Medicare and Medicaid Programs and the Children's Health Insurance Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2025 Rates; Quality Programs Requirements; and Other Policy Changes

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 431, 482, 485, 495, and 512

[CMS-1808-F]

RIN 0938-AV34

Medicare and Medicaid Programs and the Children's Health Insurance Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2025 Rates; Quality Programs Requirements; and Other Policy Changes

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Final rule.

SUMMARY:

This final rule revises the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals; makes changes relating to Medicare graduate medical education (GME) for teaching hospitals; updates 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 makes other policy-related changes.

DATES:

With the exception of instruction 2 (§ 405.1845), instruction 29 (§ 482.42(e)) and instruction 31 (§ 485.640(d)), this final rule is effective October 1, 2024. The regulation at § 405.1845 is effective January 1, 2025. The regulations at §§ 482.42(e) and 485.640(d) are effective on November 1, 2024.

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.

Lily Yuan,

NewTech@cms.hhs.gov

, New Technology Add-On Payments Issues.

Mady Hue,

marilu.hue@cms.hhs.gov

, and Andrea Hazeley,

andrea.hazeley@cms.hhs.gov

, MS-DRG Classifications Issues.

Jonathan Rudy,

jonathan.rudy@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.

Jennifer Tate,

jennifer.tate@cms.hhs.gov

, PPS-Exempt Cancer Hospital Quality Reporting—Administration Issues.

Kristina Rabarison,

kristina.rabarison@cms.hhs.gov

, PPS-Exempt Cancer Hospital Quality Reporting Program—Measure Issues.

Lorraine Wickiser,

lorraine.wickiser@cms.hhs.gov

, Long-Term Care Hospital Quality Reporting Program—Administration Issues.

Jessica Warren,

jessica.warren@cms.hhs.gov

and Elizabeth Holland,

elizabeth.holland@cms.hhs.gov

, Medicare Promoting Interoperability Program.

Bridget Dickensheets,

bridget.dickensheets@cms.hhs.gov

and Mollie Knight,

mollie.knight@cms.hhs.gov

, LTCH Market Basket Rebasing.

Benjamin Cohen,

benjamin.cohen@cms.hhs.gov

, Provider Reimbursement Review Board.

Nicholas Bonomo,

Nicholas.Bonomo@cms.hhs.gov

and Tracy Smith,

tracy.smithtaylor@cms.hhs.gov

, Payment Error Rate Measurement Program.

CMMI_TEAM@cms.hhs.gov

, Transforming Episode Accountability Model (TEAM).

Lauren Blum,

Lauren.Blum1@cms.hhs.gov

, and Kristin Shifflett,

Kristin.Shifflett@cms.hhs.gov

, Conditions of Participation Requirements for Hospitals and Critical Access Hospitals to Report Acute Respiratory Illnesses.

SUPPLEMENTARY INFORMATION:

Tables Available on the CMS Website

The IPPS tables for this fiscal year (FY) 2025 final 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 2025 IPPS Final Rule Home Page” or “Acute Inpatient—Files for Download.” The LTCH PPS tables for this FY 2025 final 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-1808-F. For further details on the contents of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this FY 2025 IPPS/LTCH PPS final rule.

Readers who experience any problems accessing any of the tables that are posted on the CMS websites, as previously identified, should contact Michael Treitel,

DAC@cms.hhs.gov

.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

This FY 2025 IPPS/LTCH PPS final rule makes 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 makes payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This final rule also makes policy changes to

programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2025 final rule, we are finalizing our proposal to continue policies to address wage index disparities impacting low wage index hospitals. We are also finalizing our proposed changes relating to Medicare graduate medical education (GME) for teaching hospitals and new technology add-on payments.

We are finalizing our proposal of a separate IPPS payment for establishing and maintaining access to essential medicines.

In the Hospital Value-Based Purchasing (VBP) Program, we are finalizing our proposal to modify scoring of the Person and Community Engagement Domain for the FY 2027 through FY 2029 program years to only score six unchanged dimensions of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure, and we are finalizing our proposal to adopt the updated HCAHPS Survey measure in the Hospital VBP Program beginning with the FY 2030 program year after the updated measure has been publicly reported under the Hospital Inpatient Quality Reporting (IQR) Program for 1 year. We are also finalizing our proposal to modify scoring on the HCAHPS Survey measure beginning with the FY 2030 program year to incorporate the updated HCAHPS Survey measure into nine survey dimensions. Lastly, we provide previously and newly established performance standards for the FY 2027 through FY 2030 program years for the Hospital VBP Program.

In the Hospital IQR Program, we are finalizing our proposals to add seven new measures, with modifications to our proposal to adopt the Patient Safety Structural measure, modify two existing measures including the HCAHPS Survey measure, and remove five measures. We are also finalizing our proposed changes to the validation process for the Hospital IQR Program data. We are finalizing the proposed reporting and submission requirements for electronic clinical quality measures (eCQMs) with modifications.

In the PPS-Exempt Cancer Hospital Quality Reporting Program (PCHQR), we are finalizing the adoption of the Patient Safety Structural measure with modification beginning with the CY 2025 reporting period/FY 2027 program year. We are also finalizing our proposed changes to the HCAHPS Survey measure and our proposal to move up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure.

In the LTCH Quality Reporting Program (QRP), we are finalizing our proposals to add four assessment items to the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set (LCDS) and modify one assessment item on the LCDS beginning with the FY 2028 LTCH QRP. Additionally, we are finalizing our proposal to extend the admission assessment window for the LCDS beginning with the FY 2028 LTCH QRP. Finally, we summarize the feedback we received on our requests for information on future measure concepts for the LTCH QRP and a future LTCH Star Rating system.

In the Medicare Promoting Interoperability Program, we are finalizing our proposal to separate the Antimicrobial Use and Resistance (AUR) Surveillance measure into two measures, an Antimicrobial Use (AU) Surveillance measure and an Antimicrobial Resistance (AR) Surveillance measure, beginning with the electronic health record (EHR) reporting period in CY 2025. We are also finalizing the following proposals to: increase the performance-based scoring threshold from 60 points to 70 points for the EHR reporting period in CY 2025 and from 70 points to 80 points beginning with the EHR reporting period in CY 2026; adopt two new eCQMs and modify one eCQM, in alignment with the Hospital IQR Program; and change the reporting and submission requirements for eCQMs with modifications, in alignment with the Hospital IQR Program.

We proposed the creation and testing of a new mandatory alternative payment model called the Transforming Episode Accountability Model (TEAM). The intent of TEAM is to improve beneficiary care through financial accountability for episodes categories that begin with one of the following procedures: coronary artery bypass graft surgery (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. We anticipated that TEAM would benefit Medicare beneficiaries through improving the coordination of items and services paid for through Medicare fee-for-service (FFS) payments, encouraging provider investment in health care infrastructure and redesigned care processes, and incentivizing higher value care across the inpatient and post-acute care settings for the episode. We proposed to test TEAM for a 5-year model performance period, beginning January 1, 2026, and ending December 31, 2030. Under the Quality Payment Program (QPP), we anticipated that TEAM would be an Advanced Alternative Payment Model (APM)for Track 2 and Track 3 and a Merit-based Incentive Payment System (MIPS) APM for all participation tracks. We are finalizing some policies as proposed and we are finalizing others with modification. There are also certain proposed policies that we are not finalizing, and we will instead go through future rulemaking to promulgate new policies before the model start date.

We are also finalizing the proposal requiring respiratory illness reporting for hospitals and critical access hospitals as a condition of participation following the expiration of the COVID-19 public health emergency requirements.

Under various statutory authorities, we either discuss continued program implementation or make changes to the Medicare IPPS, the LTCH PPS, other related payment methodologies and programs for FY 2025 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 period 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(d)(5)(F) of the Act provides for additional Medicare IPPS payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. These payments are known as the Medicare disproportionate share hospital (DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the methods under which a hospital may qualify for the DSH payment adjustment.

• 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, which 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 establishes the requirements for an eligible hospital to be treated as a meaningful EHR user of CEHRT for an EHR reporting period for a payment adjustment year or, for purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal year.

• 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 based on their performance on measures 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 the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act if subsection (r) did not apply (“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, in the absence of section 1886(r) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured; and (3) the 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 2 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 on quality measures 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, which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.

• Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program (CHIP) beneficiaries while reducing program expenditures.

• Sections 1866 and 1902 of the Act, which requires providers of services seeking to participate in the Medicare or Medicaid program, or both, to enter into an agreement with the Secretary or the state Medicaid agency, as appropriate. Hospitals (all hospitals to which the requirements of 42 CFR part 482 apply, including short-term acute care hospitals, LTC hospitals, rehabilitation hospitals, psychiatric hospitals, cancer hospitals, and children's hospitals) and critical access hospitals (CAHs) seeking to be Medicare and Medicaid providers of services under 42 CFR part 485, subpart F, must be certified as meeting Federal participation requirements (conditions of participation (CoPs) and conditions for coverage (CfCs)). Section 1861(e) of the Act provides the patient health and safety protections established by the Secretary for hospital CoPs. Section 1820(e) of the Act provides similar authority for CAHs.

2. Summary of the Major Provisions

The following is a summary of the major provisions in this final rule. In

general, these major provisions are being finalized 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 final rule is presented in section I.D. of the preamble of this final rule.

a. 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 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.5. of the preamble of this final rule, while we are using the FY 2021 cost report data for the FY 2025 wage index, we are unable to comprehensively evaluate the effect, if any, the low wage index hospital policy had on hospitals' wage increases during the years the COVID-19 public health emergency (PHE) was in effect. We believe it is necessary to wait until we have useable data from fiscal years after the PHE before reaching any conclusions about the efficacy of the policy. Therefore, after consideration of public comments, we are finalizing our proposal that the low wage index hospital policy and the related budget neutrality adjustment would be effective for at least 3 more years, beginning in FY 2025.

b. Separate IPPS Payment for Establishing and Maintaining Access to Essential Medicines

As discussed in section V.J. of the preamble of this final rule, the Biden-Harris administration has made it a priority to strengthen the resilience of medical supply chains and support reliable access to products for public health, including through prevention and mitigation of medical product shortages. As a first step in this initiative, we proposed to establish a separate payment for small, independent hospitals for the IPPS shares of the additional resource costs to voluntarily establish and maintain a 6-month buffer stock of one or more of 86 essential medicines, either directly or through contractual arrangements with a pharmaceutical manufacturer, distributor, or intermediary. For the purposes of this policy, eligibility is limited to small, independent hospitals as hospitals with 100 beds or fewer that are not part of a chain organization. We are finalizing our proposal to make this separate payment in a non-budget neutral manner under section 1886(d)(5)(I) of the Act. We are also finalizing our proposal that the payment adjustments would commence for cost reporting periods beginning on or after October 1, 2024.

c. DSH Payment Adjustment, Additional Payment for Uncompensated Care, and Supplemental Payment

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 would have been paid as Medicare DSH payments under section 1886(d)(5)(F) of the Act if subsection (r) did not apply, is paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH that has uncompensated care 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. This additional payment is known as the uncompensated care payment.

In this final rule, we are finalizing the proposed update to our estimates of the three factors used to determine uncompensated care payments for FY 2025. We also proposed 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, and we are finalizing this approach. 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 2025, we will use the 3 most recent years of audited data on uncompensated care costs from Worksheet S-10 of the FY 2019, FY 2020, and FY 2021 cost reports to calculate Factor 3 in the uncompensated care payment methodology for all eligible hospitals.

Beginning with FY 2023 (87 FR 49047 through 49051), we also established a supplemental payment for IHS and Tribal hospitals and hospitals located in Puerto Rico. In section IV.D. of the preamble of this final rule, we summarized the ongoing methodology for supplemental payments.

In this final rule, we are finalizing our proposal to calculate the per-discharge amount for interim uncompensated care payments for FY 2025 and subsequent fiscal years with modification. Specifically, for FY 2025, we will calculate the per-discharge amount for interim uncompensated care payments using the average of the most recent 2 years of discharge data. In light of the commenters' concerns regarding a trend of decreasing discharge volume and possible overestimation of discharges in recent years, we believe that, on balance, omitting FY 2021 data from the calculation of interim uncompensated care payments is likely to more accurately estimate FY 2025 discharges. Therefore, we are finalizing our proposal with modification. We are modifying the text of § 412.106(i)(1) to state that for FY 2025, interim uncompensated care payments will be calculated based on an average of the most recent 2 years of available historical discharge data, and, consistent with the proposed rule,, interim uncompensated care payments for FY 2026 and subsequent fiscal years will be calculated based on an average of the most recent 3 years of available historical discharge data.

d. Adoption of the Patient Safety Structural Measure in the Hospital IQR Program and PCHQR Program

The Patient Safety Structural measure is an attestation-based measure that assesses whether hospitals have a structure and culture that prioritizes safety as demonstrated by the following five domains: (1) leadership commitment to eliminating preventable harm; (2) strategic planning and organizational policy; (3) culture of safety and learning health system; (4) accountability and transparency; and (5) patient and family engagement. Hospitals will attest to whether they engage in specific evidence-based best practices within each of these domains to achieve a score from zero to five out of five points. We proposed that hospitals would be required to report this measure beginning with the CY 2025 reporting period/FY 2027 program year for the PCHQR Program and for the CY 2025 reporting period/FY 2027 payment determination for the Hospital IQR Program. We are finalizing this proposal, with a modification to one of the domains.

e. Updated Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey Measure in the Hospital IQR Program, Hospital VBP Program, and PCHQR Program

The updated version of the HCAHPS Survey measure aligns with the National Quality Strategy goal to bring patient voices to the forefront by incorporating feedback from patients and caregivers. We proposed that the updated HCAHPS Survey measure would be adopted for the Hospital IQR and PCHQR Programs beginning with the CY 2025 reporting period/FY 2027 payment determination and the CY 2025 reporting period/FY 2027 program year, respectively. For the Hospital VBP Program, we proposed to modify scoring on the Person and Community Engagement Domain for the FY 2027 through FY 2029 program years to only score the six dimensions of the HCAHPS Survey measure that would remain unchanged from the current version of the survey. We proposed to adopt the updated HCAHPS Survey measure beginning with the FY 2030 program year, which would result in nine HCAHPS Survey measure dimensions for the Person and Community Engagement Domain. We also proposed to modify scoring of the Person and Community Engagement Domain beginning with the FY 2030 program year to account for the proposed updates to the HCAHPS Survey measure. We are finalizing all of these proposals.

f. Hospital Value-Based Purchasing (VBP) Program

Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. We proposed to modify scoring on the Person and Community Engagement Domain for the FY 2027 through FY 2029 program years while the updated HCAHPS Survey measure would be publicly reported under the Hospital IQR Program. In addition, we proposed to adopt the updated HCAHPS Survey measure beginning with the FY 2030 program year and modify scoring beginning with the FY 2030 program year to account for the updated HCAHPS Survey measure. We are finalizing these proposals.

g. Hospital Inpatient Quality Reporting (IQR) Program

Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) hospitals are required to report data on measures selected by the Secretary for a fiscal year in order to receive the full annual percentage increase. In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed several changes to the Hospital IQR Program. We proposed the adoption of seven new measures: (1) Patient Safety Structural measure beginning with the CY 2025 reporting period/FY 2027 payment determination; (2) Age Friendly Hospital measure beginning with the CY 2025 reporting period/FY 2027 payment determination; (3) Catheter-Associated Urinary Tract Infection (CAUTI) Standardized Infection Ratio Stratified for Oncology Locations beginning with the CY 2026 reporting period/FY 2028 payment determination; (4) Central Line-Associated Bloodstream Infection (CLABSI) Standardized Infection Ratio Stratified for Oncology Locations beginning with the CY 2026 reporting period/FY 2028 payment determination; (5) Hospital Harm—Falls with Injury eCQM beginning with the CY 2026 reporting period/FY 2028 payment determination; (6) Hospital Harm—Postoperative Respiratory Failure eCQM beginning with the CY 2026 reporting period/FY 2028 payment determination; and (7) Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (Failure-to-Rescue) measure beginning with the July 1, 2023-June 30, 2025 reporting period/FY 2027 payment determination. We also proposed refinements to two measures currently in the Hospital IQR Program measure set: (1) Global Malnutrition Composite Score (GMCS) eCQM, beginning with the CY 2026 reporting period/FY 2028 payment determination; and (2) the HCAHPS Survey beginning with the CY 2025 reporting period/FY 2027 payment determination. In addition, we proposed the removal of five measures: (1) Death Among Surgical Inpatients with Serious Treatable Complications (CMS PSI 04) measure beginning with the July 1, 2023-June 30, 2025 reporting period/FY 27 payment determination; (2) Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Acute Myocardial Infarction (AMI) measure beginning with the July 1, 2021-June 30, 2024 reporting period/FY 2026 payment determination; (3) Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Heart Failure (HF) measure beginning with the July 1, 2021-June 30, 2024 reporting period/FY 2026 payment determination; (4) Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Pneumonia (PN) measure beginning with July 1, 2021-June 30, 2024 reporting period/FY 2026 payment determination, and (5) Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure beginning with the April 1, 2021-March 31, 2024 reporting period/FY 2026 payment determination. We are finalizing all of these proposals as proposed with the exception of the Patient Safety Structural measure, which we are finalizing with modifications.

Lastly, we proposed to modify eCQM data reporting and submission requirements by proposing a progressive increase in the number of mandatory eCQMs a hospital would be required to report on beginning with the CY 2026 reporting period/FY 2028 payment determination. We also proposed two changes to current policies related to validation of hospital data: (1) to implement eCQM validation scoring based on the accuracy of eCQM data beginning with the validation of CY 2025 eCQM data affecting the FY 2028 payment determination; and (2) modification of the data validation reconsideration request requirements to make medical records submission optional for reconsideration requests beginning with CY 2023 discharges/FY 2026 payment determination. We are finalizing all of these proposals as proposed with the exception of the proposed progressive increase in the number of mandatory eCQMs, which we are finalizing with modifications.

h. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 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. In the FY 2025 IPPS/LTCH PPS proposed rule, we proposed the following:

• To adopt the Patient Safety Structural measure beginning with the CY 2025 reporting period/FY 2027 program year.

• To modify the HCAHPS Survey measure beginning with the CY 2025 reporting period/FY 2027 program year.

• To move up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure from July 2026 to January 2026 or as soon as feasible thereafter.

We are finalizing all of these proposals as proposed with the

exception of the Patient Safety Structural measure, which we are finalizing with modifications.

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

We proposed and are finalizing the following changes to the LTCH QRP: (1) add four assessment items to the LCDS beginning with the FY 2028 LTCH QRP; (2) modify one item on the LCDS beginning with the FY 2028 LTCH QRP; and (3) extend the admission assessment window for the LCDS from 3 days to 4 days beginning with the FY 2028 LTCH QRP. We also summarize the feedback we received on requests for information in the proposed rule on future measure concepts for the LTCH QRP and a future LTCH Star Rating system.

j. Medicare Promoting Interoperability Program

In section X.F. of the preamble of the proposed rule, we proposed several changes to the Medicare Promoting Interoperability Program. Specifically, we proposed: (1) to separate the Antimicrobial Use and Resistance (AUR) Surveillance measure into two measures, an Antimicrobial Use (AU) Surveillance measure and an Antimicrobial Resistance (AR) Surveillance measure, beginning with the EHR reporting period in CY 2025; to add a new exclusion for eligible hospitals or critical access hospitals (CAHs) that do not have a data source containing the minimal discrete data elements that are required for AU or AR Surveillance reporting; to modify the existing exclusions for the AUR Surveillance measure to apply to the proposed AU Surveillance and AR Surveillance measures, respectively; and to treat the AU Surveillance and AR Surveillance measures as new measures with respect to active engagement beginning with the EHR reporting period in CY 2025; (2) to increase the performance-based scoring threshold for eligible hospitals and CAHs reporting under the Medicare Promoting Interoperability Program from 60 points to 80 points beginning with the EHR reporting period in CY 2025; (3) to adopt two new eCQMs that hospitals can select as one of their three self-selected eCQMs beginning with the CY 2026 reporting period: the Hospital Harm—Falls with Injury eCQM and the Hospital Harm—Postoperative Respiratory Failure eCQM; (4) beginning with the CY 2026 reporting period, to modify one eCQM, the Global Malnutrition Composite Score eCQM; and (5) to modify eCQM data reporting and submission requirements by proposing a progressive increase in the number of mandatory eCQMs eligible hospitals and CAHs would be required to report on beginning with the CY 2026 reporting period. We are finalizing all proposals as proposed, with the exception of our proposals to increase the performance-based scoring threshold for eligible hospitals and CAHs, and to progressively increase the number of mandatory eCQMs required for reporting, which we are finalizing with modification. We are finalizing, with modification, an increase to the performance-based scoring threshold for eligible hospitals and CAHs from 60 points to 70 points for the EHR reporting period in CY 2025 and from 70 points to 80 points beginning with the EHR reporting period in CY 2026, and finalizing, with modification, the regulatory text accordingly. We are also finalizing, with modification, our proposal to increase the eCQM reporting requirements in the Medicare Promoting Interoperability Program for the CY 2026, CY 2027, CY 2028, and subsequent years' reporting periods. Specifically, eligible hospitals and CAHs will be required to report a total of eight eCQMs for the CY 2026 reporting period, a total of nine eCQMs for the CY 2027 reporting period, and a total of eleven eCQMs beginning with the CY 2028 reporting period.

k. Proposed Distribution of Additional Residency Positions Under the Provisions of Section 4122 of Subtitle C of the Consolidated Appropriations Act, 2023 (CAA, 2023)

In the proposed rule, we included a proposal to implement section 4122 of the CAA, 2023. Section 4122(a) of the CAA, 2023, amended section 1886(h) of the Act by adding a new section 1886(h)(10) of the Act requiring the distribution of additional residency positions (also referred to as slots) to hospitals. After consideration of public comments, we are finalizing this proposal, with minor modifications. We refer readers to section V.F.2. of the preamble of this final rule for a summary of the provisions of section 4122 of the CAA, 2023 that we are implementing in this final rule.

l. Extension of the Medicare-Dependent, Small Rural Hospital (MDH) Program and the Temporary Changes to the Low-Volume Hospital Payment Adjustment

The Consolidated Appropriations Act, 2024 (CAA, 2024) (Pub. L. 118-42), enacted on March 9, 2024, extended the MDH program and the temporary changes to the low-volume hospital qualifying criteria and payment adjustment under the IPPS for a portion of FY 2025. Specifically, section 306 of the CAA, 2024, further extended the modified definition of low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals under section 1886(d)(12) of the Act through December 31, 2024. Section 307 of the CAA, 2024, extended the MDH program under section 1886(d)(5)(G) of the Act through December 31, 2024. Prior to enactment of the CAA, 2024, the low-volume hospital qualifying criteria and payment adjustment were set revert to the statutory requirements that were in effect prior to FY 2011 at the end of FY 2024 and beginning October 1, 2024, the MDH program would have no longer been in effect.

We recognize the importance of these extensions with respect to the goal of advancing health equity by addressing the health disparities that underlie the health system is one of CMS' strategic pillars

1

and a Biden-Harris Administration priority.

2

These provisions are projected to increase payments to IPPS hospitals by approximately $137 million in FY 2025.

1

https://www.cms.gov/about-cms/what-we-do/cms-strategic-plan

.

2

https://www.whitehouse.gov/priorities/

.

m. Transforming Episode Accountability Model (TEAM)

As discussed in section X.A. of the preamble of this final rule, we are finalizing the Transforming Episode Accountability Model (TEAM). TEAM will be a 5-year mandatory model tested under the authority of section 1115A of the Act, beginning on January 1, 2026, and ending on December 31, 2030. The intent of TEAM is to improve beneficiary care through financial accountability for episode categories that begin with one of the following procedures: coronary artery bypass graft surgery (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries.

Under Traditional Medicare, Medicare makes separate payments to providers and suppliers for the items and services furnished to a beneficiary over the course of an episode of care. Because providers and suppliers are paid for each individual item or service delivered, providers may not be incentivized to invest in quality improvement and care coordination

activities. As a result, care may be fragmented, unnecessary, or duplicative. By holding hospitals accountable for all items and services provided during an episode, providers would be better incentivized to coordinate patient care, avoid duplicative or unnecessary services, and improve the beneficiary care experience during care transitions.

Under TEAM, all acute care hospitals, with limited exceptions, located within the mandatory Core-Based Statistical Areas (CBSAs) that CMS selected for model implementation will be required to participate in TEAM. CMS will allow a one-time opportunity for hospitals that participate until the last day of the last performance period in the BPCI Advanced model or the last day of the last performance year of the CJR model, that are not located in a mandatory CBSA selected for TEAM participation to voluntarily opt into TEAM.

3

TEAM will have a 1-year glide path opportunity for all TEAM participants and a 3-year glide path opportunity for TEAM participants that are safety net hospitals, which will allow TEAM participants to ease into full financial risk. Episodes will include non-excluded Medicare Parts A and B items and services and would begin with an anchor hospitalization or anchor procedure and will end 30 days after hospital discharge. The following episode categories, when furnished by a TEAM participant, will initiate an episode in TEAM: lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure.

3

For the BPCI Advanced model, the last day of the last performance period is December 31, 2025. For the CJR model, the last day of the last performance year is December 31, 2024.

TEAM participants will continue to bill Medicare FFS as usual but will receive target prices for episodes prior to each performance year. Target prices will be based on 3 years of baseline data, prospectively trended forward to the relevant performance year, and calculated at the level of MS-DRG/HCPCS episode type and region. Target prices will also include a discount factor, normalization factor, retrospective trend adjustment factor, and beneficiary and provider level risk-adjustment. Performance in the model will be assessed by comparing TEAM participants' actual Medicare FFS spending during a performance year to their reconciliation target price as well as by performance on three quality measures. TEAM participants will earn a payment from CMS, subject to a quality performance adjustment, if their spending is below the reconciliation target price. TEAM participants will owe CMS a repayment amount, subject to a quality performance adjustment, if their spending is above the reconciliation target price. In section X.A. of the preamble of this final rule some policies as proposed, and we are finalizing others with modification. There are also certain proposed policies that we are not finalizing, and we will instead go through rulemaking in the future to promulgate new policies before the model start date.

n. Maternity Care Request for Information (RFI)

In alignment with the Biden-Harris Administration's commitment to addressing the maternal health crisis, this RFI sought to gather information on differences between hospital resources required to provide inpatient pregnancy and childbirth services to Medicare patients as compared to non-Medicare patients. To the extent that the resources required differ between patient populations, we also wanted to gather information on the extent to which non-Medicare payers, or other commercial insurers may be using the IPPS as a basis for determining their payment rates for inpatient pregnancy and childbirth services and the effect, if any, that the use of the IPPS as a basis for determining payment by those payers may have on maternal health outcomes. We summarize the comments received in section X.C. of the preamble of this final rule.

o. Conditions of Participation Requirements for Hospitals and Critical Access Hospitals To Report Acute Respiratory Illnesses

In section X.F. of the preamble of the proposed rule, we proposed to update the hospital and CAH infection prevention and control and antibiotic stewardship programs conditions of participation (CoPs) to extend a limited subset of the current COVID-19 and influenza data reporting requirements. These proposed reporting requirements ensure that hospitals and CAHs have appropriate insight related to evolving infection control needs. Specifically, we proposed to replace the COVID-19 and Seasonal Influenza reporting standards for hospitals and CAHs with a new standard addressing acute respiratory illnesses to require that, beginning on October 1, 2024, hospitals and CAHs would have to electronically report information about COVID-19, influenza, and RSV. We also proposed that outside of a public health emergency (PHE), hospitals and CAHs would have to report these data on a weekly basis. In section X.F. of the preamble of this final rule, we are finalizing these proposals with revisions.

p. Changes to the Severity Level Designation for Z Codes Describing Inadequate Housing and Housing Instability

As discussed in section II.C. of the preamble of this final rule, we are finalizing the proposed change to the severity level designation for the social determinants of health (SDOH) diagnosis codes describing inadequate housing and housing instability from non-complication or comorbidity (NonCC) to complication or comorbidity (CC) for FY 2025. Consistent with our annual updates to account for changes in resource consumption, treatment patterns, and the clinical characteristics of patients, we recognize inadequate housing and housing instability as indicators 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 further 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, Transfers, Savings, and Benefits

The following table provides a summary of the costs, transfers, savings, and benefits associated with the major provisions described in section I.A.2. of the preamble of this final rule.

BILLING CODE 4120-01-P

ER28AU24.000

ER28AU24.001

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.

With the recent enactment of section 307 of the CAA, 2024, under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through December 31, 2024. For discharges occurring on or after October 1, 2007, but before January 1, 2025, 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). As section 307 of the CAA, 2024, extended the MDH program through the first quarter of FY 2025 only, beginning on January 1, 2025, the MDH program will no longer be in effect absent a change in law. Because the MDH program is not authorized by statute beyond December 31, 2024, beginning January 1, 2025, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the IPPS Federal rate.

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 Are Implemented in This Final Rule

1. The Consolidated Appropriations Act, 2023 (CAA 2023; Pub. L. 117-328)

Section 4122 of the CAA, 2023, amended section 1886(h) of the Act by adding a new section 1886(h)(10) of the Act requiring the distribution of additional residency positions (also referred to as slots) to hospitals. Section 1886(h)(10)(A) of the Act requires that for FY 2026, the Secretary shall initiate an application round to distribute 200 residency positions. At least 100 of the positions made available under section 1886(h)(10)(A) of the Act shall be distributed for psychiatry or psychiatry subspecialty residency training programs. The Secretary is required, subject to certain provisions in the law, to increase the otherwise applicable resident limit for each qualifying hospital that submits a timely application by the number of positions that may be approved by the Secretary for that hospital. The Secretary is required to notify hospitals of the number of positions distributed to them by January 31, 2026, and the increase is effective beginning July 1, 2026.

In determining the qualifying hospitals for which an increase is provided, section 1886(h)(10)(B)(i) of the Act requires the Secretary to take into account the “demonstrated likelihood” of the hospital filling the positions made available within the first 5 training years beginning after the date the increase would be effective, as determined by the Secretary.

Section 1886(h)(10)(B)(ii) of the Act requires a minimum distribution for certain categories of hospitals. Specifically, the Secretary is required to distribute at least 10 percent of the aggregate number of total residency positions available to each of four categories of hospitals. Stated briefly, and discussed in greater detail later in this final rule, the categories are as follows: (1) hospitals located in rural areas or that are treated as being located in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) of the Act); (2) hospitals in which the reference resident level of the hospital is greater than the otherwise applicable resident limit; (3) hospitals in States with new medical schools or additional locations and branches of existing medical schools; and (4) hospitals that serve areas designated as Health Professional Shortage Areas (HPSAs). Section 1886(h)(10)(F)(iii) of the Act defines a qualifying hospital as a hospital in one of these four categories.

Section 1886(h)(10)(B)(iii) of the Act further requires that each qualifying hospital that submits a timely application receive at least 1 (or a fraction of 1) of the residency positions made available under section 1886(h)(10) of the Act before any qualifying hospital receives more than 1 residency position.

Section 1886(h)(10)(C) of the Act places certain limitations on the distribution of the residency positions.

First, a hospital may not receive more than 10 additional full-time equivalent (FTE) residency positions. Second, no increase in the otherwise applicable resident limit of a hospital may be made unless the hospital agrees to increase the total number of FTE residency positions under the approved medical residency training program of the hospital by the number of positions made available to that hospital. Third, if a hospital that receives an increase to its otherwise applicable resident limit under section 1886(h)(10) of the Act is eligible for an increase to its otherwise applicable resident limit under 42 CFR 413.79(e)(3) (or any successor regulation), that hospital must ensure that residency positions received under section 1886(h)(10) of the Act are used to expand an existing residency training program and not for participation in a new residency training program.

2. The Consolidated Appropriations Act, 2024 (CAA, 2024; Pub. L. 118-42)

Section 306 of the CAA, 2024, extended through the first 3 months of FY 2025 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 2024. Specifically, under section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 2024 and the portion of FY 2025 occurring before January 1, 2025, 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 December 31, 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 307 of the CAA, 2024, 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 the first 3 months of FY 2025 (that is, through December 31, 2024).

D. Issuance of a Notice of Proposed Rulemaking and Summary of the Proposed Provisions

The FY 2025 IPPS/LTCH PPS proposed rule appeared in the May 2, 2024,

Federal Register

(89 FR 35934). In this proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2025 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 2025.

The following is a general summary of the changes that we proposed to make:

1. Proposed Changes to MS-DRG Classifications and Recalibrations of Relative Weights

In section II. of the preamble of the proposed rule, we included the following:

• Proposed changes to MS-DRG classifications based on our yearly review for FY 2025.

• Proposed recalibration of the MS-DRG relative weights.

• A discussion of the proposed FY 2025 status of new technologies approved for add-on payments for FY 2024, a presentation of our evaluation and analysis of the FY 2025 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) Public Law 108-173, obtained in a town hall meeting for applications not submitted under an alternative pathway), and a discussion of the proposed status of FY 2025 new technology applicants under the alternative pathways for certain medical devices and certain antimicrobial products.

• A proposed change to the April 1 cutoff to October 1 for determining whether a technology would be within its 2- to 3-year newness period when considering eligibility for new technology add-on payments, beginning in FY 2026, effective for those technologies that are approved for new technology add-on payments starting in FY 2025 or a subsequent year (as discussed in II.E.8. of the preamble of the proposed rule).

• A proposal that, beginning with new technology add-on payment applications for FY 2026, we will no longer consider a hold status to be an inactive status for the purposes of eligibility for the new technology add-on payment (as discussed in section II.E.9. of the preamble of the proposed rule).

• A proposal that, subject to our review of the new technology add-on payment eligibility criteria, for certain gene therapies approved for new technology add-on payments in the FY 2025 IPPS/LTCH final rule that are indicated and used specifically for the treatment of sickle cell disease (SCD), effective with discharges on or after October 1, 2024, and concluding at the end of the 2- to 3-year newness period for such therapy, we would temporarily increase the new technology add-on payment percentage to 75 percent (as discussed in section II.E.10. of the preamble of the proposed rule).

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

In section III. of the preamble of the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following:

• Proposed changes in core-based statistical areas (CBSAs) as a result of new OMB labor market area delineations and proposed policies related to the proposed changes in CBSAs.

• The proposed FY 2025 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 2025 based on the 2022 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 2025 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 FY 2025 wage index.

3. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) for FY 2025

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 Factor 3 of the uncompensated care payment for FY 2025, which is the same methodology that was used for FY 2024.

• Proposed methodological approach for determining the amount of interim uncompensated care payments using the average of the most recent 3 years of discharge data.

4. Other Decisions and Proposed Changes to the IPPS for Operating Costs

In section V. of the preamble of the proposed rule, we discussed 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 2025.

• Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status and clarification of the qualification under the discharge criterion for osteopathic hospitals.

• Proposed implementation of the statutory extension of the temporary changes to the low-volume hospital payment adjustment through December 31, 2024, the statutory expiration beginning January 1, 2025, and the proposed payment adjustments for low-volume hospitals for FY 2025.

• Proposed implementation of the statutory extension of the MDH program through December 31, 2024, and the statutory expiration beginning January 1, 2025.

• A proposal to implement a provision of the Consolidated Appropriations Act relating to payments to hospitals for GME and IME costs, proposed direct graduate medical education (DGME) and IME policy modifications to the criteria for new residency programs; technical fixes to the DGME regulations; and a notice of closure of two teaching hospitals and opportunities to apply for available slots and a reminder of CBSA changes and application to GME policies.

• Proposed nursing and allied health education program Medicare Advantage (MA) add-on rates and direct GME MA percent reductions for CY 2023.

• Proposed update to the payment adjustment for certain clinical trial and expanded access use immunotherapy cases.

• Proposed separate IPPS payment for establishing and maintaining access to essential medicines.

• Proposed update to the estimate of the financial impacts for the FY 2025 Hospital Readmissions Reduction Program.

• Proposed modifications to the scoring of the Person and Community Engagement Domain in the Hospital VBP Program.

++ For the FY 2027 through FY 2029 program years to only score on six unchanged dimensions of the HCAHPS Survey.

++ Beginning with the FY 2030 program year to account for the proposed updated HCAHPS Survey.

• Updating the proposed estimate of the financial impacts for the FY 2025 Hospital-Acquired Conditions Reduction Program.

• Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2025.

5. Proposed FY 2025 Policy Governing the IPPS for Capital-Related Costs

In section VI. of the preamble of the proposed rule, we discussed the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2025.

6. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages

In section VII. of the preamble of the proposed rule, we discussed the following:

• Proposed changes to payments to certain excluded hospitals for FY 2025.

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

7. Proposed Changes to the LTCH PPS

In section VIII. of the preamble of the proposed rule, we proposed to rebase and revise the LTCH market basket to reflect a 2022 base year, which includes a proposed update to the LTCH PPS labor-related share. In section VIII. of the preamble of the proposed rule, we set forth proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2025. We also proposed a technical clarification to the regulations for hospitals seeking to be classified as an LTCH.

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

In section IX. of the preamble of the proposed rule, we addressed the following:

• Solicitation of comment on adopting measures across the hospital quality reporting and value-based purchasing programs which capture more forms of unplanned post-acute care and encourage hospitals to improve discharge processes.

• Proposed changes to the requirements for the Hospital IQR Program.

• Proposed changes to the requirements for the PCHQR Program.

• Proposed adoption of the Patient Safety Structural measure in the Hospital IQR Program and the PCHQR Program.

• Proposed updated HCAHPS Survey measure in the Hospital IQR Program, PCHQR Program, and Hospital VBP Program.

• Proposed changes to the requirements for the LTCH QRP, and requests for information on future measure concepts for the LTCH QRP and a star rating system for the LTCH QRP.

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

9. Other Proposals and Comment Solicitations Included in the Proposed Rule

Section X. of the preamble of the proposed rule includes the following:

• Proposed implementation of TEAM that would test whether an episode-based pricing methodology linked with accountability for quality measure performance for select acute care hospitals reduces Medicare program expenditures while preserving or improving the quality of care for Medicare beneficiaries.

• Proposed changes to permit a Provider Reimbursement Review Board (PRRB) member to serve up to 3 consecutive terms (9 consecutive years total), and up to 4 consecutive terms (12 consecutive years total) in cases where a PRRB Member who, in their second or third consecutive term, is designated as Chairperson, to continue serving as Chairperson in the fourth consecutive term.

• Solicitation of comments to gather information on differences between hospital resources required to provide inpatient pregnancy and childbirth services to Medicare patients as compared to non-Medicare patients.

• Solicitation of comments to gather information on potential solutions that can be implemented through the hospital CoPs to address well-documented concerns regarding maternal morbidity, mortality, disparities, and maternity care access in the United States. See the calendar year (CY) 2025 Outpatient Prospective Payment System (OPPS) proposed rule (89 FR XXXXX) for more information about this RFI.

• Proposal to remove the exclusion of Puerto Rico from the Payment Error Rate Measurement (PERM) program found at 42 CFR 431.954(b)(3).

• Proposal for a new hospital CoP to replace the COVID-19 and Seasonal Influenza reporting standards for

hospitals and CAHs that were created during PHE.

10. Other Provisions of the Proposed Rule

Section XI.A. of the preamble of the proposed rule includes our discussion of the MedPAC Recommendations.

Section XI.B. of the preamble of the proposed rule includes a descriptive listing of the public use files associated with this proposed rule.

Section XII. of the preamble of the proposed rule includes the collection of information requirements for entities based on our proposals.

Section XIII. of the preamble of the proposed rule includes information regarding our responses to public comments.

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

In sections II. and III. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2025 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We proposed to establish the threshold amounts for outlier cases. In addition, in section IV. of the Addendum of the proposed rule, we addressed the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2025 for certain hospitals excluded from the IPPS.

12. Determining Prospective Payment Rates for LTCHs

In section V. of the Addendum of the proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2025 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 2025. We proposed to establish the adjustments for the wage index (including proposed changes to the LTCH PPS labor market area delineations based on the new OMB delineations), labor-related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates.

13. Impact Analysis

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

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

In Appendix B of the proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provided our recommendations of the appropriate percentage changes for FY 2025 for the following:

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

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

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

15. Discussion of Medicare Payment Advisory Commission Recommendations

Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2024 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We addressed these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2024 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. Public Comments Received in Response to the FY 2025 IPPS/LTCH PPS Proposed Rule

We received approximately 6,180 timely pieces of correspondence containing multiple comments on the proposed rule that appeared in the May 2, 2024

Federal Register

(89 FR 39534) titled “Medicare and Medicaid Programs and the Children's Health Insurance Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2025 Rates; Quality Programs Requirements; and Other Policy Changes” (hereinafter referred to as the FY 2025 IPPS/LTCH PPS proposed rule). We note that some of these public comments were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed with policy responses in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate heading.

II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) Classifications and Relative Weights

A. Background

Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. 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).

Comment:

Several commenters requested that CMS make a positive adjustment to the standardized amount to restore the full amount of the documentation and coding recoupment adjustments, which they asserted is required under section (7)(B)(2) and (4) of the TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Commenters stated that the statute is explicit that CMS may not carry forward any documentation and coding adjustments applied in fiscal years 2010 through 2017 into IPPS rates after FY 2023. Commenters contended that CMS, by its own admission, has restored only 2.9588 percentage points of a total 3.9 percentage point reduction. By not fully restoring the total reductions, commenters believe that CMS is improperly extending payment adjustments beyond the FY 2023 statutory limit.

Response:

As of FY 2023, CMS completed the statutory requirements of section 7(b)(1)(B) of Public Law 110-90 as amended by section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. L. 112-240), section 404 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), and section 15005 of the 21st Century Cures Act (Pub. L. 114-255). As we discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44794 through 44795), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58444 through 58445) and in prior rules, we believe section 414 of the MACRA and section 15005 of the 21st Century Cures Act set forth the levels of positive adjustments for FYs 2018 through 2023. We are not convinced that the adjustments prescribed by MACRA were predicated on a specific adjustment level estimated or implemented by CMS in previous rulemaking. We see no evidence that Congress enacted these adjustments with the intent that CMS would make an additional +0.7 percentage point adjustment in FY 2018 to compensate for the higher than expected final ATRA adjustment made in FY 2017, nor are we persuaded that it would be appropriate to use the Secretary's exceptions and adjustments authority under section 1886(d)(5)(I) of the Act to adjust payments in FY 2025 to restore any additional amount of the original 3.9 percentage point reduction, given Congress' directive regarding prescriptive adjustment levels under section 414 of the MACRA and section 15005 of the 21st Century Cures Act. Accordingly, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38009), we implemented the required +0.4588 percentage point adjustment to the standardized amount for FY 2018. In the FY 2019 IPPS/LTCH PPS final rule (FY 2019 final rule) (83 FR 41157), the FY 2020 IPPS/LTCH PPS final rule (FY 2020 final rule) (84 FR 42057), the FY 2021 IPPS/LTCH PPS final rule (FY 2021 final rule) (85 FR 58444 and 58445), the FY 2022 IPPS/LTCH PPS final rule (FY 2022 final rule) (86 FR 44794 and 44795), and the FY 2023 IPPS/LTCH PPS final rule (FY 2023 final rule) (87 FR 48800), consistent with the requirements of section 414 of the MACRA, we implemented 0.5 percentage point positive adjustments to the standardized amount for FY 2019, FY 2020, FY 2021, FY 2022 and FY 2023, respectively. As discussed in the FY 2023 final rule, the finalized 0.5 percentage point positive adjustment for FY 2023 is the final adjustment prescribed by section 414 of the MACRA.

C. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for FY 2025 MS-DRG Updates

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

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

b. Basis for FY 2025 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 effective 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. Accordingly, interested parties had to submit MS-DRG classification change requests for FY 2025 by October 20, 2023.

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 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 2025 by October 20, 2023. 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. In the proposed rule, we noted those topics for which further research and analysis

are required, and which we will continue to consider in connection with future rulemaking as summarized in the discussion that follows.

As discussed in the proposed rule, we received four requests to modify the GROUPER logic in a number of cardiac MS-DRGs under Major Diagnostic Category (MDC) 05 (Diseases and Disorders of the Circulatory System). Specifically, we received requests to:

• Modify the GROUPER logic of new MS-DRG 212 (Concomitant Aortic and Mitral Valve Procedures) to be defined by cases reporting procedure codes describing a single open mitral or aortic valve replacement/repair (MVR or AVR) procedure, plus an open coronary artery bypass graft procedure (CABG) or open surgical ablation or cardiac catheterization procedure plus a second concomitant procedure.

• Modify the GROUPER logic of new MS-DRG 212 by redefining the procedure code list that describes the performance of a cardiac catheterization by either removing the ICD-10-PCS codes that describe plain radiography of coronary artery codes from the logic list or adding ICD-10-PCS procedure codes that involve computed tomography (CT) or magnetic resonance imaging (MRI) scanning using contrast to the list. This requestor also suggested that CMS add ICD-10-PCS procedures codes that describe endovascular valve replacement or repair procedures into the GROUPER logic of MS-DRG 212.

• Modify the GROUPER logic of new MS-DRGs 323, 324, and 325 (Coronary Intravascular Lithotripsy with Intraluminal Device with MCC, without MCC, and without Intraluminal Device, respectively). In two separate but related requests, the requestors suggested that we add procedure codes that describe additional percutaneous coronary intervention (PCI) procedures such as percutaneous coronary rotational, laser, and orbital atherectomy to the GROUPER logic of new MS-DRGs 323, 324, and 325.

In the proposed rule, we stated that we appreciated the submissions and related analyses provided by the requestors for our consideration as we reviewed MS-DRG classification change requests for FY 2025; however, we also noted the complexity of the GROUPER logic for these MS-DRGs in connection with these requests requires more extensive analyses to identify and evaluate all of the data relevant to assessing these potential modifications. Specifically, we noted the list of procedure codes that describe the performance of a cardiac catheterization is in the definition of multiple MS-DRGs in MDC 05. Analyzing the impact of revising this list would necessitate evaluating the impact across numerous other MS-DRGs in MDC 05 that also include this list in their definition, in addition to new MS-DRG 212. Secondly, as discussed further in section II.C.4.c. of the preamble of the proposed rule, we stated that our analysis continues to indicate that, when performed, open cardiac valve replacement and supplement procedures are clinically different from endovascular cardiac valve replacement and supplement procedures in terms of technical complexity and hospital resource use. Lastly, as we have stated in prior rule making (88 FR 58708), atherectomy is distinct from coronary lithotripsy in that each of these procedures are defined by clinically distinct definitions and objectives. Additional analysis to assess for unintended consequences across the classification is needed as we have made a distinction between the root operations used to describe atherectomy (Extirpation) and the root operation used to describe lithotripsy (Fragmentation) in evaluating other requests in rulemaking. We stated we will need to consider the application of these two root operations in other scenarios where we have also specifically stated that Extirpation is not the same as Fragmentation and do not warrant similar MS-DRG assignment (85 FR 58572 through 58573). Furthermore, as MS-DRG 212 and MS-DRGs 323, 324, and 325 recently became effective on October 1, 2023 (FY 2024), we stated additional time is needed to review and evaluate extensive modifications to the structure of these MS-DRGs.

Comment:

Commenters stated that they appreciated CMS' decision to await further data before analyzing the impact of the requested changes to MS-DRG 212 and MS-DRGs 323, 324, and 325, and agreed that any changes to these MS-DRGs should be carefully reviewed, as they stated these changes could have a significant impact on the remaining MS-DRGs in MDC 05. While thanking CMS for the continued consideration of appropriate MS-DRG assignment for concomitant open cardiac procedures, many commenters reiterated the request to modify the GROUPER logic of new MS-DRG 212. Some commenters stated it would be more impactful if cases reporting a single valve procedure, a coronary artery bypass grafting (CABG) procedure, and a procedure code describing surgical ablation were assigned to MS-DRG 212 (Concomitant Aortic and Mitral Valve Procedures). Other commenters stated that they believe that the logic of MS-DRG 212 should be modified to recognize an open aortic valve repair or replacement procedure or a mitral valve repair or replacement procedure when performed with any of the other concomitant procedures currently listed in the logic for MS-DRG 212. Another commenter suggested that MS-DRG 212 be defined by cases reporting either a mitral valve repair or replacement (MVR) procedure or an aortic valve repair or replacement (AVR) procedure, plus two other concomitant cardiac procedures such as surgical ablation, coronary artery bypass graft surgery, pulmonary valve replacement, or tricuspid valve replacement. This commenter stated that they performed their own analysis of recent MedPAR data, and stated they found that cases for beneficiaries who are not treated for their atrial fibrillation (AF) during open MVR or AVR (or CABG) procedures (currently assigned to MS-DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve & Other Major Cardiothoracic Procedure with and without Cardiac Catheterization, with MCC, with CC, and without CC/MCC, respectively)) may have as much as $7,000 in incremental hospital index costs and 1.6 extra hospital stay days compared to similar non-AF patients during their open MVR or AVR procedures.

Some commenters were not supportive of the suggestion to assign cases reporting a single AVR or MVR procedure and another concomitant procedure to MS-DRG 212. These commenters stated that assigning cases reporting a single AVR or MVR procedure and another concomitant procedure to MS-DRG 212 would have a significant negative impact on the remaining MS-DRGs, notably MS-DRG 216. Other commenters suggested that CMS consider moving the aortic and mitral valve procedure codes with the root operations of “Creation”, “Release”, “Restriction” and “Supplement,” that are currently listed under the Concomitant Procedures list in the GROUPER logic for MS-DRG 212 in the ICD-10 MS-DRG Definitions Manual Version 41.1 to the appropriate logic list of aortic valve or mitral valve procedures. This commenter stated that procedure codes with these other root operations also represent types of valvular repairs and should be included on the aortic valve procedures and mitral valve procedures logic lists rather than the “Concomitant Procedure” logic list. A few commenters urged CMS to devise a broader, more inclusive, supplemental payment mechanism to facilitate incremental payment when

two major procedures are performed during the same hospital admission.

In regard to the request to modify the GROUPER logic of new MS-DRGs 323, 324, and 325 (Coronary Intravascular Lithotripsy with Intraluminal Device with MCC, without MCC, and without Intraluminal Device, respectively), some commenters stated they agreed with CMS' assessment that atherectomy and coronary lithotripsy are mechanistically and clinically distinct. A commenter specifically noted that this distinction is supported by scientific literature and applauded CMS for demonstrating consistency on these questions and awareness of their impact across MDC 05. Other commenters stated they were disappointed that CMS did not propose to modify MS-DRGs 323, 324, and 325 to add procedure codes describing complex PCI procedures, including percutaneous coronary atherectomy procedures for FY 2025. A commenter stated that they offer a broad portfolio of products across the percutaneous coronary intervention space and believe they can provide additional input and data for consideration that would be helpful to CMS in evaluating potential modifications to the GROUPER logic to include orbital atherectomy procedures in the newly created MS-DRGs. Another commenter noted that the pipeline for additional technologies in the atherectomy family is expanding and recommended that CMS undertake an analysis of all ICD-10-PCS codes for atherectomy. A commenter questioned if Extirpation was the appropriate root operation to describe rotational and orbital atherectomy, as in their view, the procedures themselves are not removing calcified material. This commenter stated that in prior rulemaking CMS has stated procedures such as rotational and orbital atherectomy are reported with the root operation Extirpation because both techniques cut up the calcified material into small particles that are removed from the blood stream by the normal hemofiltration process and noted that in lithotripsy procedures, which are reported with the root operation Fragmentation, the normal hemofiltration process also removes the fragmented calcified material from the blood stream and suggested that CMS reconsider the root operation of atherectomy procedures as Fragmentation rather than Extirpation.

Response:

We thank the commenters for sharing their feedback on these requests. As discussed in the proposed rule, 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 the relevant data for evaluating a potential change. The comments received in response to our proposed rule discussion of the requests to modify the GROUPER logic of new MS-DRG 212, specifically, illustrate the complexity of the analysis and evaluation required to address these requests. Notably, many commenters believe that a modification to the logic of MS-DRG 212 may be warranted but differ greatly in the solution they believe would best address the concerns noted. We appreciate the public comments we received on these requests and will take these suggestions under consideration as we continue to monitor for impacts in MDC 05 and across the MS-DRGs to avoid unintended consequences or missed opportunities in most appropriately capturing the resource utilization and clinical coherence for these subsets of procedures. We note that we would address any proposed modifications to the existing logic in future rulemaking.

As discussed in the proposed rule, as we continue the analysis of the claims data with respect to MS-DRGs in MDC 05, we welcome public comments and feedback on other factors that should be considered in the potential restructuring of these MS-DRGs. Feedback and other suggestions may be directed to MEARIS

TM

at:

https://mearis.cms.gov/public/home

. Interested parties should submit any MS-DRG classification change requests, including any comments and suggestions for FY 2026 consideration by October 20, 2024 via MEARIS

TM

at:

https://mearis.cms.gov/public/home

.

As we did for the FY 2024 IPPS/LTCH PPS proposed rule, for the FY 2025 IPPS/LTCH PPS proposed rule we provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 42, so that the public can better analyze and understand the impact of the proposals included in the proposed rule. We noted that this test software reflected the proposed GROUPER logic for FY 2025. Therefore, it included the new diagnosis and procedure codes that are effective for FY 2025 as reflected in Table 6A.—New Diagnosis Codes—FY 2025 and Table 6B.—New Procedure Codes—FY 2025 that were associated with the proposed rule, and does not include the diagnosis codes that are invalid beginning in FY 2025 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2025, and Table 6D.—Invalid Procedure Codes—FY 2025 associated with the proposed rule. Those tables were not published in the Addendum to the 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 the proposed rule. Because the diagnosis codes no longer valid for FY 2025 are not reflected in the test software, we made available a supplemental file in Table 6P.1a and 6P.1b that includes the mapped Version 42 FY 2025 ICD-10-CM and ICD-10-PCS codes and the deleted Version 41 FY 2024 ICD-10-CM codes and V41.1 ICD-10-PCS codes that should be used for testing purposes with users' available claims data. Therefore, users had access to the test software allowing them to build case examples that reflect the proposals that were included in the proposed rule. In addition, users were able to view the draft version of the ICD-10 MS-DRG Definitions Manual, Version 42.

Comment:

A commenter expressed its appreciation that we provided a test version of the ICD-10 MS-DRG GROUPER Software, Version 42, however, the commenter stated that this version essentially only allows for a case-by-case analysis and a minimal batch analysis. The commenter stated that it would be more beneficial to have a Batch z/OS version of the test GROUPER so that it could be better utilized for broader and more meaningful analysis purposes. The commenter requested that availability of a Batch z/OS version of the test GROUPER be made publicly available for all future rulemaking.

Response:

We appreciate the commenter's feedback and will take the suggestion into consideration.

We noted in the proposed rule that in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58764), as discussed in the CY 2024 Outpatient Prospective Payment System and Ambulatory Surgical Center (OPPS/ASC) proposed rule (CY 2024 OPPS/ASC proposed rule) (88 FR 49552, July 31, 2023), we stated that, consistent with the process that is used for updates to the “Integrated” Outpatient Code Editor (I/OCE) and other Medicare claims editing systems, we proposed to address any future revisions to the IPPS Medicare Code Editor (MCE), including any additions or deletions of claims edits, as well as the addition or deletion of ICD-10 diagnosis and procedure codes to the applicable MCE edit code lists, outside of the annual IPPS rulemakings. As discussed in the CY 2024 OPPS/ASC proposed rule, we proposed to remove discussion of the IPPS MCE from the annual IPPS rulemakings, beginning with the FY 2025 rulemaking, and to generally address future changes or updates to the MCE through instruction to the

Medicare administrative contractors (MACs). We encouraged readers to review the discussion in the CY 2024 OPPS/ASC proposed rule and submit comments in response to the proposal by the applicable deadline by following the instructions provided in that proposed rule.

As also discussed in the proposed rule, in the CY 2024 OPPS/ASC final rule (88 FR 82121 through 82124), after consideration of the public comments we received, we finalized the proposal to remove discussion of the MCE from the annual IPPS rulemakings, beginning with FY 2025 rulemaking, and to generally address future changes or updates to the MCE through instruction to the MACs. We also stated that, beginning with FY 2025, in association with the annual proposed rule, we are making available a draft version of the Definitions of Medicare Code Edits (MCE) Manual to provide the public with an opportunity to review any changes that will become effective October 1 for the upcoming fiscal year. In addition, as a result of new and modified code updates approved after the annual spring ICD-10 Coordination and Maintenance Committee meeting, any further changes to the MCE will be reflected in the finalized Definitions of Medicare Code Edits (MCE) Manual, made available in association with the annual final rule. As such, we made available the draft FY 2025 ICD-10 MCE Version 42 Manual file on the CMS website at:

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software

.

We noted in the proposed rule that the MCE manual is comprised of two chapters:

Chapter 1: Edit code lists

provides a listing of each edit, an explanation of each edit, and as applicable, the diagnosis and/or procedure codes for each edit, and

Chapter 2: Code list changes

summarizes the changes in the edit code lists (for example, additions and deletions) from the prior release of the MCE software. We also stated that the public may submit any questions, comments, concerns, or recommendations regarding the MCE to the CMS mailbox at

MSDRGClassificationChange@cms.hhs.gov

for our review and consideration.

Comment:

Several commenters requested that CMS reconsider including updates to the MCE as part of the IPPS rulemaking process. A commenter stated that it recognized the importance of the MCE and expressed concern with the removal of MCE proposals from IPPS rulemaking. The commenter stated that identifying key considerations and mitigating unintended consequences are a key benefit of public review and consideration of stakeholder comments. The commenter stated that the proposed process is not transparent on key areas such as when the manual will be updated, effective dates, or the ability to provide feedback with timely responses. Other commenters stated that the MCE and related proposals include essential topics that warrant thorough review and consideration specific to inpatient hospital admissions and operational processes. The commenters asserted that these topics are vital to coding, clinical documentation, and revenue cycle professionals to ensure awareness and understanding ahead of implementation and historically allowed the opportunity for comment as applicable. According to the commenters, MCE change updates managed outside the IPPS rulemaking process create a strong potential for missed opportunities for pertinent public review and comment. The commenters stated these missed opportunities will create the potential for unintended consequences and administrative burdens for hospital teams. The commenters also stated that a historical review of IPPS comments in response to MCE proposals includes feedback on unacceptable principal diagnoses, age edits, and especially comments that affected the proposal and final implementation of CMS's unspecified code edit implemented in FY 2022.

The commenters stated that the draft version of the Definitions of Medicare Code Edits (MCE) Manual file made available in association with the proposed rule is a helpful reference, however revisions should be explicitly stated as proposed revisions or additions for consideration. According to the commenters, as currently written, the changes are not listed as proposals within the manual and are implied as changes that have already been decided and will be effective with the upcoming fiscal year. Another commenter expressed appreciation that CMS stated it will make available a draft version of the Definitions of Medicare Code Edits (MCE) Manual file in association with the annual proposed rule to provide the public with an opportunity to review any changes that will become effective October 1 for the upcoming fiscal year. However, the commenter also stated that it is difficult to identify the changes in the draft version of the MCE Manual and recommended that CMS provide a list of the draft MCE changes each year (including any additions or deletions of diagnosis or procedure codes or MCE edits).

Response:

We appreciate the commenters' feedback. As stated in the CY 2024 OPPS/ASC final rule (88 FR 82121 through 82124), in the preamble of the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35949), and previously described in the preamble of this final rule, after consideration of the public comments we received, we finalized the proposal to remove discussion of the MCE from the annual IPPS rulemakings, beginning with FY 2025 rulemaking. In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35949), we stated that beginning with FY 2025, in association with the annual proposed rule, we are making available a draft version of the Definitions of Medicare Code Edits (MCE) Manual to provide the public with an opportunity to review any changes that will become effective October 1 for the upcoming fiscal year.

We noted in the proposed rule, and as previously described in this final rule, that the MCE manual is comprised of two chapters:

Chapter 1: Edit code lists

provides a listing of each edit, an explanation of each edit, and as applicable, the diagnosis and/or procedure codes for each edit, and

Chapter 2: Code list changes

summarizes the changes in the edit code lists (for example, additions and deletions) from the prior release of the MCE software. We believe that

Chapter 2: Code list changes

in the MCE manual is clear as it lists the specific edit, followed by the list of codes that were added or deleted. The draft version of the Definitions of Medicare Code Edits (MCE) Manual will continue to be made publicly available in association with the annual proposed rulemaking, and it is referred to as a “draft version”. However, the

Chapter 2: Code list changes

are not “draft” MCE changes. Rather, consistent with our established process to assign MS-DRGs to new diagnosis codes and new procedures codes, for which we examine the MS-DRG assignment for the predecessor code to determine the most appropriate MS-DRG assignment, we have historically used, and will continue to use, a similar process in the assignment of new diagnosis codes and new procedure codes to the edit codes lists under the MCE. Specifically, we review the predecessor code to determine if there are edits under the MCE for which the predecessor code is listed to determine which edit lists may be appropriate for the newly created codes.

As discussed in prior rulemaking (88 FR 58764), as a result of new and modified code updates approved after the annual spring ICD-10 Coordination

and Maintenance Committee meeting, we routinely make changes to the MCE without discussion in IPPS rulemaking. In the past, in both the IPPS proposed and final rules, we have only provided the list of changes to the MCE that were brought to our attention after the prior year's final rule. We historically have not listed all of the changes we have made to the MCE because of the new and modified codes approved after the annual spring ICD-10 Coordination and Maintenance Committee meeting. We stated that these changes are, and would still be, approved too late in the rulemaking schedule for inclusion in the proposed rule. Furthermore, although in the past our MCE policies have been described in our proposed and final rules, we have not provided the detail of each new or modified diagnosis and procedure code edit in the final rule.

Therefore, although we published, and will continue to publish, the edit code list changes in the “draft version” of the MCE manual, because discussion of the MCE has been removed from IPPS rulemakings, beginning with FY 2025 rulemaking as previously described, the edit code lists that appear in the “draft version” of the MCE manual in association with the proposed rule are considered final at the time of the development of the proposed rule. While the public may continue to submit any questions, comments, concerns, or recommendations regarding the MCE to the CMS mailbox at

MSDRGClassificationChange@cms.hhs.gov

for our review and consideration, we will continue to make available on the CMS website at:

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software

the changes to the edit code lists for both the draft version (at the time of the development of the proposed rule) and finalized version of the Definitions of Medicare Code Edits (MCE) file, in association with the annual IPPS proposed and final rules.

Comment:

Some commenters encouraged CMS to delay, revisit, and provide details of specific code changes and the deactivation of edits. The commenters also stated that the edits are an additional quality assurance mechanism to ensure appropriate ICD-10-CM/PCS assignment for accurate and timely claims submission. The commenters further stated that the edits help to prevent added administrative burden associated with unnecessary claims rework and resubmission.

Response:

We thank the commenters for their feedback. We believe that the FY 2025 MCE updates reflect our established process as previously described in this final rule, as well as address concerns related to claims processing discussed in prior rulemaking (88 FR 58768). We will continue to monitor these updates and consider issuing additional provider guidance to ensure accurate claims submission and processing.

Comment:

Similar to the discussion in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58789), a commenter requested that CMS implement an edit for claims that group to MS-DRG 014 (Allogeneic Bone Marrow Transplant), that would reject claims when an inpatient type of bill 11X claim is received without charges mapped to revenue code 0815, which is intended to capture the costs of donor search and cell acquisition activities for allogeneic hematopoietic stem cell transplants. The commenter stated that mandatory reporting of the revenue code on inpatient claims would have several benefits, including increasing the accuracy of claims reporting by transplant centers, ensuring the accuracy of CMS's budget neutrality calculations, and helping to ensure that CMS does not inappropriately generate outlier payment on MS-DRG 014 claims (given that CMS removes costs associated with revenue code 0815 from its outlier calculation). The commenter stated it would also mirror the edit established under the outpatient code editor.

Response:

We appreciate the commenter's feedback. As stated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58789), we may consider provider education materials regarding the reporting of Allogeneic Stem Cell Acquisition/Donor Services in the future. We continue to believe that the suggested claims processing edit is not necessary at this time and expect providers to appropriately report charges associated with revenue code 0815.

Comment:

A commenter stated it supported the removal of the vascular dementia codes from the Unacceptable Principal Diagnosis edit code list and that doing so will reduce administrative challenges with billing for services, improve the clinical accuracy of medical records and encourage appropriate care for this set of patients.

Response:

We appreciate the commenter's support.

In summary, we thank the commenters for their views and feedback. Because we finalized the proposal to remove discussion of the MCE from the annual IPPS rulemakings beginning with FY 2025 rulemaking, the public may submit any future questions, comments, concerns, or recommendations regarding the MCE to the CMS mailbox at

MSDRGClassificationChange@cms.hhs.gov

for our review and consideration.

In association with the proposed rule, we made available the test version of the ICD-10 MS-DRG GROUPER Software, Version 42, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 42, the draft version of the Definitions of Medicare Code Edits Manual, Version 42, and the supplemental mapping files in Table 6P.1a and 6P.1b of the FY 2024 and FY 2025 ICD-10-CM diagnosis and ICD-10-PCS procedure codes which are available at

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

.

Following are the changes that we proposed to the MS-DRGs for FY 2025. We invited public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in the proposed rule. In some cases, we proposed changes to the MS-DRG classifications based on our analysis of claims data and clinical appropriateness. In other cases, we proposed to maintain the existing MS-DRG classifications based on our analysis of claims data and clinical appropriateness. As discussed in the FY 2025 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2023 update of the FY 2023 MedPAR file, which contains hospital bills received from October 1, 2022, through September 30, 2023. In our discussion of the proposed MS-DRG reclassification changes, we referred to these claims data as the “September 2023 update of the FY 2023 MedPAR file.”

As explained in previous rulemaking (76 FR 51487), in deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on 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 public health emergency (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 association with our discussion of application of the NonCC subgroup criteria in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26673 through 26676), we provided an alternate test version of the ICD-10 MS-DRG GROUPER Software, Version 41.A, reflecting the proposed GROUPER logic for FY 2024 as modified by the application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split, available at

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

. Therefore, users had access to the alternate test software allowing them to build case examples that reflect the proposals included in the proposed rule with application of the NonCC subgroup criteria. We also provided additional files including 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 the FY 2024 IPPS/LTCH PPS proposed rule on the CMS website at:

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.

We stated that the alternate test software and additional files were made available so that the public could better analyze and understand the impact on the proposals included in the proposed rule if the NonCC subgroup criteria were to be applied to existing MS-DRGs with a three-way severity level split. We refer readers to the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26673 through 26676) for further discussion of the alternate test software and additional files that were made available.

In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58655 through 58661), we finalized to delay the application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2024. We stated that we would continue to review and consider the feedback we had received in response to the additional information we made available in association with the FY 2024 IPPS/LTCH PPS proposed rule for our development of the FY 2025 proposed rule.

In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35950), we noted that the IPPS Payment Impact File made available in connection with our annual IPPS rulemakings includes information used to categorize hospitals by various geographic and special payment consideration groups, including geographic location (urban or rural), teaching hospital status (that is, whether or not a hospital has GME residency programs and receives an IME adjustment), DSH hospital status (that is, whether or not a hospital receives Medicare DSH payments), special payment groups (that is, SCHs, MDHs, and RRCs) and other categories reflected in the impact analysis generally shown in Appendix A of the annual IPPS rulemakings. The IPPS Payment Impact File associated with the FY 2024 IPPS/LTCH PPS final rule can be found on the CMS website at:

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2024-ipps-final-rule-home-page#Data

.

We proposed to continue to delay application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2025, as we continue to consider the public comments received in response to the FY 2024 rulemaking. In addition, we encouraged interested parties to review the impacts and other information made available with the alternate test software (V41.A) and other additional files provided in connection with the FY 2024 IPPS/LTCH PPS proposed rule, as previously discussed, and stated that we continue to welcome feedback for consideration for future rulemaking.

Comment:

Numerous commenters supported the proposal to continue to delay application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2025.

Response:

We thank the commenters for their support.

Comment:

Several commenters expressed appreciation that CMS provided the meaningful data analysis and availability of the version 41.A alternate test GROUPER in association with the FY 2024 proposed rule, however, the commenters stated that the ability to utilize an updated alternate test software and a current batch GROUPER along with additional

streamlined data by hospital type is needed. According to the commenters, updated test software and an available batch GROUPER would allow hospitals to further analyze the operational and monetary impact of this type of proposed change more thoroughly and over a longer time span.

Response:

We appreciate the commenters' feedback. As we noted in the proposed rule, the IPPS Payment Impact File made available in connection with our annual IPPS rulemakings includes information used to categorize hospitals by various geographic and special payment consideration groups and other categories reflected in the impact analysis generally shown in Appendix A of the annual IPPS rulemakings. We will consider the commenters' request to provide updated test software and a batch GROUPER for future rulemaking.

Comment:

A commenter who agreed with the proposal to delay application of the NonCC subgroup criteria stated that CMS did not provide any new information from, or analysis of, the FY 2023 MedPAR file as it related to base, deleted, or new MS-DRGs related to the application of the NonCC subgroup criteria. The commenter stated that new data should have been included with the proposed rule to continue efforts to view the impact of the policy.

Response:

We appreciate the commenter's support and feedback. In response to the commenter's request that we provide the potential impacts using the FY 2023 claims data, we are making it available in Table 6P.4 on the CMS website at

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps

in association with this final rule.

We note that we did not propose to apply the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2025. Moreover, as noted, we are continuing to consider comments received in response to FY 2024 rulemaking.

Comment:

A commenter stated it utilized the files provided by CMS to analyze the impact of application of the NonCC subgroup criteria based on its own hospital volumes. The commenter reported that while it found some positive impacts to the relative weight of the MS-DRGs impacted when applying the NonCC subgroup criteria, they continue to have concerns regarding the variations in claims data from year-to-year that may be used in the proposed MS-DRG restructuring. The commenter stated it agreed with comments in prior years from various professional organizations that have noted the variability in claims data and, thus, case mix variations from year-to-year.

Response:

We appreciate the commenter's feedback.

Comment:

A few commenters expressed concern that application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split will reduce the impact of CCs. The commenters noted from prior year's analyses findings that there are a number of MS-DRGs that would potentially be consolidated to reflect the two-way severity split for “with MCC” and “without MCC” and there were not any that reflected a “with CC/MCC” and “without CC/MCC” severity level split. The commenters stated that the impact of CCs would decrease as a result of the application of the expanded criteria, meaning that conditions designated as CC would increasingly need to be MCCs in order to impact case complexity and severity.

Response:

We thank the commenters for their feedback. We disagree that application of the NonCC subgroup criteria specifically reduces the impact of CCs. Rather, we believe that application of the criteria combines the subset of cases that may or may not report a CC into one MS-DRG grouping that reflects the average costs and length of stay for that subset. Because the IPPS MS-DRGs are a system of averages, the cases reporting a CC continue to impact the average costs and average length of stay within the subgroup. We note that in the majority of the MS-DRGs where we previously assessed the impact of application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split and provided the potential MS-DRG changes, the volume of cases in the CC subgroup was significantly greater than those in the NonCC subgroup, thus contributing more to the overall average costs and average length of stay of the “potential” new MS-DRG structure. We also note that providers have the ability to identify the subset of cases reporting a CC within the existing “with MCC” and “without MCC” MS-DRGs construct within their respective facilities.

After consideration of the public comments we received, and for the reasons discussed, we are finalizing our proposal to delay the application of the NonCC subgroup criteria to existing MS-DRGs with a three-way severity level split for FY 2025 as we continue to consider the public comments received in response to the FY 2024 rulemaking. We also continue to encourage interested parties to review the impacts and other information made available with the alternate test software (V41.A) and other additional files provided in connection with the FY 2024 IPPS/LTCH PPS proposed rule, as previously discussed. We continue to welcome feedback for consideration for future rulemaking that may be directed to MEARIS

TM

at

https://mearis.cms.gov/public/home

.

As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661), we continue to apply the criteria to create subgroups, including application of the NonCC subgroup criteria, in our annual analysis of MS-DRG classification requests, consistent with our approach since FY 2021 when we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. Accordingly, in our analysis of the MS-DRG classification requests for FY 2025 that we received by October 20, 2023, 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.

ER28AU24.002

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 the FY 2025 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2023 update of the FY 2023 MedPAR file. However, in our evaluation of requests to split an existing base MS-DRG into severity levels, as noted in prior rulemaking (80 FR 49368), we typically analyze the most recent two years of data. This analysis includes two years of MedPAR claims data to compare the data results from one 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.

Comment:

A commenter recommended that CMS consider patient risk adjustment as a criterion for creating CC and MCC subgroups, including the impact of multiple comorbidities. According to the commenter, published literature suggests that as comorbidity status increases, patient risk of clinical events increase, as well as potential resource use. For example, the commenter stated that studies suggest that in patients with one presenting risk factor/comorbidity (either hypertension, congenital heart disease, previous stroke, or diabetes), compared to patients without these risks, that the risk of future stroke was 1.96 greater.

4

According to the commenter, the authors also found patients with 2 or more of these risk factors to have an increased risk of future stroke at 2.87 greater the risk of patients without risk factors and stated that these results suggest the cumulative effect of multiple CCs can dramatically impact a patient's risk and resource use in the absence of an MCC. The commenter suggested that CMS should consider the impact of multiple CCs (heart failure, AF, etc.) as a criterion when grouping an inpatient procedure to an MCC grouping in the absence of MCC.

4

Zhang Y, et al. Association of total pre-existing comorbidities with stroke risk: a large-scale community-based cohort study from China. BMC Public Health. 2021; 21(1):1910.

Response:

We appreciate the commenter's input and will take it under consideration as we continue to consider feedback associated with application of the NonCC subgroup criteria.

We are making the FY 2025 ICD-10 MS-DRG GROUPER and Medicare Code Editor (MCE) Software Version 42, the ICD-10 MS-DRG Definitions Manual files Version 42 and the Definitions of Medicare Code Edits Manual Version 42 available to the public on our CMS

website at:

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software

.

2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other Immunotherapies

In the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35951 through 35952), we discussed a request we received to revise the title of Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies) in connection with an ICD-10-PCS procedure code request that was submitted via MEARIS

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by the December 1, 2023 deadline for consideration as an agenda topic to be discussed at the March 19-20, 2024 ICD-10 Coordination and Maintenance Committee meeting. The procedure code request involves the application of an autologous genetically engineered cell-based gene therapy, prademagene zamikeracel (PZ), that is indicated in the treatment of recessive dystrophic epidermolysis bullosa (RDEB), an extremely rare genetic disease of the skin that leads to large chronic wounds. The proposal was presented and discussed at the March 19-20, 2024, ICD-10 Coordination and Maintenance Committee meeting. We refer the reader to the CMS website at

https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-10-coordination-maintenance-committee-materials

for additional detailed information regarding the request, including a recording of the discussion and the related meeting materials. Public comments in response to the code proposal were due by April 19, 2024. The requestor suggested that if finalized, a new procedure code to identify the application of PZ should be assigned to Pre-MDC MS-DRG 018 and that the title for Pre-MDC MS-DRG 018 be revised to reflect “Chimeric Antigen Receptor (CAR) T and Other Autologous Gene and Cell Therapies”.

Because the diagnosis and procedure code proposals that are presented at the March ICD-10-CM Coordination and Maintenance Committee meeting for an October 1 implementation (upcoming FY) are not finalized in time to include in Table 6A.—New Diagnosis Codes and Table 6B.—New Procedure Codes in association with the proposed rule, as we have noted in prior rulemaking, we use our established process to examine the MS-DRG assignment for the predecessor codes to determine the most appropriate MS-DRG assignment. Specifically, we review the predecessor code and MS-DRG assignment most closely associated with the new procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We have noted in prior rulemaking that this process does not automatically result in the new procedure code being assigned to the same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as the predecessor code. Under this established process, the MS-DRG assignment for the upcoming fiscal year for any new diagnosis or procedure codes finalized after the March meeting would be reflected in Table 6A.—New Diagnosis Codes and Table 6B.—New Procedure Codes associated with the final rule for that fiscal year. Accordingly, we stated that the MS-DRG assignment for any new procedure codes describing PZ, if finalized following the March meeting, would be reflected in Table 6B.—New Procedure Codes associated with the final rule for FY 2025. As noted in prior rulemaking (87 FR 28135), the codes that are finalized after the March meeting are specifically identified with a footnote in Table 6A.—New Diagnosis Codes and Table 6B.—New Procedure Codes that are made publicly available in association with the final rule on the CMS website at

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps

. The public may provide feedback on these finalized assignments, which is then taken into consideration for the following fiscal year.

We note that the proposal to create new procedure codes that describe the application of PZ as discussed at the March 19-20, 2024, ICD-10 Coordination and Maintenance Committee meeting was approved and finalized as reflected in the FY 2025 ICD-10-PCS Code Update files that were made publicly available on the CMS website on June 5, 2024 at

https://www.cms.gov/medicare/coding-billing/icd-10-codes/2025-icd-10-pcs

.

We stated in the proposed rule that we did not agree with the request to revise the title for Pre-MDC MS-DRG 018 for FY 2025 as requested because the logic for Pre-MDC MS-DRG 018 is intended to include other immunotherapies and is not restricted to CAR T-cell and autologous gene and cell therapies. As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through 44806), we finalized our proposal to revise the title of Pre-MDC MS-DRG 018 to include “Other Immunotherapies” to better reflect the cases reporting the administration of non-CAR T-cell therapies and other immunotherapies that would also be assigned to this MS-DRG, in addition to CAR T-cell therapies. We noted that the term “Other Immunotherapies” is intended to encompass the group of therapies that are currently available and being utilized today (for which codes have been created for reporting in response to industry requests or are being considered for implementation), and to enable appropriate MS-DRG assignment for any future therapies that may also fit into this category and are not specifically identified as a CAR T-cell product, that may become available (for example receive marketing authorization or a newly established procedure code in the ICD-10-PCS classification).

In the proposed rule we also noted that, as discussed in prior rulemaking, this category of therapies continues to evolve, and we are in the process of carefully considering the feedback we have previously received about ways in which we can continue to appropriately reflect resource utilization while maintaining clinical coherence and stability in the relative weights under the IPPS MS-DRGs. We stated we will continue to examine these complex issues in connection with future rulemaking and acknowledged that there may be distinctions to account for as we continue to gain more experience in the use of these therapies and have additional claims data to analyze.

Therefore, we did not propose to revise the title for Pre-MDC MS-DRG 018 to reflect “Chimeric Antigen Receptor (CAR) T and Other Autologous Gene and Cell Therapies” and proposed to maintain the existing title to Pre-MDC MS-DRG 018, “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” for FY 2025.

Comment:

Commenters expressed support for the proposal to maintain the existing title to Pre-MDC MS-DRG 018, “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” for FY 2025.

Response:

We thank the commenters for their support.

Comment:

A commenter stated that application of PZ (prademagene zamikeracel) seems to differ significantly in terms of clinical coherence and resource utilization from other therapies currently mapped to MS-DRG 018, specifically in that it requires an operating room and subsequent post-surgical care. According to the commenter, although CMS did not specifically propose to map cases reporting the application of PZ to Pre-MDC MS-DRG 018 for FY

2025, PZ does not appear to be a match for the technologies currently included in Pre-MDC MS-DRG 018 since it is not an immunotherapy and would be the only surgical episode of care in the MS-DRG. The commenter requested that CMS not finalize the mapping for application of PZ to Pre-MDC MS-DRG 018 due to differences in resource use.

Another commenter stated that if CMS were to continue to assign new, higher volume, lower cost therapies to MS-DRG 018, it could potentially distort the relative weight of the MS-DRG, resulting in inadequate payment for CAR T-cell therapies. This commenter also recommended that CMS not map cases reporting application of PZ to Pre-MDC MS-DRG 018 due to clinical resource differences with other therapies currently mapped to Pre-MDC MS-DRG 018. The commenter further stated that given the important role CAR T-cell therapies play, and will continue to play for cancer patients, CMS should clarify its methodology for the inclusion of new procedure codes within Pre-MDC MS-DRG 018 and consider the resource costs and needs of potential new therapies to this MS-DRG so as not to limit access to current therapies. Other commenters recommended that CMS provide transparency in the assignment of therapies to Pre-MDC MS-DRG 018 to ensure accurate, predictable, and appropriate payment, including consideration of comparable resource use to existing therapies currently mapped to Pre-MDC MS-DRG 018.

Another commenter requested that CMS map the new procedure codes describing application of PZ to Pre-MDC MS-DRG 018, given the clinical characteristics and resource intensity of the gene and cellular therapy. According to the commenter, administration of both autologous CAR T-cell therapies and PZ is initiated through the collection of a sample of the patient's own cells. The commenter stated the cells are then modified as part of a complex and resource intensive process requiring the insertion of a new gene into the patient's own cells before administering them back to the patient. Specifically, the commenter stated that the keratinocyte cells (that is, the most prominent cells in the epidermis) of patients diagnosed with RDEB are collected via a “punch” biopsy procedure and transduced with a functional COL7A1 transgene using a retroviral vector, which is intended to result in adequate expression and secretion of the type VII collagen protein critical to anchoring the epidermis and facilitating wound healing. The commenter stated the transduced cells are then expanded, matured, and processed into sheets through an approximate 25-day process before they can be delivered to the hospital site and applied to the patient. The commenter stated that this process mirrors the CAR T-cell therapy development and administration process, where cells are harvested from the patient's blood, the patient's T-cells are isolated through a leukapheresis procedure, and the T-cells then are transduced with a CAR-encoding viral vector and expanded over an approximate month-long period before being returned to the treatment center for administration to the patient. The commenter also stated that the application of PZ shares other similarities with the technologies currently assigned to Pre-MDC MS-DRG 018, including the need for an inter-disciplinary team of health care personnel, and an extended length of stay following treatment. According to the commenter, from a resource perspective, like other therapies currently assigned to Pre-MDC MS-DRG 018, the main driver of resource utilization for an inpatient stay is the administration of the technology.

Response:

We appreciate the commenters' feedback. In response to the commenters who requested that CMS not finalize the mapping for application of PZ to Pre-MDC MS-DRG 018 due to the belief that there are differences in resource use when compared to other therapies currently mapped to Pre-MDC MS-DRG 018, we note that the commenters did not indicate whether they believed the differences in resource use for application of PZ are higher or lower in comparison to the other therapies currently mapped to Pre-MDC MS-DRG 018, nor did the commenters offer any alternative MS-DRG suggestions for CMS's consideration. We acknowledge that application of PZ requires use of an operating room and the administration of other therapies currently assigned to Pre-MDC MS-DRG 018 do not. We also note that consistent with our established process for assigning new diagnosis or new procedure codes to MDCs, MS-DRGs, and the associated attributes (severity level and O.R. status), we examined the MDCs, MS-DRG assignment and O.R. status of the predecessor procedure codes to inform our assignments and designations. As discussed in prior rulemaking and previously in the preamble of this final rule, we review the predecessor code and MS-DRG assignment most closely associated with the new diagnosis or procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We have previously noted that this process does not automatically result in the new diagnosis or procedure code being assigned to the same MS-DRG or to have the same designation as the predecessor code. In our evaluation of MS-DRG classification requests under the IPPS MS-DRGs, consideration is also given to the similarities and differences in resource utilization among patients in each MS-DRG and we strive to ensure that resource utilization is relatively consistent across patients in each MS-DRG. However, some variation in resource intensity will remain among the patients in each MS-DRG because the definition of the MS-DRG is not so specific that every patient is identical, rather the average pattern of resource intensity of a group of patients in an MS-DRG can be predicted.

We note that historically, in the development of the DRGs, the initial step in the determination of the DRG had been the assignment of the appropriate MDC based on the principal diagnosis, however, beginning with the eighth version of the GROUPER (CMS 8.0), the initial step in DRG assignment was based on the procedure being performed, thus the creation of the Pre-MDC DRGs, where the patient is assigned to these DRGs independent of the MDC of the principal diagnosis. Therefore, while the existing therapies (that is, CAR T-cell and non-CAR T-cell) currently mapped to Pre-MDC MS-DRG 018 may be indicated in the treatment of patients with cancer, the logic for case assignment to Pre-MDC MS-DRG 018 does not preclude the assignment of other therapies indicated in the treatment of patients that do not have a diagnosis of cancer. In our review of the MS-DRG assignment for application of PZ, we recognized that this technology is defined as an investigational genetically engineered autologous cell therapy. We also note that similar to the discussions in prior rulemaking with respect to the difficulty in predicting what the associated costs will be in the future for CAR T-cell and other immunotherapies that remain under development (87 FR 48806), it is also difficult to predict what the associated costs will be in the future for cell and gene therapies that remain under development or in clinical trials.

We further note that, in response to the President's Executive Order 14087, “Lowering Prescription Drug Costs for Americans”, a Cell and Gene Therapy

(CGT) Access Model was developed, which could help inform future inpatient payment policy for cell and gene therapies more generally. For additional information on the CGT Access Model, we refer the reader to the CMS website at

https://www.cms.gov/priorities/innovation/innovation-models/cgt

.

Until such time additional data becomes available, we believe it is appropriate to map cases reporting the application of PZ to Pre-MDC MS-DRG 018 for FY 2025 based on the information currently available indicating similar utilization of resources for other cases currently mapped to MS-DRG 018 with regard to patients' severity of illness, treatment difficulty, and complexity of service.

In response to concerns that the assignment of new, higher volume, lower cost therapies to MS-DRG 018 could potentially distort the relative weight of the MS-DRG resulting in inadequate payment for CAR T-cell therapies, we note that in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48807), we addressed similar comments and also noted that we provided detailed summaries and responses to these same or similar comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through 44806). We also refer the reader to the discussion in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36018 through 36020), and in section II.D.2.b. of this final rule, regarding the proposed and finalized relative weight methodology for cases mapping to Pre-MDC MS-DRG 018 effective October 1, 2024, for FY 2025.

After consideration of the public comments we received, we are finalizing our proposal to maintain the existing title to Pre-MDC MS-DRG 018, “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” for FY 2025. We are also finalizing the assignment of the eight procedure codes describing the use of PZ to Pre-MDC MS-DRG 018 as reflected in Table 6B.—New Procedure Codes, in association with this final rule and available on the CMS website at

https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps

.

3. MDC 01 (Diseases and Disorders of the Nervous System)

a. Logic for MS-DRGs 023 Through 027

In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661 through 58667), 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 (Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage with CC) 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.

We stated 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 was 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 believed that MS DRG 021 was the most logical fit in terms of average costs and clinical coherence for reassignment 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.

We noted that while our data findings demonstrated the average costs are higher for the cases with a principal diagnosis of epilepsy with a neurostimulator generator inserted into the skull and insertion of a neurostimulator lead into brain when compared to all cases in MS-DRG 023, these cases represented a small percentage of the total number of cases reported in this MS-DRG. We stated that while we appreciated the requestor's concerns regarding the differential in average costs for cases describing the insertion of a neurostimulator generator into the skull in combination with the insertion of a neurostimulator lead into the brain when compared to all cases in their assigned MS-DRG, we believed additional time was needed to evaluate these cases as part of our ongoing examination of the case logic to the MS-DRGs for craniotomy and endovascular procedures, which are MS-DRG 023, MS-DRG 024 (Craniotomy with Major Device Implant or Acute Complex CNS Principal Diagnosis without MCC), and MS-DRGs 02

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