public Law 110 90. Section 414 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment we intended to make in FY 2018 with a 0.5 percent positive adjustment to the standardized amount of Medicare payments to acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently adjusted to 0.4588 percent by section 15005 of the 21st Century Cures Act.) Therefore, for FY 2022, we are proposing to make an adjustment of +0.5 percent to the standardized amount. b. Proposed Changes to the New COVID-19 Treatments Add-On Payment (NCTAP) In response to the COVID-19 PHE, we established the New COVID-19 Treatments Add-on Payment (NCTAP) under the IPPS for COVID-19 cases that meet certain criteria (85 FR 71157 and 71158). We believe that as drugs and biological products become available and are authorized for emergency use or approved by Food and Drug Administration (FDA) for the treatment of COVID-19 in the inpatient setting, it is appropriate to increase the current IPPS payment amounts to mitigate any potential financial disincentives for hospitals to provide new COVID-19 treatments during the PHE. Therefore, effective for discharges occurring on or after November 2, 2020 and until the end of the PHE for COVID-19, CMS established the NCTAP. We anticipate that there might be inpatient cases of COVID-19, beyond the end of the PHE, for which payment based on the assigned MS-DRG may not adequately reflect the additional cost of new COVID-19 treatments. In order to continue to mitigate potential financial disincentives for hospitals to provide these new treatments, and to minimize any potential payment disruption immediately following the end of the PHE, we believe that the NCTAP should remain available for cases involving eligible treatments for the remainder of the fiscal year in which the PHE ends (for example, until September 30, 2022). At the same time, we also believe that any new technology add-on payments that may be approved for a COVID-19 treatment would also serve to mitigate any potential financial disincentives for hospitals to provide that new COVID-19 treatment, such that the NCTAP would no longer be needed for that same product. Therefore, we are proposing to extend NCTAP for eligible products that are not approved for new technology add-on payments through the end of the fiscal year in which the PHE ends (for example, September 30, 2022). We also are proposing to discontinue the NCTAP for discharges on or after October 1, 2021 for a product that is approved for new technology add-on payments beginning FY 2022. c. Use of FY 2020 or FY 2019 Data in the FY 2022 IPPS and LTCH PPS Ratesetting For the IPPS and LTCH PPS ratesetting, our longstanding goal is always to use the best available data overall. In section I.F. of the preamble of this proposed rule we discuss our analysis of the best available data for use in the development of this FY 2022 IPPS/LTCH PPS proposed rule given the potential impact of the public health emergency (PHE) for the Coronavirus Disease (COVID-19). As discussed in section I.F of the preamble of this proposed rule, we are proposing to use the FY 2019 data, such as the FY 2019 MedPAR file, for the FY 2022 ratesetting for circumstances where the FY 2020 data is significantly impacted by the COVID-19 PHE, primarily in that the utilization of inpatient services reflect generally markedly different utilization for certain types of services in FY 2020 than would have been expected in the absence of the PHE. In section I.O. of Appendix A of this proposed rule, we are also considering, as an alternative to this proposal, the use of the same FY 2020 data that we would ordinarily use for purposes of FY 2022 ratesetting, and which we may consider finalizing based on consideration of comments received. d. Proposed 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 rule (84 FR 42326 through 42332), we adopted a policy to increase 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 2022, we are continuing the low wage index hospital policy, and are also proposing to apply this policy in a budget neutral manner by applying an adjustment to the standardized amounts. e. Proposed Implementation of Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2) Imputed Floor Wage Index Policy for All-Urban States Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2) amended section 1886(d)(3)(E) of the Act (42 U.S.C. 1395ww(d)(3)(E)) to establish a minimum area wage index for hospitals in all-urban States. Specifically, section 1886(d)(3)(E)(iv) of the Act (as added by section 9831(a)(2) of Pub. L. 117-2) reinstates the imputed floor wage index policy for all-urban states effective for discharges on or after October 1, 2021 (FY 2022) with no expiration date using the methodology described in 42 CFR 412.64(h)(4)(vi) as in effect for FY 2018. Furthermore, section 1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor wage index shall not be applied in a budget neutral manner. We refer readers to section III.G.2. of this proposed rule for a summary of the provisions of section 9831 of Public Law 117-2 that we are proposing to implement in this proposed rule. f. Proposed DSH Payment Adjustment and Additional Payment for Uncompensated Care Section 3133 of the Affordable Care Act modified the Medicare disproportionate share hospital (DSH) payment methodology beginning in FY 2014. Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, FY 2014, Medicare DSHs receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The remaining amount, equal to 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, is paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH will receive an additional payment based on its share of the total amount of uncompensated care for all Medicare DSHs for a given time period. In this proposed rule, we are proposing to update our estimates of the three factors used to determine uncompensated care payments for FY 2022. We are also proposing to continue to use uninsured estimates produced by CMS' Office of the Actuary (OACT) as part of the development of the National Health Expenditure Accounts (NHEA) in the calculation of Factor 2. Consistent with the policy adopted in the FY 2021 IPPS/LTCH PPS final rule for FY 2022 and subsequent fiscal years, we are using a single year of data on uncompensated care costs from Worksheet S-10 of the FY 2018 cost reports to calculate Factor 3 in the FY 2022 methodology for all eligible hospitals with the exception of Indian Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. For IHS and Tribal hospitals and Puerto Rico hospitals we are proposing to continue to use the low-income insured days proxy to calculate Factor 3 for these hospitals for FY 2022. We are proposing certain methodological changes for calculating Factor 3 for FY 2022. Additionally, we are proposing to revise our regulation governing the calculation of the Medicaid fraction of the DSH calculation. Under this proposal, patient days of individuals receiving benefits under a section 1115 waiver program would be counted in the numerator of the Medicaid fraction only if the patient directly receives inpatient hospital insurance coverage on that day under a waiver authorized under section 1115(a)(2) of the Act. g. Reduction of Hospital Payments for Excess Readmissions We are proposing to make changes to policies for the Hospital Readmissions Reduction Program, which was established under section 1886(q) of the Act, as amended by section 15002 of the 21st Century Cures Act. The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating DRG payment to account for excess readmissions of selected applicable conditions. For FY 2017 and subsequent years, the reduction is based on a hospital's risk-adjusted readmission rate during a 3-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) surgery. In this FY 2022 IPPS/LTCH PPS proposed rule, we are proposing the following policies: (1) To adopt a cross-program measure suppression policy; (2) to suppress the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following Pneumonia Hospitalization measure (NQF #0506) for the FY 2023 program year; (3) to modify the remaining five condition-specific readmission measures to exclude COVID-19 diagnosed patients from the measure denominators, beginning with the FY 2023 program year; (4) to use the MedPAR data that aligns with the applicable period for FY 2022; (5) to automatically adopt the use of MedPAR data corresponding to the applicable period beginning with the FY 2023 program year and all subsequent program years, unless otherwise specified by the Secretary; and (6) to update the regulatory text to reflect that our Hospital Compare website has been renamed and is now referred to as Care Compare. We are clarifying our Extraordinary Circumstances Exceptions (ECE) policy, and we are also requesting public comment on opportunities to advance health equity through possible future stratification of results by race and ethnicity for condition/procedure-specific readmission measures and by expansion of standardized data collection to additional social factors, such as language preference and disability status. We are also seeking comment on mechanisms of incorporating other demographic characteristics into analyses that address and advance health equity, such as the potential to include administrative and self-reported data to measure co-occurring disability status. h. 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 proposed rule, we are proposing to: (1) Establish a measure suppression policy for the duration of the public health emergency for COVID-19; (2) suppress the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), Medicare Spending Per Beneficiary (MSPB), and five Healthcare-Associated Infection (HAI) measures, for the FY 2022 Program year; and (3) suppress the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia (PN) Hospitalization (MORT-30-PN) measure for the FY 2023 program year. We are also proposing to revise the scoring and payment methodology for the FY 2022 program year such that hospitals' Total Performance Scores will not include calculations based on these measures. We believe that awarding a TPS to any hospital based off the remaining measures that are not suppressed would not result in a fair national comparison and, as a result, are proposing not to award a TPS to any hospital for the FY 2022 program year. Instead, we are proposing to award each hospital a payment incentive multiplier that results in a value-based incentive payment that is equal to the amount withheld for the fiscal year (2 percent). We are proposing to remove the CMS Patient Safety and Adverse Events Composite (PSI 90) measure beginning with FY 2023 because the costs associated with the measure outweigh the benefit of its use in the program. We are also proposing to update the baseline periods for certain measures affected by the ECE granted in response to the COVID-19 PHE and to make a technical update to our terminology used in the Hospital VBP Program regulations. i. 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 2022 IPPS/LTCH PPS proposed rule, we are proposing to: (1) Clarify our ECE policy; (2) adopt a cross-program measure suppression policy; (3) apply that measure suppression policy to suppress certain program data; and (4) update the regulatory text to reflect that our Hospital Compare website has been renamed and is now referred to as Care Compare. j. 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 2022 IPPS/LTCH PPS proposed rule, we are proposing to make several changes. We are proposing to adopt five new measures: (1) A new structural measure—Maternal Morbidity Structural Measure—beginning with a shortened reporting period from October 1, 2021 through December 31, 2021 affecting the CY 2021 reporting period/FY 2023 payment determination; (2) the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (Hybrid HWM) measure in a stepwise fashion, beginning with a voluntary reporting period from July 1, 2022 through June 30, 2023, and followed by mandatory reporting from July 1, 2023 through June 30, 2024, affecting the FY 2026 payment determination and for subsequent years; (3) the COVID-19 Vaccination Coverage Among Health Care Personnel (HCP) measure beginning with a shortened reporting period from October 1, 2021 through December 31, 2021, affecting the CY 2021 reporting period/FY 2023 payment determination and with quarterly reporting beginning with the FY 2024 payment determination and for subsequent years; and two medication-related adverse event eCQMs beginning with the CY 2023 reporting period/FY 2025 payment determination; (4) Hospital Harm-Severe Hypoglycemia eCQM (NQF #3503e); and (5) Hospital Harm-Severe Hyperglycemia eCQM (NQF #3533e). We are also proposing to remove five measures: (1) Death Among Surgical Inpatients with Serious Treatable Complications (CMS PSI-04) beginning with the FY 2023 payment determination; (2) Exclusive Breast Milk Feeding (PC-05) (NQF #0480) beginning with the FY 2026 payment determination; (3) Admit Decision Time to ED Departure Time for Admitted Patients (ED-2) (NQF #0497) beginning with the FY 2026 payment determination; and two stroke-related eCQMs beginning with the FY 2026 payment determination; (4) Anticoagulation Therapy for Atrial Fibrillation/Flutter eCQM (STK-03) (NQF #0436); and (5) Discharged on Statin Medication eCQM (STK-06) (NQF #0439). We are requesting comment from stakeholders on the potential future development and inclusion of two measures: (1) A mortality measure for patients admitted with COVID-19; and (2) a patient-reported outcomes measure following elective total hip and/or total knee arthroplasty (THA/TKA). We are also requesting comment from stakeholders on ways we can leverage measures to address gaps in existing health equity generally as well as comment on: (1) Potential future confidential stratified reporting for the Hospital-Wide All-Cause Unplanned Readmission (HWR) measure using both dual eligibility and race/ethnicity; and (2) potential future reporting of a structural measure to assess the degree of hospital leadership engagement in health equity performance data. In this proposed rule, we are also requesting feedback across programs on potential actions and priority areas that would enable the continued transformation of our quality measurement toward greater digital capture of data and use of the FHIR standard. In addition, beginning with the CY 2023 reporting period/FY 2025 payment determination, we are proposing to require hospitals to use certified technology that has been updated consistent with the 2015 Edition Cures Update and clarifying that certified technology must support the reporting requirements for all available eCQMs. We also are proposing that hybrid measures comply with the same certification requirements as eCQMs, specifically that EHR technology must be certified to the 2015 Edition Cures Update. We are proposing an update to revise 42 CFR 412.140(a)(2) and 42 CFR 412.140(e)(2)(iii) replacing the terms “Security Administrator” and “System Administrator” with the term “security official” in alignment with other CMS quality programs. Due to an updated URL for the QualityNet website from QualityNet.org to QualityNet.cms.gov , we are also proposing to revise Hospital IQR Program regulations at 42 CFR 412.140(a)(1) and 42 CFR 412.140(c)(2)(i) to reflect updates to the QualityNet website. Lastly, we are proposing to extend the effects of the educational review process for chart-abstracted measures beginning with validations affecting the FY 2024 payment determination. k. 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 proposed rule, we are proposing to remove the Oncology: Plan of Care for Pain—Medical Oncology and Radiation Oncology (NQF #0383) (PCH-15) measure beginning with the FY 2024 program year, adopt the COVID-19 Vaccination Coverage Among Healthcare Personnel measure beginning with the FY 2023 program year, make a technical update to the terminology we use in the program, and codify existing PCHQR Program policies in our regulations. l. Medicare Promoting Interoperability Program For purposes of reducing the burden on eligible hospitals and CAHs, we are proposing several changes to the Medicare Promoting Interoperability Program. Specifically, we are proposing: (1) To continue the EHR reporting period of a minimum of any continuous 90-day period for new and returning eligible hospitals and CAHs for CY 2023 and to increase the EHR reporting period to a minimum of any continuous 180-day period for new and returning eligible hospitals and CAHs for CY 2024; (2) to maintain the Electronic Prescribing Objective's Query of PDMP measure as optional while increasing its available bonus from five points to 10 points for the EHR reporting period in CY 2022; (3) to modify the Provide Patient's Electronic Access to Their Health Information measure to establish a data availability requirement beginning with encounters with a date of service on or after January 1, 2016, beginning with the EHR reporting period in CY 2022; (4) to add a new Health Information Exchange (HIE) Bi-Directional Exchange measure as a yes/no attestation, to the HIE objective as an optional alternative to the two existing measures beginning with the EHR reporting period in CY 2022; (5) to require reporting a “yes” on four of the existing Public Health and Clinical Data Exchange Objective measures (Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting, and Electronic Reportable Laboratory Result Reporting) or requesting the applicable exclusion(s); (6) adding a new measure to the Protect Patient Health Information objective that requires eligible hospitals and CAHs to attest to having completed an annual assessment of SAFER Guides beginning with the EHR reporting period in CY 2022; (7) to remove attestation statements 2 and 3 from the Promoting Interoperability Program's prevention of information blocking requirement; (8) to increase the minimum required score for the objectives and measures from 50 points to 60 points (out of 100 points) in order to be considered a meaningful EHR user; and (9) to adopt two new eCQMs to the Medicare Promoting Interoperability Program's eCQM measure set beginning with the reporting period in CY 2023, in addition to removing four eCQMs from the measure set beginning with the reporting period in CY 2024 which is in alignment with the proposals for the Hospital IQR Program. We are amending our regulation texts as necessary to incorporate several of these proposed changes. m. Proposed Repeal of Market-Based Data Collection and Market-Based MS-DRG Relative Weight Methodology As discussed in section V.L. of the preamble of this proposed rule, we are proposing to repeal the requirement that a hospital report on the Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its MA organization payers, by MS-DRG, for cost reporting periods ending on or after January 1, 2021. We are also proposing to repeal the market-based MS-DRG relative weight methodology adopted for calculating the MS-DRG relative weights effective in FY 2024, and to continue using the existing cost-based methodology for calculating the MS-DRG relative weights for FY 2024 and subsequent fiscal years. Lastly, we are soliciting comment on alternative approaches or data sources that could be used in Medicare fee-for-service (FFS) ratesetting. The proposed repeal of these policies would result in a reduction of 63,780 annual burden hours for all hospitals. n. Proposed Implementation of Sections 126, 127 and 131 of the Consolidated Appropriations Act (CAA) of 2021 In this proposed rule, we are including proposals to implement sections 126, 127 and 131 of the Consolidated Appropriations Act (CAA) of 2021. Section 126(a) of the CAA amended section 1886(h) of the Act by adding a new section 1886(h)(9) of the Act requiring the distribution of additional residency positions to qualifying hospitals. Section 127 of the CAA amended section 1886(h)(4)(H)(iv) of the Act to specify that in the case of a hospital not located in a rural area that established or establishes a medical residency training program (or rural track) in a rural area, the hospital, and each such hospital located in a rural area that participates in such a training, is allowed to receive an adjustment to its full-time equivalent (FTE) resident limit. Section 131 of the CAA amended section 1886(h)(2)(F) of the Act to provide an opportunity to hospitals with such extremely low or $0 per resident amounts (PRAs) that meet certain criteria to reset and establish new PRAs if the hospital trains resident(s) in a cost reporting period beginning on or after enactment [December 27, 2020] and before the date that is 5 years after enactment [December 26, 2025]. Section 131 also amended section 1886(h)(4)(H)(i) of the Act to provide an opportunity for hospitals that meet certain criteria and that have very small FTE resident caps to replace those caps if the Secretary determines the hospital begins training residents in a new program beginning on or after enactment (December 27, 2020) and before 5 years after enactment (December 26, 2025). We refer readers to section V.J.2. of this proposed rule for rule for a summary of the provisions of sections 126, 127, and 131 of the CAA that we are proposing to implement in this proposed rule. o. Proposed Changes to Organ Acquisition Payment Policy In section X.B.2.h. of the preamble of this proposed rule, we are proposing to revise and codify the Medicare usable organ counting policy to count only organs transplanted into Medicare beneficiaries so that Medicare more accurately records and pays its share of organ acquisition costs. p. Medicare Shared Savings Program We are proposing to make changes to policies for the Shared Savings Program, which was established under section 1899 of the Act, to allow eligible ACOs participating in the BASIC track's glide path the option to elect to forgo automatic advancement along the glide path's increasing levels of risk and potential reward for performance year (PY) 2022. Under this proposal, prior to the automatic advancement for PY 2022, an eligible ACO may elect to remain in the same level of the BASIC track's glide path in which it participated during PY 2021. For PY 2023, an ACO that elects this advancement deferral option would be automatically advanced to the level of the BASIC track's glide path in which it would have participated during PY 2023 if it had advanced automatically to the required level for PY 2022 (unless the ACO elects to advance more quickly before the start of PY 2023). 3. Summary of Costs and Benefits The following table provides a summary of the costs, savings, benefits associated with the major provisions described in section I.A.3. of the preamble of this proposed rule. BILLING CODE 4120-01-P EP10MY21.000 EP10MY21.001 EP10MY21.002 EP10MY21.003 BILLING CODE 4120-01-C 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 beginning on October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals. If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. In general, to qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add-on payment, they would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through FY 2022. For discharges occurring on or after October 1, 2007, but before October 1, 2022, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M. 2. Hospitals and Hospital Units Excluded From the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF hospitals and units, LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the annual updates to the LTCH PPS are included along with the IPPS annual update in this document. Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children's hospitals, cancer hospitals, hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs continue to be paid solely under a reasonable cost-based system, subject to a rate-of-increase ceiling on inpatient operating costs. Similarly, extended neoplastic disease care hospitals are paid on a reasonable cost basis, subject to a rate-of-increase ceiling on inpatient operating costs. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, effective for LTCH's cost reporting periods beginning in FY 2016 cost reporting period, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS. 4. Critical Access Hospitals (CAHs) Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v) of the Act and existing regulations under 42 CFR part 413. 5. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR part 413. C. Summary of Provisions of Recent Legislation That Would Be Implemented in This Proposed Rule 1. 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. 2. Consolidated Appropriations Act, 2021 (Pub. L. 116-260) Sections 126, 127 and 131 of the Consolidated Appropriations Act, 2021 made a number of changes to various sections of the Act relating to payment for direct GME and IME costs to hospitals. a. Section 126 of the Consolidated Appropriations Act, 2021 Section 126 amended section 1886(h) of the Act by adding a new section 1886(h)(9) requiring the distribution of additional residency positions to qualifying hospitals. Section 1886(h)(9)(A) requires that for FY 2023, and for each succeeding fiscal year until the aggregate number of full-time equivalent residency positions distributed is equal to 1,000, the Secretary shall initiate separate rounds of applications from hospitals for these additional residency positions. The Secretary is required, subject to certain provisions in the law, to increase the otherwise applicable resident limit for each qualifying hospital that submits a timely application by the number of positions that may be approved by the Secretary for that hospital. The Secretary is required to notify hospitals of the number of positions distributed to them by January 31 of the fiscal year of the increase, and the increase is effective beginning July 1 of that fiscal year. Section 1886(h)(9)(A) also limits the aggregate number of such positions made available in a single fiscal year across all hospitals to no more than 200. In determining the qualifying hospitals for which an increase is provided, section 1886(h)(9)(B) requires the Secretary to take into account the demonstrated likelihood of the hospital filling the positions made available within the first 5 training years beginning after the date the increase would be effective, as determined by the Secretary. Section 1886(h)(9)(B) of the Act also requires a minimum distribution for certain categories of hospitals. Specifically, the Secretary is required to distribute at least 10 percent of the aggregate number of total residency positions available to each of four categories of hospitals. Stated briefly, and discussed in greater detail in later in this proposed rule, the categories are as follows: (1) Hospitals located in rural areas or that are treated as being located in a rural area; (2) hospitals in which the reference resident level of the hospital is greater than the otherwise applicable resident limit; (3) hospitals in states with new medical schools or additional locations and branches of existing medical schools; and (4) hospitals that serve areas designated as Health Professional Shortage Areas (HPSAs). Additionally, section 1886(h)(9)(F)(ii) of the Act defines a qualifying hospital as a hospital in one of these four categories. Section 1886(h)(9)(C) of the Act places certain limitations on the distribution of the residency positions. First, a hospital may not receive more than 25 additional full-time equivalent residency positions. Second, no increase in the otherwise applicable resident limit of a hospital may be made unless the hospital agrees to increase the total number of full-time equivalent residency positions under the approved medical residency training program of the hospital by the number of positions made available to that hospital. b. Section 127 of the Consolidated Appropriations Act, 2021 Section 127 of the CAA amended section 1886(h)(4)(H)(iv) of the Act to specify that in the case of a hospital not located in a rural area that established or establishes a medical residency training program (or rural tracks) in a rural area, the hospital, and each such hospital located in a rural areas that participates in such a training, is allowed to receive an adjustment to its full-time equivalent (FTE) resident limit. c. Sections 131 of the Consolidated Appropriations Act, 2021 Section 131 of the CAA amended section 1886(h)(2)(F) of the Act to provide an opportunity to hospitals with such extremely low or $0 per resident amounts (PRAs) that meet certain criteria to reset and establish new PRAs if the hospital trains resident(s) in a cost reporting period beginning on or after enactment [December 27, 2020] and before the date that is 5 years after enactment [December 26, 2025]. Section 131 of the CAA also amended section 1886(h)(4)(H)(i) of the Act to provide an opportunity for hospitals that meet certain criteria and that have very small FTE resident caps to replace those caps if the Secretary determines the hospital begins training residents in a program year beginning on or after enactment (December 27, 2020) and before 5 years after enactment (December 26, 2025). D. Summary of the Provisions of This Proposed Rule In this proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2022 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 2022. The following is a general summary of the changes that we are proposing to make in this proposed rule. 1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of this proposed rule, we include— • Proposed changes to MS-DRG classifications based on our yearly review for FY 2022. • Proposed adjustment to the standardized amounts under section 1886(d) of the Act for FY 2022 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 2022 status of new technologies approved for add-on payments for FY 2022, a presentation of our evaluation and analysis of the FY 2022 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Public Law 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 2022 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products. • A proposal to extend the New COVID-19 Treatments Add-on Payment (NCTAP) through the end of the fiscal year in which the PHE ends for certain products and discontinue NCTAP for products approved for new technology add-on payments in FY 2022. 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble of this proposed rule we are proposing to make revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but were not limited to, the following: • The proposed FY 2022 wage index update using wage data from cost reporting periods beginning in FY 2018. • Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2022 based on the 2019 Occupational Mix Survey. • Proposed application of the rural floor and the frontier State floor, and continuation of the low wage index hospital policy. • Proposed implementation of the imputed floor wage index policy for all-urban states under section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2). • 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 revisions to the regulations at § 412.278 regarding the Administrator's Review of MGCRB decisions. • Proposed changes to rural reclassification cancellation requirements at § 412.103(g). • Proposed adjustment to the wage index for acute care hospitals for FY 2022 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 2022 wage index. 3. Proposed Rebasing and Revising of the Hospital Market Baskets In section IV. of the preamble of this proposed rule, we are proposing to rebase and revise the hospital market baskets for acute care hospitals and update the labor-related share. 4. Other Decisions and Proposed Changes to the IPPS for Operating Costs In section V. of the preamble of this proposed rule, we discuss proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR parts 412 and 413, including the following: • Proposed inpatient hospital update for FY 2022. • Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • The statutorily required IME adjustment factor for FY 2022. • Proposed changes to the methodologies for determining Medicare DSH payments and the additional payments for uncompensated care. • Proposed requirements for payment adjustments under the Hospital Readmissions Reduction Program for FY 2022. • The provision of estimated and newly established performance standards for the calculation of value-based incentive payments, as well as a proposal to suppress multiple measures and provide net-neutral payment adjustments under the Hospital Value-Based Purchasing Program. • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2022. • Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2022. • Proposed revisions to the regulations regarding the counting of days associated with section 1115 demonstration projects in the Medicaid fraction. • Proposals to implement provisions of the Consolidated Appropriations Act relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs. • Proposed repeal of the market-based data collection requirement and market-based MS-DRG relative weight methodology. 5. Proposed FY 2022 Policy Governing the IPPS for Capital-Related Costs In section VI. of the preamble to this proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2022. 6. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages In section VII. of the preamble of this proposed rule, we discuss— • Proposed changes to payments to certain excluded hospitals for FY 2022. • Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration. 7. Proposed Changes to the LTCH PPS In section VIII. of the preamble of this proposed rule, we set forth proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2022. 8. Proposed Changes Relating to Quality Data Reporting for Specific Providers and Suppliers In section IX. of the preamble of this proposed rule, we address the following: • Proposed requirements for the Hospital Inpatient Quality Reporting (IQR) Program. • Proposed changes to the requirements for the quality reporting program for PPS-exempt cancer hospitals (PCHQR Program). • Proposed changes to the requirements under the LTCH Quality Reporting Program (QRP). We are also seeking information on CMS's future plans to define digital quality measures (dQMs) for the LTCH QRP and on CMS' continued efforts to close the health equity gap. • Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program. 9. Other Proposals Included in This Proposed Rule Section X. of the preamble to this proposed rule includes the following proposals: • Proposed changes pertaining to Medicaid enrollment of Medicare-enrolled providers and suppliers to 42 CFR part 455.410 and request for comment on provider experiences where state Medicaid agencies apply the Medicaid payment and coverage rules to a claim for a Medicare service rather than adjudicating the claim for Medicare cost-sharing liability. • Proposed changes pertaining to Medicare's share of organ acquisition costs transplanted into Medicare beneficiaries and the charges for services provided to cadaveric organ donors by donor community hospitals and transplants hospitals. • Proposed changes pertaining to the Shared Savings Program that would allow eligible ACOs participating in the BASIC track's glide path to maintain their current level of participation for PY 2022. 10. Other Provisions of This Proposed Rule Section XI. of the preamble to this proposed rule includes our discussion of the MedPAC Recommendations. Section XII. of the preamble to this proposed rule includes the following: • A descriptive listing of the public use files associated with the proposed rule. • The collection of information requirements for entities based on our proposals. • Information regarding our responses to public comments. 11. 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 this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2022 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 this proposed rule, we address the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2022 for certain hospitals excluded from the IPPS. 12. 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 2022 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 2022. We are proposing to establish the adjustments for the wage index, 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. 13. 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. 14. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2022 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. 15. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2021 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We address these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2021 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. To further interoperability in post-acute care settings, CMS and the Office of the National Coordinator for Health Information Technology (ONC) participate inin the Post-Acute Care Interoperability Workgroup (PACIO http://pacioproject.org/ ) to facilitate collaboration with industry stakeholders to develop FHIR standards. These standards could support the exchange and reuse of patient assessment data derived from the Minimum Data Set (MDS), Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), LTCH Continuity Assessment Record and Evaluation (CARE Data Set (LCDS), Outcome and Assessment Information Set (OASIS), and other sources. The PACIO Project has focused on FHIR implementation guides for functional status, cognitive status and new use cases on advance directives and speech language pathology. We encourage post-acute care (PAC) provider and health information technology (IT) vendor participation as the efforts advance. The CMS Data Element Library (DEL) continues to be updated and serves as the authoritative resource for PAC assessment data elements and their associated mappings to health IT standards, such as Logical Observation Identifiers Names and Codes (LOINC) and Systematized Nomenclature of Medicine Clinical Terms (SNOMED). The DEL furthers CMS' goal of data standardization and interoperability. These interoperable data elements can reduce provider burden by allowing the use and exchange of healthcare data; supporting provider exchange of electronic health information for care coordination, person-centered care; and supporting real-time, data driven, clinical decision-making. Standards in the Data Element Library ( https://del.cms.gov/DELWeb/pubHome )can be referenced on the CMS website and in the ONC Interoperability Standards Advisory (ISA). The 2021 ISA is available at https://www.healthit.gov/isa . The 21st Century Cures Act (Cures Act) (Pub. L. 114-255, enacted December 13, 2016) requires HHS to take new steps to enable the electronic sharing of health information ensuring interoperability for providers and settings across the care continuum. The Cures Act includes a trusted exchange framework and common agreement (TEFCA) provision 1 that will enable the nationwide exchange of electronic health information across health information networks and provide an important way to enable bi-directional health information exchange in the future. For more information on current developments related to TEFCA, we refer readers to https://www.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement and https://rce.sequoiaproject.org/ . 1 ONC, Draft 2 Trusted Exchange Framework and Common Agreement, https://www.healthit.gov/sites/default/files/page/2019-04/FINALTEFCAQTF41719508version.pdf . The ONC final rule entitled “21st Century Cures Act: Interoperability, Information Blocking, and the ONC Health IT Certification Program” (85 FR 25642) published in the May 1, 2020 Federal Register , (hereinafter referred to as “ONC Cures Act Final Rule”) implemented policies related to information blocking as authorized under section 4004 of the 21st Century Cures Act. Information blocking is generally defined as a practice by a health IT developer of certified health IT, health information network, health information exchange, or health care provider that, except as required by law or specified by the HHS Secretary as a reasonable and necessary activity, is likely to interfere with access, exchange, or use of electronic health information. For a health care provider (as defined in 45 CFR 171.102), the definition of information blocking (see 45 CFR 171.103) specifies that the provider knows that the practice is unreasonable, as well as likely to interfere with access, exchange, or use of electronic health information. 2 To deter information blocking, health IT developers of certified health IT, health information networks and health information exchanges whom the HHS Inspector General determines, following an investigation, have committed information blocking, are subject to civil monetary penalties of up to $1 million per violation. Appropriate disincentives for health care providers need to be established by the Secretary through rulemaking. Stakeholders can learn more about information blocking at https://www.healthit.gov/curesrule/final-rule-policy/information-blocking . ONC has posted information resources including fact sheets ( https://www.healthit.gov/curesrule/resources/fact-sheets ), frequently asked questions ( https://www.healthit.gov/curesrule/resources/information-blocking-faqs ), and recorded webinars ( https://www.healthit.gov/curesrule/resources/webinars ). 2 For other types of actors (health IT developers of certified health IT and health information network or health information exchange, as defined in 45 CFR 171.102), the definition of “information blocking” (see 45 CFR 171.103) specifies that the actor “knows, or should know, that such practice is likely to interfere with access, exchange, or use of electronic health information.” We invite providers to learn more about these important developments and how they are likely to affect LTCHs. F. Use of FY 2020 or FY 2019 Data in the FY 2022 IPPS and LTCH PPS Ratesetting We primarily use two data sources in the IPPS and LTCH PPS ratesetting: Claims data and cost report data. The claims data source is the MedPAR file, which includes fully coded diagnostic and procedure data for all Medicare inpatient hospital bills for discharges in a fiscal year. Our goal is always to use the best available data overall for ratesetting. Ordinarily, the best available MedPAR data would be the most recent MedPAR file that contains claims from discharges for the fiscal year that is 2 years prior to the fiscal year that is the subject of the rulemaking. For FY 2022 ratesetting, under ordinary circumstances, the best available data would be the FY 2020 MedPAR file. The cost report data source is the Medicare hospital cost report data files from the most recent quarterly HCRIS release. For example, ordinarily, the best available cost report data used in relative weight calculations would be based on the cost reports beginning 3 fiscal years prior to the fiscal year that is the subject of the rulemaking. For the FY 2022 ratesetting, under ordinary circumstances, that would be the FY 2019 cost report data from HCRIS, which would contain many cost reports ending in FY 2020 based on each hospital's cost reporting period. The FY 2020 MedPAR claims file and the FY 2019 HCRIS dataset both contain data significantly impacted by the COVID-19 PHE, primarily in that the utilization of inpatient services was generally markedly different for certain types of services in FY 2020 than would have been expected in the absence of the PHE, as we discuss in this section. Accordingly, we question whether these data sources are the best available data to use for the FY 2022 ratesetting. One factor in assessing whether these data sources represent the best available data is to what extent the FY 2019 data from before the COVID-19 PHE is a better overall approximation of FY 2022 inpatient experience (for example, whether the share of total inpatient utilization for elective surgeries will be more similar to FY 2019 than to FY 2020), or alternatively, to what extent the FY 2020 data which include the COVID-19 PHE time period is a better overall approximation of FY 2022 inpatient experience (for example, whether the share of total inpatient utilization for respiratory infections will be more similar to FY 2020 than to FY 2019). Another factor is to what extent the decision to use the FY 2019 or FY 2020 data differentially impacts the FY 2022 IPPS ratesetting. In order to help assess likely inpatient utilization in FY 2022, we examined the trend in the number of COVID-19 vaccinations in the United States as reported to the Centers for Disease Control (CDC) (see https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/index.html , accessed April 16, 2021). The U.S. COVID-19 Vaccination Program began December 14, 2020. As of April 15, 2021, 198.3 million vaccine doses have been administered. Overall, about 125.8 million people, or 37.9 percent of the U.S. population, have received at least one dose of vaccine as of this date. About 78.5 million people, or 23.6 percent of the U.S. population have been fully vaccinated. 3 As of April 15, the 7-day average number of administered vaccine doses reported to CDC per day was 3.3 million, a 10.3 percent increase from the previous week. As of April 15, 80 percent of people 65 or older have received at least one dose of vaccine; 63.7 percent are fully vaccinated. Nearly one-half (48.3 percent) of people 18 or older have received at least one dose of vaccine; 30.3 percent are fully vaccinated. Nationally, COVID-19-related emergency department visits as well as both hospital admissions and current hospitalizations have risen among patients ages 18 to 64 years in recent weeks, but emergency department visits and hospitalizations among people ages 65 years and older have decreased, likely demonstrating the important role vaccination plays in protecting against COVID-19. 3 People who are fully vaccinated (formerly receiving 2 doses) represents the number of people who have received the second dose in a two-dose COVID-19 vaccine series or one dose of the single-dose J&J/Janssen COVID-19 vaccine. As indicated by the CDC, COVID-19 vaccines are effective at preventing COVID-19. 4 For example, a recent CDC report on the effectiveness of the Pfizer-BioNTech and Moderna COVID-19 vaccines when administered in real-world conditions found that after being fully vaccinated with either of these vaccines a person's risk of infection is reduced by up to 90 percent. With respect to inpatient utilization in FY 2020, we believe that COVID-19 and the risk of disease were drivers of the different utilization patterns observed. Therefore, the continuing rapid increase in vaccinations coupled with the overall effectiveness of the vaccines leads us to conclude based on the information available to us at this time that there will be significantly lower risk of COVID-19 in FY 2022 and fewer hospitalizations for COVID-19 for Medicare beneficiaries in FY 2022 than there were in FY 2020. This calls into question the applicability of inpatient data from FY 2020 to the FY 2022 time period for hospitals paid under the IPPS and LTCH PPS. 4 Interim Estimates of Vaccine Effectiveness of BNT162b2 and mRNA-1273 COVID-19 Vaccines in Preventing SARS-CoV-2 Infection Among Health Care Personnel, First Responders, and Other Essential and Frontline Workers—Eight U.S. Locations, December 2020-March 2021, available at https://www.cdc.gov/mmwr/volumes/70/wr/mm7013e3.htm?s_cid=mm7013e3_e&ACSTrackingID=USCDC_921-DM53321&ACSTrackingLabel=MMWR%20Early%20Release%20-%20Vol.%2070%2C%20March%2029%2C%202021&deliveryName=USCDC_921-DM53321 , accessed April 2, 2021). We also reviewed CDC guidance to healthcare facilities during the COVID-19 PHE (see https://www.cdc.gov/coronavirus/2019-ncov/hcp/guidance-hcf.html ). In its most recent guidance, the CDC described how the COVID-19 pandemic has changed how health care is delivered in the United States and has affected the operations of healthcare facilities. Effects cited by the CDC include increases in patients seeking care for respiratory illnesses, patients deferring and delaying non-COVID-19 care, disruptions in supply chains, fluctuations in facilities' occupancy, absenteeism among staff because of illness or caregiving responsibilities, and increases in mental health concerns. In order to investigate the effects cited by the CDC, we examined the claims data from the FY 2020 MedPAR compared to the FY 2019 MedPAR. Overall, in FY 2020, inpatient admissions under the IPPS dropped by approximately 14 percent compared to FY 2019. Elective surgeries declined significantly, and the share of admissions for MS-DRGs associated with the treatment of COVID-19 increased. For example, the number of inpatient admissions for MS-DRG 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC) dropped by 40 percent in FY 2020. Its share of inpatient admissions dropped from 4.0 percent in FY 2019 to 2.8 percent in FY 2020. The number of inpatient admissions for MS-DRG 177 (Respiratory Infections and Inflammations with MCC) increased by +133 percent. Its share of inpatient admissions increased from 0.8 percent in FY 2019 to 2.2 percent in FY 2020. This data analysis is consistent with the observations in the CDC's guidance that COVID-19 increased the number of patients seeking care for respiratory illnesses, and caused patients to defer and delay non-COVID-19 care. We note that these observed changes in the claims data also extend to the cost reports submitted by hospitals that include the COVID-19 PHE time period, since those cost reports that extend into the COVID-19 PHE are based in part on the discharges that occurred during that time. The effects noted by the CDC are specific to the pandemic and to the extent that the effects on healthcare facilities noted by the CDC are not expected to continue into FY 2022, it would suggest that the inpatient data from FY 2020 impacted by the COVID-19 PHE may be less suitable for use in the FY 2022 ratesetting. We also considered the analysis of 2020 IPPS real case-mix included in the notice titled “CY 2021 Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts” that appeared in the Federal Register on November 12, 2020 (85 FR 71916). Section 1813(b) of the Act prescribes the method for computing the amount of the inpatient hospital deductible. The inpatient hospital deductible is an amount equal to the inpatient hospital deductible for the preceding CY, adjusted by the best estimate of the payment-weighted average of the applicable percentage increases used for updating the payment rates to hospitals, and adjusted to reflect changes in real case-mix. To develop the adjustment to reflect changes in real case-mix, we first calculated an average case-mix for each hospital that reflected the relative costliness of that hospital's mix of cases compared to those of other hospitals. We then computed the change in average case-mix for hospitals paid under the IPPS in FY 2020 compared to FY 2019, using Medicare bills from IPPS hospitals received as of July 2020. Those bills represented a total of about 6.1 million Medicare discharges for FY 2020 and provided the most recent case-mix data available at the time of that analysis. Based on these bills, the change in average case-mix in FY 2020 was 2.8 percent. Based on these bills and past experience, we expected the overall case-mix change to be 3.8 percent as the year progressed and more FY 2020 data became available. Real case-mix is that portion of case-mix that is due to changes in the mix of cases in the hospital and not due to coding optimization. As stated in the November 2020 notice, COVID-19 has complicated the determination of real case-mix increase. COVID-19 cases typically group to higher-weighted MS-DRGs, and hospitals have experienced a concurrent reduction in cases that group to lower weighted MS-DRGs. Both of these factors cause a real increase in case-mix. We compared the average case-mix for February 2020 through July 2020 (COVID-19 period) with average case-mix for October 2019 through January 2020 (pre-COVID-19 period). Since this increase applies for only a portion of CY 2020, we allocated this increase by the estimated discharges over the 2 periods—a 2.5 percent increase for FY 2020. The 1.3-percent residual case-mix increase is a mixture of real case-mix and coding optimization. Over the past several years, we have observed total case-mix increases of about 0.5 percent per year and have assumed that they are real. Thus, based on the information available, we expect that 0.5 percent of the residual 1.3 percent change in average case-mix for FY 2020 will be real. The combination of the 2.5 percent COVID-19 effect and the remaining residual 0.5-percent real case-mix increase results in an estimated 3.0 percent increase in real case-mix for FY 2020. Because this analysis was based on Medicare bills from IPPS hospitals received as of July 2020, for this proposed rule, we calculated case-mix values for FY 2019 and FY 2020 based on the full year FY 2019 and FY 2020 MedPAR files to help assess the change in case-mix based on more complete data. For FY 2019 we calculated a case-mix value of 1.813 and for FY 2020 we calculated a case-mix value of 1.883, an increase in total case-mix of 3.9 percent. These were calculated using the MS-DRG relative weights in effect for those time periods. 5 This is consistent with the estimate in the Notice of the CY 2021 Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts that the change in total case-mix for FY 2020 would be 3.8 percent when more complete data was available. 5 Section 3710 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act directs the Secretary of HHS to increase the weighting factor of the assigned DRG by 20 percent for an individual diagnosed with COVID-19 discharged during the COVID-19 PHE period. In order to make the case-mix values more comparable, the 20 percent increase is not included. The increases in patients seeking care for respiratory illnesses and patients deferring and delaying non-COVID-19 care during FY 2020, the increasing number of vaccinations for COVID-19, and the high estimate of FY 2020 real case-mix growth all lead us to believe that FY 2020 is not the best overall approximation of inpatient experience in FY 2022. We believe that FY 2019 as the most recent complete FY prior to the COVID-19 PHE is a better approximation of FY 2022 inpatient experience. As we indicated earlier, whether the data is a better overall approximation of FY 2022 inpatient experience is one factor in assessing which data source represents the best available data for the FY 2022 rulemaking. Another factor is to what extent the decision to use the FY 2019 or FY 2020 data differentially impacts the FY 2022 ratesetting. One way to assess this factor is to model the change in the total case-mix, which is a driver of spending, if our assumption regarding the FY 2022 inpatient experience used in calculating the MS-DRG relative weights turns out to be less accurate based on actual FY 2022 experience. We estimated the difference in the total case-mix if we calculated the MS-DRG relative weights based on the FY 2019 claims data and the actual utilization is ultimately more similar to the FY 2020 data, as compared to if we calculated the MS-DRG relative weights based on the FY 2020 data and the actual utilization is ultimately more similar to the FY 2019 data. We first calculated a set of MS-DRG relative weights using an assumption that the FY 2022 inpatient experience would be similar to the FY 2019 data. Specifically, we used the proposed version 39 GROUPER (which would be applicable to discharges occurring in FY 2022) and the FY 2019 MedPAR data to calculate MS-DRG relative weights. We refer to these MS-DRG relative weights as the FY 2019-based weights. We next calculated a set of MS-DRG relative weights using an assumption that the FY 2022 inpatient experience would be more similar to the FY 2020 data. Specifically, we used the proposed version 39 GROUPER and the FY 2020 MedPAR data to calculate MS-DRG relative weights. This is how we would ordinarily calculate the proposed FY 2022 MS-DRG relative weights. We refer to these MS-DRG relative weights as the FY 2020-based weights. We then estimated the difference in case-mix under the FY 2019-based weights and the FY 2020-based weights if the FY 2022 inpatient experience ended up being the reverse of the assumption made when calculating that set of relative weights. In other words, we compared estimated case-mix calculated under four different scenarios. For the FY 2019-based weights, we calculated the case-mix using claims from the FY 2019 MedPAR as an approximation of the actual FY 2022 experience (Scenario A), and using claims from the FY 2020 MedPAR as an approximation of the actual FY 2022 experience (Scenario B). For the FY 2020-based weights, we calculated the case-mix using claims from the FY 2020 MedPAR as an approximation of the actual FY 2022 experience (Scenario C), and using claims from the FY 2019 MedPAR as an approximation of the actual FY 2022 experience (Scenario D). The results are shown in the following table. EP10MY21.004 In Scenario A and Scenario C, there is by definition no differential impact on total case-mix due to a less accurate assumption made when the MS-DRG relative weights were calculated: The FY 2022 inpatient experience matches the assumption used when the MS-DRG relative weights were calculated. In Scenario B and Scenario D, it is the reverse of the assumption used when the MS-DRG relative weights were calculated. In Scenario B, when the FY 2019-based weights were used, but the FY 2022 inpatient experience turns out to be more similar to FY 2020 data, the less accurate assumption does not differentially impact the modelled case-mix. This can be seen by comparing the modelled case-mix under Scenario B (1.885) with the modelled case-mix under Scenario C (also 1.885). In other words, if the FY 2019-based weights and inpatient experience turn out to be more similar to the FY 2020 data, then the modelled case-mix is approximately the same as if we had used the FY 2020-based weights. The results show that use of the FY 2019-based weights did not impact the modelled case-mix compared to using the FY 2020-based weights. The same conclusion is not true of Scenario D where the FY 2020-based weights were used, but the FY 2022 inpatient experience turns out to be more similar to FY 2019 data. Here the less accurate assumption does differentially impact the modelled case-mix, by −0.2 percent. This can be seen by comparing the modelled case-mix under Scenario D (1.816) with the modelled case-mix under Scenario A (1.820). In other words, if we use the FY 2020-based weights, and FY 2022 inpatient experience turns out to be more similar to FY 2019 data, the modelled case-mix is −0.2 percent lower than if we had used the FY 2019-based weights. This shows that use of the FY 2020-based weights does impact the modelled case-mix compared to a result from using the FY 2019-based weights. Putting aside that we believe FY 2019 is a more likely approximation of the FY 2022 inpatient experience for the reasons discussed earlier, the previous analysis indicates that the differential effect of the FY 2022 MS-DRG relative weights is more limited if the FY 2019-based weights are used than it is if the FY 2020-based weights are used, should the FY 2022 inpatient experience not match the assumption used to calculate the MS-DRG relative weights. Another payment factor that is impacted by the use of the FY 2019 or FY 2020 data in the FY 2022 ratesetting is the outlier fixed-loss threshold. As discussed in section II.A.4.j. of this proposed rule, section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of certain payments and the “outlier threshold” or “fixed-loss” amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments plus outlier payments. We target 5.1 percent within this range. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. In other words, outlier payments are prospectively estimated to be budget neutral overall under the IPPS. 6 6 More information on outlier payments may be found on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/AcuteInpatientPPS/outlier.html . Under an assumption that the FY 2022 inpatient experience will be more similar to FY 2019 data, we estimate an outlier fixed-loss amount of $30,967. Under an assumption that FY 2022 inpatient experience will be more similar to FY 2020 data, we estimate an outlier fixed-loss amount of $36,843, a difference of $5,876 or approximately 20 percent higher. Again, putting aside that we believe FY 2019 is a better approximation of the FY 2022 inpatient experience for the reasons discussed earlier, the difference between the two estimated outlier fixed-loss amounts means there is a consequence to making a decision as to the best available data for estimating the FY 2022 outlier fixed-loss amount in the form of potentially exceeding or falling short of the targeted 5.1 percent of total operating DRG payments plus outlier payments. In summary, we have highlighted two factors in the decision regarding the best available data to use in the FY 2022 ratesetting. The first factor is to what extent the FY 2019 data from before the COVID-19 PHE is a better overall approximation of FY 2022 inpatient experience, or alternatively, to what extent the FY 2020 data including the COVID-19 PHE time period is a better overall approximation of FY 2022 inpatient experience. After analyzing this issue and for the reasons discussed, we believe for purposes of this proposed rule that FY 2019 is generally a better overall approximation of FY 2022. The second factor is to what extent the decision to use the FY 2019 or FY 2020 data differentially impacts the FY 2022 IPPS ratesetting. After analyzing this issue, and as discussed previously, we have determined that the decision does differentially impact the overall FY 2022 IPPS ratesetting in two primary ways. First, a decision to base the MS-DRG relative weights on the FY 2020 data has an impact of −0.2 percent if the FY 2022 inpatient experience is more like FY 2019 data. Second, the decision to use the FY 2019 or FY 2020 data results in an approximately 20 percent difference in the estimate of the outlier fixed-loss amount. Taking these factors into account, we are proposing to use the FY 2019 data for the FY 2022 ratesetting for circumstances where the FY 2020 data is significantly impacted by the COVID-19 PHE, primarily in that the data reflect generally markedly different utilization for certain types of services in FY 2020 than would have been expected in the absence of the PHE, as discussed previously. For example, we are proposing to use the FY 2019 MedPAR claims data for purposes where we ordinarily would have used the FY 2020 MedPAR claims data, such as in our analysis of changes to MS-DRG classifications (as discussed in greater detail section II.D. of the preamble of this proposed rule). Similarly, we are proposing to use cost report data from the FY 2018 HCRIS file for purposes where we ordinarily would have used the FY 2019 HCRIS file, such as in determining the proposed FY 2022 IPPS MS-DRG relative weights (as discussed in greater detail section II.E. of the preamble of this proposed rule). (As noted previously, the FY 2019 HCRIS data would contain many cost reports ending in FY 2020 based on each hospital's cost reporting period.) We note that MedPAR claims data and cost report data from the HCRIS file are examples of the data sources for which we discuss the proposed use of the FY 2019 data for the FY 2022 ratesetting in this proposed rule. We have clearly identified throughout this proposed rule where and how we are proposing to use alternative data than what ordinarily would be used for the proposed FY 2022 IPPS and LTCH PPS ratesetting, including certain provider specific information. As discussed in section I.O. of Appendix A of this proposed rule, we are also considering, as an alternative to this proposal, the use of the same FY 2020 data that we would ordinarily use for purposes of FY 2022 ratesetting, and which we may consider finalizing based on consideration of comments received. To facilitate comment on this alternative for FY 2022, we are making available the FY 2020 MedPAR file and the FY 2019 HCRIS file that we would ordinarily have provided in conjunction with this proposed rule. We are also making available the MS-DRG and MS-LTC-DRG relative weighting factors and length of stay information calculated using the FY 2020 data we would have ordinarily used. We are providing a file comparing the budget neutrality and other ratesetting adjustments calculated under our proposal with those adjustments calculated under this alternative approach. Finally, we are making available other proposed rule supporting data files based on the use of the FY 2020 data that we ordinarily would have provided, including: The IPPS and LTCH PPS Impact Files; the AOR/BOR File; the Case Mix Index File; and, the Standardizing File. We refer the reader to section I.O. of Appendix A of this proposed rule for more information on where these supplemental files may be found. II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) Classifications and Relative Weights A. Background Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually to account for changes in resource consumption. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. B. 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 2021 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, 84 FR 42058 through 42165, and 85 FR 58445 through 58596 respectively). C. Proposed FY 2022 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 adjustme [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%3A2021-08888. Public record. Not legal advice.