[Federal Register: May 18, 2004 (Volume 69, Number 96)]
[Proposed Rules]
[Page 28195-28817]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18my04-19]
[[Page 28195]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 403, et al.
Medicare Program; Proposed Changes to the Hospital Inpatient
Prospective Payment Systems and Fiscal Year 2005 Rates; Proposed Rule
[[Page 28196]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 403, 412, 413, 418, 460, 480, 482, 483, 485, and 489
[CMS-1428-P]
RIN 0938-AM80
Medicare Program; Proposed Changes to the Hospital Inpatient
Prospective Payment Systems and Fiscal Year 2005 Rates
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs to implement changes arising from our continuing experience with
these systems; and to implement a number of changes made by the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(Pub. L. 108-173), enacted on December 8, 2003. In addition, in the
Addendum to this proposed rule, we describe the proposed changes to the
amounts and factors used to determine the rates for Medicare hospital
inpatient services for operating costs and capital-related costs. These
proposed changes would be applicable to discharges occurring on or
after October 1, 2004. We also are setting forth proposed rate-of-
increase limits as well as proposed policy changes for hospitals and
hospital units excluded from the IPPS that are paid on a reasonable
cost basis subject to these limits.
Among the policy changes that we are proposing to make are: Changes
to the classification of cases to the diagnosis-related groups (DRGs);
changes to the long-term care (LTC)-DRGs and relative weights; changes
in the wage data, labor-related share of the wage index, and the
geographic area designations used to compute the wage index; changes in
the qualifying threshold criteria for and the proposed approval of new
technologies and medical services for add-on payments; changes to the
policies governing postacute care transfers; changes to payments to
hospitals for the direct and indirect costs of graduate medical
education; changes to the payment adjustment for disproportionate share
rural hospitals; changes in requirements and payments to critical
access hospitals (CAHs); changes to the disclosure of information
requirements for Quality Improvement Organization (QIOs); and changes
in the hospital conditions of participation for discharge planning and
fire safety requirements for certain health care facilities.
DATES: Comments will be considered if received at the appropriate
address, as provided below, no later than 5 p.m. on July 12, 2004.
ADDRESSES:
Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist in fully considering
issues and developing policies. You can assist us by referencing the
file code CMS-1428-P and the specific ``issue identifier'' that
precedes the section on which you choose to comment.
Submit electronic comments to: http://www.accessdata.fda.gov/scripts/oc/dockets/commentdocket.cfm?AGENCY=CMS
or www.regulations.gov.
Mail written comments (an original and three copies) to the
following address only:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1428-P, P.O. Box 8010, Baltimore, MD
21244-1850.
If you prefer, you may deliver, by hand or courier, your written
comments (an original and three copies) to one of the following
addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201, or Room C5-14-03, Central Building, 7500
Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the Humphrey Building is not
readily available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for commenters who wish to retain proof of filing by stamping
in and keeping an extra copy of the comments being filed.)
Comments mailed to those addresses specified as appropriate for
courier delivery may be delayed and could be considered late.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission.
Inspection of Public Comments: All comments received before the
close of the comment period will be available for viewing by the
public, including any personally identifiable or confidential business
information that is included in a comment. After the close of the
comment period, CMS will post all electronic comments received before
the close of the period on its public Web sites. Written comments
received timely will be available for public inspection as they are
received, generally beginning approximately 4 weeks after publication
of a document, in room C5-12-08 of the Centers for Medicare & Medicaid
Services, 7500 Security Blvd., Baltimore, MD, on Monday through Friday
of each week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to
schedule an appointment to view public comments.
For comments that relate to information collection requirements,
mail a copy of comments to the following addresses:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Security and Standards Group, Office
of Regulations Development and Issuances, Room C4-24-02, 7500 Security
Boulevard, Baltimore, Maryland 21244-1850. Attn: Dawn Willinghan, CMS-
1428-P; and
Office of Information and Regulatory Affairs, Office of Management
and Budget, Room 3001, New Executive Office Building, Washington, DC
20503, Attn: Brenda Aguilar, CMS Desk Officer.
FOR FURTHER INFORMATION CONTACT: Jim Hart, (410) 786-9520, Operating
Prospective Payment, Diagnosis-Related Groups (DRGs), Wage Index, New
Medical Services and Technology, Standardized Amounts, Hospital
Geographic Reclassifications, Postacute Care Transfers, and
Disproportionate Share Hospital Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded
Hospitals, Graduate Medical Education, Critical Access Hospitals, and
Long-Term Care (LTC)--DRGs Issues.
Mary Collins, (410) 786-3189, CAH Bed Limits and Distinct Part Unit
Issues.
John Eppinger, (410) 786-4518, CAH Periodic Interim Payment Issues.
Maria Hammel, (410) 786-1775, Quality Improvement Organization
Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Project Issues.
Jeannie Miller, (410) 786-3164, Bloodborne Pathogens Standards,
Hospital Conditions of Participation for Discharge Planning, and Fire
Safety Requirements Issues.
Dr. Mark Krushat, (410) 786-6809, and Dr. Anita Bhatia, (410) 786-
7236 Quality Data for Annual Payment Update Issues.
SUPPLEMENTARY INFORMATION:
[[Page 28197]]
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Acronyms
ACGME--Accreditation Council on Graduate Medical Education
AHIMA--American Health Information Management Association
AHA--American Hospital Association
AOA--American Osteopathic Association
ASC--Ambulatory Surgical Center
BBA--Balanced Budget Act of 1997, Public Law 105-33
BIPA--Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS--Bureau of Labor Statistics
CAH--Critical access hospital
CART--CMS Abstraction & Reporting Tool
CBSAs--Core-Based Statistical Areas
CC--Complication or comorbidity
CMS--Centers for Medicare & Medicaid Services
CMSA--Consolidated Metropolitan Statistical Area
COBRA--Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
CoP--Condition of Participation
CPI--Consumer Price Index
CRNA--Certified registered nurse anesthetist
DRG--Diagnosis-related group
DSH--Disproportionate share hospital
ESRD--End-stage renal disease
FDA--Food and Drug Administration
FQHC--Federally qualified health center
FSES--Fire Safety Evaluation System
FTE--Full-time equivalent
FY--Federal fiscal year
GME--Graduate medical education
HCRIS--Hospital Cost Report Information System
HIPC--Health Information Policy Council
HIPAA--Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HHA--Home health agency
HPSA--Health Professions Shortage Area
ICD-9-CM--International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-PCS--International Classification of Diseases, Tenth Edition,
Procedure Coding System
ICF/MRs--Intermediate care facilities for the mentally retarded
IME--Indirect medical education
IPPS--Acute care hospital inpatient prospective payment system
IPF--Inpatient psychiatric facility
IRF--Inpatient rehabilitation facility
JCAHO--Joint Commission on the Accreditation of Healthcare
Organizations
LAMA--Left Against Medical Advice
LTC-DRG--Long-term care diagnosis-related group
LTCH--Long-term care hospital
LSC--Life Safety Code
MCE--Medicare Code Editor
MCO--Managed care organization
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
MMA--Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
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
NFPA--National Fire Protection Association
NPR--Notice of Program Reimbursement
NQF--National Quality Forum
NVHRI--National Voluntary Hospital Reporting Initiative
OES--Occupational Employment Statistics
OIG--Office of the Inspector General
OMB--Executive Office of Management and Budget
O.R.--Operating room
OSCAR--Online Survey Certification and Reporting (System)
OSHA--Occupational Safety and Health Act
PACE--Programs of All-Inclusive Care for the Elderly
PIP--Periodic interim payment
PMS--Performance Measurement System
PMSAs--Primary Metropolitan Statistical Areas
PPS--Prospective payment system
PRA--Per resident amount
ProPAC--Prospective Payment Assessment Commission
PRRB--Provider Reimbursement Review Board
PS&R--Provider Statistical and Reimbursement System
QIO--Utilization and Quality Control Quality Improvement
Organization
RHC--Rural health clinic
RHQDAPU--Reporting Hospital Quality Data for Annual Payment Update
RRC--Rural referral center
SCH--Sole community hospital
SNF--Skilled nursing facility
SOCs--Standard occupational classifications
SOM--State Operations Manual
SSA--Social Security Administration
SSI--Supplemental Security Income
TEFRA--Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
UHDDS--Uniform Hospital Discharge Data Set
Table of Contents
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
a. IRFs
b. LTCH
c. IPFs
3. Critical Access Hospitals (CAHs)
4. Payments for Graduate Medical Education (GME)
B. Provisions of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003
C. Major Contents of this Proposed Rule
1. Proposed Changes to the DRG Reclassifications and
Recalibrations of Relative Weights
2. Proposed Changes to the Hospital Wage Index
3. Other Decisions and Proposed Changes to the PPS for Inpatient
Operating and GME Costs
4. Proposed Changes to the PPS for Capital-Related Costs
5. Proposed Changes for Hospitals and Hospital Units Excluded
from the IPPS
6. Proposed Changes to QIO Disclosure of Information
Requirements
7. Proposed Changes Relating to Medicare Provider Agreements:
Bloodborne Pathogens Standards, Hospital Conditions of Participation
for Discharge Planning, and Fire Safety Requirements for Certain
Health Care Facilities
8. Determining Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits
9. Impact Analysis
10. Recommendation of Update Factor for Hospital Inpatient
Operating Costs
11. Discussion of Medicare Payment Advisory Commission
Recommendations
II. Proposed Changes to DRG Classifications and Relative Weights
[[Page 28198]]
A. Background
B. DRG Reclassification
1. General
2. MDC 1 (Diseases and Disorders of the Nervous System):
Intracranial Hemorrhage and Stroke with Infarction
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Heart Assist System Transplant
b. Cardiac Resynchronization Therapy and Heart Failure
c. Combination Cardiac Pacemaker Devices and Lead Codes
4. MDC 6 (Diseases and Disorders of the Digestive System):
Artificial Anal Sphincter
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. 360 Spinal Fusion
b. Multiple Level Spinal Fusion
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
7. MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic
Mental Disorders): Drug-Induced Dementia
8. MDC 22 (Burns): Burn Patients on Mechanical Ventilation
9. Pre-MDC: Tracheostomy
10. Medicare Code Editor (MCE) Changes
11. Surgical Hierarchies
12. Refinement of Complications and Comorbidities (CC) List
13. 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 or Procedure Codes to MDCs
14. Pancreatic Islet Cell Transplantation in Clinical Trials
15. Changes to the ICD-9-CM Coding System
16. Other Issues
a. Craniotomy Procedures
(1) Unruptured Cerebral Aneurysms
(2) GLIADEL[reg] Chemotherapy Wafers
(3) DRG 3 (Craniotomy Age 0-17)
b. Coronary Stent Procedures
c. Severe Sepsis
d. Implantable Cardiac Defibrillators
C. Recalibration of DRG Weights
D. Proposed LTC-DRG Reclassifications and Relative Weights for
LTCHs for FY 2005
1. Background
2. Proposed Changes in the LTC-DRG Classifications
a. Background
b. Patient Classifications into DRGs
3. Development of the Proposed FY 2005 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 Proposed FY 2005 LTC-DRG Relative
Weights
E. Proposed Add-On Payments for New Services and Technologies
1. Background
2. Other Provisions of Section 503 of Public Law 108-173
3. FY 2005 Status of Technology Approved for FY 2004 Add-On
Payments
a. Drotrecogin Alfa (Activated)--Xigris[reg]
b. InFUSETM (Bone Morphogenetic Proteins (BMPs) for
Spinal Fusions)
4. Reevaluation of FY 2004 Applications That Were Not Approved
5. FY 2005 Applicants for New Technology Add-On Payments
a. InFUSETM Bone Graft (Bone Morphogenetic Proteins
(BMPs) for Tibia Fractures)
b. Norian Skeletal Repair System(SRS)[reg] Bone Void Filler
c. InSync[reg] Defibrillator System (Cardiac Resynchronization
Therapy with Defibrillation (CRT-D))
d. GliaSite[reg] Radiation Therapy System (RTS)
e. Natrecor[reg]--Human B-Type Natriuretic Peptide (hBNP)
f. Kinetra[reg] Implantable Neurostimulator for Deep Brain
Stimulation
g. Intramedullary Skeletal Kinetic Distractor (ISKD)
h. ActiconTM Neosphincter
i. TandemHeartTM Percutaneous Left Ventricular Assist
System
j. AquadexTM System 100 Fluid Removal System (System
100)
III. Proposed Changes to the Hospital Wage Index
A. Background
B. Revised OMB Definitions for Geographical Statistical Areas
1. Current Labor Market Areas Based on MSAs
2. Core-Based Statistical Areas
3. Revised Labor Market Areas
a. New England MSAs
b. Metropolitan Divisions
c. Micropolitan Areas
d. Transition Period
C. Proposed Occupational Mix Adjustment to Proposed FY 2005
Index
1. Development of Data for the Occupational Mix Adjustment
2. Proposed Calculation of the Occupational Mix Adjustment
Factor and the Proposed Occupational Mix Adjusted Wage Index
D. Worksheet S-3 Wage Data for the Proposed FY 2005 Wage Index
Update
E. Verification of Worksheet S-3 Wage Data
F. Computation of the Unadjusted Wage Index
G. Computation of the Proposed FY 2005 Blended Wage Index
H. Proposed Revisions to the Wage Index Based on Hospital
Redesignation
1. General
2. Effects of Reclassification
3. FY 2005 Issues
a. FY 2005 MGCRB Reclassifications
b. Implementation of New MSAs
c. Redesignations under Section 1886(d)(8)(B) of the Act
d. Reclassifications Under Section 508 of Public Law 108-173
e. Proposed Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
(1) Data
(2) Qualifying Counties
(3) The Adjustment
(4) Automatic Adjustments
4. Proposed FY 2005 Reclassifications
I. Process for Requests for Wage Index Data Corrections
1. Worksheet S-3 Wage Data
2. Occupational Mix Data
3. All FY 2005 Wage Index Data
J. Proposed Revision of the Labor-Related Share of the Wage
Index
IV. Other Decisions and Proposed Changes to the IPPS for Operating
Costs and GME Costs
A. Postacute Care Transfer Payment Policy
1. Background
2. Proposed Changes to DRGs Subject to the Postacute Care
Transfer Policy
B. Payments for Inpatient Care in Providers That Change
Classification Status During a Patient Stay
C. Geographic Reclassifications--Definitions of Urban and Rural
Areas
D. Equalization of Urban and Rural Standardized Amounts
E. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
2. Requirements for Hospital Reporting of Quality Data
3. Submission of Hospital Data for FYs 2006 and 2007
4. Proposed Regulation Change
F. Proposed Revision of the Labor-Related Share of the Hospital
Wage Index
G. Wage Index Adjustment for Commuting Patterns of Hospital
Employees
H. Additional Payments for New Medical Services and Technology:
Proposed Policy Changes
I. Rural Referral Centers
1. Case-Mix Index
2. Discharges
J. Additional Payments to Hospitals with High Percentage of End-
Stage Renal Disease (ESRD) Discharges
K. Indirect Medical Education (IME) Adjustment
1. IME Adjustment Factor Formula Multipliers
2. IME Adjustment Formula Multiplier for Redistributed FTE
Resident Slots
3. Technical Changes
L. Payment to Disproportionate Share Hospitals
1. Enhanced DSH Adjustment for Rural Hospitals and Urban
Hospitals with Fewer Than 100 Beds
2. Proposals Relating to Available Beds and Patient Days for the
DSH Adjustment
M. Payment Adjustments for Low-Volume Hospitals
N. Medicare Geographic Classification Review Board (MGCRB)
Reclassifications
1. Background
2. Standardized Amount Reclassification Provisions
3. Reclassification of Urban Rural Referral Centers
4. Special Circumstances of Sole Community Hospitals (SCHs) in
Low Population Density States
5. Possible Reclassifications for Dominant Hospitals and
Hospitals in Single-Hospital MSAs
6. Special Circumstances of Hospitals in All-Urban States
[[Page 28199]]
O. Payment for Direct Graduate Medical Education
1. Background
2. Reductions of and Increases in Hospitals' FTE Resident Caps
for GME Payment Purposes under Section 422 of Public Law 108-173
a. General Background on Methodology for Determining the FTE
Resident Count
b. Reduction of Hospitals' FTE Resident Caps under the
Provisions of Section 422 of Public Law 108-173
c. Hospitals Subject to the FTE Resident Cap Reduction
d. Exemption from FTE Resident Cap Reduction for Certain Rural
Hospitals
e. Determining the Estimated Number of FTE Resident Slots
Available for Redistribution
f. Determining the Possible Reduction to a Hospital's FTE
Resident Cap
(1) Reference Resident Level--General
(2) Expansion of an Existing Program
(3) Audits of the Reference Cost Reporting Periods
(4) Expansions Under Newly Approved Programs
(5) Affiliations
g. Criteria for Determining Hospitals That Will Receive
Increases in Their FTE Resident Caps
h. Application Process for the Increases in Hospitals' FTE
Resident Caps
i. CMS Evaluation of Applications for Increases in FTE Resident
Caps
j. Application of Locality-Adjusted National Average Per
Resident Amount (PRA)
k. Application of Section 422 to Hospitals That Participate in
Demonstration Projects or Voluntary Reduction Programs
l. Application of Section 422 to Hospitals That File Low
Utilization Medicare Cost Reports
m. Specific Solicitation for Public Comment on the Proposals
n. CMS Evaluation Form
o. CMS Central and CMS Regional Office Mailing Addresses for
Applications for Increases in FTE Resident Caps
3. Direct GME Initial Residency Period
a. Background
b. Direct GME Initial Residency Period Limitation: Simultaneous
Match Issue
c. Exception to Initial Residency Period for Geriatric Residency
or Fellowship Programs
4. Per Resident Amount: Extension of Update Limitation on High-
Cost Programs
5. Residents Training in Nonhospital Settings
a. Background
b. Moratorium on Disallowances of Allopathic or Osteopathic
Family Practice Residents Training Time in Nonhospital Settings
(1) Cost Reports That Are Settled Between January 1, 2004 and
December 31, 2004
(2) Family Practice Residents That Are Training in Nonhospital
Settings Between January 1, 2004 and December 31, 2004
c. Requirements for Written Agreements for Residency Training in
Nonhospital Settings
P. Rural Community Hospital Demonstration Program
Q. Special Circumstances of Hospitals Facing High Malpractice
Insurance Rate Increases
V. Proposed Changes to the PPS for Capital-Related Costs
A. Background
B. Payments to Hospitals Located in Puerto Rico
C. Exception Payment for Extraordinary Circumstances
A. Treatment of Hospitals Previously Reclassified for the
Operating PPS
E. Definition of Large Urban Area Standardized Amounts
VI. Proposed 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
3. Implementation of a PPS for IRFs
4. Implementation of a PPS for LTCHs
5. Development of a PPS for IPFs
6. Technical Changes Related to Establishment of Payments for
Excluded Hospitals
B. Criteria for Classification of Hospitals-Within-Hospitals
C. Critical Access Hospitals (CAHs)
1. Background
2. Payment Amounts for Inpatient CAH Services
3. Condition for Application of Special Professional Service
Payment Adjustment
4. Coverage of Costs for Certain Emergency Room On-Call
Providers
5. Authorization of Periodic Interim Payments for CAHs
6. Revision of the Bed Limit for CAHs
7. Authority to Establish Psychiatric and Rehabilitation
Distinct Part Units of CAHs
8. Waiver Authority for Designation of a CAH as a Necessary
Provider
9. Payment for Clinical Diagnostic Laboratory Tests
10. Proposed Technical Changes in Part 489
VII. Proposed Changes to the Disclosure of Information Requirements
for Quality Improvement Organizations (QIOs)
A. Background
B. Provisions of the Proposed Regulations
C. Technical Changes
VIII. Proposed Policy Changes Relating to Medicare Provider
Agreements for Compliance with Bloodborne Pathogens Standards,
Hospital Conditions of Participation for Discharge Planning, and
Fire Safety Requirements for Certain Health Care Facilities
A. Conditions of Participation for Discharge Planning
1. Background
2. Implementation
B. Compliance with Bloodborne Pathogens Standards
C. Fire Safety Requirements for Certain Health Care Facilities
1. Background
2. Proposed Changes to the Regulations
IX. MedPAC Recommendations
X. Other Required Information
A. Requests for Data from the Public
1. CMS Wage Data
2. CMS Hospital Wage Indices (Formerly: Urban and Rural Wage
Index Values Only)
3. PPS SSA/FIPS MSA State and County Crosswalk
4. Reclassified Hospitals New Wage Index (Formerly: Reclassified
Hospitals by Provider Only)
5. PPS-IV to PPS-XII Minimum Data Set
6. PPS-IX to PPS-XII Capital Data Set
7. PPS-XIII to PPS-XIX Hospital Data Set
8. Provider-Specific File
9. CMS Medicare Case-Mix Index File
10. DRG Relative Weights (Formerly Table 5 DRG)
11. PPS Payment Impact File
12. AOR/BOR Tables
13. Prospective Payment System (PPS) Standardizing File
B. Collection of Information Requirements
C. Public Comments
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts Effective with
Discharges Occurring On or After October 1, 2004 and Update Factors
and Rate-of-Increase Percentages Effective With Cost Reporting
Periods Beginning On or After October 1, 2004
Tables
Table 1A--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor (71.1 Percent Labor Share/28.9 Percent Nonlabor Share If
Wage Index Is Greater Than 1)
Table 1B--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage
Index Is Less Than or Equal to 1)
Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico,
Labor/Nonlabor
Table 1D--Capital Standard Federal Payment Rate
Table 2--Hospital Case-Mix Indexes for Discharges Occurring in
Federal Fiscal Year 2003; Hospital Average Hourly Wage for Federal
Fiscal Years 2003 (1999 Wage Data), 2004 (2000 Wage Data), and 2005
(2001 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
[[Page 28200]]
Table 4H--Pre-Reclassified Wage Index for Rural Areas
Table 4J--Wage Index Adjustment for Commuting Hospital Employees
(Out-Migration) In Qualifying Counties--FY 2005
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 2003 MedPAR Update December 2003 GROUPER V21.0
Table 7B--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2003 MedPAR Update December 2003 GROUPER V22.0
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 9A--Hospital Reclassifications and Redesignations by
Individual Hospital--FY 2004
Table 9B--Hospital Reclassifications and Redesignation by Individual
Hospital Under Section 508 of Public Law 108-173--FY 2004
Table 10--Geometric Mean Plus the Lesser of .75 of the National
Adjusted Operating Standardized Payment Amount (Increased to Reflect
the Difference Between Costs and Charges) or .75 of One Standard
Deviation of Mean Charges by Diagnosis-Related Groups (DRGs)--March
2004
Table 11--Proposed FY 2005 LTC-DRGs, Relative Weights, Geometric
Average Length of Stay, and 5/6ths of the Geometric Average Length
of Stay
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 or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
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 or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid 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 facilities
(IRFs)), psychiatric hospitals and units (referred to as inpatient
psychiatric facilities (IPFs)), 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
[[Page 28201]]
hospital units are located in 42 CFR Parts 412 and 413.
a. IRFs
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; 67 FR 49982, August 1, 2002; and 68
FR 45674, August 1, 2003). 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. IPFs
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 IPFs 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 maintains budget neutrality. We published a proposed rule
to implement the PPS for IPFs on November 28, 2003 (68 FR 66920). The
November 28, 2003 proposed rule proposed an April 1, 2004 effective
date for purposes of ratesetting and calculating impacts. However, the
proposed rule was unusually complex because it proposed a completely
new payment system for inpatient hospital services furnished by
psychiatric hospitals and units and the public requested additional
time to comment. As a result, we extended the comment period for the
proposed rule. Thus, we are still in the process of analyzing public
comments and developing a final rule for publication. Consequently, an
April 1, 2004 effective date for the IPF PPS is no longer possible.
3. Critical Access Hospitals (CAHs)
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 (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act; the amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.
On August 1, 2003, we published a final rule in the Federal
Register (68 FR 45346) that implemented changes to the Medicare
hospital inpatient prospective payment systems for both operating cost
and capital-related costs, as well as changes addressing payments for
excluded hospitals and payments for GME costs. Generally these changes
were effective for discharges occurring on or after October 1, 2003. On
October 6, 2003, we published a document in the Federal Register (68 FR
57731) that corrected technical errors made in the August 1, 2003 final
rule.
B. Provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
On December 8, 2003, the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA), Public Law 108-173, was enacted.
Public Law 108-173 made a number of changes to the Act relating to
prospective payments to hospitals for inpatient services, payments to
excluded hospitals and units, and payments to CAHs. This proposed rule
would implement amendments made by the following sections of Public Law
108-173:
Section 401, which provides that, for discharges occurring in a
fiscal year beginning with FY 2004 under the IPPS, Medicare will pay
hospitals in rural and small urban areas in the 50 States using the
standardized amount (computed for the previous fiscal year) that would
be used to pay hospitals in large urban areas (or beginning with FY
2005, for all hospitals in the previous fiscal year), increased by the
appropriate market basket percentage increase. One standardized amount
for hospitals in Puerto Rico would be established that would equal the
amount for hospitals in large urban areas in Puerto Rico.
Section 402, which provides that for discharges occurring on or
after April 1, 2004, the DSH payment adjustment for a hospital that is
not a large urban or large rural hospital will be calculated using the
current DSH adjustment formula for large urban hospitals, subject to a
limit of 12 percent for any of these hospitals that are not rural
referral centers. (There is no limit on the DSH payment percentage for
rural referral centers.)
Section 403, which provides that, for discharges occurring on or
after October 1, 2004, a hospital's labor-related share to which the
wage index is applied will be decreased to 62 percent of the
standardized amount when such a change will result in higher total
payments to the hospital. This provision also applies to the labor-
related share of the standardized amount for hospitals in Puerto Rico.
Section 405(a), which provides that inpatient, outpatient, and
covered SNF services provided by a CAH will be reimbursed at 101
percent of reasonable costs for services furnished to Medicare
beneficiaries. This provision is applicable to payments for services
furnished during cost reporting periods beginning on or after January
1, 2004.
Section 405(b), which expands coverage of the costs associated with
covered Medicare services furnished by on-call emergency room providers
in CAHs to include services furnished by physician assistants, nurse
practitioners, and clinical nurse specialists, effective for costs
incurred for services furnished on or after January 1, 2005.
Section 405(c), which provides that eligible CAHs may receive
payments for their inpatient services on a periodic interim payment
(PIP) basis, effective
[[Page 28202]]
with payments made on or after July 1, 2004.
Section 405(d), which allows CAHs to elect to receive payments
under the optional payment method (a payment encompassing both
inpatient CAH services and physician and practitioner services to
outpatients) even if some practitioners do not reassign to the CAH
their rights to bill for professional services to CAH outpatients. This
provision applies to cost reporting periods occurring on or after July
1, 2004, except that in the case of a CAH that made an election of the
optional payment method before November 1, 2003, the provision applies
to cost reporting periods beginning on or after July 1, 2001.
Section 405(e), which increases the limit on the number of beds
that a CAH may have for acute care from 15 to 25 beds. This provision
applies to CAH designations made before, on, or after January 1, 2004.
Any election made in accordance to the regulations promulgated to
implement this provision will only apply prospectively.
Section 405(g), which provides that a CAH may establish psychiatric
and rehabilitation distinct part units and limits the number of beds in
each unit to no more than 10. Services in these distinct part units
will be paid under the reasonable cost-based methodology. This
provision applies to cost reporting periods beginning on or after
October 1, 2004.
Section 405(h), which terminates a State's authority to waive the
location requirement for a CAH by designating the CAH as the necessary
provider, effective January 1, 2006. A grandfathering provision is
included for CAHs that are certified as necessary providers prior to
January 1, 2006, which allows any CAH that is designated as a necessary
provider in its State's rural health plan prior to January 1, 2006, to
maintain its necessary provider designation.
Section 406, which provides for a graduated adjustment to the
inpatient prospective payment rates to account for the higher costs
associated with hospitals described under section 1886(d) of the Act
that are located more than 25 road miles from another subsection (d)
hospital and that have less than 800 discharges during a fiscal year,
effective for discharges occurring on or after October 1, 2004. The
increase in these payments may not be greater than 25 percent and the
determination of the percentage payment increase is not subject to
administrative or judicial review.
Section 410A, which authorizes the Secretary to establish a
demonstration program to test the feasibility and advisability of the
establishment of rural community hospitals to furnish covered inpatient
hospital services to Medicare beneficiaries. The Secretary must select
up to 15 rural community hospitals to participate in the demonstration.
The Secretary must implement the demonstration program not later than
January 1, 2005, but may not implement the program before October 1,
2004.
Section 422(a), which provides that a hospital's GME FTE resident
cap will be reduced, and the reduction will be redistributed among
other hospitals if the hospital's resident count is less than its
resident cap (rural hospitals with less than 250 acute care inpatient
beds will be exempt) in a particular reference period. This provision
is effective for cost reporting periods occurring on or after July 1,
2005.
Section 422(b), which specifies that the formula multiplier for the
IME adjustment is 0.66 for FTE residents attributable to redistributed
resident positions, effective for discharges occurring on or after July
1, 2005.
Section 501, which provides the update factor for payments for the
hospital inpatient operating costs for FY 2005 and subsequent fiscal
years is the market basket percentage increase. For FYs 2005 through
2007, the update factor will be the market basket percentage increase
minus 0.4 percentage points for any ``subsection (d) hospital'' that
does not submit hospital quality data on 10 measures as specified by
the Secretary.
Section 502, which modifies the IME formula multiplier to be used
in the calculation of the IME adjustment for midway through FY 2004 and
provides a new schedule of formula multipliers for FYs 2005 and
thereafter.
Section 503(a), which includes a requirement for updating the ICD-
9-CM diagnosis and procedure codes in April 1 of each year, in addition
to the current process of annual updates on October 1 of each year.
This change will not affect Medicare payments or DRG classifications
until the fiscal year that begins after that date.
Section 503(b), which provides for changes to the threshold amount
for determining eligibility of new technologies or medical services for
add-on payments; provides for public input on applications for new
technology or medical service add-on payments prior to the publication
of a proposed rule; provides for reconsideration of applications
received for FY 2004 that were denied; provides for preference in the
use of DRG adjustments; and provides that new technology or medical
service payments shall not be budget neutral. This provision is
effective for fiscal years beginning in FY 2005.
Section 504, which increases the national portion of the operating
PPS payment rate for hospitals in Puerto Rico from 50 percent of the
Federal rate to 75 percent of the Federal rate and decreases the Puerto
Rico portion of the operating PPS payment from 50 percent to 25
percent, effective for discharges occurring on or after October 1,
2004. For the period of April 1, 2004 through September 30, 2004,
payments for hospitals in Puerto Rico will be based on 62.5 percent
Federal rate and 37.5 percent of the Puerto Rico rate.
Section 505, which provides for an increase in a hospital's wage
index value to take into consideration a commuter wage adjustment for
hospital employees who reside in a county and work in a different area
with a higher wage index.
Section 508, which provides for the establishment of a one-time
process for a hospital to appeal its geographic classification for wage
index purposes. By law, any reclassification resulting from this one-
time appeal applies for a 3-year period to discharges occurring on or
after April 1, 2004.
Section 711, which freezes the annual CPI-U updates to hospital-
specific per resident amount (PRAs) for GME payments for those PRAs
that exceed the ceiling, effective for cost reporting periods beginning
FY 2004 through FY 2013.
Section 712, which provides for an exception to the initial
residency period for purposes of direct GME payments for geriatric
residency or fellowship programs that allows the 2 years spent in an
approved geriatric program to be counted as part of the resident's
initial training period, but not to count against any limitation on the
initial residency period. This provision is effective for cost
reporting periods beginning on or after October 1, 2003.
Section 713, which, during a 1-year moratorium period of January 1,
2004 through December 31, 2004, allows hospitals to count allopathic or
osteopathic family practice residents training in nonhospital settings
for IME and direct GME purposes, without regard to the financial
arrangement between the hospital and the teaching physician practicing
in the nonhospital setting to which the resident is assigned.
Section 733, which provides for the Medicare payment of routine
costs, as well as costs relating to the transplantation and appropriate
related items and services, for Medicare beneficiaries participating in
a clinical trial involving pancreatic islet cell
[[Page 28203]]
transplantation, beginning no earlier than October 1, 2004.
Section 926, which requires the Secretary to make information
publicly available that enables hospital discharge planners, Medicare
beneficiaries, and the public to identify skilled nursing facilities
(SNFs) that are participating in the Medicare program, and requires a
hospital, as part of its discharge planning, to evaluate a patient's
need for SNF care.
Section 947, which requires that, by July 1, 2004, hospitals not
otherwise subject to the Occupational Safety and Health Act (OSHA) (or
a State occupational safety and health plan that is approved under
section 18(b) of that Act) must comply with the OSHA bloodborne
pathogens (BBP) standard as part of their Medicare provider agreements.
C. Major Contents of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the
Medicare IPPS for operating costs and for capital-related costs under
the IPPS for FY 2005. We also are setting forth proposed changes
relating to payments for GME costs, payments to certain hospitals and
units that continue to be excluded from the IPPS and paid on a
reasonable cost basis, payments for DSH, requirements and payments for
CAHs, conditions of participation for hospitals relating to discharge
planning and fire safety requirements, requirements for Medicare
provider agreements relating to bloodborne pathogen standards, and QIO
disclosure of information requirements. The changes being proposed
would be effective for discharges occurring on or after October 1,
2004, unless otherwise noted.
The following is a summary of the major changes that we are
proposing to make:
1. Proposed Changes to the DRG Reclassifications and Recalibrations of
Relative Weights
As required by section 1886(d)(4)(C) of the Act, we are proposing
annual adjustments to the DRG classifications and relative weights.
Based on analyses of Medicare claims data, in section II. of this
preamble, we are proposing to establish a number of new DRGs and make
changes to the designation of diagnosis and procedure codes under other
existing DRGs. Our proposed changes for FY 2005 are set forth in
section II. of this preamble.
Among the proposed changes discussed are:
Restructuring and retitling of several DRGs to reflect
expanded coverage of heart assist systems such as ventricular assist
devices (VAD) or left ventricular assist devices (LVAD) as destination
(or permanent) therapy for end-stage heart failure patients who are not
candidates for heart transplantation: DRG 103 (Heart Transplant or
Implant of Heart Assist System) (proposed title change), DRG 104
(Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac
Catheterization) and DRG 105 (Cardiac Valve and Other Major
Cardiothoracic Procedures Without Cardiac Catheterization), and DRG 525
(Other Heart Assist System Implant) (proposed title change).
Addition of pacemaker device and lead procedure code
combinations that could lead to the assignment of DRG 115 (Permanent
Cardiac Pacemaker Implant with Acute Myocardial Infarction, Heart
Failure, or Shock or ACID Lead or Generator Procedures) and DRG 116
(Other Permanent Cardiac Pacemaker Implant).
Movement of the procedure code for 360 spinal fusion from
DRG 496 (Combined Anterior/Posterior Spinal Fusion) to DRG 497 (Spinal
Fusion Except Cervical With CC) and DRG 498 (Spinal Fusion Except
Cervical Without CC).
Addition of combination codes, which also include heart
failure, to the list of major problems under DRG 387 (Prematurity With
Major Problems) and DRG 389 (Full-Term Neonate With Major Problems).
Modification of DRGs 504 through 509 under MDC 22 (Burns)
to recognize the impact of long-term mechanical ventilation on burn
cases and renaming DRG 504 as proposed title ``Extensive Burns or Full
Thickness Burns With Mechanical Ventilation 96+ Hours With Skin Graft''
and DRG 505 as proposed title ``Extensive Burns or Full Thickness Burns
With Mechanical Ventilation 96+ Hours Without Skin Graft.''
Deletion of DRG 483 (Tracheostomy for Face, Mouth, and
Neck Diagnoses) and splitting the assignment of cases to two proposed
new DRGs on the basis of the performance of a major operating room
procedure: proposed new DRGs 541 and 542 (Tracheostomy With Mechanical
Ventilation 96+ Hours or Principal Diagnosis Except Face, Mouth, and
Neck Diagnosis With and Without Major Operating Room Procedure,
respectively).
We also are presenting our reevaluation of FY 2004 applicants for
add-on payments for high-cost new medical services and technologies,
and our analysis of FY 2005 applicants (including public input, as
directed by Public Law 108-173, obtained in a town meeting).
We are proposing the annual update of the long-term care diagnosis-
related group (LTC-DRG) classifications and relative weights for use
under the LTCH PPS for FY 2005.
2. Proposed Changes to the Hospital Wage Index
In section III. of this preamble, we are proposing revisions to the
wage index and the annual update of the wage data. Specific issues
addressed in this section included the following:
The proposed FY 2005 wage index update, using wage data
from cost reporting periods that began during FY 2001.
Proposed revised labor market areas as a result of OMB
revised definitions of geographical statistical areas.
A discussion of the collection of occupational mix data
and the proposed occupational mix adjustment to the wage index that we
are proposing to apply beginning October 1, 2004.
The proposed revisions to the wage index based on hospital
redesignations and reclassifications, including changes that reflect
the new OMB standards for assignment of hospitals to geographic areas.
The proposed adjustment to the wage index based on
commuting patterns of hospital employees who reside in a county and
work in a different area with a higher wage index, to implement section
505 of Public Law 108-173.
A discussion of eligible hospitals reclassified under the
one-time appeals process under section 508 of Public Law 108-173.
Proposed changes to the labor-related share to which the
wage index is applied in determining the PPS rate for hospitals located
in specific geographic areas, to implement section 403 of Public Law
108-173.
The revised timetable for reviewing and verifying the wage
data that is in effect for the proposed FY 2005 wage index.
3. Other Decisions and Proposed Changes to the PPS for Inpatient
Operating and GME Costs
In section IV. of this preamble, we discuss a number of provisions
of the regulations in 42 CFR Parts 412 and 413 and set forth proposed
changes concerning the following:
Proposed expansion of the current postacute care transfer
policy.
Payments for inpatient care in providers that change
classification status during a patient stay.
Proposed changes in the definitions of urban and rural
areas for geographic reclassifications purposes.
[[Page 28204]]
Equalization of the standardized amount for urban and
rural hospitals.
The reporting of hospital quality data as a condition for
receiving the full annual payment update increase.
Proposed revision of the regulations to reflect the
revision of the labor share of the wage index.
Proposed revision of the regulations to reflect the wage
index adjustment for commuting patterns of hospital employees who live
in one county and commute to work in other areas with higher level
wages.
Proposed changes in the threshold amount for eligibility
for new medical services and technology add-on payments.
Proposed revision to our policy on additional payments to
hospitals with high percentages of ESRD discharges.
Proposed changes to the IME adjustment formula
multipliers, and the formula multiplier applicable to redistribution of
unused numbers of FTE residents slots.
Proposed changes in DSH adjustment payments to rural and
small urban hospitals.
Proposed payment adjustments for low-volume hospitals.
Proposed changes in policy affecting hospitals that apply
as a group for reclassification and a discussion of possible
reclassifications for dominant hospitals and hospitals in single-
hospital MSAs.
Proposed changes in policies governing payments for direct
GME, including the redistribution of unused FTE resident slots; changes
in the GME initial residency period; extension of the update limitation
on hospital-specific per resident amounts; and changes in the policies
on residents training in nonhospital settings, including written
agreements for teaching physician compensation.
An announcement of the rural community hospital
demonstration to be established under section 410A of Public Law 108-
173 and the opportunity for eligible hospitals to apply for
participation in the demonstration program.
A solicitation of public comments on the effect of
increases in malpractice insurance premiums on hospitals participating
in the Medicare program and beneficiary access of services.
4. Proposed Changes to the PPS for Capital-Related Costs
In section V. of this preamble, we discuss the payment requirements
for capital-related costs and propose changes relating to capital
payments to hospitals located in Puerto Rico, changes in the policies
on exception payments for extraordinary circumstances, treatment of
hospitals previously reclassified for the operating standardized
amounts, and capital payment adjustments based on the proposed changes
in geographic classifications.
5. Proposed Changes for Hospitals and Hospital Units Excluded From the
IPPS
In section VI. of this preamble, we discuss the following proposed
revisions and clarifications concerning excluded hospitals and hospital
units and CAHs:
Proposed changes in the payment rate for new excluded
hospitals.
Proposed changes to the criteria for determining payments
to hospitals-within-hospitals.
Proposed changes to the policies governing payment to
CAHs, including a change in the payment percentage for services
furnished by CAHs; changes in the rules governing the election by a CAH
of the optional method of payment; expansion of the payment to
emergency room on-call providers to include physician assistants, nurse
practitioners, and clinical nurse specialists; authorization for the
making of periodic interim payments (PIPs) for CAHs for inpatient
services furnished; revision of the bed count limit for CAHs from 15 to
25 acute care beds; proposed requirements for establishing psychiatric
and rehabilitation distinct part units in CAHs; and termination of the
location requirement for a CAH by designating the CAH as a necessary
provider.
6. Proposed Changes to QIO Disclosure of Information Requirements
In section VII. of this preamble, we discuss our proposed
clarification of the requirements for disclosure by QIOs of information
on institutions and practitioners collected in the course of the QIO's
quality improvement activities.
7. Proposed Changes Relating to Medicare Provider Agreements, Hospital
Conditions of Participation, and Fire Safety Requirements for Certain
Health Care Facilities
In section VIII. of this preamble, we are proposing to--
Require hospitals, as part of the discharge planning
standard under the Medicare hospital conditions of participation, to
furnish a list of Medicare-participating home health agencies to
patients who receive home health services after discharge and to
provide information on Medicare-certified SNFs to patients who are
likely to need posthospital extended care services.
Require that Medicare provider agreements include
provisions that would ensure that all hospital employees who may come
into contact with human blood in the course of their duties are
provided proper protection from bloodborne pathogens.
Correct a technical error relating to the application of
the 2000 edition of the Life Safety Code as the fire safety
requirements for certain health care facilities; and clarify the
effective date for the prohibition on the use of roller latches in
these facilities.
8. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the FY 2005
prospective payment rates for operating costs and capital-related
costs. We also establish the proposed threshold amounts for outlier
cases. In addition, we address proposed update factors for determining
the rate-of-increase limits for cost reporting periods beginning in FY
2005 for hospitals and hospital units excluded from the PPS.
9. 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.
10. Recommendation of Update Factor for Hospital Inpatient Operating
Costs
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2005 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs
(and hospital-specific rates applicable to SCHs and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by hospitals and
hospital units excluded from the IPPS.
11. 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. MedPAC's March 2004 recommendation
[[Page 28205]]
concerning hospital inpatient payment policies addressed only the
update factor for inpatient hospital operating costs and capital-
related costs under the IPPS and for hospitals and distinct part
hospital units excluded from the IPPS. This recommendation is addressed
in Appendix B. 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.
II. Proposed 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 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. The proposed changes to the DRG
classification system and the proposed recalibration of the DRG weights
for discharges occurring on or after October 1, 2004, are discussed
below.
B. DRG Reclassifications
[If you choose to comment on issues in this section, please include
the caption ``DRG Reclassifications'' at the beginning of your
comment.]
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 2004, cases are assigned to one of 522 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 (MDCs).
-------------------------------------------------------------------------
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 2004,
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
and for tracheostomies. Cases are assigned to these DRGs before they
are classified to an MDC. The table below lists the current eight pre-
MDCs.
------------------------------------------------------------------------
Pre-Major Diagnostic Categories (Pre-MDCs)
-------------------------------------------------------------------------
DRG 103--Heart Transplant.
DRG 480--Liver Transplant.
[[Page 28206]]
DRG 481--Bone Marrow Transplant.
DRG 482--Tracheostomy for Face, Mouth, and Neck Diagnoses.
DRG 483--Tracheostomy with Mechanical Ventiliation 96+ Hours or
Principal Diagnosis Except for Face, Mouth, and Neck Diagnoses.
DRG 495--Lung Transplant.
DRG 512--Simultaneous Pancreas/Kidney Transplant.
DRG 513--Pancreas Transplant
------------------------------------------------------------------------
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 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, the 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).
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 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.
The changes we are proposing to the DRG classification system for
the FY 2005 GROUPER version 22.0 and to the methodology used to
recalibrate the DRG weights are set forth below. Unless otherwise noted
in this proposed rule, our DRG analysis is based on data from the
December 2003 update of the FY 2003 MedPAR file, which contains
hospital bills received through December 31, 2003 for discharges in FY
2003.
2. MDC 1 (Diseases and Disorders of the Nervous System): Intracranial
Hemorrhage and Stroke With Infarction
It has come to our attention that the title of DRG 14 (Intracranial
Hemorrhage and Stroke With Infarction) may be misleading because it
implies that a combination of conditions exists when the DRG is
assigned. When we developed this title, we did not intend to imply that
a combination of conditions exists. Therefore, we are proposing to
change the title of DRG 14 to read ``Intracranial Hemorrhage or
Cerebral Infarction''.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Heart Assist System Implant
Circulatory support devices, also known as heart assist systems,
ventricular assist devices (VADs) or left ventricular assist devices
(LVADs), offer a surgical alternative for end-stage heart failure
patients. This type of device is often implanted near a patient's
native heart and assumes the pumping function of the weakened heart's
left ventricle. In many cases, heart transplantation would be the
treatment of choice for this type of patient. However, the low number
of donor hearts limits this treatment option.
We have reviewed the payment and DRG assignment for this type of
device many times in the past. The reader is referred to the August 1,
2002 IPPS final rule (67 FR 49989) for a complete listing of those
discussions.
In the August 1, 2002 final rule (67 FR 49990), we attempted to
clinically and financially align VAD procedures by creating new DRG 525
(Heart Assist System Implant). We also noted that cases in which a
heart transplant also occurred during the same hospitalization episode
would continue to be assigned to DRG 103 (Heart Transplant). At that
time, we announced that DRG 525 would consist of any principal
diagnosis in MDC 5, plus one of the following surgical procedure codes:
37.62, Insertion of nonimplantable heart assist system
37.63, Repair of heart assist system
[[Page 28207]]
37.65, Implant of external heart assist system
37.66, Insertion of implantable heart assist system
(To avoid confusion, we note that the titles of codes 37.62, 37.63,
37.65, and 37.66 have been revised for FY 2005 through the ICD-9-CM
Coordination and Maintenance Committee process as reflected in Table
6F, Revised Procedure Code Titles in the Addendum to this proposed
rule.)
Commenters on the May 19, 2003 proposed rule that preceded the
August 1, 2003 IPPS (FY 2004) final rule notified us that procedure
code 37.66 was neither a clinical nor a financial match to the rest of
the procedure codes now assigned to DRG 525. We did not modify DRG 525
for FY 2004. We agreed that we would continue to evaluate whether to
make further changes to DRG 525. After publication of the August 1,
2003 final rule, we again reviewed the MedPAR data concerning DRG 525,
and came to the conclusion that procedure code 37.62 is different in
terms of clinical procedures and resource utilization from the other
procedure codes assigned to DRG 525. Therefore, in a correction to the
August 1, 2003 IPPS (FY 2004) final rule, published on October 6, 2003
(68 FR 57733), we revised the composition of DRG 525 by correcting the
assignment of procedures to DRG 525 in light of the lower charges
associated with procedure code 37.62. We moved code 37.62 into DRG 104
(Cardiac Valve and Other Major Cardiothoracic Procedures With Cardiac
Catheterization) and DRG 105 (Cardiac Valve and Other Major
Cardiothoracic Procedures Without Cardiac Catheterization), and left
procedure codes 37.63, 37.65, and 37.66 in DRG 525.
In addition, we have evaluated a request for expanded coverage for
VADs and LVADs as destination (or permanent) therapy for end-stage
heart failure patients who are not candidates for heart
transplantation. VADs and LVADs had been approved for support of blood
circulation post-cardiotomy (effective for services performed on or
after October 18, 1993) and as a bridge to heart transplant (effective
for services performed on or after January 22, 1996) to assist a
damaged or weakened heart in pumping blood. The criteria that must be
fulfilled in order for Medicare coverage to be provided for these
purposes have been previously discussed in the August 1, 2000 final
rule (65 FR 47058), and can also be accessed online at: http://www.cms.gov/manuals/pm_trans/r2ncd1.pdf
.
As a result of that review, effective for services performed on or
after October 1, 2003, VADs have been approved as destination therapy
for patients requiring permanent mechanical cardiac support. Briefly,
VADs used for destination therapy are covered only if they have
received approval from the FDA for that purpose, and the device is used
according to the FDA-approved labeling instructions. VADs are covered
for patients who have chronic end-stage heart failure (New York Heart
Association Class IV end-stage left ventricular failure for at least 90
days with a life expectancy of less than 2 years). Implanting
facilities as well as patients must also meet all of the additional
conditions that are listed in the national coverage determination for
artificial hearts and related devices, which is posted on the above CMS
Web site.
In light of the new indication of destination therapy, we again
reviewed the FY 2003 MedPAR data for all cases in which a VAD had been
implanted, using the criterion of any case containing a procedure code
of 37.66. We found a total of 65 cases in 3 DRGs: DRG 103 (Heart
Transplant); DRG 483 (Tracheostomy With Mechanical Ventilation 96+
Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses);
and DRG 525 (Heart Assist System Implant). The following table displays
our findings:
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG with code 37.66 reported Count of stay charges
----------------------------------------------------------------------------------------------------------------
103............................................................. 14 77.36 $836,011
483............................................................. 6 100.50 1,400,706
525............................................................. 45 38.93 308,725
----------------------------------------------------------------------------------------------------------------
The remaining 354 cases in DRG 103 that did not report code 37.66
had average charges of $282,578. The remaining 171 cases in DRG 525
that did not contain code 37.66 had an average length of stay of 12.39
days and average charges of $168,388. The 45 cases in DRG 525 with code
37.66 accounted for 26 percent of the cases. However, the average
charges for these cases are approximately $140,340 higher than the
average charges for cases in DRG 525 that did not report code 37.66.
Commenters on the FY 2004 final rule suggested adding code 37.66 to
DRG 103. We were concerned with the timing of that comment, as it was
received after publication of the proposed rule. We noted that the
commenter's suggestions on the structure of the DRGs involved were
significant, and that change of that magnitude should be subject to
public review and comment. We also noted that we would evaluate the
suggestion further. (68 FR 45370) However, as one of the indications
for this device has become destination therapy, and as this new
indication is more clinically aligned with DRG 103, we are proposing to
remove procedure code 37.66 from DRG 525 and assign it to DRG 103. We
also are proposing to change the title of DRG 103 to ``Heart Transplant
or Implant of Heart Assist System''. The proposed restructured DRG 103
would include any principal diagnosis in MDC 5, plus one of the
following surgical procedure codes:
33.6, Combined heart-lung transplantation
37.51, Heart transplantation
37.66, Insertion of implantable heart assist system
In addition to the proposed changes to DRG 103, we are proposing to
change the title of DRG 525 to ``Other Heart Assist System Implant''.
In conjunction with the above data review, we also looked at DRGs
104 and 105.
DRGs 104 and 105 had been restructured in FY 2003 by assigning code
37.62 to them. (Note: The code title for 37.62 has been revised,
effective FY 2005, as reflected in Table 6F of the Addendum to this
proposed rule). We examined the MedPAR data and found that the average
charges were $113,667 and $82,899, respectively, for DRGs 104 and 105
for cases not reporting code 37.62, while cases containing code 37.62
had average charges of $124,559 and $166,129, respectively.
The removal of code 37.66 from DRG 525 would have the effect of
clinically realigning that DRG to be more coherent. As a result of the
proposal to remove code 37.66 from DRG 525 and assign it to DRG 103, we
also are proposing to remove code 37.62 from DRGs 104 and 105 and
assign it back into DRG 525. In addition, the average
[[Page 28208]]
charges for code 37.62 shown above in DRGs 104 and 105 ($124,559 and
$166,129) more closely match the average charges reported for the 171
cases in DRG 525, absent code 37.66 ($168,388).
The proposed restructured DRG 525 would include any principal
diagnosis in MDC 5, plus the following surgical procedure codes:
37.52, Implantation of total replacement heart system*
37.53, Replacement or repair of thoracic unit of total
replacement heart system*
37.54, Replacement or repair of other implantable component of
total replacement heart system*
37.62, Insertion of nonimplantable heart assist system
37.63, Repair of heart assist system
37.65, Implant of external heart assist system
*These codes represent noncovered services for Medicare beneficiaries.
However, it is our longstanding practice to assign every code in the
ICD-9-CM classification to a DRG. Therefore, they have been assigned to
DRG 525.
b. Cardiac Resychronization Therapy and Heart Failure
We received a request from a manufacturer of a Cardiac
Resynchronization Therapy Defibrillator (CRT-D) device for a
modification to DRG 535 (Cardiac Defibrillator Implant With Cardiac
Catheterization With Acute Myocardial Infarction/Heart Failure/Shock)
and DRG 536 (Cardiac Defibrillator Implant With Cardiac Catheterization
Without Acute Myocardial Infarction/Heart Failure/Shock). The commenter
pointed out that defibrillator device implantations, including the CRT-
D type of defibrillator, are assigned to DRG 535 when the patient also
has a cardiac catheterization and has either an acute myocardial
infarction, heart failure, or shock as a principal diagnosis. If the
patient receiving the defibrillator implant and cardiac catheterization
does not have a principal diagnosis of acute myocardial infarction,
heart failure, or shock, the cases are assigned to DRG 536.
The commenter requested that cases be assigned to DRG 535 when the
patient has heart failure as either a principal diagnosis or a
secondary diagnosis. The commenter stated that patients receive a CRT-D
(as opposed to other types of defibrillators) when they have both heart
failure and arrhythmia. The commenter was concerned that some coders
may sequence the heart failure as a secondary diagnosis, which would
result in the patient being assigned to DRG 536.
As stated earlier, DRGs 535 and 536 are split based on the
principal diagnosis of acute myocardial infarction, heart failure, or
shock. Cases are not assigned to DRG 535 when heart failure is a
secondary diagnosis.
The commenter described a scenario where a patient was admitted
with heart failure for an evaluation of the need for a CRT-D
implantation. The hospitalization studies indicated that the patient
had a ventricular tachycardia. The commenter indicated that coders
would be confused as to which code should be listed as the principal
diagnosis.
CMS' review of this scenario as described would be that the heart
failure led to the admission and would be the principal diagnosis. This
case would properly be assigned to DRG 535. Furthermore, when two
conditions are considered to be equally responsible for the admission,
either one of the two conditions may be selected as the principal
diagnosis.
The commenter also stated that its own study shows CRT-D patients
have significantly higher charges than do other patients in DRGs 535
and 536 who receive an implantable defibrillator. This was the case
whether heart failure was used as a principal or secondary diagnosis.
A cardiac catheterization is a diagnostic procedure 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 examined the MedPAR file for all cases in DRGs 535 and 536 and
only cases in DRG 536 in which acute myocardial infarction or heart
failure was listed as a secondary diagnosis. The following chart
illustrates the results of our findings:
----------------------------------------------------------------------------------------------------------------
Average length of
DRGs Count stay Average charges
----------------------------------------------------------------------------------------------------------------
535.................................................... 6,801 9.50 $110,663.57
536--All cases......................................... 17,454 5.47 89,493.85
536--Cases With Secondary Diagnosis of Cardiac 8,562 6.5 94,832.14
Defibrillator Implant With Cardiac Catheterization
Without Acute Myocardial Infarction/Heart Failure/
Shock.................................................
----------------------------------------------------------------------------------------------------------------
The data show that cases with a secondary diagnosis of acute
myocardial infarction or heart failure have average charges
($94,832.14) closer to the overall average charges for DRG 536
($89,493.85) where they are currently assigned. Overall charges for DRG
535 were $110,663.57. We do not believe these data support modifying
DRG 535 and DRG 536 as requested. Many of the CRT-D patients who are
admitted for heart failure would be assigned into DRG 535. Furthermore,
modifying the DRG logic for one specific type of defibrillator (CRT-D)
is not consistent with our overall policy of grouping similar types of
patients together in the same DRG. In addition, to modify the DRG logic
for the small percentage of cases where there might be confusion
concerning the selection of the principal diagnosis does not seem
prudent. Therefore, we are not proposing a modification to DRG 535 or
536 for CRT-Ds.
c. Combination Cardiac Pacemaker Devices and Lead Codes
We received a comment that recommended that we include additional
combination procedure codes representing cardiac pacemaker device and
lead codes under DRG 115 (Permanent Cardiac Pacemaker Implant With
Acute Myocardial Infarction, Heart Failure, or Shock or ACID Lead or
Generator Procedures) and DRG 116 (Other Permanent Cardiac Pacemaker
Implant). DRGs 115 and 116 are assigned when a complete pacemaker unit
with leads is implanted. Combinations of pacemaker devices and lead
codes that would lead to the DRG assignment are listed under DRGs 115
and 116. The commenter recommended that the following pacemaker device
and lead procedure code combinations be added to these two DRGs:
00.53 & 37.70
[[Page 28209]]
00.53 & 37.71
00.53 & 37.72
00.53 & 37.73
00.53 & 37.74
00.53 & 37.76
These codes are defined as follows:
00.53, Implantation or replacement of cardiac
resynchronization pacemaker, pulse generator only [CRT-P]
37.70, Initial insertion of pacemaker lead [electrode], not
otherwise specified
37.71, Initial insertion of transvenous lead [electrode] into
ventricle
37.72, Initial insertion of transvenous lead [electrode] into
atrium and ventricle
37.73, Initial insertion of transvenous lead [electrode] into
atrium
37.74, Initial insertion or replacement of epicardial lead
[electrode] into epicadium
37.76, Replacement of transvenous atrial and/or ventricular
lead(s) [electrode]
We have consulted our medical advisors and they agree that these
recommended procedure code combinations also describe pacemaker device
and lead implantations and should be included under DRGs 115 and 116.
Therefore, we are proposing to add the recommended procedure code
combinations to the list of procedure code combinations under DRGs 115
and 116.
4. MDC 6 (Diseases and Disorders of the Digestive System): Artificial
Anal Sphincter
In the FY 2003 IPPS final rule (67 FR 50242), we created two new
codes for procedures involving an artificial anal sphincter, effective
for discharges occurring on or after October 1, 2002: code 49.75
(Implantation or revision of artificial anal sphincter) that is used to
identify cases involving implantation or revision of an artificial anal
sphincter and code 49.76 (Removal of artificial anal sphincter) that is
used to identify cases involving the removal of the device. In Table 6B
of that final rule, we assigned both codes to one of four MDCs, based
on principal diagnosis, and one of six DRGs within those MDCs. In the
August 1, 2003 IPPS final rule (68 FR 45372), we discussed the
assignment of these codes in response to a request we had received to
consider reassignment of these two codes to different MDCs and DRGs.
The requester believed that the average charges ($44,000) for these
codes warranted reassignment. In the August 1, 2003 IPPS final rule, we
stated that we did not have sufficient MedPAR data available on the
reporting of codes 49.75 and 49.76 to make a determination on DRG
reassignment of these codes. We agreed that, if warranted, we would
give further consideration to the DRG assignments of these codes
because it is our customary practice to review DRG assignment(s) for
newly created codes to determine clinical coherence and similar
resource consumption after we have had the opportunity to collect
MedPAR data on utilization, average length of stay charges, and
distribution throughout the system.
Therefore, we reviewed the FY 2003 MedPAR data for the presence of
codes 49.75 and 49.76. We then arrayed the results by DRG, count,
average length of stay, charges, and the presence or absence of a
secondary diagnosis that could be classified as a CC. We found that
there were a total of 13 cases in 5 total DRGs with CCs, and 9 cases in
4 total DRGs without CCs, for a total of 22 cases that reported these
procedure codes. We had anticipated that the majority of cases would
have been found in DRGs 157 (Anal and Stomal Procedures With CC) and
158 (Anal and Stomal Procedures Without CC), but found only 2 cases
grouped to DRG 157 and 4 cases grouped to DRG 158. Our data showed
average charges of $22,374 for the cases with CC, and average charges
of $20,831 for the cases without CC. Average charges for DRG 157 were
$18,196, while average charges for DRG 158 were $9,348.
Our medical advisors also reviewed the contents of DRGs 157 and
158. The consensus was that codes 49.75 and 49.76 are not a clinical
match to the other procedure codes found in these two DRGs. The other
procedure codes in DRGs 157 and 158 are for simpler and less invasive
procedures. In some circumstances, these procedures could potentially
be performed in an outpatient setting or in a physician's office. Our
medical advisors determined that clinical coherence was not
demonstrated and recommended that we move these codes to DRGs 146
(Rectal Resection With CC) and 147 (Rectal Resection Without CC), as
these anal sphincter procedures more closely resemble the procedures in
these DRGs. In addition, the average charges for paired DRG 146
($33,853) and DRG 147 ($21,747) more closely resemble the actual
average charges found in the MedPAR data for these cases.
Even though there are few reports of codes 49.75 and 49.76 in the
MedPAR data and we do not anticipate a significant increase in
utilization of these procedures, we are proposing that these two codes
would only be removed from paired DRG 157 and 158 and reassigned to
paired DRG 146 and 147 under MDC 6 (Diseases and Disorders of the
Digestive System). All other MDC and DRG assignments for codes 49.75
and 49.76 would remain the same.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. 360 Spinal Fusions
We received a comment that suggested procedure code 81.61 (360
Spinal fusion) should not be included in DRG 496 (Combined Anterior/
Posterior Spinal Fusion). The commenter stated that code 81.61 does not
represent the same types of cases as other codes included in DRG 496.
The commenter indicated that cases reported with code 81.61 involve
making only one incision, and then fusing both the anterior and
posterior portion of the spine. All other cases in DRG 496 involve two
separate surgical approaches used to reach the site of the spinal
fusion. For these other patients, an incision is made into the patient,
and a fusion is made in part of the spine. The patient is then turned
over and a separate incision is made so that a fusion can be made in
another part of the spine. The commenter added that these two separate
incisions and fusions are more time consuming than the single incision
used for code 81.61. The commenter also stated that patients receiving
the two surgical approaches have a longer recovery period and use more
hospital resources.
We examined data in the MedPAR file for cases assigned to DRG 496
and found the following:
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG Count of stay charges
----------------------------------------------------------------------------------------------------------------
496--All Cases.................................................. 2,706 8.0 $74,967.33
496--Cases with code 81.61...................................... 829 4.7 50,659.69
496--Cases with code 81.61 with CC.............................. 451 5.4 55,639.50
496--Cases with code 81.61 without CC........................... 378 3.8 44,718.16
496--Cases without 81.61........................................ 1877 9.4 85,703.09
----------------------------------------------------------------------------------------------------------------
[[Page 28210]]
We also examined cases in related DRG 497 (Spinal Fusion Except
Cervical With CC) and DRG 498 (Spinal Fusion Except Cervical Without
CC) in which code 81.61 was not reported. The chart below reflects our
findings.
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG Count of stay charges
----------------------------------------------------------------------------------------------------------------
497............................................................. 16,965 6.19 $49,315.27
498............................................................. 11,598 3.95 37,450.68
----------------------------------------------------------------------------------------------------------------
These data clearly show that cases with code 81.61 have
significantly less average charges than other cases in DRG 496 that
have two surgical approaches. Cases with code 81.61 are more closely
aligned with cases in DRG 497 and DRG 498. Furthermore, including code
81.61 will have the effect of lowering the relative weights for DRG 496
in future years. Therefore, we are proposing to remove code 81.61 from
DRG 496 and reassign it to DRGs 497 and 498.
b. Multiple Level Spinal Fusion
On October 1, 2003 (68 FR 45596), the following new ICD-9-CM
procedure codes were created to identify the number of levels of
vertebra fused during a spinal fusion procedure:
81.62, Fusion or refusion of 2-3 vertebrae
81.63, Fusion or refusion of 4-8 vertebrae
81.64, Fusion or refusion of 9 or more vertebrae
Prior to the creation of these new codes, 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. In the August 1, 2003 final rule, we discussed the creation
of these new codes and the lack of sufficient MedPAR data with the new
multiple level spinal fusion codes (68 FR 45369). The commenter had
conducted an analysis and submitted data to support redefining the
spinal fusion DRGs. The analysis found that increasing the levels fused
from 1 to 2 levels to 3 levels or more levels increased the mean
standardized charges by 38 percent for lumbar/thoracic fusions, and by
47 percent for cervical 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); DRG
519 (Cervical Spinal Fusion With CC) and DRG 520 (Cervical Spinal
Fusion Without CC). However, the difference in charges associated with
the current CC split was only slightly greater than the difference
attributable to the number of levels fused as found by the commenter's
analysis. In addition, adopting the commenter's recommendation would
have necessitated adjusting the DRG relative weights using non-MedPAR
data because Medicare claims data with the new ICD-9-CM codes would not
have been available until the FY 2003 MedPAR file. Therefore, at that
time, we did not redefine the spinal fusion DRGs to differentiate on
the basis of the number of levels of vertebrae involved in a spinal
fusion procedure.
We did not yet have any reported cases utilizing the new multilevel
spinal fusion codes in our data. We stated that we would wait until
sufficient data with the new multilevel spinal fusion codes were
available before making a final determination on whether multilevel
spinal fusions should be incorporated into the spinal fusion DRG
structure. The codes went into effect on October 1, 2003 and we have
not received any data using these codes. Spinal surgery is an area of
rapid changes. In addition, we have created a series of new procedure
codes that describe a new type of spinal surgery, spinal disc
replacement. (See codes 84.60 through 84.69 in Table 6B in the Addendum
to this proposed rule that will go into effect on October 1, 2004.) Our
medical advisors describe this new surgical procedure as a more
conservative approach for back pain than the spinal fusion surgical
procedure. With only limited data concerning multiple level spinal
fusion and the rapid changes in spinal surgery, we believe it is more
prudent not to propose the establishment of new DRGs based on the
number of levels of vertebrae involved in a spinal fusion procedure at
this time.
In addition, no other surgical DRG is split based on the number of
procedures performed. For instance, the same DRG is assigned whether
one or more angioplasties are performed on a patient's arteries. The
insertion of multiple stents within an artery does not result in a
different DRG assignment. Similarly, the excision of neoplasms from
multiple sites does not lead to a different DRG assignment. To begin
splitting DRGs based on the number of procedures performed or devices
inserted could set a new and significant precedent for DRG policy.
Therefore, while we will continue to study this area, we are not
proposing to redefine the spinal fusion DRGs based on the number of
levels of vertebrae fused at this time.
6. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
We continue to receive comments that MDC 15 (Newborn and Other
Neonates With Conditions Originating in the Perinatal Period) does not
adequately capture care provided for newborns and neonates by
hospitals. The commenters point out that we have not updated the DRGs
within MDC 15 as we have for other parts of the DRG system.
Our primary focus of updates to the Medicare DRG classification
system is on changes relating to the Medicare patient population, not
the pediatric or neonatal patient populations. However, we acknowledge
the Medicare DRGs are sometimes used to classify other patient
populations. Over the years, we have received comments about aspects of
the Medicare newborn DRGs that appear problematic, and we have
responded to these on an individual basis. In the May 9, 2002 IPPS
proposed rule (67 FR 31413), we proposed extensive changes to multiple
DRGs within MDC 15. Because of our limited data and experience with
newborn cases under Medicare, we contacted the National Association of
Children's Hospitals and Related Institutions (NACHRI) to obtain
proposals for possible revisions of the DRG categories within MDC 15.
We received extensive comments opposing these revisions. Therefore, we
did not implement the proposals.
We advise those non-Medicare systems that need a more up-to-date
system to choose from other systems that are currently in use in this
country, or to develop their own modifications. As previously stated,
we do not have the data or the expertise to develop more extensive
newborn and pediatric DRGs. Our mission in maintaining the Medicare
DRGs is to serve the Medicare population. Therefore, we will make only
minor corrections of obvious errors to the DRGs within MDC 15. At this
time, we do not plan to conduct a more extensive analysis involving
major revisions to these DRGs.
In the IPPS final rule for FY 2004 (68 FR 45360), we added heart
failure
[[Page 28211]]
diagnosis codes 428.20 through 428.43 to the list of secondary
diagnosis of major problem under DRG 387 (Prematurity With Major
Problems) and DRG 389 (Full-Term Neonate With Major Problems). We
received a comment after the August 1, 2003 final rule stating that we
should add the following list of combination codes, which also include
heart failure, to the list of major problems under DRGs 387 and 389:
398.91, Rheumatic heart failure (congestive)
402.01, Malignant hypertensive heart disease, with heart
failure
402.11, Benign hypertensive heart disease, with heart failure
402.91, Unspecified hypertensive heart disease, with heart
failure
404.01, Malignant hypertensive heart and renal disease, with
heart failure
404.03, Malignant hypertensive heart and renal disease, with
heart failure and renal failure
404.11, Benign hypertensive heart and renal disease, with
heart failure
404.13, Benign hypertensive heart and renal disease, with
heart failure and renal failure
404.91, Unspecified hypertensive heart and renal disease, with
heart failure
404.93, Unspecified hypertensive heart and renal disease, with
heart failure and renal failure.
428.9, Heart failure, unspecified
We agree that the codes listed above also include heart failure and
should also be added to DRGs 387 and 389 as major problems. Therefore,
we are proposing to add the heart failure codes listed above to DRGs
387 and 389 as major problems.
7. MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental
Disorders): Drug-Induced Dementia
We received a request from a commenter that we remove the principal
diagnosis code 292.82 (Drug-induced dementia) from MDC 20 (Alcohol/Drug
Use and Alcohol/Drug Induced Organic Mental Disorders) and the
following DRGs under MDC 20:
DRG 521 (Alcohol/Drug Abuse or Dependence With CC)
DRG 522 (Alcohol/Drug Abuse or Dependence With Rehabilitation
Therapy Without CC)
DRG 523 (Alcohol/Drug Abuse or Dependence Without
Rehabilitation Therapy Without CC)
The commenter indicated that a patient who has a drug-induced
dementia should not be classified to an alcohol/drug DRG. However, the
commenter did not propose a new DRG assignment for code 292.82.
Our medical advisors have evaluated the request and determined that
the most appropriate DRG classification for a patient with drug-induced
dementia would be within MDC 20. The medical advisors indicated that
because this mental condition is drug induced, it is appropriately
classified to DRGs 521 through 523 in MDC 20. Therefore, we are not
proposing a new DRG classification for the principal diagnosis code
292.82.
8. MDC 22 (Burns): Burn Patients on Mechanical Ventilation
We have received concerns 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 Pre-MDC DRG 482 (Tracheostomy for
Face, Mouth, and Neck Diagnoses) or DRG 483 (Tracheostomy With
Mechanical Ventilation 96+ Hours or Principal Diagnosis 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+ hours)
for the first time in the DRG assignment (67 FR 49996). The
modification was partially in response to concerns that hospitals could
omit diagnosis codes indicating face, mouth, or neck diagnoses in order
to have cases assigned to DRG 483 rather than the much lower paying DRG
482 (the payment for DRG 483 is more than four times greater than the
DRG 482 payment weight). In addition, 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. The
modification was the first attempt to refine DRGs 482 and 483 so that
patients who receive long-term mechanical ventilation for more than 96
hours are differentiated from those who receive mechanical ventilation
for less than 96 hours. The modification was intended to ensure that
patients who have a tracheostomy and continuous mechanical ventilation
greater than 96 hours (code 96.72) would be assigned to DRG 483. By
making the GROUPER recognize long-term mechanical ventilation and
assigning those patients to the higher weighted DRG 483, we encouraged
hospitals to be more aware of the importance of reporting code 96.72
and to increase reporting of code 96.72 when, in fact, patients had
been on the mechanical ventilator for greater than 96 hours. We stated
in the August 1, 2002 final rule that, once we received more accurate
data, we would give consideration to further modifying DRGs 482 and 483
based on the presence of code 96.72.
To assess the DRG payments for burn patients on mechanical
ventilation, we analyzed FY 2003 MedPAR data for burn cases in the
following DRGs to determine the frequency for which these burn cases
were treated with continuous mechanical ventilation for 96 or more
consecutive hours (code 96.72):
DRG 483 (Tracheostomy With Mechanical Ventilation 96+ Hours or
Principal Diagnosis Except Face, Mouth, and Neck Diagnoses)
DRG 504 (Extensive 3rd Degree Burns With Skin Graft)
DRG 505 (Extensive 3rd Degree Burns Without Skin Graft)
DRG 506 (Full Thickness Burn With Skin Graft or Inhalation
Injury With CC or Significant Trauma)
DRG 507 (Full Thickness Burn With Skin Graft or Inhalation
Injury Without CC or Significant Trauma)
DRG 508 (Full Thickness Burn Without Skin Graft or Inhalation
Injury With CC or Significant Trauma)
DRG 509 (Full Thickness Burn Without Skin Graft or Inhalation
Injury Without CC or Significant Trauma)
DRG 510 (Nonextensive Burns With CC or Significant Trauma)
DRG 511 (Nonextensive Burns Without CC or Significant Trauma)
The following chart summarizes those findings:
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG Count of stay charges
----------------------------------------------------------------------------------------------------------------
483--All cases.................................................. 31,754 37.68 $210,631.94
483--Cases with code 96.72 reported............................. 19,669 36.54 195,171.66
[[Page 28212]]
483--Cases without code 96.72 reported.......................... 12,085 39.52 235,794.39
504--All cases.................................................. 98 30.54 191,645.49
504--Cases with code 97.62 reported............................. 19 25.79 264,095.16
504--Cases without code 96.72 reported.......................... 79 31.68 174,220.89
505--All cases.................................................. 119 2.96 18,619.78
505--Cases with code 96.72 reported............................. 20 7.70 42,613.00
505--Cases without code 96.72 reported.......................... 99 2.00 13,772.67
506--All cases.................................................. 754 16.15 61,370.63
506--Cases with code 96.72 reported............................. 54 20.13 138,272.46
506--Cases without code 96.72 reported.......................... 700 15.85 55,438.20
507--All cases.................................................. 236 8.78 25,891.89
507--Cases with code 96.72 reported............................. 1 38.00 137,132.00
507--Cases without code 96.72 reported.......................... 235 8.66 25,418.53
508--All cases.................................................. 448 7.02 18,332.46
508--Cases with code 96.72 reported............................. 5 10.40 83,171.80
508--Cases without code 96.72 reported.......................... 443 6.98 17,600.64
509--All cases.................................................. 117 4.32 8,994.71
509--Cases with code 96.72 reported............................. 0 0 0
509--Cases without code 96.72 reported.......................... 117 4.32 8,994.71
510--All cases.................................................. 1,209 6.90 18,457.21
510--Cases with code 96.72 reported............................. 21 20.52 93,925.62
510--Cases without code 96.72 reported.......................... 1,188 6.66 17,123.18
511--All cases.................................................. 413 4.18 10,046.89
511--Cases with code 96.72 reported............................. 0 0 0
511--Cases without code 96.72 reported.......................... 413 4.18 10,046.89
----------------------------------------------------------------------------------------------------------------
We found 120 cases that reported code 96.72 within the 3,394 burn
DRG cases (DRGs 504 through 511). Cases reporting code 96.72 have
significantly longer average lengths of stay and average charges. The
majority (54) of these cases that reported code 96.72 were in DRG 506.
The cases with code 96.72 reported had average charges approximately
1.5 times higher than other cases in DRG 506 without code 96.72.
We noted that there were 21 cases that reported code 96.72 within
DRG 510. Since the 21 patients were on continuous mechanical
ventilation for 96 consecutive hours or more, it seems surprising that
the principal diagnosis was listed as one of the nonextensive burn
codes included in DRG 510. A closer review of these cases shows some
questionable coding and reporting of information. It would appear that
hospitals did not always correctly select the principal diagnosis (the
reason after study that led to the hospital admission). For instance,
one admission was for a second-degree burn of the ear. This patient was
on a ventilator for over 96 hours. It would appear that the reason for
the admission was a diagnosis other than the burn of the ear. Other
cases where the patient received long-term mechanical ventilation
included those with a principal diagnosis of first degree burn of the
face, second degree burn of the nose, second degree burn of the lip,
and an unspecified burn of the foot. These four cases reported average
charges ranging from $48,551 to $186,824 and had lengths of stay
ranging from 8 to 36 days.
The impact of long-term mechanical ventilation is quite clear on
burn cases as was shown by the data above. Therefore, we are proposing
to modify the burn DRGs 504 through 509 under MDC 22 to recognize this
impact. We are proposing to modify DRG 504 and DRG 505 so that code
96.72 will be assigned to these DRGs when there is a principal
diagnosis of extensive third degree burns or full thickness burns
(those cases currently assigned to DRGs 504 through 509). In other
words, when cases currently in DRGs 506 through 509 also have code
96.72 reported, they would now be assigned to DRGs 504 or 505. We are
proposing to modify the titles of DRGs 504 and 505 to reflect the
proposed changes in reporting code 96.72 as follows:
Proposed DRG 504 (Extensive Burns or Full Thickness Burns With
Mechanical Ventilation 96+ Hours With Skin Graft)
Proposed DRG 505 (Extensive Burns or Full Thickness Burns With
Mechanical Ventilation 96+ Hours Without Skin Graft)
Cases currently assigned to DRGs 504 and 505 that do not entail 96+
hours of mechanical ventilation will continue to be assigned to DRGs
504 and 505 because they would have extensive burns, as required by the
DRG logic.
We are not proposing to include DRG 510 and DRG 511 within this
revised DRG logic. Cases currently assigned to DRG 510 or DRG 511 that
also report code 96.72 would not be reassigned to DRGs 504 and 505. We
recommend that hospitals examine cases that are assigned to DRG 510 or
DRG 511 and that have code 96.72 to determine if there are possible
coding problems or other issues. As stated earlier, in examining
reported cases within DRG 510, we noted several cases with code 96.72
that appear to have an incorrect principal diagnosis. It would appear
that the principal diagnosis may more appropriately be related to an
inhalation injury, if the injury was present at the time of admission.
We are specifically seeking comments on our proposal to move cases
reporting code 96.72 from DRGs 506 through 509 and assign them to DRGs
504 and 505. We also are seeking comments on our proposal not to
include DRGs 510 and 511 in this proposed revision.
9. Pre-MDC: Tracheostomy
In the August 1, 2002 IPPS final rule (67 FR 49996), for FY 2003,
we modified DRG 482 (Tracheostomy for Face, Mouth, and Neck Diagnoses)
and DRG 483 (Tracheostomy With Mechanical Ventilation 96+ Hours or
Principal Diagnosis Except Face, Mouth, and Neck Diagnoses) to
recognize procedure code 96.72 (Continuous mechanical ventilation 96+
hours) in the DRG 483 assignment. As discussed earlier, we were
concerned about an underreporting of code 96.72 and wanted to encourage
increased reporting of this code.
We examined cases in the MedPAR file in which code 96.72 was
reported
[[Page 28213]]
within DRGs 482 and 483. The following chart illustrates the average
charges and lengths of stays for cases within DRGs 482 and 483 with and
without code 96.72 reported:
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG Count of stay charges
----------------------------------------------------------------------------------------------------------------
482--All cases.................................................. 3,557 11.77 $45,419.10
482--Cases with code 96.72...................................... 22 31.64 137,880.41
482--Cases without code 96.72................................... 3,535 11.64 44,843.67
483--All cases.................................................. 31,754 37.68 210,631.94
483--Cases with code 96.72...................................... 19,669 36.54 195,171.66
483--Cases without code 96.72................................... 12,085 39.52 235,794.39
----------------------------------------------------------------------------------------------------------------
Of the 3,557 cases reported in DRG 482, only 22 cases reported code
96.72. These 22 cases did not have a tracheostomy performed. All 22
cases reported code 30.4 (Laryngectomy), which also leads to an
assignment of DRG 482. It would appear that the long-term mechanical
ventilation was performed through an endotracheal tube instead of
through a tracheostomy. While the average charges for DRG 482 cases
with code 96.72 reported were significantly higher than the average
charges for other cases in the DRG, we do not believe that the very
limited number of cases (22) warrants proposing a DRG modification.
Therefore, we are not proposing any modification for DRG 482 at this
time. We will continue to monitor cases assigned to this DRG.
In DRG 483, 19,669 cases were reported with code 96.72. However,
the data were counter-intuitive. While one would expect to find higher
average charges for cases reported with code 96.72, the opposite is the
case. Cases in DRG 483 reported with code 96.72 had average charges
that were $40,623 lower than those not reported with code 96.72.
Clearly, the presence or absence of code 96.72 does not explain
differences in charges for patients within DRG 483.
As stated earlier, we are concerned that hospitals may not always
report code 96.72 because of space limitations. The electronic billing
system limits the number of procedure codes that can be reported to six
codes. We then looked at whether or not another major O.R. procedure is
performed in addition to a tracheostomy. The DRG 483 logic requires
that all patients assigned to DRG 483 have a tracheostomy. We examined
cases in DRG 483 in the MedPAR file and discovered that those patients
in DRG 483 who have a major procedure performed in addition to the
tracheostomy have higher charges. A major procedure is a procedure
whose code is included on the list that would be assigned to DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), except for
tracheostomy codes 31.21 and 31.29. Currently, this additional O.R.
procedure does not affect the DRG assignment for cases assigned to DRG
483. The following chart reflects our findings.
----------------------------------------------------------------------------------------------------------------
Average length Average
DRG Count of stay Charges
----------------------------------------------------------------------------------------------------------------
483--All Cases.................................................. 31,754 37.68 $210,631.94
483--Cases with major O.R. procedure............................ 15,664 42.70 255,914.00
483--Cases without major O.R. procedure......................... 12,867 32.7 168,890.20
----------------------------------------------------------------------------------------------------------------
We found that cases of patients assigned to DRG 483 who had a major
procedure (in addition to the required tracheostomy) had average
charges that were $87,023 higher than the average charges for cases
without a major O.R. procedure and an average length of stay of 5 days
more than those without a major O.R. procedure. We found that the
performance of an additional major O.R. procedure helps to identify the
more expensive patients within DRG 483.
Therefore, as a result of our findings, we are proposing to modify
DRG 483 by dividing these cases into two new DRGs depending on whether
or not there is a major O.R. procedure reported (in addition to the
tracheostomy). We are proposing to delete DRG 483 and create two new
DRGs as follows:
Proposed new DRG 541 (Tracheostomy With Mechanical Ventilation
96+ Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses
With Major O.R. Procedure)
Proposed new DRG 542 (Tracheostomy With Mechanical Ventilation
96+ Hours or Principal Diagnosis Except Face, Mouth and Neck Diagnoses
Without Major O.R. Procedure)
We are specifically seeking comments on our proposal to delete DRG
483 and replace it with two proposed new DRGs by splitting the
assignment of cases on the basis of the performance of a major O.R.
procedure (in addition to the tracheostomy).
10. Medicare Code Editor (MCE) Changes
[If you choose to comment on issues in this section, please include
the caption ``Medicare Code Editor'' at the beginning of your comment.]
As explained under section II.B.1. of this preamble, the Medicare
Code Editor (MCE) is a software program that detects and reports errors
in the coding of Medicare claims data. In this proposed rule, we are
proposing to make changes to three of the edits in the MCE.
a. Edit 11 (Noncovered Procedures) in the MCE contains codes that
describe procedures for which Medicare does not provide reimbursement.
We received a request to remove procedure codes relating to stem cell
transplants from Edit 11 to conform the MCE edit to our published
coverage decisions in the Medicare Coverage Issues Manual. In
accordance with chapter 13, section 4 of the Program Integrity Manual
(PIM), contractor discretion exists to cover diagnoses that are not
explicitly stated in a national coverage decision as noncovered.
Specifically this section states: that ``a local medical review policy
(LMRP)'' must be clear, concise, properly formatted and not restrict or
conflict with NCDs or coverage provision in interpretive manuals. If an
NCD or coverage provision in an interpretive manual states that a given
[[Page 28214]]
item is ``covered for diagnoses/conditions A, B, and C,'' contractors
may not use that as a basis to develop LMRP to cover only ``diagnosis/
conditions A, B, C''. When an NCD or coverage provision in an
interpretive manual does not exclude coverage for other diagnoses/
conditions, contractors must allow for individual consideration unless
the LMRP supports automatic denial for some or all of those other
diagnoses/conditions.''
The national coverage decision on stem cell transplantation
provides for coverage of certain diagnoses and excludes coverage for
other diagnoses. However, the vast majority of diagnoses are not
mentioned as either covered or noncovered. In accordance with the
above-cited provision of the PIM, contractors must allow for individual
consideration of these diagnoses. Thus, they are not appropriate for
inclusion in the edit for noncovered procedures.
We agree that we need to make conforming changes relating to stem
cell transplants. Therefore, we are proposing the following restructure
of Edit 11:
This list contains ICD-9-CM procedure codes identified as
``Noncovered Procedures'' that are always considered noncovered
procedures:
11.71, Keratomileusis
11.72, Keratophakia
11.75, Radial keratotomy
11.76, Epikeratophakia
36.32, Other transmyocardial revascularization
37.35, Partial ventriculectomy
37.52, Implantation of total replacement heart system
37.53, Replacement or repair of thoracic unit of total
replacement heart system
37.54, Replacement or repair of other implantable component of
total replacement heart system
39.28, Extracranial-intracranial (EC-IC) vascular bypass
44.93, Insertion of gastric bubble (balloon)
50.51, Auxiliary liver transplant
52.83, Heterotransplant of pancreas
57.96, Implantation of electronic bladder stimulator
57.97, Replacement of electronic bladder stimulator
63.70, Male sterilization procedure, not otherwise specified
63.71, Ligation of vas deferens
63.72, Ligation of spermatic cord
63.73, Vasectomy
64.5, Operations for sex transformation, not elsewhere
classified
66.21, Bilateral endoscopic ligation and crushing of fallopian
tubes
66.22, Bilateral endoscopic ligation and division of fallopian
tubes
66.29, Other bilateral endoscopic destruction or occlusion of
fallopian tubes
66.31, Other bilateral ligation and crushing of fallopian
tubes
66.32, Other bilateral ligation and division of fallopian
tubes
66.39, Other bilateral destruction or occlusion of fallopian
tubes
98.52, Extracorporeal shockwave lithotripsy [ESWL] of the
gallbladder and/or bile duct
98.59, Extracorporeal shockwave lithotripsy of other sites
The following list contains ICD-9-CM procedure codes identified as
``Noncovered Procedures'' only when any of the following diagnoses are
present as either a principal or secondary diagnosis.
Procedure List
41.01, Autologous bone marrow transplant without purging
41.04, Autologous hematopoietic stem cell transplant without
purging
41.07, Autologous hematopoietic stem cell transplant with
purging
41.09, Autologous bone marrow transplant with purging
Principal or Secondary Diagnosis List
204.00, Acute lymphoid leukemia, without mention of remission
205.00, Acute myeloid leukemia, without mention of remission
206.00, Acute monocytic leukemia, without mention of remission
207.00, Acute erythremia and erythroleukemia, without mention
of remission
208.00, Acute leukemia of unspecified cell type, without
mention of remission
205.10, Acute myeloid leukemia, in remission
205.11, Chronic myeloid leukemia, in remission
The following list contains ICD-9-CM procedure codes identified as
``Noncovered Procedures'' only when any of the following diagnoses are
present as either a principal or secondary diagnosis.
Procedure List
41.02, Allogeneic bone marrow transplant with purging
41.03, Allogeneic bone marrow transplant without purging
41.05, Allogeneic hematopoietic stem cell transplant without
purging
41.08, Allogeneic hematopoietic stem cell transplant with
purging
Principal or Secondary Diagnosis List
203.00, Multiple myeloma, without mention of remission
203.01, Multiple myeloma, in remission
The following list contains ICD-9-CM procedure codes identified as
``Non-Covered Procedures'' except when there is at least one principal
or secondary diagnosis code present from both list 1 and list 2.
Procedure List
52.80, Pancreatic transplant, not otherwise specified
52.82, Homotransplant of pancreas
Procedure List 1
250.00, Diabetes mellitus without mention of complication,
type II [non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, not stated as uncontrolled
250.01, Diabetes mellitus without mention of complication,
type I [insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
250.02, Diabetes mellitus without mention of complication,
type II [non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, uncontrolled
250.03, Diabetes mellitus without mention of complication,
type I [insulin dependent type] [IDDM type] [juvenile type],
uncontrolled
250.10, Diabetes with ketoacidosis, type II [non-insulin
dependent type] [NIDDM type] [adult-onset type] or unspecified type,
not stated as uncontrolled
250.11, Diabetes with ketoacidosis, type I [insulin dependent
type] [IDDM] [juvenile type], not stated as uncontrolled
250.12, Diabetes with ketoacidosis, type II [non-insulin
dependent type] [NIDDM type] [adult-onset type] or unspecified type,
uncontrolled
250.13, Diabetes with ketoacidosis, type I [insulin dependent
type] [IDDM type] [juvenile type], uncontrolled
250.20, Diabetes with hyperosmolarity, type II [non-insulin
dependent type] [NIDDM type] [adult-onset type] or unspecified type,
not stated as uncontrolled
250.21, Diabetes with hyperosmolarity, type I [insulin
dependent type] [IDDM] [juvenile type], not stated as uncontrolled
250.22, Diabetes with hyperosmolarity, type II [non-insulin
dependent type] [NIDDM type] [adult-onset type] or unspecified type,
uncontrolled
250.23, Diabetes with hyperosmolarity, type I [insulin
dependent type] [IDDM] [juvenile type], uncontrolled
250.30, Diabetes with other coma, type II [non-insulin
dependent type]
[[Page 28215]]
[NIDDM type] [adult-onset type] or unspecified type, not stated as
uncontrolled
250.31, Diabetes with other coma, type I [insulin dependent
type] [IDDM] [juvenile type], not stated as uncontrolled
250.32, Diabetes with other coma, type II [non-insulin
dependent type] [NIDDM type] [adult-onset type] or unspecified type,
uncontrolled
250.33, Diabetes with other coma, type I [insulin dependent
type] [IDDM] [juvenile type], uncontrolled, type I [insulin dependent
type] [IDDM type] [juvenile type], uncontrolled
250.40, Diabetes with renal manifestation, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, not stated as uncontrolled
250.41, Diabetes with renal manifestation, type I [insulin
dependent type] [IDDM] [juvenile type], not stated as uncontrolled
250.42, Diabetes with renal manifestation, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, uncontrolled
250.43, Diabetes with renal manifestation, type I [insulin
dependent type] [IDDM type] [juvenile type], uncontrolled
205.50, Diabetes with ophthalmic manifestations, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, not stated as uncontrolled
205.51, Diabetes with ophthalmic manifestations, type I
[insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
205.52, Diabetes with ophthalmic manifestations, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, uncontrolled
205.53, Diabetes with ophthalmic manifestations, type I
[insulin dependent type] [IDDM type] [juvenile type], uncontrolled
250.60, Diabetes with neurological manifestations, type II
[non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, not stated as uncontrolled
250.61, Diabetes with neurological manifestations, type I
[insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
250.62, Diabetes with neurological manifestations, type II
[non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, uncontrolled
250.63, Diabetes with neurological manifestations, type I
[insulin dependent type] [IDDM type] [juvenile type], uncontrolled
250.70, Diabetes with peripheral circulatory disorders, type
II [non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, not stated as uncontrolled
250.71, Diabetes with peripheral circulatory disorders type I
[insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
250.72, Diabetes with peripheral circulatory disorders, type
II [non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, uncontrolled
250.73, Diabetes with peripheral circulatory disorders, type I
[insulin dependent type] [IDDM type] [juvenile type], uncontrolled
250.80, Diabetes with other specified manifestations, type II
[non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, not stated as uncontrolled
250.81, Diabetes with other specified manifestations, type I
[insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
250.82, Diabetes with other specified manifestations, type II
[non-insulin dependent type] [NIDDM type] [adult-onset type] or
unspecified type, uncontrolled
250.83, Diabetes with other specified manifestations, type I
[insulin dependent type] [IDDM] [juvenile type], uncontrolled
250.90, Diabetes with unspecified complication, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, not stated as uncontrolled
250.91, Diabetes with unspecified complication, type I
[insulin dependent type] [IDDM] [juvenile type], not stated as
uncontrolled
250.92, Diabetes with unspecified complication, type II [non-
insulin dependent type] [NIDDM type] [adult-onset type] or unspecified
type, uncontrolled
250.93, Diabetes with unspecified complication, type I
[insulin dependent type] [IDDM] [juvenile type], uncontrolled
Diagnosis List 2
403.01, Malignant hypertensive renal disease, with renal
failure
403.11, Benign hypertensive renal disease, with renal failure
403.91, Unspecified hypertensive renal disease, with renal
failure
404.02, Malignant hypertensive heart and renal disease, with
renal failure
404.03, Malignant hypertensive heart and renal disease, with
heart failure and renal failure
404.12, Benign hypertensive heart and renal disease, with
renal failure
404.13, Benign hypertensive heart and renal disease, with
heart failure and renal failure
404.92, Unspecified hypertensive heart and renal disease, with
renal failure
404.93, Unspecified hypertensive heart and renal disease, with
heart failure and renal failure
585, Chronic renal failure
V42.0, Organ or tissue replaced by transplant, kidney
V43.89, Organ or tissue replaced by other means, other
b. Edit 6 (Manifestations Not Allowed As Principal Diagnosis) in
the MCE contains codes that describe the manifestation of an underlying
disease, not the disease itself, and therefore, should not be used as a
principal diagnosis. The following codes describe manifestations of an
underlying disease; they should not be used as a principal diagnosis
according to ICD-9-CM coding convention. Therefore, we are proposing to
add the following diagnosis codes to Edit 6:
289.52, Splenic sequestration
571.3, Acute chest syndrome
785.52, Septic shock
Coding conventions in the ICD-9-CM Diagnostic Tabular List specify
that etiologic conditions be coded first.
c. Edit 9 (Unacceptable Principal Diagnoses) contains codes ``that
describe a circumstance which influences an individual's health status
but is not a current illness of injury; therefore, these codes are
considered unacceptable as a principal diagnosis.'' (This definition
can be found on page 1094 of the DRG Definitions Manual, Version 21.0).
Therefore, these codes are considered unacceptable as a principal
diagnosis. Last year, we became aware that two codes should be removed
from this list, as they can be legitimate causes for inpatient
admission. However, we were made aware of this too late in the process
to make a change to this edit prior to FY 2004. We will now be able to
make the necessary system changes before the start of FY 2005.
Therefore, in this proposed rule, we are proposing to remove the
following codes from Edit 9:
V53.01, Adjustment of cerebral ventricular (communicating)
shunt
V53.02, Adjustment of neuropacemaker (brain) (peripheral
nerve) (spinal cord)
11. Surgical Hierarchies
[If you choose to comment on the issues in this section, please
include the caption ``Surgical Hierarchies'' at the beginning of your
comment.]
[[Page 28216]]
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 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, we are
proposing modifications of the surgical hierarchy as set forth below.
At this time, we are proposing to revise the surgical hierarchy for
the pre-MDC DRGs and MDC 8 (Diseases and Disorders of the
Musculoskeletal System and Connective Tissue).
In the pre-MDC DRGs, we are proposing to reorder DRG 541
(Tracheostomy With Mechanical Ventilation 96+ Hours or Principal
Diagnosis Except Face, Mouth, and Neck Diagnoses With Major O.R.
Procedure) and DRG 542 (Tracheostomy With Mechanical Ventilation 96+
Hours or Principal Diagnosis Except Face, Mouth, and Neck Diagnoses
Without Major O.R. Procedure) above DRG 480 (Liver Transplant).
In MDC 8, we are proposing to--
Reorder DRG 496 (Combined Anterior/Posterior Spinal
Fusion), DRG 497 (Spinal Fusion Except Cervical With CC), and DRG 498
(Spinal Fusion Except Cervical Without CC) above DRG 471 (Bilateral or
Multiple Major Joint Procedures of the Lower Extremity).
Reorder DRG 519 (Cervical Spinal Fusion With CC) and DRG
520 (Cervical Spinal Fusion Without CC) above DRG 216 (Biopsies of the
Musculoskeletal System and Connective Tissue).
Reorder DRG 213 (Amputation for the Musculoskeletal System
and Connective Tissue Disorders) above DRG 210 (Hip and Femur
Procedures Except Major Joint Age > 17 With CC), DRG 211 (Hip and Femur
Procedures Except Major Joint Age > 17 Without CC), and DRG 212 (Hip
and Femur Procedures Except Major Joint Age 0-17).
Reorder DRG 499 (Back and Neck Procedures Except Spinal
Fusion With CC) and DRG 500 (Back and Neck Procedures Except Spinal
Fusion Without CC) above DRG 218 (Lower Extremity and Humerus
Procedures Except Hip, Foot, and Femur Age > 17 With CC), DRG 219
(Lower Extremity and Humerus Procedures Except Hip, Foot, and Femor Age
> 17 Without CC), and DRG 220 (Lower Extremity and Humerus Procedures
Except Hip, Foot, and Femur Age 0-17).
12. Refinement of Complications and Comorbidities (CC) List
[If you choose to comment on issues in this section, please include
the caption ``CC List'' at the beginning of your comment.]
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. At this time, we are not proposing to delete
any of the diagnosis codes on the CC list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
[[Page 28217]]
Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
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.
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another.
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.\1\
---------------------------------------------------------------------------
\1\ 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;
the August 1, 2002 final rule (67 FR 49998) for the FY 2003
revisions; and the August 1, 2003 final rule (68 FR 45364) for the
FY 2004 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.
---------------------------------------------------------------------------
We are proposing 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, 2004. (See section
II.B.15. of this preamble for a discussion of ICD-9-CM changes.) We are
proposing these changes in accordance with the principles established
when we created the CC Exclusions List in 1987.
Tables 6G and 6H in the Addendum to this proposed rule contain the
proposed revisions to the CC Exclusions List that would be effective
for discharges occurring on or after October 1, 2004. 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, 2004,
the indented diagnoses would 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, 2004, the indented diagnoses would be recognized by the GROUPER as
valid CCs for the asterisked principal diagnosis.
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 $152.50
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, 2001, 2002, 2003, and 2004) and those in Tables 6G
and 6H of this proposed rule for FY 2005 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, 2004. (Note:
There was no CC Exclusions List in FY 2000 because we did not make
changes to the ICD-9-CM codes for FY 2000.)
Alternatively, the complete documentation of the GROUPER logic,
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 21.0, is available for $225.00,
which includes $15.00 for shipping and handling. Version 22.0 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.
13. Review of Procedure Codes in DRGs 468, 476, and 477
[If you choose to comment on issues in this section, please include
the caption ``DRGs 468, 476, and 477'' at the beginning of your
comment.]
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:
60.0, Incision of prostate
60.12, Open biopsy of prostate
60.15, Biopsy of periprostatic tissue
60.18, Other diagnostic procedures on prostate and
periprostatic tissue
60.21, Transurethral prostatectomy
60.29, Other transurethral prostatectomy
60.61, Local excision of lesion of prostate
60.69, Prostatectomy, not elsewhere classified
60.81, Incision of periprostatic tissue
60.82, Excision of periprostatic tissue
60.93, Repair of prostate
60.94, Control of (postoperative) hemorrhage of prostate
60.95, Transurethral balloon dilation of the prostatic urethra
60.96, Transurethral destruction of prostate tissue by
microwave thermotherapy
60.97, Other transurethral destruction of prostate tissue by
other thermotherapy
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.\2\
---------------------------------------------------------------------------
\2\ In the August 1, 2003 final rule (68 FR 45365) we moved
several procedures from DRG 468 to DRGs 476 and 477 because the
procedures are nonextensive. 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.
---------------------------------------------------------------------------
[[Page 28218]]
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 procedures in DRG
477 that should be removed. Therefore, we are not proposing to move any
procedures from DRG 477 to one of the surgical DRGs.
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 a
comment we received in response to last year's proposed rule (68 FR
45366), we are proposing to move procedure code 51.23 (Laparoscopic
cholecystectomy) from DRG 468 (Extensive O.R. Procedure Unrelated to
Principal Diagnosis) into DRG 477 (Nonextensive O.R. Procedure
Unrelated to Principal Diagnosis).
The commenter suggested that a laparoscopic procedure was probably
not an extensive O.R. procedure; it was more likely a nonextensive O.R.
procedure. We agree and, therefore, are proposing this change. In
addition, we are proposing to add several new procedure codes to DRGs
476 and 477. These procedures are also listed on Table 6B--New
Procedure Codes in the Addendum to this proposed rule. However, DRGs
476 and 477 are not limited to one MDC, so the new codes are also
included here for nonextensive cases in which the procedures are
unrelated to the principal diagnosis:
44.67, Laparoscopic procedures for creation of esophagogastric
sphincteric competence
44.68, Laparoscopic gastroplasty
44.95, Laparoscopic gastric restrictive procedure
44.96, Laparoscopic revision of gastric restrictive procedure
44.97, Laparoscopic removal of gastric restrictive device(s)
44.98, Laparoscopic adjustment of size of adjustable gastric
restrictive device
In DRG 476, the above codes are to be added to the section ``With
or Without Operating Room Procedures'' in the GROUPER logic.
We are not proposing to move any procedure codes from DRG 476 to
DRGs 468 or 477, or from DRG 477 to DRGs 468 or 476.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on our review this year, we are not proposing to add any
diagnosis codes to MDCs.
14. Pancreatic Islet Cell Transplantation in Clinical Trials
[If you choose to comment on issues in this section, please include
the caption ``Pancreatic Islet Cell Transplantation'' at the beginning
of your comment.]
Section 733(a) of Public Law 108-173 directs the Secretary, acting
through the National Institute of Diabetes and Digestive and Kidney
Disorders (NIDDKD) to conduct a clinical investigation of pancreatic
islet cell transplantation that includes Medicare beneficiaries.
Section 733(b) provides for Medicare payments, beginning no earlier
than October 1, 2004, for the routine costs as well as the costs of the
transplantation and appropriate related items and services for Medicare
beneficiaries who are participating in a clinical trial as if such
transplantation were covered under Medicare Part A or Part B. Routine
costs are defined as reasonable and necessary routine patient care
costs (as defined in the CMS Coverage Issues Manual, Section 30-1)
including immunosuppressive drugs and other followup care. Section
733(c)(2) defines transplantation and appropriate related items and
services as items and services related to the acquisition and delivery
of the pancreatic islet cell transplantation, notwithstanding any
national noncoverage determination contained in the CMS Coverage Issues
Manual.
While the DRG payment will cover the transplant injection and the
subsequent hospital stay, we are considering establishing an add-on
payment to the DRG payment amount to reimburse the acquisition costs
associated with islet cell procurement. Historically, organ acquisition
costs have been reimbursed as a cost pass-through. However, islet cell
transplants are not exactly the same as solid organ transplants. While
solid pancreata are procured, islet cells are not transplanted in the
solid organ state as are other types of organs. Rather, the pancreata
are procured by an organ procurement organization (OPO) and are then
sent to an islet cell resource center that extracts the islet cells
from the pancreata and sends the cells on to the transplant center.
Since the procurement and processing system for islet cell transplants
is not the same as for solid organ transplants, we do not intend to pay
for these costs as a pass through. With the anticipated small number of
beneficiaries in the clinical trial and the Medicare program's
unfamiliarity with the isolation process, we believe it is most
appropriate at this time to have a set payment rate for acquisition
costs, rather than attempting a case-by-case determination of the
reasonableness of these costs in each institution. We note there is
precedent to exclude acquisition costs from the pass-through payment
process. For example, stem cell transplants and corneal transplants do
not have acquisition costs reimbursed as a cost pass-through payment.
The add-on payment would be a single amount that includes pre-
transplant tests and services, pancreas procurement, and islet
isolation services. We are proposing to use an
[[Page 28219]]
add-on as opposed to increasing the DRG amount because the DRGs at
issue are also applied in cases involving a variety of other procedures
that do not include the costly islet cell acquisition required for this
procedure. Thus, including these costs in the DRGs would have the
potential of skewing the weights for all other DRGs. We are asking for
specific comments on whether an add-on payment amount is the
appropriate way to reimburse islet cell acquisition costs, or whether
another methodology may be more appropriate.
In addition, while we have some data available regarding the cost
of pancreas procurement, we are specifically asking for any other data
that support the costs of acquisition and the costs of isolation cell
resource centers.
Because we do not yet have enough data, we are unable to publish a
proposed acquisition amount in this proposed rule. After analyzing data
submitted during the comment period, other data acquired by CMS, and
any suggested changes from the methodology proposed, we will issue the
final organ acquisition payment amount in the IPPS final rule.
Pancreatic islet cell transplantation during the clinical trial
will be performed to decrease or eliminate the need for insulin in
patients with Type I diabetes. Islet cells are acquired from a
cadaveric pancreas donor (islet allotransplantation).
As described in II.B.1. of this preamble, ICD-9-CM diagnosis and
procedure codes are used to determine DRG assignments. In 1996, CMS
(then HCFA) created codes for islet cell transplantation:
52.84, Autotransplantation of cells of islets of Langerhans
52.85, Allotransplantation of cells of islets of Langerhans
The Medicare GROUPER does not consider codes 52.84 and 52.85 as
O.R. procedures and, therefore, these codes do not move the case from a
medical DRG into a surgical DRG unless another procedure is performed.
Based on the circumstances noted above under which pancreatic islet
cell transplantation would be performed, we identified the three most
logical DRGs to which we believe cases would be assigned. If a patient
has Type I diabetes mellitus with ESRD and a pancreatectomy is
performed, the case would group to DRG 468 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis). If a patient has Type I diabetes
mellitus with ESRD and is also receiving a kidney transplant
(simultaneous kidney and islet transplantation), the case would group
to DRG 302 (Kidney Transplant). If a patient has Type I diabetes
mellitus with ESRD and a history of a kidney transplant and then has
the islet cells inserted via an open approach, the case would group to
DRG 315 (Other Kidney and Urinary Tract O.R. Procedures).
As each case is assigned to a DRG based on all of the ICD-9-CM
codes reported, cases could also be assigned to DRGs other than those
mentioned above. In fact, our review of FY 2003 MedPAR data revealed
that codes 52.84 and 52.85 were present in only four cases, and that
each case was assigned to a different DRG. We found one case each in
DRG 18 (Cranial and Peripheral Nerve Disorders With CC), DRG 192
(Pancreas, Liver, and Shunt Procedures Without CC), DRG 207 (Disorders
of the Biliary Tract With CC), and DRG 302 (Kidney Transplant).
We are reluctant to propose assigning the islet cell codes to one
specific DRG, as the islet cell infusion will have different
indications depending on the merits of each case, as is shown from the
MedPAR data mentioned above. In addition, we do not currently have
accurate cost data or charges for patients in this type of clinical
trial, which makes it difficult to determine an appropriate DRG weight.
As a result, assignment of cases to a specific DRG might have the
consequence of either overpaying or underpaying the cases. We believe
that both of these consequences are unacceptable. Therefore, we are not
proposing that cases involved in the clinical trials be assigned to one
specific DRG for payment purposes. As we believe that these cases will
be assigned to DRGs 302, 315, and 468, we are proposing to establish an
add-on payment for cases in these three DRGs containing procedure codes
52.84 or 52.85. As stated earlier, we will not be able to establish the
amount of this add-on until we have determined procurement costs for
the islet cells. We are soliciting information from transplant centers
and organ procurement organizations on costs for these types of
transplantations.
15. Changes to the ICD-9-CM Coding System
[If you choose to comment on issues in this section, please include
the caption ``ICD-9-CM Coding'' at the beginning of your comment.]
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 $25.00 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 2005 at public meetings held on April 3, 2003 and
December 4-5, 2003, and finalized the coding changes after
consideration of comments received at the meetings and in writing by
January 12, 2004. Those coding changes are announced in Tables 6A
through 6F in the Addendum to this proposed rule. Copies of the minutes
of the procedure codes discussions at the Committee's 2003 meetings can
be obtained from the CMS Web site: http:// www. cms. gov/ payment
systems/ icd9/. The minutes of
[[Page 28220]]
the diagnoses codes discussions at the 2003 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.
For a report of procedure topics discussed at the April 1-2, 2004
meeting, see the Summary Report at: http://www. cms. hhs. gov/ payment
systems / icd9/. For a report of the diagnosis topics discussed at the
April 1-2, 2004 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: Patricia.Brooks1@cms.hhs.gov.
The ICD-9-CM code changes that have been approved will become
effective October 1, 2004. 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
proposed 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. In this proposed rule, we
are only soliciting comments on the proposed DRG classification of
these new codes.
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, 2004. Table 6D usually contains
invalid procedure codes, however, for FY 2005, there are no 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 2005.
The first of the 2004 public meetings was held on April 1-2, 2004.
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 proposals for procedure codes that would describe new
technology discussed and approved at the April meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 includes a requirement for
updating ICD-9-CM codes twice a year instead of the current process of
annual updates on October 1 of each year. This requirement is included
as part of the amendments to the Act relating to recognition of new
technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K)
of the Act by adding a new clause (vii) which states that the
``Secretary shall provide for the addition of new diagnosis and
procedure codes in April 1 of each year, but the addition of such codes
shall not require the Secretary to adjust the payment (or diagnosis-
related group classification) * * * until the fiscal year that begins
after such date.'' Because this new statutory requirement will have a
significant impact on health care providers, coding staff, publishers,
system maintainers, software systems, among others, we are soliciting
comments on our proposals described below to implement this
requirement. This new requirement will improve the recognition of new
technologies under the IPPS system by providing information on these
new technologies at an earlier date. Data would be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1. Many coding changes apply to longstanding medical issues.
While the new requirement states that the Secretary shall not
adjust the payment of the DRG classification for the April 1 new codes,
the Department will have to update its DRG software and other systems
in order to recognize and accept the new codes. We will also have to
publicize the code changes and the need for a mid-year systems update
by providers to capture the new codes. Hospitals will have to obtain
the new code books and encoder updates, and make other system changes
in order to capture and report the new codes. We are aware of the
additional burden this will have on health care providers.
The ICD-9-CM Coordination and Maintenance Committee has held its
meetings in April and December of each year in order to update the
codes and the applicable payment and reporting systems by October 1 of
each year. Items are placed on the agenda for the ICD-9-CM Coordination
and Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. In order to provide
an update on April 1, it became clear that a December Committee meeting
would not provide time to finalize and publicize these code revisions.
Final decisions on code title revisions are currently made by March 1
so that these titles can be included in the IPPS proposed rule. A
complete addendum describing details of all changes to ICD-9-CM, both
tabular and index, are publicized on CMS and NCHS web pages in May of
each year. Publishers of coding books and software companies use this
information to modify their products that are used by health care
providers. This 5-month time period has proved to be necessary for
hospitals and other providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2003 ICD-9-CM Coordination and Maintenance
Committee minutes. The public provided comment that additional time
would be needed to update hospital systems and obtain new code books
and coding software. There was considerable concern expressed about the
impact this new update would have on providers. Therefore, we are
rescheduling the second Committee meeting for 2004. We have scheduled
this meeting for October 7-8, 2004. Those who wish to have a coding
issue discussed at the October Committee meeting would be required to
submit their request by August 7, 2004. The Department will continue
this process to accommodate all requestors who submit appropriate
requests in a timely manner.
We are proposing to implement section 503(a) by developing a
mechanism for approving, in time for the April update, diagnoses and
procedure code revisions needed to describe new technologies and
medical services for purposes of the new technology add-on payment
process. We are proposing the following process for
[[Page 28221]]
making these determinations. Topics considered during the October ICD-
9-CM Coordination and Maintenance Committee meeting would be considered
for an April 1 update if a strong and convincing case is made by the
requestor at the Committee's public meeting. The request must identify
the reason why a new code is needed in April for purposes of the new
technology process. The participants at the meeting and those reviewing
the Committee meeting summary report would be provided the opportunity
to comment on this expedited request. All other topics would be
considered for the October 1 update. Participants at the Committee
meeting would be encouraged to comment on all such requests.
We believe that this proposal captures the intent of section
503(a). This requirement was included in the provision revising the
standards and process for recognizing new technology under the IPPS. In
addition, the need for approval of new codes outside the existing cycle
(October 1) arises most frequently and most acutely where the new codes
would capture new technologies that are (or will be) under
consideration for new technology add-on payments. Thus, we believe this
provision was intended to expedite data collection through the
assignment of new ICD-9-CM codes for new technologies seeking higher
payments. Our proposal is designed to carry out that intention, while
minimizing the additional administrative costs associated with mid-year
changes to the ICD-9-CM codes.
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 25 years ago.
In November 2003, the NCVHS recommended that the Secretary prepare
a notice of proposed rulemaking for the implementation of 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. The Department is studying these
recommendations.
16. Other Issues
[If you choose to comment on issues in this section, please include
the caption ``Other DRG Issues'' at the beginning of your comments.]
a. Craniotomy Procedures
As discussed in the August 1, 2003 IPPS final rule (68 FR 45353),
for FY 2004 we conducted an analysis of the charges for various
procedures and diagnoses within DRG 1 (Craniotomy Age > 17 With CC) and
DRG 2 (Craniotomy Age > 17 Without CC) to determine whether further
changes to these DRGs were warranted. Based on our analysis and
consideration of public comments received on our May 19, 2003 IPPS
proposed rule (68 FR 27161), in the August 1, 2003 IPPS final rule, we
created three new DRGs: DRG 528 (Intracranial Vascular Procedures With
a Principal Diagnosis of Hemorrhage) for patients with an intracranial
vascular procedure and an intracranial hemorrhage; and DRGs 529
(Ventricular Shunt Procedures With CC) and 530 (Ventricular Shunt
Procedures Without CC) for patients with only a vascular shunt
procedure.
As discussed below, we have received further comments regarding the
composition of DRGs 1 and 2 that relate to the appropriate DRG
assignment of unruptured cerebral aneurysm cases and cases involving
implantation of GLIADEL[reg] chemotherapy wafers. We have also received
comments on possible revisions to DRG 3 (Craniotomy Age 0-17).
(1) Unruptured Cerebral Aneurysms
In the August 1, 2003 final rule (68 FR 45354), in response to a
comment that suggested we create a companion DRG to DRG 528 for
intracranial vascular procedures for unruptured cerebral aneurysms, we
evaluated cases in the MedPAR file involving unruptured cerebral
aneurysm and determined that the average charges for unruptured
cerebral aneurysm cases were consistent with the variation of charges
found in DRGs 1 and 2. Therefore, we did not propose a change in the
DRG classification. We indicated that we would continue to monitor
cases involving unruptured cerebral aneurysms.
We now have examined cases in the FY 2003 MedPAR file that reported
unruptured cerebral aneurysms. We found 657 unruptured aneurysm cases
assigned to DRG 1 and 481 unruptured cerebral aneurysm cases assigned
to DRG 2. The average charges for these unruptured cerebral aneurysm
cases in DRG 1 ($50,879) are slightly lower than the overall charges
for all cases in that DRG ($51,300). For unruptured cerebral aneurysm
cases assigned to DRG 2, we found the average charges of approximately
$29,524 are consistent with the overall average charges of that DRG of
approximately $28,416.
Based on the results of our analysis, we still do not believe a
proposal to modify the DRG assignment of unruptured cerebral aneurysm
cases is warranted.
(2) GLIADEL[reg] Chemotherapy Wafers
In the August 1, 2003 final rule (68 FR 45354), we stated that we
had received comments requesting a change to the DRG assignment of
cases involving implantation of GLIADEL[reg] chemotherapy wafers to
treat brain tumors. One of the commenters had offered two options: (1)
Create a new DRG for cases involving implantation of GLIADEL[reg]
chemotherapy wafers; and (2) reassign these cases to DRG 484
(Craniotomy for Multiple Significant Trauma).
At that time, we had analyzed data in the March 2003 update of the
FY 2003 MedPAR file and found a total of 61 cases in which procedure
code 00.10 (Implantation of a chemotherapy 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. The GROUPER logic for these DRGs
assigns cases with CCs to DRG 1 and those without CCs to DRG 2.
Consistent with the GROUPER logic for these DRGs, we had found that the
average standardized charges in DRGs 1 and 2 were approximately $64,864
and $42,624, respectively. However, while the estimated average charges
for GLIADEL[reg] wafer cases of $50,394 may have been higher than the
average standardized charges for DRG 2, they were within the normal
variation of overall charges within each DRG. In addition, the volume
of cases in these two DRGs was too small to warrant the establishment
of a separate new DRG for this technology. Therefore, we stated that we
wanted to review a full year of data and take the time to consider
alternative options that might appear warranted before proposing a
change.
We have now examined more complete MedPAR data (December 2003
update for FY 2003) on cases reporting GLIADEL[reg] chemotherapy
wafers. We found a total of 127 cases in which procedure code 00.10 was
reported for cases assigned to DRGs 1 and 2. There were 80 cases
assigned to DRG 1 and 47 cases assigned to DRG 2. The average
[[Page 28222]]
charges for these cases in DRGs 1 and 2 were approximately $61,866 and
$47,189, respectively. The average charges for these cases are higher
than the overall charges of DRGs 1 and 2 of approximately $51,300 and
$28,416, respectively. Although the average charges for the
GLIADEL[reg] wafer cases within these DRGs are higher than the average
charges of all cases in these DRGs, they remain within the range of
average charges for other procedures included in these DRGs. The
majority of the GLIADEL[reg] wafer cases are assigned to the second
highest weighted DRG in MDC 1 behind DRG 528 (Intracranial Vascular
Procedure With a Principal Diagnosis of Hemorrhage) in which the
weights were derived from average charges of approximately $113,884. In
DRG 1, there are 10 procedures that have higher average charges than
the GLIADEL[reg] wafer cases. However, in DRG 2, the charges associated
with GLIADEL[reg] wafer cases are the highest of the procedures
included within the DRG.
DRGs are based on the principal diagnosis, secondary diagnosis, and
procedures performed on the patient. DRGs are not generally created to
recognize the presence or absence of specific technologies for each
patient. In the past, we have made one exception to this rule. The
exception was the creation of two new DRGs for drug-eluting stents: DRG
526 (Percutaneous Cardiovascular Procedure With Drug-Eluting Stent With
Acute Myocardial Infarction) and DRG 527 (Percutaneous Cardiovascular
Procedure With Drug-Eluting Stent Without Acute Myocardial Infarction)
(67 FR 50003). We took this unprecedented approach in response to the
unique circumstances surrounding the potential breakthrough nature of
this technology. We currently have 59,613 drug-eluting cases annually,
far more cases than the volume for GLIADEL[reg] wafers. We believe that
the volume of GLIADEL[reg] wafer cases remains too small to warrant the
taking of the exceptional step of establishing a separate new DRG for
this technology.
Commenters also have proposed the reassignment of GLIADEL[reg]
wafer cases to other existing DRGs, such as DRG 484 (Craniotomy for
Multiple Significant Trauma), DRG 528 (Intracranial Vascular Procedures
With Principal Diagnosis of Hemorrhage), DRG 492 (Chemotherapy With
Acute Leukemia as a Secondary Diagnoses or With Use of a High Dose
Chemotherapeutic Agent), or DRG 481 (Bone Marrow Transplant). We have
examined these alternatives, and have come to the conclusion that none
of these alternatives meets the standard of clinical coherence under
the DRG system. For example, reconfiguring DRG 484 to include
GLIADEL[reg] wafer cases would not produce a clinically coherent DRG
because DRG 484 contains cases where craniotomy is performed in the
setting of multiple significant trauma. Similarly, assigning
GLIADEL[reg] wafer cases to DRG 528 would not produce a clinically
coherent DRG because DRG 528 contains cases where craniotomy is
performed as part of a vascular procedure with a primary diagnosis of
hemorrhage, as in the case of a ruptured aneurysm. DRG 492 is
clinically inappropriate because it contains cases of acute leukemia
treated with chemotherapy, and DRG 481 is clinically inappropriate
because it contains cases involving bone marrow transplant. None of
these DRGs contains cases of glioblastoma multiforme or other primary
brain tumors. Therefore, we are not proposing to adopt any of these
changes at this time.
We also considered several other approaches to reassigning
GLIADEL[reg] wafer cases in a manner that is appropriate both in terms
of clinical coherence and resource use. For example, we considered the
creation of a new DRG that includes GLIADEL[reg] wafer cases along with
other types of local therapy for intracerebral malignant disease.
Specifically, we considered the creation of a new DRG that includes
GLIADEL[reg] wafers and a Gliasite Radiation Therapy System, a
relatively new form of intracavitary brachytherapy. Such a DRG would be
clinically coherent because it would contain cases of malignant brain
tumors treated with local therapy. However, our analysis of existing
MedPAR data suggests that such a DRG would probably not provide
enhanced reimbursement for the GLIADEL[reg] wafer cases, and that, in
fact, decreased reimbursement for GLIADEL[reg] wafer cases is a more
likely result. Therefore, we are not proposing a change at this time.
However, we will continue to monitor our data to determine whether a
change is warranted in the future.
We recognize that the implantation of chemotherapeutically active
wafers for local therapy of malignant brain tumors represents a
significant medical technology that currently offers clinical benefits
to patients and holds out the promise of future innovation in the
treatment of these brain tumors. Therefore, we invite further comments
and suggestions regarding the appropriate DRG assignment for this
technology. (3) DRG 3 (Craniotomy Age 0-17)
We received a comment stating concern that DRG 3 has not been
reviewed, while DRGs 1 and 2 have had some revisions. The commenter
believed that, particularly with the removal of major trauma cases, age
distinctions may no longer be significant for craniotomies and the
other intracranial procedures classified in DRGs 1 through 3. The
commenter stated that it may be more consistent, from both a clinical
and resource perspective, to simply eliminate DRG 3 and redistribute
the pediatric and juvenile cases to DRGs 1 and 2 based on the
procedures performed and the complication or comorbidities present,
instead. This analysis would require supplemental data from non-MedPAR
sources.
We note that the primary focus of updates to the Medicare DRG
classification system is for changes relating to the Medicare patient
population, not the pediatric patient population. In the FY 2003 data,
there were only two cases assigned to DRG 3. Therefore, we do not
believe a proposal to address the commenter's request is warranted at
this time. We are aware that the Medicare DRGs are sometimes used to
classify other patient populations. We advise those non-Medicare
systems that need a more up-to-date system to consider choosing from
other systems that are currently in use in this country, or developing
their own modifications.
b. Coronary Stent Procedures
We have received comments and recommendations from several industry
representatives about the DRG assignments for coronary artery stents.
These representatives expressed concern about whether the reimbursement
for stents is adequate, especially for insertion of multiple stents.
They also expressed concern about whether the current DRG structure
represents the most clinically coherent classification of stent cases.
We received two comprehensive recommendations for refinement and
restructuring of the current coronary stent DRGs. The current DRG
structure incorporates stent cases into the following two pairs of
DRGs, depending on whether bare metal or drug-eluting stents are used
and whether acute myocardial infarction (AMI) is present:
DRG 516 (Percutaneous Cardiovascular Procedures With AMI)
DRG 517 (Percutaneous Cardiovascular Procedures With Nondrug-
Eluting Stent Without AMI)
DRG 526 (Percutaneous Cardiovascular Procedures With Drug-
Eluting Stent With AMI)
DRG 527 (Percutaneous Cardiovascular Procedures With Drug-
Eluting Stent Without AMI)
[[Page 28223]]
One of the recommendations involved restructuring these DRGs to
create two additional stent DRGs that are closely patterned after these
existing pairs and that would reflect insertion of multiple stents with
and without AMI. The manufacturer recommended incorporating either
stenting code 36.06 (Insertion of nondrug-eluting coronary artery
stent(s)) or code 36.07 (Insertion of drug-eluting coronary artery
stent(s)) when they are reported along with code 36.05 (Multiple vessel
percutaneous transluminal coronary angioplasty [PTCA] or coronary
atherectomy performed during the same operation, with or without
mention of thrombolytic agent). The manufacturer expressed concern that
hospitals are steering patients toward coronary artery bypass graft
surgery in place of stenting in order to avoid significant financial
losses due to what it considered the inadequate reimbursement for
inserting multiple stents.
We appreciate receiving the manufacturer's recommendation, and
agree that the DRG classification of cases involving coronary stents
must be clinically coherent and provide for adequate reimbursement,
including adequate reimbursement of cases requiring multiple stents. We
also agree that the recommendation has some merits and deserves further
study. However, we believe that it is premature to act on this
recommendation for two reasons. One reason is that the current coding
structure for coronary artery stents cannot distinguish cases in which
multiple stents are inserted from cases in which only a single stent is
inserted. Current codes are able to identify performance of PTCA in
more than one vessel by use of code 36.05. However, while this code
indicates that PTCA was performed in more than one vessel, its use does
not reflect the exact number of procedures performed or the exact
number of vessels treated. Similarly, when codes 36.06 and 36.07 are
used, they document the insertion of at least one stent. However, these
stenting codes do not identify how many stents were inserted in a
procedure, nor distinguish insertion of a single stent from insertion
of multiple stents. Even the use of one of the stenting codes in
conjunction with multiple-PTCA code 36.05 does not distinguish
insertion of a single stent from insertion of multiple stents. The use
of code 36.05 in conjunction with code 36.06 or code 36.07 indicates
only performance of PTCA in more than one vessel, along with insertion
of at least one stent. The precise numbers of PTCA-treated vessels, the
number of vessels into which stents were inserted, and the total number
of stents inserted in all treated vessels cannot be determined.
Therefore, the capabilities of the current coding structure do not
permit the distinction between single vessel stenting and multiple
vessel stenting that would be required under the recommended
restructuring of the stenting DRGs.
In addition, because the FDA approved drug-eluting stents for use
in April 2003, the distinct DRGs for drug-eluting stents have only been
effective for payment in the last year. The MedPAR file thus does not
contain a full year of data with which to conduct the requisite
analysis to evaluate the adequacy of the current structure of four
stenting DRGs. Therefore, we believe that it is still premature to
undertake such a thorough restructuring of the stent DRGs.
Nevertheless, we will consider this recommendation as we evaluate the
current DRG structure once adequate data on the current stenting DRGs
become available.
The second recommendation was that we transform the current
structure of stenting DRGs into two new pairs of DRGs, reclassifying
stenting cases according to whether bare metal or drug-eluting stents
are used (as with the present DRGs) and whether the cases are
``complex'' or ``noncomplex.'' The manufacturer indicated that complex
cases are those that include certain comorbid conditions or procedural
factors such as hypertensive renal failure, diabetes, AMI, and
multivessel PCI. The manufacturer further indicated that this structure
would provide an improvement in both clinical and resource coherence
over the current structure that classifies cases according to the type
of stent inserted and the presence or absence of AMI alone, without
considering other complicating conditions. Specifically, the
manufacturer recommended replacing the current structure with the
following four DRGs:
Recommended restructured DRG 516 (Complex percutaneous
cardiovascular procedures with nondrug-eluting stents)
Recommended restructured DRG 517 (Noncomplex percutaneous
cardiovascular procedures with nondrug-eluting stents)
Recommended restructured DRG 526 (Complex percutaneous
cardiovascular procedures with drug-eluting stents)
Recommended restructured DRG 527 (Noncomplex percutaneous
cardiovascular procedures with drug-eluting stents)
The manufacturer presented an analysis based on FY 2002 MedPAR
data, in which it evaluated charges and lengths of stay for cases with
expected high resource use, and reclassified cases into the recommended
new structure of paired ``complex'' and ``noncomplex'' DRGs. The
analysis shows some evidence of clinical and resource coherence in the
recommended DRG structure. However, the analysis does not yet provide a
convincing case for adopting the recommended restructure. First, the
analysis does not reveal significant gains in resource coherence
compared to previous DRGs for stenting cases. Second, the analysis is
limited in assessing the feasibility of using the recommended DRG
restructure versus the current DRG structure for classification of
stent cases. Because the manufacturer used FY 2002 MedPAR data in its
analysis, it was not able to compare the resource coherence of the
recommended structure with the current structure of four DRGs, but only
with the two DRGs that preceded the approval of drug-eluting stents.
While the manufacturer asserted that ``similar results would be
expected'' from a comparison between its recommended DRG restructure
and the current DRG structure, we do not believe that it is advisable
to undertake a critical DRG restructuring without examining the
recommendation against actual experience under the current structure.
Nevertheless, we believe that this recommendation may have merit, and
we will conduct a full analysis of the recommendation in comparison to
the current DRG structure once adequate data become available.
The drug-eluting stents had not yet been FDA approved when we
calculated the relative weights for DRGs 526 and 527 for the FY 2003
IPPS final rule. Therefore, in the absence of MedPAR data, we based our
FY 2003 relative weight calculations on prices in countries where drug-
eluting stents were already being used. A full discussion of this
process can be found in the FY 2004 IPPS final rule (68 FR 45370). For
computation of the proposed relative weights for FY 2005 for this
proposed rule, we are using the December update of FY 2003 MedPAR data.
There have been a total of 42,356 cases in DRG 526, and 33,179 cases in
DRG 527, with adjustments made for transfers to other facilities. For
computation of the final FY 2005 relative weights, we will use the
latest update of the MedPAR data file for cases in these two DRGs. No
foreign data will be used to compute the relative weights for DRGs 526
and 527 in FY 2005.
[[Page 28224]]
c. Severe Sepsis
We received a comment that recommended a separate DRG be assigned
to the diagnosis of severe sepsis. Patients admitted with sepsis
currently are assigned to DRG 416 (Septicemia Age > 17) and DRG 417
(Septicemia Age 0-17) in MDC 18 (Infectious and Parasitic Diseases,
Systemic or Unspecified Sites). The commenter contended that the costs
of caring for patients with severe sepsis exceed those costs associated
with other types of sepsis. Therefore, the commenter indicated, severe
sepsis should be given a separate, unique DRG. Furthermore, the
commenter requested that all cases in which severe sepsis is present on
admission, as well as those cases in which it develops after admission
(which are currently classified elsewhere) be included in this new DRG.
The commenter suggested using various coexisting conditions and their
corresponding ICD-9-CM codes (for example, respiratory failure or
hypotension and renal failure) to identify patients with severe sepsis.
The conditions suggested do not describe a clinically coherent set of
patients that have severe sepsis. Using this list of conditions would
erroneously identify patients as having severe sepsis.
We acknowledge the high costs of caring for seriously ill patients
with sepsis. However, we do not find, from a clinical perspective, that
a subset of patients with severe sepsis exists to the degree that a
separate DRG classification is justified. Sepsis in all forms is quite
common across many DRGs in the Medicare population. In addition, we do
not believe that the commenter's suggested defining criteria for severe
sepsis are specific, accurate, or unique enough to warrant a new DRG
classification. Therefore, at this time, we are not proposing any
change to the current DRG structure for sepsis.
d. Implantable Cardiac Defibrillators
There is a range of implantable cardiac defibrillators (ICDs)
available on the market from extremely complex devices with multiple
leads, settings, and functions to simpler models with a single lead and
simpler functions. ICDs deliver electrical shocks to the heart to
eliminate the life-threatening abnormal rhythms such as ventricular
fibrillation or ventricular tachycardia.
We have received a coverage request to expand the indications for
implantable defibrillators to include the population studied in the
Sudden Cardiac Death in Heart Failure Trial (SCD-HeFT) sponsored by the
National Institutes of Health. SCD-HeFT treated heart failure patients
with conventional therapy and randomized them to one of three
additional treatment strategies: (1) Placebo; (2) amiodarone (drug
therapy); or (3) single lead implantable defibrillator. The SCD-HeFT
investigators presented results at the American College of Cardiology
annual meeting that the basic single-lead implantable defibrillator is
effective for saving lives in a population at low-moderate risk for
sudden cardiac death. The requestor indicated that, as part of CMS'
coverage decisions, CMS could expand the population eligible for
implantable defibrillators. The requestor further added that CMS could
restrict use of complex defibrillators to patients for whom they are
medically necessary, that is, in the population at low-moderate risk
for sudden cardiac death.
Given the potential increase of implantable defibrillator use in
our population, we are soliciting input on how to encourage physicians
to use the simpler, less costly device when advanced devices are not
medically preferred. We are also soliciting input on the appropriate
measures within the payment systems to accommodate payment for classes
of defibrillators with very different costs. Ideally, we would like not
only to align payments with relative costs, but also to align the
incentives within the payment system with medically appropriate uses of
different technologies.
We believe that, within the PPS for inpatient hospital operating
costs, there are several ways to deal with the expanding use of
simpler, lower cost defibrillators. One possibility is to maintain the
current DRG configuration, under which complex, expensive devices and
simpler, less costly devices would remain within the same DRGs and
receive the same payment rates. This approach would encourage use of
the simpler devices, which would receive relatively higher
reimbursement because their lower charges would be averaged in with the
higher charges for the more complex devices in setting the DRG weights.
However, it could lead to complaints that the program is underpaying
for the more complex, expensive devices as the lower charges for
simpler, less expensive devices begin to affect (lower) the DRG
weights.
Another approach would be to recognize the cost differences between
various classes of defibrillators by establishing separate DRGs for
basic single-lead implantable defibrillators as opposed to more
complex, expensive models. This approach would prevent payments for the
use of more expensive defibrillators (where medically necessary) from
being diluted by the effect of the lower charges for basic single-lead
implantable defibrillators on the weights within common DRGs. However,
this policy would arguably provide less incentive for use of the lower
cost devices: the weights for the DRGs containing the less expensive
devices would be driven solely by their relatively lower charges,
without being lifted by the higher charges for the more expensive
models. This approach might also be criticized for departing from the
averaging principle within the DRG system by basing too much on the
cost differential alone in reconfiguring these DRGs.
We welcome comments on these and other approaches to paying for
defibrillators under the IPPS. We discuss an application for new
technology add-on payments for a Cardiac Resynchronization Therapy with
Defibrillator (CRT-D) in section II.E.4.c. of this proposed rule.
C. Recalibration of DRG Weights
[If you choose to comment on issues in this section, please include
the caption ``DRG Weights'' at the beginning of your comment.]
We are proposing to use the same basic methodology for the FY 2005
recalibration as we did for FY 2004 (August 1, 2003 IPPS final rule (68
FR 45373)). That is, we are proposing to recalibrate the DRG weights
based on charge data for Medicare discharges using the most current
charge information available (the FY 2003 MedPAR file).
The MedPAR file is based on fully coded diagnostic and procedure
data for all Medicare inpatient hospital bills. The FY 2003 MedPAR data
used in this proposed rule include discharges occurring between October
1, 2002 and September 30, 2003, based on bills received by CMS through
December 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 2003 MedPAR file
includes data for approximately 11,717,744 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.
The proposed methodology used to calculate the DRG relative weights
from the FY 2003 MedPAR file is as follows:
To the extent possible, all the claims were regrouped
using the DRG classification revisions discussed in section II.B. of
this preamble.
[[Page 28225]]
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 2001 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.)
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.
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.
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.
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.
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 proposed new weights are normalized by a proposed adjustment
factor of 1.46899 so that the average case weight after recalibration
is equal to the average case weight before recalibration. This proposed
adjustment is intended to ensure that recalibration by itself neither
increases nor decreases total payments under the IPPS.
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 are proposing to use that same case
threshold in recalibrating the proposed DRG weights for FY 2005. Using
the FY 2003 MedPAR data set, there are 42 DRGs that contain fewer than
10 cases. We are proposing to compute the weights for these low-volume
DRGs by adjusting the FY 2004 weights of these DRGs by the percentage
change in the average weight of the cases in the other DRGs.
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 proposed rule, we are
proposing to make a budget neutrality adjustment to ensure that the
requirement of section 1886(d)(4)(C)(iii) of the Act is met.
D. Proposed LTC-DRG Reclassifications and Relative Weights for LTCHs
for FY 2005
[If you choose to comment on issues in this section, please include
the caption ``LTC-DRGs'' at the beginning of your comment.]
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), Public Law
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.
In this proposed rule, we are proposing revisions to the LTC-DRG
classifications and relative weights and will finalize them in the IPPS
final rule, to be effective October 1, 2004 through September 30, 2005.
The proposed LTC-DRGs and relative weights for FY 2005 in this proposed
rule are based on the IPPS DRGs (GROUPER version 22.0) discussed in
section II. of this proposed rule.
2. Proposed Changes in the LTC-DRG Classifications
a. Background
Section 123 of Public Law 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 Public Law 106-554 modified the requirements of section
123 of Public Law 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 Public Law 106-554 and
Sec. 412.515 of our existing regulations, the LTCH PPS uses
information from LTCH patient
[[Page 28226]]
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, in this
proposed rule, we are proposing to use the IPPS version 22.0 GROUPER
for FY 2005 to process LTCH PPS claims. The proposed changes to the
IPPS DRG classification system for FY 2005 (Grouper 22.0) are discussed
in section II.B. of this preamble.
Under the LTCH PPS, we determine relative weights for each of the
CMS 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 the August 30, 2002 final rule (67 FR 55985), which
implemented the LTCH PPS, and the August 1, 2003 IPPS final rule (68 FR
45374), 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.
Specifically, we group those low-volume LTC-DRGs (LTC-DRGs with fewer
than 25 cases) 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
the August 1, 2003 IPPS final rule (68 FR 45377--45380).) 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 below 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 CMS 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 (Public
Law 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 an 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
LTCH PPS 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 relative 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 Proposed FY 2005 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
[[Page 28227]]
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 applicable LTC-
DRG relative weight 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 proposed LTC-DRG relative weights for FY 2005 in
this proposed rule, we obtained total Medicare allowable charges from
FY 2003 Medicare hospital bill data from the December 2003 update of
the MedPAR file, and we used the proposed Version 22.0 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 are
proposing to recalculate the FY 2005 LTC-DRG relative weights based on
the best available data for the final rule.
As we discussed in the August 1, 2003 final rule (68 FR 45376), 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 Public Law 90-248 (42 U.S.C. 1395b-
1) or section 222(a) of Public Law 92-603 (42 U.S.C. 1395b-1).
Therefore, in the development of the proposed FY 2005 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 that had claims in the FY 2003 MedPAR file.
In the August 1, 2003 final rule (68 FR 45367), we discussed coding
inaccuracies that were found in claims data for a large chain of LTCHs
in the FY 2002 MedPAR file used to determine the LTC-DRG relative
weights for FY 2004. Specifically, the principal diagnosis was not
reported correctly on many of those LTCHs' claims, which resulted in
those claims being incorrectly assigned to a LTC-DRG. As we explained
in that same final rule, we were able to determine the correct
diagnoses and procedure codes for the claims that contained the coding
errors, and we used them to group each LTCH case to the appropriate
LTC-DRG for determining the LTC-DRG relative weights for FY 2004. In
addition, we stated that 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.
As we discussed in the May 7, 2004 LTCH PPS final rule (69 FR
25673), an analysis of LTCH claims data from the September 2003 update
of the FY 2003 MedPAR file contained coding errors. Specifically, a
large hospital chain of LTCHs continued to consistently code diagnoses
inaccurately on the claims it submitted, and these coding errors were
reflected in the September 2003 update of the FY 2003 MedPAR file. Upon
discovering the coding errors, we notified the large chain of LTCHs
whose claims contained the coding inaccuracies to request that they
resubmit those claims with the correct diagnoses codes by December 31,
2003, so that those corrected claims would be contained in the December
2003 update of the FY 2003 MedPAR file. As we discussed in that same
final rule, it appears that those claims were submitted timely with the
correct diagnoses codes. Therefore, it was not necessary to correct the
FY 2003 MedPAR data for the development of the rates and factors
established in the May 7, 2004 LTCH PPS final rule. Accordingly, we are
proposing to use LTCH claims data from the December 2003 update of the
FY 2003 MedPAR file for the determination of the proposed FY 2005 LTC-
DRG relative weights in this proposed rule.
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
[[Page 28228]]
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 August 1, 2002 final rule (67 FR 55984), 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 proposed rule, using LTCH cases from the December 2003 update of
the FY 2003 MedPAR file, we identified 171 LTC-DRGs that contained
between 1 and 24 cases. This list of proposed LTC-DRGs was then divided
into one of the five low-volume quintiles, each containing a minimum of
34 LTC-DRGs (171/5 = 34 with 1 LTC-DRG as the remainder). For FY 2005,
we are proposing to make an assignment to a specific low-volume
quintile by sorting the 171 low-volume proposed 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
proposed low-volume LTC-DRG was used to determine which low-volume
quintile received the proposed additional LTC-DRG. After sorting the
171 low-volume proposed LTC-DRGs in ascending order, we are proposing
that the first fifth (34) of low-volume LTC-DRGs with the lowest
average charge would be grouped into Quintile 1. The highest average
charge cases would be grouped into Quintile 5. Since the average charge
of the proposed 69th LTC-DRG in the sorted list is closer to the
previous proposed LTC-DRG's average charge (assigned to Quintile 2)
than to the average charge of the proposed 70th LTC-DRG in the sorted
list (to be assigned to Quintile 3), we are proposing to place it into
Quintile 2. This process was repeated through the remaining low-volume
proposed LTC-DRGs so that 4 proposed low-volume quintiles contain 34
proposed LTC-DRGs and 1 proposed low-volume quintile contains 35
proposed LTC-DRGs.
In order to determine the proposed relative weights for the
proposed LTC-DRGs with low volume for FY 2005, in accordance with the
methodology described in the August 1, 2002 final rule (67 FR 55984),
we are proposing to use the five proposed low-volume quintiles
described above. The composition of each of the five proposed low-
volume quintiles shown below in Table 1 would be used in determining
the proposed LTC-DRG relative weights for FY 2005. We would determine a
proposed relative weight and (geometric) average length of stay for
each of the five proposed low-volume quintiles using the formula that
we are proposing to apply to the regular proposed LTC-DRGs (25 or more
cases), as described below in section II.D.4. of this preamble. We are
proposing to assign the same proposed relative weight and proposed
average length of stay to each of the proposed LTC-DRGs that make up
that proposed 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.--Proposed Composition of Low-Volume Quintiles
------------------------------------------------------------------------
Proposed LTC-DRG Description
------------------------------------------------------------------------
QUINTILE 1
------------------------------------------------------------------------
11......................... NERVOUS SYSTEM NEOPLASMS W/O CC.
43......................... HYPHEMA.
45......................... NEUROLOGICAL EYE DISORDERS.
47......................... OTHER DISORDERS OF THE EYE AGE >17 W/O CC.
84......................... MAJOR CHEST TRAUMA W/O CC.
95......................... PNEUMOTHORAX W/O CC.
110........................ MAJOR CARDIOVASCULAR PROCEDURES W CC.
119........................ VEIN LIGATION & STRIPPING.
143........................ CHEST PAIN.
149........................ MAJOR SMALL & LARGE BOWEL PROCEDURES W/O
CC.
178........................ UNCOMPLICATED PEPTIC ULCER W/O CC.
193........................ BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W
OR W/O C.D.E. W CC.
208........................ DISORDERS OF THE BILIARY TRACT W/O CC.
229........................ HAND OR WRIST PROC, EXCEPT MAJOR JOINT
PROC, W/O CC.
241........................ CONNECTIVE TISSUE DISORDERS W/O CC.
260........................ SUBTOTAL MASTECTOMY FOR MALIGNANCY W/O CC.
273........................ MAJOR SKIN DISORDERS W/O CC.
284........................ MINOR SKIN DISORDERS W/O CC.
301........................ ENDOCRINE DISORDERS W/O CC.
323........................ URINARY STONES W CC, &/OR ESW LITHOTRIPSY.
324........................ URINARY STONES W/O CC.
326........................ KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE
>17 W/O CC .
339........................ TESTES PROCEDURES, NON-MALIGNANCY AGE >17.
347........................ MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W/O
CC.
367........................ MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W/O
CC.
404........................ LYMPHOMA & NON-ACUTE LEUKEMIA W/O CC.
414........................ OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL
DIAG W/O CC.
433........................ ALCOHOL/DRUG ABUSE OR DEPENDENCE, LEFT AMA.
450........................ POISONING & TOXIC EFFECTS OF DRUGS AGE >17
W/O CC.
479........................ OTHER VASCULAR PROCEDURES W/O CC.
[[Page 28229]]
500........................ BACK & NECK PROCEDURES EXCEPT SPINAL FUSION
W/O CC.
509........................ FULL THICKNESS BURN W/O SKIN GRFT OR INH
INJ W/O CC OR SIG TRAUMA.
522........................ ALC/DRUG ABUSE OR DEPEND W REHABILITATION
THERAPY W/O CC
523........................ ALC/DRUG ABUSE OR DEPEND W/O REHABILITATION
THERAPY W/O CC
----------------------------
QUINTILE 2
------------------------------------------------------------------------
8.......................... PERIPH & CRANIAL NERVE & OTHER NERV SYST
PROC W/O CC.
22......................... HYPERTENSIVE ENCEPHALOPATHY.
25......................... SEIZURE & HEADACHE AGE >17 W/O CC.
31......................... CONCUSSION AGE >17 W CC.
69*........................ OTITIS MEDIA & URI AGE >17 W/O CC.
109........................ CORONARY BYPASS W/O PTCA OR CARDIAC CATH.
128........................ DEEP VEIN THROMBOPHLEBITIS.
129........................ CARDIAC ARREST, UNEXPLAINED.
140........................ ANGINA PECTORIS.
175........................ G.I. HEMORRHAGE W/O CC.
177........................ UNCOMPLICATED PEPTIC ULCER W CC.
181........................ G.I. OBSTRUCTION W/O CC.
227........................ SOFT TISSUE PROCEDURES W/O CC.
228........................ MAJOR THUMB OR JOINT PROC, OR OTH HAND OR
WRIST PROC W CC.
234........................ OTHER MUSCULOSKELET SYS & CONN TISS O.R.
PROC W/O CC.
237........................ SPRAINS, STRAINS, & DISLOCATIONS OF HIP,
PELVIS & THIGH.
250........................ FX, SPRN, STRN & DISL OF FOREARM, HAND,
FOOT AGE >17 W CC.
251........................ FX, SPRN, STRN & DISL OF FOREARM, HAND,
FOOT AGE >17 W/O CC .
276........................ NON-MALIGANT BREAST DISORDERS.
295........................ DIABETES AGE 0-35.
305........................ KIDNEY,URETER & MAJOR BLADDER PROC FOR NON-
NEOPL W/O CC.
307........................ PROSTATECTOMY W/O CC.
325........................ KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE
>17 W CC.
328........................ URETHRAL STRICTURE AGE >17 W CC.
348........................ BENIGN PROSTATIC HYPERTROPHY W CC.
349........................ BENIGN PROSTATIC HYPERTROPHY W/O CC.
399........................ RETICULOENDOTHELIAL & IMMUNITY DISORDERS W/
O CC.
420........................ FEVER OF UNKNOWN ORIGIN AGE >17 W/O CC.
427........................ NEUROSES EXCEPT DEPRESSIVE.
441........................ HAND PROCEDURES FOR INJURIES.
447........................ ALLERGIC REACTIONS AGE >17.
449........................ POISONING & TOXIC EFFECTS OF DRUGS AGE >17
W CC.
467........................ OTHER FACTORS INFLUENCING HEALTH STATUS.
511........................ NON-EXTENSIVE BURNS W/O CC OR SIGNIFICANT
TRAUMA
532........................ SPINAL PROCEDURES W/O CC
----------------------------
QUINTILE 3
------------------------------------------------------------------------
17......................... NONSPECIFIC CEREBROVASCULAR DISORDERS W/O
CC.
21......................... VIRAL MENINGITIS.
29......................... TRAUMATIC STUPOR & COMA, COMA <1 HR AGE >17
W/O CC.
44......................... ACUTE MAJOR EYE INFECTIONS.
53......................... SINUS & MASTOID PROCEDURES AGE >17.
83......................... MAJOR CHEST TRAUMA W CC.
122........................ CIRCULATORY DISORDERS W AMI W/O MAJOR COMP,
DISCHARGED ALIVE.
124........................ CIRCULATORY DISORDERS EXCEPT AMI, W CARD
CATH & COMPLEX DIAG.
136........................ CARDIAC CONGENITAL & VALVULAR DISORDERS AGE
>17 W/O CC.
159........................ HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL
AGE >17 W CC.
185........................ DENTAL & ORAL DIS EXCEPT EXTRACTIONS &
RESTORATIONS, AG >17.
200........................ HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR NON-
MALIGNANCY.
262........................ BREAST BIOPSY & LOCAL EXCISION FOR NON-
MALIGNANCY.
266........................ SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN
ULCER OR CELLULITIS W/O CC.
270........................ OTHER SKIN, SUBCUT TISS & BREAST PROC W/O
CC.
275........................ MALIGNANT BREAST DISORDERS W/O CC.
288........................ O.R. PROCEDURES FOR OBESITY.
299........................ INBORN ERRORS OF METABOLISM.
306........................ PROSTATECTOMY W CC.
319*....................... KIDNEY & URINARY TRACT NEOPLASMS W/O CC
336........................ TRANSURETHRAL PROSTATECTOMY W 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.
410........................ CHEMOTHERAPY W/O ACUTE LEUKEMIA AS
SECONDARY DIAGNOSIS.
476........................ PROSTATIC O.R. PROCEDURE UNRELATED TO
PRINCIPAL DIAGNOSIS.
[[Page 28230]]
493........................ LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W
CC.
496........................ COMBINED ANTERIOR/POSTERIOR SPINAL FUSION.
497........................ SPINAL FUSION EXCEPT CERVICAL W CC.
502........................ KNEE PROCEDURES W PDX OF INFECTION W/O CC.
517........................ PERC CARDIO PROC W NON-DRUG ELUTING STENT W/
O AMI.
518........................ PERC CARDIO PROC W/O CORONARY ARTERY STENT
OR AMI.
538........................ LOCAL EXCIS & REMOV OF INT FIX DEV EXCEPT
HIP & FEMUR W/O CC
539........................ LYMPHOMA & LEUKEMIA W MAJOR OR PROCEDURE W
CC
----------------------------
QUINTILE 4
------------------------------------------------------------------------
1.......................... CRANIOTOMY AGE >17 W CC.
63......................... OTHER EAR, NOSE, MOUTH & THROAT O.R.
PROCEDURES.
86*........................ PLEURAL EFFUSION W/O CC.
102*....................... OTHER RESPIRATORY SYSTEM DIAGNOSES W/O CC.
108........................ OTHER CARDIOTHORACIC PROCEDURES.
115........................ PRM CARD PACEM IMPL W AMI/HR/SHOCK OR AICD
LEAD OR GNRTR.
116........................ OTHER PERMANENT CARDIAC PACEMAKER IMPLANT.
157........................ ANAL & STOMAL PROCEDURES W CC.
168........................ MOUTH PROCEDURES W CC.
201........................ OTHER HEPATOBILIARY OR PANCREAS O.R.
PROCEDURES.
216........................ BIOPSIES OF MUSCULOSKELETAL SYSTEM &
CONNECTIVE TISSUE.
218........................ LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT,
FEMUR AGE >17 W CC.
224........................ SHOULDER, ELBOW OR FOREARM PROC,EXC MAJOR
JOINT PROC, W/O CC.
226........................ SOFT TISSUE PROCEDURES W CC.
268........................ SKIN, SUBCUTANEOUS TISSUE & BREAST PLASTIC
PROCEDURES.
292........................ OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W
CC.
303........................ KIDNEY, URETER & MAJOR BLADDER PROCEDURES
FOR NEOPLASM.
304........................ KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-
NEOPL W CC.
308........................ MINOR BLADDER PROCEDURES W CC.
310........................ TRANSURETHRAL PROCEDURES W CC.
312........................ URETHRAL PROCEDURES, AGE >17 W CC.
345........................ OTHER MALE REPRODUCTIVE SYSTEM O.R. PROC
EXCEPT FOR MALIGNANCY.
401........................ LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R.
PROC W CC.
408........................ MYELOPROLIF DISORD OR POORLY DIFF NEOPL W
OTHER O.R. PROC.
419........................ FEVER OF UNKNOWN ORIGIN AGE >17 W CC.
455........................ OTHER INJURY, POISONING & TOXIC EFFECT DIAG
W/O CC.
485........................ LIMB REATTACHMENT, HIP AND FEMUR PROC FOR
MULTIPLE SIGNIFICANT TRA .
487........................ OTHER MULTIPLE SIGNIFICANT TRAUMA.
501........................ KNEE PROCEDURES W PDX OF INFECTION W CC.
503........................ KNEE PROCEDURES W/O PDX OF INFECTION.
505........................ EXTENSIVE BURNS OF FULL THICKNESS BURNS
WITH MECH VENT 96+HRS WITHOUT SKIN GRAFT.
506........................ FULL THICKNESS BURN W SKIN GRAFT OR INHAL
INJ W CC OR SIG TRAUMA.
519........................ CERVICAL SPINAL FUSION W CC
529........................ VENTRICULAR SHUNT PROCEDURES W CC
----------------------------
QUINTILE 5
------------------------------------------------------------------------
46......................... OTHER DISORDERS OF THE EYE AGE >17 W CC.
55......................... MISCELLANEOUS EAR, NOSE, MOUTH & THROAT
PROCEDURES.
77......................... OTHER RESP SYSTEM O.R. PROCEDURES W/O CC.
117........................ CARDIAC PACEMAKER REVISION EXCEPT DEVICE
REPLACEMENT.
118........................ CARDIAC PACEMAKER DEVICE REPLACEMENT.
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.
154........................ STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES
AGE >17 W CC.
161........................ INGUINAL & FEMORAL HERNIA PROCEDURES AGE
>17 W CC.
171*....................... OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W/O
CC.
191........................ PANCREAS, LIVER & SHUNT PROCEDURES W CC.
197........................ CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O
C.D.E. W CC.
206*....................... DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC
HEPA W/O CC.
209........................ MAJOR JOINT & LIMB REATTACHMENT PROCEDURES
OF LOWER EXTREMITY.
210........................ HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT
AGE >17 W CC.
230........................ LOCAL EXCISION & REMOVAL OF INT FIX DEVICES
OF HIP & FEMUR.
261........................ BREAST PROC FOR NON-MALIGNANCY EXCEPT
BIOPSY & LOCAL EXCISION.
267........................ PERIANAL & PILONIDAL PROCEDURES.
338........................ TESTES PROCEDURES, FOR MALIGNANCY.
341........................ PENIS PROCEDURES.
365........................ OTHER FEMALE REPRODUCTIVE SYSTEM O.R.
PROCEDURES.
406........................ MYELOPROLIF DISORD OR POORLY DIFF NEOPL W
MAJ O.R. PROC W CC.
[[Page 28231]]
424........................ O.R. PROCEDURE W PRINCIPAL DIAGNOSES OF
MENTAL ILLNESS.
443*....................... OTHER O.R. PROCEDURES FOR INJURIES W/O CC.
454........................ OTHER INJURY, POISONING & TOXIC EFFECT DIAG
W CC.
486........................ OTHER O.R. PROCEDURES FOR MULTIPLE
SIGNIFICANT TRAUMA.
488........................ HIV W EXTENSIVE O.R. PROCEDURE.
499........................ BACK & NECK PROCEDURES EXCEPT SPINAL FUSION
W CC.
515........................ CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC
CATH.
531........................ SPINAL PROCEDURES W CC.
533........................ EXTRACRANIAL PROCEDURES W CC.
535........................ CARDIAC DEFIB IMPLANT W CARDIAC CATH W AMI/
HF/SHOCK.
536........................ CARDIAC DEFIB IMPLANT W CARDIAC CATH W/O
AMI/HF/SHOCK.
------------------------------------------------------------------------
* One of the original 171 proposed 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 Proposed FY 2005 LTC-DRG Relative Weights
As we noted previously, the proposed FY 2005 LTC-DRG relative
weights are determined in accordance with the methodology described in
the August 1, 2003 final rule (68 FR 45380). 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 proposed FY 2005
LTC-DRG relative weights can be determined. After grouping the cases in
the appropriate proposed LTC-DRG, we are proposing to calculate the
proposed relative weights for FY 2005 in this proposed rule by first
removing statistical outliers and cases with a length of stay of 7 days
or less. Next, we are proposing to adjust the number of cases in each
proposed LTC-DRG for the effect of short-stay outlier cases under Sec.
412.529. The short-stay adjusted discharges and corresponding charges
would be used to calculate ``relative adjusted weights'' in each
proposed LTC-DRG using the hospital-specific relative value method
described above.
Below we discuss in detail the steps for calculating the proposed
FY 2005 LTC-DRG relative weights.
Step 1--Remove statistical outliers.
The first step in the calculation of the proposed FY 2005 LTC-DRG
relative weights is to remove statistical outlier cases. 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 would be removed prior to calculating the proposed 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 proposed relative weights could result
in an inaccurate proposed relative weight that does not truly reflect
relative resource use among the proposed LTC-DRGs.
Step 2--Remove cases with a length of stay of 7 days or less.
The proposed FY 2005 LTC-DRG relative weights should reflect the
average of resources used on representative cases of a specific type.
Generally, 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 proposed FY
2005 LTC-DRG relative weights, the value of many proposed 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 proposed FY 2005 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 proposed FY 2005 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).
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 proposed 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 proposed 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 proposed LTC-DRG.
As we explained in the August 1, 2003 final rule (68 FR 45380),
counting short-stay outlier cases as full discharges with no adjustment
in determining the proposed LTC-DRG relative weights would lower the
proposed LTC-DRG relative weight for affected proposed LTC-DRGs because
the relatively lower charges of the short-stay outlier cases would
bring down the average charge for all cases within a proposed LTC-DRG.
This would result in an ``underpayment'' to nonshort-stay outlier cases
and an ``overpayment'' to short-stay outlier cases. Therefore, in this
proposed 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 Proposed FY 2005 LTC-DRG relative weights on
an iterative basis.
The process of calculating the proposed 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
[[Page 28232]]
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 proposed LTC-DRG, the proposed FY 2005 LTC-DRG relative
weight is calculated by dividing the average of the adjusted hospital-
specific relative charge values (from above) for the proposed LTC-DRG
by the overall average hospital-specific relative charge value across
all cases for all LTCHs. Using these recalculated proposed LTC-DRG
relative weights, each LTCH's average proposed relative weight for all
of its cases (case-mix) is calculated by dividing the sum of all the
LTCH's proposed 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 proposed LTC-DRG relative weights across all
LTCHs. In this proposed 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 proposed FY 2005 LTC-DRG relative weights to
account for nonmonotonically increasing relative weights.
As explained in section II.B. of this preamble, the proposed FY
2005 CMS DRGs, upon which the proposed FY 2005 LTC-DRGs are based,
contain ``pairs'' that are differentiated based on the presence or
absence of CCs. The proposed 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 August 1, 2003 final rule (68 FR 45381), 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 proposed LTC-DRG means that cases classified into
a ``without CC'' proposed 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
proposed LTC-DRGs.
For a case to be assigned to a proposed 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 proposed 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 proposed LTC-DRG ``without CCs''
since only one principal diagnosis was coded. Since the LTCH PPS was
only implemented for cost reporting periods beginning on or after
October 1, 2002 (FY 2003) and 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 2003
claims data, we also found on occasion that the data suggested that
cases classified to the proposed LTC-DRG ``with CCs'' of a ``with CC''/
``without CC'' pair have a lower average charge than the corresponding
proposed LTC-DRG ``without CCs'' for FY 2005.
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, in this proposed rule,
we grouped both the cases ``with CCs'' and ``without CCs'' together for
the purpose of calculating the proposed FY 2005 LTC-DRG relative
weights in this proposed rule. As we stated in the August 30, 2002 LTCH
PPS final rule (67 FR 55990), we will 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'' proposed LTC-
DRG would have a higher average charge than the ``with CC'' proposed
LTC-DRG. For this proposed rule, using the LTCH cases in the December
2003 update of the FY 2003 MedPAR file, we identified two of the three
types of nonmonotonic LTC-DRG pairs.
The first category of nonmonotonically increasing proposed relative
weights for FY 2005 LTC-DRG pairs ``with and without CCs'' contains 2
pairs of proposed LTC-DRGs in which both the proposed LTC-DRG ``with
CCs'' and the proposed LTC-DRG ``without CCs'' had 25 or more LTCH
cases and, therefore, did not fall into one of the 5 low-volume
quintiles. For those nonmonotonic LTC-DRG pairs, we would combine the
LTCH cases and compute a new proposed relative weight based on the
case-weighted average of the combined LTCH cases of the proposed 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 proposed LTC-DRG. This new proposed relative weight would
then be assigned to both of the proposed LTC-DRGs in the pair. In this
proposed rule, we are proposing that, for FY 2005, proposed LTC-DRGs
144 and 145 and LTC-DRGs 444 and 445 are in this category.
The second category of nonmonotonically increasing relative weights
for proposed LTC-DRG pairs with and without CCs consists of zero pairs
of proposed LTC-DRGs that has fewer than 25 cases, and each proposed
LTC-DRG would be grouped to different proposed low-volume quintiles in
which the ``without CC'' proposed LTC-DRG would be in a higher-weighted
proposed low-volume quintile than the ``with CC'' proposed LTC-DRG. For
those pairs, we would 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 proposed LTC-DRG.
Based on the case-weighted average LTCH charge, we determine which low-
volume quintile the ``combined LTC-DRG'' would be grouped. Both
proposed LTC-DRGs in the pair would then be grouped into the same
proposed low-volume quintile, and thus would have the same proposed
relative weight. For FY 2005, in this proposed rule, there are no
proposed LTC-DRGs that fall into this category.
The third category of nonmonotonically increasing relative weights
for proposed LTC-DRG pairs with and without CCs consists of 7 pairs of
proposed LTC-DRGs where one of the proposed LTC-DRGs has fewer than
[[Page 28233]]
25 LTCH cases and is grouped to a proposed low-volume quintile and the
other proposed LTC-DRG has 25 or more LTCH cases and has its own
proposed LTC-DRG relative weight, and the proposed LTC-DRG ``without
CCs'' has the higher proposed relative weight. We remove the proposed
low-volume LTC-DRG from the proposed low-volume quintile and combine it
with the other proposed LTC-DRG for the computation of a new proposed
relative weight for each of these proposed LTC-DRGs. This new proposed
relative weight is assigned to both proposed LTC-DRGs, so they each
have the same proposed relative weight. For FY 2005, in this proposed
rule, we are proposing the following proposed LTC-DRGs would be in this
category: LTC-DRGs 68 and 69; LTC-DRGs 85 and 86; LTC-DRGs 101 and 102;
LTC-DRGs 170 and 171; LTC-DRGs 205 and 206; LTC-DRGs 318 and 319; and
LTC-DRGs 442 and 443.
Step 6--Determine a proposed FY 2005 LTC-DRG relative weight for
proposed LTC-DRGs with no LTCH cases.
As we stated above, we determine the proposed relative weight for
each proposed LTC-DRG using charges reported in the December 2003
update of the FY 2003 MedPAR file. Of the 519 proposed LTC-DRGs for FY
2005, we identified 170 proposed LTC-DRGs for which there were no LTCH
cases in the database. That is, based on data from the FY 2003 MedPAR
file used in this proposed rule, no patients who would have been
classified to those proposed LTC-DRGs were treated in LTCHs during FY
2003 and, therefore, no charge data were reported for those proposed
LTC-DRGs. Thus, in the process of determining the proposed LTC-DRG
relative weights, we are unable to determine proposed weights for these
170 proposed LTC-DRGs using the methodology described in steps 1
through 5 above. However, since patients with a number of the diagnoses
under these proposed LTC-DRGs may be treated at LTCHs beginning in FY
2005, we assign proposed relative weights to each of the 170 ``no
volume'' proposed LTC-DRGs based on clinical similarity and relative
costliness to one of the remaining 349 (519-170 = 349) proposed LTC-
DRGs for which we are able to determine proposed relative weights,
based on FY 2003 claims data.
As there are currently no LTCH cases in these ``no volume''
proposed LTC-DRGs, we determine proposed relative weights for the 170
proposed LTC-DRGs with no LTCH cases in the FY 2003 MedPAR file used in
this proposed rule by grouping them to the appropriate proposed low-
volume quintile. This methodology is consistent with our methodology
used in determining proposed relative weights to account for the
proposed low-volume LTC-DRGs described above.
Our methodology for determining proposed relative weights for the
``no volume'' proposed LTC-DRGs is as follows: First, we crosswalk the
proposed no volume LTC-DRGs by matching them to other similar proposed
LTC-DRGs for which there were LTCH cases in the FY 2003 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
proposed relative weight for the applicable proposed low-volume
quintile to the proposed no volume LTC-DRG if the proposed LTC-DRG to
which it is crosswalked is grouped to one of the proposed low-volume
quintiles. If the proposed LTC-DRG to which the proposed no volume LTC-
DRG is crosswalked is not one of the proposed LTC-DRGs to be grouped to
one of the proposed low-volume quintiles, we compare the proposed
relative weight of the proposed LTC-DRG to which the proposed no volume
LTC-DRG is crosswalked to the proposed relative weights of each of the
five quintiles and we assign the proposed no volume LTC-DRG the
proposed relative weight of the proposed low-volume quintile with the
closest proposed weight. For this proposed rule, a list of the proposed
no volume FY 2005 LTC-DRGs and the proposed FY 2005 LTC-DRG to which it
is crosswalked in order to determine the appropriate proposed low-
volume quintile for the assignment of a proposed relative weight for FY
2005 is shown below in Table 2.
Table 2.--Proposed No Volume LTC-DRG Crosswalk and Proposed Quintile Assignment for FY 2005
----------------------------------------------------------------------------------------------------------------
Proposed low-
Proposed cross- volume
Proposed LTC-DRG Description walked LTC-DRG quintile
assigned.
----------------------------------------------------------------------------------------------------------------
2.............................. CRANIOTOMY AGE >17 W/O CC...................... 1 Quintile 4.
3.............................. CRANIOTOMY AGE 0-17............................ 1 Quintile 4.
6.............................. CARPAL TUNNEL RELEASE.......................... 251 Quintile 2.
26............................. SEIZURE & HEADACHE AGE 0-17.................... 25 Quintile 2.
30............................. TRAUMATIC STUPOR & COMA, COMA < 1 HR AGE 0-17... 29 Quintile 3.
32............................. CONCUSSION AGE >17 W/O CC...................... 25 Quintile 2.
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 VITRECTOMY..... 47 Quintile 1.
40............................. EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE >17.... 47 Quintile 1.
41............................. EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 0-17... 47 Quintile 1.
42............................. INTRAOCULAR PROCEDURES EXCEPT RETINA, IRIS & 47 Quintile 1.
LENS.
48............................. OTHER DISORDERS OF THE EYE AGE 0-17............ 47 Quintile 1.
49............................. MAJOR HEAD & NECK PROCEDURES................... 64 Quintile 4.
50............................. SIALOADENECTOMY................................ 63 Quintile 4.
51............................. SALIVARY GLAND PROCEDURES EXCEPT 63 Quintile 4.
SIALOADENECTOMY.
52............................. CLEFT LIP & PALATE REPAIR...................... 63 Quintile 4.
54............................. SINUS & MASTOID PROCEDURES AGE 0-17............ 53 Quintile 3.
56............................. RHINOPLASTY.................................... 53 Quintile 3.
57............................. T&A PROC, EXCEPT TONSILLECTOMY &/OR 69 Quintile 2.
ADENOIDECTOMY ONLY, AGE >17.
58............................. T&A PROC, EXCEPT TONSILLECTOMY &/OR 69 Quintile 2.
ADENOIDECTOMY ONLY, AGE 0-17.
59............................. TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE >17. 69 Quintile 2.
60............................. TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17 69 Quintile 2.
[[Page 28234]]
61............................. MYRINGOTOMY W TUBE INSERTION AGE >17........... 69 Quintile 2.
62............................. MYRINGOTOMY W TUBE INSERTION AGE 0-17.......... 69 Quintile 2.
66............................. EPISTAXIS...................................... 69 Quintile 2.
67............................. EPIGLOTTITIS................................... 63 Quintile 4.
70............................. OTITIS MEDIA & URI AGE 0-17.................... 69 Quintile 2.
71............................. LARYNGOTRACHEITIS.............................. 97 Quintile 1.
72............................. NASAL TRAUMA & DEFORMITY....................... 53 Quintile 3.
74............................. OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE 0- 69 Quintile 2.
17.
81............................. RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 0-17 69 Quintile 2.
91............................. SIMPLE PNEUMONIA & PLEURISY AGE 0-17........... 90 Quintile 2.
98............................. BRONCHITIS & ASTHMA AGE 0-17................... 97 Quintile 1.
104............................ CARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W 110 Quintile 1.
CARD CATH.
105............................ CARDIAC VALVE & OTH MAJOR CARDIOTHORACIC PROC W/ 110 Quintile 1.
O CARD CATH.
106............................ CORONARY BYPASS W PTCA......................... 110 Quintile 1.
107............................ CORONARY BYPASS W CARDIAC CATH................. 110 Quintile 1.
111............................ MAJOR CARDIOVASCULAR PROCEDURES W/O CC......... 110 Quintile 1.
137............................ CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 0- 136 Quintile 3.
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 5.
153............................ MINOR SMALL & LARGE BOWEL PROCEDURES W/O CC.... 152 Quintile 5.
155............................ STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 154 Quintile 5.
>17 W/O CC.
156............................ STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 0- 154 Quintile 5.
17.
158............................ ANAL & STOMAL PROCEDURES W/O CC................ 157 Quintile 4.
160............................ HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE 159 Quintile 3.
>17 W/O CC.
162............................ INGUINAL & FEMORAL HERNIA PROCEDURES AGE >17 W/ 178 Quintile 1.
O CC.
163............................ HERNIA PROCEDURES AGE 0-17..................... 178 Quintile 1.
164............................ APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W CC. 148 Quintile 5.
165............................ APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W/O 148 Quintile 5.
CC.
166............................ APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W 148 Quintile 5.
CC.
167............................ APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O 148 Quintile 5.
CC.
169............................ MOUTH PROCEDURES W/O CC........................ 53 Quintile 3.
184............................ ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS 183 Quintile 2.
AGE 0-17.
186............................ DENTAL & ORAL DIS EXCEPT EXTRACTIONS & 185 Quintile 3.
RESTORATIONS, AGE 0-17.
187............................ DENTAL EXTRACTIONS & RESTORATIONS.............. 185 Quintile 3.
190............................ OTHER DIGESTIVE SYSTEM DIAGNOSES AGE 0-17...... 189 Quintile 3.
192............................ PANCREAS, LIVER & SHUNT PROCEDURES W/O CC...... 191 Quintile 5.
194............................ BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/ 193 Quintile 1.
O C.D.E. W/O CC.
195............................ CHOLECYSTECTOMY W C.D.E. W CC.................. 197 Quintile 5.
196............................ CHOLECYSTECTOMY W C.D.E. W/O CC................ 197 Quintile 5.
198............................ CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O 197 Quintile 5.
C.D.E. W/O CC.
199............................ HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR 200 Quintile 3.
MALIGNANCY.
211............................ HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 210 Quintile 5.
>17 W/O CC.
212............................ HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 0- 210 Quintile 5.
17.
219............................ LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, 218 Quintile 4.
FEMUR AGE >17 W/O CC ].
220............................ LOWER EXTREM & HUMER PROC EXCEPT HIP, FOOT, 218 Quintile 4.
FEMUR AGE 0-17.
223............................ MAJOR SHOULDER/ELBOW PROC, OR OTHER UPPER 224 Quintile 4.
EXTREMITY PROC W CC.
232............................ ARTHROSCOPY.................................... 234 Quintile 2.
252............................ FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT 234 Quintile 2.
AGE 0-17.
255............................ FX, SPRN, STRN & DISL OF UPARM, LOWLEG EX FOOT 234 Quintile 2.
AGE 0-17.
257............................ TOTAL MASTECTOMY FOR MALIGNANCY W CC........... 275 Quintile 3.
258............................ TOTAL MASTECTOMY FOR MALIGNANCY W/O CC......... 275 Quintile 3.
259............................ SUBTOTAL MASTECTOMY FOR MALIGNANCY W CC........ 275 Quintile 3.
279............................ CELLULITIS AGE 0-17............................ 273 Quintile 1.
282............................ TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 0- 281 Quintile 3.
17.
286............................ ADRENAL & PITUITARY PROCEDURES................. 53 Quintile 3.
289............................ PARATHYROID PROCEDURES......................... 53 Quintile 3.
290............................ THYROID PROCEDURES............................. 53 Quintile 3.
291............................ THYROGLOSSAL PROCEDURES........................ 53 Quintile 3.
293............................ OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W/O 292 Quintile 2.
CC.
298............................ NUTRITIONAL & MISC METABOLIC DISORDERS AGE 0-17 297 Quintile 2.
309............................ MINOR BLADDER PROCEDURES W/O CC................ 308 Quintile 4.
311............................ TRANSURETHRAL PROCEDURES W/O CC................ 310 Quintile 4.
313............................ URETHRAL PROCEDURES, AGE >17 W/O CC............ 312 Quintile 4.
314............................ URETHRAL PROCEDURES, AGE 0-17.................. 305 Quintile 2.
322............................ KIDNEY & URINARY TRACT INFECTIONS AGE 0-17..... 326 Quintile 1.
327............................ KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 0- 326 Quintile 1.
17.
329............................ URETHRAL STRICTURE AGE >17 W/O CC.............. 305 Quintile 2.
330............................ URETHRAL STRICTURE AGE 0-17.................... 305 Quintile 2.
[[Page 28235]]
333............................ OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 0-17 332 Quintile 2.
334............................ MAJOR MALE PELVIC PROCEDURES W CC.............. 345 Quintile 4.
335............................ MAJOR MALE PELVIC PROCEDURES W/O CC............ 345 Quintile 4.
337............................ TRANSURETHRAL PROSTATECTOMY W/O CC............. 306 Quintile 3.
340............................ TESTES PROCEDURES, NON-MALIGNANCY AGE 0-17..... 339 Quintile 1.
342............................ CIRCUMCISION AGE >17........................... 339 Quintile 1.
343............................ CIRCUMCISION AGE 0-17.......................... 339 Quintile 1.
344............................ OTHER MALE REPRODUCTIVE SYSTEM O.R. PROCEDURES 345 Quintile 4.
FOR MALIGNANCY.
351............................ STERILIZATION, MALE............................ 339 Quintile 1.
353............................ PELVIC EVISCERATION, RADICAL HYSTERECTOMY & 365 Quintile 5.
RADICAL VULVECTOMY.
354............................ UTERINE, ADNEXA PROC FOR NON-OVARIAN/ADNEXAL 365 Quintile 5.
MALIG W CC.
355............................ UTERINE, ADNEXA PROC FOR NON-OVARIAN/ADNEXAL 365 Quintile 5.
MALIG W/O CC.
356............................ FEMALE REPRODUCTIVE SYSTEM RECONSTRUCTIVE 303 Quintile 4.
PROCEDURES.
357............................ UTERINE & ADNEXA PROC FOR OVARIAN OR ADNEXAL 303 Quintile 4.
MALIGNANCY.
358............................ UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W CC.. 303 Quintile 4.
359............................ UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W/O CC 303 Quintile 4.
360............................ VAGINA, CERVIX & VULVA PROCEDURES.............. 303 Quintile 4.
361............................ LAPAROSCOPY & INCISIONAL TUBAL INTERRUPTION.... 149 Quintile 1.
362............................ ENDOSCOPIC TUBAL INTERRUPTION.................. 149 Quintile 1.
363............................ D&C, CONIZATION & RADIO-IMPLANT, FOR MALIGNANCY 367 Quintile 1.
364............................ D&C, CONIZATION EXCEPT FOR MALIGNANCY.......... 367 Quintile 1.
370............................ CESAREAN SECTION W CC.......................... 369 Quintile 3.
371............................ CESAREAN SECTION W/O CC........................ 367 Quintile 1.
372............................ VAGINAL DELIVERY W COMPLICATING DIAGNOSES...... 367 Quintile 1.
373............................ VAGINAL DELIVERY W/O COMPLICATING DIAGNOSES.... 367 Quintile 1.
374............................ VAGINAL DELIVERY W STERILIZATION &/OR D&C...... 367 Quintile 1.
375............................ VAGINAL DELIVERY W O.R. PROC EXCEPT STERIL &/OR 367 Quintile 1.
D&C.
376............................ POSTPARTUM & POST ABORTION DIAGNOSES W/O O.R. 367 Quintile 1.
PROCEDURE.
377............................ POSTPARTUM & POST ABORTION DIAGNOSES W O.R. 367 Quintile 1.
PROCEDURE.
378............................ ECTOPIC PREGNANCY.............................. 369 Quintile 3.
379............................ THREATENED ABORTION............................ 367 Quintile 1.
380............................ ABORTION W/O D&C............................... 367 Quintile 1.
381............................ ABORTION W D&C, ASPIRATION CURETTAGE OR 367 Quintile 1.
HYSTEROTOMY.
382............................ FALSE LABOR.................................... 367 Quintile 1.
383............................ OTHER ANTEPARTUM DIAGNOSES W MEDICAL 367 Quintile 1.
COMPLICATIONS.
384............................ OTHER ANTEPARTUM DIAGNOSES W/O MEDICAL 367 Quintile 1.
COMPLICATIONS.
385............................ NEONATES, DIED OR TRANSFERRED TO ANOTHER ACUTE 367 Quintile 1.
CARE FACILITY.
386............................ EXTREME IMMATURITY OR RESPIRATORY DISTRESS 367 Quintile 1.
SYNDROME, NEONATE.
387............................ PREMATURITY W MAJOR PROBLEMS................... 367 Quintile 1.
388............................ PREMATURITY W/O MAJOR PROBLEMS................. 367 Quintile 1.
389............................ FULL TERM NEONATE W MAJOR PROBLEMS............. 367 Quintile 1.
390............................ NEONATE W OTHER SIGNIFICANT PROBLEMS........... 367 Quintile 1.
391............................ NORMAL NEWBORN................................. 367 Quintile 1.
392............................ SPLENECTOMY AGE >17............................ 197 Quintile 5.
393............................ SPLENECTOMY AGE 0-17........................... 197 Quintile 5.
396............................ RED BLOOD CELL DISORDERS AGE 0-17.............. 399 Quintile 2.
402............................ LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC 395 Quintile 4.
W/O CC.
405............................ ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE 0- 404 Quintile 1.
17.
407............................ MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ 408 Quintile 4.
O.R. PROC W/O CC.
411............................ HISTORY OF MALIGNANCY W/O ENDOSCOPY............ 367 Quintile 1.
412............................ HISTORY OF MALIGNANCY W ENDOSCOPY.............. 367 Quintile 1.
417............................ SEPTICEMIA AGE 0-17............................ 416 Quintile 3.
422............................ VIRAL ILLNESS & FEVER OF UNKNOWN ORIGIN AGE 0- 426 Quintile 1.
17.
432............................ OTHER MENTAL DISORDER DIAGNOSES................ 427 Quintile 2.
446............................ TRAUMATIC INJURY AGE 0-17...................... 445 Quintile 3.
448............................ ALLERGIC REACTIONS AGE 0-17.................... 447 Quintile 2.
451............................ POISONING & TOXIC EFFECTS OF DRUGS AGE 0-17.... 455 Quintile 4.
471............................ BILATERAL OR MULTIPLE MAJOR JOINT PROCS OF 236 Quintile 2.
LOWER EXTREMITY.
481............................ BONE MARROW TRANSPLANT......................... 394 Quintile 3.
482............................ TRACHEOSTOMY FOR FACE, MOUTH & NECK DIAGNOSES.. 63 Quintile 4.
484............................ CRANIOTOMY FOR MULTIPLE SIGNIFICANT TRAUMA..... 1 Quintile 4.
491............................ MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF 209 Quintile 5.
UPPER EXTREMITY.
492............................ CHEMOTHERAPY W ACUTE LEUKEMIA OR W USE OF HI 410 Quintile 3.
DOSE CHEMOAGENT.
494............................ LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O CC. 493 Quintile 3.
498............................ SPINAL FUSION EXCEPT CERVICAL W/O CC........... 497 Quintile 3.
504............................ EXTENSIVE BURNS OF FULL THICKNESS BURNS WITH 468 Quintile 5.
MECH VENT 96+HRS WITH SKIN GRAFT.
507............................ FULL THICKNESS BURN W SKIN GRFT OR INHAL INJ W/ 508 Quintile 3.
O CC OR SIG TRAUMA.
516............................ PERCUTANEOUS CARDIOVASC PROC W AMI............. 518 Quintile 3.
[[Page 28236]]
520............................ CERVICAL SPINAL FUSION W/O CC.................. 497 Quintile 3.
525............................ OTHER HEART ASSIST SYSTEM IMPLANT.............. 468 Quintile 5.
526............................ PERCUTNEOUS CARDIOVASULAR PROC W DRUG ELUTING 517 Quintile 3.
STENT W AMI.
527............................ PERCUTNEOUS CARDIOVASULAR PROC W DRUG ELUTING 517 Quintile 3.
STENT W/O AMI.
528............................ INTRACRANIAL VASCULAR PROC W PDX HEMORRHAGE.... 1 Quintile 4.
530............................ VENTRICULAR SHUNT PROCEDURES W/O CC............ 529 Quintile 4.
534............................ EXTRACRANIAL PROCEDURES W/O CC................. 500 Quintile 1.
540............................ LYMPHOMA & LEUKEMIA W MAJOR OR PROCEDURE W/O CC 399 Quintile 2.
----------------------------------------------------------------------------------------------------------------
To illustrate this methodology for determining the proposed
relative weights for the 170 proposed LTC-DRGs with no LTCH cases, we
are providing the following examples, which refer to the no volume
proposed LTC-DRGs crosswalk information for FY 2005 provided above in
Table 2:
Example 1: There were no cases in the FY 2003 MedPAR file used
for this proposed rule for proposed 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 proposed LTC-DRG 178 (Uncomplicated
Peptic Ulcer Without CC), which is assigned to proposed low-volume
quintile 1 for the purpose of determining the proposed FY 2005
relative weights, would display similar clinical and resource use.
Therefore, we assign the same proposed relative weight of proposed
LTC-DRG 178 of 0.4964 (Quintile 1) for FY 2005 (Table 11 in the
Addendum to this proposed rule) to LTC-DRG 163.
Example 2: There were no LTCH cases in the FY 2003 MedPAR file
used in this proposed rule for proposed 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 determined that proposed 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 proposed 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, proposed LTC-DRG 91, with no LTCH
cases, would need to be grouped to a low-volume quintile. We
identified that the proposed low-volume quintile with the closest
weight to proposed LTC-DRG 90 (0.7368; see Table 11 in the Addendum
to this proposed rule) would be proposed low-volume quintile 2
(0.6685; see Table 11 in the Addendum to this proposed rule).
Therefore, we assign proposed LTC-DRG 91 a proposed relative weight
of 0.6885 for FY 2005.
Furthermore, we are proposing 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 2005 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 would only include 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 proposed 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 proposed relative
weights in this proposed rule.
Table 11 in the Addendum to this proposed rule lists the
proposed LTC-DRGs and their respective proposed 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 2005.
E. Proposed Add-On Payments for New Services and Technologies
[If you choose to comment on issues in this section, please include the
caption ``New Technology Applications'' at the beginning of your
comment.]
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)(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 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.''
The regulations implementing this provision establish three
criteria for special treatment. First, Sec. 412.87(b)(2) defines when
a specific medical service or technology will be considered new for
purposes of new medical service or technology add-on payments. The
statutory provision contemplated the special payment treatment for new
medical services or technologies until such time as data are available
to reflect the cost of the technology in the DRG weights through
recalibration. There is a lag of 2 to 3 years from the point a new
medical service or technology is first introduced on the market and
when data reflecting the use of the medical service or technology are
used to calculate the DRG weights. For example, data from discharges
occurring during FY 2003 are used to calculate the proposed FY 2005 DRG
weights in this proposed rule. Section 412.87(b)(2) provides that a
``medical service or technology may be considered new within 2 or 3
years after the point at which data begin to become available
reflecting the ICD-9-CM code assigned to the new medical service or
technology (depending on when a new code is assigned and data on the
new medical service or technology become
[[Page 28237]]
available for DRG recalibration). After CMS has recalibrated the DRGs,
based on available data, to reflect the costs of an otherwise new
medical service or technology, the medical service or technology will
no longer be considered `new' under the criterion for this section.''
The 2-year to 3-year period would ordinarily begin with FDA
approval, unless there was some documented delay in bringing the
product onto the market after that approval (for instance, component
production or drug production had been postponed until FDA approval due
to shelf life concerns). After the DRGs have been recalibrated to
reflect the costs of an otherwise new medical service or technology,
the special add-on payment for new medical services or technology
ceases (Sec. 412.87(b)(2)). For example, an approved new technology
that received FDA approval in October 2003 and entered the market at
that time may be eligible to receive add-on payments as a new
technology until FY 2006 (discharges occurring before October 1, 2005),
when data reflecting the costs of the technology would be used to
recalibrate the DRG weights. Because the FY 2006 DRG weights will be
calculated using FY 2004 MedPAR data, the costs of such a new
technology would likely be reflected in the FY 2006 DRG weights.
Section 412.87(b)(3) further provides that, to receive special
payment treatment, new medical services or technologies must be
inadequately paid otherwise under the DRG system. To assess whether
technologies would be inadequately paid under the DRGs, we establish
thresholds to evaluate applicants for new technology add-on payments.
In the August 1, 2003 final rule (68 FR 45385), we established the
threshold at the geometric mean standardized charge for all cases in
the DRG plus 75 percent of 1 standard deviation above the geometric
mean standardized charge (based on the logarithmic values of the
charges and transformed back to charges) for all cases in the DRG to
which the new medical service or technology is assigned (or the case-
weighted average of all relevant DRGs, if the new medical service or
technology occurs in many different DRGs). Table 10 in the Addendum to
the August 1, 2003 final rule (68 FR 45648) listed the qualifying
threshold by DRG, based on the discharge data that we used to calculate
the FY 2004 DRG weights.
However, section 503(b)(1) of Public Law 108-173 amended section
1886(d)(5)(K)(ii)(I) of the Act to provide for ``applying a threshold*
* *that is the lesser of 75 percent of the standardized amount
(increased to reflect the difference between cost and charges) or 75
percent of one standard deviation for the diagnosis-related group
involved.'' The provisions of section 503(b)(1) apply to classification
for fiscal years beginning with FY 2005. We have updated Table 10 from
the October 6, 2003 Federal Register correction document, which
contains the thresholds that we are using to evaluate applications for
new service or technology add-on payments for FY 2005, using the
section 503(b)(1) measures stated above, and posted these new
thresholds on our Web site at: http://www.cms.hhs.gov/providers/hipps/newtech.asp.
The thresholds published in this FY 2005 proposed rule are
preliminary thresholds for FY 2006. The final thresholds published in
the FY 2005 final rule will be used to evaluate applicants for new
technology add-on payments during FY 2006. (Refer to section IV. D. of
this preamble for a discussion of a revision of the regulations to
incorporate the change made by section 503(b)(1) of Public Law 108-
173.)
Section 412.87(b)(1) of our existing regulations provides that a
new technology is 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. For example, a new technology
represents a substantial clinical improvement when it reduces
mortality, decreases the number of hospitalizations or physician visits
or reduces recovery time compared to the technologies previously
available. (See the September 7, 2001 final rule (66 FR 46902) for a
complete discussion of this criterion.)
The new medical service or technology add-on payment policy
provides additional payments for cases with high costs involving
eligible new medical services or 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 medical service
or technology. Under Sec. 412.88, Medicare pays a marginal cost factor
of 50 percent for the costs of a new medical service or technology in
excess of the full DRG payment. If the actual costs of a new medical
service or technology case exceed the DRG payment by more than the 50-
percent marginal cost factor of the new medical service or 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 Public Law 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, in the past, we
accounted for projected payments under the new medical service and
technology provision during the upcoming fiscal year at the same time
we estimated the payment effect of changes to the DRG classifications
and recalibration. The impact of additional payments under this
provision was then included in the budget neutrality factor, which was
applied to the standardized amounts and the hospital-specific amounts.
Section 503(d)(2) of Public Law 108-173 amended section
1886(d)(5)(K)(ii)(III) of the Act to provide that there shall be no
reduction or adjustment in aggregate payments under the IPPS due to
add-on payments for new medical services and technologies. Therefore,
add-on payments for new medical services or technologies for FY 2005
and later years will not be budget neutral. We discuss the regulation
change necessary to implement this provision in section IV.H. of this
proposed rule.
Applicants for add-on payments for new medical services or
technologies for FY 2006 must submit a formal request, including a full
description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement, along with a significant sample of data to
demonstrate the medical service or technology meets the high-cost
threshold, no later than early October 2004. Applicants must submit a
complete database no later than mid-December 2004. Complete application
information, along with final deadlines for submitting a full
application, will be available at our Web site after publication of the
FY 2005 final rule at: http://www.cms.hhs.gov/providers/hipps/default.asp. To
allow interested parties to identify the new medical services or
technologies under review before the publication of the proposed rule
for FY 2006, the Web site will also list the tracking forms completed
by each applicant.
[[Page 28238]]
2. Other Provisions of Section 503 of Public Law 108-173
Section 503(b)(2) of Public Law 108-173 amended section
1886(d)(5)(K) of the Act by adding a new clause (viii) to provide for a
mechanism for public input before publication of a notice of proposed
rule making regarding whether a medical service or technology
represents a substantial improvement or advancement. The revised
process for evaluating new medical service and technology applications
requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries.
Make public and periodically update a list of the services
and technologies for which an application for add-on payments is
pending.
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
improvement.
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new service or technology
represents a substantial clinical improvement to the clinical staff of
CMS.
In order to satisfy the requirements of this last provision, we
published a notice in the Federal Register on February 27, 2004, and
held a town meeting at the CMS Headquarters Office in Baltimore, MD, on
March 15, 2004. In the announcement notice for the meeting, we stated
that the opinions and alternatives provided during the meeting would
assist us in our evaluations of applications by allowing public
discussions of the substantial clinical improvement criteria for each
of the FY 2005 new medical service and technology add-on payment
applications before the publication of this FY 2005 IPPS proposed rule.
Approximately 70 participants registered and attended in person,
while additional participants listened over an open telephone line. The
participants focused on presenting data on the substantial clinical
improvement aspect of their products, as well as the need for
additional payments to ensure access to Medicare beneficiaries. In
addition, we also received many written comments regarding the
substantial clinical improvement criterion for the applicants. We have
considered these comments in our evaluation of each new application for
FY 2005 in this proposed rule. We have summarized these comments, or if
applicable, indicated that no comments were received, at the end of the
discussion of the individual applications.
Section 503(c) of Public Law 108-173 amended section 1886(d)(5)(K)
of the Act by adding a new clause (ix) requiring that before
establishing any add-on payment for a new medical service or
technology, that the Secretary shall seek to identify one or more DRGs
associated with the new technology, based on similar clinical or
anatomical characteristics and the costs of the technology and assign
the new technology into a DRG where the average costs of care most
closely approximate the costs of care using the new technology. No add-
on payment shall be made with respect to such a new technology.
At the time an application is submitted, the DRGs associated with
the new technology are identified. We only determine that a new
technology add-on payment is appropriate when the reimbursement under
these DRGs is not adequate for this new technology. The criterion for
this determination is the cost threshold, which we discuss below. We
discuss the assignments of several new technologies within the DRG
payment system in section II.B. of this preamble.
In this proposed rule, we evaluate whether new technology add-on
payments will continue in FY 2005 for the two technologies that
currently receive such payments. In accordance with section 503(e)(2)
of Public Law 108-173, we also reconsider one application for new
technology add-on payments that was denied last year. Finally, we
present our evaluations of 10 new applications for add-on payments in
FY 2005.
3. FY 2005 Status of Technology Approved for FY 2004 Add-On Payments
a. Drotrecogin Alfa (Activated)--Xigris[reg]
Xigris[reg], a biotechnology product that is a recombinant version
of naturally occurring Activated Protein C (APC), was approved by the
FDA on November 21, 2001. In the August 1, 2002 IPPS final rule (67 FR
50013), we determined that cases involving the administration of
Xigris[reg], (as identified by the presence of code 00.11 (Infusion of
drotrecogin alfa (activated)) were eligible for additional payments in
FY 2003. (The August 1, 2002 final rule contains a detailed discussion
of this technology.)
In the August 1, 2003 final IPPS rule (68 FR 45387), we indicated
that, for FY 2004, we would continue to make add-on payments for cases
involving the administration of Xigris[reg] as identified by the
presence of code 00.11. This was because we determined that Xigris[reg]
was still within the 2-year to 3-year period before the costs of this
new technology would be reflected in the DRG weights.
Xigris[reg] became available on the market at the time of its FDA
licensure on November 21, 2001. Early in FY 2005, Xigris[reg] will be
beyond the 2-year to 3-year period during which a technology can be
considered new. Therefore, we are proposing that Xigris[reg] will not
continue to receive new technology add-on payments in FY 2005. During
the period of 2 years and 6 months since it came onto the market,
Xigris[reg] has been used frequently in the appropriate DRGs. For FY
2005, we analyzed the number of cases involving this technology in the
FY 2003 MedPAR file. We found 4,243 cases that received Xigris[reg],
the majority of which fell appropriately into DRGs 415, 416, 475, and
483, with by far the most cases in DRG 416 (Septicemia Age >17).
Accordingly, the costs of Xigris[reg] are now well-represented in those
DRGs. Therefore, we are proposing that FY 2004 will be the final year
for Xigris[reg] to receive add-on payments.
We received no public comments regarding the continuation of add-on
payments for Xigris[reg].
The manufacturer also asked us to consider creating a DRG
specifically for severe sepsis. We discuss this request in section
II.B.16.c. of this proposed rule. b. InFUSETM (Bone
Morphogenetic Proteins (BMPs) for Spinal Fusions)
InFUSETM was approved by FDA for use on July 2, 2002,
and became available on the market immediately thereafter. In the
August 1, 2003 IPPS final rule (68 FR 45388), we approved
InFUSETM for add-on payments under Sec. 412.88, effective
for FY 2004. This approval was on the basis of using
InFUSETM for single-level, lumbar spinal fusion, consistent
with the FDA's approval and the data presented to us by the applicant.
Therefore, we limited the add-on payment to cases using this technology
for anterior lumbar fusions in DRGs 497 (Spinal Fusion Except Cervical
With CC) and 498 (Spinal Fusion Except Cervical Without CC). Cases
involving InFUSETM that are eligible for the new technology
add-on payment are identified by assignment to DRGs 497 and 498 as a
lumbar spinal fusion, with the combination of ICD-9-CM procedure codes
84.51 (Insertion of
[[Page 28239]]
interbody spinal fusion device) and 84.52 (Insertion of recombinant
bone morphogenetic protein).
Because InFUSETM was approved by the FDA for use on July
2, 2003, it is still within the 2-year to 3-year period during which a
technology can be considered new under the regulations. Therefore, we
are proposing to continue add-on payments for FY 2005 for cases
receiving InFUSETM for spinal fusions in DRGs 497 (Spinal
Fusion Except Cervical With CC) and 498 (Spinal Fusion Except Cervical
Without CC). We are also proposing to continue limiting the add-on
payment for cases receiving InFUSETM, to those cases
identified by the presence of procedure codes 84.51 and 84.52. However,
we are proposing to eliminate add-on payment for the interbody fusion
device that is used in combination with this recombinant human bone
morphogenetic protein (rhBMP) product (procedure code 84.52). We note
that currently add-on payments for InFUSETM include costs
for the interbody fusion device (the LT cage, identified by procedure
code 84.51), used in the spinal fusion procedure with the
InFUSETM product. Because this device is not a new
technology, but in fact has been in use for 9 years for spinal fusions,
we believe that it is inappropriate to pay for this device in
conjunction with the genuinely new rhBMP technology. Therefore, we are
proposing no longer to pay for the interbody fusion device as bundled
in the current maximum add-on payment amount of $4,450 for cases that
qualify for additional payment. This proposal would reduce the add-on
payment to account for no longer paying for the LT cage. This would
reduce the cost of this new technology by $4,990, which results in a
total cost of $3,910 for InFUSETM. Therefore, we are
proposing a maximum add-on amount of $1,955 for cases that qualify for
additional payment. Although we are proposing to eliminate payment for
the LT cage, we would still require the presence of procedure code
84.51 (in combination with procedure code 84.52) when making add-on
payments for new technology for InFUSETM. This is due to the
fact that the LT cage is still required by the FDA when
InFUSETM is used for single level spinal fusions.
We received the following public comments in accordance with
section 503(b)(2) of Public Law 108-173 regarding the continuation of
add-on payments for this technology.
Comment: Several commenters wrote expressing support for continued
add-on payments for this technology. Many of these commenters were
physicians who use the device. These commenters noted that the
hospitals for which they work did not allow use of the device until the
new technology add-on payments began on October 1, 2003. Therefore,
they encouraged the continued add-on payment to ensure continued access
of the device to patients. They also argued that, because utilization
remained low in FY 2003, the DRG recalibration for FY 2005 would not
supply adequate payment data for the cases using the device, further
jeopardizing patient access to the technology.
Response: As discussed above, we are proposing to continue payments
because this technology is still within the 2-year to 3-year period
during which a technology can be considered new under the regulation.
4. Reevaluation of FY 2004 Applications That Were Not Approved
Section 503(e)(2) of Public Law 108-173 requires us to reconsider
all applications for new medical service or technology add-on payments
that were denied for FY 2004. We received two applications for new
technologies to be designated eligible for add-on payments for new
technology for FY 2004. We approved InFUSE for use in spinal fusions
for new technology add-on payments in FY 2004. We denied the
application for new technology add-on payments for the GLIADEL[reg]
wafer.
GLIADEL[reg] Wafer
Gliablastoma Multiforme (GBM) is a very aggressive primary brain
tumor. Standard care for patients diagnosed with GBM includes surgical
resection followed by radiation and, in some cases, systemic
chemotherapy. According to the manufacturer, the GLIADEL[reg] wafer is
indicated for use at the time of surgery in order to prolong survival
in patients with GBM. Implanted directly into the cavity that is
created when a brain tumor is surgically removed, the GLIADEL[reg]
wafer delivers chemotherapy directly to the site where the tumor is
most likely to recur.
The FDA gave initial approval for the 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 2003, Guilford Pharmaceuticals submitted an application
for approval of the GLIADEL[reg] wafer for add-on payments and stated
that the technology should still be considered new for FY 2004, despite
its approval by the FDA on September 23, 1996. The manufacturer argued
that the technology was still new because it had not been possible to
specifically identify cases involving use of the GLIADEL[reg] wafer in
the MedPAR data prior to the adoption of a new ICD-9-CM code 00.10
(Implantation of a chemotherapeutic agent) on October 1, 2002. However,
as discussed in the September 7, 2001 final rule (66 FR 46914), the
determination concerning whether a technology meets this criterion
depends on the date of its availability for use in the Medicare
population rather than the date a specific code may be assigned. A
technology can be considered new for 2 or 3 years after data reflecting
the costs of the technology begin to become available. Data on the
costs of this technology began to become available in September 1996.
As a result, the costs of this technology are currently reflected in
the DRG weights. As discussed in the final rule for FY 2004 (68 FR
45391), on February 26, 2003, the FDA approved the GLIADEL[reg] wafer
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 that this is true, the charges associated with this use of
the GLIADEL[reg] wafer were also reflected in the DRG relative weights.
Therefore, the GLIADEL[reg] wafer did not meet this criterion for FY
2004.
Section 503(e)(2) of Public Law 108-173 required us to reconsider
this application, but did not revise the criterion for determining
whether a medical service or technology is new. As stated above, the
FDA originally approved the GLIADEL[reg] wafer on September 23, 1996.
Therefore, this technology is beyond the period in which it can be
considered new. Accordingly, we are proposing to deny this application
for new technology add-on payments for FY 2005.
We received no public comments regarding our reconsideration of
this application for add-on payments.
Guilford also asked us to consider reclassifying this device into
another DRG. We discuss issues relating to the DRG assignment of the
GLIADEL[reg] wafer in section II.B.16.c. of this preamble.
5. FY 2005 Applicants for New Technology Add-On Payments
a. InFUSETM Bone Graft (Bone Morphogenetic Proteins (BMPs)
for Tibia Fractures)
Bone Morphogenetic Proteins (BMPs) have been shown to have the
capacity to induce new bone formation and, therefore, to enhance
healing. Using recombinant techniques, some BMPs
[[Page 28240]]
(referred to as rhBMPs) can be produced in large quantities. This has
cleared the way for their potential use in a variety of clinical
applications such as in delayed unions and nonunions of fractured bones
and spinal fusions. One such product, rhBMP-2, is developed for use
instead of a bone graft with spinal fusions.
Medtronic Sofamor Danek submitted an application for the
InFUSETM Bone Graft for use in tibia fractures for approval
as a new technology eligible for add-on payments in FY 2005. Medtronic
submitted a similar application for new technology add-on payments in
FY 2004 for InFUSETM Bone Graft/LT-CAGE Lumbar Tapered
Fusion Device. As discussed above, we approved this application for FY
2004, and we are proposing to continue to make new technology payments
for FY 2005 for InFUSETM when used in spinal fusions (refer
to section III.E.3.b. of this preamble).
In cases of open tibia fractures, InFUSETM is applied
using an absorbable collagen sponge, which is then applied to the
fractured bone in order to promote new bone formation. This use
currently represents an off-label use of InFUSETM. The
manufacturer contends that this use is severely limited due to the
greatly increased costs for treating these cases with
InFUSETM at the time of wound debridement and closure. The
manufacturer has conducted a clinical trial and is awaiting FDA
approval for the use of InFUSETM for open tibia fractures.
According to the manufacturer, this approval is expected before
publication of the final rule. The application for add-on payments for
the use of InFUSE for open tibia fractures proposes that such payment
would encourage the use of InFUSETM for treatment of these
fractures of grade II or higher (up to and including grade III, which
often must be amputated due to the severity of injury). The additional
payment, according to the applicant, would encourage more hospitals to
use the technology at the time of initial wound closure and would
result in reduced rates of infection and nonunion currently associated
with the treatment of these injuries.
The manufacturer submitted data on 315 cases using
InFUSETM for open tibia fractures in the FY 2002 MedPAR
file, as identified by procedure code 79.36 (Reduction, fracture, open,
internal fixation, tibia and fibula) and diagnosis codes of either
823.30 (Fracture of tibia alone, shaft, open) or 823.32 (Fracture of
fibula and tibia, shaft, open). The applicant also submitted data for a
hospital sample that included 63 cases using the same identifying
codes. Based on the data submitted by the applicant,
InFUSETM would be used in four different DRGs: 217 (Wound
Debridement and Skin Graft Except Hand, for Musculoskeletal and
Connective Tissue Disorders), 218 and 219 (Lower Extremity and Humerus
Procedures Except Hip, Foot, Femur Age > 17, With and Without CCs,
respectively) and 486 (Other O.R. Procedures for Multiple Significant
Trauma). The analysis performed by the applicant resulted in a case-
weighted cost threshold of $27,111 for these four DRGs. The average
case-weighted standardized charge for cases using InFUSE in these four
DRGs would be $46,468. Therefore, the applicant maintains that
InFUSETM for open tibia fractures meets the cost criterion.
InFUSETM was approved by the FDA for use in open tibia
fractures on April 30, 2004. Because FDA approval was not received in
time for full consideration of the application in this proposed rule,
we are not presenting our full analysis of this application in this
proposed rule. However, we have already determined that this technology
still qualifies as new in the context of proposing to extend new
technology add-on payments for InFUSETM for single-level
spinal fusions. We must still determine whether it is appropriate to
approve add-on payments for InFUSETM in cases of open tibia
fractures in light of the cost and substantial improvement criteria.
Therefore, we invite comments on whether use of InFUSETM for
open tibia fractures should qualify for add-on payments under these
criteria.
We note that, in the September 7, 2001 final rule (66 FR 46915), we
stated that if an existing technology was assigned to different DRGs
than those in which the technology was initially used, the new use may
be considered for new technology add-on payments if it also meets the
substantial clinical improvement and inadequacy of payment criteria.
Under the policy suggested in that rule, approval of
InFUSETM for tibia fractures would start a new period of
add-on payments for the new use of this technology. However, we have
some reservations about whether this result would be appropriate. It
might be possible, under the policy described in the September 7, 2001
final rule, for a technology to receive new technology add-on payments
for many years after it is introduced, provided that use of the
technology is continually expanded to treatment of new conditions. We
invite comment on whether it would be more appropriate merely to extend
the existing approval of InFUSETM for spinal fusions to
cases where InFUSETM is used for open tibia fractures,
without extending the time period during which the technology will
qualify for add-on payments.
We note that as part of its application, the applicant submitted
evidence on the substantial clinical improvement criterion. The
applicant cited data from a prospective, controlled study published on
December 12, 2002 in The Journal of Bone and Joint Surgery (Govender,
S., Crismma, C., Genant, H.K., Valentin-Opran, V., ``Recombinant Human
Bone Morphogenetic Protein-2 for Treatment of Open Tibia Fractures,''
Vol. 84-A, No. 12. p. 2123). The study, also known as BESTT study
group, involved 49 trauma centers in 11 countries. The study enrolled
450 patients who had sustained an open tibia shaft fracture that
normally would be treated by intramedullary nail fixation and soft
tissue management. The patients were randomly and blindly assigned to
one of three groups: the standard of care as stated above, the standard
of care plus implantation an absorbable collagen sponge soaked with .75
mg/ml of rhBmP-2, or the standard of care plus implantation of an
absorbable collagen sponge soaked with 1.50 mg/ml of rhBMP-2. The study
followed up with 421 (94 percent) of all patients. The applicant stated
that the study found that patients who received the standard of care
plus an absorbable collagen sponge soaked with 1.50 mg/ml of rhBMP-2
achieved the following results compared to the standard of care without
the rhBMP: a 44-percent reduction in the rate of secondary surgery, an
average of 39 days reduction in time of clinical healing and lower
infection rates. As a result, the applicant maintains that
InFUSETM in tibia fractures represents a substantial
clinical improvement over previously available technologies.
We are not presenting a full analysis of this application under the
substantial clinical improvement criterion because the technology had
not yet received FDA approval for this use in time for consideration in
this proposed rule. However, we note that although the cited study does
provide some evidence of clinical efficacy, we have some concerns about
whether the study conclusively demonstrates substantial clinical
improvement over previously available technologies because of its
design. (It is important to note, as we stated in the August 1, 2002
Federal Register (67 FR 50015), that we do not employ FDA guidelines to
determine what drugs, devices, or technologies qualify for new
technology add-on payments under Medicare. Our criteria
[[Page 28241]]
do not depend on the standard of safety and efficacy that the FDA sets
for general use, but on a demonstration of substantial clinical
improvement in the Medicare population, particularly patients over age
65.) We will present our full analysis of the evidence regarding
clinical improvement in the final rule.
We received no public comments regarding this application for add-
on payments.
b. Norian Skeletal Repair System (SRS)[reg] Bone Void Filler
Brigham and Women's Hospital submitted an application for approval
of the Norian Skeletal Repair System (SRS)[reg] Bone Void Filler
(Norian SRS[reg] Cement), manufactured by Synthes for new technology
add-on payments for FY 2005. Synthes has been assisting the applicant
with supplemental information and data to help the applicant with the
application process. According to the manufacturer, Norian SRS[reg]
Cement is an injectable, fast-setting carbonated apatite cement used to
fill defects in areas of compromised cancellous bone during restoration
or augmentation of the skeleton. The product provides a bone void
filler that resorbs and is replaced with bone during the healing
process.
On December 23, 1998, the FDA approved Norian SRS[reg] for use as
an adjunct for fracture stabilization in the treatment of low impact,
unstable, metaphyseal distal radius fractures, in cases where early
mobilization is indicated. On December 20, 2001, the FDA approved
Norian SRS[reg] Cement for use in bony voids or defects that are not
intrinsic to the stability of the bony structure. Norian SRS[reg]
Cement is intended to be placed or injected into bony voids or gaps in
the skeletal system. These defects may be surgically created osseous
defects or osseous defects caused by traumatic injury to the bone.
Despite the time that has elapsed since FDA approval, the
manufacturer contends that Norian SRS[reg] Cement should still be
considered new for several reasons. First, until April 2002, Norian
SRS[reg] Cement was hand mixed using a mortar and pestle. Once Norian
SRS[reg] Cement was approved by the FDA in December 2001 (for the
indication of use in bony voids or defects that are not intrinsic to
the stability of the bony structure), the manufacturer issued a new
pneumatic mixer. According to the manufacturer, this new pneumatic
mixer allows for better preparation, reliability, and ease of use. In
addition, a new injection syringe mechanism was developed and made
available in May 2002 and replaced the ``Norian Delivery Device''. The
manufacturer believes these new procedures for mixing and delivery of
the product to the patient should be considered new services as stated
in section 1886(d)(5)(k)(ii) of the Act and Sec. 412.87(b)(1) of the
regulations. Second, the manufacturer contends that the cement should
still be considered new because there is no ICD-9-CM code to uniquely
identify Norian SRS[reg] Cement within the DRGs.
Although there have been changes in the way Norian SRS[reg] Cement
is mixed and delivered to the patient, we do not believe these changes
are significant enough to regard the technology as new. While these
changes may enhance the ease with which the technology is used, the
product remains substantially the same as when it was initially
developed. As we have indicated previously, technology can be
considered new only for 2 to 3 years after data reflecting the costs of
the technology begin to become available. Data on the costs of this
technology began to become available after FDA approval in 1998, and
these costs are currently reflected in the DRG weights. As we discussed
in the September 7, 2001 final rule (66 FR 46914), the determination
concerning whether a technology meets this criterion depends on the
date of its availability for use in the Medicare population rather than
the date a specific code may be assigned. Therefore, we are proposing
that Norian SRS[reg] Cement does not meet the criterion that a medical
service or technology be considered new.
Although we are not proposing to approve this application for add-
on payments because the technology does not meet the newness criterion,
we note that the manufacturer submitted information on the cost
criterion and the substantial clinical improvement criterion. The
manufacturer submitted 52 Medicare and non-Medicare cases using Norian
SRS[reg] Cement. There are currently no ICD-9-CM codes that can
distinctly identify Norian SRS[reg] Cement within the MedPAR data;
therefore, we cannot track this technology with our own analysis of
MedPAR data. Based on the data submitted by the manufacturer, cases
using Norian SRS'' Cement were found in 12 DRGs, with 71.1 percent of
the cases in DRGs 210, 218, 219, and 225. Based on the 52 cases
submitted by the applicant, the case-weighted threshold across all DRGs
was $22,493. The average case-weighted standardized charge was $29,032.
As a result, the applicant and manufacturer maintain that Norian
SRS[reg] Cement meets the cost criterion.
According to the manufacturer, Norian SRS[reg] Cement represents a
substantial clinical improvement for the following reasons: It enhances
short-term and long-term structural support, improves the rate and
durability of healing, decreases donor site morbidity, decreases risk
of infection at graft site, lowers the risk of operative complications
from shorter operative procedures, lowers the rate of post-treatment
hospitalizations and physician visits, and finally, reduces pain.
However, we are not presenting a full evaluation of the application
for add-on payments for Norian SRS[reg] Cement under these criteria
because the technology does not meet the newness criterion. Therefore,
we are proposing to deny add-on payments for this technology.
We received no public comments on this application for add-on
payments.
c. InSync[reg] Defibrillator System (Cardiac Resynchronization Therapy
with Defibrillation (CRT-D))
Cardiac Resynchronization Therapy (CRT), also known as bi-
ventricular pacing, is a therapy for chronic heart failure. A CRT
implantable system provides electrical stimulation to the right atrium,
right ventricle, and left ventricle to recoordinate or resynchronize
ventricular contractions and improve the oxygenated blood flow to the
body (cardiac output).
Medtronic submitted an application for approval of the InSync[reg]
Defibrillator System, a cardiac resynchronization therapy with
defibrillation system (CRT-D), for new technology add-on payments for
FY 2005. This technology combines resynchronization therapy with
defibrillation for patients with chronic, moderate-to-severe heart
failure who meet the criteria for an implantable cardiac defibrillator.
Unlike conventional implantable cardiac defibrillators, which treat
only arrhythmias, CRT- devices have a dual therapeutic nature intended
to treat two aspects of a patient's heart disease concurrently: (1) The
symptoms of moderate to severe heart failure (that is, the ventricular
dysynchrony); and (2) cardiac arrhythmias, as documented by an
electrophysiologic testing or clinical history or both, which would
cause sudden cardiac arrest.
InSync[reg] Defibrillation System received FDA approval on June 26,
2002. However, another manufacturer, Guidant, received FDA approval for
its CRT-D device on May 2, 2002. Guidant, and another competitor that
has yet to receive FDA approval for its CRT-D device, have requested
that their devices
[[Page 28242]]
be included in any approval of CRT-D for new technology add-on
payments. As we discussed in the September 7, 2001 final rule (66 FR
46915), an approval of a new technology for special payment should
extend to all technologies that are substantially similar. Otherwise,
our payment policy would bestow an advantage to the first applicant to
receive approval for a particular new technology.
The applicant contends that, despite the approval of a similar
device in May 2002, the InSync[reg] Defibrillator System should still
be considered new for several reasons: First, an ICD-9-CM code was only
issued in FY 2003, which falls within the 2-year to 3-year range
provided in the regulations. Second, the utilization of CRT-Ds is still
growing and has not reached full utilization and, therefore, CRT-Ds
remain underreported within the FY 2003 MedPAR data that will be used
to recalibrate the DRG weights for FY 2005. Finally, the applicant
believes reporting of CRT-Ds may be insufficient to accurately
recalibrate the DRGs because the new ICD-9-CM codes for CRT-Ds are
unlikely to be used consistently and accurately by hospitals in the
first year.
We have discussed the relationship between existence of a specific
ICD-9-CM code for a technology and our determination of its status as a
new technology. As discussed in the September 7, 2001 final rule (66 FR
46914), the determination of whether a technology is new depends on the
date of its availability for use in the Medicare population, rather
than the date a specific code may be assigned. Because CRT-Ds were
available upon the initial FDA approval in May 2002, we consider the
technology to be new from this date and not the date a code was
assigned.
Using the December 2003 update file to the FY 2003 MedPAR file, we
have identified 10,950 cases using CRT-D in the FY 2003 MedPAR
database. Of these, 10,694 cases were reported in DRGs 514 and 515
(then Cardiac Defibrillator Implant With and Without Cardiac Catheter,
respectively). In DRG 515, we found 3,948 cases with procedure code
00.51 (Implantation of cardiac resynchronization defibrillator, total
system (CRT-D)) and 6,746 cases in DRG 514. DRG 514 is no longer valid,
effective in FY 2004. In FY 2004, we assigned new cases of
defibrillator implants with cardiac catheters from DRG 514 to new DRGs
535 (Cardiac Defibrillator Implant with Cardiac Catheter With Acute
Myocardial Infarction (AMI) Heart Failure/Shock) and 536 (Cardiac
Defibrillator Implant with Cardiac Catheter Without Acute Myocardial
Infarction (AMI) Heart Failure/Shock). Using the 6,746 cases from the
FY 2003 MedPAR found in DRG 514, we examined the primary diagnosis
codes necessary for assignment to DRG 535 along with procedure code
00.51 and found 3,396 cases of CRT-D for DRG 535. The remaining 3,350
CRT-D cases found in DRG 514 using procedure code 00.51 fall into DRG
536. For FY 2003, the total number of cases of CRT-D found in the FY
2003 MedPAR data for DRGs 514 and 515 were 48,486. Cases reporting CRT-
Ds thus represent 22 percent of all cases for these DRGs.
A medical service or technology can no longer be considered new
after 2 to 3 years, when data reflecting the costs of the technology
begin to become available. Data on the costs of this technology began
to become available in May 2002. Our analysis of data from the FY 2003
MedPAR file also shows that the costs of CRT-D are represented by a
substantial number of cases within the DRGs. However, as discussed
above, the technology still remains within the 2-year to 3-year period
during which it can be considered new. Therefore, we are considering
whether the CRT-D technology still meets the newness criterion. We
welcome comments on this issue as we analyze whether to approve this
technology (which would included the InSync[reg] application) in the
final rule.
We note that the applicant submitted information on the cost and
substantial clinical improvement criteria. The applicant commissioned
Navigant Consulting, Inc. to collect charge data on CRT-D. Navigant
found 354 Medicare cases among 30 hospitals. Cases were identified
using ICD-9-CM procedure code 00.51. Of these 354 cases, 44.1 percent
were reported in DRG 515, 23.7 percent were reported in DRG 535, and
32.2 percent were reported in DRG 536. These DRGs result in a case-
weighted threshold of $78,674. The average case-weighted standardized
charge for the 354 cases mentioned above was $79,163. Based on these
data, the manufacturer contends that InSync[reg] Defibrillator System
would meet the cost criterion.
In the September 7, 2001 final rule, we stated that the data
submitted must be of a sufficient sample size to demonstrate a
significant likelihood that the sample mean approximates the true mean
across all cases likely to receive the new technology. Using a standard
statistical methodology for determining the needed (random) sample size
based on the standard deviations of the DRGs identified by the
applicant as likely to include cases receiving a CRT-D, we have
determined that a random sample size of 354 cases can be reasonably
expected to produce an estimate within $3,500 of the true mean.\3\ Of
course, the data submitted do not represent a random sample of all
cases in these DRGs across all hospitals.
---------------------------------------------------------------------------
\3\ The formula is n=4 [sigma]/B\2\, where [sigma] the standard
deviation of the population, and B is the bound on the error of the
estimate (the range within which the sample means can reliably
predict the population mean). See Statistics for Management and
Economics, Fifth Edition, by Mendenhall, W., Reinmuth, J., Beaver,
R., and Duhan, D.
---------------------------------------------------------------------------
The manufacturer also contends that the added capability of the
InSync[reg] Defibrillator System device provides significant benefits
over and above a conventional defibrillator. The InSync[reg]
Defibrillator System device treats both the comorbid conditions of
ventricular arrhythmias and moderate to severe heart failure, and takes
the place of the existing treatment of drug therapy for heart failure
plus a conventional implantable cardiac defibrillator for ventricular
arrhythmia. The applicant states this CRT-D is a substantial clinical
improvement for patients who remain symptomatic despite drug therapy
and have the comorbid condition of heart failure. According to the
applicant, some of the improved outcomes that result from using a CRT-D
device instead of existing treatments include: improved quality of
life, improved exercise tolerance, improved homodynamic performance,
and reduced hospitalizations and mortality due to chronic heart
failure.
We welcome comments on whether this technology meets these
criteria, but especially about whether it meets the newness criterion
in the light of the extent to which it is represented cases within the
relevant DRGs. We will determine whether to approve this technology in
the light of these comments and our continuing analysis.
We received the following public comments in accordance with
section 503(b)(2) of Public Law 108-173 regarding this application for
add-on payments:
Comment: One commenter noted that CRT-D has had positive clinical
outcomes by reversing remodeling of the heart and improving the heart's
ability to pump more efficiently. The commenter added that CRT-D has
helped decrease hospitalizations and length of stay.
Response: We appreciate the commenters' input on this criterion. We
will consider these comments regarding the substantial clinical
improvement criterion if we determine that the technology meets the
other two criteria.
[[Page 28243]]
d. GliaSite[reg] Radiation Therapy System (RTS)
The Pinnacle Health Group submitted an application for approval of
GliaSite[reg] Radiation Therapy System (RTS) for new technology add-on
payments. GliaSite[reg] RTS was approved by the FDA for use on April
15, 2001. The system involves several components, including a drug
called Iotrex and a GliaSite[reg] catheter. Iotrex is an organically
bound liquid form of Iodine \125\ used in intracavitary brachytherapy
with GliaSite[reg] RTS. Iotrex is a single nonencapsulated (liquid)
radioactive source. The liquid is a solution of sodium
3-(I\125\) iodo-4-hydroxybenzenesulfonate and is used to
deliver brachytherapy for treatment of brain cancer.
The delivery system for Iotrex is the GliaSite[reg] RTS catheter.
Iotrex is administered via injection through a self-sealing port into
the primary lumen of the barium-impregnated catheter that leads to the
balloon reservoir. After a malignant brain tumor has been resected, the
balloon catheter (GliaSite[reg]) is implanted temporarily inside the
cavity. The patient is released from the hospital. After a period of 3
days to 3 weeks, the patient is readmitted. During the second
admission, the appropriate dose (200 to 600 millicuries) of radiation
is then administered. Iotrex is infused into the GliaSite[reg] catheter
and intracavitary radiation is delivered to the target area. The gamma
radiation emitted by Iotrex is delivered directly to the margins of the
tumor bed. After 3 to 7 days, the Iotrex is removed.
GliaSite[reg] RTS was approved by the FDA for use on April 15,
2001. Technology is no longer considered new 2 to 3 years after data
reflecting the costs of the technology begin to become available.
Because data regarding this technology began to become available in
2001, we have determined that GliaSite[reg] RTS does not meet the
criterion that a medical service or technology be considered new.
Therefore, we are proposing to deny approval of GliaSite[reg] RTS for
new technology add-on payments.
Although we are proposing not to approve this application because
GliaSite[reg] does not meet the newness criterion, we note that the
applicant submitted information on the cost criterion and substantial
clinical improvement criterion. The applicant stated that the number of
cases in DRG 7 for FY 2004 was projected to be 14,782, and estimated
that 10 percent (or about 1,478) of those patients would be candidates
for GliaSite[reg] RTS. The applicant estimated that the standardized
charge for all cases using the technology in DRG 7 was $49,406. Based
on this calculation, the manufacturer stated in its application that
this figure is greater than the cost threshold of $32,115 for DRG 7.
Therefore, according to the manufacturer, it appears that GliaSite[reg]
would meet the cost criterion.
The applicant also claims this way of delivering brachytherapy to
the brain is significantly more patient friendly. The use of a single
intracavitary applicator positioned inside the resection cavity during
the initial surgery in place of an interstitial-seed implant removes
the need for additional invasive procedures and the need for multiple
puncture sites (up to 20). In addition, the manufacturer claims that
the approach used in the GliaSite[reg] RTS system improves dose-
delivery and provides a more practical means of delivering the
brachytherapy.
However, as discussed above, GliaSite[reg] does not meet the
newness criterion. Therefore, we are proposing to deny add-on payments
for this technology in FY 2005.
We received no public comments on this application for add-on
payments.
e. Natrecor[reg]--Human B-Type Natriuretic Peptide (hBNP)
Scios, Inc. submitted an application for approval of Natrecor[reg]
for new technology add-on payments. Natrecor is a member of a new class
of drugs, Human B-type Natriuretic Peptide (hBNP), and it is
manufactured from E. coli with recombinant DNA technology. It binds to
the particulate guanylate cyclase receptor of vascular smooth muscle
endothelial cells, leading to increased intracellular concentrations of
guanosine 3'5'-cyclic monophosphate, and therefore to enhance smooth
muscle cell relaxation, ultimately causing dilation of arteries and
veins. The applicant states that Natrecor[reg] is more potent and
relieves symptoms of heart failure more rapidly, while also causing
less hemodynamic instability than intravenous nitroglycerin, the most
commonly used vasodilator for heart failure.
Natrecor[reg] was approved by the FDA for the treatment of acute
congestive heart failure on August 10, 2001. It is indicated for the
intravenous treatment of patients with acutely decompensated congestive
heart failure (dyspnea). Congestive heart failure is the result of
impaired pumping capacity of the heart. It causes a variety of clinical
consequences, including water retention, sodium retention, pulmonary
congestion, and diminished perfusion of blood to all parts of the body.
The applicant concedes that the FY 2003 MedPAR file includes
hospital charge information for patients receiving Natrecor[reg]. The
manufacturer contends that Natrecor[reg] should still be considered new
for several reasons. The first reason is that these data will not
provide an accurate representation of hospital utilization of this
product nor an adequate reimbursement rate for hospitals treating acute
congestive heart failure patients with Natrecor[reg] in FY 2005. The FY
2003 MedPAR file represents the first full year in which the ICD-9-CM
procedure code 00.13 (Injection or infusion of nesiritide) was in
effect. Therefore, the manufacturer anticipates a slow increase in the
accuracy of coding and billing in FY 2003. In addition, the
manufacturer stated that market penetration for this product was 3
percent for FY 2003, but is expected to be significantly higher for FY
2005.
However, technology is no longer considered new 2 to 3 years after
data reflecting its costs begin to become available. Because data
reflecting the costs of Natrecor[reg] began to become available in
2001, these costs are currently reflected in the DRG weights. In
addition, as discussed in the September 7, 2001 final rule (66 FR
46914), the determination of whether a technology is new depends on the
date of its availability for use in the Medicare population rather than
the date a specific code was assigned. Because Natrecor[reg] was
available upon FDA approval, it does not meet the criterion that a
medical service or technology be considered new.
Although we are proposing not to approve this application because
Natrecor[reg] does not meet the newness criterion, we note that the
applicant submitted information on the cost criterion and substantial
clinical improvement criterion. Scios commissioned Premier, Inc. to
search its database of 196 hospitals for cases in FY 2003 that used
Natrecor[reg]. Premier identified 9,811 cases across many DRGs using
National Drug Codes from pharmacy databases. The majority of cases
(approximately 42 percent) were found in DRG 127 (Heart Failure and
Shock), while the remaining cases were found in other DRGs that
individually had a maximum of 8 percent of the 9,811 cases identified
by Premier. The case-weighted threshold across all DRGs for
Natrecor[reg], using data provided by Premier, was $26,509. (DRGs with
less than 25 discharges were not included in this analysis.) The
average charge for cases with Natrecor[reg] was $70,137. The average
case-weighted standardized charge across all DRGs was $43,422.
[[Page 28244]]
Because the average standardized charge is greater than the case-
weighted threshold, the applicant stated that Natrecor[reg] meets the
cost criterion.
The manufacturer stated that Natrecor[reg] represents a substantial
clinical improvement over existing treatments for decompensated
congestive heart failure because it provides novel clinical effects,
leads to fewer complications, and improves overall clinical outcomes.
Specifically, Natrecor[reg] reduces left ventricular preload,
afterload, and pulmonary capillary wedge pressure without inducing
tachyphylaxis, and it causes a balanced vasodilation of veins,
arteries, and coronary arteries that increases cardiac output. It has
also been shown to significantly reduce dyspnea, and it blocks the
rennin-aldosterone-angiotensin system, thereby reducing sodium
retention and enhancing diuresis and natriuresis. In addition,
Natrecor[reg] is not pro-arrhythmic; it does not increase cardiac work
by causing tachycardia, and it does not cause electrolyte imbalances.
However, as discussed above, Natrecor[reg] does not meet the
newness criterion. Therefore, we are proposing to deny add-on payments
for this technology in FY 2005.
We received no public comments on this application for add-on
payments.
f. Kinetra[reg] Implantable Neurostimulator for Deep Brain Stimulation
Medtronic, Inc. submitted an application for approval of the
Kinetra[reg] implantable neurostimulator device for new technology add-
on payments. The Kinetra[reg] device was approved by the FDA on
December 16, 2003. The Kinetra[reg] implantable neurostimulator is
designed to deliver electrical stimulation to the subthalamic nucleus
(STN) or internal globus pallidus (GPi) in order to ameliorate symptoms
caused by abnormal neurotransmitter levels that lead to abnormal cell-
to-cell electrical impulses in Parkinson's Disease and essential
tremor. Before the development of Kinetra[reg], treating bilateral
symptoms of patients with these disorders required the implantation of
two neurostimulators (in the form of a product called
SoletraTM manufactured by Medtronic): One for the right side
of the brain (to control symptoms on the left side of the body), the
other for the left side of the brain (to control symptoms on the right
side of the body). Additional procedures are required to create pockets
in the chest cavity to place the two generators required to run the
individual leads. The Kinetra[reg] neurostimulator generator, implanted
in the pectoral area, is designed to eliminate the need for two devices
by accommodating two leads that are placed in both the left and right
sides of the brain to deliver the necessary impulses. The manufacturer
argues that the development of a single neurostimulator that treats
bilateral symptoms provides a less invasive treatment option for
patients, and for simpler implantation, followup, and programming
procedures for physicians.
The device was approved by the FDA in December 2003. Therefore, it
qualifies under the first criterion because it is not yet reflected in
the DRG weights. Because there are no data available to evaluate costs
associated Kinetra[reg], we conducted the cost analysis using
SoletraTM, the predecessor technology used to treat this
condition, as a proxy for Kinetra[reg]. The pre-existing technology
provides the closest means to track cases that have actually used
similar technology and serves to identify the need and use of the new
device. The manufacturer informed us that the cost of the Kinetra[reg]
device is twice the price of a single SoletraTM device.
Since most patients would receive two SoletraTM devices if
the Kinetra[reg] device is not implanted, data regarding the cost of
SoletraTM give a good measure of the actual costs that will
be incurred. Medtronic submitted data for 104 cases that involved the
SoletraTM device (26 cases in DRG 1 (Craniotomy Age > 17
With CC), and 78 cases in DRG 2 (Craniotomy Age > 17 Without CC)).
These cases were identified from the FY 2002 MedPAR file using
procedure codes 02.93 (Implantation, intracranial neurostimulator) and
86.09 (Other incision of skin and subcutaneous tissue). In the analysis
presented by the applicant, the mean standardized charges for cases
involving SoletraTM in DRGs 1 and 2 were $69,018 and
$44,779, respectively. The mean standardized charge for these
SoletraTM cases according to Medtronic's data was $50,839.
We used the same procedure codes to identify 187 cases involving
the SoletraTM device in DRGs 1 and 2 in the FY 2003 MedPAR
file. Similar to the Medtronic data, 53 of the cases were found in DRG
1, and 134 cases were found in DRG 2. The average standardized charges
for these cases in DRGs 1 and 2 were $51,163 and $44,874, respectively.
Therefore, the case-weighted average standardized charge for cases that
included implantation of the SoletraTM device was $46,656.
The new cost thresholds established under the revised criteria in
Public Law 108-173 for DRGs 1 and 2 are $43,245 and $30,129,
respectively. Accordingly, the case-weighted threshold to qualify for
new technology add-on payment using the data we identified would be
$33,846. Under this analysis, Kinetra[reg] would qualify for the cost
threshold.
We note that an ICD-9-CM code was approved for dual array pulse
generator devices, effective October 1, 2004, for IPPS tracking
purposes. The new ICD-9-CM code that will be assigned to this device is
86.95 (Insertion or replacement of dual array neurostimulator pulse
generator), which includes dual array and dual channel generators for
intracranial, spinal, and peripheral neurostimulators. The code will
not identify cases with this specific device and will only be used to
distinguish single versus dual channel-pulse generator devices.
The manufacturer claims that Kinetra[reg] provides a range of
substantial improvements beyond previously available technology. These
include a reduced rate of device-related complications and
hospitalizations or physician visits and less surgical trauma because
only one generator implantation procedure is required. Kinetra[reg] has
a reed switch disabling function that physicians can use to prevent
inadvertent shutoff of the device, as occurs when accidentally tripped
by electromagnetic inference (caused by common products such as metal
detectors and garage door openers). Kinetra[reg] also provides
significant patient control, allowing patients to monitor whether the
device is on or off, to monitor battery life, and to fine-tune the
stimulation therapy within clinician-programmed parameters. While
Kinetra[reg] provides the ability for patients to better control their
symptoms and reduce the complications associated with the existing
technology, it does not eliminate the necessity for two surgeries.
Because the patients who receive the device are often frail, the
implantation generally occurs in two phases: The brain leads are
implanted in one surgery, and the generator is implanted in another
surgery, typically on another day. However, implanting Kinetra[reg]
does reduce the number of potential surgeries compared to its
predecessor (which requires two surgeries to implant the two single-
lead arrays to the brain).
Despite the improvement Kinetra[reg] represents over its immediate
predecessor, SoletraTM, we have some concerns about whether
the device is significantly different in terms of how it achieves its
desired clinical result. The stimulation mechanism by which it treats
patient symptoms remains substantially the same as the
[[Continued on page 28245]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 28245-28294]] Medicare Program; Proposed Changes to the Hospital Inpatient
Prospective Payment Systems and Fiscal Year 2005 Rates
[[Continued from page 28244]]
[[Page 28245]]
predecessor device. The enhancements cited by the manufacturer are
primarily to features such as control, power, monitoring, and
reliability. Nevertheless, these improvements, along with the reduced
number of surgeries required, may be sufficient to warrant a
determination that the device represents a substantial clinical
improvement. We welcome further public comment on the issue of whether
the device is sufficiently different from the previously used
technology to qualify as a substantially improved treatment of the same
patient symptoms.
We also invite comments concerning the cost of the device. If the
new device, at twice the cost of the existing technology, merely
replaces the costs of two of the previous devices, then the charges for
Kinetra[reg] are not substantially different from current charges
resulting from the use of either device alone. Because the costs for
the predecessor device meet the statutory cost criterion, the successor
technology would meet the criterion as well, at least under the
manufacturer's assumption that a single Kinetra[reg] costs twice as
much as each of the two SoletrasTM required to perform the
same function. However, since there should be less surgery involved,
more patient control, less risk of complications, and fewer office
visits as a result of using Kinetra[reg], the costs for patients who
receive the new device would be expected to drop. This suggests that it
may not be appropriate to base the cost analysis for Kinetra[reg] on
the manufacturer's assumption that total costs for SoletraTM
and Kinetra[reg] are substantially the same.
In addition, we also invite public comment concerning the approval
of the device for add-on payment, given the uncertainty over the
frequency with which the patients receiving the device have the
generator implanted in a second hospital stay, and the frequency with
which this implantation occurs in an outpatient setting. Any hospital
performing the implantation in two separate patient stays, whether they
are both inpatient or whether one is inpatient and the second is
outpatient, would be paid double for the single device. Therefore, we
have some concern about the appropriateness of approving add-on
payments for a device that may already receive payment at a nonbundled
rate for a high percentage of patients who receive the device. We are
currently investigating whether a second hospital stay is needed for
implantation of Kinetra[reg].
Despite these issues, we are still considering whether it is
appropriate to approve add-on status for Kinetra[reg] for FY 2005. If
approved for add-on payments, the device would be reimbursed up to half
of the costs for the device. Since the manufacturer has stated that the
cost for Kinetra[reg] would be $16,570, the maximum add-on payment for
the device would be $8,285. We will make a final determination in the
light of public comments and our continuing analysis.
We received no public comments on this application for add-on
payments.
We note that the manufacturer of Kinetra[reg] also submitted an
application for pass-through payments under the hospital outpatient
payment system (OPPS). This application was denied for pass-through
payment in OPPS because the item was already described by a previously
existing category of devices for pass-through payment (C1767,
Generator, neurostimulator (implantable)). Therefore, no substantial
improvement determination was made for that application, although one
would have been required for approval if it had met all other criteria.
The manufacturer subsequently applied for assignment of deep brain
stimulation with Kinetra[reg] neurostimulator to a new technology
ambulatory payment classification (APC) under the OPPS. This
application is currently under consideration. These special APCs were
initiated in OPPS to expedite recognition of and payment for innovative
new technologies that do not qualify for pass-through payment. In
contrast to the annual decisionmaking under the IPPS, applications for
new technology APCs of the OPPS are accepted on an ongoing basis and
updates are made quarterly.
g. Intramedullary Skeletal Kinetic Distractor (ISKD)
Orthofix, Inc. submitted an application for approval of the
Intramedullary Skeletal Kinetic Distractor (ISKD) Internal Limb
Lengthener for new technology add-on payments for FY 2005. The device
received FDA marketing approval on May 2, 2001. The ISKD System is a
``closed'' lengthening system. There are no fixation pins exiting the
skin, thus eliminating this portal for entry of infectious organisms.
The device is implanted in the intramedullary canal. This provides
mechanical stability and support to the bone segments during the
distraction, regeneration and consolidation phases, thus reducing the
opportunity for misalignment.
We reviewed the application and technology, and we have determined
that the device is not new and cannot be approved for new technology
add-on payments because it came on the market on May 2, 2001. The costs
of the device are thus reflected in the FY 2001 MedPAR file, as
acknowledged by the manufacturer's data. As a result, the costs of the
device are already reflected in the DRG weights.
The manufacturer submitted charge data for cases found in the FY
2001 MedPAR file, as well as data from several hospitals that have used
the device. The manufacturer identified cases using ICD-9-CM codes
78.35 (Limb lengthening procedure, femur) and 78.37 (Limb lengthening,
tibia/fibula). These procedure codes occur in four DRGs: DRGs 210 and
211 (Hip and Femur Procedures Except Major Joint Procedures Age > 17,
With and Without CC, respectively) and DRGs 218 and 219 (Lower
Extremity and Humerus Procedures Except Hip, Foot and Femur Age > 17,
With and Without CC). The average charges for cases involving these
procedure codes identified by the applicant were not standardized. The
average charges provided for DRGs 210, 211, 218, and 219 were $26,692,
$18,187, $32,959 and $20,228, respectively. The manufacturer then added
the cost of the device, which the manufacturer states is $6,750. The
manufacturer projects that, in FY 2005, there will be 9 cases in DRG
210, 4 cases in DRG 211, 28 cases in DRG 218, and 19 cases in DRG 219,
which results in a case-weighted threshold of $22,347. Thus, according
to the manufacturer's data, because the case-weighted average
standardized charges of $27,003 for the technology are greater than the
cost threshold of $22,347 for these projected 60 cases, the ISKD would
qualify for new technology add-on payments.
The manufacturer also asserted that the ISKD met the substantial
clinical improvement criteria because, in addition to the improvements
mentioned above (reduces infection rates and provides mechanical
stability), lengthening with the ISKD occurs gradually and with no soft
tissue impingement, reducing two factors commonly associated with pain
during distraction. The manufacturer also pointed out that with the
ISKD, the lengthening procedure is discreet because there are no
external pins. There is no cumbersome external frame that may hinder
the patient's activities of daily living, or draw further attention to
the discrepant limb. In addition, the patient may have partial weight
bearing during the lengthening process and resume some activities of
normal living.
However, because the device is already captured in our DRG weights,
we are proposing to deny the application for the ISKD device for new
technology add-on payments for FY 2005.
[[Page 28246]]
We received no public comments on this application for add-on
payments.
h. ActiconTM Neosphincter
American Medical Systems submitted an application for approval of
the ActiconTM Neosphincter for new technology add-on
payments for FY 2005. The ActiconTM Neosphincter is a small,
fluid-filled prosthesis that is completely implanted within the body.
The ActiconTM Neosphincter prosthesis has been developed to
treat severe fecal incontinence (the accidental loss of solid or liquid
stool at least weekly). It is designed to mimic the natural process of
bowel control and bowel movements. The prosthesis consists of three
components: a occlusive cuff implanted around the anal canal, a
pressure-regulating balloon implanted in the prevesical space, and a
control pump with septum implanted in the scrotum. All components are
connected with color-coded, kink-resistant tubing.
The FDA approved the Acticon Neosphincter for use on December 18,
2001. A technology can be considered new only 2 to 3 years after data
reflecting the costs of the technology begin to become available. Data
on the costs of this technology began to become available after the
December 2001 FDA approval. As a result, the costs of this technology
are currently reflected in the DRG weights. Therefore, we have
determined that ActiconTM Neosphincter does not meet this
criterion.
Although we are proposing not to approve this application because
ActiconTM Neosphincter does not meet the newness criterion,
we note that the applicant submitted information on the cost criterion
and substantial clinical improvement criterion. The applicant submitted
23 cases (that are indistinguishable as to whether they are Medicare or
non-Medicare) using ICD-9-CM procedure codes 49.75 (Implantation or
revision of artificial anal sphincter) and 49.76 (Removal of artificial
anal sphincter) in order to identify cases where the
ActiconTM Neosphincter was used. Of these cases, 9 were in
DRG 157 (Anal and Stomal Procedures With CC), and 14 were in DRG 158
(Anal and Stomal Procedures Without CC). The average standardized
charge per case was $16,758. The case-weighted threshold for DRGs 157
and 158 (39.1 percent of cases in DRG 157 and 60.1 percent of cases in
DRG 158) for this technology is $14, 426. Therefore, according to the
applicant, the ActiconTM Neosphincter meets the cost
criterion.
The applicant states in its application that the
ActiconTM Neosphincter represents a substantial clinical
improvement for the following reasons: First, there is no other
existing device in the United States that can be used to treat severe
fecal incontinence. Second, self-treatment for severe fecal
incontinence has proven to be largely unsuccessful and surgical options
have historically been more limited, including sphincteroplasty or
muscle transposition.
However, since ActiconTM Neosphincter does not meet the
newness criterion, we are proposing to deny add-on payments for this
new technology. The applicant also requested a DRG reclassification for
this technology. In section II.B.4 of the preamble of this proposed
rule, we are proposing, in MDC 6 (Diseases and Disorders of the
Digestive System) only, to remove codes 49.75 and 49.76 from DRGs 157
and 158, and reassign them to DRGs 146 (Rectal Resection With CC) and
147 (Rectal Resection Without CC). All other MDC and DRG assignments
for codes 49.75 and 49.76 would remain the same.
We received the following public comments in accordance with
section 50(b)(2) of Pub. L. 108-173 regarding this application for add-
on payments.
Comment: One commenter noted that the implant of the
ActiconTM Neosphincter avoids the life-altering and
disfiguring consequences of a permanent stoma. Another commenter noted
that the implant of the ActiconTM Neosphincter avoids the
need for a colostomy, which limits a patient's ability to travel and
work due to the fact they could have a fecal accident at any time.
Response: We appreciate the commenters' input on this criterion.
However, as stated above, the ActiconTM Neosphincter is no
longer new. Therefore, we are proposing that it is not eligible for
add-on payments for new technologies.
i. TandemHeartTM Percutaneous Left Ventricular Assist System
Brigham and Women's Hospital submitted an application for approval
of the TandemHeartTM Percutaneous Ventricular Assist System
(PVTA) manufactured by Cardiac Assists, Inc., for new technology add-on
payments for FY 2005. Cardiac Assists, Inc. has been assisting the
applicant with supplemental information and data to support the
application process. According to the manufacturer, the device contains
a controller, arterial and venous cannulae and the
TandemHeartTM Percutaneous Ventricular Assist Device (pVAD)
that works parallel with the left ventricle to provide left ventricular
circulatory support. The device is intended for extracorporeal
circulatory support using an extracorporeal bypass circuit. The
duration of use approved by the FDA is for periods of up to 6 hours.
On November 11, 2000, FDA approved the AB-180 XC Blood Pump (also
known as the TandemHeartTM pVAD) as a single use, disposable
centrifugal blood pump designed to circulate blood through an
extracorporeal circuit. On May 23, 2003, FDA approved the CardiacAssist
Transseptal Cannula Set for transseptal catherization of the left
atrium via the femoral vein for the purpose of providing a means for
temporary (6 hours or less) left ventricular bypass when connected to a
suitable extracorporeal blood pump unit that returns blood to the
patient via the femoral artery or other appropriate site. The
manufacturer stated that, although the TandemHeartTM pVAD
was approved in November 2000, this device should still be considered
new because the device was not marketed and sold to hospitals until the
CardiacAssist Transseptal Cannula Set was approved by FDA in May 2003.
We have received confirmation from hospitals that the
TandemHeartTM pVAD was indeed not marketed until FDA
approved the CardiacAssist Transseptal Cannula Set. Also, only half of
a year's worth of data containing the TandemHeartTM pVAD is
reflected within the FY 2003 MedPAR file. The manufacturer stated that
approximately 60 TandemHeartTM pVADs have been used since
FDA approved the Cardiac Arrest Transseptal Cannula Set in May 2003.
Therefore, the costs of the TandemHeartTM pVAD are not
adequately reflected within the DRGs. As a result, we consider the
TandemHeartTM pVAD to be new under our criterion.
As stated above, according to the manufacturer, approximately 60
TandemHeartTM pVADs have been used since FDA approved the
Cardiac Assist Transseptal Cannula Set in May 2003 (not all of these
have been used in Medicare beneficiaries). However, only two actual
cases were submitted by the applicant with an ICD-9-CM code of 37.65
(Implant of an external pulsatile heart assist system) used to identify
the device. As stated in the September 7, 2001 final rule (66 FR
46916), data submitted by the applicant must be of a sufficient sample
size to demonstrate a significant likelihood that the true mean across
all cases likely to receive the technology will exceed the threshold
established by CMS. Because we lack a significant sample of data
reflecting the costs of this technology,
[[Page 28247]]
we cannot accurately determine the average charge per case for the
TandemHeartTM pVAD. Neither can we determine whether this
technology meets our cost criterion. If we receive sufficient data to
complete our analysis in time for inclusion in the final rule, we will
assess whether this technology meets the cost criterion.
Although we are not proposing to approve this application because
we have insufficient data to determine whether TandemHeartTM
pVAD meets the cost criterion, we note that the applicant submitted
information on the substantial clinical improvement criterion. The
applicant stated in its application that the TandemHeartTM
pVAD represents a substantial clinical improvement because, at present,
the only alternative to intra-aortic balloon pump support is the
surgical implantation of a ventricular assist device. The
TandemHeartTM pVAD is the only therapeutic intervention that
is capable of achieving effective circulatory support to stabilize
cardiogenic shock patients that could be placed via a percutaneous
approach. We will present a full analysis of this technology under the
significant improvement criterion if we receive sufficient data in time
for the final rule to evaluate whether the technology meets the cost
criterion.
The applicant also requested an ICD-9-CM code for this technology.
We discuss this request in section II.B.3. of the preamble of this
proposed rule.
We received no public comments on this application for add-on
payments.
j. AquadexTM System 100 Fluid Removal System (System 100)
CHF Solutions, Inc. submitted an application for the approval of
the System 100 for new technology add-on payments for FY 2005. The
System 100 is designed to remove excess fluid (primarily excess water)
from patients suffering from severe fluid overload through the process
of ultrafiltration. Fluid retention, sometimes to an extreme degree, is
a common symptom of patients with chronic congestive heart failure.
This technology removes excess fluid without causing hemodynamic
instability. It also avoids the inherent nephrotoxicity and
tachyphylaxis associated with aggressive diuretic therapy, the mainstay
of current therapy for fluid overload in congestive heart failure.
The System 100 consists of: (1) An S-100 console; (2) a UF 500
blood circuit; (3) an extended length catheter (ELC); and (4) a
catheter extension tubing. The System 100 is designed to monitor the
extracorporeal blood circuit and to alert the user to abnormal
conditions. Vascular access is established via the peripheral venous
system, and up to 4 liters of excess fluid can be removed in an 8-hour
period.
On June 3, 2002, FDA approved the System 100 for use with
peripheral venous access. On November 20, 2003, FDA approved the System
100 for expanded use with central venous access and catheter extension
use for infusion or withdrawal circuit line with other commercial
applicable venous catheters. According to the applicant, although the
System 100 was first approved by FDA in June 2002, the System 100 was
not used by hospitals until August 2002 because it took a substantial
amount of time to market and sell the device to hospitals. As a result,
the applicant believes that the System 100 should still be considered
new. The applicant has presented data and evidence demonstrating that
the System 100 was not marketed until August 2002. Therefore, we also
believe August 1, 2002 is the relevant date for determining the
availability of the System 100.
The applicant estimates that 308 patients (approximately 120 cases
per year) have used the System 100 since its inception and the
potential population for use of the device is 60,000 cases per year.
These 308 cases represent a small percentage of the potential number of
cases that can utilize the System 100. Therefore, the System 100 is not
adequately reflected within the DRG weights (as discussed in the
September 7, 2001 final rule (66 FR 46914)). In addition, the System
100 is within the 2 to 3 year period contemplated under Sec.
412.87(b)(2) of the regulations. Therefore, the System 100 could be
considered new. However, the ultrafiltration process that the System
100 employs can also be considered to be a type of hemodialysis, which
is an old and well-established technology. We have concerns about
whether new technology add-on payments should be extended to a well-
established technology, even when a new clinical application is
developed for that technology. As discussed above, in the September 7,
2001 final rule (66 FR 46915), we noted that if an existing technology
is used for treating patients not expected to be assigned to the same
DRG as the patients already receiving the technology, it may be
considered for approval if it also meets the other cost and clinical
improvement criteria. In this case, the device does treat a different
patient population of congestive heart failure than the patient
population for renal dialysis. Under the policy described in the
September 7, 2001 final rule, this technology may be considered new for
the purposes of determining whether it qualifies for add-on payments.
However, we have some concerns about whether this is an appropriate
result, and about whether technologies that have been in use for many
years, in some cases decades, should be able to qualify for add-on
payments for new technologies. Therefore, we invite comments on whether
this technology should be considered new, and on the general issue of
whether existing technologies should be approved for add-on payments
when new applications are developed for these technologies and whether
special standards regarding, for example, clinical improvement, should
be applied in such cases.
The applicant submitted five sets of data to demonstrate that the
System 100 meets the cost criterion. Of these five, three sets of data
were flawed in the analysis of the cost criterion. Therefore, we will
discuss only the data that are most accurate and relevant. It is
important to note at the outset of the cost analysis that the console
is reusable and is, therefore, a capital cost. Only the circuits and
catheters are components that represent operating expenses. Section
1886(d)(K)(i) of the Act requires that the Secretary establish a
mechanism to recognize the costs of new medical services or
technologies under the payment system established under that
subsection, which establishes the system for paying for the operating
costs of inpatient hospital services. The system of payment for capital
costs is established under section 1886(g) of the Act, which makes no
mention of any add-on payments for a new medical service or technology.
Therefore, it is not appropriate to include capital costs in the add-on
payments for a new medical service or technology and these costs should
also not be considered in evaluating whether a technology meets the
cost criterion. The applicant has applied for add-on payments only for
the circuits and catheter, which represent the operating expenses of
the device. However, catheters cannot be considered new technology in
any sense. As a result, only the UF 500 disposable blood circuit is
relevant to the evaluation of the cost criterion.
The applicant commissioned Covance to search the FY 2002 MedPAR
file. The applicant used a combination of diagnosis codes to determine
which cases could potentially use the System 100. Covance found 27,589
cases with the following combination of ICD-9-CM diagnosis codes: 428.0
through 428.9 (Heart Failure), 402.91 (Unspecified with Heart Failure),
or 402.11
[[Page 28248]]
(Hypertensive Heart Disease with Heart Failure), in combination with
276.6 (Fluid Overload) and 782.3 (Edema). The 27,589 cases were found
among 281 DRGs with 49.4 percent of cases mapped across DRGs 88, 89,
127, 277 and 316. The applicant eliminated those DRGs with less than
150 cases, which resulted in a total of 22,024 cases that could
potentially use the System 100. The case-weighted average standardized
charge across all DRGs was $14,534. The case-weighted threshold across
all DRGs was $17,789. Although the case-weighted threshold is greater
than the case-weighted standardized charge, it is necessary to include
the standardized charge for the circuits used in each case. In order to
establish the charge per circuit, the manufacturer submitted data
regarding 51 actual cases that used the System 100. Based on these 51
cases, the standardized charge per circuit was $2,209. The manufacturer
also stated that an average of two circuits are used per case.
Therefore, adding $4,418 for the charge of the two circuits to the
case-weighted average standardized charge of $14,534 results in a total
case-weighted standardized charge of $18,952. This is greater than the
case-weighed threshold of $17,789. We welcome comments from the public
on the charge information submitted by the applicant for the circuits.
Using the FY 2003 MedPAR file, we used the same combination of
diagnosis codes to identify 28,660 cases across all DRGs. As in the
applicant's analysis, we eliminated those DRGs with less than 150
cases, which resulted in 22,395 cases. The case-weighted average
standardized charge for these cases is $15,447. The case-weighted
threshold to qualify for new technology add-on payment using the data
we identified would then be $18,029. Again, as in the applicant's
analysis, it was necessary to include in the charge of $4,418 for the
circuits. This results in a total case-weighted average standardized
charge of $19,865, which is also greater than the case-weighted
threshold of $18,029. Based on these two analyses, the System 100 meets
the cost criterion.
The applicant contends that the System 100 represents a substantial
clinical improvement for the following reasons: It removes excess fluid
without the use of diuretics; it does not lead to electrolyte
imbalance, hemodynamic instability or worsening renal function; it can
restore diuretic responsiveness; it does not adversely affect the
renin-angiotensin system; it reduces hospital length of stay for the
treatment of congestive heart failure; and it requires only peripheral
venous access.
Although we lack data from a large, multicenter, randomized,
prospective clinical trial, we believe the applicant has submitted data
that demonstrate the use of this technology in achieving the clinical
benefits cited. We believe that there is some basis for concluding that
the System 100 represents a substantial clinical improvement over
current standard treatment of fluid overload in congestive heart
failure. However, we invite comment on whether the data submitted are
indeed adequate to demonstrate significant clinical improvement.
Based on the criteria, we believe that the System 100 could be
approved for new technology add-on payments for FY 2005. However, we
invite comments on this application, and especially on whether the
System 100 is really new and on whether it represents a new technology
within the meaning of the statute and regulations. If approved for add-
on payments, the device would be reimbursed up to half of the costs for
the disposable portion of the device. The manufacturer has stated that
the cost for the disposable blood circuit and filter would be $900. As
stated above, an average two circuits are used per case, which results
in a total cost of $1,800 per case. Therefore, the maximum add-on
payment for the disposable parts of the device would be $900 per case.
We will determine whether to approve this application in the light of
the comments we receive and our continuing analysis.
We received the following public comments in accordance with
section 503(b)(2) of Pub. L. 108-173 regarding this application for
add-on payments.
Comment: Several commenters noted that the System 100 provides
physicians a new treatment option for patients with fluid overload who
are unresponsive to diuretics and has been documented in clinical
studies and other published articles to effectively treat fluid
overload. Another commenter noted that patients who have been treated
with the System 100 seem to have improved health versus those who have
lingered on diuretic therapy or have been treated by hemodialysis. The
commenter also noted that the system 100 reduces hospital stays. Other
commenters noted that the System 100 is safer for those patients in
terms of reduced electrolyte imbalance and renal dysfunction and is a
major step forward in the treatment of decompensated heart failure.
Response: As we stated above, we believe that there is some basis
for concluding that the System 100 offers substantial clinical
improvement. We will consider these comments as we continue to evaluate
whether the System 100 meets this criterion.
III. Proposed 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 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 statistical areas established by the Office of Management and Budget
(OMB). A detailed discussion of the proposed FY 2005 hospital wage
index based on the statistical areas, including OMB's revised
definitions of Metropolitan Areas, appears under section III.B of this
preamble.
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.
The adjustment we are proposing for FY 2005 is discussed in section
II.B. of the Addendum to this proposed rule.
As discussed below in section III.G. of this preamble, we also take
into account the geographic reclassification of 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. The budget neutrality adjustment we are
proposing for FY
[[Page 28249]]
2005 is discussed in section II.B. of the Addendum to this proposed
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 short-
term, acute care hospital participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the initial collection of these data and the occupational
mix adjustment that we are proposing to apply beginning October 1, 2004
(the FY 2005 wage index) appears under section III.C. of this preamble.
B. Revised OMB Definitions for Geographical Statistical Areas
[If you choose to comment on issues in this section, please include the
caption ``Revised MSAs'' at the beginning of your comment.]
1. Current Labor Market Areas Based on MSAs
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. In
accordance with the broad discretion under section 1886(d)(3)(E) of 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
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.
These different designations use counties as the building blocks
upon which they are based. Therefore, hospitals are assigned to either
an MSA, PMSA, or NECMA based on whether the county in which the
hospital is located is part of that area. For purposes of the IPPS wage
index, we combine all of the counties in a State outside a designated
MSA, PMSA, or NECMA together to calculate a statewide rural wage index.
2. Core-Based Statistical Areas
OMB reviews its Metropolitan Area (MA) definitions preceding each
decennial census. In the fall of 1998, OMB chartered the Metropolitan
Area Standards Review Committee to examine the MA standards and develop
recommendations for possible changes to those standards. Three notices
related to the review of the standards were published on the following
dates in the Federal Register, providing an opportunity for public
comment on the recommendations of the Committee: December 21, 1998 (63
FR 70526); October 20, 1999 (64 FR 56628), and August 22, 2000 (65 FR
51060).
In the December 27, 2000 Federal Register (65 FR 82228 through
82238), OMB announced its new standards. According to that notice, OMB
defines a Core-Based Statistical Area (CBSA), beginning in 2003, as ``a
geographic entity associated with at least one core of 10,000 or more
population, plus adjacent territory that has a high degree of social
and economic integration with the core as measured by commuting ties.
The standards designate and define two categories of CBSAs:
Metropolitan Statistical Areas and Micropolitan Statistical Areas.''
(65 FR 82235)
According to OMB, MSAs are based on urbanized areas of 50,000 or
more population, and Micropolitan Statistical Areas (referred to in
this discussion as Micropolitan Areas) are based on urban clusters of
at least 10,000 population but less than 50,000 population. Counties
that do not fall within CBSAs are deemed ``Outside CBSAs.'' In the
past, OMB defined MSAs around areas with a minimum core population of
50,000, and smaller areas were ``Outside MSAs.''
The general concept of the CBSAs is that of an area containing a
recognized population nucleus and adjacent communities that have a high
degree of integration with that nucleus. The purpose of the standards
is to provide nationally consistent definitions for collecting,
tabulating, and publishing Federal statistics for a set of geographic
areas. CBSAs include adjacent counties that have a minimum of 25
percent commuting to the central counties of the area. This is an
increase over the minimum commuting threshold for outlying counties
applied in the previous MSA definition of 15 percent.
On June 6, 2003, OMB announced the new CBSAs, comprised of MSAs and
the new Micropolitan areas based on Census 2000 data. (A copy of the
announcement may be obtained at the following Internet address: http://www.whitehouse.gov/omb/bulletins/fy04/b04-03.html.
) The new definitions
recognize 49 new MSAs and 565 new Micropolitan Areas, and extensively
revise the construct of many of the existing MSAs. There are 1,090
counties in MSAs under these new definitions (previously, there were
848 counties in MSAs). Of these 1,090 counties, 737 are in the same MSA
as they were prior to the changes, 65 are in a different MSA, and 288
were not previously designated to any MSA. There are 674 counties in
Micropolitan Areas. Of these, 41 were previously in an MSA, while 633
were not previously designated to an MSA. There are five counties that
previously were designated to an MSA but are no longer designated to
either an MSA or a new Micropolitan Area: Carter County, KY; St. James
Parish, LA; Kane County, UT; Culpepper County, VA; and King George
County, VA.
3. Revised Labor Market Areas
In its June 6, 2003 announcement, OMB cautioned that these new
definitions ``should not be used to develop and implement Federal,
State, and local nonstatistical programs and policies without full
consideration of the effects of using these definitions for such
purposes. These areas should not serve as a general-purpose geographic
framework for nonstatistical activities, and they may or may not be
suitable for use in program funding formulas.''
We have previously examined alternatives to the use of MSAs for the
purpose of establishing labor market areas for the Medicare wage index.
In the May 27, 1994, proposed rule (59 FR 27724), we presented our
latest research concerning possible future refinements to the labor
market areas. Specifically, we discussed and solicited comment on the
proposal by the Prospective Payment Assessment Commission (ProPAC, a
predecessor organization to the Medicare Payment Advisory Commission
(MedPAC)) for hospital-specific labor market areas based on each
hospital's nearest neighbors, and our research and analysis on
alternative labor market areas. Even though we found that none of the
alternative labor market areas that we studied provided a distinct
improvement over the use of MSAs, we presented an option using the MSA-
based wage index but generally giving a hospital's own wages a higher
weight than under the current system. We also described for comment a
State labor market option, under which hospitals would be allowed to
design labor market areas within their own State boundaries.
We described the comments we received in the June 2, 1995 proposed
rule (60 FR 29219). There was no consensus among the commenters on the
choice for new labor market areas. Many individual hospitals that
commented expressed dissatisfaction with all of the proposals. However,
several State hospital associations commented that the options merited
further study. Therefore, we contacted the association representatives
that
[[Page 28250]]
participated in our November 1993 meeting on labor market issues in
which we solicited ideas for additional types of labor market research
to conduct. None of the individuals we contacted suggested any ideas
for further research.
Consequently, we have continued to use MSAs to define labor market
areas for purposes of the wage index. While we recognize MSAs are not
designed specifically to define labor market areas, we believe they do
represent a useful proxy for this purpose, and our analysis and
discussion here are focused on issues related to adopting the new CBSAs
to define labor market areas.
a. New England MSAs
As stated above, we currently use NECMAs to define labor market
areas in New England, because these are county-based designations
rather than the 1990 MSA definitions for New England, which used minor
civil divisions such as cities and towns. Under the previous MSA
definitions, NECMAs provided more consistency in labor market
definitions for New England compared with the rest of the country,
where MSAs are county-based. Under the new CBSAs, OMB has defined the
MSAs and Micropolitan Areas in New England on the basis of counties.
OMB also established New England City and Town Areas, which are similar
to the previous New England MSAs. Therefore, to maintain consistency in
the definition of labor market areas between New England and the rest
of the country, we are proposing to use the New England MSAs under the
new CBSA definition.
b. Metropolitan Divisions
A Metropolitan Division is a county or group of counties within a
CBSA that contains a core population of at least 2.5 million,
representing an employment center, plus adjacent counties associated
with the main county or counties through commuting ties. A county
qualifies as a main county if 65 percent or more of its employed
residents work within the county and the ratio of the number of jobs
located in the county to the number of employed residents is at least
.75. A county qualifies as a secondary county if 50 percent or more,
but less than 65 percent, of its employed residents work within the
county and the ratio of the number of jobs located in the county to the
number of employed residents is at least .75. After all the main and
secondary counties are identified and grouped, each additional county
that already has qualified for inclusion in the MSA falls within the
Metropolitan Division associated with the main/secondary county or
counties with which the county at issue has the highest employment
interchange measure. Counties in a Metropolitan Division must be
contiguous. (65 FR 82236)
As noted above, in the past, OMB designated CMSAs as Metropolitan
Areas with a population of one million or more and comprising two or
more PMSAs. We currently use the PMSAs rather than CMSAs to define
labor market areas because they comprise a smaller geographic area with
potentially varying labor costs due to different local economies.
Similarly, we are proposing to use the Metropolitan Divisions where
applicable under the CBSA definitions.
Under the CBSA definitions, there are 11 MSAs containing
Metropolitan Divisions: Boston; Chicago; Dallas; Detroit; Los Angeles;
Miami; New York; Philadelphia; San Francisco; Seattle; and Washington,
D.C. Although these MSAs were also CMSAs under the prior definitions,
in some cases their areas have been significantly altered. Under the
prior definitions, Boston was a single NECMA. It is now comprised of 4
Divisions. Los Angeles went from 4 PMSAs to 2 Divisions because 2 MSAs
became separate MSAs. The New York CMSA went from 15 MSAs down to only
4 Divisions. Five PMSAs in Connecticut now become separate MSAs, and
the number of PMSAs in New Jersey goes from 5 to 2, with the
consolidation of 2 New Jersey PMSAs (Bergen-Passaic and Jersey City)
into the New York-Wayne-White Plains, NY-NJ Division. In San Francisco,
only 2 Divisions remain where there were once 6 PMSAs, some of which
are now separate MSAs.
Previously, Cincinnati, Cleveland, Denver, Houston, Milwaukee,
Portland, Sacramento, and San Juan were all previously designated as
CMSAs, but are not any longer. As noted previously, the population
threshold to be designated a CMSA was one million. In most of these
cases, counties formerly in a PMSA have become a separate, independent
MSA, leaving only the MSA for the core area under the new CBSA
definitions.
c. Micropolitan Areas
One of the major issues with respect to the new definitions is
whether to use Micropolitan Areas to define labor market areas for the
purpose of the IPPS wage index. Because the new Micropolitan Areas are
essentially a third area definition made up mostly of currently rural
areas, but also some or all of current MSAs, how these areas are
treated will have significant impacts on the calculation and
application of the wage index. Treating Micropolitan Areas as separate
and distinct labor market areas would affect both the wage indexes of
the hospitals in the Micropolitan Areas and the hospitals in the labor
market areas where those hospitals are currently located (both
positively and negatively).
Because we currently use MSAs to define urban labor market areas
and we group all the hospitals in counties within each State that are
not assigned to an MSA together into a statewide rural labor market
area, we have used the terms ``urban'' and ``rural'' wage indexes in
the past for ease of reference. However, the introduction of
Micropolitan Areas complicates this terminology because these areas
include so many hospitals that are currently included in the statewide
rural labor market areas. In order to facilitate the discussion below,
we use the term ``rural'' hospitals to describe hospitals in counties
that are not assigned to either an MSA or a Micropolitan Area. This
should not be taken to indicate that hospitals in Micropolitan Areas
are no longer ``rural'' hospitals. In fact, we are proposing that
hospitals in Micropolitan Areas are included in the statewide rural
labor market areas, for the reasons outlined below. The reader is
referred to section IV.B. of the preamble of this proposed rule for a
more specific discussion of the implications of these changes for
defining urban and rural areas under Sec. 412.62(f).
Chart 1 below demonstrates the distributions of hospitals by their
current and new designations. Approximately 50 percent of hospitals
currently designated rural are now in either Micropolitan Areas (691
hospitals) or MSAs (197 hospitals). The vast majority of hospitals
currently in MSAs remain in an MSA (2,478, although in some cases the
MSAs have been reconfigured), while 2 are now in rural areas and 65 are
now in Micropolitan Areas.
Chart 1.--Distribution of Hospitals by Current and New Designation
------------------------------------------------------------------------
Currently Currently
Statistical area rural MSA.
------------------------------------------------------------------------
Rural........................................... 861 2
Micropolitan.................................... 691 65
MSA............................................. 197 2,478
-------------
Totals...................................... 1,749 2,545
------------------------------------------------------------------------
In order to evaluate the impact of these changes, we grouped
hospitals based on the county where they are located according to the
new MSA and Micropolitan areas using the definitions
[[Page 28251]]
on the Census Bureau's Web site: http://www.census.gov/population/www/estimates/metrodef.html.
We then compared the proposed FY 2004 wage
indexes (using data from hospitals' FY 2001 cost reports) calculated
based on the current MSAs, without any effects of hospital geographic
reclassifications. Consistent with current policy, we applied the rural
floor in the case where the statewide rural wage index is greater than
the wage index for a particular urban area. We excluded Indian Health
Service hospitals from the analysis due to the special characteristics
of the prospective payment system for these hospitals. Hospitals in
Maryland were excluded from the analysis because they remain excluded
from the IPPS under the waiver at section 1814(b)(3) of the Act. Our
analysis also does not reflect any changes to the Puerto Rico-specific
wage index, which is applicable only to the Puerto Rico standardized
amounts (the analysis does include the national wage index values for
Puerto Rico hospitals).
Chart 2 below shows the impact on hospitals' wage indexes of
recalculating new wage indexes based on the new MSAs, and treating the
new Micropolitan Areas as separate labor market areas. Specifically,
the table shows the impact of treating the new MSA and Micropolitan
Areas as labor market areas and calculating a wage index for each one.
The most dramatic impact of this change would be on hospitals that are
currently classified as rural. Only 10 currently rural hospitals would
experience no changes in their wage indexes after applying the new MSA
definitions. Five of these hospitals are in Delaware and Connecticut
(three and two hospitals respectively), where the only counties in the
State currently considered rural are now part of Micropolitan Areas.
Approximately 62 percent (1,092 out of 1,749) of currently rural
hospitals experience decreases in their wage indexes under this change.
Among hospitals that remain rural after separately recognizing
Micropolitan Areas (those hospitals in counties ``outside CBSAs''),
rural hospitals in six States (Arizona, Florida, Idaho, Indiana,
Minnesota, and Missouri) experience a positive impact after applying
the new MSA definitions. These hospitals benefit because the net effect
on their wage index of other hospitals moving into Micropolitan Areas
is positive. The majority of the currently rural hospitals (762 out of
1,092) that experience decreases in their wage indexes are hospitals
that would remain rural under the new definitions. Moreover, among the
646 rural hospitals whose wage indexes would increase under the new
definitions, 547 would now be in an MSA or Micropolitan Area.
Furthermore, in many cases, the magnitude of the changes is quite
large. Nearly one-half of all rural hospitals would experience payment
changes of at least 5.0 percent, either negatively or positively, if we
were to adopt labor market areas based in part on the new Micropolitan
Areas.
In contrast, there are 938 currently urban hospitals (37 percent)
with wage indexes that are unaffected by the new MSA definitions. These
hospitals are in MSAs or PMSAs that are either unchanged (for example,
the Austin, Buffalo, Milwaukee, Oakland, Phoenix, San Diego, and Tampa-
St. Petersburg MSAs are all unchanged) or include new counties without
any hospitals in those counties that are now part of the existing MSA
(for example, Atlanta, Denver, Little Rock, Omaha, Portland, Richmond,
Toledo, Virginia Beach-Norfolk added counties but not hospitals).
The most significant negative impact (more than a 20-percent
decrease) among hospitals currently in an MSA is on those located in
counties that become Micropolitan areas or rural areas. Among hospitals
with the largest positive impacts (more than a 20-percent increase),
the changes appear to be largely due to changes in the counties that
are now included (under the CBSAs) in the MSA labor market area.
Chart 2.--Impact on Wage Indexes of New MSA, Micropolitan Areas, and
Rural Labor Market Areas
------------------------------------------------------------------------
Number of Number of
currently currently Total
Percent change in area wage index rural MSA number of
hospitals hospitals hospitals.
------------------------------------------------------------------------
Decrease Greater Than 10.0....... 99 36 135
Decrease Between 5.0 and 10.0.... 420 77 497
Decrease Between 2.0 and 5.0..... 238 95 333
Decrease Between 0 and 02.0...... 335 585 920
No Change........................ 10 938 948
Increase Between 0 and 2.0....... 168 495 663
Increase Between 2.0 and 5.0..... 138 145 283
Increase Between 5.0 and 10.0.... 203 139 342
Increase Greater Than 10.0....... 138 35 173
--------------
Total........................ 1,749 2,545 4,294
------------------------------------------------------------------------
One of the reasons Micropolitan Areas have such a dramatic impact
on the wage index is, because Micropolitan Areas encompass smaller
populations than MSAs, they tend to include fewer hospitals per
Micropolitan Area. Currently, there are only 25 MSAs with one hospital
in the MSA. However, under the new definitions, there are 373
Micropolitan Areas with one hospital, and 49 MSAs with only one
hospital.
This large number of labor market areas with only one hospital and
the increased potential for dramatic shifts in the wage indexes from
one year to the next is a problem for several reasons. First, it
creates instability in the wage index from year to year for a large
number of hospitals. Second, it reduces the averaging effect of the
wage index, lessening some of the efficiency incentive inherent in a
system based on the average hourly wages for a large number of
hospitals. In labor market areas with a single hospital, high wage
costs are passed directly into the wage index with no counterbalancing
averaging with lower wages paid at nearby competing hospitals. Third,
it creates an arguably inequitable system when so many hospitals have
wage indexes based solely on their own wages, while other hospitals'
wage indexes are based on an average hourly wage across many hospitals.
For these reasons, we are proposing not to adopt Micropolitan Areas
as independent labor market areas. Although we considered alternative
[[Page 28252]]
approaches that would aggregate Micropolitan Areas in order to reduce
the number of one-hospital labor market areas, these approaches created
geographically disconnected labor market areas, an undesirable outcome.
Therefore, we are proposing to maintain our current policy of defining
labor market areas based on the new MSAs (and Divisions, where they
exist) using OMB's new criteria and the 2000 Census data.
Chart 3 displays the impacts on hospital wage indexes of this
proposed approach. The most apparent difference comparing this chart to
Chart 2 is the reduction in the numbers of currently rural hospitals
impacted by more than 2.0 percent. Recognizing Micropolitan Areas as
independent labor market areas results in negative impacts of more than
2.0 percent for 757 currently rural hospitals, while the comparative
number, when recognizing only MSAs, is 256. Conversely, the number of
currently rural hospitals positively impacted by more than 2.0 percent
declines from 479 to 154.
The greatest negative impacts among hospitals currently designated
rural are in Idaho, where the statewide rural wage index falls 6.7
percent as a result of 6 formerly rural hospitals now being included in
either new or redefined MSAs. The wage index for rural Utah hospitals
declines by 5.7 percent, for similar reasons. Conversely, formerly
rural hospitals that are not part of an MSA generally experience
positive impacts.
Among hospitals that are currently in MSAs, the number of hospitals
with decreases in their wage indexes of at least 10 percent increases
under this proposal from 35 to 45. These are primarily hospitals that
are now located in Micropolitan Areas that are included in the
statewide labor market area. There are 46 counties with 72 hospitals
that are currently in an MSA that would be treated as rural under our
proposal.
Chart 3.--Impact on Wage Indexes of New MSA and Rural Labor Market Areas
------------------------------------------------------------------------
Number of Number of
currently currently Total
Percent change in area wage index rural MSA number of
hospitals hospitals hospitals.
------------------------------------------------------------------------
Decrease Greater Than 10.0....... 0 45 45
Decrease Between 5.0 and 10.0.... 122 60 182
Decrease Between 2.0 and 5.0..... 134 73 207
Decrease Between 0 and 2.0....... 588 615 1,203
No Change........................ 160 1,015 1,175
Increase Between 0 and 2.0....... 591 574 1,165
Increase Between 2.0 and 5.0..... 32 103 135
Increase Between 5.0 and 10.0.... 64 25 89
Increase Greater Than 10.0....... 58 35 93
--------------
Total........................ 1,749 2,545 4,294
------------------------------------------------------------------------
d. Transition Period
We have in the past provided for transition periods when adopting
changes that have significant payment implications, particularly large
negative impacts. When we recently removed the wage costs of teaching
physicians and residents from the wage index data of teaching
hospitals, we spread out the impact over 3 years by blending the
hospitals' average hourly wages with and without the data. Similarly,
the regulations at Sec. 412.102 provide for a 3-year transition to the
standardized amount and DSH adjustment payments to a hospital
redesignated from urban to rural.
Given the significant payment impacts upon some hospitals of these
changes, we considered options to transition from the current MSAs to
the new MSAs. As noted above, the most dramatic negative impacts are
among hospitals currently located in an MSA but would become rural
under our proposal. Some negative impacts also occur among urban
hospitals that remain in MSAs that have been reconfigured. However,
these impacts are generally smaller than those among currently urban
hospitals that would become rural. To help alleviate the decreased
payments for currently urban hospitals that would become rural, we are
proposing to allow them to maintain their assignment to the MSA where
they are currently located for the 3-year period FY 2005, FY 2006, and
FY 2007. Beginning in FY 2008, these hospitals would receive their
statewide rural wage index, although they would be eligible to apply
for reclassification by the MGCRB, both during this transition period
as well as subsequent years.
We also considered the option of allowing a transition to the new
MSAs for all hospitals, such as a blend of wage indexes based on the
old and new MSAs for some specified period of time. Although this would
help some hospitals that are negatively impacted by the changes to the
MSAs, it would dampen the payment increases for those hospitals that
are positively impacted by the changes. However, we are not proposing a
blended transition. We note that OMB in the past has announced MSA
changes on an annual basis due to population changes, and we have not
transitioned these changes.
C. Proposed Occupational Mix Adjustment to Proposed FY 2005 Index
[If you choose to comment on issues in this section, please include
the caption ``Occupational Mix'' at the beginning of your comment.]
As stated earlier, section 1886(d)(3)(E) of the Act 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, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
[[Page 28253]]
1. Development of Data for the Occupational Mix Adjustment
In the September 19, 2003 Federal Register (68 FR 54905), we
published a final notice of intent to collect occupational mix data
from hospitals using the Medicare Wage Index Occupational Mix Survey,
Form CMS-10079. (The survey and instructions may be accessed at the Web
site: http://cms.hhs.gov/providers/hipps/ippswage.asp.) The survey
requires hospitals to report the number of total paid hours for
directly hired and contract employees in occupations that provide the
following services: Nursing, physical therapy, occupational therapy,
respiratory therapy, medical and clinical laboratory, dietary, and
pharmacy. These services each include several standard occupational
classifications (SOCs), as defined by the Bureau of Labor Statistics
(BLS) on its Occupational Employment Statistics (OES) survey (http://www.bls.gov/oes/2001/oes_tec.htm
), that may be used by hospitals in
different mixes to provide specific aspects of patient care. CMS
decided to use BLS's SOCs to categorize employees for the occupational
mix survey in an effort to ease hospitals' reporting burden; most
hospitals have had experience with collecting and reporting their
employment data according to the SOC definitions. The survey includes a
total of 19 SOCs that provide services for the above 7 categories and
an ``all other occupations'' category. The hours collected on the
survey would be used to determine the proportion of a general service
category total that is attributable to each of the category's SOCs,
that is, the category's occupational mix.
In order to accurately reflect a hospital's employment, we
initially planned to require all hospitals to provide occupational mix
data collected from a 1-year period. Several hospitals and their
representatives advised us that a 1-year reporting period was feasible
because salary and wage data are maintained quarterly for revenue and
tax reporting purposes. However, several hospitals expressed concern
that their payroll and other personnel accounting systems are typically
not set up to collect data on hours for contract employees. The
hospitals and their representatives advised us that the approximately
2-month timeframe (see dates below) for collecting and submitting the
occupational mix data to the fiscal intermediaries would not allow
hospitals enough time to develop a year's worth of hours data for
contract workers. Therefore, given the short timeframe for collecting
the occupational mix data, and to reduce hospitals' reporting burden
associated with the initial collection of the data, we decided to allow
hospitals the option of providing their hours data for the 19 SOCs
either prospectively for a 4-week period beginning on or between
December 28, 2003 and January 11, 2004, and ending no later than
February 7, 2004, or retrospectively for a 12-month period, that is,
calendar year 2003. Although we recognize that using data from only a
4-week period increases our risk of obtaining results that reflect
seasonal rather than normal employment trends, we believe that the 4-
week prospective reporting period should enable hospitals to plan and
provide more accurate data according to our survey instructions and
definitions. (See the discussion below on the verification and validity
of our occupational mix survey results.)
An advance copy of the occupational mix survey was provided to
hospitals in mid-December 2003 so that hospitals could begin gathering
their data and documentation necessary to complete the survey. The
official survey was published as a CMS One-Time Notification (Pub. 100-
20, R47OTN) on January 23, 2004. We instructed our fiscal
intermediaries to distribute and collect completed occupational mix
surveys from any hospital that is subject to IPPS, or any hospital that
would be subject to IPPS if not granted a waiver. If a hospital was not
an IPPS provider during FY 2001 or, otherwise, did not submit a FY 2001
cost report, the hospital was not required to submit occupational mix
data. Consistent with the wage data, CAHs were excluded from the
occupational mix survey. In addition, the FY 2005 wage index does not
include occupational mix data for hospitals that submitted FY 2001 wage
data, but terminated participation in the Medicare program as IPPS
providers before calendar year 2003. For such terminated hospitals,
there would be no occupational mix data to collect for our survey
period.
Hospitals were to submit their completed occupational mix surveys
to their fiscal intermediaries by February 16, 2004. Our initial
collection of these data was completed by March 1, 2004, the deadline
for fiscal intermediaries to submit hospitals' survey data to CMS. We
released a public use file containing the data on March 8, 2004
(through the Internet on our Web site at: http://cms/hhs.gov/providers/hipps/ippswage.asp.
In a memorandum also dated March 8, 2004, we
instructed all fiscal intermediaries to inform the IPPS hospitals they
service of the availability of the occupational mix data file and the
process and timeframe for requesting corrections and revisions. If a
hospital wished to request a change to its data as shown in that file,
the hospital had to submit the changes to its fiscal intermediary by
March 22, 2004. In addition, as this was hospitals' first experience
with the occupational mix survey, we provided hospitals another
opportunity, if they missed the February 16 filing deadline, to submit
their completed surveys. The deadline for this one-time, final
opportunity to submit occupational mix data to fiscal intermediaries
for the FY 2005 wage index was also March 22, 2004. The final deadline
for fiscal intermediaries to submit hospitals' data to CMS was April
16, 2004. (From April 16 until the final rule is published, the
process, criteria, and timetable for correcting occupational mix data
is the same as for Worksheet S-3 wage data, under Section H.)
Occupational mix survey data received by us through March 15, 2004, are
used in computing the proposed wage index in this proposed rule. Data
received from intermediaries after March 15 through April 16, 2004 will
be included in the final rule.
The response rate for the occupational mix survey, as of March 15,
2004, was 89.4 percent. We received occupational mix data from 3,593
hospitals. We expected to receive completed survey data from 4,018
hospitals that submitted cost report wage data for FY 2001 and were
still IPPS hospitals during calendar year 2003 or on January 1, 2004.
For any hospital that was expected to provide occupational mix data but
did not, we are considering using proxy occupational mix data to adjust
the hospital's wage data in the final wage index. One option would be
to assume that the hospital only has employees in the highest level SOC
for each of the general service categories included on the occupational
mix survey. Another option would be to assume that such hospitals have
the national SOC mix for each general service category. We invite
public comment to this proposal. We note that the wage index in this
proposed rule does not include proxy data for hospitals that did not
complete and submit the occupational mix survey.
As this was the first administration of the occupational mix
survey, we did not provide fiscal intermediaries an extensive program
for reviewing the hours of data collected. However, hospitals were
required to be able to provide any documentation that could be used by
the fiscal intermediaries to verify the survey data. In addition, after
reviewing the compiled survey data, we contacted fiscal intermediaries
to
[[Page 28254]]
request corrections from a few hospitals that provided data for
reporting periods that were out of range with our specified 12-month or
4-week data collection periods. As the wage index is a relative measure
of labor costs across geographic areas, it is important that the data
collected from hospitals reflects a common period. We also tested the
validity of our occupational mix survey data by comparing our results
to those of the 2001 BLS OES survey. As shown in Charts 4 and 5 below,
the results of our survey are consistent with the findings of the BLS
OES survey.
In addition, to compute the occupational mix adjustment, we
collected data on the average hourly rates for the 19 SOCs so that we
could derive a weighted average hourly rate for each labor market area.
(More details about the occupational mix calculation are included in
section III.C.2. of this preamble.) To decrease hospital's reporting
burden for this initial collection of the occupational mix data, and to
facilitate the timely collection of the data, we did not require
hospitals to report data on their total wages or average hourly rates
associated with the 19 SOCs. Instead, we used national average hourly
rates from the BLS OES 2001 National Industry--Specific Occupational
Employment and Wage Estimates, SIC--Hospitals (accessible at Web site:
http://www.bls.gov/oes/2001/oesi3_806.htm), as reflected in Chart 4
below.
Chart 4.--BLS National Occupational Employment and Wage Estimates for Hospitals
----------------------------------------------------------------------------------------------------------------
Number of Percent of Percent of National
General service categories hospital service total average hourly
employees category employees wage $
----------------------------------------------------------------------------------------------------------------
Nursing Services and Medical Assistant Services
----------------------------------------------------------------------------------------------------------------
Registered Nurses............................... 1,307,960 68.8 25.88 23.62
Licensed Practical Nurses....................... 194,900 10.2 3.86 14.65
Nursing Aides, Orderlies, & Attendants.......... 351,910 18.5 6.96 10.01
Medical Assistants.............................. 47,250 2.5 0.93 11.79
-----------------
Total....................................... 1,902,020 100.0 37.63
-------------------------------------------------
Physical Therapy Services
----------------------------------------------------------------------------------------------------------------
Physical Therapists............................. 46,290 61.0 0.92 27.80
Physical Therapist Assistants................... 17,610 23.2 0.35 17.11
Physical Therapist Aides........................ 12,020 15.8 0.24 10.40
-----------------
Total....................................... 75,920 100.0 1.50
-------------------------------------------------
Occupational Therapy Services
----------------------------------------------------------------------------------------------------------------
Occupation Therapists........................... 24,110 75.3 0.48 25.62
Occupation Therapist Assistants................. 5,690 17.8 0.11 16.81
Occupation Therapist Aides...................... 2,220 6.9 0.04 11.60
-----------------
Total....................................... 32,020 100.0 0.63
-------------------------------------------------
Respiratory Therapy Services
----------------------------------------------------------------------------------------------------------------
Respiratory Therapists.......................... 68,920 72.8 1.36 19.26
Respiratory Therapy Technicians................. 25,710 27.2 0.51 16.96
-----------------
Total....................................... 94,630 100.0 1.87
-------------------------------------------------
Pharmacy Services
----------------------------------------------------------------------------------------------------------------
Pharmacists..................................... 48,630 48.8 0.96 34.58
Pharmacy Technicians............................ 44,270 44.4 0.88 12.30
Pharmacy Assistants/Aides....................... 6,810 6.8 0.13 11.52
-----------------
Total....................................... 99,710 100.0 1.97
-------------------------------------------------
Dietary Services
----------------------------------------------------------------------------------------------------------------
Dieticians...................................... 16,820 56.4 0.33 20.02
Dietetic Technicians............................ 13,020 43.6 0.26 11.64
-----------------
Total....................................... 29,840 100.0 0.59
-------------------------------------------------
Medical & Clinical Lab Services
----------------------------------------------------------------------------------------------------------------
Medical & Clinical Lab Technologists............ 87,380 57.8 1.73 20.74
Medical & Clinical Lab Technicians.............. 63,900 42.2 1.26 14.90
-----------------
Total....................................... 151,280 100.0 2.99
=================
[[Page 28255]]
Total Nursing, Therapy, Pharmacy, Dietary, 2,385,420 .............. 47.19
and Medical & Clinical Occupations.........
=================
All Other Occupations....................... 2,669,400 .............. 52.81
=================
Total Hospital Employees.................... 5,054,820 .............. 100.0
----------------------------------------------------------------------------------------------------------------
Source: BLS, OES, 2001 National Industry-Specific Occupational Employment and Wage Estimates, http://www.bls.gov/
oes/2001
Chart 5.--Medicare Occupational Mix Survey Results
----------------------------------------------------------------------------------------------------------------
Percent of Percent of
General Service Categories Number of employee service total employee
hours category hours hours
----------------------------------------------------------------------------------------------------------------
Nursing Services and Medical Assistant Services
----------------------------------------------------------------------------------------------------------------
Registered Nurses...................................... 1,349,683,706.61 70.38 26.23
Licensed Practical Nurses.............................. 148,480,984.66 7.74 2.89
Nursing Aides, Orderlies, & Attendants................. 349,482,222.23 18.22 6.79
Medical Assistants..................................... 70,155,219.44 3.66 1.36
--------------------------
Total.............................................. 1,917,802,132.94 100.00 37.27
--------------------------------------------------------
Physical Therapy Services
----------------------------------------------------------------------------------------------------------------
Physical Therapists.................................... 42,728,556.90 60.87 0.83
Physical Therapist Assistants.......................... 16,278,842.28 23.19 0.32
Physical Therapist Aides............................... 11,192,122.93 15.94 0.22
--------------------------
Total.............................................. 70,199,522.11 100.00 1.36
--------------------------------------------------------
Occupational Therapy Services
----------------------------------------------------------------------------------------------------------------
Occupation Therapists.................................. 18,016,924.74 76.46 0.35
Occupation Therapist Assistants........................ 3,912,014.51 16.60 0.08
Occupation Therapist Aides............................. 1,635,953.90 6.94 0.03
--------------------------
Total.............................................. 23,564,893.16 100.00 0.46
--------------------------------------------------------
Respiratory Therapy Services
----------------------------------------------------------------------------------------------------------------
Respiratory Therapists................................. 79,768,909.24 79.96 1.55
Respiratory Therapy Technicians........................ 19,993,236.90 20.04 0.39
--------------------------
Total.............................................. 99,762,146.14 100.00 1.94
--------------------------------------------------------
Pharmacy Services
----------------------------------------------------------------------------------------------------------------
Pharmacists............................................ 52,574,888.83 48.35 1.02
Pharmacy Technicians................................... 51,947,662.82 47.77 1.01
Pharmacy Assistants/Aides.............................. 4,219,798.43 3.88 0.08
--------------------------
Total.............................................. 108,742,350.08 100.00 2.11
--------------------------------------------------------
Dietary Services
----------------------------------------------------------------------------------------------------------------
Dieticians............................................. 18,221,465.33 42.23 0.35
Dietetic Technicians................................... 24,929,864.59 57.77 0.48
--------------------------
Total.............................................. 43,151,329.92 100.00 0.84
--------------------------------------------------------
Medical & Clinical Lab Services
----------------------------------------------------------------------------------------------------------------
Medical & Clinical Lab Technologists................... 109,938,139.37 52.07 2.14
Medical & Clinical Lab Technicians..................... 101,208,507.21 47.93 1.97
--------------------------
Total.............................................. 211,146,646.58 100.00 4.10
==========================
Total Nursing, Therapy, Pharmacy, Dietary, and 2,474,369,020.92 .............. 48.08
Medical & Clinical Occupations................
==========================
[[Page 28256]]
All Other Occupations.......................... 2,671,751,872.61 .............. 51.92
==========================
Total Hospital Employees................... 5,146,120,893.53 .............. 100.00
----------------------------------------------------------------------------------------------------------------
Source: Medicare Wage Index Occupational Mix Survey, Form CMS-10079
2. Proposed Calculation of the Occupational Mix Adjustment Factor and
the Proposed Occupational Mix Adjusted Wage Index
The method used to calculate the proposed occupational mix adjusted
wage index follows:
Step 1--For each hospital, the percentage of the general service
category attributable to an SOC is determined by dividing the SOC hours
by the general service category's total hours. Repeat this calculation
for each of the 19 SOCs.
Step 2--For each hospital, the weighted average hourly rate for an
SOC is determined by multiplying the percentage of the general service
category (from Step 1) by the national average hourly rate for that SOC
from the 2001 BLS OES survey (see Chart 4 above). Repeat this
calculation for each of the 19 SOCs.
Step 3--For each hospital, the hospital's adjusted average hourly
rate for a general service category is computed by summing the weighted
hourly rate for each SOC within the general category. Repeat this
calculation for each of the 7 general service categories.
Step 4--For each hospital, the occupational mix adjustment factor
for a general service category is calculated by dividing the national
adjusted average hourly rate for the category by the hospital's
adjusted average hourly rate for the category. (The national adjusted
average hourly rate is computed in the same manner as Steps 1 through
3, using instead, the total SOC and general service category hours for
all hospitals in the occupational mix survey database.) Repeat this
calculation for each of the 7 general service categories. If the
hospital's adjusted rate is less than the national adjusted rate
(indicating the hospital employs a less costly mix of employees within
the category), the occupational mix adjustment factor will be greater
than 1.0000. If the hospital's adjusted rate is greater than the
national adjusted rate, the occupational mix adjustment factor will be
less than 1.0000.
Step 5--For each hospital, the occupational mix adjusted salaries
and wage-related costs for a general service category is calculated by
multiplying the hospital's total salaries and wage-related costs (from
Step 5 of the unadjusted wage index calculation in section F) by the
national percentage of total hospital workers attributable to the
general service category (from the occupational mix survey data; see
Chart 5 above) and by the general service category's occupational mix
adjustment factor (from Step 4 above). Repeat this calculation for each
of the 7 general service categories. The remaining portion of the
hospital's total salaries and wage-related costs that is attributable
to all other employees of the hospital is not adjusted for occupational
mix.
Step 6--For each hospital, the total occupational mix adjusted
salaries and wage-related costs for a hospital are calculated by
summing the occupational mix adjusted salaries and wage-related costs
for the 7 general service categories (from Step 5) and the unadjusted
portion of the hospital's salaries and wage-related costs for all other
employees. To compute a hospital's occupational mix adjusted average
hourly wage, divide the hospital's total occupational mix adjusted
salaries and wage-related costs by the hospital's total hours (from
Step 4 of the unadjusted wage index calculation in Section F).
Step 7--To compute the occupational mix adjusted average hourly
wage for an urban or rural area, sum the total occupational mix
adjusted salaries and wage-related costs for all hospitals in the area,
then sum the total hours for all hospitals in the area. Next, divide
the area's occupational mix adjusted salaries and wage-related costs by
the area's hours.
Step 8--To compute the national occupational mix adjusted average
hourly wage, sum the total occupational mix adjusted salaries and wage-
related costs for all hospitals in the nation, then sum the total hours
for all hospitals in the nation. Next, divide the national occupational
mix adjusted salaries and wage-related costs by the national hours. The
proposed national occupational mix adjusted average hourly wage is
26.2566.
Step 9--To compute the occupational mix adjusted wage index, divide
each area's occupational mix adjusted average hourly wage (Step 7) by
the proposed national occupational mix adjusted average hourly wage
(Step 8).
Step 10--To compute the proposed Puerto Rico specific occupational
mix adjusted wage index, follow the Steps 1 through 9 above. The
proposed Puerto Rico occupational mix adjusted average hourly wage is
12.2035.
Example of Occupational Mix Adjustment
----------------------------------------------------------------------------------------------------------------
Percent of Percent of BLS national
General service categories/SOCs Number of service total employee average hourly
employee hours category hours hours wage
----------------------------------------------------------------------------------------------------------------
NATIONAL--Nursing and Medical Assistant Services
----------------------------------------------------------------------------------------------------------------
Registered Nurses.......................... 1,349,683,707 70.38 26.23 $23.62.
Licensed Practical Nurses.................. 148,480,985 7.74 2.89 14.65.
Nursing Aides, Orderlies, & Attendants..... 349,482,222 18.22 6.79 10.01
Medical Assistants......................... 70,155,219 3.66 1.36 11.79 .
-------------------
[[Page 28257]]
Total.................................. 1,917,802,133 100.00 37.27 20.01.
Hospital A:
Registered Nurses...................... 1,642,116 79.84 ............... 18.86.
Licensed Practical Nurses.............. 67,860 3.30 ............... 0.48.
Nursing Aides, Orderlies, & Attendants. 259,177 12.60 ............... 1.26
Medical Assistants..................... 87,622 4.26 ............... 0.50.
-------------------
Total.................................. 2,056,774 100.00 ............... 21.11
Occupational Mix Adjustment............ ................ ............... ............... 0.9481
Hospital B:
Registered Nurses...................... 1,510,724 64.44 ............... 0.31
Licensed Practical Nurses.............. 159,795 6.82 ............... 0.09
Nursing Aides, Orderlies, & Attendants. 391,201 16.69 ............... 0.08
Medical Assistants..................... 282,728 12.06 ............... 2.55
-------------------
Total.............................. 2,344,449 100.00 ............... 19.31
Occupational Mix Adjustment............ ................ ............... ............... 1.0362
--------------------------------------------
NATIONAL--Physical Therapy Services
----------------------------------------------------------------------------------------------------------------
Physical Therapists........................ 42,728,557 60.87 0.83 27.80
Physical Therapist Assistants.............. 16,278,842 23.19 0.32 17.11
Physical Therapist Aides................... 11,192,123 15.94 0.22 10.40
-------------------
Total.................................. 70,199,522 100.00 1.36 22.55
Hospital A:
Physical Therapists.................... 94,987 61.40 ............... 17.07
Physical Therapist Assistants.......... 36,254 23.43 ............... 4.01
Physical Therapist Aides............... 23,460 15.16 ............... 1.58
-------------------
Total.............................. 154,701 100.00 ............... 22.66
Occupational Mix Adjustment............ ................ ............... ............... 0.9953
--------------------------------------------
Hospital B:
Physical Therapists.................... 60,337 57.37 ............... 15.95
Physical Therapist Assistants.......... 22,391 21.29 ............... 3.64
Physical Therapist Aides............... 22,444 21.34 ............... 2.22
-------------------
Total.............................. 105,173 100.00 ............... 21.81
Occupational Mix Adjustment............ ................ ............... ............... 1.0339
--------------------------------------------
NATIONAL--Occupational Therapy Services
----------------------------------------------------------------------------------------------------------------
Occupation Therapists...................... 18,016,925 76.46 0.35 25.62
Occupation Therapist Assistants............ 3,912,015 16.60 0.08 16.81
Occupation Therapist Aides................. 1,635,954 6.94 0.03 11.60
-------------------
Total.................................. 23,564,893 100.00 0.46 23.18.
Hospital A:
Occupation Therapists.................. 40,366 90.06 ............... 23.07
Occupation Therapist Assistants........ 0 0.00 ............... 0.00
Occupation Therapist Aides............. 4,454 9.94 ............... 1.15
-------------------
Total.............................. 44,820 100.00 ............... 24.23
Occupational Mix Adjustment............ ................ ............... ............... 0.9568
--------------------------------------------
Hospital B:
Occupation Therapists.................. 26,547 79.48 ............... 20.36
Occupation Therapist Assistants........ 1,610 4.82 ............... 0.81
Occupation Therapist Aides............. 5,242 15.70 ............... 1.82
-------------------
Total.............................. 33,399 100.00 ............... 22.99
Occupational Mix Adjustment............ ................ ............... ............... 1.0081
--------------------------------------------
NATIONAL--Respiratory Therapy Services
----------------------------------------------------------------------------------------------------------------
Respiratory Therapists..................... 79,768,909 79.96 1.55 19.26
Respiratory Therapy Technicians............ 19,993,237 20.04 0.39 16.96
-------------------
Total.................................. 99,762,146 100.00 1.94 18.80
[[Page 28258]]
Hospital A:
Respiratory Therapists................. 75,339 97.40 ............... 18.76
Respiratory Therapy Technicians........ 2,008 2.60 ............... 0.44
-------------------
Total.............................. 77,347 100.00 ............... 19.20
Occupational Mix Adjustment............ ................ ............... ............... 0.9792
Hospital B:
Respiratory Therapists................. 73,592 65.62 ............... 12.64
Respiratory Therapy Technicians........ 38,549 34.38 ............... 5.83
-------------------
Total.............................. 112,141 100.00 ............... 18.47
Occupational Mix Adjustment............ ................ ............... ............... 1.0179
--------------------------------------------
NATIONAL--Pharmacy Services
----------------------------------------------------------------------------------------------------------------
Pharmacists................................ 52,574,889 48.35 1.02 34.58
Pharmacy Technicians....................... 51,947,663 47.77 1.01 12.30
Pharmacy Assistants/Aides.................. 4,219,798 3.88 0.08 11.52
-------------------
Total.................................. 108,742,350 100.00 2.11 23.04
Hospital A:
Pharmacists............................ 65,863 48.65 ............... 16.82
Pharmacy Technicians................... 69,525 51.35 ............... 6.32
Pharmacy Assistants/Aides.............. 0 0.00 ............... 0.00
-------------------
Total.............................. 135,388 100.00 ............... 23.14
Occupational Mix Adjustment............ ................ ............... ............... 0.9957
Hospital B:
Pharmacists............................ 45,856 39.23 ............... 13.57
Pharmacy Technicians................... 64,986 55.60 ............... 6.84
Pharmacy Assistants/Aides.............. 6,039 5.17 ............... 0.60
---------------------------------------------------------------
Total.............................. 116,881 100.00 ............... 21.00
Occupational Mix Adjustment............ ................ ............... ............... 1.0971
--------------------------------------------
NATIONAL--Dietary Services
----------------------------------------------------------------------------------------------------------------
Dieticians................................. 18,221,465 42.23 0.35 20.02
Dietetic Technicians....................... 24,929,865 57.77 0.48 11.64
Total.................................. 43,151,330 100.00 0.84 15.18
Hospital A:
Dieticians............................. 13,943 100.00 ............... 20.02
Dietetic Technicians................... 0 0.00 ............... 0.00
-------------------
Total.............................. 13,943 100.00 ............... 20.02
Occupational Mix Adjustment............ ................ ............... ............... 0.7582
Hospital B:
Dieticians............................. 27,458 16.29 ............... 3.26
Dietetic Technicians................... 141,148 83.71 ............... 9.74
-------------------
Total.............................. 168,606 100.00 ............... 13.00
Occupational Mix Adjustment............ ................ ............... ............... 1.1676
--------------------------------------------
NATIONAL--Medical & Clinical Lab Services
----------------------------------------------------------------------------------------------------------------
Medical & Clinical Lab Technologists....... 109,938,139 52.07 2.14 20.74
Medical & Clinical Lab Technicians......... 101,208,507 47.93 1.97 14.90.
-------------------
Total.................................. 211,146,647 100.00 4.10 17.94
Hospital A:
Medical & Clinical Lab Technologists... 166,522 90.82 ............... 18.84
Medical & Clinical Lab Technicians..... 16,841 9.18 ............... 1.37
-------------------
Total.............................. 183,363 100.00 ............... 20.20
Occupational Mix Adjustment............ ................ ............... ............... 0.8880
Hospital B:
Medical & Clinical Lab Technologists... 295,516 47.34 ............... 9.82
Medical & Clinical Lab Technicians..... 328,716 52.66 ............... 7.85
-------------------
[[Page 28259]]
Total.............................. 624,232 100.00 ............... 17.66
Occupational Mix Adjustment............ ................ ............... ............... 1.0156
--------------------------------------------
Total Nursing, Therapy, Pharmacy, Dietary, 2,474,369,021 ............... 48.08 ...............
and Medical & Clinical Occupations........
All Other Occupations...................... 2,671,751,873 ............... 51.92 ...............
Total Hospital Employees................... 5,146,120,894 ............... 100.00 ...............
----------------------------------------------------------------------------------------------------------------
In implementing an occupational mix adjusted wage index based on
the above calculation, the wage index values for 18 rural areas (36.7
percent) and 166 urban areas (51.2 percent) would decrease as a result
of the adjustment. Nine (9) rural areas (18.4 percent) and 89 urban
areas (27.5 percent) would experience a decrease of 1 percent or
greater in their wage index values. The largest negative impact for a
rural area would be 2.2 percent and for an urban area, 4.5 percent.
Meanwhile, 31 rural areas (63.3 percent) and 158 urban areas (48.8
percent) would experience an increase in their wage index values.
Although these results show that rural hospitals would gain the most
from an occupational mix adjustment to the wage index, their gains may
not be as great as might have been expected. Further, it might not have
been anticipated that over one-third of rural hospitals would actually
fare worse under the adjustment. Overall, a fully implemented
occupational mix adjusted wage index would have a redistributive effect
on Medicare payments to hospitals.
D. Worksheet S-3 Wage Data for the Proposed FY 2005 Wage Index Update
[If you choose to comment on issues in this section, please include the
caption ``Wage Data'' at the beginning of your comment.]
The proposed FY 2005 wage index values (effective for hospital
discharges occurring on or after October 1, 2004 and before October 1,
2005) in section VI. of the Addendum to this proposed rule are based on
the data collected from the Medicare cost reports submitted by
hospitals for cost reporting periods beginning in FY 2001 (the FY 2004
wage index was based on FY 2000 wage data).
The proposed FY 2005 wage index includes the following categories
of data associated with costs paid under the IPPS (as well as
outpatient costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty).