# Medicare Program; Proposed Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2024 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Rural Emergency Hospital and Physician-Owned Hospital Requirements; and Provider and Supplier Disclosure of Ownership > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2023-07389 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** May 1, 2023 - **Citation:** 88 FR 26658 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 411, 412, 419, 488, 489, and 495 [CMS-1785-P] RIN 0938-AV08 Medicare Program; Proposed Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2024 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Rural Emergency Hospital and Physician-Owned Hospital Requirements; and Provider and Supplier Disclosure of Ownership AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS). ACTION: Proposed rule. SUMMARY: This proposed rule would: revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals; make changes relating to Medicare graduate medical education (GME) for teaching hospitals; update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs); and make other policy-related changes. 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 9, 2023. ADDRESSES: In commenting, please refer to file code CMS-1785-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 https://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-1785-P, P.O. Box 8013, Baltimore, MD 21244-8013. 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-1785-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, and Michele Hudson, (410) 786-4487 or DAC@cms.hhs.gov , 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 Inpatient Critical Access Hospital (CAH) Issues. Emily Lipkin, and Jim Mildenberger, DAC@cms.hhs.gov , Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG Relative Weights Issues. Adina Hersko, NewTech@cms.hhs.gov , New Technology Add-On Payments and New COVID-19 Treatments Add-on Payments Issues. Mady Hue, marilu.hue@cms.hhs.gov , and Andrea Hazeley, andrea.hazeley@cms.hhs.gov , MS-DRG Classifications Issues. Siddhartha Mazumdar, siddhartha.mazumdar@cms.hhs,gov , Rural Community Hospital Demonstration Program Issues. Jeris Smith, jeris.smith@cms.hhs.gov , Frontier Community Health Integration Project (FCHIP) Demonstration Issues. Lang Le, lang.le@cms.hhs.gov , Hospital Readmissions Reduction Program—Administration Issues. Ngozi Uzokwe, ngozi.uzokwe@cms.hhs.gov , Hospital Readmissions Reduction Program—Measures Issues. Jennifer Tate, jennifer.tate@cms.hhs.gov , Hospital-Acquired Condition Reduction Program—Administration Issues. Ngozi Uzokwe, ngozi.uzokwe@cms.hhs.gov , Hospital-Acquired Condition Reduction Program—Measures Issues. Julia Venanzi, julia.venanzi@cms.hhs.gov , Hospital Inpatient Quality Reporting Program and Hospital Value-Based Purchasing Program—Administration Issues. Melissa Hager, melissa.hager@cms.hhs.gov and Ngozi Uzokwe, ngozi.uzokwe@cms.hhs.gov —Hospital Inpatient Quality Reporting Program and Hospital Value-Based Purchasing Program—Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues. Elizabeth Goldstein, elizabeth.goldstein@cms.hhs.gov , Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing—Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues. Ora Dawedeit, ora.dawedeit@cms.hhs.gov , PPS-Exempt Cancer Hospital Quality Reporting—Administration Issues. Leah Domino, leah.domino@cms.hhs.gov , PPS-Exempt Cancer Hospital Quality Reporting Program—Measure Issues. Ariel Cress, ariel.cress@cms.hhs.gov , Lorraine Wickiser, Lorraine, Wickiser@cms.hhs.gov , Long-Term Care Hospital Quality Reporting Program—Data Reporting Issues. Jessica Warren, jessica.warren@cms.hhs.gov and Elizabeth Holland, elizabeth.holland@cms.hhs.gov , Medicare Promoting Interoperability Program. Jennifer Milby, jennifer.milby@cms.hhs.gov and Sara Brice-Payne, sara.brice-payne@cms.hhs.gov , Special Requirements for Rural Emergency Hospitals (REHs). Lisa O. Wilson, Lisa.Wilson2@cms.hhs.gov , Physician-Owned Hospital Issues. Frank Whelan, Frank.Whelan@cms.hhs.gov , Disclosure of Ownership. 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: https://www.regulations.gov/ . Follow the search instructions on that website to view public comments. Tables Available on the CMS Website The IPPS tables for this fiscal year (FY) 2024 proposed rule are available 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 2024 IPPS Proposed rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2024 proposed rule are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1785-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 2024 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, DAC@cms.hhs.gov . 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. Use of the Best Available Data in the FY 2024 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 Changes to Specific MS-DRG Classifications D. Recalibration of the FY 2024 MS-DRG Relative Weights E. Add-On Payments for New Services and Technologies for FY 2024 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 2024 Unadjusted Wage Index E. Occupational Mix Adjustment to the FY 2024 Wage Index F. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2024 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 2024 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 2024 Wage Index IV. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2024 (§ 412.106) A. General Discussion B. Eligibility for Empirically Justified Medicare DSH Payments and Uncompensated Care Payments C. Empirically Justified Medicare DSH Payments D. Supplemental Payment for Indian Health Service (IHS) and Tribal Hospitals and Puerto Rico Hospitals E. Uncompensated Care Payments V. Other Decisions and Changes to the IPPS for Operating System A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-DRG Special Payments Policies (§ 412.4) B. Proposed Changes in the Inpatient Hospital Update for FY 2024 (§ 412.64(d)) C. Sole Community Hospitals—Effective Date of Status in the Case of a Merger (§ 412.92) D. Rural Referral Centers (RRCs) Proposed Annual Updates (§ 412.96) E. Proposed Payment Adjustment for Low-Volume Hospitals (§ 412.101) F. Temporary Legislative Extension of Medicare-Dependent, Rural Hospital Program G. Proposed Payments for Indirect and Direct Graduate Medical Education Costs (§§ 412.105 and 413.75 Through 413.83) H. Reasonable Cost Payment for Nursing and Allied Health Education Programs (§§ 413.85 and 413.87) I. Proposed Payment Adjustment for Certain Clinical Trial and Expanded Access Use Immunotherapy Cases (§§ 412.85 and 412.312) J. Hospital Readmissions Reduction Program (§§ 412.150 through 412.154) K. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy Changes (§§ 412.160 Through 412.167) L. Hospital-Acquired Condition (HAC) Reduction Program M. Rural Community Hospital Demonstration Program VI. Proposed Changes to the IPPS for Capital-Related Costs A. Overview B. Additional Provisions C. Proposed Annual Update for FY 2024 D. Treatment of Rural Reclassifications for Capital DSH Payments VII. Proposed Changes for Hospitals Excluded From the IPPS A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 2024 B. Critical Access Hospitals (CAHs) VIII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2024 A. Background of the LTCH PPS B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2024 C. Changes to the LTCH PPS Payment Rates and Other Proposed Changes to the LTCH PPS for FY 2024 IX. Proposed Quality Data Reporting Requirements for Specific Providers and Suppliers A. Overview B. Crosscutting Quality Program Proposal to Adopt the Up-to-Date COVID-19 Vaccination Among Healthcare Personnel Measure C. Proposed Changes to the Hospital Inpatient Quality Reporting (IQR) Program D. Proposed Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program E. Proposed Changes to the Long-Term Care Hospital Quality Reporting Program (LTCH QRP) F. Proposed Changes to the Medicare Promoting Interoperability Program X. Other Provisions Included in This Proposed Rule A. Rural Emergency Hospitals (REHs) B. Physician Self-Referral and Physician-Owned Hospitals C. Proposed Technical Corrections to 42 CFR 411.353 and 411.357 D. Safety Net RFI E. Disclosures of Ownership and Additional Disclosable Parties Information XI. MedPAC Recommendations and Publicly Available Files A. MedPAC Recommendations B. Publicly Available Files XII. Collection of Information Requirements A. Statutory Requirements for Solicitation of Comments B. Collection of Information Requirements Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2022 and Payment Rates for LTCHs Effective for Discharges Occurring on or After October 1, 2022 I. Summary and Background II. Proposed Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2024 A. Calculation of the Proposed Adjusted Standardized Amount B. 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 2024 A. Determination of the Proposed Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update for FY 2024 B. Calculation of the Inpatient Capital-Related Prospective Payments for FY 2024 C. Capital Input Price Index IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase Percentages for FY 2024 V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2024 A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2024 B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for FY 2024 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 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 2024 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. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs G. Effects of Other Policy Changes H. Effects on Hospitals and Hospital Units Excluded From the IPPS 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 the Proposed Adoption of the Up-to-Date COVID-19 Vaccination Among Healthcare Personnel Measure Across Quality Programs L. Effects of Requirements for the Hospital Inpatient Quality Reporting (IQR) Program M. Effects of Requirements for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program N. Effects of Proposed Requirements for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP) O. Effects of Proposed Requirements Regarding the Promoting Interoperability Program P. Alternatives Considered Q. Overall Conclusion R. Regulatory Review Costs II. Accounting Statements and Tables A. Acute Care Hospitals B. LTCHs III. Regulatory Flexibility Act (RFA) Analysis IV. Impact on Small Rural Hospitals V. Unfunded Mandate Reform Act Analysis VI. Executive Order 13132 VII. Executive Order 13175 VIII. Executive Order 12866 Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2024 A. Proposed FY 2024 Inpatient Hospital Update B. Proposed Update for SCHs for FY 2024 C. Proposed FY 2024 Puerto Rico Hospital Update D. Proposed Update for Hospitals Excluded From the IPPS for FY 2024 E. Proposed Update for LTCHs for FY 2024 III. Secretary's Recommendations IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare V. Responses to Comments I. Executive Summary and Background A. Executive Summary 1. Purpose and Legal Authority This FY 2024 IPPS/LTCH PPS proposed rule would make payment and policy changes under the Medicare inpatient prospective payment system (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 would also make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2024 proposed rule, we are proposing to continue policies to address wage index disparities impacting low wage index hospitals. We are also proposing to make changes relating to Medicare graduate medical education (GME) for teaching hospitals and new technology add-on payments. We are proposing to establish new requirements and revise existing requirements for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program. In the Hospital VBP Program, we are proposing to add one new measure, substantively modify two existing measures, add technical changes to the administration of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey, and change the scoring policy to include a health equity scoring adjustment and modify the Total Performance Score (TPS) maximum to be 110, resulting in numeric score range of 0 to 110. We are also providing estimated and newly established performance standards for the FY 2026 through FY 2029 program years for the Hospital VBP Program. In the HAC Reduction Program, we are proposing to establish a validation reconsideration process for data validation and to add an additional targeting criterion for validation. We are not proposing any changes to the Hospital Readmissions Reduction Program. In the Hospital IQR Program, we are proposing to add three new measures, to update three existing measures, and to remove three measures. We are proposing changes to the validation process. Additionally, we are seeking public comment on the potential future adoption of two measures. In the PPS-Exempt Cancer Hospital Quality Reporting Program (PCHQR) we are proposing to add four new measures and to modify an existing measure. In the LTCH QRP we are proposing new measures, modifying an existing measure, removing measures and proposing to increase the LTCH QRP data completion thresholds for LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) items. Additionally, we are we are seeking information on principles for selecting and prioritizing LTCH QRP quality measures and concepts under consideration for future years and provide an update on CMS' continued efforts to close the health equity gap. Under various statutory authorities, we either discuss continued program implementation or propose to make changes to the Medicare IPPS, the LTCH PPS, other related payment methodologies and programs for FY 2024 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 Balanced Budget Refinement Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) of the Benefits Improvement and Protection Act of 2000 (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. • Section 1814(l)(4) of the Act requires downward adjustments to the applicable percentage increase, beginning with FY 2015, for CAHs that do not successfully demonstrate meaningful use of certified electronic health record technology (CEHRT) for an EHR reporting payment for a payment adjustment year. • Section 1814(l)(3) of the Act offered incentive payments under Medicare for critical access hospitals (CAHs) for certain payment years, if they successfully adopted and demonstrated meaningful use of CEHRT during an electronic health record (EHR) reporting period. • Section 1814(l)(4) of the Act authorized downward payment adjustments under Medicare, beginning with FY 2015, for CAHs that do not successfully demonstrate meaningful use of CEHRT for an EHR reporting payment for a payment adjustment year. • 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. Hospitals paid under the IPPS with approved GME programs are paid for the indirect costs of training residents in accordance with section 1886(d)(5)(B) of the Act. • Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase that would otherwise apply to the standardized amount applicable to a subsection (d) hospital for discharges occurring in a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary. • Section 1886(b)(3)(B)(ix) of the Act requires downward adjustments to the applicable percentage increase, beginning with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico hospitals), for eligible hospitals that do not successfully demonstrate meaningful use of CEHRT for an EHR reporting period for a payment adjustment year. • 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(n) of the Act, which requires the Secretary to offered incentive payments under Medicare for eligible hospitals for certain payment years, if they successfully adopted and demonstrated meaningful use of CEHRT during an electronic health record (EHR) reporting period. • 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 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 an additional 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 1861(kkk) of the Act requires the Secretary to establish the conditions REHs must meet in order to participate in the Medicare program and which are considered necessary to ensure the health and safety of patients receiving services at these entities. • Section 1877(i) of the Act, as added by section 6001(a)(3) of the Patient Protection and Affordable Care Act of 2010 (Affordable Care Act) (Pub. L. 111-148) and amended by section 1106 of the Health Care and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152), which requires the Secretary to establish and implement a process under which a hospital that is an “applicable hospital” or a “high Medicaid facility” may apply for an exception from the prohibition on expansion of facility capacity. 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 changes in this proposed rule is presented in section I.D. of the preamble of this proposed rule. a. Proposed Modification to the Rural Wage Index Calculation Methodology As discussed in section III.G.1 of this proposed rule, CMS has taken the opportunity to revisit the case law, prior public comments, and the relevant statutory language with regard to its policies involving the treatment of hospitals that have reclassified as rural under section 1886(d)(8)(E) of the Act, as implemented in the regulations under 42 CFR 412.103. After doing so, CMS now agrees that the best reading of section 1886(d)(8)(E) is that it instructs CMS to treat § 412.103 hospitals the same as geographically rural hospitals. Therefore, we believe it is proper to include these hospitals in all iterations of the rural wage index calculation methodology included in section 1886(d) of the Act, including all hold harmless calculations in that provision. Beginning with FY 2024, we are proposing to include hospitals with § 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and to exclude “dual reclass” hospitals (hospitals with simultaneous § 412.103 and Medicare Geographic Classification Review Board (MGCRB) reclassifications) implicated by the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. b. Proposed Continuation of the Low Wage Index Hospital Policy To help mitigate growing wage index disparities between high wage and low wage 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 our intention 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. As discussed in section III.G.4. of the preamble of this proposed rule, as we only have 1 year of relevant data at this time that we could use to evaluate any potential impacts of this policy, we believe it is necessary to wait until we have useable data from additional fiscal years before making any decision to modify or discontinue the policy. Therefore, for FY 2024, we are proposing to continue the low wage index hospital policy and the related budget neutrality adjustment. c. DSH Payment Adjustment and Additional Payment for Uncompensated Care Under section 1886(r) of the Act, which was added by section 3133 of the Affordable Care Act, starting in FY 2014, Medicare disproportionate share hospitals (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 2024. 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 conjunction with more recently available data in the calculation of Factor 2. Consistent with the regulation at § 412.106(g)(1)(iii)(C)( 11 ), which was adopted in the FY 2023 IPPS/LTCH PPS final rule, for FY 2024, we will use the 3 most recent years of audited data on uncompensated care costs from Worksheet S-10 of the FY 2018, FY 2019, and FY 2020 cost reports to calculate Factor 3 in the uncompensated care payment methodology for all eligible hospitals. Beginning with FY 2023, we established a supplemental payment for IHS and Tribal hospitals and hospitals located in Puerto Rico, to help prevent undue long-term financial disruption to these hospitals due to discontinuing use of the low-income insured days proxy in the uncompensated care payment methodology for these providers. d. 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 adopt modified versions of: (1) the Medicare Spending Per Beneficiary (MSPB) Hospital measure beginning with the FY 2028 program year; and (2) the Hospital-level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure beginning with the FY 2030 program year. We are also proposing to adopt the Severe Sepsis and Septic Shock: Management Bundle measure in the Safety Domain beginning with the FY 2026 program year. We are also proposing to make technical changes to the form and manner of the administration of the HCAHPS Survey measure under the Hospital VBP Program beginning with the FY 2027 program year in alignment with the Hospital IQR Program. Additionally, we are proposing to adopt a health equity scoring change for rewarding excellent care in underserved populations beginning with the FY 2026 program year. We are also proposing to modify the Total Performance Score (TPS) maximum to be 110, such that the TPS numeric score range would be 0 to 110 in order to afford even top-performing hospitals the opportunity to receive the additional health equity bonus points under the proposed health equity scoring change. We are also requesting feedback on potential additional future changes to the Hospital VBP Program scoring methodology that would address health equity. e. Proposed Modification of the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) Measure in the Hospital IQR Program, PCHQR Program, and LTCH QRP In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing to modify the COVID-19 Vaccination Coverage among Health Care Personnel (HCP) measure to replace the term “complete vaccination course” with the term “up to date” with regard to recommended COVID-19 vaccines beginning with the Quarter 4 (Q4) calendar year (CY) 2023 reporting period/FY 2025 payment determination for the Hospital IQR Program, and the FY 2025 program year for the LTCH QRP and the PCHQR Program. f. 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. In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing several changes to the Hospital IQR Program. We are proposing the adoption of three new measures: (1) Hospital Harm—Pressure Injury electronic clinical quality measure (eCQM) beginning with the CY 2025 reporting period/FY 2027 payment determination; (2) Hospital Harm—Acute Kidney Injury eCQM beginning with the CY 2025 reporting period/FY 2027 payment determination; and (3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level—Inpatient) eCQM beginning with the CY 2025 reporting period/FY 2027 payment determination. We are proposing the modification of three current measures: (1) Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (HWM) measure beginning with the FY 2027 payment determination; (2) Hybrid Hospital-Wide All-Cause Readmission (HWR) measure beginning with the FY 2027 payment determination; and (3) COVID-19 Vaccination among Healthcare Personnel (HCP) measure beginning with the Quarter 4 CY 2023 reporting period/FY 2025 payment determination. We are proposing the removal of three current measures: (1) Hospital-level Risk-standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 2025-March 31, 2028 reporting period/FY 2030 payment determination; (2) Medicare Spending Per Beneficiary (MSPB)—Hospital measure beginning with the CY 2026 reporting period/FY 2028 payment determination; and (3) Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies Electively Delivered Prior to 39 Completed Weeks Gestation (PC-01) measure beginning with the CY 2024 reporting period/FY 2026 payment determination. We are proposing to codify our Measure Removal Factors. We are requesting comment on the potential future inclusion of geriatric measures and a potential future public-facing geriatric hospital designation in the Hospital IQR Program. We are proposing two changes to current policies related to data submission, reporting, and validation: (1) Modification of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey Measure beginning with the CY 2025 reporting period/FY 2027 payment determination; and (2) Modification of the targeting criteria for hospital validation for extraordinary circumstances exceptions (ECEs) beginning with the FY 2027 payment determination. g. PPS-Exempt Cancer Hospital Quality Reporting Program Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and each subsequent fiscal year, that a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) submit data in accordance with section 1866(k)(2) of the Act with respect to such fiscal year. There is no financial impact to PCH Medicare payment if a PCH does not participate. In this FY 2024 IPPS/LTCH PPS proposed rule, we are proposing to adopt four new measures for the PCHQR Program: (i) three health equity-focused measures: the Facility Commitment to Health Equity measure, the Screening for Social Drivers of Health measure, and the Screen Positive Rate for Social Drivers of Health measure; and (ii) a patient preference-focused measure, the Documentation of Goals of Care Discussions Among Cancer Patients measure. We are proposing to adopt a modified version of the COVID-19 Vaccination Coverage among Health Care Personnel (HCP) measure beginning with the FY 2025 program year. We are also proposing to publicly report the Surgical Treatment Complications for Localized Prostate Cancer (PCH-37) measure beginning with data from the FY 2025 program year, and modified data submission and reporting requirements for the HCAHPS survey measure beginning with the FY 2027 program year. h. Long-Term Care Hospital Quality Reporting Program (LTCH QRP) We are proposing several proposed changes to the LTCH QRP. Specifically, we are: (1) proposing to adopt a modified version of the COVID-19 Vaccination Coverage among Healthcare Personnel measure beginning with the FY 2025 LTCH QRP; (2) proposing to adopt the Discharge Function Score measure beginning with the FY 2025 LTCH QRP; (3) proposing to remove the Percent of LTCH Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function measure beginning with the FY 2025 LTCH QRP; (4) proposing to remove the Application of Percent of LTCH Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function measure beginning with the FY 2025 LTCH QRP; (5) proposing to adopt the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure beginning with the FY 2026 LTCH QRP; (6) proposing to increase the LTCH QRP data completion thresholds for the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) beginning with the FY 2026 LTCH QRP; and (7) proposing to begin public reporting of the Transfer of Health (TOH) Information to the Patient-Post-Acute Care (PAC) and TOH Information to the Provider-PAC measures beginning with the FY 2025 LTCH QRP. i. Medicare Promoting Interoperability Program In this proposed rule, we are proposing several changes to the Medicare Promoting Interoperability Program. Specifically, we are proposing to: (1) amend the definition of “EHR reporting period for a payment adjustment year” at 42 CFR 495.4 for eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program, to define the electronic health record (EHR) reporting period in CY 2025 as a minimum of any continuous 180-day period within CY 2025; (2) update the definition of “EHR reporting period for a payment adjustment year” at § 495.4 for eligible hospitals such that, beginning in CY 2025, those hospitals that have not successfully demonstrated meaningful use in a prior year will not be required to attest to meaningful use by October 1st of the year prior to the payment adjustment year; (3) modify our requirements for the Safety Assurance Factors for EHR Resilience (SAFER) Guides measure beginning with the EHR reporting period in CY 2024, to require eligible hospitals and CAHs to attest “yes” to having conducted an annual self-assessment of all nine SAFER Guides at any point during the calendar year in which the EHR reporting period occurs; (4) modify the way we refer to the calculation considerations related to unique patients or actions for Medicare Promoting Interoperability Program objectives and measures for which there is no numerator and denominator; and (5) adopt three new eCQMs beginning with the CY 2025 reporting period for eligible hospitals and CAHs to select as one of their three self-selected eCQMs: the Hospital Harm—Pressure Injury eCQM, the Hospital Harm—Acute Kidney Injury eCQM, and the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level—Inpatient) eCQM. j. Hospital Readmissions Reduction Program We are not proposing any changes to the Hospital Readmissions Reduction Program. We note that all previously finalized policies under this program will continue to apply and refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49081 through 49094) for information on these policies. k. Hospital-Acquired Condition Reduction Program Section 1886(p) of the Act establishes the HAC Reduction Program under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions. In this proposed rule, we are proposing to establish a validation reconsideration process for hospitals who fail data validation beginning with the FY 2025 program year, affecting calendar year 2022 discharges. We are also proposing modification of the validation targeting criteria for extraordinary circumstances exceptions (ECEs) beginning with the FY 2027 program year, affecting calendar year 2024 discharges. We are also requesting feedback on potential future measures to adopt in the HAC Reduction Program that would address patient safety and health equity. l. Safety Net Hospitals—Request for Information As discussed in section X.D. of the preamble of this proposed rule, under the Biden-Harris Administration, CMS has made advancing health equity the first pillar in its Strategic Plan. Among the goals of CMS's health equity pillar is to evaluate policies to determine how CMS can support safety-net providers, including acute care hospitals. Safety-net hospitals play a crucial role in the advancement of health equity by making essential services available to the uninsured, underinsured, and other populations that face barriers to accessing healthcare. Because they serve many low-income and uninsured patients, safety-net hospitals may experience greater financial challenges compared to other hospitals, and these challenges have been exacerbated by the impacts of the COVID-19 pandemic. As MedPAC noted in its June 2022 Report to Congress, the limited resources of many safety-net hospitals may make it difficult for them to compete with other hospitals for labor and technology, and in some cases may even lead to hospital closure. We are interested in public feedback on the challenges faced by safety-net hospitals, and potential approaches to help safety-net hospitals meet those challenges. In section X.C. of the preamble of this proposed rule, we discuss the Safety-Net Index (SNI), which was developed by MedPAC as a potential measure of the degree to which a hospital functions as a safety-net hospital. In addition, we discuss a potential alternative to the SNI, in which safety-net hospitals would be identified using area-level indices. We seek public feedback and comment on whether either of these two approaches would serve as an appropriate basis for identifying safety-net hospitals for Medicare purposes. m. Proposed Changes to the Severity Level Designation for Z Codes Describing Homelessness As discussed in section II.C. of the preamble of this proposed rule, we are proposing to change the severity level designation for social determinants of health (SDOH) diagnosis codes describing homelessness from non-complication or comorbidity (NonCC) to complication or comorbidity (CC) for FY 2024. Consistent with our annual updates to account for changes in resource consumption, treatment patterns, and the clinical characteristics of patients, CMS is recognizing homelessness as an indicator of increased resource utilization in the acute inpatient hospital setting. Consistent with the Administration's goal of advancing health equity for all, including members of historically underserved and under-resourced communities, as described in the President's January 20, 2021 Executive Order 13985 on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” 1 we also continue to be interested in receiving feedback on how we might otherwise foster the documentation and reporting of the diagnosis codes describing social and economic circumstances to more accurately reflect each health care encounter and improve the reliability and validity of the coded data including in support of efforts to advance health equity. 1 Available at 86 FR 7009 (January 25, 2021) ( https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government ). 3. Summary of Costs and Benefits The following table provides a summary of the costs, savings, and benefits associated with the major provisions described in section I.A.3. of the preamble of this proposed rule. BILLING CODE 4120-01-P EP01MY23.000 EP01MY23.001 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 an 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 and, beginning in FY 2023 for IHS and Tribal hospitals and hospitals located in Puerto Rico, the new supplemental payment. 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 2024. For discharges occurring on or after October 1, 2007, but before October 1, 2024, 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. Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved GME program receive an additional payment for each Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals. The additional payment is based on the indirect medical education (IME) adjustment factor, which is calculated using a hospital's ratio of residents to beds and a multiplier, which is set by Congress. Section 1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. The regulations regarding the indirect medical education (IME) adjustment are located at 42 CFR 412.105. C. Summary of Provisions of Recent Legislation That Would Be Implemented in This Proposed Rule 1. The Consolidated Appropriations Act, 2023 (CAA 2023; Pub. L. 117-328) Section 4101 of the CAA 2023 extended through FY 2024 the modified definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals in effect for FYs 2019 through 2022. Specifically, under section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 2024, a subsection (d) hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 3,800 total discharges during the fiscal year. Under section 1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 2019 through 2024, the Secretary determines the applicable percentage increase using a continuous, linear sliding scale ranging from an additional 25 percent payment adjustment for low-volume hospitals with 500 or fewer discharges to a zero percent additional payment for low-volume hospitals with more than 3,800 discharges in the fiscal year. Section 4102 of the CAA 2023 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH program through FY 2024. Section 4143 of the CAA 2023 amended section 1886(l)(2)(B) of the Act to specify that for portions of cost reporting periods occurring in each of calendar years (CYs) 2010 through 2019, the $60 million payment limit specified in that subparagraph is not to apply to the total amount of additional payments for nursing and allied health education to be distributed to hospitals that, as of December 29, 2022, were operating a school of nursing, a school of allied health, or a school of nursing and allied health. In addition, section 4143 of the CAA 2023 provides that in addition to not applying the $60 million limit for each of years 2010 through 2019, the Secretary shall not reduce direct GME payments by such additional payment amounts for such nursing and allied health education for portions of cost reporting periods occurring in the year. 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 2024 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 2024. 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 the following: • Proposed changes to MS-DRG classifications based on our yearly review for FY 2024. • Proposed recalibration of the MS-DRG relative weights. • A discussion of the proposed FY 2024 status of new technologies approved for add-on payments for FY 2023, a presentation of our evaluation and analysis of the FY 2024 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108-173, obtained in a town hall meeting) for applications not submitted under an alternative pathway, and a discussion of the proposed status of FY 2024 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products. • Proposed modifications to the new technology add-on payment application eligibility requirements for technologies that are not already Food and Drug Administration (FDA) market authorized to require such applicants to have a complete and active FDA market authorization request at the time of new technology add-on payment application submission, to provide documentation of FDA acceptance or filing, and to move the FDA marketing authorization deadline from July 1 to May 1, beginning with applications for FY 2025 (as discussed in section II.E.8. of the preamble of this proposed rule). 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble of this proposed rule, we propose revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following: • The proposed FY 2024 wage index update using wage data from cost reporting periods beginning in FY 2019. • Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2024 based on the 2019 Occupational Mix Survey. • Proposed application of the rural, imputed and frontier State floors, and continuation of the low wage index hospital policy. • Proposed revisions to the wage index for acute care hospitals, based on hospital redesignations and reclassifications under sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act. • Proposed adjustment to the wage index for acute care hospitals for FY 2023 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 2024 wage index. 3. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2024 In section IV. of the preamble of this proposed rule, we discuss the following: • Proposed calculation of Factor 1 and Factor 2 of the uncompensated care payment methodology. • Proposed methodological approach for determining the additional payments for uncompensated care for FY 2024, which is the same overall approach as was for FY 2023. 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 2024. • Proposed change related to the effective date of sole community hospital (SCH) classification in cases that involve a merger. • Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • Proposed payment adjustment for low-volume hospitals for FY 2024. • Discussion of statutory extension of the MDH program through FY 2024. • Proposed requirements for payment adjustments to hospitals under the HAC Reduction Program for FY 2024. • Proposed changes to the regulations for GME payments when training occurs in REHs. • Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2024. • Proposed nursing and allied health education program Medicare Advantage (MA) add-on rates and direct GME MA percent reductions for CY 2022. • Proposal to implement section 4143 of the CAA 2023 which waives the $60 million limit on annual nursing and allied health education program MA payments. • Proposed update to the payment adjustment for certain clinical trial and expanded access use immunotherapy cases. 4. Proposed FY 2024 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 2024. In addition, we discuss a proposed change to how hospitals with a rural reclassification are treated for capital DSH payments. 5. 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 the following: • Proposed changes to payments to certain excluded hospitals for FY 2024. • Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration. 6. 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 2024. 7. 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: • Proposal to adopt a modified version of the COVID-19 Vaccination Among Healthcare Personnel Measure in the Hospital IQR Program, PCHQR Program, and LTCH QRP • 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 for the Long-Term Care Hospital Quality Reporting Program (LTCH QRP), and a request for information on principles for selecting and prioritizing LTCH QRP quality measures and concepts under consideration for future years. We also provide an update on health equity. • Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program. 8. Other Proposals and Comment Solicitations Included in the Proposed Rule Section X. of the preamble to this proposed rule includes the following: • Proposals to establish requirements for additional information that an eligible facility would be required to submit when applying for enrollment as an REH. • Proposed changes pertaining to the process for hospitals requesting an exception from the prohibition against facility expansion and program integrity restrictions on approved facility expansion. • Solicitation of comments on potential approaches to address the challenges faced by safety-net hospitals, including an appropriate mechanism for identifying safety-net hospitals for Medicare policy purposes. • Proposals to apply certain definitions included in the Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities proposed rule published in the February 15, 2023 Federal Register (88 FR 9820) to all provider types that complete the Form CMS-855-A enrollment application. 9. Other Provisions of the Proposed Rule Section XI.A. of the preamble of this proposed rule includes our discussion of the MedPAC Recommendations. Section XI.B. of the preamble to this proposed rule includes a descriptive listing of the public use files associated with this proposed rule. Section XII. of the preamble to this proposed rule includes the collection of information requirements for entities based on our proposals. Section XIII. of the preamble to this proposed rule includes information regarding our responses to public comments. 10. Determining Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals In sections II. and III. of the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2024 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We are proposing to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum to this proposed rule, we address the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2024 for certain hospitals excluded from the IPPS. 11. Determining Prospective Payment Rates for LTCHs In section V. of the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2024 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 2024. 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. 12. Impact Analysis In Appendix A of this proposed rule, we set forth an analysis of the impact the proposed changes would have on affected acute care hospitals, CAHs, LTCHs and other entities. 13. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of this proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2024 for the following: • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs). • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS. • The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges. 14. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2023 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 2023 report or to obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit MedPAC's website at https://www.medpac.gov . E. Use of the Best Available Data for the FY 2024 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 Medicare Provider Analysis and Review (MedPAR) file, which includes fully coded diagnostic and procedure data for all Medicare inpatient hospital bills for discharges in a fiscal year. The cost report data source is the Medicare hospital cost report data files from the most recent quarterly Healthcare Cost Report Information System (HCRIS) release. Our goal is always to use the best available data overall for ratesetting. Ordinarily, the best available MedPAR data is 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. Ordinarily, the best available cost report data is based on the cost reports beginning 3 fiscal years prior to the fiscal year that is the subject of the rulemaking. However, due to the impact of the COVID-19 public health emergency (PHE) on our ordinary ratesetting data, we finalized modifications to our usual ratesetting procedures in the FY 2022 and FY 2023 IPPS/LTCH PPS final rules. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44789 through 44793), we discussed that the FY 2020 MedPAR claims file and the FY 2019 HCRIS dataset (the most recently available data at the time of rulemaking) both contained data that was significantly impacted by the COVID-19 PHE, primarily in that the utilization of services at IPPS hospitals and LTCHs was generally markedly different for certain types of services in FY 2020 than would have been expected in the absence of the PHE. We stated that the most recent vaccination and hospitalization data from the Centers for Disease Control and Prevention (CDC) available at the time of development of that rule supported our belief at the time that the risk of COVID-19 in FY 2022 would be significantly lower than the risk of COVID-19 in FY 2020 and there would be fewer COVID-19 hospitalizations for Medicare beneficiaries in FY 2022 than there were in FY 2020. Therefore, we finalized our proposal to use FY 2019 data for the FY 2022 ratesetting for circumstances where the FY 2020 data was significantly impacted by the COVID-19 PHE, based on the belief that FY 2019 data from before the COVID-19 PHE would be a better overall approximation of the FY 2022 inpatient experience at both IPPS hospitals and LTCHs. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48795 through 48798), we discussed that the FY 2021 MedPAR claims file and the FY 2020 HCRIS dataset (the most recently available data at the time of rulemaking) both contain data that was significantly impacted by the COVID-19 PHE, primarily in that the utilization of services at IPPS hospitals and LTCHs was again generally markedly different for certain types of services in FY 2021 than would have been expected in the absence of the virus that causes COVID-19. Based on review of the most recent hospitalization data and information available from the CDC at the time of development of that rule, we stated our belief that it was reasonable to assume that some Medicare beneficiaries would continue to be hospitalized with COVID-19 at IPPS hospitals and LTCHs in FY 2023. However, we also stated our belief that it would be reasonable to assume based on the information available at the time that there would be fewer COVID-19 hospitalizations in FY 2023 than in FY 2021. Accordingly, because we anticipated Medicare inpatient hospitalizations for COVID-19 would continue in FY 2023 but at a lower level, we finalized our proposal to use FY 2021 data for purposes of the FY 2023 IPPS and LTCH PPS ratesetting but with several modifications to our usual ratesetting methodologies to account for the anticipated decline in COVID-19 hospitalizations of Medicare beneficiaries at IPPS hospitals and LTCHs as compared to FY 2021. For this FY 2024 IPPS/LTCH PPS rulemaking, we have analyzed the FY 2022 MedPAR claims file and the FY 2021 HCRIS dataset, which are the most recently available data for FY 2024 ratesetting. We observed that certain shifts in inpatient utilization and costs that occurred in FY 2020 continued to persist in FY 2022. Specifically, the share of admissions at IPPS hospitals and LTCHs for MS-DRGs and MS-LTC-DRGs that are associated with the treatment of COVID-19 continued to remain at levels higher than those observed in the pre-pandemic data. For example, in FY 2019, the share of IPPS cases grouped to MS-DRG 177 (Respiratory Infections and Inflammations with major complication or comorbidity (MCC)) was approximately 1 percent, while in FY 2022 the share of IPPS cases grouped to MS-DRG 177 was approximately 4 percent. Similarly, in FY 2019, the share of LTCH PPS standard Federal payment rate cases grouped to MS-LTC-DRG 207 (Respiratory System Diagnosis with Ventilator Support >96 Hours) was approximately 18 percent, while in FY 2022 the share of LTCH PPS standard Federal payment rate cases grouped to MS-LTC-DRG 207 was approximately 22 percent. We have continued to monitor the latest COVID-19 related data and information released by the CDC. The CDC graph below illustrates new inpatient hospital admissions of patients with confirmed COVID-19 from August 1, 2020 through January 20, 2023. ( https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/01202023/images/hospitalizations.PNG?_=24630 , accessed January 20, 2023) EP01MY23.002 As seen in the graph, in the United States, patients continue to be hospitalized with the virus that causes COVID-19. The CDC has stated that new variants will continue to emerge. Viruses constantly change through mutation and sometimes these mutations result in a new variant of the virus. Some variants spread more easily and quickly than other variants, which may lead to more cases of COVID-19. Even if a variant causes less severe disease in general, an increase in the overall number of cases could cause an increase in hospitalizations. 2 Based on the information available at this time, we believe there will continue to be COVID-19 cases treated at IPPS hospitals and LTCHs in FY 2024, such that it is appropriate to use the FY 2022 data, as the most recent available data, for purposes of the FY 2024 IPPS and LTCH PPS ratesetting. However, based on the information available at this time, we do not believe there is a reasonable basis for us to assume that there will be a meaningful difference in the number of COVID-19 cases treated at IPPS hospitals and LTCHs in FY 2024 relative to FY 2022, such that modifications to our usual ratesetting methodologies would be warranted. 2 https://www.cdc.gov/coronavirus/2019-ncov/variants/index.html , accessed January 20, 2023. As such, we believe that FY 2022 data, as the most recent available data, is the best available data for approximating the inpatient experience at IPPS hospitals and LTCHs in FY 2024. Therefore, we are proposing to use the FY 2022 MedPAR claims file and the FY 2021 HCRIS dataset (which contains data from many cost reports ending in FY 2022 based on each hospital's cost reporting period) for purposes of the FY 2024 IPPS and LTCH PPS ratesetting. For the reasons discussed, we are not proposing any modifications to our usual ratesetting methodologies to account for the impact of COVID-19 on the ratesetting data. 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/rate year (RY) 2010 LTCH PPS final rule (74 FR 43764 through 43766) and the FYs 2011 through 2023 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; 85 FR 58445 through 58596; 86 FR 44795 through 44961; and 87 FR 48800 through 48891, respectively). For discussion regarding our previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48799 through 48800). C. Proposed Changes to Specific MS-DRG Classifications 1. Discussion of Changes to Coding System and Basis for Proposed FY 2024 MS-DRG Updates a. Conversion of MS-DRGs to the International Classification of Diseases, 10th Revision (ICD-10) As of October 1, 2015, providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system instead of the ICD-9-CM coding system, which was used through September 30, 2015. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting. For a detailed discussion of the conversion of the MS-DRGs to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56789). b. Basis for Proposed FY 2024 MS-DRG Updates As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28127) and final rule (87 FR 48800 through 48801), beginning with FY 2024 MS-DRG classification change requests, we changed the deadline to request changes to the MS-DRGs to October 20 of each year to allow for additional time for the review and consideration of any proposed updates. We also described the new process for submitting requested changes to the MS-DRGs via a new electronic application intake system, Medicare Electronic Application Request Information System TM (MEARIS TM ), accessed at https://mearis.cms.gov . We stated that beginning with FY 2024 MS-DRG classification change requests, CMS will only accept requests submitted via MEARIS TM and will no longer consider requests sent via email. Additionally, we noted that within MEARIS TM , we have built in several resources to support users, including a “Resources” section available at https://mearis.cms.gov/public/resources with technical support available under “Useful Links” at the bottom of the MEARIS TM site. Questions regarding the MEARIS TM system can be submitted to CMS using the form available under “Contact”, also at the bottom of the MEARIS TM site. We note that the burden associated with this information collection requirement is the time and effort required to collect and submit the data in the request for MS-DRG classification changes to CMS. The aforementioned burden is subject to the Paperwork Reduction Act (PRA) of 1995 and approved under Office of Management and Budget (OMB) control number 0938-1431 and has an expiration date of 09/30/2025. As noted previously, interested parties had to submit MS-DRG classification change requests for FY 2024 by October 20, 2022. As we have discussed in prior rulemaking, we may not be able to fully consider all of the requests that we receive for the upcoming fiscal year. We have found that, with the implementation of ICD-10, some types of requested changes to the MS-DRG classifications require more extensive research to identify and analyze all of the data that are relevant to evaluating the potential change. We note in the discussion that follows those topics for which further research and analysis are required, and which we will continue to consider in connection with future rulemaking. Interested parties should submit any comments and suggestions for FY 2025 by October 20, 2023 via MEARIS TM at: https://mearis.cms.gov/public/home . As we did for the FY 2023 IPPS/LTCH PPS proposed rule, for this FY 2024 IPPS/LTCH PPS proposed rule we are providing a test version of the ICD-10 MS-DRG GROUPER Software, Version 41, so that the public can better analyze and understand the impact of the proposals included in this proposed rule. We note that this test software reflects the proposed GROUPER logic for FY 2024. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2024 as reflected in Table 6A.—New Diagnosis Codes—FY 2024 and Table 6B.—New Procedure Codes—FY 2024 associated with this proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2024 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2024 associated with this proposed rule. We note that at the time of the development of this proposed rule there were no procedure codes designated as invalid for FY 2024, and therefore, there is no Table 6D—Invalid Procedure Codes—FY 2024 associated with this proposed rule. These tables are not published in the Addendum to this proposed rule, but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the Addendum to this proposed rule. Because the diagnosis codes no longer valid for FY 2024 are not reflected in the test software, we are making available a supplemental file in Table 6P.1a that includes the mapped Version 41 FY 2024 ICD-10-CM codes and the deleted Version 40.1 FY 2023 ICD-10-CM codes that should be used for testing purposes with users' available claims data. Therefore, users will have access to the test software allowing them to build case examples that reflect the proposals included in this proposed rule. In addition, users will be able to view the draft version of the ICD-10 MS-DRG Definitions Manual, Version 41. The test version of the ICD-10 MS-DRG GROUPER Software, Version 41, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 41, and the supplemental mapping files in Table 6P.1a of the FY 2023 and FY 2024 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software . Following are the changes that we are proposing to the MS-DRGs for FY 2024. We are inviting public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in this proposed rule. In some cases, we are proposing changes to the MS-DRG classifications based on our analysis of claims data and clinical appropriateness. In other cases, we are proposing to maintain the existing MS-DRG classifications based on our analysis of claims data and clinical appropriateness. For this FY 2024 IPPS/LTCH PPS proposed rule, our initial MS-DRG analysis was based on ICD-10 claims data from the September 2022 update of the FY 2022 MedPAR file, which contains hospital bills received from October 1, 2021, through September 30, 2022. In our discussion of the proposed MS-DRG reclassification changes, we refer to these claims data as the “September 2022 update of the FY 2022 MedPAR file.” Separately, where otherwise indicated, additional analysis was based on ICD-10 claims data from the December 2022 update of the FY 2022 MedPAR file, which contains hospital bills received by CMS through December 31, 2022, for discharges occurring from October 1, 2021 through September 30, 2022. In our discussion of the proposed MS-DRG reclassification changes, we refer to these claims data as the “December 2022 update of the FY 2022 MedPAR file.” Specifically, as discussed further in this section, we used the additional claims data available in the December 2022 update of the FY 2022 MedPAR file to assess the application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split, as well as to simulate restructuring of any proposed MS-DRGs, to assess the case counts and other criteria for determining whether a proposed new base MS-DRG would satisfy the criteria to create subgroups. In deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on clinical factors to determine whether patients are clinically distinct or similar to other patients represented in the MS-DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average costs between the cases we select for review and the remainder of cases in the MS-DRG. We also consider variation in costs within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of costs or length of stay, or both. Further, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS-DRG unless it would include a substantial number of cases. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized our proposal to expand our existing criteria to create a new complication or comorbidity (CC) or major complication or comorbidity (MCC) subgroup within a base MS-DRG. Specifically, we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. We stated we believed that applying these criteria to the NonCC subgroup would better reflect resource stratification as well as promote stability in the relative weights by avoiding low volume counts for the NonCC level MS-DRGs. We noted that in our analysis of MS-DRG classification requests for FY 2021 that were received by November 1, 2019, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC, and NonCC subgroups. We also noted that the application of the NonCC subgroup criteria going forward may result in modifications to certain MS-DRGs that are currently split into three severity levels and result in MS-DRGs that are split into two severity levels. We stated that any proposed modifications to the MS-DRGs would be addressed in future rulemaking consistent with our annual process and reflected in Table 5—Proposed List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay for the applicable fiscal year. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798), we finalized a delay in applying this technical criterion to existing MS-DRGs until FY 2023 or future rulemaking, in light of the PHE. Interested parties recommended that a complete analysis of the MS-DRG changes to be proposed for future rulemaking in connection with the expanded three-way severity split criteria be conducted and made available to enable the public an opportunity to review and consider the redistribution of cases, the impact to the relative weights, payment rates, and hospital case mix to allow meaningful comment prior to implementation. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48803), we also finalized a delay in application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split in light of the ongoing PHE and until such time additional analyses can be performed to assess impacts, as discussed in response to public comments in the FY 2022 and FY 2023 IPPS/LTCH PPS final rules. In our analysis of the MS-DRG classification requests for FY 2024 that we received by October 20, 2022, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC, and NonCC subgroups, as described in the following table. BILLING CODE 4120-01-P EP01MY23.003 In general, once the decision has been made to propose to make further modifications to the MS-DRGs as described previously, such as creating a new base MS-DRG, or in our evaluation of a specific MS-DRG classification request to split (or subdivide) an existing base MS-DRG into severity levels, all five criteria must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. We note that in our analysis of requests to create a new MS-DRG, we typically evaluate the most recent year of MedPAR claims data available. For example, we stated earlier that for this FY 2024 IPPS/LTCH PPS proposed rule, our initial MS-DRG analysis was generally based on ICD-10 claims data from the September 2022 update of the FY 2022 MedPAR file, with the additional claims data available in the December 2022 update of the FY 2022 MedPAR file used to assess the case counts and other criteria for determining whether a proposed new base MS-DRG would satisfy the criteria to create subgroups. However, in our evaluation of requests to split an existing base MS-DRG into severity levels, as noted in prior rulemaking (80 FR 49368), we typically analyze the most recent two years of data. This analysis includes 2 years of MedPAR claims data to compare the data results from 1 year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. The first step in our process of evaluating if the creation of a new CC subgroup within a base MS-DRG is warranted is to determine if all the criteria is satisfied for a three-way split. In applying the criteria for a three-way split, a base MS-DRG is initially subdivided into the three subgroups: MCC, CC, and NonCC. Each subgroup is then analyzed in relation to the other two subgroups using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the criteria fail, the next step is to determine if the criteria are satisfied for a two-way split. In applying the criteria for a two-way split, a base MS-DRG is initially subdivided into two subgroups: “with MCC” and “without MCC” (1_23) or “with CC/MCC” and “without CC/MCC” (12_3). Each subgroup is then analyzed in relation to the other using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the criteria for both of the two-way splits fail, then a split (or CC subgroup) would generally not be warranted for that base MS-DRG. If the three-way split fails on any one of the five criteria and all five criteria for both two-way splits (1_23 and 12_3) are met, we would apply the two-way split with the highest R2 value. We note that if the request to split (or subdivide) an existing base MS-DRG into severity levels specifies the request is for either one of the two-way splits (1_23 or 12_3), in response to the specific request, we will evaluate the criteria for both of the two-way splits, however we do not also evaluate the criteria for a three-way split. As previously noted, to validate whether the established severity levels within a base MS-DRG are supported, we typically analyze the most recent two years of MedPAR claims data. For this FY 2024 IPPS/LTCH PPS proposed rule, using the December 2022 update of the FY 2022 MedPAR file and the March 2022 update of the FY 2021 MedPAR file, we also analyzed how applying the NonCC subgroup criteria to all MS-DRGs currently split into three severity levels would potentially affect the MS-DRG structure in connection with the proposed FY 2024 MS-DRG classification changes. While, as previously noted, our MS-DRG analysis for this FY 2024 IPPS/LTCH PPS proposed rule was otherwise based on ICD-10 claims data from the September 2022 update of the FY 2022 MedPAR file, we utilized the additional claims data available from the December 2022 update of the FY 2022 MedPAR file for purposes of assessing the application of the NonCC subgroup criteria to these existing MS-DRGs as well as to determine whether a proposed new base MS-DRG satisfies the criteria to create subgroups. Findings from our analysis indicated that approximately 45 base MS-DRGs would be subject to change based on the three-way severity level split criterion finalized in FY 2021. Specifically, we found that applying the NonCC subgroup criteria to all MS-DRGs currently split into three severity levels would result in the potential deletion of 135 MS-DRGs (45 MS-DRGs × 3 severity levels = 135) and the potential creation of 86 new MS-DRGs. We refer the reader to Table 6P.10—Potential MS-DRG Changes with Application of the NonCC Subgroup Criteria and Detailed Data Analysis- FY 2024 associated with this proposed rule and available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS for detailed information, including the criteria to create subgroups in Table 6P.10a (as also set forth in the preceding table) and the list of the 135 MS-DRGs that would potentially be subject to deletion and the list of the 86 MS-DRGs that would potentially be created in Table 6P.10b. We note that we also identified an additional 12 obstetric MS-DRGs (4 base MS-DRGs x 3 severity levels=12) that would be subject to change based on the application of the three-way severity level split criterion, as reflected in our data analysis in Table 6P.10c associated with this proposed rule. However, in response to prior public comments expressing concern about the historical low volume of the obstetric related MS-DRGs being subject to application of the NonCC subgroup criteria and consistent with our discussion in prior rulemaking regarding this population in our Medicare claims data and the development of these MS-DRGs (83 FR 41210), we believe it may be appropriate to exclude these MS-DRGs from application of the NonCC subgroup criteria. The list of 12 obstetric MS-DRGs is shown in the following table. EP01MY23.004 BILLING CODE 4120-01-C We also refer the reader to Table 6P.10d for the data analysis of all 49 base MS-DRGs that would be subject to change based on the application of the three-way severity level split criterion and to Table 6P.10e for the corresponding data dictionary that describes the meaning of the data elements and assists with interpretation of the data related to our analysis with application of the NonCC subgroup criteria. We note, in our analysis of the claims data and as reflected in Table 6P.10d, we identified four base MS-DRGs currently subdivided with a three-way severity level split (4 base MS-DRGs × 3 severity levels = 12 MS-DRGs) that result in the potential creation of a single, base MS-DRG when grouped under the proposed V41 GROUPER software with application of the NonCC subgroup criteria. As shown in Table 6P.10d, the four current base MS-DRGs (excluding the 4 obstetric related base DRGs) are base MS-DRGs 283, 296, 411 and 799. In addition to not satisfying the criterion that there be at least 500 cases in the NonCC subgroup for a three-way severity level split, these four base MS-DRGs also failed one or more of the other criteria to create subgroups. For example, our review of base MS-DRGs 283 and 296 showed they failed the criterion that there be at least 5% or more of the patient cases in the NonCC subgroup. For base MS-DRG 411, we found the criterion that there be at least 500 cases in each subgroup for a three-way severity level split, as well as in each subgroup for both of the two-way severity level splits, was not met. Lastly, for base MS-DRG 799, we found less than 500 cases in at least two of three subgroups for a three-way severity level split, as well as for at least one of the two subgroups for a two-way severity level split, and the R2 value was less than 3.0 for the two-way severity level split. We also refer the reader to Table 6P.10f for the alternate cost weight analysis with application of the NonCC subgroup criteria that includes transfer-adjusted cases from the December 2022 update of the FY 2022 MedPAR file under the proposed V41 ICD-10 MS- DRG GROUPER Software, the MS-DRG relative weights calculated under the proposed V41 ICD-10 MS-DRG GROUPER Software, the alternate MS-DRG relative weights calculated with application of the NonCC subgroup criteria using an alternate version of the ICD-10 MS-DRG GROUPER Software, Version 41.A (discussed in more detail in this section of this proposed rule), and the change in MS-DRG relative weights between those calculated under the proposed V41 GROUPER Software and those calculated under the alternate V41.A GROUPER Software. We note that to facilitate the structural comparison between the proposed V41 GROUPER and the alternate V41.A GROUPER, the relative weights calculated using the proposed V41 GROUPER Software (column F) do not reflect application of the 10-percent cap. We further note that changes in the status for transfer adjusted cases are reflected for the relative weights calculated using the proposed V41 GROUPER Software only and are not reflected for the alternate MS-DRG weights with application of the NonCC subgroup criteria. We note, as shown in Table 6P.10f, that we found five MS-DRGs for which there appears to be a greater than negative 10% change between the relative weight calculated under the proposed V41 GROUPER Software and the calculated alternate relative weight under the V41.A GROUPER Software with application of the NonCC subgroup criteria. As shown in Table 6P.10f, the five MS-DRGs are existing MS-DRG 021 (potential new MS-DRG 105), existing MS-DRG 411 (potential new MS-DRG 426), existing MS-DRG 573 (potential new MS-DRG 529), existing MS-DRG 574 (potential new MS-DRG 530), and existing MS-DRG 799 (potential new MS-DRG 649). Of the five existing MS-DRGs, two of the MS-DRGs are those for which a new single, base MS-DRG would potentially be created from the current three-way split, as previously described: MS-DRG 411 (potential new MS-DRG 426) and MS-DRG 799 (potential new MS-DRG 649). The findings are consistent with what we would expect given the low volume of cases in the NonCC subgroups compared to the volume of cases in the CC subgroups for these MS-DRGs. As noted in prior rulemaking, any potential MS-DRG updates to be considered for a future proposal in connection with application of the NonCC subgroup criteria would also involve a redistribution of cases, which would impact the relative weights, and, thus, the payment rates proposed for particular types of cases. As such, and in response to prior public comments requesting that further analysis of the application of the NonCC subgroup criteria be made available, in addition to Table 6P.10f, we are making available additional files reflecting application of the NonCC subgroup criteria in connection with the proposed FY 2024 MS-DRG changes, using the December 2022 update of the FY 2022 MedPAR file. These additional files include an alternate Table 5—Alternate List of Medicare Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay, an alternate Length of Stay (LOS) Statistics file, an alternate Case Mix Index (CMI) file, and an alternate After Outliers Removed and Before Outliers Removed (AOR_BOR) file. The files are available in association with this proposed rule on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS . For this FY 2024 IPPS/LTCH PPS proposed rule we are also providing an alternate test version of the ICD-10 MS-DRG GROUPER Software, Version 41.A, so that the public can better analyze and understand the impact on the proposals included in this proposed rule if the NonCC subgroup criteria were to be applied to existing MS-DRGs with a three-way severity level split. We note that this alternate test software reflects the proposed GROUPER logic for FY 2024 as modified by the application of the NonCC subgroup criteria. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2024 as reflected in Table 6A.—New Diagnosis Codes—FY 2024 and Table 6B.—New Procedure Codes—FY 2024 associated with this proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2024 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2024 associated with this proposed rule. As previously noted, at the time of the development of this proposed rule there were no procedure codes designated as invalid for FY 2024, and therefore, there is no Table 6D- Invalid Procedure Codes—FY 2024 associated with this proposed rule. These tables are not published in the Addendum to this proposed rule, but are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the Addendum to this proposed rule. Because the diagnosis codes no longer valid for FY 2024 are not reflected in the alternate test software, we are making available a supplemental file in Table 6P.1a that includes the mapped Version 41 FY 2024 ICD-10-CM codes and the deleted Version 40.1 FY 2023 ICD-10-CM codes that should be used for testing purposes with users' available claims data. Therefore, users will have access to the alternate test software allowing them to build case examples that reflect the proposals included in this proposed rule with application of the NonCC subgroup criteria. Because the potential MS-DRG changes with application of the NonCC subgroup criteria are available in Table 6P.10b associated with this proposed rule, an alternate version of the ICD-10 MS-DRG Definitions Manual was not developed. The alternate test version of the ICD-10 MS-DRG GROUPER Software, Version 41.A, and the supplemental mapping files in Table 6P.1a of the FY 2023 and FY 2024 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software . After delaying the application of the NonCC subgroup criteria for two years, and in response to prior public comments, we are making available these additional analyses reflecting application of the criteria in connection with the proposed FY 2024 MS-DRG changes for public review and comment, to inform application of the NonCC subgroup criteria for FY 2025 rulemaking. We are proposing to continue to delay application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2024. We are interested in hearing feedback regarding the experience of large urban hospitals, rural hospitals, and other hospital types and will take commenters' feedback into consideration for our development of the FY 2025 proposed rule. 2. Major Diagnostic Category (MDC) 01: (Diseases and Disorders of the Nervous System): Epilepsy With Neurostimulator The Responsive Neurostimulator (RNS®) System is a cranially implanted neurostimulator and is a treatment option for persons diagnosed with medically intractable epilepsy, a brain disorder characterized by persistent seizure activity which despite maximal medical treatment, remains sufficiently debilitating. Cases involving the use of the RNS® System are identified by the reporting of an ICD-10-PCS code combination capturing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain and the cases are assigned to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator) when reported with a principal diagnosis of epilepsy. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 40.1, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software , for complete documentation of the GROUPER logic for MS-DRG 023. As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019), we finalized our proposal to reassign all cases with a principal diagnosis of epilepsy and one of the following ICD-10-PCS code combinations capturing cases with a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) to MS-DRG 023 even if there is no MCC reported: • 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H00MZ (Insertion of neurostimulator lead into brain, open approach); • 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H03MZ (Insertion of neurostimulator lead into brain, percutaneous approach); and • 0NH00NZ (Insertion of neurostimulator generator into skull, open approach), in combination with 00H04MZ (Insertion of neurostimulator lead into brain, percutaneous endoscopic approach). We also finalized our proposed change to the title of MS-DRG 023 from “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant” to “Craniotomy with Major Device Implant or Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator” to reflect the modifications to the MS-DRG structure. In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459 through 58462), we discussed a request to reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 to MS-DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with CC) or to reassign these cases to another MS-DRG for more appropriate payment. We stated that while the results of our claims analysis indicated that the average costs of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator), and a principal diagnosis of epilepsy are higher compared to the average costs for all cases in their assigned MS-DRG, we could not ascertain from the claims data the resource use specifically attributable to the procedure during a hospital stay. We stated that we believed that further analysis of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator), and a principal diagnosis of epilepsy was needed prior to proposing any further reassignment of these cases to ensure clinical coherence between these cases and the other cases with which they may potentially be grouped and therefore did not propose to reassign cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) from MS-DRG 023 to MS-DRG 021. We also did not propose to reassign Responsive Neurostimulator (RNS®) System cases to another MS-DRG. We stated we expected that, in future years, we would have additional data that could be used to evaluate the potential reassignment of cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator), and a principal diagnosis of epilepsy. For this FY 2024 IPPS/LTCH PPS proposed rule, we received a similar request to reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain from MS-DRG 023 to MS-DRG 021 or reassign all cases currently assigned to MS-DRG 023 that involve a craniectomy or a craniotomy with the insertion of device implant and create a new MS-DRG for these cases. The requestor acknowledged both the refinements made to MS-DRG 023 effective for FY 2018 and the discussion in FY 2021 rulemaking, but stated that cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) are negatively impacted from a payment perspective in their current MS-DRG assignment due to the large number of cases, with a wide range of principal diagnoses, procedures, and procedure approaches, also assigned to MS-DRG 023 and MS-DRG 024 (Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis without MCC) and therefore continue to be underpaid. The requestor performed its own analysis of Medicare claims data and stated that it found that the average costs of cases describing the insertion of the RNS® neurostimulator were significantly higher than the average costs of all cases in their current assignment to MS-DRG 023, and as a result, cases describing the insertion of the RNS® neurostimulator are not being adequately reimbursed. The requestor suggested the following two options for MS-DRG assignment updates: (1) reassign cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) from MS-DRG 023 to MS-DRG 021 with a change in title to “Intracranial Vascular Procedures with PDX Hemorrhage with CC or Craniectomy with Neurostimulator;” or (2) extract all cases from MS-DRG 023 involving a craniectomy/craniotomy with device implant and create a new MS-DRG for these cases. The requestor acknowledged that the relatively low volume of cases that only involve the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain in the claims data is likely not sufficient to warrant the creation of a new MS-DRG. The requestor further stated given the limited options within the existing MS-DRG structure that fit from both a cost and clinical cohesiveness perspective, they believe that MS-DRG 021 is the most logical fit in terms of average costs and clinical coherence for reassignment of RNS® System cases even though, according to the requestor, the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain is technically more complex and involves a higher level of training, extreme precision and sophisticated technology than performing a craniectomy for hemorrhage. As another option, the requestor identified procedures involving a craniectomy or craniotomy by searching for ICD-10-PCS codes that describe the root operations “Destruction”, “Division”, “Drainage”, “Excision”, Extirpation”, or “Insertion” performed related to the brain or specific brain anatomy (for example, cerebral ventricle, cerebellum) with an “Open Approach” in the claims data. The requestor also said they identified claims involving a device implant by searching for ICD-10-PCS codes that describe the root operation “Insertion” and stated that they found that the claims they identified had average costs comparable to the average costs of RNS® cases and therefore creating a new MS-DRG for all cases involving a craniectomy/craniotomy with device implant was a reasonable alternative option. To begin our analysis, we identified the ICD-10-CM diagnosis codes that describe a diagnosis of epilepsy. We refer the reader to Table 6P.2a associated with this proposed rule (and available at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps ) for the list of the ICD-10-CM codes that we identified. We then examined the claims data from the September 2022 update of the FY 2022 MedPAR file for all cases in MS-DRG 023 and compared the results to cases reporting a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG 023. The following table shows our findings: BILLING CODE 4120-01-P EP01MY23.005 As shown in the table, for MS-DRG 023, we identified a total of 11,602 cases, with an average length of stay of 10.4 days and average costs of $47,321. Of those 11,602 cases in MS-DRG 023, there were 57 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) that had a principal diagnosis of epilepsy. We note that the 57 cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) and a principal diagnosis of epilepsy have an average length of stay of 3.1 days and average costs of $58,676, as compared to the average length of stay of 10.4 days and average costs of $47,321 for all cases in MS-DRG 023. While these neurostimulator cases have average costs that are $11,355 higher than the average costs of all cases in MS-DRG 023, there were only a total of 57 cases. We reviewed these data, and agreed with the requestor that the number of cases continues to be too small to warrant the creation of a new MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 38019) and the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459 through 58462). We examined the reassignment of cases describing a neurostimulator generator inserted into the skull with the insertion of a neurostimulator lead into the brain (including cases involving the use of the RNS® neurostimulator) to MS-DRGs 020, 021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with MCC, with CC, and without CC/MCC, respectively). While the requ [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%3A2023-07389. Public record. Not legal advice.