[Federal Register: August 1, 2003 (Volume 68, Number 148)]
[Rules and Regulations]
[Page 45345-45672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au03-9]
[[Page 45345]]
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Part III
Department of Health and Human Services
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Centers of Medicare & Medicaid Services
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42 CFR Parts 412 and 413
Medicare Program; Changes to the Hospital Inpatient Prospective Payment
Systems and Fiscal Year 2004 Rates; Final Rule
[[Page 45346]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412 and 413
[CMS-1470-F]
RIN 0938-AL89
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2004 Rates
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital costs to implement
changes arising from our continuing experience with these systems. In
addition, in the Addendum to this final rule, we are describing changes
to the amounts and factors used to determine the rates for Medicare
hospital inpatient services for operating costs and capital-related
costs. These changes are applicable to discharges occurring on or after
October 1, 2003. We also are setting forth rate-of-increase limits as
well as policy changes for hospitals and hospital units excluded from
the IPPS that are paid on a cost basis subject to these limits.
Among other changes that we are making are: changes to the
classification of cases to the diagnosis-related groups (DRGS); changes
to the long-term care (LTC)-DRGs and relative weights; the introduction
of updated wage data used to compute the wage index; the approval of
new technologies for add-on payments; changes to the policies governing
postacute care transfers; payments to hospitals for the direct and
indirect costs of graduate medical education; pass-through payments for
nursing and allied health education programs; determination of hospital
beds and patient days for payment adjustment purposes; and payments to
critical access hospitals (CAHs).
EFFECTIVE DATES: The provisions of this final rule, except the
provisions of Sec. 412.230(e)(2)(ii)(A) (because it grants an
exemption) and Sec. 412.278(f)(2)(i), are effective on October 1,
2003. The provisions of Sec. 412.230(e)(2)(ii)(A) and Sec.
412.278(f)(2)(i) are effective on August 1, 2003. This rule is a major
rule as defined in 5 U.S.C. 804(2). Pursuant to 5 U.S.C. 801(a)(1)(A),
we are submitting a report to Congress on this rule on August 1, 2003.
FOR FURTHER INFORMATION CONTACT:
Stephen Phillips, (410) 786-4548, Operating Prospective Payment,
Diagnosis-Related Groups (DRGs), Wage Index, New Medical Services and
Technology, Patient Transfers, Counting Beds and Patient Days, and
Hospital Geographic Reclassifications Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded
Hospitals, Nursing and Allied Health Education, Graduate Medical
Education, and Critical Access Hospital Issues, and Long-Term Care
(LTC)-DRGs.
Sandra Hetrick, (410) 786-4542, RCE Limits.
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Acronyms
AHIMA American Health Information Management Association
AHA American Hospital Association
CAH Critical access hospital
CBSAs Core Based Statistical Areas
CC Complication or comorbidity
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Areas
COBRA Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99-272
CPI Consumer Price Index
CRNA Certified registered nurse anesthetist
DRG Diagnosis-related group
DSH Disproportionate share hospital
FDA Food and Drug Administration
FQHC Federally qualified health center
FTE Full-time equivalent
FY Federal fiscal year
GME Graduate medical education
HIPC Health Information Policy Council
HIPAA Health Insurance Portability and Accountability Act, Pub. L. 104-
191
HHA Home health agency
ICD-9-CM International Classification of Diseases, Ninth Revision, and
Clinical Modification
ICD-10-PCS International Classification of Diseases Tenth Edition, and
Procedure Coding System
IME Indirect medical education
IPPS Acute care hospital inpatient prospective payment system
IRF Inpatient Rehabilitation Facility
LDP Labor, delivery, and postpartum
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MCE Medicare Code Editor
MDC Major diagnostic category
MDH Medicare-dependent small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NECMA New England County Metropolitan Areas
NCHS National Center for Health Statistics
NCVHS National Committee on Vital and Health Statistics
O.R. Operating room
PPS Prospective payment system
PRA Per resident amount
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
RCE Reasonable compensation equivalent
[[Page 45347]]
RHC Rural health center
RRC Rural referral center
SCH Sole community hospital
SNF Skilled nursing facility
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248
UHDDS Uniform Hospital Discharge Data Set
Table of Contents
I. Background
A. Summary
B. Summary of the Provisions of the May 19, 2003 Proposed Rule
C. Public Comments Received to the May 19, 2003 IPPS Proposed
Rule
II. Changes to DRG Classifications and Relative Weights
A. Background
B. DRG Reclassification
1. General
2. Review of DRGs for Complications or Comorbidity (CC) Split
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Revisions of DRGs 1 and 2
b. DRG 23 (Nontraumatic Stupor and Coma)
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. DRG 478 (Other Vascular Procedures With CC) and DRG 479
(Other Vascular Procedures Without CC)
b. DRGs 514 (Cardiac Defibrillator Implant With Cardiac
Catheterization) and 515 (Cardiac Defibrillator Implant Without
Cardiac Catheterization)
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
a. Nonneonate Diagnoses
b. Heart Failure Codes for Newborns and Neonates
7. MDC 17 (Myeloproliferative Diseases and Disorders and Poorly
Differentiated Neoplasms)
8. MDC 23 (Factors Influencing Health Status and Other Contracts
with Health Services)
a. Implantable Devices
b. Malignancy Codes
9. Medicare Code Editor (MCE) Change
10. Surgical Hierarchies
11. Refinement of CCs
12. Review of Procedure Codes in DRGs 468, 476, and 477
a. Moving Procedure Codes from DRG 468 or DRG 477 to MDCs
b. Reassignment of Procedures among DRGs 468, 476, and 477
c. Adding Diagnosis Codes to MDCs
13. Changes to the ICD-9-CM Coding System
14. Other Issues
a. Cochlear Implants
b. Burn Patients on Mechanical Ventilation
c. Multiple Level Spinal Fusion
d. Heart Assist System Implant
e. Drug-Eluting Stents
f. Artificial Anal Sphincter
C. Recalibration of DRG Weights
D. LTC-DRG Reclassifications and Relative Weights for LTCHs for
FY 2004
1. Background
2. Changes in the LTC-DRG Classifications
a. Background
b. Patient Classifications into DRGs
3. Development of the Final FY 2004 LTC-DRG Relative Weights
a. General Overview of Development of the LTC-DRG Relative
Weights
b. Data
c. Hospital-Specific Relative Value Methodology
d. Low Volume LTC-DRGs
4. Steps for Determining the Final FY 2004 LTC-DRG Relative
Weights
E. Add-On Payments for New Services and Technologies
1. Background
2. FY 2004 Status of Technology Approved for FY 2003 Add-On
Payments:
Drotrecogin Alfa (Activated)--Xigris[reg]
3. FY 2004 Applicants for New Technology Add-On Payments
a. Bone Morphogenetic Proteins (BMPs) for Spinal Fusions
b. GLIADEL[reg] Wafer
4. Review of the High-Cost Threshold
5. Technical Changes
III. Changes to the Hospital Wage Index
A. Background
B. FY 2004 Wage Index Update
C. FY 2004 Wage Index Changes
1. Elimination of Wage Costs Associated with Rural Health
Clinics and Federally Qualified Health Centers
2. Paid Hours
D. Verification of Wage Data from the Medicare Cost Reports
E. Computation of the FY 2004 Wage Index
F. Revisions to the Wage Index Based on Hospital Redesignation
1. General
2. Effects of Reclassification
G. Requests for Wage Data Corrections
H. Modification of the Process and Timetable for Updating the
Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
GME Costs
A. Transfer Payment Policy
1. Transfers to Another Acute Care Hospital
2. Technical Correction
3. Expanding the Postacute Care Transfer Policy to Additional
DRGs
B. Rural Referral Centers
1. Case-Mix Index
2. Discharges
C. Indirect Medical Education (IME) Adjustment and
Disproportionate Share Hospital (DSH) Adjustment
1. Available Beds and Patient Days: Background
2. Unoccupied Beds
3. Nonacute Care Beds and Days
4. Observation Beds and Swing-Beds
5. Labor, Delivery, and Postpartum Beds and Days
6. Days Associated with Demonstration Projects under Section
1115 of the Act
7. Dual-Eligible Patient Days
8. Medicare+Choice (M+C) Days
D. Medicare Geographic Classification Review Board (MGCRB)
Reclassification Process
E. Costs of Approved Nursing and Allied Health Education
Activities
1. Background
2. Continuing Education Issue for Nursing and Allied Health
Education Activities
3. Programs Operated by Wholly Owned Subsidiary Educational
Institutions of Hospitals
F. Payment for Direct Costs of Graduate Medical Education
1. Background
2. Prohibition Against Counting Residents Where Other Entities
First Incur the Training Costs
3. Rural Track FTE Limitation for Purposes of Direct GME and IME
for Urban Hospitals that Establish Separately Accredited Approved
Medical Programs in a Rural Area
a. Change in the Amount of Rural Training Time Required for an
Urban Hospital to Qualify for an Increase in the Rural Track FTE
Limitation
b. Inclusion of Rural Track FTE Residents in the Rolling Average
Calculation
4. Technical Changes Related to Affiliated Groups and Affiliated
Agreements
G. Notification of Updates to the Reasonable Compensation
Equivalent (RCE) Limits
1. Background
2. Publication of the Updated RCE Limits
3. Application of RCE Limits
4. Exceptions to RCE Limits
5. Geographic Area Classifications for RCE Limits
V. PPS for Capital-Related Costs
VI. Changes for Hospitals and Hospital Units Excluded from the IPPS
A. Payments to Excluded Hospitals and Hospital Units
1. Payments to Existing Excluded Hospitals and Hospital Units
2. Updated Caps for New Excluded Hospitals and Units
6. Implementation of a PPS for IRFs
4. Development of a PPS for Inpatient Psychiatric Facilities
5. Implementation of a PPS for LTCHs
6. Report of Adjustment (Exception) Payments
B. Payment for Services Furnished at Hospitals-Within-Hospitals
and Satellite Facilities
C. Clarification of Classification Requirements for LTCHs
D. Criteria for Payment on a Reasonable Cost Basis for Clinical
Diagnostic Laboratory Services Performed by CAHs
E. Technical Changes
VII. MedPAC Recommendations
VIII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
Regulation Text
Addendum--Schedule of Standardized Amounts Effective with Discharges
Occurring On or After October 1, 2003 and Update Factors and Rate-
of-Increase Percentages Effective With Cost Reporting Periods
Beginning On or After October 1, 2003
Tables
Table 1A--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor
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Table 1C--Adjusted Operating Standardized Amounts for Puerto
Rico, Labor/Nonlabor
Table 1D--Capital Standard Federal Payment Rate
Table 2--Hospital Average Hourly Wage for Federal Fiscal Years
2002 (1998 Wage Data), 2003 (1999 Wage Data), and 2004 (2000 Wage
Data) Wage Indexes and 3-Year Average of Hospital Average Hourly
Wages
Table 3A--3-Year Average Hourly Wage for Urban Areas
Table 3B--3-Year Average Hourly Wage for Rural Areas
Table 4A--Wage Index and Capital Geographic Adjustment Factor
for Urban Areas
Table 4B--Wage Index and Capital Geographic Adjustment Factor
for Rural Areas
Table 4C--Wage Index and Capital Geographic Adjustment Factor
for Hospitals That Are Reclassified
Table 4F--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor
Table 4G--Pre-Reclassified Wage Index for Urban Areas
Table 4H--Pre-Reclassified Wage Index for Rural Areas
Table 5--List of Diagnosis-Related Groups (DRGs), Relative
Weighting Factors, and Geometric and Arithmetic Mean Length of Stay
(LOS)
Table 6A--New Diagnosis Codes
Table 6B--New Procedure Codes
Table 6C--Invalid Diagnosis Codes
Table 6D--Invalid Procedure Codes
Table 6E--Revised Diagnosis Code Titles
Table 6F--Revised Procedure Code Titles
Table 6G--Additions to the CC Exclusions List
Table 6H--Deletions from the CC Exclusions List
Table 7A--Medicare Prospective Payment System Selected
Percentile Lengths of Stay FY 2002: MedPAR Update March 2003 GROUPER
V20.0
Table 7B--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2002 MedPAR Update March 2003 GROUPER
V21.0
Table 8A--Statewide Average Operating Cost-to-Charge Ratios for
Urban and Rural Hospitals (Case-Weighted)
Table 8B--Statewide Average Capital Cost-to-Charge Ratios (Case-
Weighted)
Table 9--Hospital Reclassifications and Redesignations by
Hospital--FY 2004
Table 10--Thresholds to Qualify for New Technology Add-On
Payments: FY 2004
Table 11--LTC-DRGs Relative Weights and Geometric and Five-
Sixths of the Average Length of Stay--FY 2004
Appendix A--Regulatory Impact Analysis
Appendix B--Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (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 pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). 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; and 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 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 may vary based on the outcome
of the statutory calculations.
If the hospital is an approved teaching hospital, 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 that have been approved for special add-on payments. To
qualify, a new technology must demonstrate that it is a substantial
clinical improvement over technologies otherwise available, and that,
absent an add-on payment, it 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 outlier payment due is added to the DRG-adjusted base payment rate,
plus any DSH, IME, and new technology add-on adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid the higher of a hospital-specific rate based on their costs in a
base year (the higher of FY 1982, FY 1987, or FY 1996) or the IPPS rate
based on the standardized amount. For example, sole community hospitals
(SCHs) are the sole source of care in their areas, and Medicare-
dependent, small rural hospitals (MDHs) are a major source of care for
Medicare beneficiaries in their areas. Both of these categories of
hospitals are afforded this special payment protection in order to
maintain access to services for beneficiaries (although MDHs receive
only 50 percent of the difference between the IPPS rate and their
hospital-specific rates if the hospital-specific rate is higher than
the IPPS 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 PPS, payments are adjusted by the same DRG for the case as they
are under the operating IPPS. Similar adjustments are also made for IME
and DSH as under the operating IPPS. In addition, hospitals may receive
an outlier payment 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
specialty hospitals and hospital units are excluded from the IPPS.
These hospitals and units are: psychiatric hospitals and units,
rehabilitation hospitals and units; long-term care hospitals (LTCHs);
children's hospitals; and cancer hospitals. Various sections of the
Balanced Budget Act of 1997 (Pub. L. 105-33), the Medicare, Medicaid
and SCHIP [State Children's Health Insurance Program] Balanced Budget
Refinement Act of 1999 (Pub. L. 106-113), and the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106-
554) provide for the implementation of PPSs for rehabilitation
hospitals and units (referred to as inpatient rehabilitation
[[Page 45349]]
facilities (IRFs)), psychiatric hospitals and units, and LTCHs, as
discussed below. Children's hospitals and cancer hospitals continue to
be paid under reasonable cost-based reimbursement.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
a. Inpatient Rehabilitation Facilities
Under section 1886(j) of the Act, as amended, rehabilitation
hospitals and units (IRFs) have been transitioned from payment based on
a blend of reasonable cost reimbursement subject to a hospital-specific
annual limit under section 1886(b) of the Act and prospective payments
for cost reporting periods beginning January 1, 2002 through September
30, 2002, to payment on a full prospective payment system basis
effective for cost reporting periods beginning on or after October 1,
2002 (66 FR 41316, August 7, 2001 and 67 FR 49982, August 1, 2002). The
existing regulations governing payments under the IRF PPS are located
in 42 CFR part 412, subpart P.
b. LTCHs
Under the authority of sections 123(a) and (c) of Public Law 106-
113 and section 307(b)(1) of Public Law 106-554, LTCHs are being
transitioned from being paid for inpatient hospital services based on a
blend of reasonable cost-based reimbursement under section 1886(b) of
the Act to fully Federal prospective rates during a 5-year period,
beginning with cost reporting periods that start on or after October 1,
2002. For cost reporting periods beginning on or after October 1, 2006,
LTCHs will be paid under the fully Federal prospective payment rate
(the June 6, 2003 LTCH PPS final rule (68 FR 34122)). LTCHs may elect
to be paid based on full PPS payments instead of a blended payment in
any year during the 5-year transition period. The existing regulations
governing payment under the LTCH PPS are located in 42 CFR part 412,
subpart O.
c. Psychiatric Hospitals and Units
Sections 124(a) and (c) of Public Law 106-113 provide for the
development of a per diem PPS for payment for inpatient hospital
services furnished in psychiatric hospitals and units under the
Medicare program, effective for cost reporting periods beginning on or
after October 1, 2002. This system must include an adequate patient
classification system that reflects the differences in patient resource
use and costs among these hospitals and maintain budget neutrality. We
are in the process of developing a proposed rule, to be followed by a
final rule, to implement the PPS for psychiatric hospitals and units
(referred to as inpatient psychiatric facilities (IPFs).
3. Critical Access Hospitals
Under sections 1814, 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services on a reasonable cost basis. Reasonable cost is
determined under the provisions of section 1861(v)(1)(A) of the Act and
existing regulations under 42 CFR parts 413 and 415.
4. Payments for Graduate Medical Education
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.
B. Summary of the Provisions of the May 19, 2003 Proposed Rule
On May 19, 2003, we published a proposed rule in the Federal
Register (68 FR 27154) that set forth proposed changes to the Medicare
IPPS for operating costs and for capital-related costs in FY 2004. We
also set forth proposed changes relating to payments for GME costs,
payments to CAHs, and payments to providers classified as psychiatric
hospitals and units that continue to be excluded from the IPPS and paid
on a reasonable cost basis. These changes were proposed to be effective
for discharges occurring on or after October 1, 2003.
The following is a summary of the major changes that we proposed
and the issues we addressed in the May 19, 2003 proposed rule:
1. Changes to the DRG Reclassifications and Recalibrations of Relative
Weights
As required by section 1886(d)(4)(C) of the Act, we proposed annual
adjustments to the DRG classifications and relative weights. Based on
analyses of Medicare claims data, we proposed to establish a number of
new DRGs and make changes to the designation of diagnosis and procedure
codes under other existing DRGs.
Among the proposed changes discussed were:
[sbull] Expansion of the number of DRGs that are split on the basis
of the presence or absence of complications or comorbidities (CCs). The
DRGs we proposed to split were: DRG 4 (Spinal Procedures) into proposed
new DRGs 531 and 532 (Spinal Procedures With and Without CC,
respectively); DRG 5 (Extracranial Vascular Procedures) into proposed
new DRGs 533 and 534 (Extracranial Vascular Procedures With and Without
CC, respectively); DRG 231 (Local Excision and Removal of Internal
Fixation Devices Except Hip and Femur) into proposed new DRGs 537 and
538 (Local Excision and Removal of Internal Fixation Devices Except Hip
and Femur With and Without CC, respectively); and DRG 400 (Lymphoma and
Leukemia With Major O.R. Procedure) into proposed new DRGs 539 and 540
(Lymphoma and Leukemia With Major O.R. Procedure With and Without CC,
respectively).
[sbull] Creation of a new DRG for patients with an intracranial
vascular procedure and an intracranial hemorrhage. The DRG we proposed
to create was DRG 528 (Intracranial Vascular Procedure With a Principal
Diagnosis of Hemorrhage).
[sbull] Creation of two new DRGs, differentiated on the basis of
the presence or absence of a CC, for craniotomy patients with only a
vascular shunt procedure. The DRGs we proposed to create were DRGs 529
and 530 (Ventricular Shunt Procedure With CC and Without CC,
respectively).
[sbull] Creation of two new DRGs to differentiate current DRG 514
(Cardiac Defibrillator Implant With Cardiac Catheterization) on the
basis of whether the patient does or does not experience any of the
following symptoms: acute myocardial infarction, heart failure, or
shock. The new DRGs we proposed were DRG 535 (Cardiac Defibrillator
Implant With Cardiac Catheterization and With Acute Myocardial
Infarction, Heart Failure, or Shock) and DRG 536 (Cardiac Defibrillator
Implant With Cardiac Catheterization and Without Acute Myocardial
Infarction, Heart Failure, or Shock)
[sbull] Changes in the DRG assignment of certain congenital
anomalies that currently result in patients being assigned to newborn
DRGs even when the patient is actually an adult. We also proposed
adding to the list of major problems in newborns that affect DRG
assignment.
[sbull] Modification of DRG 492 (Chemotherapy With Acute Leukemia
as
[[Page 45350]]
Secondary Diagnosis) to include in this DRG cases receiving high-dose
Interleukin-2 (IL-2) chemotherapy for patients with advanced renal cell
cancer and advanced melanoma.
We also presented our analysis of applicants for add-on payments
for high-cost new medical technologies and proposed a revision to the
high-cost threshold for a new technology or medical service to qualify
for add-on payments.
[sbull] We proposed to continue to make add-on payments for Xigris.
[sbull] We discussed new applications for add-on payments for FY
2004.
[sbull] We proposed to reduce the high-cost threshold for a new
technology or medical service to qualify for add-on payments from 1
standard deviation above the geometric mean standardized charge for
cases in the DRGs to which the new technology is assigned to 75 percent
of 1 standard deviation.
2. Changes to the Hospital Wage Index
We proposed revisions to the wage index and the annual update of
the wage data. Specific issues addressed in this section included the
following:
[sbull] The FY 2004 wage index update, using wage data from cost
reporting periods that began during FY 2000.
[sbull] Exclusion of the wage data for rural health centers (RHCs)
and Federally qualified health centers (FQHCs) from the calculation of
the FY 2004 wage index.
[sbull] Exclusion of paid hours associated with military and jury
duty leave from the wage index calculation, and request for comments on
possible exclusion of paid lunch or meal break hours.
[sbull] Revisions to the wage index based on hospital
redesignations and reclassifications.
[sbull] Amendments to the timetable for reviewing and verifying the
wage data that will be in effect for the FY 2005 wage index.
3. Other Decisions and Changes to the PPS for Inpatient Operating and
GME Costs
In the proposed rule, we discussed several provisions of the
regulations in 42 CFR Parts 412 and 413 and set forth certain proposed
changes concerning the following:
[sbull] Expansion of the current postacute transfer policy to 19
additional DRGs.
[sbull] Clarification of our policies that would be applied to
counting hospital beds and patient days, in particular with regard to
the treatment of swing-beds and observation beds, for purposes of the
IME and DSH adjustments.
[sbull] Changes in our policy relating to nursing and allied health
education payments to wholly owned subsidiary educational institutions
of hospitals.
[sbull] Clarification of our policy relating to application of
redistribution of costs and community support funds in determining a
hospital's resident training costs.
[sbull] A change in the amount of rural training time required for
an urban hospital to qualify for an increase in the rural track FTE
limitation.
[sbull] Inclusion of FTE residents training in rural tracks in a
hospital's rolling average calculation.
4. PPS for Capital-Related Costs
We discussed the payment requirements for capital-related costs. We
did not propose any changes to the policies on payments to hospitals
for capital-related costs.
5. Changes for Hospitals and Hospital Units Excluded From the IPPS
We discussed the following proposed revisions and clarifications
concerning excluded hospitals and hospital units and CAHs:
[sbull] Revisions to the operation of excluded grandfathered
hospitals-within-hospitals in effect on September 30, 1999.
[sbull] Clarification of the classification criteria for LTCHs.
[sbull] Clarification of the policy on payments for laboratory
services provided by a CAH to patients outside a CAH.
6. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits
In the Addendum to the May 19, 2003 proposed rule, we proposed
changes to the amounts and factors for determining the FY 2004
prospective payment rates for operating costs and capital-related
costs. We also established the proposed threshold amounts for outlier
cases. In addition, we addressed update factors for determining the
rate-of-increase limits for cost reporting periods beginning in FY 2004
for hospitals and hospital units excluded from the PPS.
7. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected hospitals.
8. Recommendation of Update Factor for Hospital Inpatient Operating
Costs
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 2004 for the following:
[sbull] Large urban area and other area average standardized
amounts (and hospital-specific rates applicable to SCHs and MDHs) for
hospital inpatient services paid under the IPPS for operating costs.
[sbull] Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by hospitals and
hospital units excluded from the IPPS.
9. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, the Medicare Payment Advisory
Commission (MedPAC) is required to submit a report to Congress, no
later than March 1 of each year, that reviews and makes recommendations
on Medicare payment policies. In the proposed rule, we discussed the
MedPAC recommendations concerning hospital inpatient payment policies
and presented our response to those recommendations. For further
information relating specifically to the MedPAC March 1 report or to
obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: http://www.medpac.gov.
C. Public Comments Received in Response to the May 19, 2003 IPPS
Proposed Rule
We received approximately 4,200 timely items of correspondence
containing multiple comments on the May 19, 2003 proposed rule.
Summaries of the public comments and our responses to those comments
are set forth below under the appropriate heading.
II. Changes to 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 DRGs) for inpatient
discharges and adjust payments under the IPPS based on appropriate
weighting factors assigned to each DRG. Therefore, under the IPPS, we
pay 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
[[Page 45351]]
resources used to treat cases in all DRGS.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources. Changes to the DRG
classification system and the recalibration of the DRG weights for
discharges occurring on or after October 1, 2003 are discussed below.
B. DRG Reclassification
1. General
Cases are classified into DRGs for payment under the IPPS based on
the principal diagnosis, up to eight additional diagnoses, and up to
six procedures performed during the stay. In a small number of DRGs,
classification is also based on the age, sex, and discharge status of
the patient. The diagnosis and procedure information is reported by the
hospital using codes from the International Classification of Diseases,
Ninth Revision, Clinical Modification (ICD-9-CM).
For FY 2003, cases are assigned to one of 510 DRGs in 25 major
diagnostic categories (MDCs). Most MDCs are based on a particular organ
system of the body. For example, MDC 6 is Diseases and Disorders of the
Digestive System. This approach is used because clinical care is
generally organized in accordance with the organ system affected.
However, some MDCs are not constructed on this basis because they
involve multiple organ systems (for example, MDC 22 (Burns)). The table
below lists the 25 MDCs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Major diagnostic categories
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................... Diseases and Disorders of the Nervous System.
2.......................................... Diseases and Disorders of the Eye.
3.......................................... Diseases and Disorders of the Ear, Nose, Mouth, and Throat.
4.......................................... Diseases and Disorders of the Respiratory System.
5.......................................... Diseases and Disorders of the Circulatory System
6.......................................... Diseases and Disorders of the Digestive System.
7.......................................... Diseases and Disorders of the Hepatobiliary System and Pancreas.
8.......................................... Diseases and Disorders of the Musculoskeletal System and Connective Tissue.
9.......................................... Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast.
10......................................... Endocrine, Nutritional and Metabolic Diseases and Disorders.
11......................................... Diseases and Disorders of the Kidney and Urinary Tract.
12......................................... Diseases and Disorders of the Male Reproductive System.
13......................................... Diseases and Disorders of the Female Reproductive System.
14......................................... Pregnancy, Childbirth, and the Puerperium.
15......................................... Newborns and Other Neonates with Conditions Originating in the Perinatal Period.
16......................................... Diseases and Disorders of the Blood and Blood Forming Organs and Immunological Disorders.
17......................................... Myeloproliferative Diseases and Disorders and Poorly Differentiated Neoplasms.
18......................................... Infectious and Parasitic Diseases (Systemic or Unspecified Sites).
19......................................... Mental Diseases and Disorders.
20......................................... Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders.
21......................................... Injuries, Poisonings, and Toxic Effects of Drugs.
22......................................... Burns.
23......................................... Factors Influencing Health Status and Other Contacts with Health Services.
24......................................... Multiple Significant Trauma.
25......................................... Human Immunodeficiency Virus Infections.
--------------------------------------------------------------------------------------------------------------------------------------------------------
In general, cases are assigned to an MDC based on the patient's
principal diagnosis before assignment to a DRG. However, for FY 2003,
there are eight DRGs to which cases are directly assigned on the basis
of ICD-9-CM procedure codes. These DRGs are for heart, liver, bone
marrow, lung, simultaneous pancreas/kidney, and pancreas transplants
(DRGs 103, 480, 481, 495, 512, and 513, respectively) and for
tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs
before they are classified to an MDC.
Within most MDCs, cases are then divided into surgical DRGs and
medical DRGs. Surgical DRGs are based on a hierarchy that orders
operating room (O.R.) procedures or groups of O.R. procedures by
resource intensity. Medical DRGs generally are differentiated on the
basis of diagnosis and age (less than or greater than 17 years of age).
Some surgical and medical DRGs are further differentiated based on the
presence or absence of a complication or a comorbidity (CC).
Generally, nonsurgical procedures and minor surgical procedures
that are not usually performed in an operating room are not treated as
O.R. procedures. However, there are a few non-O.R. procedures that do
affect DRG assignment for certain principal diagnoses, for example,
extracorporeal shock wave lithotripsy for patients with a principal
diagnosis of having urinary stones.
Patient's diagnosis, procedure, discharge status, and demographic
information is fed into the Medicare claims processing systems and
subjected to a series of automated screens called the Medicare Code
Editor (MCE). The MCE screens are designed to identify cases that
require further review before classification into a DRG.
After patient information is screened through the MCE and any
further development of the claim is conducted, cases are classified
into the appropriate DRG by the Medicare GROUPER software program. The
GROUPER program was developed as a means of classifying each case into
a DRG on the basis of the diagnosis and procedure codes and, for a
limited number of DRGs, demographic information (that is, sex, age, and
discharge status).
[[Page 45352]]
After cases are screened through the MCE and assigned to a DRG by
the GROUPER, a base DRG payment is calculated by the PRICER software.
The PRICER calculates the payments for each case covered by the IPPS
based on the DRG relative weight and additional factors associated with
each hospital, such as IME and DSH adjustments. These additional
factors increase the payment amount to hospitals above the base DRG
payment.
The records for all Medicare hospital inpatient discharges are
maintained in the Medicare Provider Analysis and Review (MedPAR) file.
The data in this file are used to evaluate possible DRG classification
changes and to recalibrate the DRG weights. However, in the July 30,
1999 IPPS final rule (64 FR 41500), we discussed a process for
considering non-MedPAR data in the recalibration process. In order for
us to consider the feasibility of using particular non-MedPAR data, we
must have sufficient time to evaluate and test the data. The time
necessary to do so depends upon the nature and quality of the non-
MedPAR data submitted. Generally, however, a significant sample of the
non-MedPAR data should be submitted by mid-October for consideration in
conjunction with the next year's proposed rule. This allows us time to
test the data and make a preliminary assessment as to the feasibility
of using the data. Subsequently, a complete database should be
submitted by early December for consideration in conjunction with the
next year's proposed rule.
Many of the changes to the DRG classifications are the result of
specific issues brought to our attention by interested parties. We
encourage individuals with concerns about DRG classifications to bring
those concerns to our attention in a timely manner so they can be
carefully considered for possible inclusion in the next proposed rule
and so any proposed changes may be subjected to public review and
comment. Therefore, similar to the timetable for interested parties to
submit non-MedPAR data for consideration in the DRG recalibration
process, concerns about DRG classification issues should be brought to
our attention no later than early December in order to be considered
and possibly included in the next annual proposed rule updating the
IPPS.
In the May 19, 2003 proposed rule, we proposed numerous changes to
the DRG classification system for FY 2004. The changes we proposed to
the DRG classification system for FY 2004, the public comments we
received concerning the proposed changes, the final DRG changes, and
the methodology used to recalibrate the DRG weights are set forth
below. The changes we are implementing in this final rule will be
reflected in the revised FY 2004 GROUPER version 21.0 and effective for
discharges occurring on or after October 1, 2003. Unless otherwise
noted in this final rule, our DRG analysis is based on data from the
March 2002 update of the FY 2002 MedPAR file, which contains hospital
bills received through March 31, 2002, for discharges in FY 2002.
2. Review of DRGs for a Split Based on Presence or Absence of a CC
In an effort to improve the clinical and cost cohesiveness of the
DRG classification system, we have evaluated whether additional DRGs
should be split based on the presence or absence of a CC. There are
currently 116-paired DRGs that reflect a split based on the presence or
absence of a CC. We last performed a systematic evaluation and
considered changes to the DRGs to recognize the within-DRG cost
differences based on the presence or absence of CCs in 1994 (May 27,
1994 IPPS proposed rule, 59 FR 27715). In the May 27, 1994 IPPS
proposed rule, we described a refined DRG system based on a list of
secondary diagnoses that have a major effect on the resources that
hospitals use to treat patients across DRGs. We analyzed how the
presence of the secondary diagnosis affected resource use compared to
other secondary diagnoses, and classified these secondary diagnoses as
non-CC, CC, or major CC. After finalizing the classification of
secondary diagnoses, we evaluated which collapsed DRGs should be split
based on the presence of a major CC, other CC, or both.\1\ However, we
did not implement this refined system because we did not believe it
would be prudent policy to make changes for which we could not predict
the effect on the case-mix (the average DRG relative weight for all
cases) and, thus, payments (60 FR 29209). We were concerned that we
would be unable to fulfill the requirement of section
1886(d)(4)(C)(iii) of the Act that aggregate payments may not be
affected by DRG reclassification and recalibration of weighting
factors. That is, our experience has been that hospitals respond to
major changes to the DRGs by changing their coding practices in ways
that increase total payments (for example, by beginning to include ICD-
9-CM codes that previously did not affect payment for a case). Because
changes in coding behavior do not represent a real increase in the
severity of the overall mix of cases, total payments should not
increase. We believe that the only way to ensure this behavioral
response does not lead to higher total payments is to make an
offsetting adjustment to the system in advance of the fiscal year for
which the changes are effective.
---------------------------------------------------------------------------
\1\ The complete description of the analysis was published in
the Health Care Financing Review (Edwards, N., Honemann, D., Burley,
D., Navarro, M., ``Refinement of the Medicare Diagnosis-Related
Groups to Incorporate a Measure of Severity,'' Health Care Financing
Review, Winter 1994, Vol. 16, No. 2, p. 45).
---------------------------------------------------------------------------
Section 301(e) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (Pub. L. 106-554) authorized the
Secretary to make such a prospective adjustment to the average
standardized amounts for discharges occurring on or after October 1,
2001, to ensure the total payment impacts of changes to the DRGs do not
result in any more or less total spending than would otherwise occur
without the changes (budget neutrality).
We are not proceeding with implementing a refined DRG system at
this time, pending a decision whether to replace the ICD-9-CM coding
system with another classification system. The refined DRG system
discussed in the May 1994 IPPS proposed rule involved a complete and
thorough assessment of all of the ICD-9-CM diagnosis codes in order to
establish an illness severity level associated with each code. Rather
than undertaking the time-consuming process of establishing illness
severity levels for all ICD-9-CM codes at this time, we believe the
more prudent course would be to delay this evaluation pending the
potential replacement of ICD-9-CM. For example, the National Committee
on Health and Vital Statistics (NCHVS) is considering making a
recommendation to the Secretary on whether to recommend the adoption of
the ICD-10-CM and the ICD-10--Procedure Coding System (PCS) as the
national uniform standard coding system for inpatient reporting.
In the meantime, we have undertaken an effort to identify
additional DRGs where a CC split appears most justified. Our analysis
identified existing DRGs that meet the following criteria: a reduction
in variance in charges within the DRG of at least 4 percent; fewer than
75 percent of all patients in the current DRG would be assigned to the
with-CC DRG; and the overall payment impact (higher payments for cases
in the with-CC DRG offset by lower payments for cases in the without-CC
DRG) is at least $40 million.
The following four DRGs meet these criteria: DRG 4 (Spinal
Procedures) and
[[Page 45353]]
DRG 5 (Extracranial Vascular Procedures) in MDC 1 (Diseases and
Disorders of the Nervous System); DRG 231 (Local Excision and Removal
of Internal Fixation Devices Except Hip and Femur) in MDC 8 (Diseases
and Disorders of the Musculoskeletal and Connective Tissue); and DRG
400 (Lymphoma and Leukemia with Major O.R. Procedure) in MDC 17
(Myeloproliferative Diseases and Disorders and Poorly Differentiated
Neoplasms).
The following data indicate that the presence or absence of a CC
was found to have a significant impact on patient charges and on
average lengths of stay in these four DRGs.
------------------------------------------------------------------------
Average
DRG Number of Average length of
cases charges stay
------------------------------------------------------------------------
DRG 4 (Current).................. 4,488 $35,074 7.3
With CC...................... 2,514 46,071 10.0
Without CC................... 1,974 21,070 3.9
DRG 5 (Current).................. 64,942 18,613 2.9
With CC...................... 29,296 23,213 4.1
Without CC................... 35,646 14,833 2.0
DRG 231 (Current)................ 8,971 20,147 4.9
With CC...................... 4,565 25,948 6.9
Without CC................... 4,406 14,136 2.9
DRG 400 (Current)................ 4,275 39,953 9.0
With CC...................... 2,990 49,044 11.2
Without CC................... 1,285 18,799 4.0
------------------------------------------------------------------------
Therefore, we proposed to establish the following new DRGs:
proposed DRG 531 (Spinal Procedures With CC) and proposed DRG 532
(Spinal Procedures Without CC) in MDC 1; proposed DRG 533 (Extracranial
Procedures With CC) (the proposed rule incorrectly included
``Vascular'' in the title) and proposed DRG 534 (Extracranial
Procedures Without CC) (the proposed rule incorrectly included
``Vascular'' in the title) in MDC 1; proposed DRG 537 (Local Excision
and Removal of Internal Fixation Devices Except Hip and Femur With CC)
and proposed DRG 538 (Local Excision and Removal of Internal Fixation
Devices Except Hip and Femur Without CC) in MDC 8; and proposed DRG 539
(Lymphoma and Leukemia With Major O.R. Procedure With CC) and DRG 540
(Lymphoma and Leukemia With Major O.R. Procedure Without CC) in MDC 17.
We proposed that DRGs 4, 5, 231, and 400 would become invalid.
Comment: Seven commenters supported the proposed expansion of the
number of DRGs related to spinal procedures and extracranial vascular
procedures and the removal of internal fixation devices. One commenter
commended CMS for the proposed change to payments for implanting spinal
code stimulation devices. Referring to proposed new DRGs 531 and 532,
the commenter stated that most inpatients receiving a spinal cord
stimulator implant have a comorbid condition, which adds significantly
to the cost of care and can serve as a barrier to patient access.
Another commenter specifically supported the new DRGs 533 and 534 for
extracranial vascular procedures.
One commenter expressed support for CMS' recognition of cost
differences within a given DRG based on the presence or absence of a CC
and encouraged CMS to continue to consider secondary diagnoses that can
have a substantial effect on hospital resources when restructuring DRGs
based on cost considerations.
Response: We appreciate the support for these proposals and are
adopting them as final without further modification.
We are establishing new DRGs 531, 532, 533, 534, 537, 538, 539, and
540, effective for discharges occurring on or after October 1, 2003. As
a result of establishing these new DRGS, DRGs 4, 5, 231, and 400 are
invalid, effective October 1, 2003. We will continue to monitor whether
additional DRGs should be split based on the presence or absence of a
CC.
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Revisions of DRGs 1 and 2
In the FY 2003 IPPS final rule, we split DRGs 1 and 2 (Craniotomy
Age 17 With and Without CC, respectively) based on the
presence or absence of a CC (67 FR 49986). We have received several
proposals related to devices or procedures that are used in a small
subset of cases from these DRGS. These proposals argue that the current
payment for these devices or procedures under DRGs 1 and 2 is
inadequate.
Therefore, we conducted an analysis of the charges for various
procedures and diagnoses within DRGs 1 and 2 to assess whether further
changes to these DRGs may be warranted. Currently, the average charges
for cases assigned to DRGs 1 and 2 are approximately $55,000 and
$30,000, respectively. In the May 19, 2003 proposed rule, we proposed
to create two separate new DRGs for: (1) cases with an intracranial
vascular procedure and a principal diagnosis of an intracranial
hemorrhage; and (2) craniotomy cases with a ventricular shunt procedure
(absent another procedure). The former set of cases are much more
expensive than those presently in DRGs 1 and 2; the latter set of cases
are much less expensive.
(1) Intracranial Vascular Procedures
Our analysis indicated that patients with an intracranial vascular
procedure and a principal diagnosis of an intracranial hemorrhage were
significantly more costly than other cases in DRGS 1 and 2. These
patients have an acute condition with a high severity of illness and
risk of mortality. There were 917 cases in DRGs 1 and 2 with an
intracranial vascular procedure and a principal diagnosis of hemorrhage
with average charges of approximately $113,884, which are much higher
than the average charges of DRGS 1 and 2 noted above.
We also found 890 cases that had an intracranial vascular procedure
without a principal diagnosis of hemorrhage (for example, nonruptured
aneurysms). These cases are generally less acutely ill than those
involving ruptured aneurysms, and have a lower risk of mortality. Among
these 890 cases, the average charges were approximately $52,756, which
are much more similar to the average charges for all cases in DRGs 1
and 2.
[[Page 45354]]
Based on this analysis, we proposed to create new DRG 528
(Intracranial Vascular Procedure With a Principal Diagnosis of
Hemorrhage) for patients with an intracranial vascular procedure and an
intracranial hemorrhage. We proposed that cases involving intracranial
vascular procedures without a principal diagnosis of hemorrhage would
remain in DRGs 1 and 2.
We indicated that proposed new DRG 528 would have the following
principal diagnoses:
[sbull] 094.87, Syphilitic ruptured cerebral aneurysm
[sbull] 430, Subarachnoid hemorrhage
[sbull] 431, Intracerebral hemorrhage
[sbull] 432.0, Nontraumatic extradural hemorrhage
[sbull] 432.1, Subdural hemorrhage
[sbull] 432.9, Unspecified intracranial hemorrhage
And operating room procedures:
[sbull] 02.13, Ligation of meningeal vessel
[sbull] 38.01, Incision of vessel, intracranial vessels
[sbull] 38.11, Endarterectomy, intracranial vessels
[sbull] 38.31, Resection of vessel with anastomosis, intracranial
vessels
[sbull] 38.41, Resection of vessel with replacement, intracranial
vessels
[sbull] 38.51, Ligation and stripping of varicose veins,
intracranial vessels
[sbull] 38.61, Other excision of vessels, intracranial vessels
[sbull] 38.81, Other surgical occlusion of vessels, intracranial
vessels
[sbull] 39.28, Extracranial-intracranial (EC-IC) vascular bypass
[sbull] 39.51, Clipping of aneurysm
[sbull] 39.52, Other repair of aneurysm
[sbull] 39.53, Repair of arteriovenous fistula
[sbull] 39.72, Endovascular repair or occlusion of head and neck
vessels
[sbull] 39.79, Other endovascular repair of aneurysm of other
vessels
(2) Ventricular Shunt Procedures
We also found that craniotomy patients who had a ventricular shunt
procedure (absent another procedure) were significantly less costly
than other craniotomy patients in DRGs 1 and 2. Ventricular shunts are
normally performed for draining intracranial fluid. A ventricular shunt
is a less extensive procedure than the other intracranial procedures in
DRGs 1 and 2. As a result, if a ventricular shunt is the only
intracranial procedure performed, these cases will typically be less
costly.
There were 4,373 cases in which only ventricular shunt procedures
were performed. These cases had average charges of approximately
$27,188. However, the presence or absence of a CC had a significant
impact on patient charges and lengths of stay. There were 2,533 cases
with CC, with average charges of approximately $33,907 and an average
length of stay of 8.2 days. In contrast, there were 1,840 cases without
CC, with average charges of approximately $17,939 and an average length
of stay of 3.7 days.
Therefore, we proposed to create two new DRGs, splitting with CC
and without CC, for patients with only a vascular shunt procedure:
proposed new DRG 529 (Ventricular Shunt Procedures With CC) and
proposed new DRG 530 (Ventricular Shunt Procedures Without CC).
We indicated that proposed new DRG 529 would consist of any
principal diagnosis in MDC 1 (erroneously cited as MDC 5 in the
proposed rule), with the presence of a CC and one of the following
operating room procedures:
[sbull] 02.31, Ventricular shunt to structure in head and neck
[sbull] 02.32, Ventricular shunt to circulatory system
[sbull] 02.33, Ventricular shunt to thoracic cavity
[sbull] 02.34, Ventricular shunt to abdominal cavity and organs
[sbull] 02.35, Ventricular shunt to urinary system
[sbull] 02.39, Other operations to establish drainage of ventricle
[sbull] 02.42, Replacement of ventricular shunt
[sbull] 02.43, Removal of ventricular shunt
We proposed that the proposed new DRG 530 would consist of any
principal diagnosis in MDC 1 (erroneously cited as MDC 5 in the
proposed rule) with one of the operating room procedures listed above
for the proposed new DRG 529, but without the presence of a CC.
Comment: Four commenters supported the proposed creation of two
DRGs to capture ventricular shunt procedures. Ten commenters supported
the proposed creation of new DRG 528 for an intracranial vascular
procedure with a principal diagnosis of hemorrhage.
Two commenters requested that CMS verify its GROUPER analysis and
clarify in the final rule the estimated number of cases that will be
assigned to DRG 528. One commenter also believed that CMS is
underestimating the volume of hemorrhagic cases that would be assigned
to this new DRG. The commenter indicated that its analysis of MedPAR
2001 data demonstrated 1,550 cases.
Response: We conducted an analysis based on later available MedPAR
data and found 1,596 cases that would be assigned to DRG 528 (based on
a full year of MedPAR data). This volume is consistent with the
commenter's analysis, although different MedPAR files were used in the
analysis. In the proposed rule (68 FR 27161), we reported 917 cases
based on preliminary data (6 months' worth of cases) that we analyzed
when we considered the proposed change in the DRG classification. There
were actually 1,354 cases grouped to the proposed new DRG 528 for the
proposed rule.
Comment: One commenter suggested the creation of a new companion
DRG to DRG 528 for intracranial vascular procedures for unruptured
cerebral aneurysms. The commenter was concerned that the charges for
endovascular repair of unruptured aneurysms is higher than other
procedures currently assigned to DRG 2.
Response: The average charges for unruptured aneurysm cases varied
according to the DRG to which the cases were assigned. The average
charges for these cases in DRG 1 were slightly higher than the overall
charges for that DRG, of approximately $69,682 and $54,900,
respectively. However, we found that these charges are consistent with
the variation of charges within this DRG and, therefore, did not
propose a change in the DRG reclassification. Similarly, for cases
assigned to DRG 2, we found the average charges of approximately
$36,077 are consistent with the overall average charges of that DRG of
approximately $32,000. We will continue to monitor these cases.
Comment: Three commenters requested a change to the DRG assignment
of cases involving implantation of GLIADEL[reg] chemotherapy wafers to
treat brain tumors.\2\ One of the commenters offered two options:
create a new DRG or reassign these cases to DRG 484 (Craniotomy for
Multiple Significant Trauma). The commenter cited an example in which
CMS has in the past grouped together in the same DRG cases that are
clinically dissimilar but similar in resource intensity when there were
no other options available. For FY 1998 (62 FR 45974), coronary stent
cases were moved from DRG 112 (Percutaneous Cardiovascular Procedures)
to DRG 116 (Other Permanent Cardiac Pacemaker Implant or PTCA with
Coronary Artery Stent Implant). In that instance, CMS concluded that,
although coronary artery stent cases are not clinically similar to the
pacemaker cases in DRG 116, the resource consumption of these
[[Page 45355]]
cases is very similar. The commenter contended that, absent another
appropriate craniotomy DRG, the same argument could be applied to
assigning cases with GLIADEL[reg] wafer to DRG 484.
---------------------------------------------------------------------------
\2\ We also discuss this issue later in this preamble under
section II.E.3.b. relative to the application for new technology
add-on payments for the GLIADEL[reg] wafer.
---------------------------------------------------------------------------
In a comment on the proposed rule, the manufacturer of this implant
provided estimated FY 2003 average costs and charges for these cases.
Its report indicated that the costs of the cases of $24,280 would be
the same for cases assigned to DRG 1 and DRG 2, and the charges of the
cases of $50,394 would be the same for both DRGs. The manufacturer
requested that we analyze the available data in the FY 2003 MedPAR file
to identify GLIADEL[reg] cases. The manufacturer believed these data
support the need for a DRG change.
One commenter agreed with our determination that this technology is
currently reflected within the DRG weights and does not meet the
definition of a new technology.
Response: In our analysis of the data from the March 2003 update of
the FY 2003 MedPAR file, we found a total of 61 cases in which the ICD-
9-CM procedure code 00.10 (Implantation of a chemotherapeutic agent)
was reported for cases assigned to DRGs 1 and 2. There were 38 cases
assigned to DRG 1 and 23 cases assigned to DRG 2. Consistent with the
GROUPER logic for these DRGs that splits cases based on the presence or
absence of CCs, we found that the average standardized charges in DRGs
1 and 2 were approximately $64,864 and $42,624, respectively. We
believe that while the charges for GLIADEL[reg] wafer cases may be
higher than the average standardized charges for DRG 2, they are within
the normal variation of the overall charges within each DRG.
We note that the DRGs are a system of averages, and there is
expected to be variation in the average charges for different
procedures and services across all DRGs. Hospitals are expected to be
able to finance some higher cost procedures with lower cost procedures
within the same DRG as well as across DRGs. Although the average
charges of the cases we identified in our analysis are somewhat higher
than the average charges of all cases in these DRGs, they are within
the range of other procedures included in these DRGs. By way of
comparison, we are creating a new DRG for cases with an intracranial
vascular procedure and a principal diagnosis of an intracranial
hemorrhage on the basis of our analysis that showed the average charges
for these cases were $113,884. This is approximately $59,000 more than
the average charges in DRG 1 (more than the total charges for the
GLIADEL[reg] cases reported by the commenter) and approximately $84,000
more than the average charges in DRG 2.
We also are concerned that there may be insufficient volume of
cases to warrant the establishment of a new DRG for this technology.
Thus, before considering the creation of a new DRG for these cases, we
would like to review a full year of data, as well as consider
alternative options if they appear warranted. It would also be
necessary to provide opportunity for public comment on any potential
changes to the DRG assignment of these cases before proceeding with a
final change.
Currently, DRG 484 includes complex, multiple significant trauma
cases; that is, patients with a principal diagnosis of trauma and at
least two significant trauma diagnosis codes (either as principal or
secondary diagnosis) from different body site categories. While this
DRG includes craniotomy, it is assigned to MDC 24 (Multiple Significant
Trauma). While the treatment for glioblastoma multiforme is
significant, we do not believe these cases are clinically similar to
other cases currently assigned to DRG 484.
We also are concerned that there may be insufficient volume to
warrant the establishment of a new DRG for this technology, and we
would like to review a full year of data, as well as consider
alternative options if they appear warranted. It also would be
necessary to provide opportunity for public comment on any potential
changes before proceeding with a final change.
Comment: Two commenters pointed out a typographical error in our
proposal. The commenters indicated that we proposed new DRGs 529 and
530 for placement in MDC 5; the correct MDC should have been MDC 1.
Response: We agree with the commenters and have corrected this
placement, as indicated in the discussion above.
After consideration of the comments received, we are adopting as
final the three new proposed DRGs 528, 529, and 530. These DRGS will be
effective for discharges occurring on or after October 1, 2003.
b. DRG 23 (Nontraumatic Stupor and Coma)
In DRG 23 (Nontraumatic Stupor and Coma), there are currently six
principal diagnoses identified by the following ICD-9-CM diagnosis
codes: 348.4, Compression of the brain; 348.5, Cerebral edema; 780.01,
Coma; 780.02, Transient alteration of awareness; 780.03, Persistent
vegetative state; and 780.09, Other alteration of consciousness. Code
780.02 is often used to describe the diagnosis of psychiatric patients
rather than the diagnosis of patients with severe neurological
disorders. The treatment plan for a patient with ``transient alteration
of awareness'' is clinically very different from the treatment plan for
a coma patient. Furthermore, many patients with this diagnosis are
treated in psychiatric facilities rather than in acute care hospitals.
Although there are neurological patients who present with the
complaint of ``transient alteration of awareness,'' the cause of this
alteration of consciousness is commonly identified, and the principal
diagnosis for the hospital admission is the etiology of the alteration
of consciousness rather than the symptom itself. For the few remaining
neurological patients for whom the cause is not identified and for whom
code 780.02 is assigned as the principal diagnosis, we believe that the
care of these patients is different than the care of patients with coma
or cerebral edema.
Because we believe the patients with a principal diagnosis of
``transient alteration of consciousness'' are more clinically related
to the patients in DRG 429 (Organic Disturbances and Mental
Retardation) in MDC 19 (Mental Diseases and Disorders), we proposed
that patients who are assigned a principal diagnosis of code 780.02
would be assigned to DRG 429 instead of DRG 23. DRG 429 also contains
similar diagnoses, such as code 293.81, Organic delusional syndrome and
code 293.82, Organic hallucinosis syndrome. (We note that the charges
for the patient cases in DRGs 23 and 429 are very similar ($11,559 and
$11,713, respectively), so the proposed movement of code 780.02 from
DRG 23 to DRG 429 would have minimal payment impact.) Moving this
diagnosis code as proposed would also consolidate diagnoses treated
frequently in psychiatric hospitals in those DRGs that are likely to be
a part of the upcoming proposed Medicare psychiatric facility PPS.
Comment: An organization representing hospitals supported our
proposed change, while other commenters opposed the change. The
commenters who opposed the change stated that code 780.02 is included
in the ICD-9-CM chapter for signs and symptoms of ill-defined
conditions. The commenters believed that since this code is included in
a chapter with ill-defined conditions, it would be inappropriate to
move the code to DRG 429. The commenters stated that this
[[Page 45356]]
code does not describe a mental disorder; and disagreed with our
statement in the proposed rule that code 780.02 was similar to codes
293.81 and 293.82. The commenters further stated that they disagreed
with our assertion that many patients with a diagnosis of transient
alteration of awareness are treated in psychiatric facilities.
Response: Our review of claims data indicates that code 780.02 is a
frequent diagnosis for patients admitted to psychiatric hospitals. Many
patients are likely to present with transient alteration of awareness
at the time of admission to a psychiatric hospital. The cause of this
transient alteration is likely to be diagnosed during the stay, leading
to the assignment of another, more specific principal diagnosis.
However, in many patients, this is not the case, and no underlying
cause for the transient alteration of awareness is determined. When a
more definitive diagnosis cannot be made, the patient is left with the
diagnosis of alteration of awareness. We recognize the difficulty in
assigning symptoms such as these to the most appropriate DRG. However,
we will note that the average charges for DRG 23 (where the code is
currently assigned) and DRG 429 are similar.
Therefore, we are proceeding with the assignment of code 780.02 to
DRG 429 based on a review of psychiatric hospital data as well as a
clinical comparison of cases already assigned to DRG 429.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. DRG 478 (Other Vascular Procedures With CC) and DRG 479 (Other
Vascular Procedures Without CC)
Code 37.64 (Removal of heart assist system) in DRGs 478 and 479
describes the operative, as opposed to bedside, removal of a heart
assist system. Based on comments we received suggesting that code 37.64
was inappropriately assigned to DRGs 478 and 479, we reviewed the
MedPAR data for both DRGs 478 and 479 and DRG 110 (Major Cardiovascular
Procedures With CC) and DRG 111 (Major Cardiovascular Procedures
Without CC) to assess the appropriate assignment of code 37.64.
We found that there were only 17 cases of code 37.64 in DRGs 478
and 479, with an average length of stay of 14.1 days and average
charges of $105,153. There were a total of 90,591 cases in DRGs 478 and
479 that did not contain code 37.64. These cases had an average length
of stay of 6.6 days and average charges of $31,879. In DRGs 110 and
111, we found an average length of stay of 8.1 days, with average
charges of $54,653.
We proposed to remove code 37.64 from DRGs 478 and 479 and reassign
it to DRGs 110 and 111. The surgical removal of a heart assist system
is a major cardiovascular procedure and, therefore, more appropriately
assigned to DRGs 110 and 111. Accordingly, we believe this DRG
assignment for this procedure is more clinically and financially
appropriate.
We received two comments in support of this change. Therefore, we
are adopting as final our proposal to remove code 37.64 from DRGs 478
and 479 and assign it to DRGs 110 and 111.
b. DRGs 514 (Cardiac Defibrillator Implant With Cardiac
Catheterization) and 515 (Cardiac Defibrillator Implant Without Cardiac
Catheterization)
(1) Cardiac Defibrillator Implant With Cardiac Catheterization With
Acute Myocardial Infarction
Prior to the publication of the proposed rule, we received a
recommendation to modify DRG 514 (Cardiac Defibrillator Implant With
Cardiac Catheterization) and DRG 515 (Cardiac Defibrillator Implant
Without Cardiac Catheterization) so that these DRGs are split based on
the presence or absence of acute myocardial infarction, heart failure,
or shock as a principal diagnosis. We note that the increased cost of
treating cardiac patients with acute myocardial infarction, heart
failure, or shock is recognized in the payment logic for pacemaker
implants (DRG 115 (Permanent Cardiac Pacemaker Implant With Acute
Myocardial Infarction, Heart Failure or Shock, or AICD Lead or
Generator) and DRG 116 (Other Permanent Cardiac Pacemaker Implant)).
We examined FY 2002 MedPAR data regarding the number of cases and
the average charges for DRGs 514 and 515. The results of our
examination are summarized in the following table.
----------------------------------------------------------------------------------------------------------------
With AMI,
Number of Average heart Average
DRG cases charges failure, or charges
shock count
----------------------------------------------------------------------------------------------------------------
514......................................................... 16,743 $97,133 3,623 $120,852
515......................................................... 4,674 76,537 935 84,140
----------------------------------------------------------------------------------------------------------------
A cardiac catheterization is generally performed to establish the
nature of the patient's cardiac problem and determine if implantation
of a cardiac defibrillator is appropriate. Generally, the cardiac
catheterization can be done on an outpatient basis. Patients who are
admitted with acute myocardial infarction, heart failure, or shock and
have a cardiac catheterization are generally acute patients who require
emergency implantation of the defibrillator. Thus, there are very high
costs associated with these patients.
We found that the average charges for patients with cardiac
catheterizations who also were admitted with acute myocardial
infarction, heart failure, or shock were $120,852, compared to the
average charges for all DRG 514 cases of $97,133. Therefore, we
proposed to split DRG 514 and create a new DRG for patients receiving a
cardiac defibrillator implant with cardiac catheterization and with a
principal diagnosis of acute myocardial infarction, heart failure, or
shock.
Patients without cardiac catheterization generally have had the
need for the defibrillator established on an outpatient basis prior to
admission. We found 935 cases with acute myocardial infarction, heart
failure, or shock, with average charges of $84,140. The average charges
for all cases in DRG 515 were $76,537. Because of the relatively small
number of patients and the less-than-10-percent charge difference for
patients in DRG 515 who have acute myocardial infarction, heart
failure, or shock, we did not propose to create a separate DRG for
patients with a cardiac defibrillator implant without cardiac
catheterization with acute myocardial infarction, heart failure, or
shock.
Specifically, we proposed to create two new DRGs that would replace
the current DRG 514. We indicated that the two proposed new DRGs would
have the same procedures currently listed for DRG 514, but would be
split based on the presence or absence of acute myocardial infarction,
heart failure, or
[[Page 45357]]
shock as a principal diagnosis. We proposed to establish new DRG 535
(Cardiac Defibrillator Implant With Cardiac Catheterization and With
Acute Myocardial Infarction, Heart Failure, or Shock) and new DRG 536
(Cardiac Defibrillator Implant With Cardiac Catheterization and Without
Acute Myocardial Infarction, Heart Failure, or Shock). Proposed new DRG
536 would exclude the following principal diagnosis codes from MDC 5
associated with acute myocardial infarction, heart failure, or shock.
[sbull] 398.91, Rheumatic heart failure
[sbull] 402.01, Malignant hypertensive heart disease with heart
failure
[sbull] 402.11, Benign hypertensive heart disease with heart
failure
[sbull] 402.91, Hypertensive heart disease not otherwise specified
with heart failure
[sbull] 404.01, Malignant hypertensive heart and renal disease with
heart failure
[sbull] 404.03, Malignant hypertensive heart and renal disease with
heart failure and renal failure
[sbull] 404.11, Benign hypertensive heart and renal disease with
heart failure
[sbull] 404.13, Benign hypertensive heart and renal disease with
heart failure and renal failure
[sbull] 404.91, Hypertensive heart and renal disease not otherwise
specified with heart failure
[sbull] 404.93, Hypertensive heart and renal disease not otherwise
specified with heart failure and renal failure
[sbull] 410.01, AMI anterolateral, initial
[sbull] 410.11, AMI anterior wall, initial
[sbull] 410.21, AMI inferolateral, initial
[sbull] 410.31, AMI inferopost, initial
[sbull] 410.41, AMI inferior wall, initial
[sbull] 410.51, AMI lateral not elsewhere classified, initial
[sbull] 410.61, True posterior infarction, initial
[sbull] 410.71, Subendocardial infarction, initial
[sbull] 410.81, AMI not elsewhere classified, initial
[sbull] 410.91, AMI not otherwise specified, initial
[sbull] 428.0, Congestive heart failure, not otherwise specified
[sbull] 428.1, Left heart failure
[sbull] 428.20, Systolic heart failure, not otherwise specified
[sbull] 428.21, Acute systolic heart failure
[sbull] 428.22, Chronic systolic heart failure
[sbull] 428.23, Acute on chronic systolic heart failure
[sbull] 428.30, Diastolic heart failure, not otherwise specified
[sbull] 428.31, Acute diastolic heart failure
[sbull] 428.32, Chronic diastolic heart failure
[sbull] 428.33, Acute on chronic diastolic heart failure
[sbull] 428.40, Combined systolic and diastolic heart failure not
otherwise specified
[sbull] 428.41, Acquired combined systolic and diastolic heart
failure
[sbull] 428.42, Chronic combined systolic and diastolic heart
failure
[sbull] 428.43, Acute on chronic combined systolic and diastolic
heart failure
[sbull] 428.9, Heart failure, not otherwise specified
[sbull] 785.50, Shock, not otherwise specified
[sbull] 785.51, Cardiogenic shock
(2) Cardiac Resynchronization Therapy (CRT)
Prior to the publication of the proposed rule, we received a
comment from a provider who pointed out that we did not include the
following combination of codes under the list of procedure combinations
that would lead to an assignment of DRG 514 or DRG 515:
[sbull] 37.95, Implantation of automatic cardioverter/defibrillator
lead(s) only
[sbull] 00.54, Implantation or replacement of cardiac
resynchronization defibrillator, pulse generator device only [CRT-D]
The commenter pointed out that cases are assigned to DRGs 514 and
515 when a total cardiodefibrillator or CRT-D system is implanted. In
addition, cases are assigned to DRGs 514 and 515 when implantation of a
variety of combinations of defibrillator leads and device combinations
is reported. The commenter indicated that a total defibrillator and
CRT-D system may be replaced with a completely new system or all new
devices and leads, and added that it is also possible to replace a
generator, a lead, or a combination of generators and up to three
leads.
When the CRT-D generator (code 00.54) and one of the cardioverter/
defibrillator leads are replaced, the case currently is assigned to DRG
115 (Permanent Cardiac Pacemaker Implant with AMI, Heart Failure, or
Shock or AICD Lead or Generator Procedure). The commenter recommended
that we include the combination of codes 37.95 and 00.54 as a
combination that would result in assignment to DRG 514 or DRG 515, as
do other combinations of generators and leads. Our medical advisors
agree with this recommendation. As discussed previously, we proposed to
delete DRG 514 and replace it with proposed new DRGs 535 and 536.
Therefore, we proposed to add codes 37.95 and 00.54 to the list of
procedure combinations that would result in assignment to DRG 515 or
new proposed DRGs 535 and 536.
Comment: Several commenters supported our proposed revision to DRG
514 so that it would be split based on the presence or absence of a
principal diagnosis of acute myocardial infarction, heart failure, or
shock.
One commenter pointed out a typographical error in the proposed
rule in the code number cited for the procedure, Implantation of
automatic cardioverter/defibrillator lead(s) only. The code number
should have been 37.95 instead of 39.75.
Response: We appreciate the support for our proposed revision of
DRG 514. We have corrected the code number for Implantation of
automatic cadioverter/defibrillator lead(s) only to 37.95 in the
description of this issue above.
Comment: Several commenters supported the addition of codes 37.95
and 00.54 to the list of procedure combinations that would lead to an
assignment of DRG 515 and new DRGs 535 and 536. However, one commenter
suggested that, in addition to this combination, codes 37.97
(Replacement of automatic cardioverter/defibrillator lead(s) only and
00.54 also should be added to the procedure combination list under DRG
515 and new DRGs 535 and 536. The commenter pointed out that both
procedures would involve the insertion of a pulse generator and a lead
so that resources required are equivalent to those for a total system
implant.
Response: We agree with the commenter that the combination of codes
37.97 and 00.54 also would involve the implantation of a pulse
generator and a lead. Therefore, in this final rule, we are adding the
combination of procedure codes 37.97 and 00.54 to the list of procedure
combinations that will lead to assignment to DRG 515 and new DRGs 535
and 536.
Comment: One commenter recommended that CMS also consider modifying
DRGs 115 and 116 to recognize more combination groups of devices and
leads. Specifically, the commenter recommended adding the following
combination of codes to the list of procedure combinations under DRGs
115 and 116:
[sbull] 00.53, Implantation or replacement of CRT-P pulse generator
only
[sbull] 37.74, Implantation or replacement of epicardial pacemaker
lead.
Response: DRGs 115 and 116 have one of the most complex assignment
structures of all the DRGs. The DRG logic for DRGs 115 and 116 involves
three separate combinations of code groups that can possibly lead to
these DRG assignments. Before making a
[[Page 45358]]
modification to one of the combination groups (particularly the
procedure combinations), we believe we should analyze the impact of a
modification to the currently existing types of device, lead, and
diagnosis combinations. In the future, we will undertake a close review
of DRGs 115 and 116 to determine if additional modifications, such as
the one suggested, are needed.
Comment: Two commenters supported the proposal to restructure DRG
514 through the creation of new DRGs 535 and 536. One of the commenters
supported the division of these new DRGs based on the presence or
absence of acute myocardial infarction, heart failure, or shock.
However, the commenter believed that this new structure would lead to
significant confusion among hospital coders with respect to the coding
of CRT-Ds. The commenter stated that hospital coders may be confused
when a patient is admitted with one diagnosis, but then develops an
acute myocardial infarction, heart failure, or shock after the
admission but prior to discharge. In these cases, the acute myocardial
infarction, heart failure, or shock would be a secondary diagnosis. The
split of DRGs 535 and 536 is based on these conditions when they are
the principal diagnosis (reason for the hospital admission). To
eliminate the potential for misunderstanding, the commenter requested
that the definition of DRG 535 be modified so that patients who receive
CRT-D devices are assigned to DRG 535 when an ICD-9-CM diagnosis code
for heart failure is present as either a principal or secondary
diagnosis.
Response: We appreciate the support from the commenters for our
proposal to modify DRG 514 through the creation of new DRGs 535 and
536. We note that the issue of coding the implantation of CRT-Ds has
been covered through extensive articles in the American Hospital
Association's Coding Clinic for ICD-9-CM. In the past, the coding of
cases with acute myocardial infarction, heart failure, or shock has not
been problematic for hospital coding specialists. However, should the
DRG modifications lead to coding questions on CRT-D cases, we will ask
the American Hospital Association to provide additional guidance in its
Coding Clinic for ICD-9-CM. Furthermore, the DRG splits for an acute
myocardial infarction, heart failure, or shock, which currently are
included in DRGs 115 and 116, are based on these conditions being the
principal diagnosis. As a result, this is a longstanding DRG logic
precedent. We do not believe that replicating the logic used for
splitting DRGs 115 and 116 and using it for DRGs 535 and 536 would
create confusion for hospital coders. Rather, we believe hospital
coders would easily recognize this type of longstanding DRG logic.
Comment: Another commenter supported the proposal to split DRG 514
into DRGs 535 and 536 based on the presence or absence of acute
myocardial infarction, heart failure, or shock. The commenter stated
that this split would ensure greater consistency within the DRG system
and ensure adequate payment to hospitals for the higher costs patients
receiving implantable cardioverter-defibrillator implants. However, the
commenter recommended that DRG 515 undergo a similar split based on the
presence or absence of acute myocardial infarction, heart failure, or
shock. The commenter stated that the creation of these additional new
DRGs would fully align payment logic across all pacemaker and
implantable cardioverter-defibrillator implant devices. The
manufacturer also believed that differences between average charges and
average length of stay for these cases within DRG 515 would warrant
this additional splitting of the DRG.
Response: We appreciate the support for the revisions involving
DRGs 514, 535, and 536. However, when we examined the data for DRGs 514
and 515, we found that there were almost three times as many cases with
an acute myocardial infarction, heart failure, or shock cases in DRG
515 as in DRG 514. Those cases in DRG 514 with a principal diagnosis of
an acute myocardial infarction, heart failure, or shock, had average
charges approximately 20 percent greater than the average charges for
all cases in DRG 514. However, cases with a principal diagnosis of an
acute myocardial infarction, heart failure, or shock in DRG 515 had
average charges that were only about 10 percent greater than all cases
in this DRG. Therefore, there is a significantly greater need for the
DRG split for DRG 514. We will continue to examine cases within this
area, and specifically DRG 515, to determine if additional DRG
refinements are needed in the future.
Comment: One commenter, who supported the revisions to DRG 514
through the new DRGs 535 and 536, expressed concern about our coverage
decisions on automatic implantable cardioverter-defibrillators. The
commenter believed the coverage was extremely restricted.
Response: We appreciate the support of the commenter for new DRGs
535 and 536. We will share the concerns relating to coverage decisions
on automatic implantable cardioverter-defibrillators with our coverage
staff.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
Prior to the issuance of the proposed rule, we received a comment
that two codes for cervical fusion of the spine are not included within
DRG 519 (Cervical Spinal Fusion With CC) and DRG 520 (Cervical Spinal
Fusion Without CC). The two cervical fusion codes are:
[sbull] 81.01, Atlas-axis spinal fusion
[sbull] 81.31, Refusion of atlas-axis
The atlas-axis includes the first two vertebrae of the cervical
spine (C1 and C2). These two cervical fusion codes are currently
assigned to DRG 497 (Spinal Fusion Except Cervical With CC) and DRG 498
(Spinal Fusion Except Cervical Without CC). Because codes 81.01 and
81.31 involve the cervical spine, we proposed to remove these codes
from DRGs 497 and 498 and reassign them to DRGs 519 and 520.
We did not receive any comments on this proposal. Therefore, we are
adopting as final our proposal to remove codes 81.01 and 81.31 from
DRGs 497 and 498 and reassign them to DRGs 519 and 520, effective for
FY 2004.
6. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
a. Nonneonate Diagnoses
As indicated earlier, ICD-9-CM diagnosis codes are assigned to MDCs
based on 25 groupings corresponding to a single organ system or
etiology and, in general, are associated with a particular medical
specialty. MDC 15 is comprised of diagnoses that relate to newborns and
other neonates with conditions originating in the perinatal period.
Some of the codes included in MDC 15 consist of conditions that
originate in the neonatal period but can persist throughout life. These
conditions are referred to as congenital anomalies. When an older (not
neonate) population is treated for a congenital anomaly, DRG assignment
problems can arise. For instance, if a patient is over 65 years old and
is admitted with a congenital anomaly, it is not appropriate to assign
the patient to a newborn DRG. This situation occurs when a congenital
anomaly code is classified within MDC 15.
Prior to the publication of the proposed rule, we received a
recommendation to move the following congenital anomaly codes from MDC
15 and reassign them to other appropriate MDCs based on the body system
being treated:
[sbull] 758.9, Chromosome anomaly, not otherwise specified
[sbull] 759.4, Conjoined twins
[[Page 45359]]
[sbull] 759.7, Multiple congenital anomalies, not elsewhere
classified
[sbull] 759.81, Prader-Willi syndrome
[sbull] 759.83, Fragile X syndrome
[sbull] 759.89, Specified congenital anomalies, not elsewhere
classified
[sbull] 759.9, Congenital anomaly, not otherwise specified
[sbull] 779.7, Periventricular leukomalacia
[sbull] 795.2, Abnormal chromosomal analysis
Each of the congenital anomaly diagnosis codes recommended for
reassignment represents a condition that is frequently addressed beyond
the neonatal period. In addition, the assignment of these congenital
anomaly codes as principal diagnosis currently results in assignment to
MDC 15.
We evaluated the recommendation and agreed that each of the
identified codes represents a condition that is frequently addressed
beyond the neonate period and should therefore be removed from the list
of principal diagnoses that result in assignment to MDC 15. Therefore,
we proposed to change the MDC and DRG assignments of the congenital
anomaly codes as specified in the following table. The table shows the
principal diagnosis code for the congenital anomaly and the proposed
MDC and DRG to which the code would be assigned.
----------------------------------------------------------------------------------------------------------------
Proposed
Principal diagnosis code in MDC 15 Code title MDC Proposed DRG assignment
assignment
----------------------------------------------------------------------------------------------------------------
758.9.................................... Chromosome anomaly, not 23 467 (Other Factors
otherwise specified. Influencing Health
Status).
759.4.................................... Conjoined twins............ 6 188, 189, and 190 (Other
Digestive System
Diagnoses, Age 17 with CC, Age 17 without CC, and Age
0-17, respectively).
759.7.................................... Multiple congenital 8 256 (Other Musculoskeletal
anomalies, not elsewhere System and Connective
classified. Tissue Diagnoses).
759.81................................... Prader-Willi syndrome...... 8 256 (Other Musculoskeletal
System and Connective
Tissue Diagnoses).
759.83................................... Fragile X syndrome......... 19 429 (Organic Disturbances
and Mental Retardation).
759.89................................... Specified congenital 8 256 (Other Musculoskeletal
anomalies, not elsewhere System and Connective
classified. Tissue Diagnoses).
759.9.................................... Congenital anomaly, not 23 467 (Other Factors
otherwise specified. Influencing Health
Status).
779.7.................................... Periventricular 1 34 and 35 (Other Disorders
leukomalacia. of Nervous System with CC,
and without CC,
respectively).
795.2.................................... Abnormal chromosomal 23 467 (Other Factors
analysis. Influencing Health
Status).
----------------------------------------------------------------------------------------------------------------
Comment: Several commenters supported all of the proposed changes
relating to congenital anomalies. One commenter supported the changes
in general, but mentioned several concerns. While this commenter agreed
that it was feasible to move these congenital conditions out of MDC 15,
the commenter suggested that those patients who are still in the
neonatal period (first 28 days of life) when admitted should continue
to be classified to MDC 15.
In addition, this commenter questioned whether the proposed DRG
assignments were correct for codes 759.4 (Conjoined twins), code 759.7
(Multiple congenital anomalies, not elsewhere classified), and 759.89
(Specified congenital anomalies, not elsewhere classified). The
commenter stated that although the proposed DRG assignments for these
three DRGs may be appropriate based on the body system being treated
for most cases, these DRGs do not necessarily reflect the body system
affected or being treated. The commenter did not suggest alternative
DRG assignments.
Response: We acknowledge the commenter's point that, for a minority
of cases, the admission will, in fact, be in the neonatal period.
However, the majority of cases will continue to be patients well beyond
the neonatal period. The proposed DRG modifications will correct the
majority of inappropriate DRG assignments that occur when adults are
assigned to MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period). In the future, we will examine
other means to further refine this area, such as making new DRG
assignments for congenital anomalies based on the age of the patient.
However, at this point, we are attempting to resolve the problems
created for the majority of patients.
Regarding the commenter's concern that codes 759.4, 759.7, and
759.89 may not always be appropriately assigned according to our
proposal, the commenter did not suggest an alternative. The commenter
agreed that many cases with these three codes will be assigned to the
appropriate body system by using our proposed DRG assignments. We
recognize that reassignment of these codes will not resolve all
problems, and some cases may be assigned to the wrong body system based
on the patient's actual condition. However, we note that these three
codes are vague and do not specify a precise congenital anomaly by body
system. Therefore, we had to rely on our medical advisors to determine
the most appropriate DRG for the majority of cases. Our main concern
was to correct the DRG assignment that resulted in adults being
assigned to a neonatal DRG when they had a congenital anomaly. We will
continue to examine the data for these cases to determine if additional
modifications are needed in the future.
Therefore, we are adopting the proposed revisions as final without
modification.
b. Heart Failure Codes for Newborns and Neonates
Under MDC 15, cases of newborns and neonates with major problems
may be assigned to DRG 387 (Prematurity With Major Problems) or DRG 389
(Full-Term Neonate With Major Problems). Existing DRG 387 has three
components: (1) Principal or secondary diagnosis of prematurity; (2)
principal or secondary diagnosis of major problem (these are the
diagnoses that define MDC 15); or (3) secondary diagnosis of major
problem (these are diagnoses that do not define MDC 15, so they will
only be secondary diagnosis codes for patients assigned to MDC 15). To
be assigned to DRG 389, the neonate must have one of the principal or
secondary diagnoses listed under the DRG.
Prior to the publication of the proposed rule, we received
correspondence suggesting that the following diagnosis codes for heart
failure, which are currently in MDC 5, be added to the list of
secondary diagnosis of major problems for neonates under MDC 15.
[[Page 45360]]
------------------------------------------------------------------------
Diagnosis code Title
------------------------------------------------------------------------
428.20............................ Systolic heart failure, not
otherwise specified.
428.21............................ Acute systolic heart failure.
428.22............................ Chronic systolic heart failure.
428.23............................ Acute on chronic systolic heart
failure.
428.30............................ Diastolic heart failure, not
otherwise specified.
428.31............................ Acute diastolic heart failure.
428.32............................ Chronic diastolic heart failure.
428.33............................ Acute on chronic diastolic heart
failure.
428.40............................ Systolic/diastolic heart failure,
not otherwise specified.
428.41............................ Acute systolic/diastolic heart
failure.
428.42............................ Chronic systolic/diastolic heart
failure.
428.43............................ Acute on chronic systolic/diastolic
heart failure.
------------------------------------------------------------------------
These heart failure-related diagnosis codes were new codes as of
October 1, 2002. They were an expansion of the previous 4-digit codes
for heart failure and provided additional detail about the specific
type of heart failure. The codes for heart failure that existed prior
to October 1, 2002, are classified as secondary diagnoses of major
problems within MDC 15 and are currently assigned to DRGs 387 and DRG
389. We stated in the proposed rule that these other heart failure
diagnosis codes should be included as principal diagnosis of major
problem codes within MDC 15. However, these heart failure codes are
currently listed in the secondary, not principal, diagnoses of major
problems within MDC 15.
We agree that diagnosis codes 428.20 through 428.43 listed in the
chart above should be included as secondary diagnosis of major problem
codes within MDC 15, as are the other heart failure codes. Therefore,
we proposed to add them to DRG 387 and 389.
Comment: Several commenters supported the proposal to add codes
428.20 through 428.43 (codes for heart failure that became effective
October 1, 2002, listed in the chart above) to DRGs 387 and 389. The
commenters agreed that the heart failure codes created on October 1,
2002, should be assigned to DRGs 387 and 389 in the same fashion as
were those heart failure codes created prior to October 1, 2002.
One commenter indicated that we incorrectly described the addition
of diagnosis codes 428.20 through 428.43 listed in the chart to the
list of ``principal'' diagnosis of major problem codes. The commenter
stated that we should have indicated that these codes would be added to
the list of ``secondary'' diagnoses of major problem codes because this
category is where the other heart failure codes are currently assigned.
Response: We agree that the codes should have been described as an
addition to the list of secondary diagnoses of major problem codes
within DRGs 387 and 389. We have clarified this point in the
description above.
Comment: One commenter who supported the addition of the heart
failure-related diagnosis codes (428.20 through 428.43) to DRGs 387 and
389, asked for clarification of how diagnoses for combined codes that
include congestive heart failure will be handled. The commenter
mentioned code 402.91 (Hypertensive heart disease with heart failure,
unspecified benign or malignant) as an example.
Response: We will conduct an additional review of DRGs 387 and 389
to determine if additional codes should be added to the list of
secondary diagnoses of major problems for FY 2005. We encourage
commenters to send their recommendations to us to assist in this
review.
We are adopting our proposal as final, with the clarification that
the major problem codes are secondary, not principal, codes.
Accordingly, we are adding codes 428.20 through 428.43 listed above to
the list of secondary diagnoses of major problem codes within DRGs 387
and 389.
7. MDC 17 (Myeloproliferative Diseases and Disorders and Poorly
Differentiated Neoplasms)
High-dose Interleukin-2 (IL-2) Chemotherapy is a hospital
inpatient-based regimen requiring administration by experienced
oncology professionals. It is used for the treatment of patients with
advanced renal cell cancer and advanced melanoma. Unlike traditional
cytotoxic chemotherapies that attack cancer cells themselves,
Interleukin-2 is designed to enhance the body's defenses by mimicking
the way natural IL-2 activates the immune system and stimulates the
growth and activity of cancer-killing cells. The Food and Drug
Administration (FDA) approved the IL-2 product on the market for use in
1992.
High-dose IL-2 therapy is performed only in very specialized
treatment settings, such as an intensive care unit or a bone marrow
transplant unit. This therapy requires oversight by oncology health
care professionals experienced in the administration and management of
patients undergoing this intensive treatment because of the severity of
the side effects. Unlike most cancer therapies, high-dose IL-2 therapy
is associated with predictable toxicities that require extensive
monitoring. Often patients require one-on-one nursing or physician care
for extended portions of their stay.
High-dose IL-2 therapy is significantly different from conventional
chemotherapy in terms of the resources required to administer it.
Conventional chemotherapy may be given to patients either on an
outpatient basis or through a series of short (that is, 1 to 3 day)
inpatient stays.
High-dose IL-2 therapy is given during two separate hospital
admissions. For the first cycle, the IL-2 is administered every 8 hours
over 5 days. Patients are then discharged to rest at home for several
days and are admitted for the second cycle of therapy during which the
same regimen and dosing is repeated. The two cycles complete the first
course of high-dose IL-2 therapy. This regimen may be repeated at 8 to
12 weeks if the patient is responding. The maximum number of courses
for any one patient is predicted to be five courses.
Not all patients with end-stage renal cell carcinoma or end-stage
melanoma are appropriate candidates for high-dose IL-2 chemotherapy. It
is estimated that there are between 15,000 and 20,000 patients in the
United States who have one of these two types of cancer. However, only
20 percent of those patients will be appropriate candidates for the
rigors of the treatment regimen. It is further estimated that,
annually, approximately 1,300 of these patients will be Medicare
beneficiaries. However, we have been informed by industry sources that,
allegedly due to the level of payment for the DRGs to which these cases
are currently assigned, only 100 to 200 Medicare patients receive the
treatment each year. According to these industry sources, several
treatment centers have had to discontinue their high-dose IL-2 therapy
programs for end-stage renal cell carcinoma or end-stage melanoma
because of the low Medicare payment.
According to industry sources, the wholesale cost of IL-2 is
approximately $700 per vial. Dosages range between 15 and 20 vials per
treatment, or between $10,500 and $14,000 per patient, per cycle, for
the cost of the IL-2 drug alone. There is no ICD-9-CM procedure code
that currently identifies patients receiving this therapy. Therefore,
it is not possible to identify directly these cases in the MedPAR data.
Currently, this therapy is coded using the more general ICD-9-CM code
99.28 (Injection or infusion of biologic response modifier). When we
addressed this issue previously in the August 1, 2000 IPPS final rule
(65 FR 47067) by examining cases for which procedure code 99.28
[[Page 45361]]
was present, our analysis was inconclusive due to the wide range of
cases identified (1,179 cases across in 136 DRGs). However, recent data
collected by the industry on 30 Medicare beneficiaries who received
high-dose IL-2 therapy during FY 2002 show average charges for these
cases of approximately $54,000.
Depending on the principal diagnosis reported, patients receiving
high-dose IL-2 therapy may be assigned to one of the following five
DRGs: DRG 272 (Major Skin Disorder With CC) and DRG 273 (Major Skin
Disorder Without CC) in MDC 9; DRG 318 (Kidney and Urinary Tract
Neoplasms With CC) and DRG 319 (Kidney and Urinary Tract Neoplasms
Without CC) in MDC 11; and DRG 410 (Chemotherapy Without Leukemia as
Secondary Diagnosis) in MDC 17. The following table illustrates the
average charges for patients in these DRGs.
------------------------------------------------------------------------
Average
DRG charges
------------------------------------------------------------------------
272.......................................................... $14,997
273.......................................................... 9,128
318.......................................................... 16,892
319.......................................................... 9,583
410.......................................................... 16,103
------------------------------------------------------------------------
Because of the need to identify the subset of patients receiving
this type of treatment, the ICD-9-CM Coordination and Maintenance
Committee determined, based on its consideration at the December 6,
2002 public meeting, that a new code for high-dose IL-2 therapy was
warranted. Therefore, a new code has been created in the 00 Chapter of
ICD-9-CM (Procedures and Interventions, Not Elsewhere Classified), in
category 00.1 (Pharmaceuticals) at 00.15 (High-dose infusion
Interleukin-2 (IL-2)). The code is effective for cases discharged on or
after October 1, 2003.
We believe patients receiving high-dose IL-2 therapy are clinically
similar to other cases currently assigned to DRG 492 (Chemotherapy With
Acute Leukemia as Secondary Diagnosis) in MDC 17. The average charge
for patients currently assigned to DRG 492 is $55,581. Currently, DRG
492 requires one of the following two principal diagnoses:
[sbull] V58.1, Encounter for chemotherapy
[sbull] V67.2, Followup examination following chemotherapy
And one of the following secondary diagnoses:
[sbull] 204.00, Acute lymphoid leukemia without mention of
remission
[sbull] 204.01, Acute lymphoid leukemia with remission
[sbull] 205.00, Acute myeloid leukemia without mention of remission
[sbull] 205.01, Acute myeloid leukemia with remission
[sbull] 206.00, Acute monocytic leukemia without mention of
remission
[sbull] 206.01, Acute monocytic leukemia with remission
[sbull] 207.00, Acute erythremia and erythroleukemia without
mention of remission
[sbull] 207.01, Acute erythremia and erythroleukemia with remission
[sbull] 208.00, Acute leukemia of unspecified cell type without
mention of remission
[sbull] 208.01, Acute leukemia of unspecified cell type without
mention of remission
We proposed to modify DRG 492 by adding new procedure code 00.15 to
the logic. We indicated that assignment to this DRG would require the
same two V-code principal diagnosis codes listed above (V58.1 and
V67.2), but would require either one of the leukemia codes listed as a
secondary diagnosis, or would require the procedure code 00.15. In
addition, we proposed to change the title of DRG 492 to ``Chemotherapy
With Acute Leukemia or With Use of High Dose Chemotherapy Agent''.
In the proposed rule, we indicated that we would monitor cases with
procedure code 00.15 as these data became available, and consider
potential further refinements to DRG 492 as necessary.
Comment: Five commenters supported our proposed change. One
commenter who opposed the proposed change believed that classifying
high-dose IL-2 therapy as chemotherapy would be a violation of coding
advice published in the American Hospital Association's coding
publication, Coding Clinic for ICD-9-CM, because IL-2 therapy is a
biologic response modifier and is considered immunotherapy, not
chemotherapy. Therefore, the commenter asserted that the use of either
V58.1 or V67.2 as principal diagnosis codes for these cases would
result in erroneous coding advice. The commenter added that Coding
Clinic, Fourth Quarter, page 51, indicates that when a patient is
admitted for immunotherapy, the code for the neoplasm should be
assigned as the principal diagnosis.
Response: We acknowledge the commenter's points concerning correct
selection of principal diagnosis, as well as the advice published
previously in Coding Clinic. However, the discussion of this topic has
raised some concerns among the Cooperating Parties of AHA's Editorial
Advisory Board. The advice given in the Fourth Quarter 1994 Coding
Clinic predates the new treatment technology now available, which calls
into question the correctness of the published advice. Therefore, this
topic will be included on the agenda of an upcoming AHA Editorial
Advisory Board meeting for further discussion and clarification. It is
likely that new instructions will be issued in the next several months
to clarify these coding instructions.
Therefore, in anticipation of this clarification, we are adopting
as final the proposed changes to DRG 492. We will continue to monitor
this DRG for shifts in resource consumption and validity of DRG
assignment, and will specifically monitor code 00.15 for appropriate
placement in DRG 492.
8. MDC 23 (Factors Influencing Health Status and Other Contacts With
Health Services)
a. Implantable Devices
Prior to the publication of the proposed rule, we received a
comment regarding three ICD-9-CM diagnosis codes that are currently
assigned to MDC 23: V53.01 (Fitting and adjustment of cerebral
ventricular (communicating) shunt); V53.02 (Neuropacemaker (brain)
(peripheral nerve) (spinal cord)); and V53.09 (Fitting and adjustment
of other devices related to nervous system and special senses). The
commenter suggested that we move these three codes from MDC 23 to MDC 1
(Diseases and Disorders of the Nervous System) because these codes are
used as the principal diagnosis for admissions involving removal,
replacement, and reprogramming of devices such as cerebral ventricular
shunts, neurostimulators, intrathecal infusion pumps and thalamic
stimulators.
Currently, if these diagnosis codes are reported alone without an
O.R. procedure, the case would be assigned to DRG 467 (Other Factors
Influencing Health Status). However, if an O.R. procedure is reported
with the principal diagnosis of V53.01, V53.02, or V53.09, the case
would be assigned to DRG 461 (O.R. Procedure with Diagnoses of Other
Contact with Health Services).
In our analysis of the MedPAR data, we found 30 cases assigned to
DRG 467 and 179 cases assigned to DRG 461 with one of these codes as
principal diagnosis. We found that the procedures reported with one of
these diagnosis codes were procedures in MDC 1. The most frequent
procedure was 86.06 (Insertion of totally implantable infusion pump).
Because the procedures that are routinely used with these codes are
in MDC 1, we believe it would be
[[Page 45362]]
appropriate to assign these diagnosis codes to MDC 1. As the commenter
also stated, this assignment would be consistent with how fitting and
adjustments of devices are handled within other MDCs, such as in MDC 5
(Diseases and Disorders of the Circulatory System) and MDC 11 (Diseases
and Disorders of the Kidney and Urinary Tract). Diagnosis codes V53.31
(Cardiac pacemaker), V53.32 (Automatic implantable cardiac
defibrillator), and V53.39 (Other cardiac device) are used for fitting
and adjustment of cardiac devices and are assigned to MDC 5. Diagnosis
code V53.6 (Urinary devices) is used for fitting and adjustment of
urinary devices and is assigned to MDC 11.
Therefore, we proposed to move V53.01, V53.02, and V53.09 from MDC
23 to MDC 1 when an O.R. procedure is performed. If no O.R. procedure
is performed, these diagnosis codes would be assigned to DRG 34 (Other
Disorders of Nervous System With CC) or DRG 35 (Other Disorders of
Nervous System Without CC). If an O.R. procedure is performed on a
patient assigned with one of these codes as the principal diagnosis,
the case would be assigned to the DRG in MDC 1 to which the O.R.
procedure is assigned.
We received three comments that supported our proposal to move
diagnosis codes V53.01, V53.02, and V53.09 from MDC 23 to MDC 1.
Accordingly, we are adopting as final the proposed reassignment,
effective for discharges occurring on or after October 1, 2003.
b. Malignancy Codes
Prior to the issuance of the proposed rule, we received
correspondence that indicated that when we recognized code V10.48
(History of malignancy, epididymis) as a new code for FY 2002, we did
not include the code as a history of malignancy code in DRG 465
(Aftercare with History of Malignancy as Secondary Diagnosis). All
other history of malignancy codes were included in DRG 465.
We agree that code V10.48 should have been included in the list of
history of malignancy codes within DRG 465. Therefore, we proposed to
add it to the list of secondary diagnoses in DRG 465.
We received several comments that supported this DRG modification.
Accordingly, we are adopting the proposal as final without
modification.
9. Medicare Code Editor (MCE) Change
As explained under section II.B.1. of this preamble, the MCE is a
software program that detects and reports errors in the coding of
Medicare claims data.
We received a request to examine the MCE edit ``Adult Diagnosis--
Age Greater than 14'' because currently the edit rejects claims for
patients under age 15 who are being treated for gall bladder disease.
We reviewed this issue with our pediatric consultants and determined
that, although incidence is rare, gallbladder disease does occur in
patients under age 15. Therefore, in the May 19, 2003 proposed rule, we
proposed to modify the MCE by removing the following codes from the
edit ``Adult Diagnosis--Age Greater Than 14'':
[sbull] 574.00, Calculus of gallbladder with acute cholecystitis
without mention of obstruction
[sbull] 574.01, Calculus of gallbladder with acute cholecystitis
with obstruction
[sbull] 574.10, Calculus of gallbladder with other cholecystitis
without mention of obstruction
[sbull] 574.11, Calculus of gallbladder with other cholecystitis
with obstruction
[sbull] 574.20, Calculus of gallbladder without mention of
cholecystitis without mention of obstruction
[sbull] 574.21, Calculus of gallbladder without mention of
cholecystitis with obstruction
[sbull] 574.30, Calculus of bile duct with acute cholecystitis
without mention of obstruction
[sbull] 574.31, Calculus of bile duct with acute cholecystitis with
obstruction
[sbull] 574.40, Calculus of bile duct with other cholecystitis
without mention of obstruction
[sbull] 574.41, Calculus of bile duct with other cholecystitis with
obstruction
[sbull] 574.50, Calculus of bile duct without mention of
cholecystitis without mention of obstruction
[sbull] 574.51, Calculus of bile duct without mention of
cholecystitis with obstruction
[sbull] 574.60, Calculus of gallbladder and bile duct with acute
cholecystitis without mention of obstruction
[sbull] 574.61, Calculus of gallbladder and bile duct with acute
cholecystitis with obstruction)
[sbull] 574.70, Calculus of gallbladder and bile duct with other
cholecystitis without mention of obstruction
[sbull] 574.71, Calculus of gallbladder and bile duct with other
cholecystitis with obstruction
[sbull] 574.80, Calculus of gallbladder and bile duct with acute
and chronic cholecystitis without mention of obstruction
[sbull] 574.81, Calculus of gallbladder and bile duct with acute
and chronic cholecystitis with obstruction
[sbull] 574.90, Calculus of gallbladder and bile duct without
cholecystitis without mention of obstruction
[sbull] 574.91, Calculus of gallbladder and bile duct without
cholecystitis with obstruction
[sbull] 575.0, Acute cholecystitis
[sbull] 575.10, Cholecystitis, not otherwise specified
[sbull] 575.11, Chronic cholecystitis
[sbull] 575.12, Acute and chronic cholecystitis
[sbull] 575.2, Obstruction of gallbladder
[sbull] 575.3, Hydrops of gallbladder
[sbull] 576.0, Postcholecystectomy syndrome
[sbull] 577.1, Chronic pancreatitis
Comment: Four commenters agreed in general with our decision to
remove the above listed codes from the MCE in the edit ``Adult
Diagnosis--Age Greater than 14.'' However, one commenter recommended
that all ICD-9-CM codes in the 575 through 577 range be removed from
the edit and listed several codes that appeared to be missing from our
list. These codes were 575.4 (Perforation of gallbladder), 577.0 (Acute
pancreatitis), and 577.1 (Chronic pancreatitis). In addition, three
commenters pointed out that code 574.90 had been erroneously listed
twice with different narrative descriptions.
Response: We appreciate the commenters' interest in the correctness
of the MCE. We also have received many telephone calls and e-mails
concerning the typographical error with code 574.90. We have corrected
the list above to reflect the correct code number, 574.91. As noted,
the second narrative listing in the proposed rule correctly described
code 574.91, not 574.90 (68 FR 27166).
With regard to the comment concerning the absence of codes 575.4
and 577.0 from the above list, we note that these codes are not
included in the MCE edit. That is, these codes were never part of the
MCE edit. With regard to code 577.1, this code is the last one on the
list and was printed correctly in the proposed rule (68 FR 27166, third
column).
Accordingly, we are adopting as final the proposal to remove the
listed codes from the MCE edit ``Adult Diagnosis--Age Greater than
14,'' with the correction of the fifth digit of code 574.91 (Calculus
of gallbladder and bile duct without cholecystitis with obstruction).
10. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different DRG within the MDC to which the principal diagnosis is
assigned. Therefore, it is necessary to have a
[[Page 45363]]
decision rule within the GROUPER by which these cases are assigned to a
single DRG. The surgical hierarchy, an ordering of surgical classes
from most resource-intensive to least resource-intensive, performs that
function. Application of this hierarchy ensures that cases involving
multiple surgical procedures are assigned to the DRG associated with
the most resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of DRG reclassification and recalibrations, we
reviewed the surgical hierarchy of each MDC, as we have for previous
reclassifications and recalibrations, to determine if the ordering of
classes coincides with the intensity of resource utilization.
A surgical class can be composed of one or more DRGs. For example,
in MDC 11, the surgical class ``kidney transplant'' consists of a
single DRG (DRG 302) and the class ``kidney, ureter and major bladder
procedures'' consists of three DRGs (DRGs 303, 304, and 305).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one DRG. The methodology for determining the most resource-
intensive surgical class involves weighting the average resources for
each DRG by frequency to determine the weighted average resources for
each surgical class. For example, assume surgical class A includes DRGs
1 and 2 and surgical class B includes DRGs 3, 4, and 5. Assume also
that the average charge of DRG 1 is higher than that of DRG 3, but the
average charges of DRGs 4 and 5 are higher than the average charge of
DRG 2. To determine whether surgical class A should be higher or lower
than surgical class B in the surgical hierarchy, we would weight the
average charge of each DRG in the class by frequency (that is, by the
number of cases in the DRG) to determine average resource consumption
for the surgical class. The surgical classes would then be ordered from
the class with the highest average resource utilization to that with
the lowest, with the exception of ``other O.R. procedures'' as
discussed below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, this result is unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average charge is
ordered above a surgical class with a higher average charge. For
example, the ``other O.R. procedures'' surgical class is uniformly
ordered last in the surgical hierarchy of each MDC in which it occurs,
regardless of the fact that the average charge for the DRG or DRGs in
that surgical class may be higher than that for other surgical classes
in the MDC. The ``other O.R. procedures'' class is a group of
procedures that are only infrequently related to the diagnoses in the
MDC but are still occasionally performed on patients in the MDC with
these diagnoses. Therefore, assignment to these surgical classes should
only occur if no other surgical class more closely related to the
diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
charges for two surgical classes is very small. We have found that
small differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average charges are likely to shift such that the higher-
ordered surgical class has a lower average charge than the class
ordered below it.
Based on the preliminary recalibration of the DRGs, in the May 19,
2003 proposed rule, we proposed modifications of the surgical hierarchy
as set forth below.
We proposed to revise the surgical hierarchy for the pre-MDC DRGs,
MDC 1 (Diseases and Disorders of the Nervous System), MDC 5 (Diseases
and Disorders of the Circulatory System), MDC 8 (Diseases and Disorders
of the Musculoskeletal System and Connective Tissue), and MDC 17
(Myeloproliferative Disease and Disorders, Poorly Differentiated
Neoplasms for Lymphoma and Leukemia) as follows:
[sbull] In the pre-MDC DRGs, we proposed to reorder DRG 513
(Pancreas Transplant) above DRG 512 (Simultaneous Pancreas/Kidney
Transplant).
[sbull] In MDC 1, we proposed to reorder DRG 3 (Craniotomy Age 0-
17) above DRG 528 (Intracranial Vascular Procedures with Principal
Diagnosis Hemorrhage); DRG 528 above DRGs 1 and 2 (Craniotomy Age
17 With and Without CC, respectively); DRGs 1 and 2 above
DRGs 529 and 530 (Ventricular Shunt Procedures With and Without CC,
respectively); DRGs 529 and 530 above DRGs 531 and 532 (Spinal
Procedures With and Without CC, respectively); DRGs 531 and 532 above
DRGs 533 and 534 (Extracranial Procedures With and Without CC,
respectively); and DRGs 533 and 534 above DRG 6 (Carpal Tunnel
Release).
[sbull] In MDC 5, we proposed to reorder DRG 535 (Cardiac
Defibrillator Implant With Cardiac Catheterization With AMI, Heart
Failure, or Shock) above DRG 536 (Cardiac Defibrillator Implant With
Cardiac Catheterization Without AMI, Heart Failure, or Shock), and DRG
536 above DRG 515 (Cardiac Defibrillator Implant Without Cardiac
Catheterization).
[sbull] In MDC 8, we proposed to reorder DRGs 537 and 538 (Local
Excision and Removal of Internal Fixation Devices Except Hip and Femur
With and Without CC, respectively) above DRG 230 (Local Excision and
Removal of Internal Fixation Devices of Hip and Femur).
[sbull] In MDC 17, we proposed to reorder DRGs 539 and 540
(Lymphoma and Leukemia With Major O.R. Procedure With and Without CC,
respectively) above DRGs 401 and 402 (Lymphoma and Non-Acute Leukemia
With Other O.R. Procedures With and Without CC, respectively).
In the proposed rule, we were unable to test the effects of the
proposed revisions to the surgical hierarchy and reflect these changes
in the proposed relative weights because the revised GROUPER software
was unavailable at the time the proposed rule was published. Rather, we
simulated most major classification changes to approximate the
placement of cases under the proposed reclassification, and then
determined the average charge for each DRG. These average charges
served as our best estimate of relative resources used for each
surgical class. We have now tested the proposed surgical hierarchy
changes using the revised GROUPER software, and are reflecting the
final changes in the DRG relative weights in this final rule. Further,
as discussed in section II.C. of the preamble of this final rule, the
final recalibrated weights are different from the proposed weights
because they were based on more complete data.
Based on a test of the proposed revisions using the March 2003
update of the FY 2002 MedPAR file and the revised GROUPER software, we
have found that the proposed change in the pre-MDC DRGs to reorder DRG
513 (Pancreas Transplant) above DRG 12 (Simultaneous Pancreas/Kidney
Transplant) was not supported by the data. If this proposal were
finalized, no cases would be assigned to DRG 512. The other proposed
revisions are still supported by the data.
Comment: Two commenters expressed support for the proposed
[[Page 45364]]
change in the surgical hierarchy. Another commenter requested a change
in the surgical hierarchy for a case in which a spinal fusion with
subsequent debridement is performed during the same admission. This
case is assigned to DRG 217 (Wound Debridement and Skin Graft Except
Hand, for Musculoskeletal and Connective Tissue Disease). The commenter
requested that this case be reassigned to DRG 497 (Spinal Fusion Except
Cervical With CC) because it has a higher DRG weight than DRG 217.
Response: The surgical hierarchy places a patient with multiple
procedures in the most resource intensive class, but this does not
necessarily mean that the patient is assigned to the most resource
intensive DRG. In this scenario, one surgical class is actually one
DRG, and another surgical class is back and neck procedures. These
classes encompass 7 DRGs (DRGs 496-500 and DRGs 519 and 520). The
average charges for DRG 217 are approximately $15,000 more than the
back and neck procedures class. DRG 217 is hierarchically ordered
higher in the surgical group than DRG 497, which is the reason the case
is assigned to DRG 217.
Therefore, we are adopting the proposed changes in MDCs 1, 5, 8,
and 17 as final. We are not making any changes in the pre-MDC DRGs.
11. Refinement of Complications and Comorbidities (CC) List
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. We developed this list of
diagnoses, using physician panels, to include those diagnoses that,
when present as a secondary condition, would be considered a
substantial complication or comorbidity. In previous years, we have
made changes to the list of CCs, either by adding new CCs or deleting
CCs already on the list. As we proposed in the May 19, 2003 proposed
rule, we are not deleting any of the diagnosis codes on the CC list.
As explained in the May 19, 1989 proposed rule (52 FR 18877) and
the September 1, 1987 final notice (52 FR 33154), the excluded
secondary diagnoses were established using the following five
principles:
[sbull] Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
[sbull] Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
[sbull] Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another.
[sbull] Codes for the same condition in anatomically proximal sites
should not be considered CCs for one another.
[sbull] Closely related conditions should not be considered CCs for
one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\3\
We proposed a limited revision of the CC Exclusions List to take
into account the proposed changes that will be made in the ICD-9-CM
diagnosis coding system effective October 1, 2003. (See section
II.B.13. of this preamble for a discussion of ICD-9-CM changes.) We
proposed these changes in accordance with the principles established
when we created the CC Exclusions List in 1987.
---------------------------------------------------------------------------
\3\ See the September 30, 1988 final rule (53 FR 38485) for the
revision made for the discharges occurring in FY 1989; the September
1, 1989 final rule (54 FR 36552) for the FY 1990 revision; the
September 4, 1990 final rule (55 FR 36126) for the FY 1991 revision;
the August 30, 1991 final rule (56 FR 43209) for the FY 1992
revision; the September 1, 1992 final rule (57 FR 39753) for the FY
1993 revision; the September 1, 1993 final rule (58 FR 46278) for
the FY 1994 revisions; the September 1, 1994 final rule (59 FR
45334) for the FY 1995 revisions; the September 1, 1995 final rule
(60 FR 45782) for the FY 1996 revisions; the August 30, 1996 final
rule (61 FR 46171) for the FY 1997 revisions; the August 29, 1997
final rule (62 FR 45966) for the FY 1998 revisions; the July 31,
1998 final rule (63 FR 40954) for the FY 1999 revisions, the August
1, 2000 final rule (65 FR 47064) for the FY 2001 revisions; the
August 1, 2001 final rule (66 FR 39851) for the FY 2002 revisions;
and the August 1, 2002 final rule (67 FR 49998) for the FY 2003
revisions.) In the July 30, 1999 final rule (64 FR 41490), we did
not modify the CC Exclusions List for FY 2000 because we did not
make any changes to the ICD-9-CM codes for FY 2000.
---------------------------------------------------------------------------
Tables 6G and 6H in the Addendum to this final rule contain the
revisions to the 13 CC Exclusions List that will be effective for
discharges occurring on or after October 1, 2003. Each table shows the
principal diagnoses with changes to the excluded CCs. Each of these
principal diagnoses is shown with an asterisk, and the additions or
deletions to the CC Exclusions List are provided in an indented column
immediately following the affected principal diagnosis.
CCs that are added to the list are in Table 6G--Additions to the CC
Exclusions List. Beginning with discharges on or after October 1, 2003,
the indented diagnoses will not be recognized by the GROUPER as valid
CCs for the asterisked principal diagnosis.
CCs that are deleted from the list are in Table 6H--Deletions from
the CC Exclusions List. Beginning with discharges on or after October
1, 2003, the indented diagnoses will be recognized by the GROUPER as
valid CCs for the asterisked principal diagnosis.
Comment: One commenter indicated that it was unable to provide
meaningful comments on Tables 6G and 6H because of formatting errors in
the printed tables. In addition, the commenter suggested that the
changes in the tables should not be effective until a revised version
was made available for public comment.
Response: We apologize for the errors in the format of the tables,
which were printer's errors. However, we note that the tables did
contain the correct codes, even though the format of the columns was
distorted. Therefore, we do not believe a delay in the effective date
of the changes is warranted.
Copies of the original CC Exclusions List applicable to FY 1988 can
be obtained from the National Technical Information Service (NTIS) of
the Department of Commerce. It is available in hard copy for $133.00
plus shipping and handling. A request for the FY 1988 CC Exclusions
List (which should include the identification accession number (PB) 88-
133970) should be made to the following address: National Technical
Information Service, United States Department of Commerce, 5285 Port
Royal Road, Springfield, VA 22161; or by calling (800) 553-6847.
Users should be aware of the fact that all revisions to the CC
Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996,
1997, 1998, 1999, 2000, 2002, and 2003) and those in Tables 6G and 6H
of this final rule for FY 2004 must be incorporated into the list
purchased from NTIS in order to obtain the CC Exclusions List
applicable for discharges occurring on or after October 1, 2003. (Note:
There was no CC Exclusions List in FY 2001 because we did not make
changes to the ICD-9-CM codes for FY 2001.)
Alternatively, the complete documentation of the GROUPER logic,
[[Page 45365]]
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current DRG Definitions Manual, Version 20.0, is available for $225.00,
which includes $15.00 for shipping and handling. Version 21.0 of this
manual, which includes the final FY 2004 DRG changes, is available for
$225.00. These manuals may be obtained by writing 3M/HIS at the
following address: 100 Barnes Road, Wallingford, CT 06492; or by
calling (203) 949-0303. Please specify the revision or revisions
requested.
12. Review of Procedure Codes in DRGs 468, 476, and 477
Each year, we review cases assigned to DRG 468 (Extensive O.R.
Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic O.R.
Procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive
O.R. Procedure Unrelated to Principal Diagnosis) to determine whether
it would be appropriate to change the procedures assigned among these
DRGs.
DRGs 468, 476, and 477 are reserved for those cases in which none
of the O.R. procedures performed are related to the principal
diagnosis. These DRGs are intended to capture atypical cases, that is,
those cases not occurring with sufficient frequency to represent a
distinct, recognizable clinical group. DRG 476 is assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
[sbull] 60.0 Incision of prostate
[sbull] 60.12 Open biopsy of prostate
[sbull] 60.15 Biopsy of periprostatic tissue
[sbull] 60.18 Other diagnostic procedures on prostate and
periprostatic tissue
[sbull] 60.21 Transurethral prostatectomy
[sbull] 60.29 Other transurethral prostatectomy
[sbull] 60.61 Local excision of lesion of prostate
[sbull] 60.69 Prostatectomy, not elsewhere classified
[sbull] 60.81 Incision of periprostatic tissue
[sbull] 60.82 Excision of periprostatic tissue
[sbull] 60.93 Repair of prostate
[sbull] 60.94 Control of (postoperative) hemorrhage of prostate
[sbull] 60.95 Transurethral balloon dilation of the prostatic
urethra
[sbull] 60.99 Other operations on prostate
All remaining O.R. procedures are assigned to DRGs 468 and 477,
with DRG 477 assigned to those discharges in which the only procedures
performed are nonextensive procedures that are unrelated to the
principal diagnosis. The original list of the ICD-9-CM procedure codes
for the procedures we consider nonextensive procedures, if performed
with an unrelated principal diagnosis, was published in Table 6C in
section IV. of the Addendum to the September 30, 1988 final rule (53 FR
38591). As part of the final rules published on September 4, 1990 (55
FR 36135), August 30, 1991 (56 FR 43212), September 1, 1992 (57 FR
23625), September 1, 1993 (58 FR 46279), September 1, 1994 (59 FR
45336), September 1, 1995 (60 FR 45783), August 30, 1996 (61 FR 46173),
and August 29, 1997 (62 FR 45981), we moved several other procedures
From DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468.
No procedures were moved in FY 1999, as noted in the July 31, 1998
final rule (63 FR 40962); in FY 2000, as noted in the July 30, 1999
final rule (64 FR 41496); in FY 2001, as noted in the August 1, 2000
final rule (65 FR 47064); or in FY 2002, as noted in the August 1, 2001
final rule (66 FR 39852). In the August 1, 2002 final rule (67 FR
49999), we did not move any procedures from DRG 477. However, we did
move procedures codes from DRG 468 and placed them in more clinically
coherent DRGs.
a. Moving Procedure Codes From DRG 468 or DRG 477 to MDCs
We annually conduct a review of procedures producing assignment to
DRG 468 or DRG 477 on the basis of volume, by procedure, to see if it
would be appropriate to move procedure codes out of these DRGs into one
of the surgical DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed two ways for comparison purposes. We look
at a frequency count of each major operative procedure code. We also
compare procedures across MDCs by volume of procedure codes within each
MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical DRGs for the MDC in which the diagnosis falls.
Based on this year's review, we did not identify any necessary changes
in procedures under DRG 477. Therefore, we did not propose moving any
procedures from DRG 477 to one of the surgical DRGs in this final rule.
However, in the proposed rule, we identified a necessary proposed
change under DRG 468 relating to code 50.29 (Other destruction of
lesion of liver). We were contacted by a hospital about the fact that
code 50.29 is not currently included in MDC 6 (Diseases and Disorders
of the Digestive System). The hospital pointed out that it is not
uncommon for patients to have procedures performed on the liver when
they are admitted for a condition that is classified in MDC 6. For
example, DRGs 170 and 171 (Other Digestive System O.R. Procedures With
and Without CC, respectively) in MDC 6 currently include liver
procedures such as biopsy of the liver. The hospital disagreed with the
assignment of code 50.29 to DRG 468 when performed on a patient with a
principal diagnosis in MDC 6. We believe that the commenter is correct.
Therefore, we proposed to assign code 50.29 to DRGs 170 and 171 in MDC
6.
We received several comments of support for our proposal to assign
code 50.29 to DRGs 170 and 171 in MDC 6. Therefore, we are adopting the
proposal as final without modification. As a result, code 50.29 will
not result in assignment to DRG 468 when this procedure is performed on
patient with a principal diagnosis in MDC 6.
b. Reassignment of Procedures Among DRGs 468, 476, and 477
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to DRGs 468, 476, and 477, to ascertain if any of those
procedures should be reassigned from one of these three DRGs to another
of the three DRGs based on average charges and the length of stay. We
look at the data for trends such as shifts in treatment practice or
reporting practice that would make the resulting DRG assignment
illogical. If we find these shifts, we would propose to move cases to
keep the DRGs clinically similar or to provide payment for the cases in
a similar manner. Generally, we move only those procedures for which we
have an adequate number of discharges to analyze the data. Based on our
review this year, we did not propose moving any procedures from DRG 476
to DRGs 468 or 477, or from DRG 477 to DRGs 468 or 476.
However, in the proposed rule, we identified several procedures
that we proposed to move from DRG 468 and add to DRGs 476 and 477
because the procedures are nonextensive:
[sbull] 38.21, Biopsy of blood vessel
[sbull] 77.42, Biopsy of scapula, clavicle and thorax [ribs and
sternum]
[sbull] 77.43, Biopsy of radius and ulna
[sbull] 77.44, Biopsy of carpals and metacarpals
[sbull] 77.45, Biopsy of femur
[sbull] 77.46, Biopsy of patella
[[Page 45366]]
[sbull] 77.47, Biopsy of tibia and fibula
[sbull] 77.48, Biopsy of tarsals and metatarsals
[sbull] 77.49, Biopsy of other bones
[sbull] 92.27, Implantation or insertion of radioactive elements
We note that the above codes being moved from DRG 468 to DRGs 476
and 477 were erroneously listed in the May 19, 2003 proposed rule under
section II.B.12.c., which related to adding diagnosis or procedure
codes to MDCs, instead of section II.B.12.b., which discussed the
reassignment of procedures among DRGs 468, 476, and 477. We regret any
inconvenience this inadvertent listing may have caused.
Comment: One commenter asked us to consider moving procedure code
51.23, Laparoscopic cholecystectomy, from DRG 468 and adding it to DRG
477. The commenter indicated that this procedure is often performed in
the outpatient setting.
Response: We believe that the commenter's request has merit. We
will perform the necessary data analysis and will consider proposing
this change in next fiscal year's rule if we find that the data support
this change.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on our review this year, we did not propose adding any
diagnosis codes to MDCs in this final rule. We did not receive any
comments on the proposal.
13. Changes to the ICD-9-CM Coding System
As described in section II.B.1. of this preamble, the ICD-9-CM is a
coding system that is used for the reporting of diagnoses and
procedures performed on a patient. In September 1985, the ICD-9-CM
Coordination and Maintenance Committee was formed. This is a Federal
interdepartmental committee, co-chaired by the National Center for
Health Statistics (NCHS) and CMS, charged with maintaining and updating
the ICD-9-CM system. The Committee is jointly responsible for approving
coding changes, and developing errata, addenda, and other modifications
to the ICD-9-CM to reflect newly developed procedures and technologies
and newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The ICD-9-CM Manual contains the list of valid diagnosis and
procedure codes. (The ICD-9-CM Manual is available from the Government
Printing Office on CD-ROM for $23.00 by calling (202) 512-1800.) The
NCHS has lead responsibility for the ICD-9-CM diagnosis codes included
in the Tabular List and Alphabetic Index for Diseases, while CMS has
lead responsibility for the ICD-9-CM procedure codes included in the
Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, medical record
administrators, health information management professionals, and other
members of the public, to contribute ideas on coding matters. After
considering the opinions expressed at the public meetings and in
writing, the Committee formulates recommendations, which then must be
approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2004 at a public meeting held on December 6, 2002,
and finalized the coding changes after consideration of comments
received at the meetings and in writing by January 10, 2003. Those
coding changes are announced in Tables 6A and 6B of this final rule.
Copies of the minutes of the procedure codes discussions at the
Committee's 2002 meetings can be obtained from the CMS Web site: http://www.cms.gov/paymentsystems/icd9/.
The minutes of the diagnoses codes
discussions at the 2002 meetings are found at: http://www.cdc.gov/nchs/icd9.htm.
Paper copies of these minutes are no longer available and the
mailing list has been discontinued.
The first of the 2003 public meetings was held on April 3, 2003. In
the September 7, 2001 final rule implementing the IPPS new technology
add-on payments (66 FR 46906), we indicated we would attempt to include
all proposals discussed and approved at the April meeting as part of
the code revisions effective the following October. Because the
proposed rule was published after the April meeting, we were able to
include all new procedure codes that were approved subsequent to that
meeting in Table 6B of the Addendum to the proposed rule, including the
DRG assignments. However, the National Center for Health Statistics
(NCHS) created and finalized three new severe acute respiratory
syndrome (SARS) related codes after the proposed rule was published.
These new codes, which were not listed in Table 6A of the Addendum to
the proposed rule, have been included in Table 6A of the Addendum to
this final rule. The new codes are as follows:
[sbull] 079.82, SARS-associated coronavirus
[sbull] 480.3, Pneumonia due to SARS-associated coronavirus
[sbull] V01.82, Exposure to SARA-associated coronavirus
These new codes have been identified with a footnote (1) in Table
6A of the Addendum to this final rule.
For a report of procedure topics discussed at the April 2003
meeting, see the Summary Report at: http://www.cms.hhs.gov/paymentsystems/icd9/.
For a report of the diagnosis topics discussed at
the April 2003 meeting, see the Summary Report at: http://www.cdc.gov/nchs/icd9.htm
.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson; ICD-9-CM
Coordination and Maintenance Committee; NCHS; Room 2404, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by E-mail to:
dfp4@cdc.gov. Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination
and Maintenance Committee; CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care; C4-08-06;
7500 Security Boulevard; Baltimore, MD 21244-1850. Comments may be sent
by E-mail to: pbrooks1@cms.hhs.gov. The ICD-9-CM code changes that have been approved will become
effective October 1, 2003. The new ICD-9-CM codes are listed, along
with their DRG classifications, in Tables 6A and 6B (New Diagnosis
Codes and New Procedure Codes, respectively) in the Addendum to this
final rule. As we stated above, the code numbers and their titles were
presented for public comment at the ICD-9-CM Coordination and
Maintenance Committee meetings. Both oral and written comments were
considered before the codes were approved. Accordingly, in the May 19,
2003 proposed rule, we only solicited comments on the proposed DRG
classification of these new codes.
Comment: One commenter expressed concern about the MDC and DRG
designations for new diagnosis code 752.89 (Other specified anomalies
of genital organs) that was included in
[[Page 45367]]
Table 6A of the Addendum to the proposed rule. We had proposed
assigning this new code to MDC 12 (Diseases and Disorders of the Male
Reproductive System), and DRG 352 (Other Male Reproductive System
Diagnoses). The commenter pointed out that this new code could apply to
both males and females. Its predecessor code was assigned to MDC 12,
DRG 352, as well as to MDC 13 (Diseases and Disorders of the Female
Reproductive System) and DRGs 358 (Uterine and Adnexa Procedure for
Non-Malignancy with CC), 359 (Uterine and Adnexa Procedure for Non-
Malignancy without CC), and 369 (Menstrual and Other Female
Reproductive System Disorders).
Response: The commenter is correct. Diagnosis code 752.89 would
apply to both males and females and should have been included in both
MDC 12 and MDC 13. In this final rule, we are assigning diagnosis code
752.89 to MDC 13 under DRGs 358, 359, and 369 and have modified Table
6A of the Addendum to this final rule accordingly.
Comment: One commenter pointed out a typographical error for the
code title for V15.87. The commenter indicated that the word
``membrance'' should be changed to ``membrane''; that is, the title
should read ``History of Extracorporeal Membrane Oxygenation (ECMO).''
Response: We agree with the commenter and have corrected the title
in Table 6A of the Addendum to this final rule.
For codes that have been replaced by new or expanded codes, the
corresponding new or expanded diagnosis codes are included in Table 6A.
New procedure codes are shown in Table 6B. Diagnosis codes that have
been replaced by expanded codes or other codes or have been deleted are
in Table 6C (Invalid Diagnosis Codes). These invalid diagnosis codes
will not be recognized by the GROUPER beginning with discharges
occurring on or after October 1, 2003. Table 6D contains invalid
procedure codes. Revisions to diagnosis code titles are in Table 6E
(Revised Diagnosis Code Titles), which also includes the DRG
assignments for these revised codes. Table 6F includes revised
procedure code titles for FY 2004.
The Department of Health and Human Services has been actively
working on the development of new coding systems to replace the ICD-9-
CM. In December 1990, the National Committee on Vital and Health
Statistics (NCVHS) issued a report noting that, while the ICD-9-CM
classification system had been responsive to changing technologies and
identifying new diseases, there was concern that the ICD classification
might be stressed to a point where the quality of the system would soon
be compromised. The ICD-10-CM (for diagnoses) and the ICD-10-PCS (for
procedures) were developed in response to these concerns. These efforts
have become increasingly important because of the growing number of
problems with the ICD-9-CM, which was implemented 24 years ago.
Implementing ICD-10-PCS as a national standard was discussed at the
December 6, 2002, ICD-9-CM Coordination and Maintenance Committee
meeting. A complete report of the meeting, including examples of
letters supporting and opposing ICD-10-PCS, can be found at the CMS Web
site: http://www.cms.hhs.gov/paymentsystems/icd9/. Also, the Secretary
has asked the NCVHS to recommend whether or not the country should
replace ICD-9-CM as a national coding standard with ICD-10-CM and ICD-
10-PCS. A complete report on the activities of this committee can be
found at: http://www.ncvhs.hhs.gov.
Comment: Several commenters supported the move to ICD-10-CM and
ICD-10-PCS as national coding standards. One commenter representing
hospitals supported moving to these systems expeditiously. The
commenter stated that ICD-10-CM and ICD-10-PCS are a vast improvement
over ICD-9-CM and would provide greater specificity and detail in
coding. Another commenter believed that the new systems would offer
immediate and long-term benefits for specifying illness severity and
accommodating a diverse array of new technologies that warrant
expedited assignment under the DRG system.
Response: We appreciate the support from many in the health care
industry for ICD-10-CM and ICD-10-PCS. We agree with the importance of
having and maintaining medical coding systems that accurately capture
the patient's conditions and medical procedures. We also agree that
ICD-9-CM is seriously constrained because of its structure and space
limitations. We recognize that over 30 countries have implemented ICD-
10 to better capture medical conditions. Countries such as Canada and
Australia have successfully implemented ICD-10 without serious
ramifications to their data or reimbursement systems. We agree that it
is important to capture information on new technologies. It is becoming
increasingly difficult to do so using ICD-9-CM. We will continue
working with NCVHS and the health care industry to determine if these
new systems should be named as national coding standards.
14. Other Issues
In addition to the specific topics discussed in section II.B.1.
through 13. of this preamble, we considered a number of other DRG-
related issues in the May 19, 2003 proposed rule. Below is a summary of
the issues that were addressed.
a. Cochlear Implants
Cochlear implants were first covered by Medicare in 1986 and were
assigned to DRG 49 (Major Head and Neck Procedures) in MDC 3 (Diseases
and Disorders of the Ear, Nose, Mouth, and Throat). This is the highest
weighted surgical DRG in MDC 3. However, prior to the publication of
the proposed rule, commenters contended that this DRG assignment is
clinically and economically inappropriate for cochlear implants and
requested a more specific DRG. The commenters contend that, like heart
assist systems (for which we created a new DRG last year, DRG 525
(Heart Assist System Implant) in MDC 5), cochlear implants are low
incidence procedures with disproportionately high costs compared to
other procedures within DRG 49.
As we stated in the FY 2003 final rule in our discussion regarding
the creation of DRG 525 (67 FR 49989), we found 185 heart assist system
cases in DRG 104 (Cardiac Valve and Other Major Cardiothoracic
Procedures with Cardiac Catheterization) and 90 cases in DRG 105
(Cardiac Valve and Other Major Cardiothoracic Procedures without
Cardiac Catheterization). The average charges for these cases were
approximately $36,000 and $85,000 higher than the average charges for
cases in DRGS 104 and 105, respectively. However, these cases
represented only a small fraction of all cases in these DRGs (1.3
percent and 0.5 percent, respectively). Therefore, despite the
drastically higher average charges for heart assist systems, the
relative volume was insufficient to affect the DRG weight to any great
degree.
In our analysis of the FY 2002 MedPAR file, we found 134 cochlear
implant cases out of 1,637 cases assigned to DRG 49, which represent
more than 8 percent of the total cases in DRG 49. Compared to the
situation with the heart assist system implant cases in DRGs 104 and
105, cochlear implants do have a greater effect on the relative weight
for DRG 49. Also, while average charges for cochlear implant cases are
significantly more than other cases in DRG 49 (average charges for
cochlear implant cases were $51,549 compared to
[[Page 45368]]
$25,052 for noncochlear implant cases), this difference is much less
than the $36,000 and $85,000 differences for heart assist systems cited
above.
Although we are concerned about the disparity between the average
costs and payments for cochlear implant patients, we also have concerns
about establishing a separate DRG for these cases. Doing so could
create an incentive for some of these procedures to be shifted from
outpatient settings, where most are currently performed. Even among
current cochlear implant cases, our analysis found the average length
of stay for Medicare patients receiving this procedure in the inpatient
setting was just over 1 day, indicating minimal inpatient care is
necessary for these cases. It is unclear whether a shift toward more
inpatient stays would be appropriate.
We also are concerned whether the volume of cochlear implant cases
across all hospitals performing this procedure warrants establishing a
new DRG. The DRG relative weights reflect an average cost per case,
with the costs of some procedures above the DRG mean costs and some
below the mean. It is expected that hospitals will offset losses for
certain procedures with payment gains for other procedures, while
responding to incentives to maintain efficient operations. An excessive
proliferation of new DRGs for specific technologies would fundamentally
alter this averaging concept.
Accordingly, for the reasons cited above, we did not propose to
change the DRG assignment of cochlear implants in the May 19, 2003
proposed rule. However, we did encourage public comments as to whether
a new DRG for cochlear implants (or some other solution) is warranted.
Comment: Several commenters urged CMS to reassign cochlear
implantation procedures to a DRG that has a weight appropriate to
reflect the costs of cochlear implantation. The commenters stated that
while a hospital's acquisition cost of the device itself averages
approximately $23,800, the proposed payment for FY 2004 is
approximately $8,233. While most cochlear implants have been and will
continue to be performed on an outpatient basis, a small, but
significant portion, particularly for Medicare beneficiaries, need to
be conducted as an inpatient procedure. The commenters stated that the
low volume of inpatient cases is a direct result of the inadequate
payment rate.
The commenters stated that cochlear implantation is clinically
incongruent and economically inconsistent with the other procedures in
DRG 49. The commenters believed that cochlear implants do not
meaningfully affect the weighting of DRG 49 and proposed two options:
Create a new DRG specifically for cochlear implants, or reassign
cochlear implants cases to DRG 482 (Tracheostomy for Face, Mouth, and
Neck Diagnoses).
Response: We requested public input on possible solutions for these
cases because we recognize the data indicate the charges for these
cases are much higher than for other cases in DRG 49. However, we are
concerned that the options suggested by commenters are not workable
solutions. As we alluded to in the proposed rule, we have concerns
about creating a new DRG for this procedure. We appreciate the point
made by commenters that only those patients requiring inpatient care
would receive the procedure in an inpatient setting, even if the DRG
payment were increased. However, as we have stated previously, we are
reluctant to create new DRGs for specific, low-volume procedures. Doing
so would create a proliferation of DRGs and a loss of some of the
efficiency incentives inherent in the current system. Hospitals are
generally able to offset any losses on such procedures through
corresponding payment advantages from other, less expensive procedures.
The second option suggested, to reassign these cases to DRG 482, is
inconsistent with the structure of that DRG, which requires that a
tracheostomy be performed in order to be assigned to this DRG.
Assigning cochlear implants to this DRG would fundamentally alter its
structure, which could not be done without first proposing such a
change for public review and comment.
However, as we indicated above, we recognize the disparity in
average charges for these cases compared to other cases in DRG 49, and
will continue to evaluate possible reclassification options for FY
2005.
b. Burn Patients on Mechanical Ventilation
Prior to the publication of the proposed rule, concerns were raised
by hospitals treating burn patients that the current DRG payment for
burn patients on mechanical ventilation is not adequate. The DRG
assignment for these cases depends on whether the hospital performed
the tracheostomy, or the tracheostomy was performed prior to transfer
to the hospital. If the hospital does not actually perform the
tracheostomy, the case is assigned to one of the burn DRGs in MDC 22
(Burns). If the hospital performs a tracheostomy, the case is assigned
to DRG 482 (Tracheostomy for Face, Mouth, and Neck Diagnoses) or DRG
483 (Tracheostomy with Mechanical Ventilation 96 + Hours, Except Face,
Mouth and Neck Diagnoses).
In the August 1, 2002 final rule, we modified DRGs 482 and 483 to
recognize code 96.72 (Continuous mechanical ventilation for 96
consecutive hours or more) for the first time in the DRG assignment (67
FR 49996). We noted that many patients assigned to DRG 483 did not have
code 96.72 recorded. We believed this was due, in part, to the limited
number of procedure codes (six) that can be submitted on the current
billing form, and the fact that code 96.72 did not affect the DRG
assignment (prior to FY 2003). We stated that we would give future
consideration to further modifying DRGs 482 and 483 based on the
presence of code 96.72. We anticipate that cases of patients receiving
96 or more hours of continuous mechanical ventilation are more
expensive than other tracheostomy patients. Once code 96.72 is reported
more frequently, we will be better able to assess the need for future
revisions to DRGs 482 and 483.
To assess the payment for burn patients on mechanical ventilation
when the hospital did not perform the tracheostomy, we analyzed data on
cases reporting both code 96.72 and diagnosis code V44.0 (Tracheostomy
status). We had hoped that these cases would show patients on long-term
ventilation who were admitted to the hospital with a tracheostomy in
place. Our data did not include any cases reported in any of the burn
DRGs with codes 96.72 and V44.0. We then analyzed data on the frequency
of cases reporting code 96.72 along with diagnosis code V46.1
(Respirator dependence). We found only 5 of these cases in the burn
DRGs. With so few cases reporting code 96.72, it is difficult for us to
determine the effect of long-term ventilation on reimbursement for burn
cases.
All hospitals, including those that treat burn patients, are
encouraged to increase the reporting of code 96.72 for patients who are
on continuous mechanical ventilation for 96 or more hours. With better
data, we would be able to determine how best to make any future DRG
modification for all patients on long-term mechanical ventilation.
We received one comment from an organization representing coders
that agreed with the importance of reporting code 96.72 and the need
for further education on this issue. We will continue to monitor our
data to assess
[[Page 45369]]
the payment for burn patients on mechanical ventilation in the future.
c. Multiple Level Spinal Fusion
Prior to the publication of the proposed rule, we received a
comment recommending the establishment of new DRGs that would
differentiate between the number of levels of vertebrae involved in a
spinal fusion procedure. The commenter noted that the ICD-9-CM
Coordination and Maintenance Committee discussed adding a new series of
codes to identify multiple levels of spinal fusions at its December 6,
2002 meeting.
The following codes were approved by the Committee, effective for
October 1, 2003, and are listed in Table 6B in the Addendum to this
final rule:
[sbull] 81.62, Fusion or refusion of 2-3 vertebrae
[sbull] 81.63, Fusion or refusion of 4-8 vertebrae
[sbull] 81.64, Fusion or refusion of 9 or more vertebrae
The commenter conducted an analysis to support redefining the
spinal fusion DRGs using these new ICD-9-CM codes. Using the CMS FY
2001 Standard Analytical File data for physicians and hospitals as the
basis for its analysis, the commenter linked a 5-percent sample of
hospital spinal fusion cases with the corresponding physician claims.
Because there were no ICD-9-CM codes to identify multiple level fusions
in 2001, multiple level fusions were identified using Current
Procedural Terminology (CPT) codes on the physician claims.
The analysis found that increasing the levels fused from 1 to 2
levels to 3 or more levels increased the mean standardized charges by
38 percent for lumbar/thoracic fusions, and by 47 percent for cervical
fusions. The commenter then recommended redefining the spinal fusion
DRGs to differentiate between 1 to 2 level spinal fusions and
multilevel spinal fusions.
The following current spinal fusion DRGs separate cases based on
whether or not a CC is present: DRG 497 (Spinal Fusion Except Cervical
With CC) and DRG 498 (Spinal Fusion Except Cervical Without CC); and
DRG 519 (Cervical Spinal Fusion With CC) and DRG 520 (Cervical Spinal
Fusion Without CC). The difference in charges associated with the
current CC split is only slightly greater than the difference
attributable to the number of levels fused as found by the commenter's
analysis. Therefore, in the May 19, 2003 proposed rule, we did not
propose to redefine these DRGs to differentiate on the basis of the
number of levels fused.
We note that adopting the commenter's recommendation would
necessitate adjusting the DRG relative weights using non-MedPAR data,
because Medicare claims data with the new ICD-9-CM codes will not be
available until the FY 2003 MedPAR file. Although we considered this
possibility, we believe the more prudent course, given that the current
DRG structure actually appears to differentiate appropriately among
these cases, is to wait until sufficient data with the new multilevel
spinal fusion codes are available before making a final determination
on whether multilevel spinal fusions should be incorporated into the
DRG structure.
Comment: Several commenters supported our proposal to wait for data
using the new ICD-9-CM procedure codes for multiple level spinal
fusions prior to making revisions to the spinal fusion DRGs. One
commenter representing hospitals supported our proposal to continue
with the current DRG classification system until sufficient data are
available to evaluate a potential DRG change. Several commenters
expressed their appreciation for the creation of the new codes for
multiple level spinal fusion. They recognized the difficult challenge
that was involved in developing this new classification system as part
of ICD-9-CM.
One commenter requested us to proceed with a DRG revision for
multiple level spinal fusion without waiting for data using the new
codes. This commenter stated that there are significant costs involved
with increased instrumentation and hardware when multiple level spinal
fusions are performed, and requested that we consider using non-MedPAR
data to establish relative weights for new DRGs based on the levels of
vertebrae involved. In addition, the commenter stated that there is a
need to distinguish between fusions and refusions within the DRGs. The
commenter stated that refusions vary significantly due to the existence
of scar tissue and implants that need to be removed and replaced.
Further, the commenter recommended that we split DRG 496 Combined
anterior/posterior spinal fusion based on the presence or absence of a
complication or comorbidity.
Response: We appreciate the support of commenters that we wait for
data from the reporting of the new codes for multiple level spinal
fusion prior to proposing revisions to the spinal DRGs (rather than
using non-MedPAR data prior to the availability of data using the new
codes). We also appreciate the comments concerning the extensive effort
it took on our part to develop a set of ICD-9-CM codes that could
capture this type of information. We believe it is important to
carefully examine hospital data prior to making any revisions for
multiple level spinal fusions. Therefore, we will look at this data as
we receive it and evaluate any need for DRG revisions. We will consider
all the points raised by the commenters as we consider additional DRG
revisions for spinal fusions in the future.
d. Heart Assist System Implant
During the comment period for the FY 2003 IPPS proposed rule on
which the FY 2003 IPPS final rule was based, we received a suggestion
from a commenter that we develop a new heart transplant DRG entitled
``Heart Transplant with Left Ventricular Assist Device (LVAD).'' The
commenter stated that, because a great number of LVAD cases remain
inpatients until heart transplant occurs, there is a disparity in costs
between heart transplant patients who receive LVADs during the stay and
those who do not. Cases in which heart transplantation occurs during
the hospitalization are assigned to DRG 103 (Heart Transplant).
Therefore, the costs of these LVAD cases where a heart transplant is
also performed during the same hospitalization are included in the DRG
relative weight for DRG 103. Accordingly, we did not create a new DRG
for these cases. However, we noted that we would continue to monitor
these types of cases.
When we reviewed the FY 2002 MedPAR data, we identified only 21
cases in DRG 103 that listed a procedure code indicating the use of any
heart assist system. We do not believe that 21 cases is a sufficient
number of cases to support creation of an additional DRG. Therefore, in
the May 19, 2003 proposed rule, we did not propose a change to the
structure of either DRG 103 or DRG 525.
Comment: Two commenters argued that procedure code 37.66 (Implant
of an implantable, pulsatile heart assist system) does not fit
clinically or financially with the following other procedure codes in
DRG 525:
[sbull] 37.62, Implant of other heart assist system,
[sbull] 37.63, Replacement and repair of heart assist system,
[sbull] 37.65, Implant of an external, pulsatile heart assist
system
[sbull] 37.66, Implant of an implantable, pulsatile heart assist
system.
One commenter indicated that, according to an analysis that it
performed, Medicare data on procedure code 37.66 demonstrates that
average charges ($342,725) and length of stay
[[Page 45370]]
(40.1 days) are significantly higher than data on all other procedures
in DRG 525 (average charges ranging from $112,748 to $190,672) and
(average length of stay ranging from 10.9 to 16.7). According to the
commenter, the implantable pulsatile technology represents a different
class of device and procedure (long-term support) compared to the less
resource intensive, short-term devices used in other procedures in DRG
525.
The commenters requested three possible alternatives for the
reclassification of procedure code 37.66: (1) Create a unique DRG for
this procedure; (2) add this procedure code to DRG 103 (Heart
Transplant); or (3) add a new technology add-on payment for code 37.66
to DRG 525.
Response: In response to comments we received on the creation of
new DRG 525 last year, we noted that these four codes represent the
most expensive cases in MDC 5 (67 FR 49991). However, the specific
point made by the commenters this year, that procedure code 37.66 is
significantly different in terms of clinical procedures and resource
utilization from the other procedures in DRG 525, was not raised prior
to this year's proposed rule.
While we recognize the significant disparities referenced by the
commenter warrant further consideration, the potential solutions
suggested by the commenter are significant changes to the DRG system
that warrant public comment. In particular, the reassignment of code
37.66 to DRG 103 would result in inclusion of nontransplant cases in
this existing single-procedure DRG. Therefore, in light of the
significant impacts of each of the commenters' suggestions on the
structure of the DRGs involved and the need to submit any such
significant impacts to public review and comment, we are not changing
DRG 525 for FY 2004. We appreciate the commenter bringing this issue to
our attention. We will evaluate whether to make further changes to DRG
525 in light of the information that there is significant disparity in
the costs of the different procedures included in the DRG. We note that
the outlier payment policy will help to offset extraordinarily
expensive costs.
Furthermore, the volume and mix of cases in this DRG is likely to
change over the next year. Currently, CMS has approved the use of LVADs
in two instances. They can be used as either a bridge to heart
transplant or for support of blood circulation postcardiotomy (the
period following open-heart surgery). In these two applications, the
LVAD is used as temporary mechanical circulatory support. CMS is
currently reviewing a request for expanded coverage for these devices
as destination (or permanent) therapy for end-stage heart failure
patients who are not candidates for heart transplantation. Destination
therapy means that the patient will use the LVAD for the remainder of
his or her life.
We believe it will be helpful to have data on the resources and
volume associated with any potential destination therapy cases prior to
revising DRG 525.
e. Drug-Eluting Stents
In the August 1, 2002 final rule, we created two new temporary DRGs
to reflect cases involving the insertion of a drug-eluting coronary
artery stent as signified by the presence of code 36.07 (Insertion of
drug-eluting coronary artery stent): DRG 526 (Percutaneous
Cardiovascular Procedure With Drug-Eluting Stent With AMI); and DRG 527
(Percutaneous Cardiovascular Procedure With Drug-Eluting Stent Without
AMI). We expect that when claims data are available that reflect the
use of these stents, we will combine drug-eluting stent cases with
other cases in DRGs 516 and 517.
In the absence of MedPAR data reflecting the use of drug-eluting
stents, it was necessary to undertake several calculations to establish
the FY 2003 DRG relative weights for these two new DRGs. First, based
on prices in countries where drug-eluting stents were already being
used compared to the average price of nondrug-eluting stents in those
countries, we calculated a price differential of approximately $1,200.
When we apply average overall hospital charge markups to this
technology (based on weighted average cost-to-charge ratios), we
estimated that the charge differential between nondrug-eluting and
drug-eluting stents would be approximately $2,664 per stent. However,
we recognize that some cases involve more than one stent. Using an
average of 1.5 stents per procedure, we estimated that the net
incremental charge for cases that would receive drug-eluting stents is
$3,996.
In order to determine accurately the DRG relative weights for these
two new DRGs relative to all other DRGs, we also must estimate the
volume of drug-eluting stent cases likely to occur. We used the
manufacturer's estimate that as many as 43 percent of current stent
patients will receive drug-eluting stents during FY 2003 to calculate
the FY 2003 DRG relative weights, although we prorated this percentage
since the new DRGs did not become active until April 1, 2003.\4\
---------------------------------------------------------------------------
\4\ Even though the DRG became active on April 1, 2003, we
expect that hospitals did not use this technology before FDA
approval. (We intend to identify and review any cases with the code
36.07 that occurred prior to FDA approval.) Therefore, no payments
are expected to have been made under these DRGs for cases occurring
before FDA approval.
---------------------------------------------------------------------------
In determining the FY 2004 DRG relative weights for DRGs 526 and
527, we assumed that 43 percent of coronary stent cases (those with
code 36.06 (Insertion of nondrug-eluting coronary artery stent)) from
DRGs 516 and 517 would be reassigned to new DRGs 526 and 527 (with code
36.07), and the charges for these cases would be increased $3,996 per
case, to approximate the higher charges associated with the drug-
eluting stents in DRGs 526 and 527. The relative weights for DRGs 516
and 517 are calculated based on the charges of the cases estimated to
remain in these two DRGs.
Comment: In response to our statement in the proposed rule that we
would use the best available data to establish the FY 2004 relative
weights for DRGs 526 and 527, one commenter (the manufacturer of the
only FDA-approved drug-eluting stents at this time) commissioned an
independent accounting firm to collect costs, charges, and utilization
data from hospitals on drug-eluting and nondrug-eluting stents.
The data were collected from a randomized, statistically
significant sample of United States hospitals with interventional
cardiac catherization laboratories. First, the firm identified those
hospitals that performed coronary angioplasty on Medicare
beneficiaries. The method used to identify these hospitals was first to
review MedPAR data to isolate those hospitals with average volume in
DRGs with a placement of coronary artery stent, ICD-9-CM procedure code
(36.06). From this list of hospitals, it was necessary to eliminate
those that appeared to have quality issues with the data. This resulted
in a list of 1,033 hospitals for the ``population'' group from which
the sample was drawn.
A sample size sufficient to achieve a confidence level of 95
percent that the results would be within 5 percent of the actual
distribution (assuming a normal distribution) was then determined, and
a randomized selection within each state identified 279 hospitals. An
additional 30 hospitals from a preliminary phase of the study were
added because these hospitals had already supplied nondrug-eluting
stent data and had committed to supply drug-
[[Page 45371]]
eluting stent data. Therefore, the total sample size for the survey
instrument was 309 hospitals.
At the time of the survey, 83 of the selected hospitals had not yet
received shipments of the drug-eluting stents and, hence, were not able
to complete the survey because they had no cost or charge data for
drug-eluting stents. The final number of completed surveys was 119 (or
53 percent of the sample).
The survey was designed to collect data regarding costs, charges,
and utilization for drug-eluting stents at three different points in
time: currently; October 1, 2003; and at full-maturity (defined as that
point in time in which the hospital has achieved a stable and
consistent usage of the drug-eluting stent). The data were submitted
(including a sample of invoices) under a request for confidential
treatment under the Freedom of Information Act.
Based on the data collected, the commenter recommended that CMS
increase the harge differential between nondrug-eluting and drug-
eluting stents to create a payment differential of $3,024. This
represents the cost per case differential between nondrug-eluting stent
and drug-eluting stent cases anticipated by surveyed hospitals on
October 1, 2003. The current cost differential reported by the sample
of hospitals was $2,721. The commenter estimated that our proposed
methodology results in a payment differential of $1,451 and $1,495
between DRGs 516 and 526, and DRGs 517 and 527, respectively. The
surveyed hospitals reported average current and anticipated stents used
per case of 1.4 and 1.5, respectively. Average projected utilization of
drug-eluting stents relative to all stents was reported in the survey
to currently be 33 percent, and by October 1, 2003, utilization is
projected to be 69 percent.
Another commenter noted that the actual cost per stents is 59
percent higher than our projection of $1,200. The commenter also noted
that most cases use 2 stents instead of the projected 1.5 stents, and,
therefore, the net incremental charge difference should be $5,554
instead of the $3,996 projected by CMS.
Response: The data submitted was extensively detailed and helped us
better understand the costs, charges, and utilization for all types of
stents. As noted above, we stated in the proposed rule that we would
use the best available data at the time of the final rule to establish
the FY 2004 relative weights for DRGs 526 and 527, and these data are
much more detailed and current than any other sources available to us
at this time. These data are extremely useful to assess the
appropriateness of our proposed methodology to determine the relative
weights for DRGs 526 and 527.
The commenter recommended that CMS establish a payment differential
between DRGs for nondrug-eluting stents and drug-eluting stents of
$3,024 to account for the estimated cost difference between the two
types of stents. However, the DRG relative weights are established
using the average charges per case of each DRG relative to the national
average. Therefore, we examined the charge per case data from the
sample.
The commenter referred to a mean charge differential per case of
$5,721, based on anticipated costs per drug-eluting stent on October 1,
2003. However, we do not believe it is appropriate to use anticipated
October 1, 2003 charges for several reasons. First, these data cannot
be substantiated. As noted above, we received a sampling of current
invoices that allowed us to verify the current costs per drug-eluting
stent. These invoices cannot verify the $300 average per stent cost
increase that reportedly will occur between the time the survey was
conducted and October 1, 2003. Second, for all other DRGs, we are using
charge data reflective of FY 2002 charges. Although we are establishing
the FY 2004 relative weights in this final rule, using anticipated FY
2004 charge data would result in 2-year later charge data being used to
establish the DRG 526 and 527 relative weights, while FY 2002 charge
data are used to establish all other relative weights. Therefore, we
believe the current data more closely approximate the data used to
determine the FY 2004 relative weights for the remainder of the DRGs.
Finally, hospitals must rely upon the manufacturer of the only
currently available drug-eluting stents for information on future
pricing. We believe this raises questions as to the validity of the
data due to the lack of independently verifiable pricing data for the
future.
Therefore, we are basing our evaluation of our proposed methodology
on the sample data from the current period. The commenter reported a
mean differential in charges per case of $4,859 for the current period.
However, we are concerned that the mean differential in charges per
case is unduly influenced by extraordinarily high charge markups
reported on the part of some hospitals. For example, one hospital
reported charging $28,000 per drug-eluting stent, while its costs per
stent were only $3,023. This same hospital reported charges of $9,500
for nondrug-eluting stents, with costs per stent of $1,010. To control
the distorting impact such a hospital would have on the mean charge
differential, we examined the geometric mean charge differential based
on current charges per case.
The survey data showed that, for seven hospitals, the charge per
case was higher for nondrug-eluting stent cases. In order to calculate
the geometric mean differential charge per case, it was necessary to
remove these seven negative differentials. The result was a current
geometric mean differential charge per case of $4,186. As an
alternative to removing these seven negative numbers, we set them to a
$1 differential, and calculated a geometric mean differential charge
per case of $2,291. Based on the range of these results, we believe our
proposed charge differential of $3,996 represents a reasonable
approximation of the differential in charges per case, and we are
proceeding to establish the DRG relative weights for DRGs 526 and 527
for FY 2004 using this amount.
We note that there is a difference between CMS and the commenter on
the current cost difference between drug-eluting stents and nondrug-
eluting stents (our estimate began with a $1,200 per stent
differential, while the survey found a $2,721 current differential). It
appears that the reason our charges per case for drug-eluting stents
and nondrug-eluting stents are not substantially different from the
charges in the survey data, despite the discrepancy in the cost
differential, is due to the fact that hospitals are not marking up
drug-eluting stents by the same proportion as nondrug-eluting stents.
From the data submitted by the commenter, we found the average charge
increase for nondrug-eluting stents is 183 percent. The average charge
increase for drug-eluting stents is 124 percent. This lower markup
reduces the differential in charges relative to the actual costs
hospitals may incur.
Based on data submitted to us last year by the commenter, we
proposed that 43 percent of stent cases from DRGs 516 and 517 would be
reassigned to DRGs 526 and 527. However, based on the survey data, for
FY 2004 we are changing our estimate to assume that 69 percent of
coronary stent cases will be reassigned from DRGs 516 and 517 to DRGs
526 and 527, respectively. We note that, although this percentage is
based on anticipated utilization on October 1, 2003, it is not based on
data that is only available from the manufacturer. We are continuing to
assume a utilization rate of 1.5 stents per case.
[[Page 45372]]
Comment: Many commenters argued that the proposed payment for drug-
eluting stents is inadequate and asked that CMS consider the data it
has received to date from hospital claims to determine whether the
proposed FY 2004 payment rate for drug-eluting stents is adequate.
Other commenters requested that CMS use the most current United States
data available (as opposed to data from the United Kingdom) to
establish the DRG weights for FY 2004.
Some commenters noted that current DRG weights account for 1.5
stents per case, but that the number of stents per case is expected to
rise because the insertion of drug-eluting stents is more technically
challenging in comparison to competitive products. The commenters also
noted that because drug-eluting stents are able to treat smaller
vessels, more diffuse disease in diabetics, and longer lesions, a rise
is expected in the stent per patient ratio. The commenters asked that
CMS adjust its ratio of 1.5 stents per case to an amount closer to 2
stents per case when recalibrating the DRG weights. Another commenter
explained that, based on their analysis, an average of 1.7 drug-eluting
stents is used per procedure and the average cost per drug-eluting
stent is $3,195. The commenter requested that these amounts be used to
compute the relative weights for DRGs 526 and 527. The commenter also
noted that the payment rates for FY 2003 are higher than the payment
rates for FY 2004 due to the decline in the DRG relative weights.
One commenter suggested as an alternative to increasing the weights
for drug-eluting stents that payment be contingent on the type and
number of stents used per procedure. The commenter recommended that CMS
set up revenue codes to indicate the type and number of stents used per
case and make payment approximately $1,000 above the cost per stent.
Another commenter also noted that the demand from hospitals for
drug-eluting stents is much higher than the projected 43 percent of
coronary artery stent cases. The commenter estimated that 85 to 90
percent of all stent cases should be reassigned from DRGs 516 and 517
to DRGs 526 and 527. Another commenter explained that drug-eluting
stents, compared with nondrug-eluting stents, have already been shown
to decrease angiographic restenosis in coronary arteries by more than
half, which should reduce the need for repeat procedure rates from 20
percent of cases to less than 5 percent. As a result, demand for drug-
eluting stents is expected to increase and the commenter estimated that
70 percent of all coronary artery stent cases will involve the use of
drug-eluting stents. Therefore, 70 percent of all stent cases should be
moved to DRGs 526 and 527 to account for drug-eluting stents instead of
the 43 percent proposed by CMS.
One commenter explained that there are many added costs of using
drug-eluting stents, such as that the area of blockage to be treated is
to be predilated with an angioplasty balloon before and after
implanting the stent, the use of intravascular ultrasound to ensure
proper positioning and deployment of stents in certain cases, and
increased length of time a patient spends in the cardiac
catheterization laboratory. The commenter also added that percutaneous
transluminal coronary angioplasty volume is expected to increase due to
obesity, smoking, sedentary lifestyle, and diabetes. Therefore, the
commenter recommended that CMS ensure that drug-eluting stents are
adequately paid.
Response: As described above, we used data submitted to us from a
survey of U.S. hospitals to evaluate our proposed methodology. Our
analysis indicates that the proposed charge differential and the number
of stents per procedure in our methodology are appropriate. However, we
have increased our assumed utilization rate of drug-eluting stents to
69 percent from 43 percent, based on these data.
With respect to the decline in the proposed FY 2004 DRG relative
weights compared to FY 2003, every year we recalibrate the DRG weights
comparing the average charge per DRG to all other DRGs. The weights of
one DRG can change for numerous reasons (for example, increase or
decrease in total cases or increase or decrease in charges) and cause
weights from other DRGs to increase or decrease due to budget
neutrality.
As we proposed, we are maintaining DRGs 526 and 527 for FY 2004,
and adopting the same methodology to establish the relative weights as
we used for FY 2003. We have used the best available data to establish
the final FY 2004 relative weights for DRGs 526 and 527 included in
this final rule. We will continue to evaluate the appropriate
assignment of these cases in the future.
Comment: One commenter recommended that CMS move drug-eluting
stents to DRGs 516 and 517 and adjust the weights, because CMS should
not provide a financial incentive for hospitals to favor one therapy
when other alternatives with equal or better outcomes are available.
The commenter stated further that CMS should not create an incentive
that promotes a more expensive treatment for which risks and benefits
are not yet completely known. Another commenter suggested that drug-
eluting stents should receive add-on payments for new technology
instead of receiving their own DRG payment.
Response: We explained our rationale for creating new DRGs 525 and
526 (instead of assigning these cases to DRGs 516 or 517 or approving a
new technology add-on) in the August 1, 2002 IPPS final rule (67 FR
50005) and refer the commenters to that rule for our response. We
appreciate the commenter's continual input and interest in these
issues.
f. Artificial Anal Sphincter
The ICD-9-CM Coordination and Maintenance Committee created two new
codes to describe procedures involving an artificial anal sphincter for
use for discharges occurring on or after October 1, 2002. One code
(49.75, Implantation or revision of artificial anal sphincter) is used
to identify cases involving implantation or revision of an artificial
anal sphincter. The second code (49.76, Removal of artificial anal
sphincter) is used to identify cases involving the removal of the
device. In Table 6B of the August 1, 2002 IPPS final rule (67 FR
50242), we assigned both codes to one of four MDCs based on principal
diagnosis, and to one of six DRGs within those MDCs as follows: MDC 6
(Diseases and Disorders of the Digestive System), DRG 157 (Anal and
Stomal Procedures With CC) and DRG 158 (Anal and Stomal Procedures
Without CC); MDC 9 (Diseases and Disorders of the Skin, Subcutaneous
Tissue and Breast), DRG 267 (Perianal and Pilonidal Procedures); MDC 21
(Injuries, Poisonings, and Toxic Effect of Drugs), DRG 442 (Other O.R.
Procedures for Injuries With CC) and DRG 443 (Other O.R. Procedures for
Injuries Without CC); and MDC 24 (Multiple Significant Trauma), DRG 486
(Other O.R. Procedures for Multiple Significant Trauma).
Prior to the publication of the proposed rule, we received a
request that we review these DRG assignments. According to the
requester, the artificial anal sphincter procedures are expensive and
the payment does not adequately cover a hospital's costs in the most
likely occurring DRGs: DRG 157 and DRG 158. The requester submitted
data showing cases involving artificial anal sphincters with average
charges of $44,000, and suggested that we assign codes 49.75 and 49.76
in MDC 6 to DRG 170 (Other Digestive System O.R. Procedures With CC)
and DRG 171 (Other Digestive System O.R. Procedures Without CC) because
DRG
[[Page 45373]]
170 and DRG 171 are higher weighted than DRGs 157 and 158.
In the May 19, 2003 proposed rule, we did not propose to assign
these cases to DRGs 170 and 171. Although we recognized that the data
submitted by the commenter appear to show this procedure is associated
with above average costs in the DRGs to which these cases are assigned,
we stated that we believe the current assignment is the most clinically
appropriate at this time. As noted above, the procedure codes to
identify the implantation, revision, or removal of these devices were
effective beginning on October 1, 2002. Therefore, we proposed to
monitor the costs of these cases using actual Medicare cases with these
codes included from the FY 2003 MedPAR that will be used for the FY
2004 DRG relative weights.
Comment: Two commenters expressed concern that the procedures for
insertion and removal of an artificial anal sphincter are assigned to
DRG groupings that do not cover the cost of the device. In addition,
one commenter stated that, as the surgeon must operate on two distinct
areas of the patient's body, these procedures are more resource-
intensive and, therefore, are not clinically coherent with other
procedures of low complexity in DRGs 157 and 158.
Response: As noted above, the codes describing the implantation,
revision, or removal of artificial anal sphincters were created for use
beginning on October 1, 2002. Therefore, we do not have data on cases
assigned to codes 49.75 and 49.76. Accordingly, we are not making any
changes to the DRG assignments of these codes at this time. However, we
will continue to monitor this procedure in the upcoming MedPAR data and
will, in the future, consider modifications relating to DRG
assignment(s) if warranted.
C. Recalibration of DRG Weights
As we proposed, in this final rule we used the same basic
methodology for the FY 2004 recalibration as we did for FY 2003 (August
1, 2002 IPPS final rule (67 FR 50008). That is, we recalibrated the DRG
weights based on charge data for Medicare discharges using the most
current charge information available (the FY 2002 MedPAR file).
The MedPAR file is based on fully coded diagnostic and procedure
data for all Medicare inpatient hospital bills. The FY 2002 MedPAR data
used in this final rule include discharges occurring between October 1,
2001 and September 30, 2002, based on bills received by CMS through
March 31, 2003, from all hospitals subject to the IPPS and short-term
acute care hospitals in Maryland (which is under a waiver from the IPPS
under section 1814(b)(3) of the Act). The FY 2002 MedPAR file includes
data for approximately 11,496,239 Medicare discharges. Discharges for
Medicare beneficiaries enrolled in a Medicare+Choice managed care plan
are excluded from this analysis. The data excludes CAHs, including
hospitals that subsequently became CAHs after the period from which the
data were taken. This is a change from the recalibration methodology in
the proposed rule, where hospitals that subsequently became CAHs were
included in the data. In this final rule, we changed the recalibration
methodology for consistency with our change that excluded these CAHs
from the data used to construct the wage index.
The methodology used to calculate the DRG relative weights from the
FY 2002 MedPAR file is as follows:
[sbull] To the extent possible, all the claims were regrouped using
the DRG classification revisions discussed in section II.B. of this
preamble.
[sbull] The transplant cases that were used to establish the
relative weight for heart and heart-lung, liver, and lung transplants
(DRGs 103, 480, and 495) were limited to those Medicare-approved
transplant centers that have cases in the FY 2000 MedPAR file.
(Medicare coverage for heart, heart-lung, liver, and lung transplants
is limited to those facilities that have received approval from CMS as
transplant centers.)
[sbull] Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average charge for the DRG and before
eliminating statistical outliers.
[sbull] Charges were standardized to remove the effects of
differences in area wage levels, indirect medical education and
disproportionate share payments, and, for hospitals in Alaska and
Hawaii, the applicable cost-of-living adjustment.
[sbull] The average standardized charge per DRG was calculated by
summing the standardized charges for all cases in the DRG and dividing
that amount by the number of cases classified in the DRG. A transfer
case is counted as a fraction of a case based on the ratio of its
transfer payment under the per diem payment methodology to the full DRG
payment for nontransfer cases. That is, a transfer case receiving
payment under the transfer methodology equal to half of what the case
would receive as a nontransfer would be counted as 0.5 of a total case.
[sbull] Statistical outliers were eliminated by removing all cases
that are beyond 3.0 standard deviations from the mean of the log
distribution of both the charges per case and the charges per day for
each DRG.
[sbull] The average charge for each DRG was then recomputed
(excluding the statistical outliers) and divided by the national
average standardized charge per case to determine the relative weight.
The new weights are normalized by an adjustment factor (1.45726) so
that the average case weight after recalibration is equal to the
average case weight before recalibration. This adjustment is intended
to ensure that recalibration by itself neither increases nor decreases
total payments under the IPPS.
As noted below in section IV.A.2. of the preamble of this final
rule, we are expanding the transfer policy applicable to postacute care
transfers to a total of 29 DRGs (the current 10 DRGs, minus 2, plus 21
additional DRGs), beginning in FY 2004. Because we count a transfer
case as a fraction of a case as described above in the recalibration
process, the expansion of the postacute care transfer policy to
additional DRGs affects the relative weights for those DRGs. Therefore,
we calculated the final FY 2004 normalization factor comparing: the
case-mix using the final FY 2004 DRG relative weights in which we
treated postacute care transfer cases in the additional DRGs for the
postacute transfer policy for FY 2004 as a fraction of a case with the
case-mix using the FY 2003 DRG relative weights without treating cases
in these additional DRGs as transfer cases.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. We used that same case threshold in
recalibrating the final DRG weights for FY 2004. Using the FY 2002
MedPAR data set, there are 42 DRGs that contain fewer than 10 cases. We
computed the weights for these low-volume DRGs by adjusting the FY 2003
weights of these DRGs by the percentage change in the average weight of
the cases in the other DRGs.
Comment: Commenters questioned the fact that the proposed weights
for several DRGs declined from the prior fiscal year.
Response: As described above, the relative weight for each DRG is
[[Page 45374]]
calculated by comparing the average charge for cases within each DRG
(after removing statistical outliers) with the national average charge
per case. Therefore, there are several factors that can cause a shift
in the relative weight of a DRG from one fiscal year to the next. For
example, even though the average charges of cases within a particular
DRG may have increased, if they did not increase by an equal or greater
percentage than the national average, the DRG relative weight would
decline. In this final rule, the weights for 223 DRGs for FY 2004
decline from those for FY 2003 (all but 38 DRGs by less than 5
percent), while the weights for 299 DRGs for FY 2004 increased from
those for FY 2003 (all but 39 DRGs by less than 5 percent).
Section 1886(d)(4)(C)(iii) of the Act requires that, beginning with
FY 1991, reclassification and recalibration changes be made in a manner
that assures that the aggregate payments are neither greater than nor
less than the aggregate payments that would have been made without the
changes. Although normalization is intended to achieve this effect,
equating the average case weight after recalibration to the average
case weight before recalibration does not necessarily achieve budget
neutrality with respect to aggregate payments to hospitals because
payments to hospitals are affected by factors other than average case
weight. Therefore, as we have done in past years and as discussed in
section II.A.4.a. of the Addendum to this final rule, we are making a
budget neutrality adjustment to ensure that the requirement of section
1886(d)(4)(C)(iii) of the Act is met.
Comment: One commenter expressed concern that the impact of the
proposed DRG recalibration is a $3 million decrease in payments to its
hospitals. The commenter was hopeful that the budget neutrality
adjustment to ensure that the normalization of DRG weights is achieved
will somehow restore the estimated negative impact.
Response: As explained above and in the proposed rule, section
1886(d)(4)(C)(iii) of the Act requires that the changes made through
DRG reclassification and recalibration be made in a manner that assures
that the aggregate payments are neither greater than nor less than the
aggregate payment that would have been made without the changes.
However, this requirement refers to aggregate national payments.
Therefore, for individual hospitals, the impacts of these changes may
be either positive or negative.
D. LTC-DRG Reclassifications and Relative Weights for LTCHs for FY 2004
1. Background
In the June 6, 2003 LTCH PPS final rule (68 FR 34122) we changed
the LTCH PPS annual payment rate update cycle to be effective July 1
through June 30 instead of October 1 through September 30. In addition,
since the patient classification system utilized under the LTCH PPS is
based directly on the DRGs used under the IPPS for acute care
hospitals, in that same final rule, we explained that the annual update
of the long-term care diagnosis-related group (LTC-DRG) classifications
and relative weights will continue to remain linked to the annual
reclassification and recalibration of the CMS-DRGs under the IPPS.
The annual update to the IPPS DRGs is based on the annual revisions
to the ICD-9-CM codes and is effective each October 1. In the health
care industry, annual changes to the ICD-9-CM codes are effective for
discharges occurring on or after October 1 each year. The use of the
ICD-9-CM coding system is also compliant with the requirements of the
Health Insurance Portability and Accountability Act (HIPAA), Pub. L.
104-191, under 45 CFR parts 160 and 162. Therefore, the manual and
electronic versions of the GROUPER software, which are based on the
ICD-9-CM codes, are also revised annually and effective for discharges
occurring on or after October 1 each year. Because the LTC-DRGs are
based on the patient classification system used under the IPPS (CMS-
DRGs), which is updated annually and effective for discharges occurring
on or after October 1 through September 30 each year, in the June 6,
2003 LTCH PPS final rule (68 FR 34128), we specified that we will
continue to update the LTC-DRG classifications and relative weights to
be effective for discharges occurring on or after October 1 through
September 30 each year. Furthermore, we stated that we will publish the
annual update of the LTC-DRGs in the proposed and final rules for the
IPPS.
As we explained in the May 19, 2003 IPPS proposed rule (68 FR
27173), we proposed revisions to the LTC-DRG classifications and
relative weights and indicated that we would finalize them in the IPPS
final rule, to be effective October 1, 2003 through September 30, 2004.
The final LTC-DRGs and relative weights for FY 2004 in this final rule
are based on the IPPS DRGs (GROUPER version 21.0) discussed in section
II. of this final rule.
2. Changes in the LTC-DRG Classifications
a. Background
Section 123 of Pub. L. 106-113 specifically requires that the PPS
for LTCHs be a per discharge system with a DRG-based patient
classification system reflecting the differences in patient resources
and costs in LTCHs while maintaining budget neutrality. Section
307(b)(1) of Pub. L. 106-554 modified the requirements of section 123
of Pub. L. 106-113 by specifically requiring that the Secretary examine
``the feasibility and the impact of basing payment under such a system
[the LTCH PPS] on the use of existing (or refined) hospital diagnosis-
related groups (DRGs) that have been modified to account for different
resource use of long-term care hospital patients as well as the use of
the most recently available hospital discharge data.''
In accordance with section 307(b)(1) of Pub. L. 106-554 and Sec.
412.515 of our existing regulations, the LTCH PPS uses information from
LTCH patient records to classify patient cases into distinct LTC-DRGs
based on clinical characteristics and expected resource needs. The LTC-
DRGs used as the patient classification component of the LTCH PPS
correspond to the DRGs under the IPPS for acute care hospitals. Thus,
under this final rule, we will use the IPPS version 21.0 GROUPER for FY
2004 to process LTCH PPS claims. The changes to the IPPS DRG
classification system for FY 2004 (Grouper 21.0) are discussed in
section II.B. of this preamble.
Under the LTCH PPS, we determine relative weights for each of the
IPPS DRGs to account for the difference in resource use by patients
exhibiting the case complexity and multiple medical problems
characteristic of LTCH patients. In a departure from the IPPS, as we
discussed in both the May 19, 2003 proposed rule (68 FR 27174) and the
June 6, 2003 LTCH PPS final rule (68 FR 34132), we use low volume
quintiles in determining the LTC-DRG weights for LTC-DRGs with less
than 25 LTCH cases, since LTCHs do not typically treat the full range
of diagnoses as do acute care hospitals. In order to deal with the
large number of low volume LTC-DRGs (LTC-DRGs with fewer than 25
cases), as we discussed in the May 19, 2003 proposed rule (68 FR
27176), we group those low volume LTC-DRGs into 5 quintiles based on
average charge per discharge. (A listing of the composition of low
volume quintiles for the FY 2004 LTC-DRGs (based on FY 2002 MedPAR
data) appears in section II.D.3. of this final
[[Page 45375]]
rule.) We also adjust for cases in which the stay at the LTCH is less
than or equal to five-sixths of the geometric average length of stay;
that is, short-stay outlier cases (Sec. 412.529), as discussed in
section II.D.4. of this preamble.
b. Patient Classifications Into DRGs
Generally, under the LTCH PPS, Medicare payment is made at a
predetermined specific rate for each discharge; that is, payment varies
by the LTC-DRG to which a beneficiary's stay is assigned. Similar to
case classification for acute care hospitals under the IPPS (see
section II.B. of this preamble), cases are classified into LTC-DRGs for
payment under the LTCH PPS based on the principal diagnosis, up to
eight additional diagnoses, and up to six procedures performed during
the stay, as well as age, sex, and discharge status of the patient. The
diagnosis and procedure information is reported by the hospital using
codes from the ICD-9-CM.
As discussed above in section II.B. of this preamble, the DRGs are
organized into 25 major diagnostic categories (MDCs), most of which are
based on a particular organ system of the body; the remainder involve
multiple organ systems (such as MDC 22, Burns). Accordingly, the
principal diagnosis determines MDC assignment. Within most MDCs, cases
are then divided into surgical DRGs and medical DRGs. Some surgical and
medical DRGs are further differentiated based on the presence or
absence of CCs. (See section II.B. of this preamble for further
discussion of surgical DRGs and medical DRGs.)
Because the assignment of a case to a particular LTC-DRG will help
determine the amount that is paid for the case, it is important that
the coding is accurate. As used under the IPPS, classifications and
terminology used under the LTCH PPS are consistent with the ICD-9-CM
and the Uniform Hospital Discharge Data Set (UHDDS), as recommended to
the Secretary by the National Committee on Vital and Health Statistics
(``Uniform Hospital Discharge Data: Minimum Data Set, National Center
for Health Statistics, April 1980'') and as revised in 1984 by the
Health Information Policy Council (HIPC) of the U.S. Department of
Health and Human Services. We wish to point out again that the ICD-9-CM
coding terminology and the definitions of principal and other diagnoses
of the UHDDS are consistent with the requirements of the Administrative
Simplification Act of 1996 of the HIPAA (45 CFR Parts 160 and 162).
The emphasis on the need for proper coding cannot be overstated.
Inappropriate coding of cases can adversely affect the uniformity of
cases in each LTC-DRG and produce inappropriate weighting factors at
recalibration and result in inappropriate payments under the LTCH PPS.
LTCHs are to follow the same coding guidelines used by the acute care
hospitals to ensure accuracy and consistency in coding practices. There
will be only one LTC-DRG assigned per long-term care hospitalization;
it will be assigned at the discharge. Therefore, it is mandatory that
the coders continue to report the same principal diagnosis on all
claims and include all diagnostic codes that coexist at the time of
admission, that are subsequently developed, or that affect the
treatment received. Similarly, all procedures performed during that
stay are to be reported on each claim.
Upon the discharge of the patient from a LTCH, the LTCH must assign
appropriate diagnosis and procedure codes from the ICD-9-CM. As of
October 16, 2002, a LTCH that was required to comply with the HIPAA
Administrative Simplification Standards and that had not obtained an
extension in compliance with the Administrative Compliance Act (Pub. L.
107-105) is obligated to comply with the standards at 45 CFR 162.1002
and 45 CFR 162.1102. Completed claim forms are to be submitted to the
LTCH's Medicare fiscal intermediary.
Medicare fiscal intermediaries enter the clinical and demographic
information into their claims processing systems and subject this
information to a series of automated screening processes called the
Medicare Code Editor (MCE). These screens are designed to identify
cases that require further review before assignment into a LTC-DRG can
be made.
After screening through the MCE, each LTCH claim will be classified
into the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH
GROUPER is specialized computer software based on the same GROUPER used
under the IPPS. After the LTC-DRG is assigned, the Medicare fiscal
intermediary determines the prospective payment by using the Medicare
PRICER program, which accounts for LTCH hospital-specific adjustments.
As provided for under the IPPS, we provide an opportunity for the LTCH
to review the LTC-DRG assignments made by the fiscal intermediary and
to submit additional information within a specified timeframe (Sec.
412.513(c)).
The GROUPER is used both to classify past cases in order to measure
relative hospital resource consumption to establish the LTC-DRG weights
and to classify current cases for purposes of determining payment. The
records for all Medicare hospital inpatient discharges are maintained
in the MedPAR file. The data in this file are used to evaluate possible
DRG classification changes and to recalibrate the DRG weights during
our annual update (as discussed in section II. of this preamble). The
LTC-DRG weights are based on data for the population of LTCH
discharges, reflecting the fact that LTCH patients represent a
different patient mix than patients in short-term acute care hospitals.
3. Development of the FY 2004 LTC-DRG Relative Weights
a. General Overview of Development of the LTC-DRG Relative Weights
As we stated in the August 30, 2002 LTCH PPS final rule (67 FR
55981), one of the primary goals for the implementation of the LTCH PPS
is to pay each LTCH an appropriate amount for the efficient delivery of
care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
Medicare patients whose care is more costly. To accomplish these goals,
we adjust the LTCH PPS standard Federal prospective payment system rate
by the LTC-DRG relative weights in determining payment to LTCHs for
each case.
Under the LTCH PPS, relative weights for each LTC-DRG are a primary
element used to account for the variations in cost per discharge and
resource utilization among the payment groups (Sec. 412.515). To
ensure that Medicare patients classified to each LTC-DRG have access to
an appropriate level of services and to encourage efficiency, we
calculate a relative weight for each LTC-DRG that represents the
resources needed by an average inpatient LTCH case in that LTC-DRG. For
example, cases in a LTC-DRG with a relative weight of 2 will, on
average, cost twice as much as cases in a LTC-DRG with a weight of 1.
b. Data
To calculate the LTC-DRG relative weights for FY 2004 in this final
rule, we obtained total Medicare allowable charges from FY 2002
Medicare hospital bill data from the December 2002 update of the MedPAR
file, and we used Version 21.0 of the CMS GROUPER for IPPS, as
discussed in section II.B. of this preamble, to classify cases.
Consistent with the methodology under the IPPS, we recalculated the FY
2004 LTC-DRG
[[Page 45376]]
relative weights based on the best available data for this final rule.
As we discussed in the May 19, 2003 proposed rule (68 FR 27151), we
have excluded the data from LTCHs that are all-inclusive rate providers
and LTCHs that are reimbursed in accordance with demonstration projects
authorized under section 402(a) of Pub. L. 90-248 (42 U.S.C. 1395b-1)
or section 222(a) of Pub. L. 92-603 (42 U.S.C. 1395b-1). Therefore, in
the development of the FY 2004 LTC-DRG relative weights, we have
excluded the data of the 22 all-inclusive rate providers and the 3
LTCHs that are paid in accordance with demonstration projects.
In addition, as we discussed in that same proposed rule, a data
problem regarding the proposed FY 2003 LTC-DRG relative weight values
that were determined using MedPAR (claims) data for FYs 2000 and 2001
was brought to our attention. Following notification of this problem,
we researched the commenter's claims and determined that, given the
long stays at LTCHs, some providers had submitted multiple bills for
payment under the reasonable cost-based reimbursement system for the
same stay. Based upon our research, we became aware of the following
situation: In certain LTCHs, hospital personnel apparently reported a
different principal diagnosis on each bill since, under the reasonable
cost-based reimbursement system, payment was not dependent upon
principal diagnosis, as it is under a DRG-based system. These claims
from the MedPAR file were run through the LTCH GROUPER and used in
determining the proposed FY 2003 relative weights for each LTC-DRG.
After this issue was brought to our attention, we discovered that
only data from the final bills were being extracted for the MedPAR
file. Therefore, it was possible that the original MedPAR file was not
receiving the correct principal diagnosis. In the August 30, 2002 final
rule (67 FR 55989), we addressed the problem by identifying all LTCH
cases in the FY 2001 MedPAR file for which multiple bills were
submitted. For each of these cases, beginning with the first bill and
moving forward consecutively through subsequent bills for that stay, we
recorded the first unique diagnosis codes up to 10 and the first unique
procedure codes up to 10. We then used these codes to appropriately
group each LTCH case to a LTC-DRG for FY 2003.
As we noted above, we are using LTCH claims data from the FY 2002
MedPAR file for the determination of the FY 2004 LTC-DRG relative
weights. Since at the time (FY 2002) LTCHs were still reimbursed under
the reasonable cost-based system, some LTCHs also had submitted
multiple bills for Medicare payment for the same stay. Thus, in certain
LTCHs, hospital personnel were apparently still reporting a different
principal diagnosis on each bill since, under the reasonable cost-based
reimbursement system in FY 2002, payment was not dependent upon
principal diagnosis as it is under a DRG-based system. Therefore, as we
explained in the May 19, 2003 proposed rule (68 FR 27151), we are
following the same methodology outlined above to determine the
appropriate diagnosis and procedure codes for those multiple bill LTCH
cases in the FY 2002 MedPAR files, and we are using these codes to
group each LTCH case to a LTC-DRG for FY 2004. Since the LTCH PPS was
implemented for cost reporting periods beginning on or after October 1,
2002 (FY 2003), we believe that this problem will be self-correcting as
LTCHs submit more completely coded data in the future.
c. Hospital-Specific Relative Value Methodology
By nature LTCHs often specialize in certain areas, such as
ventilator-dependent patients and rehabilitation and wound care. Some
case types (DRGs) may be treated, to a large extent, in hospitals that
have, from a perspective of charges, relatively high (or low) charges.
Such nonarbitrary distribution of cases with relatively high (or low)
charges in specific LTC-DRGs has the potential to inappropriately
distort the measure of average charges. To account for the fact that
cases may not be randomly distributed across LTCHs, we use a hospital-
specific relative value method to calculate the LTC-DRG relative
weights instead of the methodology used to determine the DRG relative
weights under the IPPS described above in section II.C. of this
preamble. We believe this method will remove this hospital-specific
source of bias in measuring LTCH average charges. Specifically, we
reduce the impact of the variation in charges across providers on any
particular LTC-DRG relative weight by converting each LTCH's charge for
a case to a relative value based on that LTCH's average charge.
Under the hospital-specific relative value method, we standardize
charges for each LTCH by converting its charges for each case to
hospital-specific relative charge values and then adjusting those
values for the LTCH's case-mix. The adjustment for case-mix is needed
to rescale the hospital-specific relative charge values (which, by
definition, averages 1.0 for each LTCH). The average relative weight
for a LTCH is its case-mix, so it is reasonable to scale each LTCH's
average relative charge value by its case-mix. In this way, each LTCH's
relative charge value is adjusted by its case-mix to an average that
reflects the complexity of the cases it treats relative to the
complexity of the cases treated by all other LTCHs (the average case-
mix of all LTCHs).
In accordance with the methodology established under Sec. 412.523,
we standardize charges for each case by first dividing the adjusted
charge for the case (adjusted for short-stay outliers under Sec.
412.529 as described in section II.D.4. (step 3) of this preamble) by
the average adjusted charge for all cases at the LTCH in which the case
was treated. Short-stay outliers under Sec. 412.529 are cases with a
length of stay that is less than or equal to five-sixths the average
length of stay of the LTC-DRG. The average adjusted charge reflects the
average intensity of the health care services delivered by a particular
LTCH and the average cost level of that LTCH. The resulting ratio is
multiplied by that LTCH's case-mix index to determine the standardized
charge for the case.
Multiplying by the LTCH's case-mix index accounts for the fact that
the same relative charges are given greater weight in a LTCH with
higher average costs than they would at a LTCH with low average costs
which is needed to adjust each LTCH's relative charge value to reflect
its case-mix relative to the average case-mix for all LTCHs. Because we
standardize charges in this manner, we count charges for a Medicare
patient at a LTCH with high average charges as less resource intensive
than they would be at a LTCH with low average charges. For example, a
$10,000 charge for a case in a LTCH with an average adjusted charge of
$17,500 reflects a higher level of relative resource use than a $10,000
charge for a case in a LTCH with the same case-mix, but an average
adjusted charge of $35,000. We believe that the adjusted charge of an
individual case more accurately reflects actual resource use for an
individual LTCH because the variation in charges due to systematic
differences in the markup of charges among LTCHs is taken into account.
d. Low Volume LTC-DRGs
In order to account for LTC-DRGs with low volume (that is, with
fewer than 25 LTCH cases), in accordance with the methodology discussed
in the May 19, 2003 proposed rule (68 FR 27176), we group those low
volume LTC-DRGs into one of five categories (quintiles) based on
average charges, for the purposes of determining relative weights. For
this final rule, using LTCH
[[Page 45377]]
cases from the FY 2002 MedPAR file, we identified 173 LTC-DRGs that
contained between 1 and 24 cases. This list of LTC-DRGs was then
divided into one of the five low volume quintiles, each containing a
minimum of 34 LTC-DRGs (173/5 = 34 with 3 LTC-DRGs as the remainder).
For FY 2004, as we described in that same proposed rule, we are making
an assignment to a specific low volume quintile by sorting the 173 low
volume LTC-DRGs in ascending order by average charge. Since the number
of LTC-DRGs with less than 25 LTCH cases is not evenly divisible by
five, the average charge of the low volume LTC-DRG was used to
determine which low volume quintile received the additional LTC-DRG.
After sorting the 173 low volume LTC-DRGs in ascending order, we
grouped the first fifth (34) of low volume LTC-DRGs with the lowest
average charge into Quintile 1. The highest average charge cases are
grouped into Quintile 5. Since the average charge of the 69th LTC-DRG
in the sorted list is closer to the previous LTC-DRG's average charge
(assigned to Quintile 2) than to the average charge of the 70th LTC-DRG
in the sorted list (to be assigned to Quintile 3), we placed it into
Quintile 2. This process was repeated through the remaining low volume
LTC-DRGs so that 3 low volume quintiles contain 35 LTC-DRGs and 2 low
volume quintiles contain 34 LTC-DRGs.
In order to determine the relative weights for the LTC-DRGs with
low volume for FY 2004, in accordance with the methodology described in
the May 19, 2003 proposed rule (68 FR 27176), we used the five low
volume quintiles described above. The composition of each of the five
low volume quintiles shown below in Table 1 is used in determining the
LTC-DRG relative weights for FY 2004. We determine a relative weight
and (geometric) average length of stay for each of the five low volume
quintiles using the formula that we apply to the regular LTC-DRGs (25
or more cases), as described below in section II.D.4. of this preamble.
We assign the same relative weight and average length of stay to each
of the LTC-DRGs that make up that low volume quintile. We note that as
this system is dynamic, it is possible that the number and specific
type of LTC-DRGs with a low volume of LTCH cases will vary in the
future. We use the best available claims data in the MedPAR file to
identify low volume LTC-DRGs and to calculate the relative weights
based on our methodology.
Table 1.--Composition of Low Volume Quintiles
------------------------------------------------------------------------
LTC-DRG Description
------------------------------------------------------------------------
Quintile 1
------------------------------------------------------------------------
44...................... ACUTE MAJOR EYE INFECTIONS.
46...................... OTHER DISORDERS OF THE EYE AGE 17 W
CC.
47...................... OTHER DISORDERS OF THE EYE AGE 17 W/
O CC.
65...................... DYSEQUILIBRIUM.
66...................... EPISTAXIS.
69...................... OTITIS MEDIA & URI AGE 17 W/O CC.
93...................... INTERSTITIAL LUNG DISEASE W/O CC.
95...................... PNEUMOTHORAX W/O CC.
149..................... MAJOR SMALL & LARGE BOWEL PROCEDURES W/O CC.
178..................... UNCOMPLICATED PEPTIC ULCER W/O CC.
192..................... PANCREAS, LIVER & SHUNT PROCEDURES W/O CC.
273..................... MAJOR SKIN DISORDERS W/O CC.
276..................... NON-MALIGANT BREAST DISORDERS.
284..................... MINOR SKIN DISORDERS W/O CC.
305..................... KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-
NEOPL W/O CC.
311..................... TRANSURETHRAL PROCEDURES W/O CC.
319..................... KIDNEY & URINARY TRACT NEOPLASMS W/O CC.
326..................... KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE
17 W/O CC.
342..................... CIRCUMCISION AGE 17.
344..................... OTHER MALE REPRODUCTIVE SYSTEM O.R. PROCEDURES
FOR MALIGNANCY.
348..................... BENIGN PROSTATIC HYPERTROPHY W CC.
349..................... BENIGN PROSTATIC HYPERTROPHY W/O CC.
367..................... MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W/O CC.
376..................... POSTPARTUM & POST ABORTION DIAGNOSES W/O O.R.
PROCEDURE.
399..................... RETICULOENDOTHELIAL & IMMUNITY DISORDERS W/O
CC.
414..................... OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL
DIAG W/O CC.
428..................... DISORDERS OF PERSONALITY & IMPULSE CONTROL.
431..................... CHILDHOOD MENTAL DISORDERS.
432..................... OTHER MENTAL DISORDER DIAGNOSES.
433..................... ALCOHOL/DRUG ABUSE OR DEPENDENCE, LEFT AMA.
467..................... OTHER FACTORS INFLUENCING HEALTH STATUS.
511..................... NON-EXTENSIVE BURNS W/O CC OR SIGNIFICANT
TRAUMA.
538..................... LOCAL EXCISION AND REMOVAL OF INTERNAL
FIXATION DEVICES EXCEPT HIP AND FEMUR WITHOUT
CC.
540..................... LYMPHOMA AND LEUKEMIA WITH MAJOR O.R.
PROCEDURE WITHOUT CC.
-------------------------
Quintile 2
------------------------------------------------------------------------
21...................... VIRAL MENINGITIS.
22...................... HYPERTENSIVE ENCEPHALOPATHY.
31**.................... CONCUSSION AGE 17 W CC.
53...................... SINUS & MASTOID PROCEDURES AGE 17.
61...................... MYRINGOTOMY W TUBE INSERTION AGE 17.
72...................... NASAL TRAUMA & DEFORMITY.
84...................... MAJOR CHEST TRAUMA W/O CC.
128..................... DEEP VEIN THROMBOPHLEBITIS.
[[Page 45378]]
177..................... UNCOMPLICATED PEPTIC ULCER W CC.
185..................... DENTAL & ORAL DIS EXCEPT EXTRACTIONS &
RESTORATIONS, AGE 17.
193..................... BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR
W/O C.D.E. W CC.
194*.................... BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR
W/O C.D.E. W/O CC.
200..................... HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR NON-
MALIGNANCY.
206***.................. DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA
W/O CC.
208***.................. DISORDERS OF THE BILIARY TRACT W/O CC.
211..................... HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE
17 W/O CC.
232..................... ARTHROSCOPY.
237..................... SPRAINS, STRAINS, & DISLOCATIONS OF HIP,
PELVIS & THIGH.
275..................... MALIGNANT BREAST DISORDERS W/O CC.
301..................... ENDOCRINE DISORDERS W/O CC.
309..................... MINOR BLADDER PROCEDURES W/O CC.
323..................... URINARY STONES W CC, &/OR ESW LITHOTRIPSY.
324..................... URINARY STONES W/O CC.
339..................... TESTES PROCEDURES, NON-MALIGNANCY AGE 17.
341..................... PENIS PROCEDURES.
420..................... FEVER OF UNKNOWN ORIGIN AGE 17 W/O
CC.
421..................... VIRAL ILLNESS AGE 17.
454..................... OTHER INJURY, POISONING & TOXIC EFFECT DIAG W
CC.
455..................... OTHER INJURY, POISONING & TOXIC EFFECT DIAG W/
O CC.
465..................... AFTERCARE W HISTORY OF MALIGNANCY AS SECONDARY
DIAGNOSIS.
502..................... KNEE PROCEDURES W PDX OF INFECTION W/O CC.
506..................... FULL THICKNESS BURN W SKIN GRAFT OR INHAL INJ
W CC OR SIG TRAUMA.
507*.................... FULL THICKNESS BURN W SKIN GRAFT OR INHAL INJ
W/O CC OR SIG TRAUMA.
508..................... FULL THICKNESS BURN W/O SKIN GRAFT OR INHAL
INJ W CC OR SIG TRAUMA.
509..................... FULL THICKNESS BURN W/O SKIN GRAFT OR INH INJ
W/O CC OR SIG TRAUMA.
510..................... NON-EXTENSIVE BURNS W CC OR SIGNIFICANT
TRAUMA.
529..................... VENTRICULAR SHUNT PROCEDURES WITH CC.
-------------------------
QUINTILE 3
------------------------------------------------------------------------
31*..................... CONCUSSION AGE 17 W CC.
32*..................... CONCUSSION AGE 17 W/O CC.
63...................... OTHER EAR, NOSE, MOUTH & THROAT O.R.
PROCEDURES.
83...................... MAJOR CHEST TRAUMA W CC.
117..................... CARDIAC PACEMAKER REVISION EXCEPT DEVICE
REPLACEMENT.
129..................... CARDIAC ARREST, UNEXPLAINED.
158..................... ANAL & STOMAL PROCEDURES W/O CC.
194**................... BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR
W/O C.D.E. W/O CC.
197..................... CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O
C.D.E. W CC.
218..................... LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT,
FEMUR AGE 17 W CC.
223..................... MAJOR SHOULDER/ELBOW PROC, OR OTHER UPPER
EXTREMITY PROC W CC.
225..................... FOOT PROCEDURES.
226**................... SOFT TISSUE PROCEDURES W CC.
233..................... OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC
W CC.
234..................... OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC
W/O CC.
257..................... TOTAL MASTECTOMY FOR MALIGNANCY W CC.
262..................... BREAST BIOPSY & LOCAL EXCISION FOR NON-
MALIGNANCY.
295..................... DIABETES AGE 0-35.
299..................... INBORN ERRORS OF METABOLISM.
317..................... ADMIT FOR RENAL DIALYSIS.
325..................... KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE
17 W CC.
347***.................. MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W/O CC.
352..................... OTHER MALE REPRODUCTIVE SYSTEM DIAGNOSES.
369..................... MENSTRUAL & OTHER FEMALE REPRODUCTIVE SYSTEM
DISORDERS.
394..................... OTHER O.R. PROCEDURES OF THE BLOOD AND BLOOD
FORMING ORGANS.
402..................... LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R.
PROC W/O CC.
408..................... MYELOPROLIF DISORD OR POORLY DIFF NEOPL W
OTHER O.R. PROC.
410..................... CHEMOTHERAPY W/O ACUTE LEUKEMIA AS SECONDARY
DIAGNOSIS.
419..................... FEVER OF UNKNOWN ORIGIN AGE 17 W
CC.
447..................... ALLERGIC REACTIONS AGE 17.
449..................... POISONING & TOXIC EFFECTS OF DRUGS AGE 17 W CC.
450*.................... POISONING & TOXIC EFFECTS OF DRUGS AGE 17 W/O CC.
473..................... ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE
17.
497..................... SPINAL FUSION W CC.
498 *................... SPINAL FUSION W/O CC.
503..................... KNEE PROCEDURES W/O PDX OF INFECTION.
507 * *................. FULL THICKNESS BURN W SKIN GRFT OR INHAL INJ W/
O CC OR SIG TRAUMA.
518..................... PERCUTANEOUS CARDIVASCULAR PROC W/O CORONARY
ARTERY STENT OR AMI.
532..................... SPINAL PROCEDURES WITHOUT CC.
-------------------------
[[Page 45379]]
QUINTILE 4
------------------------------------------------------------------------
119..................... VEIN LIGATION & STRIPPING.
124..................... CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH
& COMPLEX DIAG.
125..................... CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH
W/O COMPLEX DIAG.
150..................... PERITONEAL ADHESIOLYSIS W CC.
152..................... MINOR SMALL & LARGE BOWEL PROCEDURES W CC.
157..................... ANAL & STOMAL PROCEDURES W CC.
161..................... INGUINAL & FEMORAL HERNIA PROCEDURES AGE 7 W CC.
171..................... OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W/O CC.
191..................... PANCREAS, LIVER & SHUNT PROCEDURES W CC.
195..................... CHOLECYSTECTOMY W C.D.E. W CC.
209..................... MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF
LOWER EXTREMITY.
210..................... HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT
AGE17 W CC.
216..................... BIOPSIES OF MUSCULOSKELETAL SYSTEM &
CONNECTIVE TISSUE.
226 *................... SOFT TISSUE PROCEDURES W CC.
227..................... SOFT TISSUE PROCEDURES W/O CC.
228..................... MAJOR THUMB OR JOINT PROC,OR OTH HAND OR WRIST
PROC W CC.
230..................... LOCAL EXCISION & REMOVAL OF INT FIX DEVICES OF
HIP & FEMUR.
266 * * *............... SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER
OR CELLULITIS W/O CC.
292..................... OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W
CC.
308..................... MINOR BLADDER PROCEDURES W CC.
310..................... TRANSURETHRAL PROCEDURES W CC.
312..................... URETHRAL PROCEDURES, AGE 17 W CC.
360..................... VAGINA, CERVIX & VULVA PROCEDURES.
424..................... O.R. PROCEDURE W PRINCIPAL DIAGNOSES OF MENTAL
ILLNESS.
427..................... NEUROSES EXCEPT DEPRESSIVE.
443..................... OTHER O.R. PROCEDURES FOR INJURIES W/O CC.
479 * * *............... OTHER VASCULAR PROCEDURES W/O CC.
486..................... OTHER O.R. PROCEDURES FOR MULTIPLE SIGNIFICANT
TRAUMA.
493..................... LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W CC.
494 *................... LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O
CC.
498 **.................. SPINAL FUSION W/O CC.
500..................... BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W/
O CC.
505..................... EXTENSIVE 3RD DEGREE BURNS W/O SKIN GRAFT.
517..................... PERCUTANEOUS CARDIVASCULAR PROC W NON-DRUG
ELUTING STENT W/O AMI.
519..................... CERVICAL SPINAL FUSION W CC.
531..................... SPINAL PROCEDURES WITH CC.
537..................... LOCAL EXCISION AND REMOVAL OF INTERNAL
FIXATION DEVICES EXCEPT HIP AND FEMUR WITH
CC.
-------------------------
QUINTILE 5
------------------------------------------------------------------------
1....................... CRANIOTOMY AGE 17 W CC.
8 ***................... PERIPH & CRANIAL NERVE & OTHER NERV SYST PROC
W/O CC.
32 **................... CONCUSSION AGE 17 W/O CC.
40...................... EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 17.
75...................... MAJOR CHEST PROCEDURES.
77...................... OTHER RESP SYSTEM O.R. PROCEDURES W/O CC.
108..................... OTHER CARDIOTHORACIC PROCEDURES.
110..................... MAJOR CARDIOVASCULAR PROCEDURES W CC.
115..................... PRM CARD PACEM IMPL W AMI, HRT FAIL OR SHK, OR
AICD LEAD OR GNRTR P.
116..................... OTH PERM CARD PACEMAK IMPL OR PTCA W CORONARY
ARTERY STENT IMPLNT.
118..................... CARDIAC PACEMAKER DEVICE REPLACEMENT.
148..................... MAJOR SMALL & LARGE BOWEL PROCEDURES W CC.
154..................... STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE
17 W CC.
168..................... MOUTH PROCEDURES W CC.
201..................... OTHER HEPATOBILIARY OR PANCREAS O.R.
PROCEDURES.
261..................... BREAST PROC FOR NON-MALIGNANCY EXCEPT BIOPSY &
LOCAL EXCISION.
268..................... SKIN, SUBCUTANEOUS TISSUE & BREAST PLASTIC
PROCEDURES.
288..................... O.R. PROCEDURES FOR OBESITY.
304..................... KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-
NEOPL W CC.
345..................... OTHER MALE REPRODUCTIVE SYSTEM O.R. PROC
EXCEPT FOR MALIGNANCY.
365..................... OTHER FEMALE REPRODUCTIVE SYSTEM O.R.
PROCEDURES.
401..................... LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R.
PROC W CC.
406..................... MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ
O.R.PROC W CC.
441..................... HAND PROCEDURES FOR INJURIES.
450 **.................. POISONING & TOXIC EFFECTS OF DRUGS AGE 17 W/O CC.
471..................... BILATERAL OR MULTIPLE MAJOR JOINT PROCS OF
LOWER EXTREMITY.
482..................... TRACHEOSTOMY FOR FACE, MOUTH & NECK DIAGNOSES.
488..................... HIV W EXTENSIVE O.R. PROCEDURE.
494 **.................. LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O
CC.
499..................... BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W
CC.
[[Page 45380]]
501..................... KNEE PROCEDURES W PDX OF INFECTION W CC.
515..................... CARDIAC DEFIBRILATOR IMPLANT W/O CARDIAC CATH.
533..................... EXTRACRANIAL VASCULAR PROCEDURES WITH CC.
536..................... CARDIAC DEFIB IMPLANT WITH CARDIAC CATH
WITHOUT AMI/HF/SHOCK.
------------------------------------------------------------------------
* One of the original 173 low volume LTC-DRGs initially assigned to a
different low volume quintile; reassigned to this low volume quintile
in addressing nonmonotonicity (see step 5 below).
** One of the original 173 low volume LTC-DRGs initially assigned to
this low volume quintile; reassigned to a different low volume
quintile in addressing nonmonotonicity (see step 5 below).
*** One of the original 173 low volume LTC-DRGs initially assigned to
this low volume quintile; removed from the low volume quintiles in
addressing nonmonotonicity (see step 5 below).
4. Steps for Determining the FY 2004 LTC-DRG Relative Weights
As we noted previously, the FY 2004 LTC-DRG relative weights are
determined in accordance with the methodology described in the May 19,
2003 proposed rule (68 FR 27179). In summary, LTCH cases must be
grouped in the appropriate LTC-DRG, while taking into account the low
volume LTC-DRGs as described above, before the FY 2004 LTC-DRG relative
weights can be determined. After grouping the cases in the appropriate
LTC-DRG, we calculate the relative weights for FY 2004 in this final
rule by first removing statistical outliers and cases with a length of
stay of 7 days or less. Next, we adjust the number of cases in each
LTC-DRG for the effect of short-stay outlier cases under Sec. 412.529.
The short-stay adjusted discharges and corresponding charges are used
to calculate ``relative adjusted weights'' in each LTC-DRG using the
hospital-specific relative value method described above.
Below we discuss in detail the steps for calculating the FY 2004
LTC-DRG relative weights.
Step 1--Remove Statistical Outliers
The first step in the calculation of the FY 2004 LTC-DRG relative
weights is to remove statistical outlier cases. As we discussed in the
May 19, 2003 proposed rule (68 FR 27179), we define statistical
outliers as cases that are outside of 3.0 standard deviations from the
mean of the log distribution of both charges per case and the charges
per day for each LTC-DRG. These statistical outliers are removed prior
to calculating the relative weights. We believe that they may represent
aberrations in the data that distort the measure of average resource
use. Including those LTCH cases in the calculation of the relative
weights could result in an inaccurate relative weight that does not
truly reflect relative resource use among the LTC-DRGs.
Step 2--Remove Cases With a Length of Stay of 7 Days or Less
The FY 2004 LTC-DRG relative weights reflect the average of
resources used on representative cases of a specific type. Generally,
as we discussed in the May 19, 2003 proposed rule (68 FR 27179), cases
with a length of stay 7 days or less do not belong in a LTCH because
such stays do not fully receive or benefit from treatment that is
typical in a LTCH stay, and full resources are often not used in the
earlier stages of admission to a LTCH. If we were to include stays of 7
days or less in the computation of the FY 2004 LTC-DRG relative
weights, the value of many relative weights would decrease and,
therefore, payments would decrease to a level that may no longer be
appropriate.
We do not believe that it would be appropriate to compromise the
integrity of the payment determination for those LTCH cases that
actually benefit from and receive a full course of treatment at a LTCH,
in order to include data from these very short-stays. Thus, in
determining the FY 2004 LTC-DRG relative weights, we remove LTCH cases
with a length of stay of 7 days or less.
Step 3--Adjust Charges for the Effects of Short-Stay Outliers
The third step in the calculation of the FY 2004 LTC-DRG relative
weights is to adjust each LTCH's charges per discharge for short-stay
outlier cases (that is, a patient with a length of stay that is less
than or equal to five-sixths the average length of stay of the LTC-
DRG).
As we discussed in the May 19, 2003 proposed rule (68 FR 27179), we
make this adjustment by counting a short-stay outlier as a fraction of
a discharge based on the ratio of the length of stay of the case to the
average length of stay for the LTC-DRG for nonshort-stay outlier cases.
This has the effect of proportionately reducing the impact of the lower
charges for the short-stay outlier cases in calculating the average
charge for the LTC-DRG. This process produces the same result as if the
actual charges per discharge of a short-stay outlier case were adjusted
to what they would have been had the patient's length of stay been
equal to the average length of stay of the LTC-DRG.
As we explained in that same proposed rule, counting short-stay
outlier cases as full discharges with no adjustment in determining the
LTC-DRG relative weights would lower the LTC-DRG relative weight for
affected LTC-DRGs because the relatively lower charges of the short-
stay outlier cases would bring down the average charge for all cases
within a LTC-DRG. This would result in an ``underpayment'' to nonshort-
stay outlier cases and an ``overpayment'' to short-stay outlier cases.
Therefore, in this final rule, we adjust for short-stay outlier cases
under Sec. 412.529 in this manner since it results in more appropriate
payments for all LTCH cases.
Step 4--Calculate the FY 2004 LTC-DRG Relative Weights on an Iterative
Basis
As we discussed in the May 19, 2003 proposed rule (68 FR 27180),
the process of calculating the LTC-DRG relative weights using the
hospital specific relative value methodology is iterative. First, for
each LTCH case, we calculate a hospital-specific relative charge value
by dividing the short-stay outlier adjusted charge per discharge (see
step 3) of the LTCH case (after removing the statistical outliers (see
step 1)) and LTCH cases with a length of stay of 7 days or less (see
step 2) by the average charge per discharge for the LTCH in which the
case occurred. The resulting ratio is then multiplied by the LTCH's
case-mix index to produce an adjusted hospital-specific relative charge
value for the case. An initial case-mix index value of 1.0 is used for
each LTCH.
For each LTC-DRG, the FY 2004 LTC-DRG relative weight is calculated
by dividing the average of the adjusted hospital-specific relative
charge values (from above) for the LTC-DRG by the
[[Page 45381]]
overall average hospital-specific relative charge value across all
cases for all LTCHs. Using these recalculated LTC-DRG relative weights,
each LTCH's average relative weight for all of its cases (case-mix) is
calculated by dividing the sum of all the LTCH's LTC-DRG relative
weights by its total number of cases. The LTCHs' hospital-specific
relative charge values above are multiplied by these hospital specific
case-mix indexes. These hospital-specific case-mix adjusted relative
charge values are then used to calculate a new set of LTC-DRG relative
weights across all LTCHs. In this final rule, this iterative process is
continued until there is convergence between the weights produced at
adjacent steps, for example, when the maximum difference is less than
0.0001.
Step 5--Adjust the FY 2004 LTC-DRG Relative Weights to Account for
Nonmonotonically Increasing Relative Weights
As explained in section II.B. of this preamble, the FY 2004 CMS
DRGs, upon which the FY 2004 LTC-DRGs are based, contain ``pairs'' that
are differentiated based on the presence or absence of CCs. The LTC-
DRGs with CCs are defined by certain secondary diagnoses not related to
or inherently a part of the disease process identified by the principal
diagnosis, but the presence of additional diagnoses does not
automatically generate a CC. As we discussed in the May 19, 2003
proposed rule (68 FR 27180), the value of monotonically increasing
relative weights rises as the resource use increases (for example, from
uncomplicated to more complicated). The presence of CCs in a LTC-DRG
means that cases classified into a ``without CC'' LTC-DRG are expected
to have lower resource use (and lower costs). In other words, resource
use (and costs) are expected to decrease across ``with CC''/``without
CC'' pairs of LTC-DRGs.
For a case to be assigned to a LTC-DRG with CCs, more coded
information is called for (that is, at least one relevant secondary
diagnosis), than for a case to be assigned to a LTC-DRG ``without CCs''
(which is based on only one principal diagnosis and no relevant
secondary diagnoses). Currently, the LTCH claims data include both
accurately coded cases without complications and cases that have
complications (and cost more) but were not coded completely. Both types
of cases are grouped to a LTC-DRG ``without CCs'' since only one
principal diagnosis was coded. Since LTCHs were previously paid under
cost-based reimbursement, which is not based on patient diagnoses,
coding by LTCHs for these cases may not have been as detailed as
possible.
Thus, in developing the FY 2003 LTC-DRG relative weights for the
LTCH PPS based on FY 2001 claims data, as we discussed in the August
30, 2002 LTCH PPS final rule (67 FR 55990), we found on occasion that
the data suggested that cases classified to the LTC-DRG ``with CCs'' of
a ``with CC''/``without CC'' pair had a lower average charge than the
corresponding LTC-DRG ``without CCs.'' Similarly, based on FY 2002
claims data, we also found on occasion that the data suggested that
cases classified to the LTC-DRG ``with CCs'' of a ``with CC''/``without
CC'' pair have a lower average charge than the corresponding LTC-DRG
``without CCs'' for FY 2004.
We believe this anomaly may be due to coding that may not have
fully reflected all comorbidities that were present. Specifically,
LTCHs may have failed to code relevant secondary diagnoses, which
resulted in cases that actually had CCs being classified into a
``without CC'' LTC-DRG. It would not be appropriate to pay a lower
amount for the ``with CC'' LTC-DRG. Therefore, as we discussed in the
May 19, 2003 proposed rule (68 FR 27180), we grouped both the cases
``with CCs'' and ``without CCs'' together for the purpose of
calculating the FY 2004 LTC-DRG relative weights in this final rule. We
continue to employ this methodology to account for nonmonotonically
increasing relative weights until we have adequate data to calculate
appropriate separate weights for these anomalous LTC-DRG pairs. We
expect that, as was the case when we first implemented the IPPS, this
problem will be self-correcting, as LTCHs submit more completely coded
data in the future.
There are three types of ``with CC'' and ``without CC'' pairs that
could be nonmonotonic, that is, where the ``without CC'' LTC-DRG would
have a higher average charge than the ``with CC'' LTC-DRG. For this
final rule, using the LTCH cases in the December 2002 update of the FY
2002 MedPAR file, we identified three of the types of nonmonotonic LTC-
DRG pairs.
The first category of nonmonotonically increasing relative weights
for FY 2004 LTC-DRG pairs ``with and without CCs'' contains 1 pair of
LTC-DRGs in which both the LTC-DRG ``with CCs'' and the LTC-DRG
``without CCs'' had 25 or more LTCH cases and, therefore, did not fall
into one of the 5 low volume quintiles. For that type of nonmonotonic
LTC-DRG pair, as discussed in the May 19, 2003 proposed rule (68 FR
27180), we combine the LTCH cases and compute a new relative weight
based on the case-weighted average of the combined LTCH cases of the
LTC-DRGs. The case-weighted average charge is determined by dividing
the total charges for all LTCH cases by the total number of LTCH cases
for the combined LTC-DRG. This new relative weight is then assigned to
both of the LTC-DRGs in the pair. In this final rule, for FY 2004, LTC-
DRGs 180 and 181 are in this category.
The second category of nonmonotonically increasing relative weights
for LTC-DRG pairs with and without CCs consists of 7 pairs of LTC-DRGs
that has fewer than 25 cases, and each LTC-DRG is grouped to different
low volume quintiles in which the ``without CC'' LTC-DRG is in a
higher-weighted low volume quintile than the ``with CC'' LTC-DRG. For
those pairs, as we discussed in the May 19, 2003 proposed rule (68 FR
27181), we combine the LTCH cases and determine the case-weighted
average charge for all LTCH cases. The case-weighted average charge is
determined by dividing the total charges for all LTCH cases by the
total number of LTCH cases for the combined LTC-DRG. Based on the case-
weighted average LTCH charge, we determine which low volume quintile
the ``combined LTC-DRG'' is grouped. Both LTC-DRGs in the pair are then
grouped into the same low volume quintile, and thus would have the same
relative weight. For FY 2004, in this final rule, the following LTC-
DRGs are in this category: LTC-DRGs 31 and 32 (low volume quintile 3);
LTC-DRGs 193 and 194 (low volume quintile 2); LTC-DRGs 226 and 227 (low
volume quintile 4); LTC-DRGs 449 and 450 (low volume quintile 3); LTC-
DRGs 493 and 494 (low volume quintile 4); LTC-DRGs 497 and 498 (low
volume quintile 3); and LTC-DRGs 506 and 507 (low volume quintile 2).
The third category of nonmonotonically increasing relative weights
for LTC-DRG pairs with and without CCs consists of 6 pairs of LTC-DRGs
where one of the LTC-DRGs has fewer than 25 LTCH cases and is grouped
to a low volume quintile and the other LTC-DRG has 25 or more LTCH
cases and has its own LTC-DRG relative weight, and the LTC-DRG
``without CCs'' has the higher relative weight. As we discussed in the
May 19, 2003 proposed rule (68 FR 27181), we remove the low volume LTC-
DRG from the low volume quintile and combine it with the other LTC-DRG
for the computation of a new relative weight for
[[Page 45382]]
each of these LTC-DRGs. This new relative weight is assigned to both
LTC-DRGs, so they each have the same relative weight. For FY 2004, in
this final rule, the following LTC-DRGs are in this category: LTC-DRGs
7 and 8; LTC-DRGs 205 and 206; LTC-DRGs 207 and 208; LTC-DRGs 265 and
266; LTC-DRGs 346 and 347; and LTC-DRGs 478 and 479.
Step 6--Determine a FY 2004 LTC-DRG Relative Weight for LTC-DRGs With
No LTCH Cases
As we stated above, we determine the relative weight for each LTC-
DRG using charges reported in the December 2002 update of the FY 2002
MedPAR file. Of the 518 LTC-DRGs for FY 2004, we identified 167 LTC-
DRGs for which there were no LTCH cases in the database. That is, based
on data from the FY 2002 MedPAR file used in this final rule, no
patients who would have been classified to those LTC-DRGs were treated
in LTCHs during FY 2002 and, therefore, no charge data were reported
for those LTC-DRGs. Thus, in the process of determining the LTC-DRG
relative weights, we are unable to determine weights for these 167 LTC-
DRGs using the methodology described in steps 1 through 5 above.
However, since patients with a number of the diagnoses under these LTC-
DRGs may be treated at LTCHs beginning in FY 2004, we assign relative
weights to each of the 167 ``no volume'' LTC-DRGs based on clinical
similarity and relative costliness to one of the remaining 354 (518-167
= 351) LTC-DRGs for which we are able to determine relative weights,
based on FY 2002 claims data.
As there are currently no LTCH cases in these ``no volume'' LTC-
DRGs, as we discussed in the May 19, 2003 proposed rule (68 FR 27181),
we determine relative weights for the 167 LTC-DRGs with no LTCH cases
in the FY 2002 MedPAR file used in this final rule by grouping them to
the appropriate low volume quintile. This methodology is consistent
with our methodology used in determining relative weights to account
for the low volume LTC-DRGs described above.
Our methodology for determining relative weights for the ``no
volume'' LTC-DRGs is as follows: First, we crosswalk the no volume LTC-
DRGs by matching them to other similar LTC-DRGs for which there were
LTCH cases in the FY 2002 MedPAR file based on clinical similarity and
intensity of use of resources as determined by care provided during the
period of time surrounding surgery, surgical approach (if applicable),
length of time of surgical procedure, post-operative care, and length
of stay. We assign the relative weight for the applicable low volume
quintile to the no volume LTC-DRG if the LTC-DRG to which it is
crosswalked is grouped to one of the low volume quintiles. If the LTC-
DRG to which the no volume LTC-DRG is crosswalked is not one of the
LTC-DRGs to be grouped to one of the low volume quintiles, we compare
the relative weight of the LTC-DRG to which the no volume LTC-DRG is
crosswalked to the relative weights of each of the five quintiles and
we assign the no volume LTC-DRG the relative weight of the low volume
quintile with the closest weight. For this final rule, a list of the no
volume FY 2004 LTC-DRGs and the FY 2004 LTC-DRG to which it is
crosswalked in order to determine the appropriate low volume quintile
for the assignment of a relative weight for FY 2004 is shown below in
Table 2.
Table 2.--No Volume LTC-DRG Crosswalk and Quintile Assignment for FY 2004
----------------------------------------------------------------------------------------------------------------
Cross-walked
LTC-DRG Description LTC-DRG Low volume quintile assigned
----------------------------------------------------------------------------------------------------------------
2............................. CRANIOTOMY AGE 17 W/ 1 Quintile 5
O CC.
3............................. CRANIOTOMY AGE 0-17............ 1 Quintile 5
6............................. CARPAL TUNNEL RELEASE.......... 251 Quintile 1
26............................ SEIZURE & HEADACHE AGE 0-17.... 25 Quintile 2
30............................ TRAUMATIC STUPOR & COMA, COMA 29 Quintile 3
<1 HR AGE 0-17.
33............................ CONCUSSION AGE 0-17............ 25 Quintile 2
36............................ RETINAL PROCEDURES............. 47 Quintile 1
37............................ ORBITAL PROCEDURES............. 47 Quintile 1
38............................ PRIMARY IRIS PROCEDURES........ 47 Quintile 1
39............................ LENS PROCEDURES WITH OR WITHOUT 47 Quintile 1
VITRECTOMY.
41............................ EXTRAOCULAR PROCEDURES EXCEPT 47 Quintile 1
ORBIT AGE 0-17.
42............................ INTRAOCULAR PROCEDURES EXCEPT 47 Quintile 1
RETINA, IRIS & LENS.
43............................ HYPHEMA........................ 47 Quintile 1
45............................ NEUROLOGICAL EYE DISORDERS..... 46 Quintile 1
48............................ OTHER DISORDERS OF THE EYE AGE 47 Quintile 1
0-17.
49............................ MAJOR HEAD & NECK PROCEDURES... 64 Quintile 4
50............................ SIALOADENECTOMY................ 63 Quintile 3
51............................ SALIVARY GLAND PROCEDURES 63 Quintile 3
EXCEPT SIALOADENECTOMY.
52............................ CLEFT LIP & PALATE REPAIR...... 63 Quintile 3
54............................ SINUS & MASTOID PROCEDURES AGE 63 Quintile 3
0-17.
55............................ MISCELLANEOUS EAR, NOSE, MOUTH 63 Quintile 3
& THROAD PROCEDURES.
56............................ RHINOPLASTY.................... 72 Quintile 2
57............................ T&A PROC, EXCEPT TONSILLECTOMY 63 Quintile 3
&/OR ADENOIDECTOMY ONLY, AGE
17.
58............................ T&A PROC, EXCEPT TONSILLECTOMY 63 Quintile 3
&/OR ADENOIDECTOMY ONLY, AGE 0-
17.
59............................ TONSILLECTOMY &/OR 63 Quintile 3
ADENOIDECTOMY ONLY, AGE 17.
60............................ TONSILLECTOMY &/OR 63 Quintile 3
ADENOIDECTOMY ONLY, AGE 0-17.
62............................ MYRINGOTOMY W TUBE INSERTION 63 Quintile 3
AGE 0-17.
67............................ EPIGLOTTITIS................... 63 Quintile 3
70............................ OTITIS MEDIA & URI AGE 0-17.... 69 Quintile 1
71............................ LARYNGOTRACHEITIS.............. 97 Quintile 1
74............................ OTHER EAR, NOSE, MOUTH & THROAT 69 Quintile 1
DIAGNOSES AGE 0-17.
81............................ RESPIRATORY INFECTIONS & 69 Quintile 1
INFLAMMATIONS AGE 0-17.
91............................ SIMPLE PNEUMONIA & PLEURISY AGE 90 Quintile 2
0-17.
98............................ BRONCHITIS & ASTHMA AGE 0-17... 97 Quintile 1
104........................... CARDIAC VALVE & OTHER MAJOR 110 Quintile 5
CARDIOTHORACIC PROC W CARDIAC
CATH.
105........................... CARDIAC VALVE & OTHER MAJOR 110 Quintile 5
CARDIOTHORACIC PROC W/O
CARDIAC CATH.
[[Page 45383]]
106........................... CORONARY BYPASS W PTCA......... 110 Quintile 5
107........................... CORONARY BYPASS W CARDIAC CATH. 110 Quintile 5
109........................... CORONARY BYPASS W/O PTCA OR 110 Quintile 5
CARDIAC CATH.
111........................... MAJOR CARDIOVASCULAR PROCEDURES 110 Quintile 5
W/O CC.
137........................... CARDIAC CONGENITAL & VALVULAR 136 Quintile 2
DISORDERS AGE 0-17.
146........................... RECTAL RESECTION W CC.......... 148 Quintile 5
147........................... RECTAL RESECTION W/O CC........ 148 Quintile 5
151........................... PERITONEAL ADHESIOLYSIS W/O CC. 150 Quintile 4
153........................... MINOR SMALL & LARGE BOWEL 152 Quintile 4
PROCEDURES W/O CC 155 STOMACH,
ESOPHAGEAL & DUODENAL.
155........................... STOMACH, ESOPHAGEAL & DUODENAL 171 Quintile 4
PROCEDURES AGE 17 W/
O CC.
156........................... STOMACH, ESOPHAGEAL & DUODENAL 171 Quintile 4
PROCEDURES AGE 0-17.
159........................... HERNIA PROCEDURES EXCEPT 161 Quintile 4
INGUINAL & FEMORAL AGE 17 W CC.
160........................... HERNIA PROCEDURES EXCEPT 161 Quintile 4
INGUINAL & FEMORAL AGE 17 W/O CC.
162........................... INGUINAL & FEMORAL HERNIA 178 Quintile 1
PROCEDURES AGE 17 W/
O CC.
163........................... HERNIA PROCEDURES AGE 0-17..... 178 Quintile 1
164........................... APPENDECTOMY W COMPLICATED 148 Quintile 5
PRINCIPAL DIAG W CC.
165........................... APPENDECTOMY W COMPLICATED 149 Quintile 1
PRINCIPAL DIAG W/O CC.
166........................... APPENDECTOMY W/O COMPLICATED 148 Quintile 5
PRINCIPAL DIAG W CC.
167........................... APPENDECTOMY W/O COMPLICATED 149 Quintile 1
PRINCIPAL DIAG W/O CC.
169........................... MOUTH PROCEDURES W/O CC........ 72 Quintile 2
184........................... ESOPHAGITIS, GASTROENT & MISC 183 Quintile 2
DIGEST DISORDERS AGE 0-17.
186........................... DENTAL & ORAL DIS EXCEPT 185 Quintile 2
EXTRACTIONS & RESTORATIONS,
AGE 0-17.
187........................... DENTAL EXTRACTIONS & 185 Quintile 2
RESTORATIONS.
190........................... OTHER DIGESTIVE SYSTEM 189 Quintile 2
DIAGNOSES AGE 0-17.
196........................... CHOLECYSTECTOMY W C.D.E. W/O CC 197 Quintile 3
198........................... CHOLECYSTECTOMY EXCEPT BY 197 Quintile 3
LAPAROSCOPE W/O C.D.E. W/O CC.
199........................... HEPATOBILIARY DIAGNOSTIC 200 Quintile 2
PROCEDURE FOR MALIGNANCY.
212........................... HIP & FEMUR PROCEDURES EXCEPT 211 Quintile 2
MAJOR JOINT AGE 0-17.
219........................... LOWER EXTREM & HUMER PROC 218 Quintile 3
EXCEPT HIP, FOOT, FEMUR AGE
17 W/O CC.
220........................... LOWER EXTREM & HUMER PROC 218 Quintile 3
EXCEPT HIP, FOOT, FEMUR AGE 0-
17.
224........................... SHOULDER, ELBOW OR FOREARM 234 Quintile 3
PROC, EXC MAJOR JOINT PROC, W/
O CC.
229........................... HAND OR WRIST PROC, EXCEPT 234 Quintile 3
MAJOR JOINT PROC, W/O CC.
252........................... FX, SPRN, STRN & DISL OF 234 Quintile 3
FOREARM, HAND, FOOT AGE 0-17.
255........................... FX, SPRN, STRN & DISL OF UPARM, 234 Quintile 3
LOWLEG EX FOOT AGE 0-17.
258........................... TOTAL MASTECTOMY FOR MALIGNANCY 257 Quintile 3
W/O CC.
259........................... SUBTOTAL MASTECTOMY FOR 257 Quintile 3
MALIGNANCY W CC.
260........................... SUBTOTAL MASTECTOMY FOR 257 Quintile 3
MALIGNANCY W/O CC.
267........................... PERIANAL & PILONIDAL PROCEDURES 158 Quintile 3
279........................... CELLULITIS AGE 0-17............ 78 Quintile 3
282........................... TRAUMA TO THE SKIN, SUBCUT TISS 281 Quintile 2
& BREAST AGE 0-17.
286........................... ADRENAL & PITUITARY PROCEDURES. 53 Quintile 2
289........................... PARATHYROID PROCEDURES......... 53 Quintile 2
290........................... THYROID PROCEDURES............. 53 Quintile 2
291........................... THYROGLOSSAL PROCEDURES........ 53 Quintile 2
293........................... OTHER ENDOCRINE, NUTRIT & METAB 63 Quintile 3
O.R. PROC W/O CC.
298........................... NUTRITIONAL & MISC METABOLIC 297 Quintile 2
DISORDERS AGE 0-17.
303........................... KIDNEY, URETER & MAJOR BLADDER 304 Quintile 5
PROCEDURES FOR NEOPLASM.
306........................... PROSTATECTOMY W CC............. 310 Quintile 4
307........................... PROSTATECTOMY W/O CC........... 310 Quintile 4
313........................... URETHRAL PROCEDURES, AGE 17 W/O CC.
314........................... URETHRAL PROCEDURES, AGE 0-17.. 311 Quintile 1
322........................... KIDNEY & URINARY TRACT 326 Quintile 1
INFECTIONS AGE 0-17.
327........................... KIDNEY & URINARY TRACT SIGNS & 326 Quintile 1
SYMPTOMS AGE 0-17.
328........................... URETHRAL STRICTURE AGE 17 W CC.
329........................... URETHRAL STRICTURE AGE 17 W/O CC.
330........................... URETHRAL STRICTURE AGE 0-17.... 311 Quintile 1
333........................... OTHER KIDNEY & URINARY TRACT 332 Quintile 1
DIAGNOSES AGE 0-17.
334........................... MAJOR MALE PELVIC PROCEDURES W 345 Quintile 5
CC.
335........................... MAJOR MALE PELVIC PROCEDURES W/ 345 Quintile 5
O CC.
336........................... TRANSURETHRAL PROSTATECTOMY W 341 Quintile 2
CC.
337........................... TRANSURETHRAL PROSTATECTOMY W/O 341 Quintile 2
CC.
338........................... TESTES PROCEDURES, FOR 339 Quintile 2
MALIGNANCY.
340........................... TESTES PROCEDURES, NON- 339 Quintile 2
MALIGNANCY AGE 0-17.
343........................... CIRCUMCISION AGE 0-17.......... 339 Quintile 2
351........................... STERILIZATION, MALE............ 339 Quintile 2
353........................... PELVIC EVISCERATION, RADICAL 365 Quintile 5
HYSTERECTOMY & RADICAL
VULVECTOMY.
354........................... UTERINE, ADNEXA PROC FOR NON- 365 Quintile 5
OVARIAN/ADNEXAL MALIG W CC.
355........................... UTERINE, ADNEXA PROC FOR NON- 365 Quintile 5
OVARIAN/ADNEXAL MALIG W/O CC.
356........................... FEMALE REPRODUCTIVE SYSTEM 360 Quintile 4
RECONSTRUCTIVE PROCEDURES.
357........................... UTERINE & ADNEXA PROC FOR 360 Quintile 4
OVARIAN OR ADNEXAL MALIGNANCY.
[[Page 45384]]
358........................... UTERINE & ADNEXA PROC FOR NON- 360 Quintile 4
MALIGNANCY W CC.
359........................... UTERINE & ADNEXA PROC FOR NON- 360 Quintile 4
MALIGNANCY W/O CC.
361........................... LAPAROSCOPY & INCISIONAL TUBAL 149 Quintile 1
INTERRUPTION.
362........................... ENDOSCOPIC TUBAL INTERRUPTION.. 149 Quintile 1
363........................... D&C, CONIZATION & RADIO- 367 Quintile 1
IMPLANT, FOR MALIGNANCY.
364........................... D&C, CONIZATION EXCEPT FOR 367 Quintile 1
MALIGNANCY.
370........................... CESAREAN SECTION W CC.......... 369 Quintile 3
371........................... CESAREAN SECTION W/O CC........ 367 Quintile 1
372........................... VAGINAL DELIVERY W COMPLICATING 367 Quintile 1
DIAGNOSES.
373........................... VAGINAL DELIVERY W/O 367 Quintile 1
COMPLICATING DIAGNOSES.
374........................... VAGINAL DELIVERY W 367 Quintile 1
STERILIZATION &/OR D&C.
375........................... VAGINAL DELIVERY W O.R. PROC 367 Quintile 1
EXCEPT STERIL &/OR D&C.
377........................... POSTPARTUM & POST ABORTION 367 Quintile 1
DIAGNOSES W O.R. PROCEDURE.
378........................... ECTOPIC PREGNANCY.............. 369 Quintile 3
379........................... THREATENED ABORTION............ 376 Quintile 1
380........................... ABORTION W/O D&C............... 376 Quintile 1
381........................... ABORTION W D&C, ASPIRATION 376 Quintile 1
CURETTAGE OR HYSTEROTOMY.
382........................... FALSE LABOR.................... 376 Quintile 1
383........................... OTHER ANTEPARTUM DIAGNOSES W 376 Quintile 1
MEDICAL COMPLICATIONS.
384........................... OTHER ANTEPARTUM DIAGNOSES W/O 376 Quintile 1
MEDICAL COMPLICATIONS.
385........................... NEONATES, DIED OR TRANSFERRED 367 Quintile 1
TO ANOTHER ACUTE CARE FACILITY.
386........................... EXTREME IMMATURITY............. 367 Quintile 1
387........................... PREMATURITY W MAJOR PROBLEMS... 367 Quintile 1
388........................... PREMATURITY W/O MAJOR PROBLEMS. 367 Quintile 1
389........................... FULL TERM NEONATE W MAJOR 367 Quintile 1
PROBLEMS.
390........................... NEONATE W OTHER SIGNIFICANT 367 Quintile 1
PROBLEMS.
391........................... NORMAL NEWBORN................. 376 Quintile 1
392........................... SPLENECTOMY AGE 17.. 194 Quintile 2
393........................... SPLENECTOMY AGE 0-17........... 194 Quintile 2
396........................... RED BLOOD CELL DISORDERS AGE 0- 399 Quintile 1
17.
405........................... ACUTE LEUKEMIA W/O MAJOR O.R. 404 Quintile 2
PROCEDURE AGE 0-17.
407........................... MYELOPROLIF DISORD OR POORLY 408 Quintile 3
DIFF NEOPL W MAJ O.R. PROC W/O
CC.
411........................... HISTORY OF MALIGNANCY W/O 367 Quintile 1
ENDOSCOPY.
412........................... HISTORY OF MALIGNANCY W 367 Quintile 1
ENDOSCOPY.
417........................... SEPTICEMIA AGE 0-17............ 416 Quintile 3
422........................... VIRAL ILLNESS & FEVER OF 420 Quintile 2
UNKNOWN ORIGIN AGE 0-17.
446........................... TRAUMATIC INJURY AGE 0-17...... 445 Quintile 2
448........................... ALLERGIC REACTIONS AGE 0-17.... 455 Quintile 2
451........................... POISONING & TOXIC EFFECTS OF 455 Quintile 2
DRUGS AGE 0-17.
481........................... BONE MARROW TRANSPLANT......... 394 Quintile 3
484........................... CRANIOTOMY FOR MULTIPLE 1 Quintile 5
SIGNIFICANT TRAUMA.
485........................... LIMB REATTACHMENT, HIP AND 209 Quintile 4
FEMUR PROC FOR MULTIPLE
SIGNIFICANT TR.
491........................... MAJOR JOINT & LIMB REATTACHMENT 209 Quintile 4
PROCEDURES OF UPPER EXTREMITY.
492........................... CHEMOTHERAPY W ACUTE LEUKEMIA 410 Quintile 3
AS SECONDARY DIAGNOSIS.
496........................... COMBINED ANTERIOR/POSTERIOR 210 Quintile 4
SPINAL FUSION.
504........................... EXTENSIVE 3RD DEGREE BURNS W 468 Quintile 5
SKIN GRAFT.
516........................... PERCUTANEOUS CARDIOVASCULAR 518 Quintile 3
PROCEDURE W AMI.
520........................... CERVICAL SPINAL FUSION W/O CC.. 498 Quintile 3
525........................... HEART ASSIST SYSTEM IMPLANT.... 468 Quintile 5
526........................... PERCUTANEOUS CARDIOVASCULAR 517 Quintile 4
PROC W DRUG-ELUTING STENT W
AMI.
527........................... PERCUTANEOUS CARVIOVASCULAR 517 Quintile 4
PROC W DRUG-ELUTING STENT W/O
AMI.
528........................... INTRACRANIAL VASCULAR 1 Quintile 5
PROCEDURES WITH PDX HEMORRHAGE.
530........................... VENTRICULAR SHUNT PROCEDURES 529 Quintile 2
WITHOUT CC.
534........................... EXTRACRANIAL VASCULAR 500 Quintile 4
PROCEDURES WITHOUT CC.
535........................... CARDIAC DEFIB IMPLANT WITH 515 Quintile 5
CARDIAC CATH WITH AMI/HF/SHOCK.
539........................... LYMPHOMA AND LEUKEMIA WITH 401 Quintile 5
MAJOR O.R. PROCEDURE WITH CC.
----------------------------------------------------------------------------------------------------------------
To illustrate this methodology for determining the relative weights
for the 164 LTC-DRGs with no LTCH cases, we are providing the following
examples, which refer to the no volume LTC-DRGs crosswalk information
for FY 2004 provided above in Table 2:
Example 1: There were no cases in the FY 2002 MedPAR file used for
this final rule for LTC-DRG 163 (Hernia Procedures Age 0-17). Since the
procedure is similar in resource use and the length and complexity of
the procedures and the length of stay are similar, we determined that
LTC-DRG 178 (Uncomplicated Peptic Ulcer Without CC), which is assigned
to low volume quintile 1 for the purpose of determining the FY 2004
relative weights, would display similar clinical and resource use.
Therefore, we assign the same relative weight of LTC-DRG 178 of 0.4964
(Quintile 1) for FY 2004 (Table 11 in the Addendum to this final rule)
to LTC-DRG 163.
Example 2: There were no LTCH cases in the FY 2002 MedPAR file used
in this final rule for LTC-DRG 91 (Simple Pneumonia and Pleurisy Age 0-
17). Since the severity of illness in patients with bronchitis and
asthma is similar in patients regardless of age, we
[[Page 45385]]
determined that LTC-DRG 90 (Simple Pneumonia and Pleurisy Age
17 Without CC) would display similar clinical and resource
use characteristics and have a similar length of stay to LTC-DRG 91.
There were over 25 cases in LTC-DRG 90. Therefore, it would not be
assigned to a low volume quintile for the purpose of determining the
LTC-DRG relative weights. However, under our established methodology,
LTC-DRG 91, with no LTCH cases, would need to be grouped to a low
volume quintile. We identified that the low volume quintile with the
closest weight to LTC-DRG 90 (0.7318; see Table 11 in the Addendum to
this final rule) would be low volume quintile 2 (0.7372; see Table 11
in the Addendum to this final rule). Therefore, we assign LTC-DRG 91 a
relative weight of 0.7372 for FY 2004.
Furthermore, we are providing LTC-DRG relative weights of 0.0000
for heart, kidney, liver, lung, pancreas, and simultaneous pancreas/
kidney transplants (LTC-DRGs 103, 302, 480, 495, 512, and 513,
respectively) for FY 2004 because Medicare will only cover these
procedures if they are performed at a hospital that has been certified
for the specific procedures by Medicare and presently no LTCH has been
so certified.
Based on our research, we found that most LTCHs only perform minor
surgeries, such as minor small and large bowel procedures, to the
extent any surgeries are performed at all. Given the extensive criteria
that must be met to become certified as a transplant center for
Medicare, we believe it is unlikely that any LTCHs would become
certified as a transplant center. In fact, in the nearly 20 years since
the implementation of the IPPS, there has never been a LTCH that even
expressed an interest in becoming a transplant center.
However, if in the future a LTCH applies for certification as a
Medicare-approved transplant center, we believe that the application
and approval procedure would allow sufficient time for us to determine
appropriate weights for the LTC-DRGs affected. At the present time, we
are only including these six transplant LTC-DRGs in the GROUPER program
for administrative purposes. Since we use the same GROUPER program for
LTCHs as is used under the IPPS, removing these LTC-DRGs would be
administratively burdensome.
Again, we note that as this system is dynamic, it is entirely
possible that the number of LTC-DRGs with a zero volume of LTCH cases
based on the system will vary in the future. We used the best most
recent available claims data in the MedPAR file to identify zero volume
LTC-DRGs and to determine the relative weights in this final rule.
Table 11 in the Addendum to this final rule lists the LTC-DRGs and
their respective relative weights, geometric mean length of stay, and
five-sixths of the geometric mean length of stay (to assist in the
determination of short-stay outlier payments under Sec. 412.529) for
FY 2004.
E. Add-On Payments for New Services and Technologies
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies under the IPPS. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that the process must apply to a new medical service or
technology if, ``based on the estimated costs incurred with respect to
discharges involving such service or technology, the DRG prospective
payment rate otherwise applicable to such discharges under this
subsection is inadequate.'' Section 1886(d)(5)(K)(vi) of the Act
specifies that a medical service or technology will be considered
``new'' if it meets criteria established by the Secretary after notice
and opportunity for public comment.
Section 412.87(b)(1) of our existing regulations provides that a
new technology will be an appropriate candidate for an additional
payment when it represents an advance in medical technology that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries (see the September
7, 2001 final rule (66 FR 46902)). Section 412.87(b)(3) provides that,
to receive special payment treatment, new technologies meeting this
clinical definition must be demonstrated to be inadequately paid
otherwise under the DRG system. As discussed below, for applicants for
new technology add-on payments for FY 2005, we are establishing the
criteria that will be applied to assess whether technologies would be
inadequately paid under the DRGs 75 percent of 1 standard deviation
(based on the logarithmic values of the charges and transformed back to
charges) beyond the geometric mean standardized charge for all cases in
the DRGs to which the new technology is assigned (or the case-weighted
average of all relevant DRGs, if the new technology occurs in many
different DRGs). Table 10 in the Addendum to this final rule lists the
qualifying criteria by DRG, based on the discharge data that we used to
calculate the FY 2004 DRG weights. The thresholds that are published in
this final rule for FY 2004 will be used to evaluate applicants for new
technology add-on payments during FY 2005.
In addition to the clinical and cost criteria, we established that,
in order to qualify for the new technology add-on payments, a specific
technology must be ``new'' under the requirements of Sec. 412.87(b)(2)
of our regulations. The statutory provision contemplated the special
payment treatment for new technologies until such time as data are
available to reflect the cost of the technology in the DRG weights
through recalibration (no less than 2 years and no more than 3 years).
There is a lag of 2 to 3 years from the point a new technology is first
introduced on the market and when data reflecting the use of the
technology are used to calculate the DRG weights. For example, data
from discharges occurring during FY 2002 are used to calculate the FY
2004 DRG weights in this final rule.
Technology may be considered ``new'' for purposes of this provision
within 2 or 3 years after the point at which data begin to become
available reflecting the costs of the technology. After we have
recalibrated the DRGs to reflect the costs of an otherwise new
technology, the special add-on payment for new technology will cease
(Sec. 412.87(b)(2)). For example, an approved new technology that
received FDA approval in October 2002 would be eligible to receive add-
on payments as a new technology at least until FY 2005 (discharges
occurring before October 1, 2004), when data reflecting the costs of
the technology would be used to recalibrate the DRG weights. Because
the FY 2005 DRG weights will be calculated using FY 2003 MedPAR data,
the costs of such a new technology would likely be reflected in the FY
2005 DRG weights.
Similar to the timetable for applying for new technology add-on
payments during FY 2004, applicants for FY 2005 must submit a formal
request, including a full description of the clinical applications of
the technology and the results of any clinical evaluations
demonstrating that the new technology represents a substantial clinical
improvement, along with a significant sample of data to demonstrate the
technology meets the high-cost threshold, no later than early October
2003. Applicants must submit a complete database no later than mid-
December 2003. Complete application information is available at our Web
site at: http://www.cms.hhs.gov/providers/hipps/default.asp. To allow
interested parties to identify the technologies under review before the
publication of
[[Page 45386]]
the annual proposed rule, the Web site also lists the tracking forms
completed by each applicant.
The new technology add-on payment policy provides additional
payments for cases with high costs involving eligible new technologies
while preserving some of the incentives under the average-based payment
system. The payment mechanism is based on the cost to hospitals for the
new technology. Under Sec. 412.88, Medicare pays a marginal cost
factor of 50 percent for the costs of the new technology in excess of
the full DRG payment. If the actual costs of a new technology case
exceed the DRG payment by more than the estimated costs of the new
technology, Medicare payment is limited to the DRG payment plus 50
percent of the estimated costs of the new technology.
The report language accompanying section 533 of Pub. L. 106-554
indicated Congressional intent that the Secretary implement the new
mechanism on a budget neutral basis (H.R. Conf. Rep. No. 106-1033,
106th Cong., 2nd Sess. at 897 (2000)). Section 1886(d)(4)(C)(iii) of
the Act requires that the adjustments to annual DRG classifications and
relative weights must be made in a manner that ensures that aggregate
payments to hospitals are not affected. Therefore, we account for
projected payments under the new technology provision during the
upcoming fiscal year at the same time we estimate the payment effect of
changes to the DRG classifications and recalibration. The impact of
additional payments under this provision would then be included in the
budget neutrality factor, which is applied to the standardized amounts
and the hospital-specific amounts.
Because any additional payments directed toward new technology
under this provision must be offset to ensure budget neutrality, it is
important to consider carefully the extent of this provision and ensure
that only technologies representing substantial advances are recognized
for additional payments. In that regard, we indicated that we would
discuss in the annual proposed and final rules those technologies that
were considered under this provision; our determination as to whether a
particular technology meets our criteria to be considered new; whether
it is determined further that cases involving the new technology would
be inadequately paid under the existing DRG payment; and any
assumptions that went into the budget neutrality calculations related
to additional payments for that new technology, including the expected
number, distribution, and costs of these cases.
To balance appropriately the Congress' intent to increase
Medicare's payments for eligible new technologies with concern that the
total size of those payments not result in significantly reduced
payments for other cases, we set a target limit for estimated add-on
payments for new technology under the provisions of sections
1886(d)(5)(K) and (L) of the Act at 1.0 percent of estimated total
operating prospective payments.
If the target limit is exceeded, we would reduce the level of
payments for approved technologies across the board, to ensure
estimated payments do not exceed the limit. Using this approach, all
cases involving approved new technologies that would otherwise receive
additional payments would still receive special payments, albeit at a
reduced amount. Although the marginal payment rate for individual
technologies would be reduced, this reduction would be offset by large
overall payments to hospitals for new technologies under this
provision.
Comment: Some commenters asked that CMS ensure that the necessary
software changes be made to accommodate newly approved technologies so
that hospitals experience no delay in receiving add-on payments for new
technologies. Commenters noted that, at the time they prepared their
comments, it was unclear whether hospitals were receiving any new
technology add-on payments for FY 2003. Given that $74.8 million was
carved out of the FY 2003 standardized amount, it is critical that a
reliable system be put in place to ensure that hospitals receive these
add-on payments.
Response: We regret the delay any hospital may be experiencing in
receiving add-on payments for FY 2003. On December 13, 2002, we issued
Program Memorandum A-02-124 that requested fiscal intermediaries to
implement the new technology payment mechanism into the claims
processing system by April 1, 2003. The changes outlined in this
program memorandum were delayed until July 16, 2003, in order to ensure
that the claims processing system could properly process these add-on
payments.
Comment: Several commenters pointed out that new ICD-9-CM codes are
being created for procedures that were not typically captured and
reported using ICD-9-CM coding. The commenters specifically mentioned
the creation of new codes for types of drugs. Commenters are concerned
about the types of medical record documentation that may be required
for the administration of these drugs to be assigned an ICD-9-CM code.
They asked if a physician order for a drug and a notation on a medical
sheet that a nurse had in fact injected the drug were sufficient
documentation. The commenters indicated that further guidance is needed
regarding documentation requirements for ICD-9-CM codes for new
services and technologies that have not traditionally been reported
through the use of ICD-9-CM coding.
One commenter recommended that the approval process for new
technologies be revised to include a requirement that the applicant
must barcode such item with appropriate detailed information. The
commenter stated that the use of barcoding would reduce medical errors.
The commenter also was concerned that the limit of 6 procedure codes
that can be reported on the billing form may become problematic as more
new technologies are approved in the future.
Response: We have asked the AHA to schedule this topic for
discussion by the Cooperating Parties for ICD-9-CM and the Editorial
Advisory Board for Coding Clinic for ICD-9-CM. AHA agrees that this is
a timely topic and has scheduled it for discussion in one of its
upcoming ICD-9-CM meetings.
We would like to explore further the commenter's suggestion to
require applicants for new technology add-on payments to barcode the
technology. We recognize the potential limitations of the current
claims form, as well as the overall limitations of ICD-9-CM. As we have
stated previously, we believe ICD-10-PCS offers great potential
improvement for more specific coding that may limit the use of multiple
ICD-9-CM codes to identify certain classes of patients.
Comment: Commenters asked that CMS present a full and clear
accounting for estimated and actual new technology add-on payments and
their impact on the DRG base rate in each proposed and final rule in
order to ensure that hospitals receive these add-on payments in full.
Another commenter recommended that, similar to outlier payments, CMS
should report every year on the extent to which the actual add-on
payments per case exceeded or were lower than the amount removed from
the standardized amounts.
One commenter was concerned that additional payments might be
carved out of the standardized amount for new technologies to ensure
budget neutrality, and those payments might not be made because CMS'
projection of spending for the add-on payments was too high or because
hospitals failed to bill properly for add-on payments. The commenter
recommended that CMS
[[Page 45387]]
split the budget neutrality adjustment for DRG reclassification and
recalibration into two components in order to isolate the reduction
associated with add-on payments for new technologies.
Commenters did not agree that add-on payments for new technology
should be budget neutral, and explained that the purpose of having
additional payments for high-cost items was to compensate a hospital
for its unrecovered cost. Because of budget neutrality, these high-cost
items are not being properly paid. The commenter also noted that these
high-cost items are also the cause of a higher than expected outlier
payment.
One commenter recommended that CMS develop a separate pool of money
to fund new technology and remove it from the budget neutrality
calculation. The commenter explained that, while the technology is new,
there should be money set aside and accessed only by those hospitals
utilizing that technology.
Response: When we approve a new technology for add-on payments, we
conduct an analysis based on the latest data available to estimate the
total add-on payments that will be made for the new technology during
the upcoming fiscal year and include the results in the annual proposed
and final rules. Analyses of technologies approved for add-on payments
for FY 2004 are presented below. These analyses include our analysis of
available FY 2003 MedPAR data on the utilization of Xigris[reg] and the
basis for our estimated payments for new technologies approved for FY
2004. We also discuss this analysis in our description of budget
neutrality in section II.A.4.a. of the Addendum to this final rule. We
note that, based on our analysis, we have reduced considerably our
estimate of add-on payments for Xigris[reg] from the FY 2003 level,
which led to a smaller budget neutrality offset to the standardized
amounts.
As we stated above, the Congressional Report language accompanying
section 533 of Pub. L. 106-554 clearly indicated Congress' intent that
this provision be implemented in a budget neutral manner. Therefore,
Congress is the appropriate body to consider concerns about the budget
neutrality of this provision.
We do not believe it necessary to establish a separate budget
neutrality calculation or pool for these payments. The amount of the
payments is clearly identified in the final rule. Like all of the
budget neutrality calculations, it is a prospective estimate.
Comment: Commenters recommended that CMS eliminate the use of case-
weighted averages in the calculation of the cost threshold for
technologies that occur in more than one DRG. The commenter believed
that the goal of add-on payments is to provide adequate payment for new
technologies in the DRGs in which the technology is used. The commenter
added that the use of a case-weighted average biases the cost threshold
against technologies that occur in more than one DRG and places
hospitals at a disadvantage in DRGs where the threshold would otherwise
be met except for application of the case-weighted average.
Commenters argued that our criteria for what is considered a new
technology is not consistent with section 1886(d)(5)(K)(ii)(II) of the
Act. The commenter stated that this provision was intended to provide
for the collection of data with respect to the costs of a new medical
service or technology for a period of not less than 2 years and not
more than 3 years, ``beginning on the date on which an inpatient
hospital code is issued with respect to the service or technology.''
Therefore, the commenter recommended that, instead of no longer
considering technologies new because the related charges are already
captured in the MedPAR data, CMS should only view a technology as
ineligible on the grounds that it is no longer new if the agency can
specifically identify a significant sample of cases involving use of
the technology in the MedPAR data. One commenter noted that sufficient
charge data to assess whether the new technology meets the cost
threshold criterion are often only available through the MedPAR data
after the new ICD-9-CM code becomes effective. Some commenters also
recommended that CMS raise the add-on payment amount from 50 percent of
the cost of the new technology to an 80-percent or 100-percent marginal
cost factor.
Another commenter asked CMS to provide established clinical
requirements or criteria that would control substantial clinical
improvement determinations.
One commenter recommended that CMS deem products that fall within
one of the following categories designated by the FDA to have met the
substantial clinical improvement criterion: Drugs or biologicals that
obtain fast track or accelerated approval; and drugs or biologicals
approved after priority review or approved for orphan indication. The
commenter recommended that CMS defer to the clinical expertise of the
FDA with respect to these products and find that any product falling in
the above categories satisfy the substantial clinical improvement
criterion without further CMS analysis.
In addition, many commenters addressed the proposed change to the
cost threshold criterion. (We are addressing these comments in our
discussion of specific proposals later in this section of the
preamble.)
Response: We appreciate the interest of the many stakeholders in
ensuring that Medicare beneficiaries have full access to improvements
in medical technology. We have previously discussed our position on
each of the issues raised by the commenters on the proposed rule in
detail in the September 7, 2001 final rule (66 FR 46905) and the August
1, 2002 final rule (67 FR 50009). Our rationales for these policies
have not changed since we discussed them in those final rules, and we
did not propose changes to these policies in the May 19, 2003 proposed
rule. Therefore, readers are referred to the September 7, 2001 final
rule and the August 1, 2002 final rule for our responses to these
comments. However, we will continue to assess each of these policies
and would appreciate the commenters' continued input on these issues.
Comment: One commenter suggested that CMS conduct a historical
review of technologies that would have likely met the ``new'' and
substantial improvement criteria and determine the relationship between
the costs of those items and the new technology cost threshold. The
commenter noted that such an analysis might provide useful insights as
to whether a more flexible cost criterion is needed.
Response: We will take this suggestion under consideration.
2. FY 2004 Status of Technology Approved for FY 2003 Add-On Payments:
Drotrecogin Alfa (Activated)--Xigris[reg]
In the August 1, 2002 IPPS final rule, we stated that cases
involving the administration of Xigris[reg] (a biotechnology product
that is a recombinant version of naturally occurring Activated Protein
C (APC)) as identified by the presence of code 00.11 (Infusion of
drotrecogin alfa (activated)) are eligible for additional payments of
up to $3,400 (50 percent of the average cost of the drug) (67 FR
50013). (The August 1, 2002 final rule contains a detailed discussion
of this technology.) Although Xigris[reg] was approved by the FDA in
November 2001, it did not qualify for add-on payments until discharges
on or after October 1, 2002. Consequently, FY 2002 discharges (between
October 1, 2001 and September 30, 2002) may not reflect full
[[Page 45388]]
utilization of the technology due to the absence of the add-on payment.
Therefore, for FY 2004, we will continue to make add-on payments
for cases involving the administration of Xigris[reg] as identified by
the presence of code 00.11. Based on preliminary analysis of the
incidence of Xigris[reg] in the first quarter FY 2003 MedPAR file, in
the May 19, 2003 proposed rule, we proposed to revise downward our
estimate of total add-on payments for Xigris[reg]. For FY 2003, we
estimated that total add-on payments would be approximately $74.8
million (22,000 Medicare patients who would be eligible for a $3,400
add-on payment). For FY 2004, we estimated in the proposed rule the
total add-on payments would be approximately $50 million (based on
14,000 Medicare patients who would be eligible for a $3,400 add-on
payment). We indicated that this proposed additional payment would be
included in the DRG reclassification and recalibration budget
neutrality factor, which is applied to the standardized amounts and the
hospital-specific amounts. However, we indicated that, before the
publication of the FY 2004 IPPS final rule, we would reevaluate our
assumptions regarding this estimate based on preliminary claims data
from the FY 2003 MedPAR file.
We have analyzed the claims from the March 2003 update to the FY
2003 MedPAR file. We identified claims that had received Xigris[reg]
based on the inclusion of procedure code 00.11. We identified only
1,500 claims from this file. Although the March 2003 update of the FY
2003 MedPAR probably only realistically includes about 5 months' worth
of claims, it appears that a lower than expected number of cases are
receiving this new technology at the present time.
Therefore, in this final rule for FY 2004, we are lowering the
total payments in proportion to the cases that have actually received
this drug. We are doubling the number of cases in our March 2003 MedPAR
update to an estimated 3,000 cases that will receive Xigris[reg] in FY
2003. We recognize there may actually be more cases than this by the
end of the year, as only about 5 months of data are accounted for in
our analysis. Also, this estimate does not account for future increased
use of the drug. However, these potential underestimates are offset by
the fact that we are assuming all cases will qualify for the full
$3,400 add-on payment. We believe these effects will largely offset one
another. Therefore, the final projected costs for add-on payments are
estimated to be $10 million. We will use this estimate in our budget
neutrality calculations.
Comment: One commenter supported our decision to continue paying
add on payments for Xigris[reg], but disagreed with the proposed
estimated decline in add-on payments in FY 2004 from $74.8 million to
$50 million. The commenter explained that this conclusion was made
using only first quarter FY 2003 MedPAR data and, since this technology
is still in its infancy, the commenter believed FY 2003 MedPAR data
will reflect an upward trend in its use and overall availability.
Some commenters were concerned that first year utilization of any
new technology is an inappropriate measure for CMS to rely on in
determining the full extent of use of a new technology. They asserted
that the gradual adoption of new technology and the time required for
hospitals to adapt their coding and charge structures to new
technologies make it difficult to base projections of the ultimate
utilization and costs of new technology immediately following its
introduction. In addition, one commenter explained that CMS' system
delays in processing claims have led to a negative impact on both
uptake of the technology and the data collection associated with its
use.
Also, the commenter explained that Congress required data relating
to the cost of the technology be collected for not less than 2 years
and not more than 3 years after an appropriate inpatient hospital
service code is established. The commenter added that, because CMS
publishes its proposed and final rules before the completion of a
fiscal year, CMS would make its decision for FY 2005 with less than 2
full year's worth of data. As a result, the commenters recommended that
CMS make additional payments for the full 3 years so when it moves a
new technology into a DRG, it does so based on accurate and reliable
information about its cost and clinical use.
Response: Before each fiscal year, we use the latest available data
to determine if we should continue to pay add-on payments for approved
new technologies. As stated above, we are continuing to pay for
Xigris[reg] for FY 2004 because FY 2002 discharges may not reflect full
utilization of the technology. Based on the March update of the FY 2003
MedPAR file, we lowered our cost estimates from the proposed rule
because a lower than projected number of cases is receiving this
technology at the present time. Before FY 2005, we will again use the
latest available data to determine whether we would propose to continue
to make add-on payments for Xigris[reg] for FY 2005.
3. FY 2004 Applicants for New Technology Add-On Payments
We received two applications for new technologies to be designated
eligible for inpatient add-on payments for new technology for FY 2004.
A discussion of these applications and our determinations appear below.
a. Bone Morphogenetic Proteins (BMPs) for Spinal Fusions
An application was submitted for the InFUSETM Bone
Graft/LT-CAGETM Lumbar Tapered Fusion Device
(InFUSETM) for approval as a new technology eligible for
add-on payments. A similar application was submitted last year.
However, we denied it because, based on the available data, the
technology did not exceed the 1 standard deviation threshold above the
average charges for the DRGs to which the technology is assigned.
The product is applied through use of an absorbable collagen sponge
and an interbody fusion device, which is then implanted at the fusion
site. The patient undergoes a spinal fusion, and the product is placed
at the fusion site to promote bone growth. This procedure is done in
place of the more traditional use of autogenous iliac crest bone graft.
For a more detailed discussion about InFUSETM, see the
August 1, 2002 IPPS final rule (67 FR 50016).
On July 2, 2002, the FDA approved InFUSETM for spinal
fusion procedures in skeletally mature patients at one level.
Therefore, based on the FDA's approval, multilevel use of this
technology would be off-label. In the August 1, 2002 IPPS final rule
(67 FR 50017), we stated this technology would meet the cost threshold
only if the added costs of multilevel fusions were taken into account.
Because the FDA had not approved this technology for multilevel
fusions, and the applicant had not submitted data to demonstrate this
technology is a substantial clinical improvement for multilevel fusions
(the clinical trial upon which the application was based was a single-
level fusion trial), we could not issue a substantial clinical
improvement determination for multilevel fusions and, consequently, did
not consider the costs associated with multilevel fusions in our
analysis of whether this technology met the cost threshold. Therefore,
because the average charges for this new technology, when used for
single-level spinal fusions, did not exceed the threshold to qualify
for new technology add-on payment, we denied this application for
[[Page 45389]]
add-on payments for FY 2003. For similar reasons, we did not consider
data on the charges for multilevel fusions in our analysis of whether
this technology meets the cost threshold for FY 2004.
In its application for add-on payments for FY 2004, the applicant
used data from the CMS FY 2001 Standard Analytical File for physicians
and hospitals. The analysis linked a 5-percent sample of hospital
spinal fusions cases with the corresponding physician claims. Because
there were no ICD-9-CM codes to identify multilevel fusions in 2001,
multilevel fusions were identified using CPT codes on the physician
claims. Average charges were taken from actual cases used in clinical
trials.
After grouping these cases into one, two, and three or more levels
fused in DRGs 497 and 498 (Spinal Fusion Except Cervical With and
Without CC, respectively), the applicant then calculated average
charges assuming the use of the InFUSETM for these cases.
For DRG 497, the estimated single-level fusion average charge was
$41,321; for DRG 498, the estimated single-level fusion average charge
was $37,200. Because these DRGs are not currently split for different
numbers of fusion levels involved, Medtronic has calculated its own
standard deviation of average charges to determine the threshold for
these DRGs using the 5-percent sample data. For DRG 497, the threshold
(calculated by Medtronic) was $45,646, which is greater than the
estimated average charge of $41,321 for single-level fusions noted
above. For DRG 498, the threshold (calculated by Medtronic) was
$36,935, which is less than the average charges for single-level
fusions in this DRG as noted above.
However, we note the thresholds to qualify for the new technology
add-on payments for FY 2003 published in Table 10 of the August 1, 2002
IPPS final rule for DRGs 497 and 498 were $58,040 and $41,923,
respectively. These thresholds were computed based on all cases
assigned to these DRGs, and do not differentiate between the number of
spinal levels fused. Because we are not redefining these DRGs to
differentiate cases on the basis of the number of levels of the spine
fused in the manner suggested by the applicant's analysis, the
thresholds published in last year's final rule are applicable for a new
technology to qualify for add-on payments in these DRGs for FY 2004.
Therefore, because the averages calculated by the applicant for single-
level fusions do not exceed the published thresholds, as proposed, we
did not approve this technology on the basis of this analysis.
The applicant also submitted data from actual cases involving the
InFUSETM with single level fusions only. The data submitted
included 31 claims from 4 hospitals (only one Medicare patient was
included in the sample). All 31 cases were from DRG 498. The average
standardized charge for these cases was $47,172. Based on these data,
the average standardized charge exceeds the threshold for DRG 498.
However, we note that this limited sample excludes any cases from DRG
497.
For discharges occurring on or after October 1, 2002, ICD-9-CM
codes 84.51 (Insertion of interbody spinal fusion device) and 84.52
(Insertion of recombinant bone morphogenetic protein) are effective to
identify cases involving this technology. Therefore, in an effort to
resolve the difficulties in obtaining sufficient data upon which to
determine whether this technology exceeds the applicable threshold in
the May 19, 2003 proposed rule, we stated our intention to review
available MedPAR data for the first several months of FY 2003 to
identify these cases and calculate their average standardized charges
to compare with the thresholds. We noted that some of these cases would
involve multilevel spinal fusions, and that it would be necessary to
adjust for those cases in order to remove them from the calculation of
the average charges.
We have analyzed data from the March update of FY 2003 MedPAR,
containing claims data for the first 6 months of FY 2003. As discussed
above, accounting for a lag time in claims processing, we are assuming
that this data accounts for approximately 5 months of FY 2003
discharges. We identified InFUSETM cases by the presence of
the two new ICD-9-CM codes 84.51 and 84.52, used in combination with
each other. We identified 117 and 88 cases in the March 2003 MedPAR
data for DRGs 497 and 498, respectively.
We standardized the charges to remove the effects of differences in
area wage levels, indirect medical education and disproportionate share
payments, and, for hospitals in Alaska and Hawaii, the applicable cost-
of-living adjustment, and calculated an average standardized charge of
$64,931 for the 117 cases in DRG 497. For DRG 498, the average
standardized charge was $58,266 for the 88 cases in our data. The
average standardized charge across both DRGs was $62,752. As we noted
in the proposed rule, we anticipate that some of these cases will
involve multilevel spinal fusions. Based on the applicant's analysis of
FY 2001 Standard Analytical File data in which they were able to
distinguish between one, two, and three or more levels fused by using
CPT codes on the physician claims, we determined that the average
charges of single level fusions were about 78 percent of the average
charges across all spinal fusions in the analysis. (It was not possible
to independently match records from the Standard Analytical File in the
time available after we attained the March 2003 MedPAR data.) However,
as noted above, these data are from FY 2001 and did not include any
cases involving InFUSETM. Therefore, we anticipate more of
the cases in our data will be single-fusion cases, consistent with the
FDA approval, and that the total charges in our data for single-level
fusion cases will be higher than 78 percent of the average for all
InFUSETM cases in our data. Given the relatively recent
approval by the FDA of this product, we anticipate the majority of uses
are in accordance with the FDA's approval criteria. Therefore, to
estimate the average standardized charges of the single-level spinal
fusion cases in our data, we estimated 90 percent of the average
standardized charges of all the InFUSETM cases in our data
would approximate the charges for single-level cases.
Finally, because these were FY 2003 cases compared to FY 2002
thresholds (based on FY 2001 cases), we adjusted the average charges
(by the market basket) to be consistent with the FY 2002 thresholds.
The resulting average standardized charge for the cases from our FY
2003 MedPAR data for all InFUSETM cases across both DRGs 497
and 498 was $53,376.
We then calculated the case-weighted threshold amount across DRGs
497 and 498 based on the proportion of cases in our data in each DRG.
Since 57 percent of the cases we identified in our database were in DRG
497, we applied this percentage to the threshold amount for DRG 497 of
$58,040. We then added this amount to 43 percent of the threshold
amount for DRG 498, for a combined threshold amount of $51,121. Because
our data indicates that the average standardized charge for single-
level InFUSETM cases exceeds this threshold amount, this
technology has met the cost criteria to qualify for new technology add-
on payments.
Because the technology meets the cost threshold based on the MedPAR
data, we evaluated whether it qualifies as a substantial clinical
improvement. According to the applicant:
``InFUSETM Bone Graft is more appropriate to use and has
been proven
[[Page 45390]]
more effective in its use than autogenous iliac crest bone graft, when
either is placed in the LT-CageTM Lumbar Tapered Fusion
Device for anterior lumbar interbody fusion. Use of InFUSETM
Bone Graft instead of autogenous iliac crest bone graft:
[sbull] Obviates iliac crest bone graft donor site morbidity.
[sbull] Reduces operative time, blood loss and hospitalization.
[sbull] Results in greater fusion success.
[sbull] We found that the Oswestry Low Back Pain Disability score
and SF-36 Physical Component and Pain Index score were consistently 10
percent better in the InFUSETM Bone Graft group than the
autogenous iliac bone graft group.
[sbull] Enables earlier return to work.''
As indicated in the May 19, 2003 proposed rule, among the issues we
planned to consider were: does avoiding the complications associated
with the iliac crest bone harvesting procedure constitute a substantial
clinical improvement; and, with the increased rate of osteoarthritis
and osteoporosis in the Medicare population, is there evidence that the
technology represents a substantial clinical improvement in spinal
fusions among this population? In the May 19, 2003 proposed rule, we
indicated we were particularly interested in data on the results of
aged Medicare patients who have been treated with BMP, and any basic
biology bench data on the results of using BMP in osteoporotic bones.
Since the May 19, 2003 proposed rule, we received from the sponsor
of this application an analysis, prepared by an orthopedic surgeon,
that showed limited evidence of results in a series of patients older
than 65, all with good or better fusion results than the younger age
group. That analysis presented evidence that older patients typically
have better results than younger patients in the standard iliac crest
bone harvesting fusion procedure. Finally, it included the results of
bench testing of mesenchymal and osteoblastic cells that demonstrated
response to rhBMP-2, including cells from elderly patients.
The sum of this evidence does not preclude generalizing the results
of InFUSETM trials to Medicare aged beneficiaries. In
addition, the small series of Medicare-aged patients treated with
InFUSETM technology, as well as the bench science on the
response of elderly mesenchymal cells to rhBMP-2, do provide some
positive, though limited, evidence for generalizability. These results,
combined with the benefits of the elimination of the need to harvest
bone from the iliac crest (and the associated complications), lead us
to conclude that InFUSETM does meet the substantial
improvement criteria. Therefore, we are approving InFUSETM
for add-on payments under Sec. 412.88, to be effective for FY 2004.
This approval is on the basis of using InFUSETM for a
single-level, lumbar spinal fusions, consistent with the FDA's approval
and the data presented to us by the applicant. Therefore, we intend to
limit the add-on payment to cases using this technology for anterior
lumbar fusions in DRGs 497 and 498. Cases involving InFUSETM
that are eligible for the new technology add-on payment will be
identified by assignment to DRGs 497 or 498 as a lumbar spinal fusion,
with the combination of ICD-9-CM procedure codes 84.51 and 84.52.
As explained above, we are limiting our approval of this technology
to uses consistent with our substantial clinical improvement decision.
Therefore, add-on payments are only available for use of the technology
at a single-level. The average cost of the InFUSETM is
reported to be $8,900, and a single level fusion requires two of the
products. Therefore, the total cost for the InFUSETM for a
single-level fusion is expected to be $17,800. Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the DRG payment for the case. As a result, the
maximum add-on payment for a case involving the InFUSETM is
$8,900.
For purposes of budget neutrality, it is necessary to estimate the
additional payments that would be made under this provision during FY
2004. We identified 205 cases in DRGs 497 and 498 in the March 2003
update of the FY 2003 MedPAR data. For our FY 2004 budget neutrality
estimate, we are projecting this number will grow to 500. Given this
estimate and the maximum add-on payment of $8,900, we estimate the
total amount of the add-on payments for the InFUSETM for FY
2004 will be $4.4 million dollars.
Comment: One commenter asked that CMS reconsider the decision to
exclude multilevel fusions with InFUSETM from the cost
threshold calculation. The commenter noted that excluding multilevel
fusions with InFUSETM is inconsistent with FDA guidance,
clinical practice and other CMS payment decisions for new technologies
(notably the creation of DRGs for drug-eluting stents based on the
presence of a condition not indicated on the product label, that is,
acute myocardial infarction).
Response: As stated previously, because the FDA has not approved
this technology for multilevel fusions and the applicant has not
submitted data to demonstrate this technology is a substantial clinical
improvement for multilevel fusions, we cannot issue a substantial
clinical improvement for multilevel fusions. In the September 7, 2001
final rule implementing this provision (66 FR 46913), we stated our
position that the special payments under this provision should be
limited to those new technologies that have been demonstrated to
represent a substantial improvement in caring for Medicare
beneficiaries. Where such an improvement is not demonstrated, we
continue to believe the incentives of the DRG system provide a useful
balance to the introduction of new technologies, and no new technology
add-on payment is necessary.
Comment: In the proposed rule, we stated that, if
InFUSETM meet the cost threshold, we would evaluate whether
it qualifies as a substantial clinical improvement. One commenter noted
that, assuming InFUSETM does meet the cost threshold, CMS
would make a determination on whether the technology meets the
substantial clinical improvement criterion without public input or the
opportunity to address concerns that CMS may have. The commenter noted
that these actions are inconsistent with the Administrative Procedure
Act and CMS's pledge to be more open in its policy making.
Response: Because of the many questions that remained at the time
of the proposed rule, we were unable to determine if
InFUSETM qualified as a substantial clinical improvement.
However, in order to receive comments on this determination, we
indicated certain issues we would consider when determining if
InFUSETM qualifies as a substantial clinical improvement. As
noted above, we received additional information that enabled us to
approve this technology as a substantial clinical improvement.
Therefore, we believe interested parties had sufficient information to
provide informed comments.
Comment: One commenter, a designer, manufacturer, and supplier of
orthopedic devices and supplies, explained that the applicant's
analysis probably includes cases for both posterior approaches or
posterior instrumentation, or both, which are considered off-label uses
from the indications approved by the FDA. Therefore, the commenter
requested that cases that do not meet FDA approved indications, once
identified, be eliminated from the analysis.
The commenter also noted that once claims of InFUSETM
can be identified
[[Page 45391]]
with MedPAR data, DRG weights become eligible for recalibration in
order to reflect the appropriate payment within the assigned DRG. Once
the weights of a DRG can be evaluated, a technology should no longer be
classified as new. Also, the commenter stated that clinical trial
results counter the claim of significant improvement, because
information presented at the FDA Orthopedics and Rehabilitation Devices
Panel public meeting on January 20, 2002, indicated that the
InFUSETM product resulted in an equivalency to that of
traditional bone grafting techniques. Although there was a decrease in
donor site pain in a small number of subjects in the BMP group,
compared with the control group, the commenter questioned whether this
factor meets the criteria of substantial clinical improvement. The
commenter also questioned the results of a published article on this
technology.
Response: One of the criteria for a substantial clinical
improvement classification is avoidance of surgery. CMS determined that
InFUSETM should be classified as a substantial improvement
if the results of the clinical trials demonstrated outcomes at least
equivalent to bone grafting, and the bone harvesting procedure was
avoided. CMS clinical staff reviewed the literature and concluded that
the current evidence did support grafting equivalence for the FDA
approved indications and, therefore, InFUSETM met the
substantial improvement standard. As described above, we did not rely
on the applicant's analysis to determine the technology met the high-
cost threshold, but conducted direct analysis of available FY 2003
MedPAR data.
b. GLIADEL[reg] Wafer
Glioblastoma Multiforme (GBM) is the most common and most
aggressive of the primary brain tumors. Standard care for patients
diagnosed with GBM is surgical resection and radiation. According to
the manufacturer, the GLIADEL[reg] Wafer is indicated for
use as an adjunct to surgery to prolong survival in patients with
recurrent GBM. Implanted directly into the cavity that is created when
a brain tumor is surgically removed, GLIADEL[reg] delivers
chemotherapy directly to the site where tumors are most likely to
recur.
The FDA approved GLIADEL[reg] Wafer on September 23,
1996, for use as an adjunct to surgery to prolong survival in patients
with recurrent GBM for whom surgical resection is indicated. In
announcing its approval, the FDA indicated that GLIADEL[reg]
was approved:
``* * * based on the results of a multi-center placebo controlled
study in 222 patients who had recurrent malignant glioma after initial
treatment with surgery and radiation therapy. Following surgery to
remove the tumor, half of the patients were treated with
GLIADEL[reg] implants and half with placebo. In patients
with glioblastoma multiforme, the 6-month survival rate increased from
36 percent with placebo to 56 percent with GLIADEL[reg]
Median survival increased from 20 weeks with placebo to 28 weeks with
GLIADEL[reg]. In patients with pathologic diagnoses other
than glioblastoma multiforme, GLIADEL[reg] had no effect on
survival.''
Guilford Pharmaceuticals has requested that GLIADEL[reg]
still be considered new because, until a new ICD-9-CM code (00.10
Implementation of Chemotherapeutic Agent) was established on October 1,
2002, it was not possible to identify specifically these cases in the
MedPAR data. However, as noted previously, technology will no longer be
considered new after the costs of the technology are reflected in the
DRG weights. Because the costs of GLIADEL[reg] are currently
reflected in the DRG weights (despite the absence of a specific code),
GLIADEL[reg] does not meet our criterion that a medical
service or technology be ``new''. That is, FY 2002 MedPAR data used to
calculate the DRG weights for FY 2004 in this final rule include cases
where GLIADEL[reg] was administered (and the corresponding
charges of these cases include charges associated with
GLIADEL[reg]). On February 26, 2003, the FDA approved
GLIADEL[reg] for use in newly diagnosed patients with high-
grade malignant glioma as an adjunct to surgery and radiation. However,
our understanding is that many newly diagnosed patients were already
receiving this therapy. To the extent this is true, the charges
associated with this use of GLIADEL[reg] are also reflected
in the DRG relative weights.
According to Guilford's application, the current average wholesale
price of GLIADEL[reg] is $10,985. Guilford submitted charge
data for 23 Medicare patients at 7 hospitals from FY 2000. The charges
were then standardized and adjusted for inflation using the hospital
market basket inflation factor (from 2000 to 2003) in order to
determine an inflated average standardized charge of $33,002. Guilford
points out that this charge narrowly misses the DRG 2 threshold
published in Table 10 of the August 1, 2002 IPPS final rule of $34,673.
However, we note that, according to the manufacturer, as many as 60
percent of current GLIADEL[reg] cases may be assigned to DRG
1 based on the presence of CCs. Based on this assumption, the
qualifying threshold for GLIADEL[reg] would be $54,312 (60
percent of the DRG 1 threshold of $67,404, and 40 percent of the DRG 2
threshold of $34,673).
As mentioned in section II.B.3.a of the May 19, 2003 proposed rule
and above in this final rule, we examined the definitions of DRGs 1 and
2 to determine whether they could be improved. As proposed, we are
creating a new DRG for patients with an intracranial vascular procedure
and an intracranial hemorrhage and two new DRGs for patients with only
a vascular shunt procedure (splitting on the presence or absence of a
CC). We also compared the data submitted in the application for add-
payments regarding the charges for GLIADEL[reg] cases with
the charges of other procedures in DRGs 1 and 2. We found that,
although the $33,002 average standardized charge reported is just below
the qualifying threshold in DRG 2, it is actually well below the mean
average standardized charge for DRG 1 ($42,092). As noted previously,
as many as 60 percent of current GLIADEL[reg] cases may be
assigned to DRG 1 based on the presence of CCs. Therefore, we do not
believe that any change to the DRG assignment of cases receiving
GLIADEL[reg] is warranted at this time. However, we will
continue to monitor our data to determine whether a change is warranted
in the future.
Comment: One commenter supported CMS' determination that this
technology is currently reflected within the DRG weights and does not
meet the criteria of being called ``new.'' Another commenter commented
that CMS' interpretation of whether a technology is ``new'' is
inconsistent with the current statute. The commenter explained that
section 1886 (d)(5)(K)(ii)(II) of Act states that CMS should collect
data on new technologies ``for a period of not less than 2 years and
not more than 3 years beginning on the date on which an inpatient
hospital code is issued for the technology.'' Accordingly, the
commenter believed it is inconsistent with the intent of Congress to
deny new technology status to a product that has been on the market but
for which there is no unique ICD-9 code that allows CMS to track the
costs of cases in which it is utilized. The commenter urged CMS to
reconsider its interpretation of the statute and approve
GLIADEL[reg] as a new technology, making clear that a
technology will be considered new for 2 to 3 years from the date that
an ICD-9-CM code, specific to the technology, becomes available.
[[Page 45392]]
Response: As stated above, we discussed our position on this issue
in detail in the September 7, 2001 final rule (66 FR 46905). Our
rationale for this policy has not changed since we discussed it in that
final rule, and we did not propose changes to this policy in the May
19, 2003 proposed rule. Therefore, we are denying this application for
add-on payments for FY 2004.
4. Review of the High-Cost Threshold
The current cost threshold for a new technology to qualify for add-
on payments is that the average standardized charges of cases involving
the new technology must be demonstrated to exceed 1 standard deviation
beyond the geometric mean of the standardized charges of the DRG to
which the new technology will be assigned. If the new technology is
assigned to more than one DRG, the qualifying threshold is equal to the
case-weighted (based on the proportion of cases involving the new
technology estimated to be assigned to each DRG) average threshold
across all relevant DRGs. When we established this threshold in the
September 7, 2001 final rule, we expressed our belief that it is
important to establish a threshold that recognizes the variability in
costs per case within DRGs and maintains the fundamental financial
incentives of the IPPS (66 FR 46917).
In commenting on this approach, MedPAC and some hospital
associations supported the 1 standard deviation threshold. However,
others, particularly representatives of the manufacturers of new
technology, have argued this threshold is too high, and that virtually
no new technology would qualify for the special payment provision.
We are concerned that establishing higher payments for a great
number of new technologies may be inflationary because the add-on
payments reduce the efficiency incentives hospitals face when new
technologies must otherwise be financed out of current payments for
similar cases. Traditionally, under the IPPS, new technologies were
required to compete with existing treatment methods on clinical and
cost criteria. Add-on payments are intended to give new technologies a
competitive boost relative to existing treatment methods with the goal
of encouraging faster and more widespread adoption of new technologies.
Much of the current variation around the mean within any particular
DRG is due to the range of procedures contained within each DRG.
Generally, some of these procedures will be more expensive than the
mean and some will be less expensive. The threshold should be set high
enough to ensure that it identifies truly high-cost technologies. If
the threshold were set too low (for example, at $2,500, as some have
suggested), additional technologies may qualify merely by association
with a procedure only slightly more costly than the mean for the DRG.
For example, consider a DRG with five different procedures and mean
charges of $15,000. The mean charges for each procedure are distributed
around $15,000, as illustrated in the following table. A qualifying
threshold of $2,500 would result in any new technology that is only
used for the fifth procedure automatically qualifying for new
technology add-on payments (unless the new technology had the unlikely
effect of lowering the mean cost for cases with this procedure by at
least $2,500). This is because the average charge of $20,000 for cases
in this procedure already exceeds the mean charges for the DRG plus
$2,500.
------------------------------------------------------------------------
Procedure Mean charge
------------------------------------------------------------------------
1....................................................... $10,000
2....................................................... 12,000
3....................................................... 15,000
4....................................................... 17,000
5....................................................... 20,000
------------------------------------------------------------------------
At the same time, we recognize that the very limited number of
applications that have been submitted the past 2 years (five for FY
2003; two for FY 2004) may indicate that only a very small number of
the new technologies that come onto the market every year are costly
enough even to apply for new technology add-on payments. Therefore, for
FY 2005 and subsequent fiscal years, in the May 19, 2003 proposed rule,
we proposed to reduce the threshold to 75 percent of 1 standard
deviation beyond the geometric mean standardized charge for all cases
in the DRG to which the new medical service or technology is assigned
(Sec. 412.87(b)(3)).
Based on our analysis of the thresholds for FY 2004, this proposed
change would reduce the average threshold across all DRGs to qualify
for the add-on payments from approximately $9,900 above the mean
standardized charges for each DRG to approximately $7,400. This
reduction would maintain the averaging principles of the IPPS while
easing the requirement somewhat to allow more technologies to qualify.
Furthermore, the situation illustrated above, where a technology
qualifies on the basis of its association with a high cost procedure,
is much less likely to occur as a result of this reduction than if the
threshold were reduced dramatically.
Comment: Some commenters were concerned that the revised threshold
of 75 percent of the standard deviation remains too high. The
commenters noted that even with the revised cost threshold, few
technologies would qualify for add-on payments.
On the assumption that the vast majority of technologies that would
qualify for add-on payments would be identified by a new ICD-9-CM
procedure code, one commenter identified a total of 26 ICD-9-CM
procedure codes issued between the years of 1998 and 2001. The
commenter then analyzed 2001 MedPAR data and found that only 2 of the
26 procedures will exceed either the current 1 standard deviation
threshold, and 4 would exceed the a threshold at 75 percent of 1
standard deviation. The commenter also explained that the proposed
reduction of the threshold is only an 8-percent reduction, and
continues to block eligibility for add-on-payments for important new
technologies, even where costs increase by 70 percent. The commenter
recommended that CMS use a threshold based upon 75 percent of the
standardized amount inflated to charges, plus the geometric mean
charges for the DRG. The commenter identified 13 of the 26 procedures
that would qualify using this threshold.
Another commenter asked that CMS consider adopting separate
criteria for biologics and devices, because they have different price
levels and pricing patterns relative to drugs and relative to DRG
standardized amounts. Other commenters recommended a threshold where
the cost of the technology must exceed the cost of existing
technologies by at least 50 percent of the DRG standardized amount,
multiplied by the DRG weight, but not to exceed $7,500.
One commenter was concerned that, because of budget neutrality, any
reduction to the threshold for new technologies would allow more
technologies to qualify for add-on payments and would therefore reduce
payments for all other hospital inpatient services. The commenter
explained that shifting money within the IPPS leaves some hospitals
without additional money they need to ensure beneficiaries have access
to the newest medical tests and treatments. Therefore, the commenter
recommended that add-on payments continue to be limited to new,
cutting-edge, breakthrough technologies with significant cost
implications.
Response: As stated in the August 1, 2002 final rule (67 FR 50011),
it is our intention to implement this provision without fundamentally
disrupting the
[[Page 45393]]
IPPS. A substantial number of cases receiving extra cost-based payments
(or substantial disaggregation of the DRGs into smaller units of
payment) would undermine the efficiency incentives of the DRG payment
system. Also, we continue to believe a threshold based on the standard
deviation is appropriate for this purpose. (For further reading on
this, see the September 7, 2001 final rule (66 FR 46917).)
The DRG system is an average-based system under which hospitals
expect to finance costly cases through less costly cases. We believe
the add-on policy envisioned by some commenter, that would reduce the
maximum threshold across all DRGs to 75 percent of the standardized
amount (approximately $3,300) adjusted to charges, would significantly
disrupt the averaging principles of the IPPS. By assuming only 26 new
technologies over a 4-year span, the analysis presented by the
commenter dramatically underestimates the annual volume of new
technologies that would be likely to meet such a reduced threshold.
Industry sources cite over 1,000 companies producing medical devices,
diagnostic products, and medical information systems in the U.S.,
producing over $70 billion worth of products annually. A very limited
number of these products receive specific ICD-9-CM procedure codes,
particularly in years prior to the establishment of the IPPS new
technology add-on policy. A more accurate estimate of the number of
technologies likely to be approved under this revised threshold could
be attained by listing the technologies approved during that period
with the average wholesale price.
As stated above, we recognize the limited number of applications
for add-on payments that have been submitted in the past 2 years and,
therefore, we are lowering the threshold. We believe this new threshold
is a fair balance that maintains the averaging principles of the IPPS
while easing the qualifying requirement. Therefore, for FY 2005 and
subsequent fiscal years, we are reducing the threshold to 75 percent of
1 standard deviation (based on the logarithmic values of the charges)
beyond the geometric mean standardized charges for all cases in the DRG
to which the new medical service or technology is assigned, transformed
back to charges.
We disagree with the commenter's suggestion that we establish
separate thresholds for biologics and devices. We believe the IPPS is
intended to pay hospitals for their costs to treat patients, and
physicians select from a range of options based on the medical needs of
the patients. The payment system should be neutral with respect to
those options. We are concerned that establishing separate thresholds
for biologics and devices would indicate an inappropriate payment
preference for one or the other option.
Comment: Other commenters representing hospitals approved of the
threshold proposed by CMS. One commenter explained that a threshold
that limits the number of new technologies is necessary, as the
administrative burden for hospitals and the program is significant for
each additional item qualifying. Given the finite pool of funds, an
abundance of qualifying technologies could result in prorata
reductions, such as those that were experienced under the outpatient
prospective payment system. With that in mind, the commenter asked that
CMS look at other approval mechanisms that would direct the funds to be
focused on significantly expensive new technologies that also have
significant volumes nationally. For example, national expenditures
projected by CMS for each technology seeking approval should exceed $30
million. Assuming national total expenditures of $75 billion with a 1
percent set aside at $750 million, and a marginal cost at 50 percent,
25 technologies could be approved by CMS.
As an alternative, the commenter recommended that CMS incorporate
new technologies into the appropriate DRG without having to
specifically code the new technology. The DRG weights would then be
adjusted to reflect the increased costs associated with such new
technologies rather than making a separate add-on payment. The
commenter believed this would be a reasonable compromise between the
need to incorporate new technologies into the DRGs, while avoiding an
unduly burdensome coding and billing process.
Response: We believe the incremental costs to hospitals associated
with this provision should be minimal. Specifically, the additional
payments are triggered by the presence of an ICD-9-CM code on the bill,
information already required to process the claim for normal DRG
payments. Accordingly, there should be little need for training or
other operational changes in response to the approval of a new
technology for add-on payments.
Also, adding further criteria as suggested by the commenter would
make it even more difficult for new technologies to qualify for add-on
payments. In this final rule, it is our intention to lower the
threshold in order to increase the number of applications we receive
each year for add-on payments. With respect to the commenter's
suggestion to incorporate a new technology in a DRG and raise the
weight of the DRG based on the increased cost of the new technology, we
are concerned that this suggestion would have the potential to create
possibly large imbalances in the DRG weights if the predicted volume of
a particular technology turns out to be inaccurate. We believe an add-
on payment is the most appropriate methodology to provide additional
payments for qualifying high cost new technologies, while still
maintaining the overall integrity of the DRG system.
5. Technical Changes
Subpart H of part 412 describes payments to hospitals under IPPS.
We have become aware of references to the calculation of IPPS payments
in this subpart that inadvertently omit references to new technology
add-on payments. For example, Sec. 412.112(c) describes the basis for
per case payments. This section refers to outlier payments under
subpart F, but was not revised to reflect the implementation of the new
technology add-on payments. Therefore, in the May 19, 2003 proposed
rule, we proposed to amend Sec. 412.112(c) to add a new paragraph (d)
to include a reference to additional payments for new medical services
or technologies under subpart F.
We did not receive any comments on this proposal and, therefore,
are adopting it as final.
Section 412.116(e) currently states that payments for outlier cases
are not made on an interim basis. That is, for hospitals receiving
payments under a biweekly, lump-sum payment methodology, outlier
payments are not included in the calculation of the lump-sum payment
amounts. Rather, outlier payments are calculated on a case-by-case
basis. Similarly, due to the unique nature of the new technology add-on
payments, in the May 19, 2003 proposed rule, we proposed that they
would also be calculated on a case-by-case basis rather than included
in the calculation of interim payment amounts. Therefore, we proposed
to revise Sec. 412.116(e) to include this policy.
We did not receive any comments on this proposal. Therefore, in
this final rule, we are adopting the proposal as final without
modification.
III. Changes to the Hospital Wage Index
A. Background
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary must adjust the
[[Page 45394]]
standardized amounts ``for area differences in hospital wage levels by
a factor (established by the Secretary) reflecting the relative
hospital wage level in the geographic area of the hospital compared to
the national average hospital wage level.'' In accordance with the
broad discretion conferred under the Act, we currently define hospital
labor market areas based on the definitions of Metropolitan Statistical
Areas (MSAs), Primary MSAs (PMSAs), and New England County Metropolitan
Areas (NECMAs) issued by the Office of Management and Budget (OMB). OMB
also designates Consolidated MSAs (CMSAs). A CMSA is a metropolitan
area with a population of one million or more, comprising two or more
PMSAs (identified by their separate economic and social character). For
purposes of the hospital wage index, we use the PMSAs rather than CMSAs
because they allow a more precise breakdown of labor costs. If a
metropolitan area is not designated as part of a PMSA, we use the
applicable MSA. For purposes of the IPPS wage index, rural areas are
counties outside a designated MSA, PMSA, or NECMA. For purposes of the
wage index, we combine all of the rural counties in a State to
calculate a rural wage index for that State.
We note that, effective April 1, 1990, the term Metropolitan Area
(MA) replaced the term MSA (which had been used since June 30, 1983) to
describe the set of metropolitan areas consisting of MSAs, PMSAs, and
CMSAs. The terminology was changed by OMB in the March 30, 1990 Federal
Register to distinguish between the individual metropolitan areas known
as MSAs and the set of all metropolitan areas (MSAs, PMSAs, and CMSAs)
(55 FR 12154). For purposes of the IPPS, we continue to refer to these
areas as MSAs.
Under section 1886(d)(8)(B) of the Act, hospitals in certain rural
counties adjacent to one or more MSAs are considered to be located in
one of the adjacent MSAs if certain standards are met. Under section
1886(d)(10) of the Act, the Medicare Geographic Classification Review
Board (MGCRB) considers applications from hospitals for geographic
reclassification from a rural area to a MSA, from one rural area to
another rural area, or from one MSA to another MSA for purposes of
payment under the IPPS.
On June 6, 2003, the Office of Management and Budget (OMB) issued
OMB Bulletin No. 03-04, announcing revised definitions of Metropolitan
Statistical Areas and new definitions of Micropolitan Statistical Areas
and Combined Statistical Areas. A copy of the bulletin may be obtained
at the following Internet address: http://www.whitehouse.gov/omb/bulletins/b03-04.html.
According to OMB, ``(t)his bulletin provides the
definitions of all Metropolitan Statistical Areas, Metropolitan
Divisions, Micropolitan Statistical Areas, Combined Statistical Areas,
and New England City and Town Areas in the United States and Puerto
Rico based on the standards published on December 27, 2000, in the
Federal Register (65 FR 82228-82238) and Census 2000 data.''
In the proposed rule, we stated that we would evaluate the new area
designations and their possible effects on the Medicare hospital wage
index. In addition, we proposed that the earliest usage of these new
definitions would be the FY 2005 wage index.
The new definitions recognize 49 new Metropolitan Statistical Areas
and 565 new Micropolitan Statistical Areas, as well as extensively
revising the construct of many of the existing Metropolitan Areas. For
example, according to OMB's previous definition of the Asheville, NC
MSA, this Metropolitan Statistical Area was comprised of Buncombe and
Madison counties. When we apply the new definitions, Asheville's
Metropolitan Statistical Area includes both Buncombe and Madison
counties, as well as Henderson and Haywood counties. An example of a
Micropolitan Statistical Area is that of Elizabeth City, NC which
includes Camden, Pasquotank, and Perquimans counties. These were non-
Metropolitan Statistical Area counties in previous OMB definitions.
In order to implement these changes for the IPPS, it is necessary
to identify the new area designation for each county and hospital in
the country. Because this process will have to be extensively reviewed
and verified, we are unable to undertake it before publication of this
final rule. In addition, because we wish to engage in notice and
comment rulemaking, prior to adopting these changes, it would be
impractical to have done so prior to this final rule. (We note that the
OMB Bulletin was issued during the comment period and we did not
receive any comments regarding whether the new definitions should be
applied to the FY 2004 wage index or objecting to our proposed policy
of implementing the changes in FY 2005 at the earliest.)
Finally, geographic reclassification decisions for FY 2004 have
already been made based on the previous Metropolitan Statistical Area
definitions. These decisions would have to be individually reevaluated
if we were to adopt the new OMB definitions for FY 2004. This would not
be possible to accomplish while complying with the requirement of
section 1886(d)(6) of the Act to publish this annual IPPS update final
rule by August 1. For these reasons, at this time, we are not applying
these new definitions to the FY 2004 wage index.
Comment: Several commenters recommended that when CMS does
implement OMB's new definitions, it should adopt the new 49 MSAs as
outlined in the OMB Bulletin. However, the commenters mentioned that
the adoption of the MSAs for FY 2004 would be premature, given the
magnitude of the policy change. One commenter encouraged CMS to issue a
rule or to elaborate on plans for the new Metropolitan and Micropolitan
Statistical Area definition changes as soon as possible to allow time
for impact analysis, as well as public comments and input. One
commenter raised concerns with respect to the criteria that OMB used to
define the new MSAs.
Response: We indicated in the proposed IPPS rule that we would need
to assess these new definitions before adopting them. In order to
implement such a change, it will be necessary to identify the new area
designation for each county and hospital in the country, requiring
extensive review and verification. We will undertake this analysis as
soon as possible. We intend to move very deliberately and expeditiously
regarding these potentially vast changes. Any changes would be made
through notice and comment rulemaking. Therefore, we are not addressing
technical comments relating to the new MSAs in this document.
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, this
section provides that the Secretary base the update on a survey of
wages and wage-related costs of short-term, acute care hospitals. The
survey should measure, to the extent feasible, the earnings and paid
hours of employment by occupational category, and must exclude the
wages and wage-related costs incurred in furnishing skilled nursing
services. This provision also requires us to make any updates or
adjustments to the wage index in a manner that ensures that aggregate
payments to hospitals are not affected by the change in the wage index.
This adjustment is discussed in section II.4.a. of the Addendum to this
final rule.
As discussed below in section III.F. of this preamble, we also take
into account the geographic reclassification of
[[Continued on page 45395]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 45395-45444]] Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2004 Rates
[[Continued from page 45394]]
[[Page 45395]]
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of
the Act when calculating the wage index. Under section 1886(d)(8)(D) of
the Act, the Secretary is required to adjust the standardized amounts
so as to ensure that aggregate payments under the IPPS after
implementation of the provisions of sections 1886(d)(8)(B) and (C) and
1886(d)(10) of the Act are equal to the aggregate prospective payments
that would have been made absent these provisions. This adjustment is
discussed in section II.4.b. of the Addendum to this final rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for each
short-term, acute care hospital participating in the Medicare program,
in order to construct an occupational mix adjustment to the wage index.
The initial collection of these data must be completed by September 30,
2003, for application beginning October 1, 2004 (the FY 2005 wage
index). In the April 4, 2003 Federal Register (68 FR 16516), we
published a notice of intent to collect calendar year 2002 data from
hospitals.
Many commenters on the April 4, 2003 notice requested that CMS
publish a more detailed proposed methodology, illustrating how the
occupational mix index will be calculated and how it will be used to
adjust the overall wage index. Other comments on the April 4, 2003
notice included: CMS should develop or expand more categories to
include all hospital employees; CMS should develop and publish a more
reasonable timeframe for the hospitals to complete the survey, and a
more reasonable timeframe for fiscal intermediaries to audit the
occupational mix survey; CMS should clarify the relationship between
the current annual cost report wage index schedule and the proposed
occupational mix survey.
We plan to publish a final notice of intent in the Federal
Register, with a 30-day comment period. The notice will include any
revisions to the survey published on April 4, 2003 based on the
comments we received, a detailed timetable, and all audit guidelines.
Subsequent to that, we plan to send the surveys to all IPPS hospitals
(and hospitals in Maryland that are under a waiver from the IPPS)
through the fiscal intermediaries, with the intent to collect these
data to be incorporated in the FY 2005 wage index.
Comment: In response to the May 19, 2003 IPPS proposed rule,
commenters requested that we publish a detailed proposed methodology,
for comment, illustrating how the occupational mix index will be
calculated and how it will be used to adjust the overall wage index.
Response: Although our approach will not be finalized until
publication of the FY 2005 rule, one possible approach to computing an
occupational mix adjusted index is to first calculate, based on the
hours collected for each occupational category from all hospitals
nationally, a national average percentage attributable to each
occupational category. Next, for each hospital, the total dollars and
hours for each category would be summed, and an average hourly wage
would be determined for each category by dividing dollars by hours.
Each hospital's occupational mix adjusted average hourly wage would be
calculated by multiplying each category's average hourly wage by the
applicable weighting factors and then summing the results across all
categories. Similar calculations would then be performed at the labor
market level and the national level to construct an index.
We intend to analyze the impacts of implementing an occupational
mix adjusted index in the proposed rule for FY 2005. Based on the
estimated impacts, we will also evaluate at that time the possibilities
for blending such an index with the FY 2005 wage index calculated using
our current methodology based on data from the Worksheet S-3, Part II
of the Medicare cost report.
B. FY 2004 Wage Index Update
The FY 2004 wage index values (effective for hospital discharges
occurring on or after October 1, 2003 and before October 1, 2004) in
section VI. of the Addendum to this final rule are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2000 (the FY 2003 wage index was
based on FY 1999 wage data).
The data for the FY 2004 wage index were obtained from Worksheet S-
3, Parts II and III of the FY 2000 Medicare cost reports. Instructions
for completing the Worksheet S-3, Parts II and III are in the Provider
Reimbursement Manual, Part I, sections 3605.2 and 3605.3. The FY 2004
wage index includes the following categories of data associated with
costs paid under the IPPS (as well as outpatient costs), which were
also included in the FY 2003 wage index:
[sbull] Salaries and hours from short-term, acute care hospitals.
[sbull] Home office costs and hours.
[sbull] Certain contract labor costs and hours (includes direct
patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services).
[sbull] Wage-related costs (The September 1, 1994 Federal Register
included a list of core wage-related costs that are included in the
wage index, and discussed criteria for including other wage-related
costs (59 FR 45356)).
Consistent with the wage index methodology for FY 2003, the wage
index for FY 2004 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as skilled nursing
facility (SNF) services, home health services, costs related to GME
(teaching physicians and residents) and certified registered nurse
anesthetists (CRNAs), and other subprovider components that are not
paid under the IPPS.
These wage data are also currently used to calculate wage indexes
applicable to other providers, such as SNFs, home health agencies, and
hospices. They are also used for prospective payments to rehabilitation
and long-term care hospitals, and for hospital outpatient services.
C. FY 2004 IPPS Wage Index
1. Elimination of Wage Costs Associated With Rural Health Clinics and
Federally Qualified Health Centers
In the FY 2001 IPPS final rule, we discussed removing from the wage
index the salaries, hours, and wage-related costs of hospital-based
rural health clinics (RHCs) and Federally qualified health centers
(FQHCs) because Medicare pays for these costs outside of the IPPS (65
FR 47074). We noted that because RHC and FQHC costs were not previously
separately reported on Worksheet S-3 of the Medicare cost report, we
could not exclude these costs from the prior wage indexes. We further
noted that we would evaluate the exclusion of RHC and FQHC wage data in
developing the FY 2004 wage index.
We revised the FY 2000 Worksheet S-3 so that it now allows for the
separate reporting of RHC and FQHC wage costs and hours. In the May 19,
2003 proposed rule, we proposed to exclude the wage and hours data for
RHCs and FQHCs from the hospital wage index calculation beginning with
the FY 2004 wage index.
We received several comments, all supporting this proposal.
Therefore, beginning with the FY 2004 wage index, we are excluding the
salaries, hours and wage-related costs associated with RHCs and FQHCs.
This change is consistent with others we have implemented in our
continuous effort to limit the wage index as much as possible to costs
for which hospitals receive payment under
[[Page 45396]]
IPPS. An analysis of the effects of this change is included in the
Appendix A of this final rule.
2. Paid Hours
It has been the longstanding policy of CMS to calculate the wage
index using paid hours rather than hours worked (see the September 1,
1993 Federal Register, 58 FR 46299). This policy reflects our belief
that paid hours more appropriately reflect a hospital's total wage
costs, which include amounts paid for actual time worked and for
covered leave periods (for example, annual, sick, and holiday leave).
Therefore, the inclusion of paid lunch hours in the wage index is
consistent with our inclusion of other paid nonworking hours.
Several hospitals have requested that we exclude paid lunch or meal
break hours from the wage index calculation. At these hospitals, the
typical workday is 7\1/2\ working hours, plus a \1/2\ hour paid meal
break, for a total of 8 paid hours. These hospitals, some of which are
municipal-owned and required by their overarching union contracts to
provide paid lunch hours, believe they are disadvantaged by a wage
index policy that requires paid lunch hours to be included in
calculating the wage index.
The hospitals argue that their practice of paying employees for
meal breaks is not substantially different, in practice, from other
hospitals whose employees do not receive paid lunch hours but who are
on call during their lunch periods. These hospitals further argue that
this policy causes them, in some cases due to union contracts beyond
their control, to be the only hospitals with this category of
nonproductive hours included in their wage index.
In the May 19, 2003 proposed rule, we solicited comments on our
policy that paid lunch hours should be excluded from the wage index.
Specifically, we were interested in a broader understanding of the
issue of whether some hospitals may, in fact, be truly disadvantaged by
this policy through no fault of their own. We indicated that any change
in our policy would not be implemented until, at the earliest, the FY
2005 wage index.
Some hospitals and associations have also recommended that we
exclude the paid hours associated with military and jury duty leave
from the wage index calculation. They state that, unlike other paid
leave categories for which workers are usually paid at their full
hourly rates (for example, annual, sick, and holiday), hospitals
typically pay employees on military or jury duty only a fraction of
their normal pay. The amount that the hospital pays is intended to only
supplement the earnings that the employee receives from the government
so that, while performing military or civic duties, the employee can
continue to be paid the same salary level, as if he or she were still
working at the hospital.
The hospitals and associations believe that including lower pay
rates associated with employees' military and jury duty leave unfairly
decreases a hospital's average hourly wage and, therefore, its wage
index value. Therefore, we proposed to exclude from the wage index the
paid hours associated with military and jury duty leave, beginning with
the FY 2005 wage index. We also proposed that the associated salaries
would continue to be reported on Worksheet S-3, Part II, Line 1 of the
Medicare cost report.
Comment: A few commenters agreed that paid lunch hours and hours
associated with military and jury duty leave should be removed from the
wage index. Many more commenters, including some national and state
hospital associations and Medicare fiscal intermediaries, opposed or
expressed concern about whether excluding paid lunch hours and hours
associated with military and jury duty leave would result in a more
accurate wage index.
Those commenters who opposed the proposal to exclude paid lunch
hours and hours associated with military and jury duty leave expressed
concern that these changes would further complicate the wage index and
that the additional data collection effort for providers might outweigh
any benefits achieved through these changes. Further, the commenters
believed that paid lunch hours, military, and jury leave affect all
providers in the same way, so the changes would likely be immaterial.
One commenter also expressed concern that excluding paid hours could
cause hospitals to rewrite existing contracts to raise their wage
index. In addition, some commenters cautioned that excluding these paid
hours would be difficult for intermediaries to apply consistently;
excluding these hours would require estimations because most payroll
systems do not capture this data. Many commenters indicated that CMS
had not published data to provide support that these changes are
warranted.
One commenter suggested that, if CMS excludes paid lunch hours, CMS
should set a standard for hospitals to qualify for excluding the hours,
such as the Fair Labor Standards Act requirements for payment. Another
suggested that the determination of excluding paid lunch hours should
be based on whether lunch is included for the purpose of computing the
hourly wage rate used to pay for overtime. If paid lunch hours are
included in the overtime payment computation, and excluding them would
result in an hourly rate that is higher than what is usually used for
overtime, the paid lunch hours should be excluded. If the paid lunch
hours are not included in computing the hourly wage for overtime, and
excluding them would result in the correct hourly wage rate that should
be used for overtime, the lunch hours should be excluded. Two
commenters recommended that the wage index should also exclude time
associated with paid breaks from the wage index, but acknowledged that
paid breaks are not usually tracked in payroll systems. One commenter
recommended that CMS allow all hospitals in an area to include paid
hours on a standard basis in order to eliminate differences that are
more a matter of how hours are reported rather than actual difference
in wages.
Those commenters who opposed the exclusion of paid lunch hours were
generally concerned that hospitals do not currently track paid lunch
hours. They indicated that it would be a major burden for hospitals to
change their systems to accommodate reporting the hours and the
benefits are likely to be minimum.
A few commenters suggested that, if a hospital pays its employees
at the full rate for military and jury duty leave, the full associated
hours should be included. However, they added that if a hospital pays
its employees at a reduced rate for these leave categories, the
hospital should exclude hours based on the fraction of the salary that
is not paid. If the hospital does not pay for any military or jury duty
leave, all of the associated hours should be excluded. The commenters
believed that this treatment would be consistent with our longstanding
policy to include hours associated with paid time off, while a
hospital's average hourly rate would not be negatively impacted by the
reduced rates that some hospitals pay for military and jury duty leave.
One commenter recommended that CMS permit hospitals to exclude the
hours, but not require such reporting.
Several commenters opposed excluding paid hours associated with
military and jury duty because they believe that military and jury duty
leave affect all providers in the same way. Therefore, they believed
that any changes in the wage index would likely be immaterial. Two
commenters expressed concern that, if paid hours are excluded and wages
are not, the wage index would be overstated. The
[[Page 45397]]
commenters recommended that, if CMS excludes paid hours associated with
military and jury duty leave, for consistency, CMS should also exclude
the related wages. Alternatively, the commenters recommended that CMS
collect data on the wages and hours associated with military and jury
duty first, so that the impact of excluding the hours can be determined
before the policy is implemented. One commenter believed that CMS
should only include in the wage index, hours associated with regular
hours, overtime, and sick leave, because these paid leave or paid time
off categories are consistently offered among hospitals. The commenter
also believed other paid leave or paid time off categories such as
vacation hours, maternity leave, bereavement leave, and vacation hours
should be excluded because they are not consistently offered among
hospitals. In addition, the commenter believed that when hospitals are
competing for employees in the labor market, if offered, these paid
leave or paid time off hours could vary from hospital to hospital. For
example, hospital A will only pay 2 weeks for paid vacation leave,
while hospital B will pay 4 weeks for paid vacation leave. Therefore,
the commenter believed these other paid leave or paid time off leave
hours should be excluded from the wage index.
Response: As we stated above and in the proposed rule, it has been
our longstanding policy to include paid hours in the calculation of the
wage index because they more appropriately reflect a hospital's total
wage costs. We solicited comments on the possible exclusion of paid
lunch hours and proposed to exclude the paid hours associated with
military and jury duty hours because of our concern that there were
significant issues with the consistent treatment of these issues across
hospitals that may impact the validity of the wage index. However, the
comments indicate to us there is substantial disagreement with respect
to whether either category of paid hours should be excluded from the
wage index calculation. Therefore, we are not proceeding with either
change at this time. We intend to explore a more comprehensive
assessment of the use of paid hours in a future rule. For the FY 2005
final wage index, we are including paid lunch hours, and hours
associated with military leave and jury duty.
D. Verification of Wage Data From the Medicare Cost Reports
The data file used to construct the wage index includes FY 2000
data submitted to us as of June 27, 2003. As in past years, we
performed an intensive review of the wage data, mostly through the use
of edits designed to identify aberrant data.
We constructed the proposed FY 2004 wage index based on the wage
data for facilities that were IPPS hospitals in FY 2000, even for those
facilities that have terminated their participation in the program as
hospitals or have since been designated as a critical access hospital
(CAH), as long as those data do not fail any of our edits for
reasonableness. We stated that including the wage data for these
hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period.
Prior to the proposed rule, we had received correspondence
suggesting that the wage data for hospitals that have subsequently been
redesignated as CAHs should be removed from the wage index calculation
because CAHs are a separate provider type and are unique compared to
other short-term, acute care hospitals. CAHs are limited to only 15
acute care beds. An additional 10 beds may be designated as swing-beds,
but only 15 beds can be used at one time to serve acute care patients.
CAHs tend to be located in isolated, rural areas. In the May 19, 2003
proposed rule, we solicited comments on whether we should exclude wage
data from such hospitals from the wage index calculation. However, we
included the data for current CAHs in the proposed FY 2004 wage index
if the CAH was paid under the IPPS during FY 2000 as an acute care
hospital.
Comment: Commenters, including national hospital associations,
generally supported the removal of CAH wage data from the wage index.
One commenter agreed that CAHs are dissimilar to IPPS hospitals and
described a situation in which including a CAH has a negative impact on
the other hospitals' wage index. One commenter agreed that CMS should
exclude the costs, but expressed concern about the immediate financial
impact that excluding CAHs might have on all hospitals in FY 2004. The
commenter recommended that CMS examine the impact of removing CAH wage
data from the wage index and make this analysis available for public
comment. Another commenter recommended that CMS establish a date prior
to the release of the wage index public use file that the facility must
be certified as a CAH to be excluded from the wage index calculation.
Several commenters opposed excluding CAH data from the wage index.
Some commenters indicated that CMS does not exclude hospitals that
converted to CAH status subsequent to the year used to derive DRG
weights. Another commenter opposed excluding CAHs from the wage index
because the commenter believed that the wage index should reflect
conditions of a labor market at a specific point in time. The commenter
believed that other conditions, such as closures, mergers, or
expansions, are analogous circumstances and warned that excluding these
hospitals would also distort the wage index. Another commenter
recommended that CMS apply a hold-harmless policy.
Response: CAHs represent a substantial number of hospitals with
significantly different labor costs in many labor market areas where
they exist. Using data collected for the proposed FY 2004 wage index,
we found that, in 89 percent of all labor market areas with hospitals
that converted to CAH status some time after FY 2000, the average
hourly wage for CAHs is lower than the average hourly wage for other
short-term hospitals in the area. In 79 percent of the labor market
areas with CAHs, the average hourly wage for CAHs is lower than the
average hourly wage for other short-term hospitals by 5 percent or
greater. These results suggest that the wage data for CAHs, in general,
are significantly different from other short-term hospitals.
Further, we found that removing CAHs from the wage index would have
a minimal redistributive effect on Medicare payments to hospitals. The
majority of the labor market areas would decrease by only 0.30 percent
in their wage index value. The actual payment impact would be even
smaller because the wage index is applied to only the labor-related
portion of the average standardized amount. Only 10 areas would
experience a decrease in their wage index values greater than 0.30
percent. The greatest negative impact is 9.57 percent. Meanwhile,
positive impacts occur in 48 areas, 30 of which are in rural areas.
Overall, removing CAHs from the wage index would have a minimal
redistributive effect on Medicare payments to hospitals.
We believe that removing CAHs from the wage index is prudent
policy, given the substantial negative impact these hospitals have on
the wage indexes in the areas where they are located and the minimal
impact they have on the wage indexes of other areas. We note that we
would continue to include the wage data for other terminating or
converting hospitals for the period preceding their change in Medicare
provider status, as long as those data do not fail any of our edits for
reasonableness. This is because
[[Page 45398]]
we continue to believe that the wage data for these hospitals, unlike
CAHs, are not necessarily unique compared to other short-term
hospitals, and these terminating or converting hospitals provide an
accurate reflection of the labor market area during the relevant past
period.
Therefore, beginning with the FY 2004 wage index, we are excluding
from the wage index the wages and hours for all hospitals that are
currently designated as a CAH, even if the hospital was paid under the
IPPS during the cost reporting period used in calculating the wage
index. We believe that this change improves the overall equity of the
wage index. Therefore, it is important to proceed with this change for
FY 2004. Consistent with our general approach to wage index changes, we
are not holding other hospitals' payments harmless for this change.
As recommended, any hospital that is designated as a CAH by 7 days
prior to the publication of the preliminary wage index public use file
are excluded from the calculation of the wage index. Hospitals
receiving designation after this date will remain in the wage index
calculation.
We asked our fiscal intermediaries to revise or verify data
elements that resulted in specific edit failures. The unresolved data
elements that were included in the calculation of the proposed FY 2004
wage index have been resolved and are reflected in the calculation of
the final FY 2004 wage index. For the final FY 2004 wage index in this
final rule, we removed data for 23 hospitals that failed edits. For 9
of these hospitals, we were unable to obtain sufficient documentation
to verify or revise the data because the hospitals are no longer
participating in the Medicare program, are under new ownership, or are
in bankruptcy status, and supporting documentation is no longer
available. We identified 14 hospitals with incomplete or inaccurate
data resulting in zero or negative, or otherwise aberrant, average
hourly wages. Therefore, these hospitals were removed from the
calculation. As a result, the final FY 2004 wage index is calculated
based on FY 2000 wage data for 4,087 hospitals.
E. Computation of the FY 2004 Wage Index
The method used to compute the FY 2004 wage index follows:
Step 1--As noted above, we based the FY 2004 wage index on wage
data reported on the FY 2000 Medicare cost reports. We gathered data
from each of the non-Federal, short-term, acute care hospitals for
which data were reported on the Worksheet S-3, Parts II and III of the
Medicare cost report for the hospital's cost reporting period beginning
on or after October 1, 1999 and before October 1, 2000. In addition, we
included data from some hospitals that had cost reporting periods
beginning before October 1999 and reported a cost reporting period
covering all of FY 2000. These data were included because no other data
from these hospitals are available for the cost reporting period
described above, and because particular labor market areas might be
affected due to the omission of these hospitals. However, we generally
describe these wage data as FY 2000 data. We note that, if a hospital
had more than one cost reporting period beginning during FY 2000 (for
example, a hospital had two short cost reporting periods beginning on
or after October 1, 1999 and before October 1, 2000), we included wage
data from only one of the cost reporting periods, the longer, in the
wage index calculation. If there was more than one cost reporting
period and the periods were equal in length, we included the wage data
from the later period in the wage index calculation.
Step 2--Salaries--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS. In
calculating a hospital's average salaries plus wage-related costs, we
subtracted from Line 1 (total salaries) the GME and CRNA costs reported
on lines 2, 4.01, and 6, the Part B salaries reported on Lines 3, 5 and
5.01, home office salaries reported on Line 7, and excluded salaries
reported on Lines 8 and 8.01 (that is, direct salaries attributable to
SNF services, home health services, and other subprovider components
not subject to the IPPS). We also subtracted from Line 1 the salaries
for which no hours were reported. To determine total salaries plus
wage-related costs, we added to the net hospital salaries the costs of
contract labor for direct patient care, certain top management,
pharmacy, laboratory, and nonteaching physician Part A services (Lines
9, 9.01, 9.02, and 10), home office salaries and wage-related costs
reported by the hospital on Lines 11 and 12, and nonexcluded area wage-
related costs (Lines 13, 14, and 18).
We note that contract labor and home office salaries for which no
corresponding hours are reported were not included. In addition, wage-
related costs for nonteaching physician Part A employees (Line 18) are
excluded if no corresponding salaries are reported for those employees
on Line 4.
Step 3--Hours--With the exception of wage-related costs, for which
there are no associated hours, we computed total hours using the same
methods as described for salaries in Step 2.
Step 4--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocated overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determined the ratio of excluded area hours (sum
of Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours
(Line 1 minus the sum of Part II, Lines 2, 3, 4.01, 5, 5.01, 6, 7, and
Part III, Line 13 of Worksheet S-3). We then computed the amounts of
overhead salaries and hours to be allocated to excluded areas by
multiplying the above ratio by the total overhead salaries and hours
reported on Line 13 of Worksheet S-3, Part III. Next, we computed the
amounts of overhead wage-related costs to be allocated to excluded
areas using three steps: (1) we determined the ratio of overhead hours
(Part III, Line 13) to revised hours (Line 1 minus the sum of Lines 2,
3, 4.01, 5, 5.01, 6, and 7); (2) we computed overhead wage-related
costs by multiplying the overhead hours ratio by wage-related costs
reported on Part II, Lines 13, 14, and 18; and (3) we multiplied the
computed overhead wage-related costs by the above excluded area hours
ratio. Finally, we subtracted the computed overhead salaries, wage-
related costs, and hours associated with excluded areas from the total
salaries (plus wage-related costs) and hours derived in Steps 2 and 3.
Step 5--For each hospital, we adjusted the total salaries plus
wage-related costs to a common period to determine total adjusted
salaries plus wage-related costs. To make the wage adjustment, we
estimated the percentage change in the employment cost index (ECI) for
compensation for each 30-day increment from October 14, 1999 through
April 15, 2001 for private industry hospital workers from the Bureau of
Labor Statistics' Compensation and Working Conditions. We use the ECI
because it reflects the price increase associated with total
compensation (salaries plus fringes) rather than just the increase in
salaries. In addition, the ECI includes managers as well as other
hospital workers. This methodology to compute the monthly update
factors uses actual quarterly ECI data and assures that the update
factors match the actual quarterly and annual percent changes. The
factors used to adjust the hospital's data were based on the midpoint
of the cost reporting period, as indicated below.
[[Page 45399]]
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
After Before Adjustment factor
------------------------------------------------------------------------
10/14/1999 11/15/1999 1.06794
11/14/1999 12/15/1999 1.06447
12/14/1999 01/15/2000 1.06083
01/14/2000 02/15/2000 1.05713
02/14/2000 03/15/2000 1.05335
03/14/2000 04/15/2000 1.04954
04/14/2000 05/15/2000 1.04571
05/14/2000 06/15/2000 1.04186
06/14/2000 07/15/2000 1.03786
07/14/2000 08/15/2000 1.03356
08/14/2000 09/15/2000 1.02898
09/14/2000 10/15/2000 1.02425
10/14/2000 11/15/2000 1.01953
11/14/2000 12/15/2000 1.01482
12/14/2000 01/15/2001 1.01004
01/14/2001 02/15/2001 1.00509
02/14/2001 03/15/2001 1.00000
03/14/2001 04/15/2001 0.99491
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2000 and ending December 31, 2000 is June 30, 2000. An
adjustment factor of 1.03786 would be applied to the wages of a
hospital with such a cost reporting period. In addition, for the data
for any cost reporting period that began in FY 2000 and covered a
period of less than 360 days or more than 370 days, we annualized the
data to reflect a 1-year cost report. Annualization is accomplished by
dividing the data by the number of days in the cost report and then
multiplying the results by 365.
Step 6--Each hospital was assigned to its appropriate urban or
rural labor market area before any reclassifications under section
1886(d)(8)(B) or section 1886(d)(10) of the Act. Within each urban or
rural labor market area, we added the total adjusted salaries plus
wage-related costs obtained in Step 5 for all hospitals in that area to
determine the total adjusted salaries plus wage-related costs for the
labor market area.
Step 7--We divided the total adjusted salaries plus wage-related
costs obtained under both methods in Step 6 by the sum of the
corresponding total hours (from Step 4) for all hospitals in each labor
market area to determine an average hourly wage for the area.
Step 8--We added the total adjusted salaries plus wage-related
costs obtained in Step 5 for all hospitals in the nation and then
divided the sum by the national sum of total hours from Step 4 to
arrive at a national average hourly wage. Using the data as described
above, the national average hourly wage is $24.8076.
Step 9--For each urban or rural labor market area, we calculated
the hospital wage index value by dividing the area average hourly wage
obtained in Step 7 by the national average hourly wage computed in Step
8.
Step 10--Following the process set forth above, we developed a
separate Puerto Rico-specific wage index for purposes of adjusting the
Puerto Rico standardized amounts. (The national Puerto Rico
standardized amount is adjusted by a wage index calculated for all
Puerto Rico labor market areas based on the national average hourly
wage as described above.) We added the total adjusted salaries plus
wage-related costs (as calculated in Step 5) for all hospitals in
Puerto Rico and divided the sum by the total hours for Puerto Rico (as
calculated in Step 4) to arrive at an overall average hourly wage of
$11.5905 for Puerto Rico. For each labor market area in Puerto Rico, we
calculated the Puerto Rico-specific wage index value by dividing the
area average hourly wage (as calculated in Step 7) by the overall
Puerto Rico average hourly wage.
Step 11--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. Furthermore, this wage index floor is to be
implemented in such a manner as to ensure that aggregate IPPS payments
are not greater or less than those that would have been made in the
year if this section did not apply. For FY 2004, this change affects
150 hospitals in 49 MSAs. The MSAs affected by this provision are
identified by a footnote in Table 4A in the Addendum of this final
rule.
Comment: One commenter indicated that there are serious
deficiencies in the payment rates to Iowa hospitals under IPPS because
of the development and application of the wage index, and, accordingly,
CMS must make revisions to the wage index in this final rule. The
comment suggested that CMS should: reduce the labor-related portion of
the standardized amount to which the wage index is applied; adjust the
wage index upward to account for low Medicare payments; or utilize a
wage index floor or compress the wage index.
Response: We appreciate the concerns expressed by this commenter
about the impact of the wage index upon Iowa's hospitals. We strive
each year to ensure the wage index accurately reflects the relative
wage differences across labor market areas. Further, the methodology we
use to compute the wage index values is the same for all urban and
rural hospitals. Therefore, the wage index values we include in the
proposed and final rules for Iowa hospitals reflect the actual wage
costs that are reported by these hospitals relative to those reported
by hospitals across the nation.
With respect to the commenter's specific recommendations, we
address comments related to the labor-related portion of the
standardized amounts in section VII. of the preamble of this final
rule. With respect to the other recommendations raised, these were not
proposed and, therefore, we do not wish to implement them in this final
rule. We are willing to explore these and other options in the future
and to work with the commenter to address the concerns expressed.
Comment: One commenter indicated that we failed to address the
problem associated with the exclusion of indirect patient care contract
labor in the proposed rule. The commenter indicated that we recognized
this problem in the FY 2002 final rule (67 FR 50022), but failed to
carry out our commitment to address it.
Response: We indicated last year it would be necessary to revise
the cost report form and instructions in order to collect the data
necessary to separately identify the costs and hours associated with
the following contracted overhead services: administrative and general;
housekeeping; and dietary. In Transmittal Number 10 of the Medicare
cost report, we revised Worksheet S-3, Part II to collect contract
labor costs associated with these services, effective with cost
reporting periods beginning on or after October 1, 2003.
We also indicated our final decision on whether to include contract
indirect patient care labor costs in our calculation of the wage index
will depend on the outcome of our analyses of the data collected and
public comments.
F. Revisions to the Wage Index Based on Hospital Redesignation
1. General
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the IPPS.
Hospitals can elect to reclassify for the wage index or the
standardized amount, or both, and as individual hospitals or as rural
groups. Generally, hospitals must be proximate to the labor market area
to which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. Hospitals
must apply for reclassification to the MGCRB. The MGCRB issues its
decisions by the end of February for
[[Page 45400]]
reclassification to become effective for the following fiscal year
(beginning October 1). The regulations applicable to reclassifications
by the MGCRB are located in Sec. Sec. 412.230 through 412.280.
Section 1886(d)(10)(D)(v) of the Act provides that, beginning with
FY 2001, a MGCRB decision on a hospital reclassification for purposes
of the wage index is effective for 3 fiscal years, unless the hospital
elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of
the Act provides that the MGCRB must use the 3 most recent years'
average hourly wage data in evaluating a hospital's reclassification
application for FY 2003 and any succeeding fiscal year.
Section 304(b) of Pub. L. 106-554 provides that the Secretary must
establish a mechanism under which a statewide entity may apply to have
all of the geographic areas in the State treated as a single geographic
area for purposes of computing and applying a single wage index, for
reclassifications beginning in FY 2003. The implementing regulations
for this provision are located at Sec. 412.235.
Section 1886(d)(8)(B) of the Act permits a hospital located in a
rural county adjacent to one or more urban areas to be designated as
being located in the MSA to which the greatest number of workers in the
county commute (1) if the rural county would otherwise be considered
part of an urban area under the standards published in the Federal
Register for designating MSAs (and for designating NECMAs), and (2) if
the commuting rates used in determining outlying counties (or, for New
England, similar recognized area) were determined on the basis of the
aggregate number of resident workers who commute to (and, if applicable
under the standards, from) the central county or counties of all
contiguous MSAs (or NECMAs). Hospitals that meet these criteria are
deemed urban for purposes of the standardized amounts and for purposes
of assigning the wage index.
Revised MSA standards were published in the December 27, 2000
Federal Register (65 FR 82228). We are working with the Census Bureau
to compile a list of hospitals that meet the new standards based on the
2000 census data; however, that work was not yet complete at the time
of publication of the proposed rule.
As noted above, OMB announced the new Metropolitan and Micropolitan
Statistical Area designations and definitions on June 6, 2003. These
new designations have extensively revised the construct of many of the
existing Metropolitan Areas and created many new designated areas. In
order to implement these changes, we need to carefully evaluate the
implications of these changes for each county and hospital nationwide.
As a result, we are unable to incorporate these new standards for
redesignating hospitals and, therefore, we are not implementing the new
standards for purposes of redesignation for FY 2004 under section
1886(d)(8)(B) of the Act. As a result, to qualify for redesignation
under this section in FY 2004, hospitals must be located in counties
that meet the 1990 standards.
2. Effects of Reclassification
The methodology for determining the wage index values for
redesignated hospitals is applied jointly to the hospitals located in
those rural counties that were deemed urban under section 1886(d)(8)(B)
of the Act and those hospitals that were reclassified as a result of
the MGCRB decisions under section 1886(d)(10) of the Act. Section
1886(d)(8)(C) of the Act provides that the application of the wage
index to redesignated hospitals is dependent on the hypothetical impact
that the wage data from these hospitals would have on the wage index
value for the area to which they have been redesignated. Therefore, as
provided in section 1886(d)(8)(C) of the Act,\5\ the wage index values
were determined by considering the following:
---------------------------------------------------------------------------
\5\ Although section 1886(d)(8)(C)(iv)(I) of the Act also
provides that the wage index for an urban area may not decrease as a
result of redesignated hospitals if the urban area wage index is
below the wage index for rural areas in the State in which the urban
area is located, this was effectively made moot by section 4410 of
Public Law 105-33, which provides that the area wage index
applicable to any hospital that is located in an urban areas of a
State may not be less than the area wage index applicable to
hospitals located in rural areas in that State.
Also, section 1886(d)(8)(C)(iv)(II) of the Act provides that an
urban area's wage index may not decrease as a result of redesignated
hospitals if the urban area is located in a State that is composed
of a single urban area.
---------------------------------------------------------------------------
[sbull] If including the wage data for the redesignated hospitals
would reduce the age index value for the area to which the hospitals
are redesignated by 1 percentage point or less, the area wage index
value determined exclusive of the wage data for the redesignated
hospitals applies to the redesignated hospitals.
[sbull] If including the wage data for the redesignated hospitals
reduces the wage index value for the area to which the hospitals are
redesignated by more than 1 percentage point, the area wage index
determined inclusive of the wage data for the redesignated hospitals
(the combined wage index value) applies to the redesignated hospitals.
[sbull] If including the wage data for the redesignated hospitals
increases the wage index value for the urban area to which the
hospitals are redesignated, both the area and the redesignated
hospitals receive the combined wage index value. Otherwise, the
hospitals located in the urban area receive a wage index excluding the
wage data of hospitals redesignated into the area.
[sbull] The wage data for a reclassified urban hospital is included
in both the wage index calculation of the area to which the hospital is
reclassified (subject to the rules described above) and the wage index
calculation of the urban area where the hospital is physically located.
[sbull] Rural areas whose wage index values would be reduced by
excluding the wage data for hospitals that have been redesignated to
another area continue to have their wage index values calculated as if
no redesignation had occurred (otherwise, redesignated rural hospitals
are excluded from the calculation of the rural wage index).
[sbull] The wage index value for a redesignated rural hospital
cannot be reduced below the wage index value for the rural areas of the
State in which the hospital is located.
The wage index values for FY 2004 are shown in Tables 4A, 4B, 4C,
and 4F in the Addendum to this final rule. Hospitals that are
redesignated must use the wage index values shown in Table 4C. Areas in
Table 4C may have more than one wage index value because the wage index
value for a redesignated urban or rural hospital cannot be reduced
below the wage index value for the rural areas of the State in which
the hospital is located. Therefore, those areas with more than one wage
index shown have hospitals from more than one State reclassified into
them, and the rural wage index for a State in which at least one
hospital is physically located is higher than the wage index for the
area to which the hospital is reclassified.
Tables 3A and 3B in the Addendum of this final rule list the 3-year
average hourly wage for each labor market area before the redesignation
of hospitals, based on FYs 1998, 1999, and 2000 cost reporting periods.
Table 3A lists these data for urban areas and Table 3B lists these data
for rural areas. In addition, Table 2 in the Addendum to this final
rule includes the adjusted average hourly wage for each hospital from
the FY 1998 and FY 1999 cost reporting periods, as well as the FY 2000
period used to calculate the final FY 2004 wage index. The 3-year
averages are calculated by dividing the sum of the dollars (adjusted to
a common reporting
[[Page 45401]]
period using the method described previously) across all 3 years, by
the sum of the hours. If a hospital is missing data for any of the
previous years, its average hourly wage for the 3-year period is
calculated based on the data available during that period.
Table 9 in the Addendum of this final rule shows hospitals that
have been reclassified under either section 1886(d)(8) or section
1886(d)(10)(D) of the Act. This table includes hospitals reclassified
for FY 2004 by the MGCRB (68 for wage index, 31 for the standardized
amount, and 34 for both the wage index and the standardized amount), as
well as hospitals that were reclassified for the wage index in either
FY 2002 (451) or FY 2003 (55) and are, therefore, in either the second
or third year of their 3-year reclassification. In addition, it
includes rural hospitals redesignated to an urban area under section
1886(d)(8)(B) of the Act for purposes of the standardized amount and
the wage index (42). Since publication of the May 19 proposed rule, the
number of reclassifications has changed because some MGCRB decisions
were still under review by the Administrator and because some hospitals
decided to withdraw their requests for reclassification.
Changes to the wage index that result from withdrawals of requests
for reclassification, wage index corrections, appeals, and the
Administrator's review process have been incorporated into the wage
index values published in this final rule. The changes may affect not
only the wage index value for specific geographic areas, but also the
wage index value redesignated hospitals receive; that is, whether they
receive the wage index value that includes the data for both the
hospitals already in the area and the redesignated hospitals. Further,
the wage index value for the area from which the hospitals are
redesignated may be affected.
Applications for FY 2005 reclassifications are due to the MCGRB by
September 2, 2003. We note that this is also the deadline for canceling
a previous wage index reclassification withdrawal or termination under
Sec. 412.273(d). Applications and other information about MCGRB
reclassifications may be obtained via the CMS Internet Web site at
http://cms.hhs.gov/providers/prrb/mgcinfo.asp, or by calling the MCGRB
at (410) 786-1174. The mailing address of the MGCRB is: 2520 Lord
Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
As noted previously, OMB announced its new Metropolitan and
Micropolitan Statistical Area definitions on June 6, 2003. However, as
noted previously as well as in the proposed rule, in order to implement
these changes for the IPPS, it is necessary to identify the new area
designations for each county and hospital in the country. This is not
possible by the September 2, 2003 deadline for reclassification by the
MCGRB for FY 2005. Therefore, hospitals submitting applications for
reclassification by the MCGRB for FY 2005 should base those
applications on the current MSAs. We plan to move deliberately in
determining the implications the new definitions will have on
hospitals' reclassification requests, and we are considering addressing
these implications in the FY 2005 proposed rule.
G. Requests for Wage Data Corrections
In the May 19, 2003 proposed rule, we described the process for
hospitals to review and revise their FY 2000 wage data. The preliminary
wage data file was made available on January 10, 2003 (and subsequently
on February 4, 2003), through the Internet on CMS's Web site at: http://www.cms.hhs.gov/providers/hipps/default.asp.
At that time, we also
made available, at the same Internet address, a file showing each MSA's
and rural areas's FY 2004 average hourly wage based on data then
available compared to its FY 2003 average hourly wage. In a memorandum
dated December 31, 2002, we instructed all Medicare fiscal
intermediaries to inform the IPPS hospitals they service of the
availability of the wage data file and the process and timeframe for
requesting revisions (including the specific deadlines listed below).
We also instructed the fiscal intermediaries to advise hospitals that
these data are made available directly through their representative
hospital organizations.
If a hospital wished to request a change to its data as shown in
that wage data file, the hospital was to submit corrections along with
complete, detailed supporting documentation to its intermediary by
February 17, 2003 (this deadline was initially announced as February
10, 2003, but was changed due to the need to repost some of the data).
Hospitals were notified of this deadline and of all other possible
deadlines and requirements, including the requirement to review and
verify their data as posted on the preliminary wage data file on the
Internet, through the December 31, 2002 memorandum referenced above.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries transmitted any revised cost reports to CMS and
forwarded a copy of the revised Worksheet S-3, Parts II and III to the
hospitals by April 4, 2003. In addition, fiscal intermediaries were to
notify hospitals of the changes or the reasons that changes were not
accepted. These deadlines were necessary to allow sufficient time to
review and process the data so that the final wage index calculation
could be completed for the development of the final FY 2004 prospective
payment rates to be published by August 1, 2003.
If a hospital disagreed with the fiscal intermediary's resolution
of a policy issue (for example, whether a general category of cost is
allowable in the wage data), the hospital could have contacted CMS in
an effort to resolve the issue. We note that the April 4, 2003 deadline
also applied to these requests. Requests were required to be sent to
CMS at the address below (with a copy to the hospital's fiscal
intermediary). The request must have fully documented all attempts by
the hospital to resolve the dispute through the process described
above, including copies of relevant correspondence between the hospital
and the fiscal intermediary. During review, we do not consider issues
such as the adequacy of a hospital's supporting documentation, as we
believe that fiscal intermediaries are generally in the best position
to make evaluations regarding the appropriateness of these types of
issues (which should have been resolved earlier in the process).
The final wage data public use file was released in May 2003.
Hospitals had an opportunity to examine both Table 2 of the proposed
rule and the May 2003 final public use wage data file (which reflected
revisions to the data used to calculate the values in Table 2) to
verify the data CMS used to calculate the wage index.
As with the file made available in January 2003, we made the final
wage data released in May 2003 available to hospital associations and
the public on the internet. However, the May 2003 public use file was
made available solely for the limited purpose of identifying any
potential errors made by CMS or the fiscal intermediary in the entry of
the final wage data that result from the correction process described
above (with the February 2003 deadline). Hospitals were encouraged to
review their hospital wage data promptly after the release of the May
2003 file. Data presented at that time could not be used by hospitals
to initiate new wage data correction requests.
If, after reviewing the May 2003 final file, a hospital believed
that its wage data were incorrect due to a fiscal
[[Page 45402]]
intermediary or CMS error in the entry or tabulation of the final wage
data, it was provided an opportunity to send a letter to both its
fiscal intermediary and CMS that outlined why the hospital believed an
error existed and provided all supporting information, including
relevant dates (for example, when it first became aware of the error).
These requests had to be received by CMS and the fiscal intermediaries
no later than June 6, 2003.
Changes to the hospital wage data were only made in those very
limited situations involving an error by the intermediary or CMS that
the hospital could not have known about before its review of the final
wage data file. Specifically, at this stage of the process, neither the
intermediary nor CMS accepted the following types of requests:
[sbull] Requests for wage data corrections that were submitted too
late to be included in the data transmitted to CMS by fiscal
intermediaries on or before April 4, 2003.
[sbull] Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 2003
wage data file.
[sbull] Requests to revisit factual determinations or policy
interpretations made by the intermediary or CMS during the wage data
correction process.
Verified corrections to the wage index received timely (that is, by
June 6, 2003) are incorporated into the final wage index in the final
rule to be published by August 1, 2003, and to be effective October 1,
2003.
We have created the process described above to resolve all
substantive wage data correction disputes before we finalize the wage
data for the FY 2004 payment rates. Accordingly, hospitals that did not
meet the procedural deadlines set forth above will not be afforded a
later opportunity to submit wage data corrections or to dispute the
intermediary's decision with respect to requested changes.
Specifically, our policy is that hospitals that do not meet the
procedural deadlines set forth above will not be permitted to challenge
later, before the Provider Reimbursement Review Board, the failure of
CMS to make a requested data revision (See W. A. Foote Memorial
Hospital v. Shalala, No. 99-CV-75202-DT (E.D. Mich. 2001), also
Palisades General Hospital v. Thompson, No. 99-1230 (D.D.C. 2003)).
Again, we believe the wage data correction process described above
provides hospitals with sufficient opportunity to bring errors in their
wage data to the fiscal intermediaries' attention. Moreover, because
hospitals had access to the final wage data by early May 2003, they had
the opportunity to detect any data entry or tabulation errors made by
the fiscal intermediary or CMS before the development and publication
of the FY 2004 wage index in this final rule, and the implementation of
the FY 2004 wage index on October 1, 2003. If hospitals avail
themselves of this opportunity, the wage index implemented on October 1
should be accurate. Nevertheless, in the event that errors are
identified after publication in the final rule, we retain the right to
make midyear changes to the wage index under very limited
circumstances.
Specifically, in accordance with Sec. 412.63(x)(2) of our existing
regulations, we make midyear corrections to the wage index only in
those limited circumstances in which a requesting hospital can show:
(1) that the intermediary or CMS made an error in tabulating its data;
and (2) that the requesting hospital could not have known about the
error or did not have an opportunity to correct the error, before the
beginning of FY 2004 (that is, by the June 6, 2003 deadline.) This
provision is not available to a hospital seeking to revise another
hospital's data that may be affecting the requesting hospital's wage
index. As indicated earlier, since a hospital had the opportunity to
verify its data, and the fiscal intermediary notified the hospital of
any changes, we do not expect that midyear corrections would be
necessary. However, if the correction of a data error changes the wage
index value for an area, the revised wage index value will be effective
prospectively from the date the correction is approved.
Comment: One commenter requested that CMS release all of the
assumptions used in developing the MSA average hourly wage file posted
on the Internet, including the midpoint of cost reporting period
adjustment factors. The commenter also requested that CMS release a
file with the average hourly wage by hospital prior to the proposed
rule. The commenter believed that this information would facilitate a
hospital's review of its wage data.
Response: We agree that providing all of the assumptions used in
calculating the wage index would be useful for hospitals and other
interested parties. This year, we added to our Web site a spreadsheet
that can be used to calculate a hospital's average hourly wage.
Beginning with the release of the FY 2005 wage index, we will also
publish on our Web site the midpoint of cost reporting period
adjustment factors and a file that includes the average hourly wage for
each hospital.
Comment: One commenter recommended that CMS establish a wage index
list server similar to those available for the various open door
forums. The list server would allow CMS to e-mail interested parties
when items, such as the wage index PUF and program memoranda, are
released.
Response: We currently notify all hospitals, through the fiscal
intermediaries, regarding all public use files and program memorandum
releases pertaining to the wage index. We also post this information on
the IPPS Web site (http://cms.hhs.gov/providers/hipps/ippswage.asp). In
addition, we make announcements regarding the wage index at the
hospital open door forums. To supplement these efforts, we will also
begin announcing the availability of wage index files and new program
memoranda on the hospital open door forum Web site, at http://www.cms.hhs.gov/opendoor/.
Those registered with the hospital open door
forum list server will be automatically notified when there are
announcements at this site pertaining to the wage index. Information on
registering with the hospital open door forum list server is located at
the open door forum Web site.
Comment: One commenter expressed concern regarding the average
hourly wage calculator available on the Internet, stating that they
were unable to replicate the average hourly wage published in the
proposed rule for its area hospitals using the May public use file data
and the online calculator.
Response: The average hourly wage values printed in the proposed
rule, published on May 19, 2003 in the Federal Register, reflect the
data saved in our database as of February 17, 2003. Alternatively, the
May public use file was updated based on data collected through May 5,
2003. Therefore, calculating an average hourly wage using the May data
could yield discrepancies between the value published in the proposed
rule and the number generated by the online calculator.
H. Modification of the Process and Timetable for Updating the Wage
Index
In the May 19, 2003 proposed rule, we stated that although the wage
data correction process described in section III.G. of the preamble of
this final rule has proven successful in the past for ensuring that the
wage data used each year to calculate the wage indexes are generally
reliable and accurate, we continue to be concerned about the growing
volume of wage data revisions initiated by hospitals after the release
of the first public use file in February. This issue has been discussed
previously in
[[Page 45403]]
the FY 1998 IPPS proposed rule (62 FR 29918) and in the FY 2002 IPPS
proposed rule (66 FR 22682). In each discussion, we described the
increasing number of revisions to wage data between the proposed rule
and the final rule.
Currently, the fiscal intermediaries are required to conduct
initial desk reviews on or before November 15 in advance of the
preparation of the preliminary wage data public use file in early
January (see Program Memorandum A-02-94, October 4, 2002). Furthermore,
fiscal intermediaries are required to explain and attempt to resolve
items that fall outside the established thresholds. This may involve
further review of the supplementary documentation or contacting the
hospital for additional documentation. In addition, fiscal
intermediaries are required to notify State hospital associations
regarding hospitals that fail to respond to issues raised during the
desk review. These actions are to be completed in advance of sending
the data to CMS to prepare the preliminary wage data public use file in
early January. However, as we have indicated in prior Federal
Registers, nearly 30 percent of hospitals subsequently request
revisions to their data after the preliminary wage data file is made
available.
This high volume of revisions results in an additional workload for
the fiscal intermediaries. In particular, much of a fiscal
intermediary's efforts prior to submitting the data to prepare the
preliminary public use file may be in vain if the hospital subsequently
revises all of its data prior to the early February deadline (which is
the hospital's right at that point). Therefore, in the May 19 proposed
rule, we proposed to modify the process to release the preliminary wage
data file prior to requiring the fiscal intermediaries to conduct their
initial desk reviews on the data. We proposed that this unaudited data
would be available on the Internet by early October rather than early
January. Hospitals would review this file to ensure it contains their
correct data as submitted on their cost reports and request any changes
by early November. At that time, the fiscal intermediaries would review
the revised requests and conduct desk reviews of the data including all
approved changes.
Under the proposed revised timetable, the fiscal intermediaries
would notify the hospitals in early February of any changes to the wage
data as a result of the desk reviews and the resolution of the
hospitals' early November change requests. The fiscal intermediaries
would also submit the revisions to CMS in early February. Hospitals
would then have until early March to submit requests to the fiscal
intermediaries for reconsideration of adjustments made by the fiscal
intermediaries as a result of the desk review. Other than requesting
reconsideration of desk review adjustments, hospitals would not be able
to submit new requests for additional changes that were not submitted
by early November. By early April, the fiscal intermediaries would
notify all hospitals of their decisions regarding the hospitals'
requests to reconsider desk review adjustments and submit all of the
revised wage data to CMS. From this point (early April) until the
publication of the final rule, the process would be identical to the
current timetable. Similar to the current timetable, hospitals would
also have the opportunity in early April to request CMS consideration
of policy disputes.
Therefore, we proposed to revise the schedule to improve the
quality of the wage index by initiating hospitals' review of their data
sooner and allowing the fiscal intermediaries to focus their reviews on
the final data submitted by hospitals to be included in the wage index.
In addition, we would receive the revised data in time to incorporate
them into the wage indexes published in the proposed rule, resulting in
fewer changes from the proposed rule to the final rule. This will
improve the ability of hospitals to assess whether they should request
a withdrawal from a MGCRB reclassification. Because the decision of
whether to withdraw a wage index reclassification must be made prior to
publication of the final rule, the proposed schedule should decrease
the likelihood that the final wage index will be dramatically different
from the proposed wage index.
Comment: Commenters stated their appreciation of the desire to
expedite the process and reduce the workload of its fiscal
intermediaries, but some were concerned about the additional workload
these timeframes would place on hospitals.
Some commenters were concerned about the 30-day review period for
the hospitals, stating it would not be enough time to conduct a
thorough and complete review of the detailed data, adding that a 45-day
comment period should be the minimum review time for providers.
Commenters also stated their concerns about adjusting to a new
timetable while also collecting and submitting occupational mix data,
and the possible adoption of the new MSA definitions for the FY 2005
wage index. They believe any changes to the timeline should be
postponed until the FY 2006 wage index.
Other commenters were concerned about the additional workloads for
hospitals whose fiscal year ends on June 30. These hospitals would most
likely be preparing cost reports for the fiscal year just ended and
this would be an additional burden. Another commenter expressed concern
that the proposed rule did not mention the State hospital association
notification for hospitals failing desk review edits and that the new
deadlines would not afford hospitals any recourse to ensure accurate
data. One commenter cited the major role its fiscal intermediary played
in the delay of revisions to its wage index.
Several other commenters generally supported the proposal to modify
the wage index timetable, but with some modification. The commenters
asked that hospitals have 75 days from the proposed October release of
the public use file to submit revised data to the fiscal intermediaries
and that CMS finalize the timetable in June rather than waiting until
the final rule is published. The commenters believed this would allow
virtually all hospitals the time they need to do a thorough and
complete review to determine the accuracy of the detail data needed to
compute an accurate wage index. Commenters also believed this would
give fiscal intermediaries time to respond to hospital issues raised
during the desk review period.
Finally, other commenters expressed support for the timetable
changes. These commenters believed the hospitals will have more time to
review their wage data and there will be less of an administrative
burden on fiscal intermediaries. Another commenter believed auditors'
and hospitals' resources will be better utilized and this could help
eliminate the problem of reauditing wage index data after revisions are
submitted. Another commenter added that hospitals would be able to
better determine how they compare to other hospitals and whether a
reclassification would be appropriate using much more accurate data.
Also, aberrant data would become more apparent earlier in the process.
Response: Although hospitals will be required to review the data
sooner, they are not being asked to perform any more reviews or work
than currently. Therefore, we do not believe this change will be
burdensome to hospitals. Hospitals will still have sufficient time to
complete a thorough review of the data, because the data for the FY
2005 wage index values will be taken from cost reporting periods
beginning during FY 2001. These cost reports should have already been
thoroughly reviewed
[[Page 45404]]
before being submitted to their fiscal intermediary and sent to CMS
earlier this year.
Further, since the ultimate goal is improvement of the wage index,
we believe this will be achieved with a more streamlined process in
which fiscal intermediary work is not duplicated and is instead focused
on the final data submitted by hospitals instead of preliminary data,
of which nearly 40 percent ends up being revised under the current
timetable. As noted above, these revisions under the current process
often nullify the desk reviews performed by the fiscal intermediary.
We recognize the commenters' concern with respect to the
interaction of this process with the collection of occupational mix
data and the potential adoption of OMB's new MSA definitions. As we
proceed with developing the details of the occupational mix data
collection for the FY 2005 wage index, we intend to schedule that
collection effort in a way that accommodates this revised timetable.
The details of that schedule will be forthcoming shortly.
Finally, as previously discussed, the ability of hospitals to
assess whether they should request a withdrawal from a MGCRB
reclassification will also be improved, thereby decreasing the
likelihood that the final wage index will be dramatically different
from the proposed wage index. For these reasons, we are adopting as
final the proposed revisions to the wage data development timeline and
will use the revised timeline for the development of the FY 2005 wage
index.
However, in order to address commenter concerns about the 30-day
review period being too short, we are modifying the timetable to have
the preliminary public use file on the CMS Web site in mid-September,
thereby giving hospitals approximately 45 days instead of 30 days to
review the preliminary wage data. Further instructions and a detailed
timeline will be released in the form of a Program Memorandum.
The following table illustrates the timetable that will be
applicable for the development of the FY 2005 wage index:
------------------------------------------------------------------------
Steps in wage index development
Timeframe process
------------------------------------------------------------------------
Mid-September..................... Preliminary and unaudited wage data
file published as a public use file
(PUF) on CMS Web site.
Mid-November...................... Deadline for hospitals to send
requests for revisions to their
fiscal intermediaries.
Early February.................... Fiscal intermediaries review
revisions and desk review wage
data; notify hospitals of changes
and resolution of revision
requests; and submit preliminary
revised data to CMS.
Early March....................... Deadline for hospitals to request
wage data reconsideration of desk
review adjustments and provide
adequate documentation to support
the request.
Early April....................... Deadline for the fiscal
intermediaries to submit additional
revisions resulting from the
hospitals' reconsideration
requests. This is also the deadline
for hospitals to request CMS
intervention in cases where the
hospital disagrees with the fiscal
intermediary's policy
interpretations.
Early May*........................ Release of final wage data PUF on
CMS Web site.
Early June*....................... Deadline for hospitals to submit
correction requests, to both CMS
and their fiscal intermediary, for
errors due to the mishandling of
the final wage data by CMS or the
fiscal intermediary.
August 1*......................... Publication of the final rule.
October 1*........................ Effective date of updated wage
index.
------------------------------------------------------------------------
*Indicates no change from prior years.
IV. Other Decisions and Changes to the IPPS for Operating Costs and GME
Costs
A. Transfer Payment Policy (Sec. 412.4)
Existing regulations at Sec. 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
transfers from one acute care hospital to another, and Sec. 412.4(c)
defines transfers to certain postacute care providers. Our policy
provides that, in transfer situations, full payment is made to the
final discharging hospital and each transferring hospital is paid a per
diem rate for each day of the stay, not to exceed the full DRG payment
that would have been made if the patient had been discharged without
being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full DRG payment by the geometric mean length of stay for
the DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
provides for payment that is double the per diem amount for the first
day (Sec. 412.4(f)(1)). Transfer cases are also eligible for outlier
payments. The outlier threshold for transfer cases is equal to the
fixed-loss outlier threshold for nontransfer cases, divided by the
geometric mean length of stay for the DRG, multiplied by the length of
stay for the case, plus one day.
1. Transfers to Another Acute Care Hospital (Sec. 412.4(b))
Medicare adopted its IPPS transfer policy because, if we were to
pay the full DRG payment regardless of whether a patient is transferred
or discharged, there would be a strong incentive for hospitals to
transfer patients to another IPPS hospital early in their stay in order
to minimize costs while still receiving the full DRG payment. The
transfer policy adjusts the payments to approximate the reduced costs
of transfer cases.
Currently, when a patient chooses to depart from a hospital against
the medical opinion of treating physicians, the case is treated as a
left against medical advice (LAMA) discharge and coded as discharge
status ``07-Left Against Medical Advice (LAMA)'' on the inpatient
billing claim form. Because, by definition, LAMA discharges are assumed
not to involve the active participation of the hospital administration,
our policy has been to treat LAMA cases as discharges. This policy
applies even if the patient is admitted to another hospital on the date
of the LAMA discharge. Consequently, we currently make a full DRG
payment for any discharge coded as a LAMA case.
However, we are concerned that some hospitals may be incorrectly
coding transfers as LAMA cases. The Office of Inspector General (OIG)
issued a report in March 2002 (A-06-99-00045), asserting that of the
approximately 60,000 LAMA discharges annually, 1,500 patients were
subsequently admitted to another IPPS hospital the same day. The OIG
performed a detailed review of the medical records at selected
hospitals and found evidence that the hospitals actively participated
in transferring the patients to a different IPPS hospital, yet the
hospital coded the claim as a LAMA. OIG cited several examples of these
cases:
[[Page 45405]]
``In the first example, the transferring hospital did not have an
inpatient room available for the patient, who had been in the emergency
room for 24 hours. The medical record showed that the treating
physician contacted another PPS hospital to determine whether the
hospital could accept the patient. Specifically, the medical record
stated: `Upon request of the patient, [hospital name] was contacted
since there is a good possibility of transferring patient to [name of
hospital]. At present, he has been in emergency room for 24 hours
waiting for a bed.' ''
In this example, despite the overt participation of the physician
in securing the admission to the other IPPS hospital and the fact that
the transferring hospital did not have an inpatient room available for
the patient, the claim was submitted as a LAMA discharge, rather than
as a transfer to another IPPS hospital.
``In the second example, the patient was brought to the first
hospital by ambulance. Subsequently, the patient's family indicated
that they wanted a neurologist at another hospital to render the
treatment needed by the patient. The attending physician contacted the
neurologist in order to determine if the neurologist would accept,
admit, and treat the patient. The medical record contained ample
evidence of knowledge and participation of the transferring hospital,
and the discharge should have been reported as a PPS transfer.
Specifically, the medical record stated: `Patient's family wanted to
sign the patient out against medical advice and take her to [name of
hospital]. The physician spoke with the neurologist at [name of
hospital], who agreed to accept the patient. The patient's family
signed the patient discharged against medical advice. All the risks of
self-discharge were explained.' ''
In this case, although the medical record indicated the patient
wanted to leave against medical advice, there is also evidence that the
patient's attending physician at the hospital participated in the
transfer to another IPPS hospital. While we do not wish to discourage
such participation and cooperation in cases where a transfer occurs,
this situation would seem almost indistinguishable from other transfer
situations. For instance, we have long recognized situations where
patients are transferred from a rural hospital to an urban hospital for
a surgical procedure, then back to the rural hospital to complete the
recuperative care, as appropriate transfer situations as long as the
transfers are medically appropriate. In such a case, the rural hospital
would receive a payment under the transfer policy for the first portion
of the stay, the urban hospital would also receive payment under the
transfer policy for the care it provided, and the rural hospital would
receive a full DRG payment as the discharging hospital for the
recuperative care it provided upon the patient's return from the urban
hospital. In such situations, each portion of the stay may be assigned
a different DRG.
Therefore, in the May 19, 2003 proposed rule, we proposed to expand
our definition of a transfer under Sec. 412.4(b) to include all
patients who are admitted to another IPPS hospital on the same day that
the patient is discharged from an IPPS hospital, unless the first
(transferring) hospital can demonstrate that the patient's treatment
was completed at the time of discharge from that hospital. In other
words, unless the same-day readmission is to treat a condition that is
unrelated to the condition treated during the original admission (for
example, the beneficiary is in a car accident later that day), any
situation where the beneficiary is admitted to another IPPS hospital on
the same date that he or she is discharged from an IPPS hospital would
be considered a transfer, even if the patient left against medical
advice from the first hospital.
Although we considered proposing a policy that would be based on
whether the hospital actively participated in the transfer, and
exempting from the transfer definition cases where the hospital had
absolutely no knowledge that the patient intended to go to another
hospital, we did not propose such a policy for two reasons. First, it
would be difficult to administer equitably a policy that required a
determination as to whether the hospital or the physician had knowledge
of the patient's intentions. Such a policy would require fiscal
intermediaries to make a difficult judgment call in many cases. Second,
if we were to base the determination of whether a case is a transfer on
the level of involvement of the hospital and the physician caring for
the patient, we would be creating a financial disincentive to hospitals
for ensuring an efficient and cooperative transfer once a decision has
been made by the patient or the patient's family to leave the hospital.
We recognize that, in some cases, a hospital cannot know the
patient will go to another hospital. However, we note the claims
processing system can identify cases coded as discharges where the date
of discharge matches the admission date at another hospital. In these
cases, the fiscal intermediary will notify the hospital of the need to
submit an adjustment claim. However, if the hospital can present
documentation showing that the patient's care associated with the
admission to the hospital was completed before discharge, consistent
with our current policy, the transfer policy will not be applied.
Comment: Commenters opposed the proposed expansion of the transfer
policy to include all patients who are admitted to another IPPS
hospital on the same day that the patient is discharged from an IPPS
hospital. They argued that situations in which a limited number of
hospitals are abusing the payment rules should be handled by review of
those hospitals' claims, and not through a policy change that will
place additional burdens on all hospitals.
Response: We disagree that this policy expansion would create an
additional burden on all hospitals. We note that it is our current
policy to consider patients discharged from one IPPS hospital and
admitted to another IPPS hospital on the same day as a transfer in all
situations except LAMA situations, unless the original discharging
hospital can document that the discharge was appropriate and unrelated
to the subsequent same-day admission. We understand from the OIG that
these situations are extremely rare, and in the vast majority of cases,
same-day readmissions to another hospital are, in fact, transfers.
Our proposal would merely extend this current policy to LAMA
situations. As is the case under our present policy, we believe it will
be exceedingly rare that a patient leaves one hospital in LAMA status,
and is readmitted to a second hospital on the same day for an unrelated
purpose. Because the need for a hospital to supply documentation would
only arise in these rare situations, we do not believe this policy
change creates an additional burden for hospitals.
In relation to the appropriateness of a general policy expansion as
opposed to a review and adjustment of individual hospital's claims, we
believe a general policy expansion is necessary in this circumstance.
As described in the proposed rule and above in this final rule, we
considered proposing a policy that would be based on whether the
hospital actively participated in the transfer and that would exempt
from the transfer definition cases in which the hospital had absolutely
no knowledge that the patient intended to go to another hospital.
However, we did not propose such a policy because it would require a
determination as to whether the hospital or the physician had
[[Page 45406]]
knowledge of the patient's intentions. We believed that if we adopted
such a policy, we would be creating a financial disincentive to
hospitals for ensuring an efficient and cooperative transfer once a
decision has been made by the patient or the patient's family to leave
the hospital.
Comment: Several commenters wrote that CMS was overreacting to
anecdotal examples and that the proposed policy was ``not sustainable
under any application of reasonableness.'' They suggested that, rather
than put the burden on all hospitals due to the abuse from these
isolated incidents, hospitals should be evaluated from the frequency of
LAMA discharges. Those that fall outside of the ``norm'' could be
investigated, similar to the outlier studies.
Response: We agree that the problems uncovered in the OIG's report
on transfers reported as LAMAs are relatively small within the overall
scope of the IPPS. In fact, we made the point to OIG in our comments on
a draft of its report that their findings equated with one
inappropriate LAMA discharge per hospital per year. However, the OIG
found this problem was not spread equally across all hospitals, but
occurred disproportionately in a small number of hospitals.
We believe we are establishing clear and unequivocal policies for
handling those situations that do occur and that this policy change
will have a minimal impact on the majority of hospitals nationwide.
Consequently, we are finalizing the change to our regulations to expand
our definition of a transfer under Sec. 412.4(b) to include all
patients who are admitted to another IPPS hospital on the same day that
the patient is discharged from an IPPS hospital, unless the first
(transferring) hospital can demonstrate that the patient's treatment
was completed at the time of discharge from that hospital, effective
for discharges occurring on or after October 1, 2003.
Comment: Commenters stated that the proposed expanded definition of
a transfer provides no guidance to hospitals as to what would be
acceptable documentation that the patient's treatment was completed at
the time of discharge. Some commenters asked whether an exact match of
the principal diagnoses codes for the two admissions would be used to
determine that the same-day readmission was related to the prior
discharge. One commenter suggested that it would be more appropriate
for the fiscal intermediary to request medical documentation from both
hospitals involved in the transfer in order to determine whether a
transfer payment should be made to the transferring hospital, rather
than solely requesting documentation from the transferring hospital.
Another commenter asserted that CMS is placing the burden of
correcting this situation on all hospitals rather than directing fiscal
intermediaries to develop screens to identify these cases. In addition,
they noted possible conflicts of sharing information between hospitals
regarding patient care due to new HIPAA requirements.
Response: We anticipate the documentation necessary to establish
that the readmission was unrelated to the prior, same-day discharge
would be similar to the type of documentation relied upon by fiscal
intermediaries and Quality Improvement Organizations (QIOs) to evaluate
whether patients were discharged prematurely. (For example, section
4135 of the Peer Review Manual discusses discharge review.) That is,
there are existing practices for determining that patients were
medically unstable at discharge or the discharge was inconsistent with
the patient's need for continued acute inpatient hospitalization.
Therefore, there should be no breach in HIPAA disclosure requirements.
We are developing claims processing systems edits to more
accurately identify transfers that are inappropriately coded as
discharges. These edits identify claims that are entered with
inappropriate discharge codes and will prevent payment to the second
hospital if there is already a discharge from another hospital in the
system for the same beneficiary on the same day. If this situation
occurs, the claim from the first hospital is sent back to the hospital
for correction, and the second claim is paid. We expect a similar edit
that identifies same-day readmissions following a LAMA discharge would
be added to the claims processing system edits.
Comment: One commenter requested clarification as to the
appropriate discharge destination code in those situations when a
patient left the first hospital against medical advice and the fiscal
intermediary notifies this hospital of a subsequent same-day admission
to another hospital.
Response: This situation is similar to those situations in which a
hospital believes and intends to discharge a patient to home, but is
subsequently notified that the discharge qualifies under the postacute
care transfer policy because the patient received qualifying postacute
care. The hospital would submit an amended bill coded to reflect the
fact that the hospital now has information that the patient received
subsequent care.
2. Technical Correction
Section 412.4(b)(2) defines a discharge from one inpatient area of
the hospital to another area of the hospital as a transfer. Although
this situation may be viewed as an intrahospital transfer, it does not
implicate the transfer policy under the IPPS. In the May 19, 2003
proposed rule, to avoid confusion and to be consistent with the changes
to Sec. 412.4(b) described at section IV.A.3. of this preamble, we
proposed to delete existing Sec. 412.4(b)(2) from the definition of a
transfer. We did not receive any comments on this proposal. Therefore,
we are deleting existing Sec. 412.4(b)(2) from the definition of a
transfer.
3. Expanding the Postacute Care Transfer Policy to Additional DRGs
(Sec. Sec. 412.4(c) and (d))
Under section 1886(d)(5)(J) of the Act, a ``qualified discharge''
from one of 10 DRGs selected by the Secretary, to a postacute care
provider is treated as a transfer case beginning with discharges on or
after October 1, 1998. This section requires the Secretary to define
and pay as transfers all cases assigned to one of 10 DRGs selected by
the Secretary, if the individuals are discharged to one of the
following postacute care settings:
[sbull] A hospital or hospital unit that is not a subsection
1886(d) hospital. (Section 1886(d)(1)(B) of the Act identifies the
hospitals and hospital units that are excluded from the term
``subsection (d) hospital'' as psychiatric hospitals and units,
rehabilitation hospitals and units, children's hospitals, long-term
care hospitals, and cancer hospitals.)
[sbull] A SNF (as defined at section 1819(a) of the Act).
[sbull] Home health services provided by a home health agency, if
the services relate to the condition or diagnosis for which the
individual received inpatient hospital services, and if the home health
services are provided within an appropriate period (as determined by
the Secretary).
In the July 31, 1998 IPPS final rule (63 FR 40975 through 40976),
we specified the appropriate time period during which we would consider
a discharge to postacute home health services to constitute a transfer
as within 3 days after the date of discharge. Also, in the July 31,
1998 final rule, we did not include in the definition of postacute care
transfer cases patients transferred to a swing-bed for skilled nursing
care (63 FR 40977).
[[Page 45407]]
Section 1886(d)(5)(J) of the Act directed the Secretary to select
10 DRGs based upon a high volume of discharges to postacute care and a
disproportionate use of postacute care services. As discussed in the
July 31, 1998 final rule, these 10 DRGs were selected in 1998 based on
the MedPAR data from FY 1996. Using that information, we identified and
selected the first 20 DRGs that had the largest proportion of
discharges to postacute care (and at least 14,000 such transfer cases).
In order to select 10 DRGs from the 20 DRGs on our list, we considered
the volume and percentage of discharges to postacute care that occurred
before the mean length of stay and whether the discharges occurring
early in the stay were more likely to receive postacute care. We
identified the following DRGs to be subject to the special 10 DRG
transfer rule:
[sbull] DRG 14 (Intracranial Hemorrhage and Stroke with Infarction
(formerly ``Specific Cerebrovascular Disorders Except Transient
Ischemic Attack''));
[sbull] DRG 113 (Amputation for Circulatory System Disorders Except
Upper Limb and Toe);
[sbull] DRG 209 (Major Joint Limb Reattachment Procedures of Lower
Extremity);
[sbull] DRG 210 (Hip and Femur Procedures Except Major Joint
Procedures Age 17 With CC);
[sbull] DRG 211 (Hip and Femur Procedures Except Major Joint
Procedures Age 17 Without CC);
[sbull] DRG 236 (Fractures of Hip and Pelvis);
[sbull] DRG 263 (Skin Graft and/or Debridement for Skin Ulcer or
Cellulitis With CC);
[sbull] DRG 264 (Skin Graft and/or Debridement for Skin Ulcer or
Cellulitis Without CC);
[sbull] DRG 429 (Organic Disturbances and Mental Retardation); and
[sbull] DRG 483 (Tracheostomy With Mechanical Ventiliation 96 +
Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses
(formerly ``Tracheostomy Except for Face, Mouth, and Neck
Diagnoses'')).
Similar to the policy for transfers between two acute care
hospitals, the transferring hospital in a postacute care transfer for 7
of the 10 DRGs receives twice the per diem rate the first day and the
per diem rate for each following day of the stay before the transfer,
up to the full DRG payment. However, 3 of the 10 DRGs exhibit a
disproportionate share of costs very early in the hospital stay in
postacute care transfer situations. For these 3 DRGs, hospitals receive
50 percent of the full DRG payment plus the single per diem (rather
than double the per diem) for the first day of the stay and 50 percent
of the per diem for the remaining days of the stay, up to the full DRG
payment. This is consistent with section 1886(d)(5)(J)(i) of the Act,
which recognizes that in some cases ``a substantial portion of the
costs of care are incurred in the early days of the inpatient stay.''
Section 1886(d)(5)(J)(iv) of the Act authorizes the Secretary to
expand the postacute care transfer policy beyond 10 DRGs. In the May 9,
2002 IPPS proposed rule, we discussed the possibility of expanding this
policy to either all DRGs or a subset of additional DRGs (we identified
13 additional DRGs in that proposed rule) (67 FR 31455). However, as
discussed further in the August 1, 2002 final rule (65 FR 50048), we
did not expand the postacute care transfer provision to additional DRGs
for FY 2003. The commenters on the options in the May 9, 2002 proposed
rule raised many issues regarding the impact of expanding this policy
that we needed to consider further before proceeding. In particular,
due to the limited time between the close of the comment period and the
required publication date of August 1, we were unable to completely
analyze and respond to all of the points that were raised. We indicated
that we would continue to conduct research to assess whether further
expansion of this policy may be warranted and, if so, how to design any
such refinements.
Many commenters on the May 9, 2002 proposed rule argued that, in a
system based on averages, expansion of the postacute care transfer
policy negatively influences, and in fact penalizes, hospitals for
efficient care. They claimed that this policy indiscriminately
penalizes hospitals for efficient treatment and for ensuring that
patients receive the right care at the right time in the right place.
They believed that the postacute care transfer provision creates an
inappropriate incentive for hospitals to keep patients longer.
Commenters also expressed concern that the expansion of the
transfer provision violates the fundamental principle of the IPPS. The
DRG system is based on payments that will, on average, be adequate.
These commenters argued that expansion of the postacute care transfer
policy would give the IPPS a per-diem focus and would mean that
hospitals would be paid less for shorter than average lengths of stay,
although they would not be paid more for the cases that are longer than
average (except for outlier cases).
We agree that the transfer policy should not hamper the provision
of effective patient care. We also agree that any future expansion must
consider both the need to reduce payments to reflect cost-shifting out
of the acute care setting due to reductions in length of stay
attributable to early transfers to postacute care and the need to
ensure that payments, on average, remain adequate to ensure effective
patient care. Therefore, we have assessed the extent to which the
current postacute care transfer policy balances these objectives.
The table below displays the results of our analysis. We first
examined whether the 10 DRGs included in the policy continue to exhibit
a relatively high percentage of cases transferred to postacute care
settings, particularly among cases with lengths of stay shorter than
the geometric mean for the DRG (these cases would be affected by the
reduced payments for transfers). The table shows that these DRGs
continue to contain high percentages of cases transferred to postacute
care settings similar to those we reported in the FY 1999 final rule
(63 FR 40975). These results would appear to demonstrate that the
postacute care transfer policy has not greatly altered hospitals'
treatment patterns for these cases.
This similarity in treatment patterns is further evidenced by the
fact that, for 6 of the 10 DRGs, the geometric mean length of stay has
continued to decline in the 5 years since the policy was implemented.
Accordingly, hospitals have continued to transfer many patients in
these DRGs before the mean length of stay, despite the transfer policy.
As we stated in the July 31, 1998 final rule, the transfer provision
adjusts payments to hospitals to reflect the reduced lengths of stay
arising from the shift of patient care from the acute care setting to
the postacute care setting (63 FR 40977). This policy does not require
a change in physician clinical decisionmaking nor in the manner in
which physicians and hospitals practice medicine: It simply addresses
the appropriate level of payments once those decisions have been made.
With respect to whether this policy alters the fundamental
averaging principles of the IPPS, we believe the current policy, which
targets specific DRGs where evidence shows hospitals have aggressively
moved care to postacute care settings, does not alter the averaging
principles of the system. In fact, it could be said to enhance those
principles because a transfer case is counted as only a fraction of a
case toward DRG recalibration based on the ratio of its transfer
payment to the full DRG payment for nontransfer cases. This methodology
ensures the DRG
[[Page 45408]]
weight calculation is consistent with the payment policy for transfer
cases. The last column of the table below indicates that all but three
of these DRGs have experienced increases in DRG weights since the
policy was implemented. By reducing the contribution of transfer cases
to the calculation of the DRG average charge, the relative weights (the
result of dividing the DRG average charge by the national average
charge per case) are higher than they would otherwise be. This is
because transfers, particularly short-stay transfers, have lower total
charges, on average.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent change
all cases all cases Percent change Percent change in DRG
DRG DRG title All transfer transferred to transferred in mean in mean relative
cases postacute care prior to mean length of stay length of stay weight FYs
setting length of stay FYs 1992-1998 FYs 1998-2003 1998-2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
14.................... Intracranial Hemorrhage and 143,649 48.88 11.74 -29.17 -5.88 8.53
Stroke with Infarction.
113................... Amputation for Circulatory 24,470 66.57 30.12 -32.17 7.22 9.21
System Disorders Except Upper
Limb and Toe.
209................... Major Joint and Limb 244,969 66.66 19.76 -47.52 -15.09 -8.09
Reattachment Procedures of
Lower Extremity.
210................... Hip and Femur Procedures Except 87,253 76.26 35.67 -42.98 -6.15 0.1
Major Joint Age 17
With CC.
211................... Hip and Femur Procedures Except 20,239 72.38 15.89 -44.44 -8.00 1.39
Major Joint Age 17
Without CC.
236................... Fractures of Hip and Pelvis..... 26,583 69.86 11.20 -34.85 -6.98 -1.43
263................... Skin Graft and/or Debridement 13,158 62.00 31.35 -41.45 4.49 9.36
for Skin Ulcer or Cellulitis
with CC.
264................... Skin Graft and/or Debridement 1,759 49.97 18.81 -37.21 1.85 5.36
for Skin Ulcer or Cellulitis
Without CC.
429................... Organic Disturbances and Mental 30,349 53.25 15.22 -28.95 -12.96 -5.27
Retardation.
483................... Tracheostomy With Mechanical 21,818 52.93 27.34 -15.29 2.37 1.38
Ventilation 96 + Hours or
Principal Diagnosis Except
Face, Mouth, and Neck Diagnoses.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We indicated in the proposed rule that we believe the current 10
DRG postacute care transfer policy appears to be appropriately
balancing the objectives to reduce payments to reflect cost-shifting
due to reductions in length of stay attributable to early postacute
care transfers and to ensure that payments, on average, remain adequate
to ensure effective patient care. Therefore, we once again undertook
the analysis to identify additional DRGs to which the policy might be
expanded.
However, we did not propose to expand the policy to all DRGs.
Although we indicated that expanding the postacute care transfer policy
to all DRGs might be the most equitable approach because a policy that
is limited to certain DRGs may result in disparate payment treatment
across hospitals, at this time, we believe an incremental expansion is
appropriate. That is, we believe further analysis is necessary to
assess whether it would be appropriate to apply a reduced payment for
postacute care transfers across all DRGs. In particular, it is
important to attempt to distinguish between DRGs where the care is
increasingly being shifted to postacute care sites versus DRGs where
some patients have always been discharged to postacute care early in
the stay. It may not be appropriate to reduce payment for these latter
DRGs if the base payment already reflects a similar postacute care
utilization rate (for example, in these cases there would be no cost
shifting).
As described below, we proposed an additional 19 DRGs, based on
declining mean lengths of stay and high percentages of postacute
transfers, for which an expansion of the current policy appeared
warranted.
We also noted that MedPAC has conducted analysis on the current
postacute care transfer policy. Most recently, in its March 2003 Report
to Congress, MedPAC recommended adding 13 additional DRGs to the 10
DRGs covered under the current policy (page 46). The 13 DRGs were the
same DRGs included in one of our proposals to expand the postacute care
transfer policy in last year's IPPS proposed rule. MedPAC did not
recommend expanding the policy to include all DRGs at this time, noting
that this expansion might reduce payments to some hospitals by as much
as 4 percent. Rather, it suggested evaluating the impact of a limited
expansion before extending the policy to more DRGs.
MedPAC's report cites several reasons for expanding the postacute
care transfer policy beyond the current 10 DRGs. First, it notes the
continuing shifts in services from the acute care setting to the
postacute care setting. Second, the report points to different
postacute care utilization for different hospitals, particularly based
on geographic location. Third, the report states: ``the expanded
transfer policy provides a better set of incentives to protect
beneficiaries from potential premature discharge to postacute care.''
Fourth, MedPAC notes that the policy improves payment equity across
hospitals by: reducing payments to hospitals that transfer patients to
postacute care while making full payments to hospitals that provide all
of the acute inpatient services in an acute care setting; and
maintaining more accurate DRG weights that reflect the
[[Page 45409]]
true resource utilization required to provide the full course of acute
inpatient care, as distinguished from the partial services provided to
patients who are transferred to postacute care.
Since the publication of last year's rule, we have conducted an
extensive analysis to identify the best method by which to expand the
postacute care transfer policy. Similar to the analysis used to
identify the current 10 DRGs, in the May 19, 2003 proposed rule, we
proposed to identify DRGs with high postacute care transfer rates and
at least 14,000 transfer cases. However, rather than ranking DRGs on
the basis of the percentage of all postacute care transfers, we
proposed to rank DRGs on the basis of the percentage of postacute care
transfers occurring before the DRG geometric mean length of stay. This
is because only transfers that occur before the geometric mean length
of stay, minus one day due to the policy that hospitals receive double
the per diem for the first day, are impacted by the transfer policy. In
order to focus on those DRGs where this policy would have the most
impact, we proposed to include only DRGs where at least 10 percent of
all cases were transferred to postacute care before the geometric mean
length of stay. (We note that preceding sentence was stated incorrectly
in the proposed rule. The criterion should have read ``at least 10
percent of all cases that were transferred to postacute care were
transferred before the geometric mean length of stay.'') The next
proposed criterion is to identify DRGs with at least a 7-percent
decline in length of stay over the past 5 years (from FY 1998 to FY
2003). This criterion would focus on those DRGs for which hospitals
have been most aggressively discharging patients sooner into postacute
care settings. Finally, we proposed to include only DRGs with a
geometric mean length of stay of at least 3 days because the full
payment is reached on the second day for a DRG with a 3-day length of
stay.
Using these criteria, we proposed 19 additional DRGs to include in
the postacute care transfer policy. However, some of the 13 DRGs
proposed last year (and included in MedPAC's proposed expansion) were
not included in the May 19, 2003 proposed rule. For example, DRGs 79
and 80 (Respiratory Infections and Inflammations Age 17 With
and Without CC, respectively) were included in last year's proposed
expansion but were not included in the proposed rule for FY 2004. DRGs
79 and 80 were excluded from the proposed rule because they did not
exhibit a decline in length of stay of at least 7 percent over the past
5 years.
We noted that 7 of the proposed 19 DRGs are paired DRGs (that is,
they contain a CC and no-CC split). Because these DRGs are paired DRGs
(that is, the only difference in the cases assigned to DRG 130, for
example, as opposed to DRG 131 is that the patient has a complicating
or comorbid condition), we proposed to include both DRGs under this
expanded policy. If we were to include only DRG 130 in the transfer
policy, we believed there would be an incentive for hospitals not to
include any code that would identify a complicating or comorbid
condition, so that a transfer case would be assigned to DRG 131 instead
of DRG 130.
Using the selection criteria described above, we proposed the
following 19 DRGs to include under the postacute care transfer policy
(in addition to the 10 DRGs already subject to the policy).
----------------------------------------------------------------------------------------------------------------
Percent of Percent of
all cases all cases Percent change Percent change
DRG DRG title All transfer transferred to transferred in mean in mean
cases postacute care prior to mean length of stay length of stay
setting length of stay FYs 1992-1998 FYs 1998-2003
----------------------------------------------------------------------------------------------------------------
12........ Degenerative Nervous 39,034 54.13 13.10 -21.74 -12.00
System Disorders.
24........ Seizure and Headache 19,239 35.67 11.63 -20.75 -7.69
Age 17
With CC.
25........ Seizure and Headache 4,738 19.15 2.15 -14.29 -10.71
Age 17
Without CC.
89........ Simple Pneumonia and 175,441 34.86 11.37 -18.31 -11.11
Pleurisy Age 17 With CC.
90........ Simple Pneumonia and 9,544 20.86 2.82 -20.37 -15.00
Pleurisy Age 17 Without
CC.
121....... Circulatory 79,242 52.52 20.46 -21.95 -11.67
Disorders With AMI
and Major
Complication,
Discharged Alive.
122....... Circulatory 33,028 48.91 24.09 -26.67 -23.08
Disorders With AMI
Without Major
Complications
Discharged Alive.
130....... Peripheral Vascular 31,106 37.78 14.27 -13.11 -11.76
Disorders With CC.
131....... Peripheral Vascular 5,723 23.08 5.42 -4.44 -19.51
Disorders Without
CC.
239....... Pathological 23,188 53.54 21.96 -22.67 -7.55
Fractures and
Musculoskeletal and
Connective Tissue
Malignancy.
243....... Medical Back 36,772 41.49 13.61 -14.00 -7.50
Problems.
277....... Cellulitis Age 17 With CC.
278....... Cellulitis Age 17 Without
CC.
296....... Nutritional and 104,216 40.05 11.88 -21.67 -9.30
Miscellaneous
Metabolic Disorders
Age 17
With CC.
297....... Nutritional and 12,649 28.03 2.17 -17.50 -10.00
Miscellaneous
Metabolic Disorders
Age 17
Without CC.
320....... Kidney and Urinary 77,669 44.64 12.40 -23.88 -8.51
Tract Infectious
Age 17
With CC.
321....... Kidney and Urinary 8,610 29.90 5.67 -20.41 -13.89
Tract Infections
Age 17
Without CC.
462....... Rehabilitation...... 147,211 56.59 22.69 -22.54 -11.43
468....... Extensive O.R. 24,783 44.51 18.53 -20.30 -7.07
Procedure Unrelated
to Principal
Diagnosis.
----------------------------------------------------------------------------------------------------------------
We proposed to revise Sec. 412.4(d) to incorporate these
additional 19 DRGs as qualifying DRGs for transfer payments and to make
a conforming change to Sec. 412.4(c).
We also examined whether any of these DRGs would qualify for the
alternative payment methodology of 50
[[Page 45410]]
percent of the full DRG payment plus the per diem for the first day of
the stay, and 50 percent of the per diem for the remaining days of the
stay, up to the full DRG payment specified in existing regulations
under Sec. 412.4(f). To identify the DRGs that might qualify, we
compared the average charges for all cases with a length of stay of 1
day to the average charges of all cases in a particular DRG. To qualify
for the alternative methodology, we indicated that the average charges
of 1-day discharge cases must be at least 50 percent of the average
charges for all cases in the DRG.
Based on this analysis, we determined that 5 out of the proposed 19
DRGs would qualify for this payment method (DRGs 25, 122, 131, 297, and
321). However, the fact that the average charges of 1-day stays equal
at least 50 percent of the average charges for all cases in these DRGs
is due to the very short lengths of stay for these DRGs. Therefore, we
did not propose to include them in the alternative payment methodology.
For example, for a DRG with a 3-day geometric mean length of stay, full
DRG payment will be made on the second day of the stay, regardless of
which payment methodology is used. Therefore, in the May 19, 2003
proposed rule, we proposed that none of the 19 additional DRGs that we
were proposing to add to the postacute care transfer policy would be
paid under the alternative payment methodology.
We also analyzed the 10 DRGs that are currently subject to the
postacute care transfer policy. Of the three DRGs that are receiving
payments under the special payment (transfers after 1 day incur charges
equal to at least 50 percent of the average charges for all cases).
Unlike the five DRGs that would otherwise meet this criterion, the
geometric mean length of stay of both DRG 209 and 211 is over 4 days.
In addition, DRG 210 is currently paid under the special payment
methodology, but our current analysis indicates average charges for 1-
day stays are less than 50 percent of the average charges for all cases
in the DRG. Nonetheless, DRG 210 is paired with DRG 211, which meets
the criteria. Therefore, we proposed that DRG 210 would continue to be
paid under the special payment methodology. Similar to our rationale
for including both paired DRGs when one qualifies for inclusion in the
postacute care transfer policy, we proposed to include both DRGs in
this pair under the special payment methodology. Accordingly, we
proposed that only DRGs 209, 210, and 211 that are currently paid under
the alternative transfer payment methodology would continue to be paid
under this methodology.
Finally, we noted that the OIG has prepared several reports that
examined hospitals' compliance with proper coding of patients'
discharge status as transferred under our guidelines, and has found
substantial noncompliance leading to excessive payments.\6\
Specifically, the OIG found hospitals submitting claims indicating the
patient had been discharged when, in fact, the patient was transferred
to a postacute care setting. As we indicated in the May 8, 1998 Federal
Register (63 FR 25593), hospitals found to be intentionally engaging in
such practices may be investigated for fraudulent or abusive billing
practices. We intend to work with the OIG to develop the most
appropriate response to ensure all hospitals are compliant with our
guidelines.
---------------------------------------------------------------------------
\6\ The OIG report identification numbers are: A-04-00-02162, A-
04-00-01210, A-04-0122, and A-04-02-07005.
---------------------------------------------------------------------------
Comment: Many commenters argued that any expansion of the postacute
care transfer policy, and even the policy itself, undermines clinical
decisionmaking and penalizes hospitals for providing the right care at
the right time and in the right setting. Commenters further argued that
the policy itself violates the original premise of the IPPS, because it
makes it difficult or impossible for hospitals to break-even on
patients who receive postacute care after discharge. One commenter
argued that hospitals lose if patients are discharged prior to the mean
length of stay, and they lose if patients are discharged after the mean
length of stay.
Commenters also argued the postacute care transfer policy is not
good policy because it may create a perverse incentive for hospitals to
increase patients' lengths of stay. One commenter expressed concern
that longer lengths of stay would result from a shift in focus from
per-case cost control to per-day cost control. The commenter suggested
that this policy sends a conflicting message to hospital administrators
who have taken steps recently to reduce their hospitals' average
lengths of stay.
Some commenters pointed out that the postacute care transfer policy
fails to acknowledge or recognize that, for many patients, postacute
care is already reflected in the IPPS base payment rate for many DRGs.
In particular, hospitals in certain regions of the country have
historically had lower average lengths of stay, and therefore, these
hospitals are disproportionately impacted by this policy.
Other commenters suggested the DRG relative weights are self-
adjusting, and as patients spend less time in the acute care setting
and costs decrease, the DRG relative weights will begin to fall.
Therefore, there is no need for a postacute care transfer policy.
Commenters also noted the increasing costs of dealing with these
higher cost cases, and that transfer payments do not adequately cover
the costs of the newer and better treatment that is resulting in
shorter lengths of stay. Commenters objected to the expansion of the
policy due to the current financial pressure that many hospitals are
currently under because of nursing shortages, inadequate Medicare
payment for services they provide, and increasing costs associated with
malpractice and insurance costs and increasing costs of pharmaceuticals
and equipment. They also noted the financial burden in preparing to
treat the aging ``baby boomer'' generation and costs associated with
emergency management preparation.
Commenters argued that many hospitals are suffering as a result of
not receiving the full market basket update (accounting for inflation
each year), and further expansion of the postacute care transfer policy
will further limit their resources. In addition, they argued, Congress
already addresses the issues of shorter lengths of stay when it
determines the market basket update each year. In effect, they claimed,
hospitals whose lengths of stay decline significantly are not praised,
but penalized--twice--for their efforts to provide better care. One
commenter wrote to ``respectfully submit that to deal with fraudulent
providers in this sweeping manner is inconsistent and inappropriate.''
Response: We disagree that the postacute care transfer policy is
contrary to the fundamental theory of the IPPS. Concern that hospitals
would shift a portion of the acute care services to other providers in
response to the incentives of the IPPS has been an ongoing concern. In
fact, in response to a comment during the first year of the IPPS on the
hospital-to-hospital transfer policy, we stated that ``(t)he rationale
for per diem payments as part of our transfer policy is that the
transferring hospital generally provides only a limited amount of
treatment. Therefore, payment of the full prospective payment rate
would be unwarranted'' (49 FR 244). We also note that in its earliest
update recommendations, the Prospective Payment Assessment Commission
(a predecessor to MedPAC)
[[Page 45411]]
included what it called a site-of-service substitution adjustment to
account for the shifting of portions of inpatient care to other
settings.
We disagree that the postacute care transfer policy creates a
perverse incentive to keep patients in the hospital longer than
necessary. Our view is the policy simply responds to changing medical
practice and addresses the appropriate level of payment once clinical
decisions about the most appropriate care in the most appropriate
setting have been made. The validity of this position is substantiated
by the finding that the geometric mean length of stay for 6 of the 10
DRGs currently included in the policy have continued to fall since the
policy was implemented.
In regard to the comment that the policy fails to recognize that
the DRG base payments reflect some degree of postacute care, we note
that the policy is intended to recognize that, since the implementation
of the IPPS, the use of postacute care has generally increased. For
many DRGs, the use of postacute care continues to increase at a high
rate. However, an increase in the frequency of the use of postacute
care does not, by itself, necessitate a policy response. If patients
continue to receive the full course of acute care in the IPPS setting
prior to transfer, a full DRG payment is warranted. However, if
patients begin to be transferred to postacute care settings to receive
care that, during the IPPS base period, was provided in the IPPS
setting, paying a full DRG would not be appropriate because some of the
care on which the full DRG payment is based is now being provided in
the postacute care setting.
This shift in the setting where care is provided is not accounted
for through DRG recalibration. During recalibration, reductions in the
relative weights of certain DRGs result in increases in the weights of
other DRGs. Therefore, there is no net reduction in the IPPS payments
to hospitals, even though some of the care that used to be provided in
the acute inpatient setting is now provided elsewhere.
Comment: Commenters took issue with our evaluation of the impact of
the postacute care transfer policy on the averaging aspects of the IPPS
if the policy were expanded. Pointing to our statement in the August 1,
2002 Federal Register that we intended to undertake a more
comprehensive analysis of this issue, some commenters stated that we
did not provide such a comprehensive analysis or include a discussion
of the topic in the proposed rule.
However, other commenters expressed appreciation for our analysis
of the impacts of the existing policy in the proposed rule. One
commenter noted that we had made some interesting and potentially valid
points that an expanded transfer policy would eliminate or reduce some
of the problems caused by making national average payments to all
hospitals, regardless of treatment patterns and patient-mix within
specific DRGs (although this commenter suggested that we address the
payment inequities caused by expensive short-stay cases, or
``inliers'').
Several commenters noted that the recalculation of weights in the
affected DRGs is unfair because, in the system of averages, transfers
are accounted for as only partial cases but the remaining cases are not
adjusted upward. The commenter wrote: ``[i]f a DRG's length of stay is
declining, doesn't that suggest recalibration of the relative weight?''
The commenter believed inclusion of reduction in length of stay
criteria ``begs the question of what is the true average length of stay
for these particular DRGs. If these DRGs are experiencing a large
percentage of cases transferred prior to the average length of stay, it
logically follows that the average length of stay would be less.''
Response: We regret that commenters perceived that we neglected to
address this important issue. Our point in evaluating the DRG relative
weights for the 10 DRGs that are currently included in the policy was
to make the point that reducing the contribution of transfer cases in
the DRG relative weight recalibration enhances the averaging mechanism
for these DRGs. By treating transfer cases as less than a full
discharge (reducing the denominator), we effectively inflate the
charges (the numerator) to reflect the higher charges that would have
occurred if the patient had been transferred. This increases, rather
than decreases, the average charges (and thus the relative weights) for
the affected DRGs.
For example, the DRG weights for each of these 10 DRGs declined
over the 5-year period (FYs 1993 through 1998) immediately preceding
the implementation of this policy. However, as shown in the table
above, the DRG weights for all but three of these DRGs have increased
during the 5-years since implementation of this policy. Payments for
all cases in these DRGs were declining as the number of cases being
transferred to postacute care increased and the average length of the
inpatient acute stay decreased. However, since implementation of the
policy, payments for the cases that are not implicated under this
policy are rising in most of the 10 DRGs. In those DRGs where the
relative weight has declined in over the 5-year period since
implementation of this policy, the geometric mean length of stay has
continued to decline.
As discussed above, the premise of the postacute care transfer
policy is that hospitals have shifted some of the acute care formerly
provided in the hospital into the postacute care setting. This distorts
the averaging principle of the IPPS because the average case is now
less expensive without a corresponding adjustment to the base rate.
However, a high percentage of postacute care utilization by cases in a
particular DRG does not, by itself, create a distortion, if the high
postacute care utilization was also reflected in the calculation of the
base rate.
Therefore, to ensure that any proposed expansion of the postacute
care transfer policy did not improperly distort the averaging
principles of the IPPS, we evaluated the change in the mean lengths of
stay for the DRGs we proposed to add to the policy to identify those in
which the high postacute care utilization is resulting in shorter
lengths of stay and lower costs. These shorter stays represent a shift
in the site (and costs) of care relative to the base period, and, thus,
a distortion in the averaging principle of the IPPS.
Comment: Several commenters argued that the postacute care transfer
policy is no longer necessary, as lengths of stay have stabilized and
Medicare spending on postacute care has slowed. In particular,
commenters pointed to the transition of postacute care provider types
to prospective payment systems, which reduces the incentives for
postacute care providers to agree to admit very sick patients from an
acute care hospital. One commenter argued that the concept of duplicate
payment for the same care is a misconception when both the acute and
the postacute care providers are paid under a prospective payment
system.
Commenters claimed the policy puts an undue burden on them to be
required to track patients after they are discharged to another
setting. They claimed this creates an ``unworkable'' situation for them
by making hospitals track patients and requiring frequent payment and
claim readjustments. They noted the relatively small payment impact for
all hospitals (only 0.2 percent) compared to the administrative burden
hospitals will incur to administer the expansion of the policy.
Response: We agree that postacute care providers are likely to be
less willing to admit very sick patients under prospective payment
systems than they were under cost reimbursement payment methodologies.
[[Page 45412]]
However, the incentives for acute care hospitals to reduce costs by
transferring patients to a postacute care setting remain as strong as
ever. Furthermore, duplicate payments would still exist if the acute
care hospital is shifting costs for which it is paid under the IPPS to
a postacute care provider; that is, receiving payment for the care
under a prospective payment system (potentially at a rate even higher
than its costs). Therefore, we believe there is still a need for the
postacute care transfer policy, despite the adoption of prospective
payment systems for most postacute care providers under Medicare.
Similarly, it is appropriate to evaluate the need to expand the policy.
Comment: Commenters suggested that, under our proposed criterion
for selecting additional DRGs to cover under the policy, we should
apply the same criteria to the existing postacute care transfer DRGs as
to the new proposed DRGs. These commenters pointed out that 7 of the 10
DRGs would not qualify under these criteria, and should no longer be
included in the policy.
One commenter argued that DRG 209 should be removed from the
current list of DRGs subject to the postacute care transfer policy
because the rate of decline in the average length of stay for this DRG
had fallen dramatically since its inclusion in the postacute care
transfer policy.
In addition, one commenter applied the proposed criteria to more
recent data and determined some of the DRGs proposed to be included in
the policy no longer met all the criteria. Specifically, the commenter
found that 11 of the 19 DRGs proposed to be included in the transfer
policy fail to meet the criterion that at least 10 percent of the
postacute care transfer cases occur prior to the geometric mean length
of stay.
Several commenters also noted that it appears our analysis
identifying the 19 DRGs that were proposed to be added to the list
included transfers from IPPS-exempt units. The commenters added that
these units are not subject to the postacute care transfer policy and
should not have been included in the analysis. The commenters pointed
out that DRG 462 (Rehabilitation) only qualifies as a result of the
inclusion of transfers from IPPS-exempt units in the analysis.
Response: We do not believe it is necessary to evaluate whether the
lengths of stay for the DRGs currently included in the policy are
declining. One would expect that, to the extent patients were being
transferred early in the episode of care to a postacute care setting in
order to minimize costs to the acute care hospital (as opposed to a
general shift in the clinical care for particular cases, which is more
likely to result in a continued drop in the length of stay despite the
inclusion of the DRG in the transfer policy), inclusion of a particular
DRG in the postacute care transfer policy would be likely to stabilize
the mean length of stay for the DRG. Therefore, we did not evaluate the
current DRGs included in the policy to the 7-percent decline in the
length of stay criterion.
We also note that included in the commenter's list of 11 DRGs that
it claim did not meet the new criteria, 6 of these DRGs are paired DRGs
and were not selected based on meeting the criteria, but rather were
included due to the paired nature of the DRG.
We have analyzed the remaining 5 DRGs the commenter identified as
having not met the criteria that at least 10 percent of all postacute
care transfer cases occur before the geometric mean length of stay.
However, it appears the commenter divided the total number of transfer
cases by the total number of cases in the DRG, rather than dividing by
the number of postacute care transfer cases. Using the data the
commenter provided to us, we found that all but l DRG met the 10
percent short-stay transfer definition we had proposed, with one DRG
being a pair to another DRG that does meet the criterion.
However, we do agree with the notion that, to be included in the
postacute care transfer policy, DRGs currently included in the policy
should continue to meet all of the other applicable criteria. In
addition, concerns from the commenters encouraged us evaluate whether
the variation from year to year might also needs to be accounted for in
our new criteria. Therefore, in order to improve the year-to-year
stability of all the DRGs included in the policy, in this final rule,
we are adding the requirement that the criteria must be met during both
of the 2 most recent years for which data are available. That is, to be
included in the policy, a DRG must have, for both of the 2 most recent
years for which data are available:
[sbull] At least 14,000 cases postacute care transfer cases;
[sbull] At least 10 percent of its postacute care transfers
occurring before the geometric mean length of stay;
[sbull] A geometric mean length of stay of at least 3 days; and
[sbull] If a DRG is not already included in the policy, a decline
in its geometric mean length of stay during the most recent 5 year
period of at least 7 percent.
Applying these criteria, we determined that DRG 263 no longer
qualifies (there were only 13,588 postacute care transfer cases in this
DRG during FY 2002). In addition, this is a paired DRG with DRG 264.
Therefore, for FY 2004, we are no longer including DRGs 263 and 264 in
the postacute care transfer policy.
We also corrected the programming error noted by the commenters
that allowed IPPS-exempt units to be included in the analysis. Removing
these units from the analysis resulted in the exclusion of some DRGs
that were proposed to be included in the policy, and the inclusion of
some new DRGs. The table below displays all the DRGs that met the
criteria during both of the 2 most recent years available (FYs 2001 and
2002), as well as their paired-DRG if one of the DRGs meeting the
criteria includes a CC/no-CC split.
----------------------------------------------------------------------------------------------------------------
Percent of all
cases Percent change
DRG DRG title DRG title care transferred in mean length
transfer cases prior to mean of stay FYs 1998-
length of stay 2003
----------------------------------------------------------------------------------------------------------------
12..................... Degenerative Nervous System 28,103 31.42 -12.00
Disorders.
14..................... Intracranial Hemorrhage and 138,636 22.84 -5.88
Stroke with Infarction.
24..................... Seizure and Headache Age 17 With CC.
25..................... Seizure and Headache Age 17 Without CC.
88..................... Chronic Obstructive Pulmonary 95,249 24.88 -10.87
Disease.
89..................... Simple Pneumonia nad Pleurisy Age 175,526 31.83 -11.11
17 With CC.
90..................... Simple Pneumonia and Pleurisy Age 47,987 12.51 -15.00
17 Without CC.
113.................... Amputation for Circulatory System 24,810 45.31 7.22
Disorders Except Upper Limb and
Toe.
121.................... Circulatory Disorders With AMI 55,629 22.42 -11.67
and Major Complication,
Discharged Alive.
122.................... Circulatory Disorders With AMI 71,838 10.53 -23.08
Without Major Complications
Discharged Alive.
[[Page 45413]]
127.................... Heart Failure & Shock............ 196,581 24.18 -8.89
130.................... Peripheral Vascular Disorders 29,859 21.92 -11.76
With CC.
131.................... Peripheral Vascular Disorders 26,455 20.16 -19.51
Without CC.
209.................... Major Joint and Limb Reattachment 247,513 29.20 -15.09
Procedures of Lower Extremity.
210.................... Hip and Femur Procedures Except 89,612 46.77 -6.15
Major Joint Age 17
With CC.
211.................... Hip and Femur Procedures Except 20,584 21.89 -8.00
Major Joint Age 17
Without CC.
236.................... Fractures of Hip and Pelvis...... 24,633 11.26 -6.98
239.................... Pathological Fractures and 23,184 40.44 -7.55
Musculoskeletal and Connective
Tissue Malignancy.
277.................... Cellulitis Age 17 With 35,873 36.56 -7.84
CC.
278.................... Cellulitis Age 17 31,857 13.24 -10.00
Without CC.
294.................... Diabetes Age 35....... 29,608 17.65 -15.00
296.................... Nutritional and Miscellaneous 106,923 29.26 -9.30
Metabolic Disorders Age 17 With CC.
297.................... Nutritional and Miscellaneous 48,116 7.25 -10.00
Metabolic Disorders Age 17 Without CC.
320.................... Kidney and Urinary Tract 80,717 27.38 -8.51
Infections Age 17
With CC.
321.................... Kidney and Urinary Tract 30,934 18.34 -13.89
Infections Age 17
Without CC.
395.................... Red Blood Cell Disorders Age 17.
429.................... Organic Disturbances and Mental 14,731 46.30 -12.96
Retardation.
468.................... Extensive O.R. Procedure 25,114 41.26 7.07
Unrelated to Principal Diagnosis.
483.................... Tracheotomy With Mechanical 20,034 49.56 2.37
Ventilation 96 + Hours or
Principal Diagnosis Except Face,
Mouth, and Neck Diagnoses.
----------------------------------------------------------------------------------------------------------------
Transfers to postacute care from the DRGs listed in the above table
will be included under this policy, effective for discharges occurring
on or after October 1, 2003. As a result of our analysis in which we
applied the new qualifying criteria, we removed DRG 263 and DRG 264
from the current list of 10 DRGs, and we removed DRG 243 and DRG 462
from the proposed list of additional 19 DRGs. However, we added four
new DRGs (that were not included in our proposal) to the policy based
on this analysis: DRG 88 (Chronic Obstructive Pulmonary Disease); DRG
127 (Heart Failure and Shock); DRG 294 (Diabetes Age 35);
and DRG 395 (Red Blood Cell Disorders, Age 17). We will
review and update this list periodically to assess whether additional
DRGs should be added or existing DRGs should be removed.
Comment: One commenter contested the automatic inclusion of both
DRGs in a paired-DRG combination. The commenter believed any incentive
for hospitals not to include a code that would identify a complicating
or comorbid condition would be very limited and would have negligible
effect on hospital behavior. However, the commenter asserted that if
CMS is going to include both DRGs in a paired-DRG combination, CMS must
combine the data for