[Federal Register: August 18, 2006 (Volume 71, Number 160)]
[Rules and Regulations]
[Page 47869-48351]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18au06-21]
[[Page 47869]]
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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 Parts 409, 410, 412, et al.
Revision to Hospital Inpatient Prospective Payment Systems--2007 FY
Occupational Mix Adjustment to Wage Index; Implementation; Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 409, 410, 412, 413, 414, 424, 485, 489, and 505
[CMS-1488-F; CMS-1287-F; CMS-1320-F; and CMS-1325-IFC4]
RINs 0938-AO12; 0938-AO03; 0938-AN93; and 0938-AN58
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2007 Rates; Fiscal Year 2007
Occupational Mix Adjustment to Wage Index; Health Care Infrastructure
Improvement Program; Selection Criteria of Loan Program for Qualifying
Hospitals Engaged in Cancer-Related Health Care and Forgiveness of
Indebtedness; and Exclusion of Vendor Purchases Made Under the
Competitive Acquisition Program (CAP) for Outpatient Drugs and
Biologicals Under Part B for the Purpose of Calculating the Average
Sales Price (ASP)
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rules and interim final rule with comment period.
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SUMMARY: We are revising 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 Deficit
Reduction Act of 2005 (Pub. L. 109-171). In addition, in the Addendum
to this final rule, we describe the changes to the amounts and factors
used to determine the rates for Medicare hospital inpatient services
for operating costs and capital-related costs. We also are setting
forth rate-of-increase limits as well as policy changes for hospitals
and hospital units excluded from the IPPS that are paid in full or in
part on a reasonable cost basis subject to these limits. These changes
are applicable to discharges occurring on or after October 1, 2006.
In this final rule, we discuss public comments we received on our
proposals to refine the diagnosis-related group (DRG) system under the
IPPS to better recognize severity of illness among patients--to use a
hospital-specific relative value (HSRV) cost center weighting
methodology to adjust DRG relative weights; and to implement
consolidated severity-adjusted DRGs or alternative severity adjustment
methods.
Among the other policy changes that we are making are those changes
related to: limited revisions of the reclassification of cases to DRGs;
the long-term care (LTC)-DRGs and relative weights; the wage data,
including the occupational mix data, used to compute the wage index;
applications for new technologies and medical services add-on payments;
payments to hospitals for the direct and indirect costs of graduate
medical education; submission of hospital quality data; payments to
sole community hospitals and Medicare-dependent, small rural hospitals;
and provisions governing emergency services under the Emergency Medical
Treatment and Labor Act of 1986 (EMTALA).
We are responding to requested public comments on a number of other
issues that include performance-based hospital payments for services
and health information technology, as well as how to improve health
data transparency for consumers.
In addition, we are responding to public comments received on a
proposed rule issued in the Federal Register on May 17, 2006 that
proposed to revise the methodology for calculating the occupational mix
adjustment to the wage index for the FY 2007 hospital inpatient
prospective payment system by applying an adjustment to 100 percent of
the wage index using new 2006 occupational mix survey data collected
from hospitals.
We are finalizing two policy documents published in the Federal
Register relating to the implementation of the Health Care
Infrastructure Improvement Program, a hospital loan program for cancer
research, established under the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003.
This final rule also revises the definition of the term ``unit'' to
specify the exclusion of units of drugs sold to approved Medicare
Competitive Acquisition Program (CAP) vendors for use under the CAP
from average sales price (ASP) calculations for a period of up to 3
years, at which time we will reevaluate our policy.
DATES: Effective Dates: The provisions of these final rules are
effective on October 1, 2006, with the exception of the provisions in
Sec. 412.8, Sec. 414.802, and the procedures for withdrawing or
terminating reclassifications established in section III.H.4. of the
preamble. The provisions of Sec. 412.8, Sec. 414.802, and the
procedures for withdrawing or terminating reclassifications established
in section II.H.4. of the preamble are effective August 18, 2006. This
rule is a major rule as defined in 5 U.S.C. 804(2). Pursuant to 5
U.S.C. 801(a)(1)(A), we are submitting a report to the Congress on this
rule on August 1, 2006.
Comment Date: We will consider comments on the exclusion of CAP
drugs from the ASP calculation (Sec. 414.802) as discussed in section
XII. of the preamble of this final rule, if we receive them at one of
the addresses provided below, no later than 5 p.m. on October 2, 2006.
ADDRESSES: In commenting, on section XII. of this rule, please refer to
file code CMS-1325-IFC4.
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1325-IFC4, P.O. Box 8011, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1325-IFC4, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to
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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 persons
wishing to retain a proof of filing by stamping in and retaining an
extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Marc Hartstein, (410) 786-4548, Operating Prospective Payment,
Diagnosis-Related Groups (DRGs), Wage Index, Occupational Mix
Adjustment, New Medical Services and Technology Add-On Payments,
Hospital Geographic Reclassifications, Sole Community Hospital,
Disproportionate Share Hospital, and Medicare-Dependent, Small Rural
Hospital Issues.
Tzvi Hefter, (410) 786-4487, Capital Prospective Payment, Excluded
Hospitals, Graduate Medical Education, Critical Access Hospitals, Long-
Term Care (LTC)-DRGs, and Terms of Hospital Loans under Health Care
Infrastructure Improvement Program Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Issues.
Sheila Blackstock, (410) 786-3502, Quality Data for Annual Payment
Update Issues.
Thomas Valuck, (410) 786-7479, Hospital Value-Based Purchasing Issues.
Frederick Grabau, (410) 786-0206, Services in Foreign Hospitals Issues.
Brian Reitz, (410) 786-5001, Obsolete Paper Claims Forms Issues.
Melinda Jones, (410) 786-7069, Loan Forgiveness Criteria for Health
Care Infrastructure Improvement Program.
Corinne Axelrod, (410) 786-5620, Competitive Acquisition Program (CAP)
for Part B Drugs Issues.
Angela Mason, (410) 786-7452, Payment for Covered Outpatient Drugs and
Biologicals Issues.
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1325-IFC4 and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on a public Web site as
soon as possible after they are received: http://www.cms.hhs.gov/eRulemaking.
Clink on the link ``Electronic Comments on CMS
Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
Electronic Access
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
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required).
Acronyms
AHA American Hospital Association
AHIMA American Health Information Management Association
AHRO Agency for Health Care Research and Quality
AMI Acute myocardial infarction
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis-Related Group System
ASC Ambulatory surgical center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance
Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106-
554
BLS Bureau of Labor Statistics
AH Critical access hospital
AP Competitive Acquisition Program
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CDAC Clinical Data Abstraction Center
CIPI Capital input price index
CPI Consumer price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99-272
CPI Consumer price index
CRNA Certified registered nurse anesthetist
CY Calendar year
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Pub. L. 99-
272
FDA Food and Drug Administration
FFY Federal fiscal year
FIPS Federal information processing standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems
HCFA Health Care Financing Administration
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HIC Health insurance card
HIPAA Health Insurance Portability and Accountability Act of 1996, Pub.
L. 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HSA Health savings account
HSCRC Maryland Health Services Cost Review Commission
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HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-within-a-hospital
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Edition,
Procedure Coding System
ICU Intensive care unit
IHS Indian Health Service
IME Indirect medical education
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS Acute care hospital inpatient prospective payment system
IRF Inpatient rehabilitation facility
IRP Initial residency period
JCAHO Joint Commission on Accreditation of Healthcare Organizations
LAMCs Large area metropolitan counties
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
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, Pub. L. 108-173
MRHFP Medicare Rural Hospital Flexibility Program
MSA Metropolitan Statistical Area
NAICS North American Industrial Classification System
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NICU Neonatal intensive care unit
NQF National Quality Forum
NTIS National Technical Information Service
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)
PRM Provider Reimbursement Manual
PPI Producer price index
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)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious Nonmedical Health Care Institution
RRC Rural referral center
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSA Social Security Administration
SSI Supplemental Security Income
TAG Technical Advisory Group
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248
UHDDS Uniform hospital discharge data set
Table of Contents
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
a. Inpatient Rehabilitation Facilities (IRFs)
b. Long-Term Care Hospitals (LTCHs)
c. Inpatient Psychiatric Facilities (IPFs)
3. Critical Access Hospitals (CAHs)
4. Payments for Graduate Medical Education (GME)
B. Provisions of the Deficit Reduction Act of 2005 (DRA)
C. Summary of the Provisions of the FY 2007 IPPS and FY 2007
Occupational Mix Adjustment to the Wage Index Proposed Rules
1. DRG Reclassifications and Recalibrations of Relative Weights
2. Changes to the Hospital Wage Index
3. Other Decisions and Changes to the IPPS for Operating Costs,
GME Costs, and Promoting Hospitals' Effective Use of Health
Information Technology
4. Changes to the PPS for Capital-Related Costs
5. Changes for Hospitals and Hospital Units Excluded from the
IPPS
6. Payments for Services Furnished Outside the United States
7. Payment for Blood Clotting Factor Administered to Inpatients
with Hemophilia
8. Limitation on Payments to Skilled Nursing Facilities for Bad
Debt
9. Determining Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits
10. Impact Analysis
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Inpatient Hospital Services
12. Discussion of Medicare Payment Advisory Commission
Recommendations
13. Appendix C and Appendix D
D. Public Comments Received in Response to the FY 2007 IPPS and
FY 2007 Occupational Mix Adjustment to the Wage Index Proposed Rules
E. Interim Final Rule on Selection Criteria of Loan Program for
Qualifying Hospitals Engaged in Cancer-Related Health Care
F. Proposed Rule on Forgiveness of Indebtedness under the Health
Care Infrastructure Improvement Program
G. Interim Final Rule on the Exclusion of Vendor Purchases Made
Under the Competitive Acquisition Program for Part B Outpatient
Drugs and Biologicals for the Purpose of Calculating the Average
Sales Price
II. Changes to DRG Classifications and Relative Weights
A. Background
B. DRG Reclassifications
1. General
2. Yearly Review for Making DRG Changes
C. Revisions to the DRG System Used Under the IPPS
1. MedPAC Recommendations
2. Refinement of the Relative Weight Calculation
3. Refinement of DRGs Based on Severity of Illness
a. Comparison of the CMS DRG System and the APR DRG System
b. CS DRGs for Use in the IPPS
c. Changes to CMI from a New DRG System
4. Effect of CS DRGs on the Outlier Threshold
5. Impact of Refinement of DRG System on Payments
6. Conclusions
7. Severity Refinement to CMS DRGs
a. MDC 1 (Diseases and Disorders of the Nervous System)
b. MDC 4 (Diseases and Disorders of the Respiratory System):
Respiratory System Diagnosis with Ventilator Support
c. MDC 6 (Diseases and Disorders of the Digestive System)
d. MDC 11 (Diseases and Disorders of the Kidney and Urinary
Tract): Major Bladder Procedures
e. MDC 16 (Diseases and Disorders of the Blood and Blood Forming
Organs and Immunological Disorders): Major Hematological and
Immunological Diagnoses
f. MDC 18 (Infectious and Parasitic Diseases (Systemic or
Unspecified Sites)): O.R. Procedure for Patients with Infectious and
Parasitic Diseases
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g. Severe Sepsis
D. Changes to Specific DRG Classifications
1. Pre-MDCs
a. Heart Transplant or Implant of Heart Assist System: Addition
of Procedure to DRG 103
b. Pancreas Transplants
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Implantation of Intracranial Neurostimulator System for Deep
Brain Stimulation (DBS)
b. Carotid Artery Stents
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Insertion of Epicardial Leads for Defibrillator Devices
b. Application of Major Cardiovascular Diagnoses (MCVs) List to
Defibrillator DRGs
4. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Hip and Knee Replacements
b. Spinal Fusion
c. CHARITETM Spinal Disc Replacement Device
5. MDC 18 (Infectious and Parasitic Diseases (Systemic or
Unspecified Sites)): Severe Sepsis
6. Medicare Code Editor (MCE) Changes
a. Edit: Newborn Diagnoses
b. Edit: Diagnoses for Pediatric--Age 0-17 Years Old
c. Edit: Maternity Diagnoses--Age 12 through 55
d. Edit: Diagnoses Allowed for Females Only
e. Edit: Diagnoses Allowed for Males Only
f. Edit: Procedures Allowed for Females Only
g. Edit: Manifestations Not Allowed as Principal Diagnosis
h. Edit: Nonspecific Principal Diagnosis
i. Edit: Unacceptable Principal Diagnosis
j. Edit: Nonspecific O.R. Procedures
k. Edit: Noncovered Procedures
l. Edit: Bilateral Procedure
7. Surgical Hierarchies
8. Refinement of Complications and Comorbidities (CC) List
a. Background
b. Comprehensive Review of the CC List
c. CC Exclusions List for FY 2007
9. 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
10. Changes to the ICD-9-CM Coding System
11. Other Issues
a. Chronic Kidney Disease
b. Bronchial Valve
c. Female Reproductive System Reconstruction Procedures
d. Devices That are Replaced Without Cost or Where Credit for a
Replaced Device is Furnished to the Hospital
E. Recalibration of DRG Weights
F. LTC-DRG Reclassifications and Relative Weights for LTCHs for
FY 2007
1. Background
2. Changes in the LTC-DRG Classifications
a. Background
b. Patient Classifications into DRGs
3. Development of the FY 2007 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 FY 2007 LTC-DRG Relative Weights
5. Summary of Public Comments and Departmental Responses
G. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2007 Status of Technologies Approved for FY 2006 Add-On
Payments
a. Kinetra[supreg] Implantable Neurostimulator (Kinetra[supreg])
for Deep Brain Stimulation
b. Endovascular Graft Repair of the Thoracic Aorta
c. Restore[supreg] Rechargeable Implantable Neurostimulator
4. FY 2007 Applications for New Technology Add-On Payments
a. C-Port[supreg] Distal Anastomosis System
b. NovoSeven[supreg] for Intracerebral Hemorrhage
c. X STOP Interspinous Process Decompression System
5. Interim and Final Cost Threshold Tables Due to Changes to
Wage Index and Budget Neutrality Factors
III. Changes to the Hospital Wage Index
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
C. Occupational Mix Adjustment to the FY 2007 Wage Index
1. Development of Data for the FY 2007 Occupational Mix
Adjustment
2. Timeline for the Collection, Review, and Correction of the
Occupational Mix Data
3. Calculation of the Occupational Mix Adjustment
D. Worksheet S-3 Wage Data for the FY 2007 Wage Index Update
E. Verification of Worksheet S-3 Wage Data
F. Computation of the FY 2007 Unadjusted Wage Index
G. Implementation of the FY 2007 Occupational Mix Adjustment to
the Wage Index
H. Revisions to the Wage Index Based on Hospital Redesignations
1. General
2. Effects of Reclassification/Redesignation
3. FY 2007 MGCRB Reclassifications
4. Procedures for Hospitals Applying for Reclassification
Effective in FY 2008 and Reinstating Reclassifications in FY 2008
5. FY 2007 Redesignations Under Section 1886(d)(8)(B) of the Act
6. Reclassifications Under Section 508 of Pub. L. 108-173
7. Wage Indices for Reclassified Hospitals and Reclassification
Budget Neutrality Factor
I. FY 2007 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Labor-Related Share for the Wage Index for FY 2007
L. Proxy for the Hospital Market Basket
IV. Other Decisions and Changes to the IPPS for Operating Costs and
GME Costs
A. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
2. New Procedures for Hospital Reporting of Quality Data
a. Two Percentage Point Reduction
b. New Procedures
c. Expanded Quality Measures
d. HCAHPS[supreg] Survey
e. Data Submission
f. RHQDAPU Program Withdrawal and Chart Validation Requirements
g. Data Validation and Attestation
h. Public Display and Reconsideration Procedures
i. Conclusion
3. Electronic Medical Records
B. Value-Based Purchasing
1. Introduction
2. Premier Hospital Quality Incentive Demonstration
3. RHQDAPU Program
a. Section 501(b) of Pub. L. 108-173 (MMA)
b. Section 5001(a) of Pub. L. 109-171 (DRA)
4. Plan for Implementing Hospital Value-Based Purchasing
Beginning with FY 2009
a. Measure Development and Refinement
b. Data Infrastructure
c. Incentive Methodology
d. Public Reporting
5. Considerations Related to Certain Conditions, Including
Hospital-Acquired Infections
6. Promoting Effective Use of Health Information Technology
C. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small
Rural Hospitals (MDHs)
1. Background
2. Volume Decrease Adjustment for SCHs and MDHs
a. HAS/Monitrend Data
b. HAS/Monitrend Data Book Replacement Alternative
3. Mandatory Reporting Requirements for Any Changes in the
Circumstances Under Which a Hospital Was Designated as an SCH or MDH
4. Payment Changes for MDHs under the DRA of 2005
a. Background
b. Regulation Changes
5. Technical Change
D. Rural Referral Centers
1. Case-Mix Index
2. Discharges
E. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2007
3. Technical Change to Revise Cross-Reference
F. Payment Adjustment for Disproportionate Share Hospitals
(DSHs)
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1. Background
2. Technical Corrections
3. Reinstatement of Inadvertently Deleted Provisions on DSH
Payment Adjustment Factors
4. Enhanced DSH Adjustment for MDHs
G. Geographic Reclassifications
1. Background
2. Reclassifications under Section 508 of Pub. L. 108-173
3. Multicampus Hospitals
4. Urban Group Hospital Reclassifications
5. Effect of Change of Ownership on Urban County Group
Reclassifications
6. Requested Reclassification for Hospitals Located in a Single
Hospital MSA Surrounded by Rural Counties
7. Special Adjustment for the Hospital Group Reclassification
Denied on the Basis of Incomplete CSA Listing
H. Payment for Direct Graduate Medical Education
1. Background
2. Determination of Weighted Average Per Resident Amounts (PRAs)
for Merged Teaching Hospitals
3. Determination of Per Resident Amounts (PRAs) for New Teaching
Hospitals
4. Requirements for Counting and Appropriate Documentation of
FTE Residents: Clarification
5. Resident Time Spent in Nonpatient Care Activities as Part of
Approved Residency Programs
6. Medicare GME Affiliated Groups: Technical Changes to
Regulations
I. Payment for the Costs of Nursing and Allied Health Education
Activities: Clarification
J. Hospital Emergency Services under EMTALA
1. Background
2. Role of the EMTALA Technical Advisory Group (TAG)
3. Definition of ``Labor''
4. Application of EMTALA Requirements to Hospitals Without
Dedicated Emergency Departments
5. Clarification of Reference to ``Referral Centers''
K. Other Technical Changes
1. Cross-Reference Correction in Regulations on Limitations on
Beneficiary Charges
2. Cross-Reference Corrections in Regulations on Payment Denials
Based on Admissions and Quality Reviews
3. Cross-Reference Correction in Regulations on Outlier Payments
4. Removing References to Two Paper Claims Forms
L. Rural Community Hospital Demonstration Program
M. Health Care Information Transparency Initiative
V. Changes to the PPS for Capital-Related Costs
A. Background
B. Treatment of Certain Urban Hospitals Reclassified as Rural
Hospitals Under Sec. 412.103
C. Other Technical Corrections Relating to the Capital PPS
Geographic Adjustment Factors
VI. Changes for Hospitals and Hospital Units Excluded from the IPPS
A. Payments to Excluded Hospitals and Hospital Units
1. Payments to Existing Excluded and New Hospitals and Hospital
Units
2. Separate PPS for IRFs
3. Separate PPS for LTCHs
4. Separate PPS for IPFs
5. Grandfathering of Hospitals-Within-Hospitals (HwHs) and
Satellite Facilities
6. Changes to the Methodology for Determining LTCH Cost-to-
Charge Ratios (CCRs) and the Reconciliation of High-Cost and Short-
Stay Outlier Payments under the LTCH PPS
a. Background
b. High-Cost Outliers
c. Short-Stay Outliers
d. CCR Ceiling
e. Statewide Average CCRs
f. Data Used to Determine a CCR
g. Reconciliation of Outlier Payments Upon Cost report
Settlement
7. Technical Corrections Relating to LTCHs
8. Cross-Reference Correction in Authority Citations for 42 CFR
412 and 413
9. Report of Adjustment (Exceptions) Payments
B. Critical Access Hospitals (CAHs)
1. Background
2. Sunset of Designation of CAHs as Necessary Providers:
Technical Correction
VII. Payment for Services Furnished Outside the United States
A. Background
B. Proposed Clarification of Regulations
VIII. Payment for Blood Clotting Factor Administered to Inpatients
with Hemophilia
IX. Limitation on Payments to Skilled Nursing Facilities for Bad
Debt
A. Background
B. Changes Made by Section 5004 of Pub. L. 109-171
C. Proposed Regulation Changes
X. MedPAC Recommendations
XI. Health Care Infrastructure Improvement Program: Selection
Criteria for Loan Program for Qualifying Hospitals Engaged in
Cancer-Related Health Care and Forgiveness of Indebtedness
A. Background
B. Issuance of an Interim Final Rule with Comment Period and a
Proposed Regulation
C. Provisions of the Interim Final Rule With Comment Period
1. Loan Qualifying Criteria
2. Selection Criteria
3. Terms of the Loan
4. Public Comments Received on the Interim Final Rule With
Comment Period
5. Provisions of this Final Rule
D. Proposed Rule on Forgiveness of Indebtedness
1. Conditions for Loan Forgiveness
2. Plan Criteria for Meeting the Conditions for Loan Forgiveness
3. Public Comments Received on the Proposed Rule and Our
Responses
4. Provisions of the Final Rule
E. Statutory Requirements for Issuance of Regulations
XII. Exclusion of Vendor Purchases Made Under the Competitive
Acquisition Program (CAP) for Outpatient Drugs and Biologicals Under
Part B for the Purpose of Calculating the Average Sales Price (ASP)
A. Background
1. Average Sales Price (ASP)
2. Competitive Acquisition Program (CAP)
3. Regulatory History
B. Regulation Change
XIII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
C. Waiver of Proposed Rulemaking and Delay in the Effective Date
D. Response to Comments
Regulation Text
Addendum--Schedule of Tentative Standardized Amounts, Tentative
Update Factors and Rate-of-Increase Percentages Effective With Cost
Reporting Periods Beginning On or After October 1, 2006
I. Summary and Background
II. Changes to Prospective Payment Rates for Hospital Inpatient
Operating Costs
A. Calculation of the Tentative Adjusted Standardized Amount
1. Standardization of Base-Year Costs or Target Amounts
2. Computing the Tentative Average Standardized Amount
3. Updating the Tentative Average Standardized Amount
4. Other Adjustments to the Average Standardized Amount
a. Recalibration of DRG Weights and Updated Wage Index--Budget
Neutrality Adjustment
b. Reclassified Hospitals--Tentative Budget Neutrality
Adjustment
c. Outliers
d. Tentative Rural Community Hospital Demonstration Program
Adjustment (Section 410A of Pub. L. 108-173)
5. Tentative FY 2007 Standardized Amount
B. Tentative Adjustments for Area Wage Levels and Cost-of-Living
1. Tentative Adjustment for Area Wage Levels
2. Final Adjustment for Cost-of-Living in Alaska and Hawaii
C. DRG Relative Weights
D. Calculation of the Prospective Payment Rates
1. Federal Rate
2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
b. Updating the FY 1982, FY 1987, FY 1996, and FY 2002 Hospital-
Specific Rates for FY 2007
3. General Formula for Calculation of Prospective Payment Rates
for Hospitals Located in Puerto Rico Beginning On or After October
1, 2006, and Before October 1, 2007
a. Puerto Rico Rate
b. National Rate
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2007
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
1. Projected Capital Standard Federal Rate Update
[[Page 47875]]
a. Description of the Update Framework
b. Comparison of CMS and MedPAC Update Recommendation
2. Outlier Payment Adjustment Factor
3. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF
4. Exceptions Payment Adjustment Factor
5. Capital Standard Federal Rate for FY 2007
6. Special Capital Rate for Puerto Rico Hospitals
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2007
C. Capital Input Price Index
1. Background
2. Forecast of the CIPI for FY 2007
IV. Payment Rates for Excluded Hospitals and Hospital Units: Rate-
of-Increase Percentages
A. Payments to Existing Excluded Hospitals and Units
B. New Excluded Hospitals and Units
V. Payment for Blood Clotting Factor Administered to Inpatients with
Hemophilia
Tables
The following tables are included as part of this final rule:
Table 1A--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If
Wage Index Is Greater Than 1) (Tentative)
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) (Tentative)
Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico,
Labor/Nonlabor (Tentative)
Table 1D--Capital Standard Federal Payment Rate (Tentative)
Table 4J--Out-Migration Wage Adjustment--FY 2007 (Tentative)
Table 5--List of Diagnosis-Related Groups (DRGs), Relative Weighting
Factors, and Geometric and Arithmetic Mean Length of Stay (LOS)
(Tentative)
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 2005 MedPAR Update March 2006 GROUPER V23.0
Table 7B--Medicare Prospective Payment System Selected Percentile
Lengths of Stay: FY 2005 MedPAR Update March 2006 GROUPER V24.0
Table 8A--Statewide Average Operating Cost-to-Charge Ratios--July
2006
Table 8B--Statewide Average Capital Cost-to-Charge Ratios--July 2006
Table 8C-- Statewide Average Total Cost-to-Charge Ratios for LTCHs--
July 2006
Table 9A--Hospital Reclassifications and Redesignations by
Individual Hospital and CBSA for FY 2007 (Tentative)
Table 9B--Hospital Reclassifications and Redesignation by Individual
Hospital Under Section 508 of Pub. L. 108-173 for FY 2007
(Tentative)
Table 9C--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act for FY 2007 (Tentative)
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 Group (DRG)--July
2006 (Tentative)
Table 11--FY 2007 LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, and \5/6\ths of the Geometric Average Length of Stay
Appendix A--Regulatory Impact Analysis
I. Overall Impact
II. Objectives
III. Limitations on Our Analysis
IV. Hospitals Included In and Excluded From the IPPS
V. Effects on Excluded Hospitals and Hospital Units
VI. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects on the Hospitals that Failed the Quality Data
Submission Process (Column 2)
D. Effects of the DRA Provision Related to MDHs (Column 3)
E. Effects of the Changes to the DRG Reclassifications and
Relative Cost-Based Weights (Column 4)
F. Effects of Wage Index Changes (Column 5)
G. Combined Effects of DRG and Wage Index Changes, Including
Budget Neutrality Adjustment (Column 6)
H. Effects of the 3-Year Provision Allowing Urban Hospitals that
Were Converted to Rural as a Result of the FY 2005 Labor Market Area
Changes to Maintain the Wage Index of the Urban Labor Market Area in
Which They Were Formerly Located (Column 7)
I. Effects of MGCRB Reclassifications (Column 8)
J. Effects of the Wage Index Adjustment for Out-Migration
(Column 9)
K. Effects of All Changes (Column 10)
L. Effects of Policy on Payment Adjustments for Low-Volume
Hospitals
M. Impact Analysis of Table II
VII. Effects of Other Policy Changes
A. Effects of LTC-DRG Reclassifications and Relative Weights for
LTCHs
B. Effects of New Technology Add-On Payments
C. Effects of Requirements for Hospital Reporting of Quality
Data for Annual Hospital Payment Update
D. Effects of Other Policy Changes Affecting Sole Community
Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals
(MDHs)
E. Effects of Policy on Payment for Direct Costs of Graduate
Medical Education
1. Determination of Weighted Average GME PRAs for Merged
Teaching Hospitals
2. Determination of PRAs for New Teaching Hospitals
3. Requirements for Counting and Appropriate Documentation of
FTE Residents
4. Resident Time Spent in Nonpatient Care Activities as Part of
an Approved Residency Program
F. Effects of Policy Changes Relating to Emergency Services
under EMTALA
G. Effects of Policy on Rural Community Hospital Demonstration
Program
H. Effects of Policy on Hospitals-within-Hospitals and Satellite
Facilities
I. Effects of Policy Changes to the Methodology for Determining
LTCH CCRs and the Reconciliation of LTCH PPS Outlier Payments
J. Effects of Policy on Payment for Services Furnished Outside
the United States
K. Effects of Final Policy on Limitation on Payments to SNFs
L. Effects of Policy on CAP for Outpatient Drugs and Biologicals
under Part B for the Purpose of Calculating the ASP
VIII. Impact of Changes in the Capital PPS
A. General Considerations
B. Results
IX. Impact of Changes Relating to the Loan Program for Capital Cost
under the Health Care Infrastructure Improvement Program
A. Effects on Hospitals
B. Effects on the Medicare and Medicaid Programs
X. Alternatives Considered
XI. Overall Conclusion
XII. Accounting Statement
XIII. Executive Order 12866
Appendix B--Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Secretary's Final Recommendation for Updating the Prospective
Payment System Standardized Amounts
III. Secretary's Final Recommendation for Updating the Rate-of-
Increase Limits for Excluded Hospitals and Hospital Units
IV. Secretary's Recommendation for Updating the Capital Prospective
Payment Amounts
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
[[Page 47876]]
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, FY 1996, or FY 2002) 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 special payment protection in
order to maintain access to services for beneficiaries. (Through FY
2007, an MDH receives the IPPS rate plus 50 percent of the difference
between the IPPS rate and its hospital-specific rate if the hospital-
specific rate is higher than the IPPS rate. In addition, an MDH may not
use FY 1996 as its base year for the hospital-specific rate. As
discussed below, for discharges occurring on or after October 1, 2007,
but before October 1, 2011, an MDH will receive the IPPS rate plus 75
percent of the difference between the IPPS rate and its hospital-
specific rate, 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. Capital PPS payments are also adjusted
for IME and DSH, similar to the adjustments made under the operating
IPPS. In addition, hospitals may receive outlier payments for those
cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
specialty hospitals and hospital units are excluded from the IPPS.
These hospitals and units are: inpatient rehabilitation hospitals and
units (commonly referred to as inpatient rehabilitation facilities
(IRFs); long-term care hospitals (LTCHs); inpatient psychiatric
hospitals and units (commonly referred to as inpatient psychiatric
facilities (IPFs); children's hospitals; and cancer hospitals.
Religious nonmedical health care institutions (RNHCIs) are also
excluded from the IPPS. 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 IRFs, LTCHs, and IPFs, as discussed
below. Children's hospitals, cancer hospitals, and RNHCIs continue to
be paid solely under a reasonable cost-based system.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
a. Inpatient Rehabilitation Facilities (IRFs)
Under section 1886(j) of the Act, IRFs have been transitioned from
payment based on a blend of reasonable cost reimbursement and the
adjusted IRF Federal prospective payment rate for cost reporting
periods beginning on or after January 1, 2002, through September 30,
2002, to payment at 100 percent of the Federal rate effective for cost
reporting periods beginning on or after October 1, 2002. IRFs subject
to the blend were also permitted to elect payment based on 100 percent
of the Federal rate. The existing regulations governing payments under
the IRF PPS are located in 42 CFR Part 412, Subpart P.
b. Long-Term Care Hospitals (LTCHs)
Under the authority of sections 123(a) and (c) of Pub. L. 106-113
and section 307(b)(1) of Pub. L. 106-554, LTCHs that do not meet the
definition of ``new'' under Sec. 412.23(e)(4) 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
100 percent of the Federal rate during a 5-year period with cost
reporting periods beginning on or after October 1, 2002. Those LTCHs
that do not meet the definition of ``new'' may elect to be paid based
on 100 percent of the Federal prospective payment rate instead of a
blended payment in any year during the 5-year transition. For cost
reporting periods beginning on or after October 1, 2006, LTCHs will be
paid 100 percent of the Federal rate. The existing regulations
governing payment under the LTCH PPS are located in 42 CFR Part 412,
Subpart O.
c. Inpatient Psychiatric Facilities (IPFs)
Under the authority of sections 124(a) and (c) of Pub. L. 106-113,
IPFs are paid under the IPF PPS. Under the IPF PPS, some IPFs are
transitioning from being paid for inpatient hospital services based on
a blend of reasonable cost-based payment to a Federal per diem
[[Page 47877]]
payment rate, effective for cost reporting periods beginning on or
after January 1, 2005 (November 15, 2004 IPF PPS final rule (69 FR
66922) and May 9, 2006 IPF PPS final rule (71 FR 27040)). For cost
reporting periods beginning on or after January 1, 2008, all IPFs will
be paid 100 percent of the Federal per diem payment amount. The
existing regulations governing payment under the IPF PPS are located in
42 CFR 412, Subpart N.
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 based on 101 percent of reasonable cost. 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.
B. Provisions of the Deficit Reduction Act of 2005 (DRA)
On February 8, 2006, the Deficit Reduction Act of 2005 (DRA), Pub.
L. 109-171, was enacted. Pub. L. 109-171 made a number of changes to
the Act relating to prospective payments to hospitals and other
providers for inpatient services. This final rule implements amendments
made by the following sections of Pub. L. 109-171:
Section 5001(a), which, effective for FY 2007 and
subsequent years, allows for expansion of the requirements for hospital
quality data reporting.
Section 5003, which makes several changes to the MDH
program. It extends special payment provisions, requires MDHs to use FY
2002 as their base year for determining whether use of their hospital-
specific rate enhances payment (but permits them to continue to use
either their 1982 or 1987 hospital-specific rate if using either of
those rates results in higher payments), and removes the application of
the 12-percent cap on the DSH payment adjustment factor for MDHs.
Section 5004, which reduces certain allowable SNF bad debt
payments by 30 percent. Payments for the bad debts of full-benefit,
dual eligible individuals are not reduced.
In this final rule, we also discuss the provisions of section
5001(b) of Pub. L. 109-171, which require us to develop a plan to
implement, beginning with FY 2009, a value-based purchasing plan for
section 1886(d) hospitals and summarize the public comments received in
response to our invitation for public comments. This discussion also
includes the provisions of section 5001(c) of Pub. L. 109-171, which
requires a quality adjustment in DRG payments for certain hospital-
acquired conditions, effective for FY 2008.
C. Summary of the Provisions of the FY 2007 IPPS and FY 2007
Occupational Mix Adjustment to the Wage Index Proposed Rules
In the FY 2007 IPPS proposed rule, we set forth proposed changes to
the Medicare IPPS for operating costs and for capital-related costs in
FY 2007. We also set 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, and
payments for SCHs and MDHs. The changes were proposed to be effective
for discharges occurring on or after October 1, 2006, unless otherwise
noted.
After publication of the FY 2007 IPPS proposed rule, the United
States Court of Appeals for the Second Circuit issued a decision in the
Bellevue case that caused us to modify our proposals on the
implementation of the occupational mix adjustment. As a result, we
published a second proposed rule in the May 17, 2006 Federal Register
that superseded the occupational mix proposals that had been made in
the FY 2007 IPPS proposed rule (published April 25, 2006). The
following is a summary of the major changes that we proposed to make
and the issues that we addressed in the FY 2007 IPPS and FY 2007
Occupational Mix Adjustment to the Wage Index proposed rules:
1. DRG Reclassifications and Recalibrations of Relative Weights
As required by section 1886(d)(4)(C) of the Act, we proposed
limited annual revisions to the DRG classifications structure. In this
section, we responded to several recommendations made by MedPAC
intended to improve the DRG system. We also proposed to use, for FY
2007, hospital-specific relative values (HSRVs) for 10 cost centers to
compute DRG relative weights. In addition, we proposed to use
consolidated severity-adjusted DRGs or alternative severity adjustment
methods in FY 2008 (if not earlier).
We presented our reevaluation of certain FY 2006 applicants for
add-on payments for high-cost new medical services and technologies,
and our analysis of FY 2007 applicants (including public input, as
directed by Pub. L. 108-173, obtained in a town hall meeting).
We proposed 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 2007.
2. Changes to the Hospital Wage Index
We proposed revisions to the wage index and the annual update of
the wage data. Specific issues addressed include the following:
The FY 2007 wage index update, using wage data from cost
reporting periods that began during FY 2003.
The FY 2007 occupational mix adjustment to the wage index
(discussed inthe May 17, 2006 proposed rule).
The revisions to the wage index based on hospital
redesignations and reclassifications.
The adjustment to the wage index for FY 2007 based on
commuting patterns of hospital employees who reside in a county and
work in a different area with a higher wage index.
The timetable for reviewing and verifying the wage data
that will be in effect for the proposed FY 2007 wage index.
The special timetable that will apply in FY 2007 in order
to allow us to make presumptive reclassification withdrawal or
termination decisions on behalf of affected hospitals which will then
become final unless reversed or modified by the affected hospitals in
accordance with CMS procedural rules.
The labor-related share for the FY 2007 wage index,
including the labor-related share for Puerto Rico.
3. Other Decisions and Changes to the IPPS for Operating Costs, GME
Costs, and Promoting Hospitals' Effective Use of Health Information
Technology
In the proposed rule, we discussed a number of provisions of the
regulations in 42 CFR Parts 412 and 413 and related proposed changes,
including the following:
The reporting of hospital quality data as a condition for
receiving the full annual payment update increase.
Changes in payments to SCHs and MDHs.
[[Page 47878]]
Updated national and regional case-mix values and
discharges for purposes of determining rural referral center status.
The statutorily-required IME adjustment factor for FY
2007.
Changes relating to hospitals' geographic classifications,
including reclassifications under section 508 of Pub. L. 108-173,
multicampus hospitals, urban group hospital reclassification and the
effect of change in ownership on urban county group reclassifications.
Changes and clarifications relating to GME that address
determining the per resident amounts (PRAs) for merged hospitals and
new teaching hospitals, counting and appropriate documentation of FTE
residents, and counting of resident time spent in nonpatient care
activities as part of approved residency programs.
Changes relating to payment for costs of nursing and
allied health education programs.
Changes relating to requirements for emergency services
for hospitals under EMTALA.
Discussion of the third year of implementation of the
Rural Community Hospital Demonstration Program.
We also invited comments on promoting hospitals' effective use of
health information technology.
4. Changes to the PPS for Capital-Related Costs
In the proposed rule, we discussed the payment policy requirements
for capital-related costs and capital payments to hospitals and
proposed several technical corrections to the regulations.
5. Changes for Hospitals and Hospital Units Excluded From the IPPS
In the proposed rule, we discussed payments made to excluded
hospitals and hospital units, proposed policy changes regarding
decreases in square footage or decreases in the number of beds of the
``grandfathering'' HwHs and satellite facilities, and proposed changes
to the methodology for determining LTCH CCRs and the reconciliation of
high-cost and short-stay outlier payments under the LTCH PPS. In
addition, we proposed a technical change relating to the designation of
CAHs as necessary providers.
6. Payments for Services Furnished Outside the United States
In the proposed rule, we set forth proposed changes to clarify what
is considered ``outside the United States'' for Medicare payment
purposes.
7. Payment for Blood Clotting Factor Administered to Inpatients With
Hemophilia
In the proposed rule, we discussed the proposed changes in payment
for blood clotting factor administered to Medicare beneficiaries with
hemophilia for FY 2007.
8. Limitation on Payments to Skilled Nursing Facilities for Bad
Debt
In the proposed rule, we proposed to implement section 5004 of Pub.
L. 109-171 relating to reduction in payments to SNFs for bad debt.
9. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the FY 2007 prospective
payment rates for operating costs and capital-related costs. We also
proposed to establish the threshold amounts for outlier cases. In
addition, we addressed the proposed update factors for determining the
rate-of-increase limits for cost reporting periods beginning in FY 2007
for hospitals and hospital units excluded from the PPS.
10. 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.
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Inpatient Hospital Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2007 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.
12. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to the Congress, no later than March 1 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2006 recommendation concerning hospital inpatient
payment policies addressed 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 was addressed in Appendix B of the proposed rule. For
further information relating specifically to the MedPAC reports or to
obtain a copy of the reports, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: http://www.medpac.gov.
13. Appendix C and Appendix D
In Appendix C of the proposed rule, we listed the combinations of
the consolidated severity-adjusted DRGs that we proposed to implement
on FY 2008 (if not earlier), as discussed in section II.C. of the
preamble of the proposed rule. In Appendix D of the proposed rule, we
provided a crosswalk of the proposed consolidated severity-adjusted DRG
system to the respective All Patient Related Diagnosis-Related Group
(APR DRG) system.
D. Public Comments Received in Response to the FY 2007 IPPS and FY 2007
Occupational Mix Adjustment to the Wage Index Proposed Rules
We received over 2,300 timely items of correspondence containing
multiple comments on the FY 2007 IPPS proposed rule. We also received
over 100 timely items of correspondence on the FY 2007 Occupational Mix
Adjustment to the Wage Index proposed rule. Summaries of the public
comments and our responses to those comments are set forth under the
appropriate heading.
E. Interim Final Rule on Selection Criteria of Loan Program for
Qualifying Hospitals Engaged in Cancer-Related Health Care
On September 30, 2005, we published in the Federal Register (70 FR
57368) an interim final rule with comment period (CMS-1287-IFC) that
set forth the criteria for implementing a loan program for qualifying
hospitals engaged in research in the causes, prevention, and treatment
of cancer, as specified in section 1016 of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173).
Specifically, this interim final rule established a loan application
process by which qualifying hospitals, including specified entities,
may apply for a loan for the capital costs of health care
infrastructure improvement projects. The interim final rule was
effective on November 29, 2005.
We received seven timely items of correspondence on the interim
final
[[Page 47879]]
rule. In section XI. of the preamble to this final rule, we are
finalizing this interim final rule with comment period. In that
section, we discuss the provisions of the program, the public comments
received, our responses to those comments, and the final policy.
F. Proposed Rule on Forgiveness of Indebtedness under the Health Care
Infrastructure Improvement Program
On September 30, 2005, we published in the Federal Register (70 FR
57376) a proposed rule (CMS-1320-P) to establish the loan forgiveness
criteria for qualifying hospitals who receive loans under the Health
Care Infrastructure Improvement Program that was established under
section 1016 of Pub. L. 108-173.
We received one timely item of correspondence on this proposed
rule. We address the provisions of the proposed rule, a summary of the
public comments received and our responses, and the provisions of the
final rule in section XI. of the preamble of this final rule.
G. Interim Final Rule on the Exclusion of Vendor Purchases Made Under
the Competitive Acquisition Program for Part B Outpatient Drugs and
Biologicals for the Purpose of Calculating the Average Sales Price
In November 21, 2005 Federal Register (70 FR 70748), we published
an interim final rule with comment period (CMS-1325-IFC3) to clarify
and solicit comments on the relationship between drugs supplied under
the CAP for Part B Drugs and Biologicals and the calculation of the
ASP.
We did not receive any timely items of correspondence on this
interim final rule with comment period. We summarize the provisions of
the July 6, 2005 and the November 21, 2005 interim final rules and the
current interim final provisions in section XII. of the preamble of
this final rule.
II. Changes to DRG Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as DRGs) for inpatient
discharges and adjust payments under the IPPS based on appropriate
weighting factors assigned to each DRG. Therefore, under the IPPS, we
pay for inpatient hospital services on a rate per discharge basis that
varies according to the DRG to which a beneficiary's stay is assigned.
The formula used to calculate payment for a specific case multiplies an
individual hospital's payment rate per case by the weight of the DRG to
which the case is assigned. Each DRG weight represents the average
resources required to care for cases in that particular DRG, relative
to the average 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.
B. DRG Reclassifications
1. General
As discussed in section II.D. of the preamble to the FY 2007 IPPS
proposed rule (71 FR 24030), for FY 2007, we are making only limited
changes to the current DRG classifications that will be applicable to
discharges occurring on or after October 1, 2006. We are limiting our
changes because, as discussed in detail in section II.C. of the
preamble to the proposed rule and to this final rule, we are focusing
our efforts on addressing the recommendations made last year by MedPAC
to refine the entire CMS DRG system by taking into account severity of
illness and applying hospital-specific relative value (HSRV) weights to
DRGs.
Currently, cases are classified into CMS 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).
The process of forming the DRGs was begun by dividing all possible
principal diagnoses into mutually exclusive principal diagnosis areas,
referred to as Major Diagnostic Categories (MDCs). The MDCs were formed
by physician panels as the first step toward ensuring that the DRGs
would be clinically coherent. The diagnoses in each MDC correspond to a
single organ system or etiology and, in general, are associated with a
particular medical specialty. Thus, in order to maintain the
requirement of clinical coherence, no final DRG could contain patients
in different 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)). For FY 2006, cases are
assigned to one of 526 DRGs in 25 MDCs. 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.
[[Page 47880]]
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 2006,
there are nine DRGs to which cases are directly assigned on the basis
of ICD-9-CM procedure codes. These DRGs are for heart transplant or
implant of heart assist systems, liver and/or intestinal transplants,
bone marrow transplants, lung transplants, simultaneous pancreas/kidney
transplants, pancreas transplants, and for tracheostomies. Cases are
assigned to these DRGs before they are classified to an MDC. The table
below lists the nine current pre-MDCs.
Pre-Major Diagnostic Categories (Pre-MDCs)
------------------------------------------------------------------------
------------------------------------------------------------------------
DRG 103..................... Heart Transplant or Implant of Heart
Assist System.
DRG 480..................... Liver Transplant and/or Intestinal
Transplant.
DRG 481..................... Bone Marrow Transplant.
DRG 482..................... Tracheostomy for Face, Mouth, and Neck
Diagnoses.
DRG 495..................... Lung Transplant.
DRG 512..................... Simultaneous Pancreas/Kidney Transplant.
DRG 513..................... Pancreas Transplant.
DRG 541..................... ECMO or Tracheostomy with Mechanical
Ventilation 96+ Hours or Principal
Diagnosis Except for Face, Mouth, and
Neck Diagnosis with Major O.R.
DRG 542..................... Tracheostomy with Mechanical Ventilation
96+ Hours or Principal Diagnosis Except
for Face, Mouth, and Neck Diagnosis
without Major O.R.
------------------------------------------------------------------------
Once the MDCs were defined, each MDC was evaluated to identify
those additional patient characteristics that would have a consistent
effect on the consumption of hospital resources. Because the presence
of a surgical procedure that required the use of the operating room
would have a significant effect on the type of hospital resources used
by a patient, most MDCs were initially 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 (0 to 17 years of age 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. An example is
extracorporeal shock wave lithotripsy for patients with a principal
diagnosis of urinary stones.
Once the medical and surgical classes for an MDC were formed, each
class of diagnoses was evaluated to determine if complications,
comorbidities, or the patient's age would consistently affect the
consumption of hospital resources. Physician panels classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial CC. A
substantial CC was defined as a condition which, because of its
presence with a specific principal diagnosis, would cause an increase
in the length of stay by at least one day in at least 75 percent of the
patients. Each medical and surgical class within an MDC was tested to
determine if the presence of any substantial CC would consistently
affect the consumption of hospital resources.
A 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, the PRICER software calculates a base DRG payment. The
PRICER calculates the payment 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
[[Page 47881]]
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.
In the FY 2007 IPPS proposed rule, we proposed limited changes to
the DRG classification system for FY 2007 for the FY 2007 GROUPER,
Version 24.0 and to the methodology used to recalibrate the DRG
weights. The changes we proposed, the public comments we received
concerning the proposed changes, the final DRG changes, and the
methodology used to calculate the DRG weights are set forth below. The
changes we are implementing in this final rule will be reflected in the
FY 2007 GROUPER, Version 24.0, and are effective for discharges
occurring on or after October 1, 2006. Unless otherwise noted in this
final rule, our DRG analysis is based on data from the March 2006
update of the FY 2005 MedPAR file, which contains hospital bills
received through March 31, 2006, for discharges occurring in FY 2005.
2. Yearly Review for Making DRG Changes
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 annual proposed rule
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 actual process of forming the DRGs was, and continues to be,
highly iterative, involving a combination of statistical results from
test data combined with clinical judgment. For purposes of this final
rule, in deciding whether to create a separate DRG, we consider whether
the resource consumption and clinical characteristics of the patients
with a given set of conditions are significantly different than the
remaining patients in the existing DRG. We evaluate patient care costs
using average charges and lengths of stay as proxies for costs and rely
on the judgment of our medical officers to decide whether patients are
clinically distinct or similar to other patients in the DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average charges between the cases we are selecting for
review and the remainder of cases in the DRG. We also consider
variation in charges within these groups; that is, whether observed
average differences are consistent across patients or attributable to
cases that are extreme in terms of charges or length of stay, or both.
Further, we also consider the number of patients who will have a given
set of characteristics and generally prefer not to create a new DRG
unless it will include a substantial number of cases.
C. Revisions to the DRG System Used Under the IPPS
1. MedPAC Recommendations
In the FY 2006 IPPS final rule, we discussed a number of
recommendations made by MedPAC regarding revisions to the DRG system
used under the IPPS (70 FR 47473 through 47482).
In Recommendation 1-3 in the 2005 Report to Congress on Physician-
Owned Specialty Hospitals, MedPAC recommended that CMS refine the
current DRGs to more fully capture differences in severity of illness
among patients, including:
Base the DRG relative weights on the estimated cost of
providing care.
Base the weights on the national average of the hospital-
specific relative values (HSRVs) for each DRG (using hospital-specific
costs to derive the HSRVs).
Adjust the DRG relative weights to account for differences
in the prevalence of high-cost outlier cases.
Implement the case-mix measurement and outlier policies
over a transitional period.
As we noted in the FY 2006 IPPS final rule, we had insufficient
time to complete a thorough evaluation of these recommendations for
full implementation in FY 2006. However, we did adopt severity-weighted
cardiac DRGs in FY 2006 to address public comments on this issue and
the specific concerns of MedPAC regarding cardiac surgery DRGs. We also
indicated that we planned to further consider all of MedPAC's
recommendations and thoroughly analyze options and their impacts on the
various types of hospitals in the FY 2007 IPPS proposed rule. Following
the publication of the FY 2006 IPPS final rule, we contracted with 3M
Health Information Systems to assist us in performing this analysis.
Beginning with MedPAC's relative weight recommendations, we
analyzed MedPAC's recommendations to move to a cost-based HSRV
weighting methodology. In performing this portion of the analysis, we
studied hospital cost report data, departmental cost-to-charge ratios
(CCRs), MedPAR claims data, and HSRV weighting methodology. Our
intention in undertaking this portion of the analysis was to find an
administratively feasible approach to improving the accuracy of the DRG
weights. As we described in the proposed rule, we believe some changes
can be made to MedPAC's methodology for determining the relative
weights that will make it more feasible to replicate on an annual basis
but will result in similar impacts.
In conjunction with analyzing MedPAC's relative weight
recommendations, we looked at refining the current DRG system to better
recognize severity of illness. Starting with the APR DRG GROUPER used
by MedPAC in its analysis, we studied Medicare claims data. Based on
this analysis, we developed a CS DRG GROUPER that we believe could be a
better alternative for recognizing severity of illness among the
Medicare population. We note that MedPAC's recommendations with regard
to revising the DRGs to better recognize severity of illness may have
implications for the outlier threshold, the measurement of real case-
mix versus apparent case-mix, and the IME and the DSH adjustments. We
discuss these implications in more detail in the following sections.
As we present below, we believe that the recommendations made by
MedPAC, or some variants of them, have significant promise to improve
the accuracy of the payment rates in the IPPS. We agree with MedPAC
about exploring possible refinements to our payment methodology even in
the absence of concerns about the proliferation of specialty hospitals.
In the FY 2006 final rule, we indicated that until we had completed
further analysis of the options and their effects, we could not predict
the extent to which changing to APR DRGs would provide payment equity
between specialty and general hospitals. In fact, we cautioned that any
system that groups cases will always present some opportunities for
providers to specialize in cases they believe to have higher margins.
We believe that improving payment accuracy should reduce these
opportunities and potentially reduce the
[[Page 47882]]
incentives that Medicare payments may provide for the further
development of specialty hospitals.
We considered MedPAC's recommendation to adjust the relative
weights to account for differences in the prevalence of outlier cases.
However, we placed most of our attention and resources on the
recommendations related to refinement of the current DRGs to more fully
capture differences in severity of illness among patients, as we do not
have the statutory authority to make the specific changes to our
outlier policy that MedPAC recommended. While we have not made MedPAC's
recommendation regarding outliers a central focus of our analysis, we
do intend to examine this issue in more detail in the future. In
sections II.C.2. through C.6. of the FY 2007 proposed rule, we
discussed a number of issues related to the MedPAC recommendations. We
also presented our analysis and specific proposals for FY 2007 and FY
2008 including their estimated impacts. In this final rule, we present
the public comments received on the proposed rule, our responses to
those comments, our final decisions for FY 2007 and our intended
actions for FY 2008.
2. Refinement of the Relative Weight Calculation
MedPAC made two recommendations with respect to the DRG relative
weight calculation. First, MedPAC recommended that CMS base the DRG
relative weights on the estimated cost of providing care. Second,
MedPAC recommended that CMS base the weights on the national average of
hospitals' relative values in each DRG. Because both of these
recommendations address the relative weight calculation, we are
addressing them together. The work we have done to address these
recommendations was discussed in detail in the proposed rule (71 FR
24006-24011).
MedPAC recommended that CMS replace its charge-based relative
weight methodology with cost-based weights, as it believed that the
charge-based relative weight methodology that CMS has utilized since
1985 has introduced bias into the weights due to differential markups
for ancillary services among the DRGs. In analyzing claims data, it is
evident to us that some hospital types (for example, teaching
hospitals) are systematically more expensive overall than the average
hospital and certain case types are more commonly treated at these more
expensive facilities. Higher average charges for cases that are treated
at more expensive hospitals may result in higher weights for these
types of cases. MedPAC suggested a hospital-specific relative value
(HSRV) methodology which MedPAC believed would reduce the effect of
cost differences among hospitals that may be present in the national
relative weights due to differences in case-mix adjusted costs.
Under the HSRV methodology recommended by MedPAC, charges are
standardized for each provider by converting its charges for each case
to hospital-specific relative charge values and then adjusting those
values for the hospital's case-mix. The first step in this process
involves dividing the charge for each case at the hospital by the
average charge for all cases at the hospital in which the case was
treated. The hospital-specific relative charge value, by definition,
averages 1.0 for each hospital. The resulting ratio is then multiplied
by the hospital's case-mix index (CMI). In this way, each hospital'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 hospitals. We discuss this
issue in further detail below.
Our analysis of departmental-level CCRs from the Medicare cost
report data has shown that charges for routine days, intensive care
days, and various ancillary services are not marked up by a consistent
amount. For example, the markup amounts for cardiology services are
higher than average. Because charges are the current basis for the DRG
relative weights, the practice of differential markups can lead to bias
in the DRG weights because various DRGs use, on average, more or less
of particular ancillary services. MedPAC believes that the bias in the
national DRG relative weights that may arise as a result of
differential markups across various cost centers can be removed by
moving from charge-based to cost-based weights. Based on the analysis
we have conducted, we agree that it is appropriate to adjust the DRG
relative weights to account for the differences in charge markups
across cost centers.
In the proposed rule, we indicated several concerns about the
methodology used by MedPAC. MedPAC's methodology to reduce hospital
charges to cost is administratively burdensome, not only to develop,
but also to maintain. First, MedPAC developed CCRs for individual
hospitals at the most detailed department level. Specifically, in
calculating costs as the basis for the relative weights, MedPAC applied
hospital-specific CCRs from each provider's cost report to the line
item charges on the claims that the hospital submitted during the same
time period. This methodology required matching cost report data to
claims data, and because cost report data take longer to compile and
file, the method necessitates using older claims data to set relative
weights. The most recent complete set of Medicare cost reports
available to us is from FY 2003. Thus, if we were to model the exact
approach used by MedPAC and use claims data for a matching year, we
would be using claims data from FY 2003 instead of using FY 2005 claims
data, as we would if we were to continue with our current methodology.
In addition, MedPAC's hospital-specific approach required detailed cost
center distinctions for each hospital that are difficult to define,
map, and apply. This approach also required the use of the Standard
Analytic File (SAF) because MedPAR data that we currently use to set
DRG weights did not have the necessary level of detail. Using the SAF
increases processing time and adds further complexity to the process of
setting the relative weights.
Second, because MedPAC applied these CCRs at the individual claim
level, missing or invalid data resulted in MedPAC deleting a large
number of claims (approximately 10 percent) from the relative weight
calculation. Lastly, MedPAC acknowledged that its method was too
difficult to replicate on an annual basis and suggested that the
weights be recalculated once every 5 years with other adjustments based
on charges during the intervening years.
As we explained in the FY 2007 IPPS proposed rule, we developed an
alternative to MedPAC's approach that we believe achieves similar
results in a more administratively feasible manner. This method
involves developing hospital-specific charge relative weights at the
cost center level and then scaling the weights to costs using the
national cost center charge ratios developed from the cost report data.
After studying Medicare cost report data, we established 10 cost center
categories based upon broad hospital accounting definitions. In our
cost center categories, there are 8 ancillary cost groups in addition
to routine day costs and intensive care day costs, and each category
represents at least 5 percent of the charges in the claims data. The
specific cost report lines that contribute to each category and the
corresponding charge lines from the MedPAR claims data are itemized in
Table A below.
In the proposed rule, we stated that this alternative approach,
which we labeled as the HSRV cost center (HSRVcc) methodology, has
several advantages. First, the use of national average rather than
hospital-specific CCRs avoids the complexity
[[Page 47883]]
encountered with cost center CCRs at the hospital level and allows us
to retain more data for use in the relative weight calculation. In
addition, the methodology eliminates the need to match claims to the
time period of the CCRs, resulting in the ability to use more timely
claims data. Furthermore, the alternative approach makes it more
feasible to update the relative weights annually using a single
methodology. We do not have to replicate the methodology once every 5
years and make adjustments based on changes in charges in the
intervening years. The HSRVcc methodology is described in detail in the
proposed rule (71 FR 24008 through 24011).
Comment: Several commenters supported CMS' effort to restructure
the DRG relative weights based on cost. They stated that using charges
as a proxy for hospital costs in determining resource utilization under
the current system is inappropriate and encouraged CMS to implement a
cost-based system consistent with the agency's original intent without
delay.
Response: We appreciate the commenters' support of our proposal to
implement a cost-based weighting methodology. We believe that adopting
cost-based weights will result in significant improvements to
Medicare's IPPS payments. MedPAC concluded after an extensive analysis
of Medicare hospital inpatient claims and cost data that the IPPS
payment rates are badly distorted, resulting in Medicare paying too
much for some types of patients and too little for others. As indicated
below, we are making some modifications to our proposals in response to
the public comments. However, we are adopting a system of cost-based
weights for FY 2007 to address the concerns raised by MedPAC. As a
result, all hospitals, including specialty hospitals, will be paid more
appropriately. In addition, based on our analysis, we concur with
MedPAC that the current DRG system needs to be changed to better
account for severity of illness among patients. This issue is discussed
in more detail in the next section of this final rule.
Comment: A majority of commenters supported CMS' efforts to improve
the accuracy of the DRG weights, and better reflect variations in
patients' severity of illness. However, many commenters viewed the
HSRVcc proposal as flawed from both a methodological and policy
perspective, and believed the proposal to implement cost-based weights
should be delayed for at least a year. They believed that CMS needs to
further consider a number of issues raised in the public comments
before such sweeping changes are implemented. In addition, the
commenters indicated that CMS needs to provide hospitals with more
lead-time before implementing changes so they can budget accurately.
They urged CMS to use the current standardized charge-based approach in
FY 2007 until these issues can be addressed. At a minimum, they
believed CMS should address what were characterized as methodological
flaws and publish revised relative weights along with hospital impacts
for public comment prior to implementation.
Response: We appreciate the commenters' concerns with regard to a
rapid and full implementation of the changes we proposed to the
relative weight methodology. However, based on our analysis and study
of the MedPAC recommendations that we presented in our proposed rule,
it has come to our attention that differential markups between routine
and ancillary cost centers have introduced significant bias into the
relative weights. In order to reduce the bias in weights and make more
appropriate payments under the IPPS, we believe it is necessary to
initiate the transition to a cost-based relative weight methodology in
FY 2007. However, we have considered the commenters' requests to
further review the HSRV methodology. Therefore, in this final rule, we
are not adopting our proposal to standardize charges using the HSRV
methodology. However, we are adopting our proposal to reduce charges to
estimated costs prior to setting DRG weights. We will undertake further
analysis of the HSRV methodology during the next year. Based on this
analysis, we will consider proposing further changes to adopt the HSRV
methodology for FY 2008.
Comment: Many commenters disagreed with CMS' assertion that the
more administratively feasible HSRVcc approach achieves similar results
to the MedPAC methodology. While they supported CMS' efforts to ensure
the DRG weights are updated annually to reflect the most recent trends
in inpatient care, they expressed concern with the specifics of the
HSRVcc methodology.
First, they noted that CMS stated in the proposed rule that organ
acquisition costs were eliminated from hospital charges before the
HSRVcc weights were calculated. However, it had come to their attention
that organ acquisition charges were actually included in the
calculation of DRG weights under the proposed methodology. They stated
that organ acquisition is reimbursed by Medicare on a cost basis and
should not be included in the weight calculation. Furthermore, the
commenters asserted that the inclusion of organ acquisition charges
improperly overstated the transplant DRG HSRVcc weights. Commenters
recommended that CMS remove the organ acquisition charges from the
computation of the DRG weights if the HSRVcc methodology is to be
adopted.
Second, commenters believe CMS made questionable methodological
decisions when calculating the national CCRs. Under the proposed
methodology, CMS calculated hospital-weighted rather than charge-
weighted CCRs for each of the 10 cost centers used to scale the charge-
based weights. Because the averages are unweighted, the commenters
stated that the CCRs do not account for the differential contribution
of each hospital to total charges. The commenters asserted that,
mathematically, the only correct way to get from total hospital charges
to total hospital costs is to use a charge-weighted average of hospital
CCRs. Failure to use charge-weighted averages overestimates routine and
ICU costs and underestimates ancillary costs, which ultimately
exaggerates the shift in payments, according to the commenters.
Therefore, commenters believed CMS should recalculate the mean national
CCRs using a charge-weighted method.
Third, commenters believed CMS applied questionable trimming
criteria in computing the cost center CCRs. They stated that trimming
the cost center CCRs at 1.96 standard deviations (rather than 3
standard deviations) from the geometric mean inappropriately excluded
over 200 large hospitals that account for 25 percent of routine
accommodation charges. They noted that the CCRs for these hospitals
appear to be predominantly correct. In addition, the commenters noted
that CMS applied the CCRs to the charge data for hospitals that were
excluded from the national average CCR calculation. Thus, the
commenters argued there is a significant mismatch between the hospital
data that was included in the CCR and HSRVcc calculations. These
commenters recommended that CMS exclude hospital data from the CCRs if
it is more than 3 standard deviations (rather than 1.96) from the mean
CCR. Many commenters characterized these methodological decisions as
errors and indicated that their combined impact is significant. If CMS
is to use the HSRVcc methodology, the commenters indicated that these
issues should be addressed.
A few commenters stated that we made incorrect assumptions that may
have resulted in new distortions to the relative weights. Specifically,
the commenters stated that we were incorrect in applying the same CCR
[[Page 47884]]
across all hospitals for a given cost center and applying the same
percent mix of services by cost center to all DRGs. The commenters
recommended that we first convert charges to costs for each hospital
and DRG, and then compute hospital-specific relative values. They
stated that the reversal of the calculations in the HSRVcc methodology
accommodates cost center mix and charge markup differences across
hospitals and across DRGs.
Many commenters argued that the hospital-specific relative value
methodology is unnecessary and compresses the DRG weights. Commenters
cited past research indicating that HSRV has a disproportionate impact
on certain types of hospitals and types of care, and reduces the range
of DRG weights between the lowest and highest weight DRGs.\1\
Commenters noted that the HSRV methodology ``produces more compressed
DRG weights'' than the existing standardization methodology and that
``the greater compression of the HSRV weights is counter balanced by
the fact that more high-weighted cases qualify as [high cost] outlier
cases.'' A few commenters expressed concern that adopting MedPAC's
recommendation to exclude high-cost outliers in addition to statistical
outliers from the computation of the DRG weights so that the weights
reflect the average cost only of inlier cases would compound the DRG
weight compression caused by the HSRV methodology because high-cost
outlier cases occur most frequently in high-weighted DRGs. The
commenters indicated that the finding raises the concern of patient
access to care for services in higher cost DRGs.
---------------------------------------------------------------------------
\1\ Carter, Grace ``How recalibration method, pricing, and
coding affect DRG weights,'' Health Care Financing Review, Winter
1992.
---------------------------------------------------------------------------
Commenters also believed that the HSRV methodology fails to take
into account legitimate variation in costs that occur between
hospitals. Therefore, any hospital-level variation in cost that is not
explained by the IPPS case mix index is simply ignored, according to
the commenters. To the extent that certain services are provided most
frequently in hospitals with higher than average cost, the commenters
believed that the HSRV methodology will result in inappropriately lower
DRG weights for these services.
Therefore, commenters strongly recommended that the HSRV
methodology be eliminated in favor of the cost-based weighting
methodology adopted under the OPPS. They stated that the main
difference between these two approaches is the treatment of cost
variation that is not otherwise explained with IPPS payment factors. In
the standardization approach employed by OPPS, any variation in
hospital costs that is not explained by CMS payment factors affects the
calibration of DRG weights. They stated that the HSRV approach proposed
by CMS, by contrast, ignores any hospital level variation in charges
that is not explained by the case mix index. Many commenters added that
CMS could propose to remove other sources of cost variation beyond its
current practice of standardizing for wage index, DSH, and IME. They
believed a factor-specific approach to standardization would lead to
more precise and valid adjustments than those recognized under the HSRV
methodology, which eliminates all sources of charge variation
irrespective of whether there are legitimate differences among
hospitals in costs that are not taken into account in the payment
system.
Response: In preparing the FY 2007 relative weights, the costs of
organ acquisition were inadvertently included in the relative weight
for the calculation of ``other services.'' The costs of organ
acquisition are paid by Medicare on a cost basis and should not be
included in setting the IPPS relative weights. These costs have been
excluded from the IPPS relative weights calculated for this final rule.
In response to the concerns expressed regarding the CCR
calculation, we proposed to establish the geometric mean CCRs using a
hospital-weighted methodology because we believed that it served as an
acceptable measure of central tendency. In addition, we proposed to
trim the CCRs on the basis of 1.96 standard deviations since we were
using national averages and thought a more stringent statistical trim
would be appropriate. In response to comments, however, we have
reconsidered our approach and have implemented the 3 standard deviation
statistical trim supported by commenters. Further, we are also adopting
the charge-weighted method of calculating CCRs, as we now believe it
may be more appropriate to apply CCRs based on aggregate costs and
charges among hospitals to the charges that are aggregated by DRG and
used to set the relative weights.
Although commenters asserted that the HSRV methodology exacerbates
the effect of charge compression on the relative weights, we have not
had sufficient time between the close of the comment period and the
publication of this final rule to analyze this assertion. Therefore, in
response to comments (and as stated above), we are postponing the
implementation of the HSRV methodology until we can study this comment
further. Instead, as suggested by many commenters, we are using an
approach to calculating the IPPS relative weights that is more similar
to the approach used in the OPPS. That is, rather than using a
hospital-specific relative weighting methodology, we are standardizing
charges to remove relevant payment factor adjustments and then
adjusting those charges to costs using national cost center CCRs. As we
stated in the proposed rule, it is not administratively feasible to
adjust charges to cost using hospital-specific cost to charge ratios.
Therefore, while we are standardizing charges for the IPPS cost-based
weights using a similar process to the OPPS, we are still utilizing
national average CCRs to determine cost. Specifically, we are
standardizing the charges for each DRG by cost center to remove
differences in wage index, indirect medical education and
disproportionate share adjustments and are then reducing the
standardized charges to cost using the national average CCRs. The
relative weights we are adopting in this final rule are calculated
based on the average total cost for a DRG in relation to the national
average total cost.
Comment: Many commenters expressed concern that CMS collapsed the
full set of at least 37 cost centers into only 10. They believed this
approach eliminates detail that is available on the cost report. The
commenters requested that CMS elaborate on the process it went through
to derive the 10 cost centers used to calculate the HSRVcc weights.
Some commenters stated CMS should use all 37 cost centers that are used
in calculating the OPPS relative weights for the IPPS. Other commenters
suggested that CMS expand the number of cost centers used in the
calculation. MedPAC found that the CCRs within the proposed 10 cost
centers varied significantly in some areas and recommended that CMS
expand the number to 13 by distinguishing anesthesia and labor and
delivery from the operating room cost center and distinguishing
inhalation therapy from the therapy services cost center. Several
commenters supported MedPAC's recommendation. Further, MedPAC
recommended that the CCRs be based on Medicare-specific costs and
charges rather than on the costs and charges for the entire facility.
Some commenters advocated that a separate cost center be added for
implantable devices. They believed this additional cost center would
better identify the mark-up for high cost technological devices than
[[Page 47885]]
using the average for all supplies and equipment.
Several commenters encouraged CMS to specifically incorporate
nursing costs into the weighting methodology. They stated that nursing
care represents approximately 30 percent of all hospital expenditures
and nearly half of all direct care costs and have been essentially
ignored in the payment formula. Specifically, these commenters urged
CMS to create a unique Nursing Cost Center that identifies the
inpatient direct and indirect costs for registered nurses, licensed
practical nurses, and unlicensed assistive personnel. They defined
direct nursing costs as those associated with licensed and assistive
nursing personnel assigned to care for an individual patient. Indirect
nursing costs are all other salary and benefits related to licensed and
assistive nursing personnel not directly assigned to care for
individual patients. They suggested that the routine and intensive care
cost centers in the proposed HSRVcc methodology be replaced with a
nursing cost center and a separate facility cost center to identify the
non-nursing cost component of care. They urged CMS to set aside funds
to study and implement the above recommendation using methodologically
sound research and demonstration projects.
Response: As we stated in the proposed rule, we established 10 cost
center categories based upon broad hospital accounting definitions.
These 10 cost center categories consist of 8 ancillary cost groups, a
routine days cost group, and an intensive care days cost group. These
cost centers were selected because each category represents at least 5
percent of the charges in the claims data.
We thoroughly reviewed the comments advocating that we expand the
number of cost centers used in the calculation. We currently use the
MedPAR data set for charge detail. The MedPAR file does not provide
enough granularity in the charge detail to support 37 different cost
centers. In addition, in the proposed methodology, we eliminated claims
for providers that did not have costs greater than zero for at least 8
of the 10 cost centers. At least 96 percent of the providers in the
MedPAR file had charges for at least 8 of the 10 cost centers. We
believe that if we were to expand to the full set of 37 cost centers
outlined in the cost report, we would eliminate a greater number of
claims in the calculation of the DRG relative weights.
While we do not believe expanding to 37 cost centers is feasible,
we agree with MedPAC that we may have consolidated a few revenue
centers that have significantly different CCRs. Upon further
examination of the data, in this final rule, we are expanding the
number of cost centers from 10 to 13 by creating separate cost centers
for anesthesia, labor and delivery, and inhalation therapy. We also
agree with MedPAC that it would be more appropriate to set the CCRs
based on Medicare-specific charges and costs rather than on the costs
and charges for the entire facility. Therefore, in this final rule, we
are modifying our CCR calculations to incorporate Medicare-specific
charge data from Worksheet D Part 4 in addition to the cost and charge
data from Worksheet C Part I that we used in the proposed rule.
Other commenters suggested that we also create separate cost
centers for implantable devices and nursing. As noted in the comments,
the MedPAR file does not contain the necessary detail to identify a
separate cost center for implantable devices or nursing. In addition,
we did not have enough time to evaluate whether it would be reasonable
to utilize a nursing cost center in the methodology in the future.
However, we anticipate undertaking further analysis of the relative
weight methodology over the next year in conjunction with the research
we are doing on charge compression to determine if additional cost
centers are necessary.
Comment: Commenters, referring to Table A, ``Charge Line Items from
MedPAR Included in Cost Center Charge Group,'' noted that MedPAR charge
descriptions do not match the Form CMS-2552-96 Cost Center
description(s) for several cost centers. For example:
(a) MedPAR lists (18) Lithotripsy Charges where the cost reporting
form lists Radioisotopes;
(b) MedPAR lists (6) Other Services where the cost reporting form
lists Whole Blood and Packed Red Blood Cells;
(c) MedPAR lists (19) Cardiology Charges as including line 54 of
the cost report, which is Electroencephalography;
(d) MedPAR lists (16) Blood Administration Charges where the cost
reporting form lists ASC (Non-Distinct Part);
(e) MedPAR lists (24) Outpatient Services Charges where the cost
reporting form lists Emergency;
(f) MedPAR lists (25) Emergency Room Charges where the cost
reporting form lists Ambulance Services;
(g) MedPAR lists (26) Ambulance Charges where the cost reporting
form lists Renal Dialysis;
(h) MedPAR lists (29) ESRD Revenue Setting Charges where the cost
reporting form lists Clinic;
(i) MedPAR lists (30) Clinic Visit Charges where the cost reporting
form lists Other Outpatient Services, Other Ancillary, Home Program
Dialysis and Ambulance Services;
(j) Ambulance Services appear to be included twice, once in (30)
Clinic Visit Charges and once in (25) Emergency Room Charges;
(k) Lithotripsy is included in Radiology Services;
(l) Line 62 ``Observation Beds'' is not reflected separately in
Table A; and
(m) Line 68 ``Other reimbursement'' of the cost report is not
listed in Table A.
In addition, commenters were unclear as to whether CMS accounted
for subscripted lines in the cost report when calculating CCRs. The
commenters noted that subscripted lines did not appear in Table A.
Commenters believed this inconsistency in reporting may lead to
distorted DRG weights. Therefore, commenters recommended that CMS
examine this issue thoroughly before implementing cost-based weights.
Several commenters requested that CMS publish a crosswalk of the
revenue codes that are used for each MedPAR charge data group and
require intermediaries to review cost report data to ensure that
providers have reported data consistent with the mapping to the MedPAR
data.
Response: We wish to clarify to the commenters that the charge
description titles shown in the MedPAR charge description column in
Table A were not meant to also be interpreted as the title for each of
the cost report line items. That is, we were simply using Table A to
illustrate the MedPAR charge groups and the cost report line numbers
that were used to create the 10 proposed cost centers. To alleviate
this confusion, we are revising Table A to show both the MedPAR charge
titles and the titles of the cost report line items. In response to
comments (j) and (l), we note that the cost report line item number 65
for ambulance was inadvertently listed twice in the proposed rule; line
item 62, observation beds, was used in establishing the CCR for the
other services category. Line 65 for ambulance was only used once in
the actual other services CCR calculation. Line item 62 should have
appeared in the ``other services'' cost center grouping printed in
Table A in the proposed rule. We have corrected this error in the final
version of Table A. In addition, in regards to comment (k) above, we
have moved the lithotripsy charges from MedPAR to the ``other
services'' cost center grouping and we have also
[[Page 47886]]
revised the CCR for ``other services'' to include the cost report line
item 43 for radioisotopes, which was formerly included in the radiology
CCR.
In response to the commenters' question regarding the inclusion of
subscripted lines, when we calculated the CCRs for the proposed rule
and subsequently for this final rule, we relied on a HCRIS data set
that contains rolled-up cost report fields such that line items which
are subscripted contain the total value for the line item and any
subscripted lines below. Therefore, most subscripted lines were
included in the proposed rule CCRs and continue to be included in the
final rule CCR calculations. However, some subscripted line items are
not rolled up and continue to have their own field on the HCRIS data
set that we used to calculate the CCRs. Therefore, we are now including
the cost report line item 6201 for observation beds, the cost report
line item 6350 for Rural Health clinics and the cost report line item
6360 for Federally Qualified Health clinics in the other services CCR.
Cost report line items 6350 and 6360 are only reported by provider-
based Rural Health clinics and Federally Qualified Health clinics and
are necessary in order to identify all incurred costs applicable to
furnishing an observation bed prior to a decision to admit a patient to
the hospital. Further, we are now including the cost report line item
68 for other reimbursement in the other services CCR, and we are
including professional services charges from MedPAR in the other
services charge grouping. In response to the commenters' requests that
we show the revenue codes that comprise the MedPAR charges, we have
also inserted an additional column in Table A that lists the revenue
codes MedPAR groups into each charge field that we are using in the
final 13 cost centers. The final version of Table A appears below:
BILLING CODE 4120-01-P
[[Page 47887]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.000
[[Page 47888]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.001
[[Page 47889]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.002
[[Page 47890]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.003
[[Page 47891]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.004
[[Page 47892]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.005
Comment: Many commenters warned that the redistribution of payments
from the surgical to the medical DRGs under the proposed methodology
may create unintended consequences. Several of these commenters stated
that this redistribution poses a threat to patients' access to the
latest medical advances and highest quality care. They feared that
hospitals will invest less in new medical technologies because Medicare
would not pay sufficiently for the DRGs that use them. Another
commenter stated that the increased reimbursement for psychiatric DRGs
may create an incentive for IPFs to decertify and become inpatient
units.
Response: We appreciate the commenters' concern that payment
redistribution may create the potential for unintended consequences.
However, we wish to emphasize that the redistribution of payments among
DRGs is necessary to improve payment accuracy and eliminate the
distortions in the current IPPS payment rates. Under the methodology in
this final rule, we will increase payment for relatively underpaid
cases and reduce payment for relatively overpaid cases.
We are adopting a methodology that will realign payments with costs
to pay more appropriately for services rendered by hospitals.
Therefore, we do not believe altering the DRG relative weighting
methodology will affect patients' access to quality medical care.
Patients should have continued and uninterrupted access to new,
innovative technologies.
We have analyzed the impact of the increased reimbursement for
psychiatric DRGs in response to the commenter's concern that increased
reimbursement may provide incentives for IPFs to decertify their units
and be paid under the IPPS. Because of the differences in payment
between the IPPS and the IPF PPS, we do not believe that the DRG
relative weights we are adopting in this final rule will provide
increased incentive for IPFs to decertify units. Whereas under the IPF
PPS, hospitals receive a daily base rate and adjustments to account for
certain patient and facility characteristics, hospitals paid under the
IPPS are paid a specified amount based on the DRG for the same cases,
regardless of the length of the hospital stay. Our analysis suggests
that even though the average payment per day (total payment divided by
average length of stay) for the psychiatric DRGs in the IPPS proposed
rule may be higher than under the IPF PPS, the total average payment
per episode of care remains lower (product of the average IPF payment
per day and the average length of stay). Thus, because payments per
episode of care remain lower under the IPPS than under the IPF PPS, we
are not concerned that IPFs will decertify to get paid using the IPPS.
In addition, as indicated above, we are making some modifications to
our methodology in response to the public comments. Based on these
changes, the increase in the relative weights for the psychiatric DRGs
presented in this final rule will not be as significant as those
contained in the proposed rule.
Comment: Commenters expressed concern that because hospitals often
allocate charges on the cost reports differently than charges on the
claims, the cost-center level CCRs are calculated based on a different
set of charges than the charges on the claims to which the CCRs are
later applied. Commenters expressed concern that Medicare cost report
data are not detailed enough or consistently reported accurately to
determine costs accurately at a DRG level since such data lack specific
cost data on individual items and services. They reiterated that the
Medicare cost reports, which serve as the primary source of data under
the proposed system, were not designed to be used in a prospective
payment system and have not been used to establish hospital rates for
inpatient services for some time. They noted several limitations in
using the cost reports to derive estimated costs utilized in the DRG
relative weight calculations that should be carefully examined and
addressed before moving forward with the proposed system of hospital-
specific cost weights.
First, the commenters believed that CMS should address cost report
accuracy. The commenters stated that because the cost reports have only
been used for payment in limited circumstances (DSH, IME, outlier
policy), hospitals have had little incentive to report accurately and
completely for the services provided to Medicare beneficiaries. In
addition, they claimed the cost reports do not contain the level of
detail necessary to accurately determine costs at the DRG level.
Instead, the cost report provides payments, costs, and some
reimbursement totals by department or cost center. The commenters also
advised that CMS perform additional auditing of the cost reports to
ensure accuracy. The commenters were concerned that if CMS implements a
cost-based weighting methodology, the DRG weights will be based on
largely un-audited cost reports since approximately 15 percent of
hospital cost reports are audited each year. They noted that MedPAC
estimated that a full-scale audit could require 1,000 to 2,000 hours
from a fiscal intermediary,
[[Page 47893]]
as well as additional time and resources from the hospital. In
addition, a few commenters stated that CMS should only use final
settled cost report data, not as-submitted data, in calculating DRG
weights.
Second, some commenters contended that CMS should evaluate the
overall timeliness of cost report data. They stated that cost report
data used to recalibrate the DRG weights are outdated and significantly
older than the charge-based data currently used to determine DRG
weights under the IPPS. Under the proposed methodology, CMS used
hospital claims data from FY 2005 and hospital cost reports from FY
2003. The commenters were concerned that because a lag between the cost
report year and the payment year exists, the proposed methodology would
rely on older data that does not reflect the costs of many newer
technologies. The commenters supported an approach that uses more
recent claims and cost report data and also urge CMS to explore options
for using alternative data sources that include current information on
the costs of inpatient care.
Third, the commenters stated that CMS should examine the
comparability of cost reports due to variability in how hospitals
allocate costs. Commenters explained that a cost allocation methodology
must be used to estimate the cost of individual items and services from
the aggregate costs reported for each cost-center on the cost-report.
They stated that the proposed methodology assumes that all hospitals
consistently allocate costs to the same cost centers. However,
hospitals may have inconsistent cost accounting practices or use
different cost allocation methods (for example, utilization or square-
footage) according to the commenters. The commenters suggested these
factors and the compression of charges both within and across cost-
centers, limits the usefulness of cost report data to accurately
estimate costs. According to the commenters, each hospital uses its own
method to allocate costs among cost centers, often resulting in cost
assignments that do not reflect the departments to which charges are
assigned in the MedPAR data. For example, some commenters indicated
that they included cardiac catheterization in lines other than 53 and
54 that group to the cardiac cost center. In addition, several
commenters noted that hospitals report medical supply costs
inconsistently. While some report them in the supply cost center,
others report the medical supply cost in the cost center for the
procedure in which the device was used (that is, medical supplies
specific to the Emergency Room are included in line 61 of the cost
report). The commenters suggested that more specific cost report
instructions may be necessary to ensure that hospitals report the
information correctly and consistently. Some commenters believed that
cost report data were not intended or designed to be used to develop
accurate payment rates and suggested developing a proxy to more
accurately allocate costs at the DRG level, such as collecting data
from hospitals that utilize ``sophisticated cost accounting tools that
provide more accurate allocation of costs.''
Some commenters also recommended that CMS convene an expert panel
to explore ways to address the current limitations of the cost report.
They stated that this effort should identify methods to better use or
improve hospital cost reports for use in setting the inpatient and
outpatient relative weights. The expert panel should aim to identify
changes to the cost report that reduce the net information burden on
hospitals, while improving overall payment accuracy. The panel should
report its recommendations by April 2007 to enable CMS enough time to
consider the recommendations in setting the relative weights for FY
2008. Other commenters advocated that CMS initiate a national project
to correct any misalignments between cost and charges in cost reports
and on the MedPAR claims. Other commenters suggested that CMS postpone
the adoption of the proposed HSRVcc methodology until such time that
providers improve the accuracy of the source data used in the
determination of the DRG weights.
Response: With respect to the commenters' recommendation regarding
the reporting of costs and charges for services, CMS requires hospitals
to report their costs and charges through the cost report with
sufficient specificity to support CMS' use of cost report data for
monitoring and payment. Within generally accepted principles of cost
accounting, CMS allows providers flexibility to accommodate the unique
attributes of each institution's accounting systems. For example,
providers must match the generally intended meaning of the line-item
cost centers, both standard and non-standard, to the unique
configuration of department and service categories used by each
hospital's accounting system. Also, while the cost report provides a
recommended basis of allocation for the general service cost centers, a
provider is permitted, within specified guidelines, to use an
alternative basis for a general service cost if it can support to its
intermediary that the alternative is more accurate than the recommended
basis. This approach creates internal consistency between a hospital's
accounting system and the cost report but cannot guarantee the precise
comparability of costs and charges for individual cost centers across
institutions.
However, we believe that achieving greater uniformity by, for
example, specifying the exact components of individual cost centers,
would be very burdensome for hospitals and auditors. Hospitals would
need to tailor their internal accounting systems to reflect a national
definition of a cost center. It is not clear that the marginal
improvement in precision created here is worth the additional
administrative burden. The current hospital practice of matching costs
to the generally intended meaning of a cost center ensures that most
services in the cost center will be comparable across providers, even
if the precise composition of a cost center among hospitals differs.
Further, every hospital provides a different mix of services. Even if
CMS specified the components of each cost center, costs and charges on
the cost report would continue to reflect each hospital's mix of
services. At the same time, internal consistency is very important to
the IPPS. Costs are estimated on claims by matching CCRs for a given
hospital to their own claims data through a cost center-to-revenue code
crosswalk.
Despite the concerns raised in the comments, we believe that costs
and charges are reported through the cost report with sufficient
specificity to support CMS' use of cost report data to develop cost-
based weights. The information we obtained from the cost report on the
differing level of charge markups occurring between routine and
ancillary hospital departments supports MedPAC's conclusions that the
most profitable DRGs that are leading to the development of specialty
hospitals are those that require a lot of ancillary services with high
markups and low CCRs. To the extent that charge markups vary
significantly between the various routine and ancillary hospital
departments, we believe that there is a need to adjust charges to cost
prior to setting the relative weights. We will continue to rely on the
cost report to establish the CCRs that we are finalizing to use to
adjust the DRG charges to costs.
However, we continue to be interested in receiving suggestions on
ways that hospitals can uniformly and consistently report charges and
costs related to all cost centers that also acknowledge the ubiquitous
tradeoff between greater precision in developing CCRs and
administrative burden
[[Page 47894]]
coupled with reduced flexibility in hospital accounting practices.
Another issue to consider is the potential changes to the relative
weights from undertaking efforts of this magnitude that will be costly
for both CMS, its fiscal intermediaries and costly and burdensome to
hospitals. Although we are not modifying the cost report or our cost
report instructions at this time, we would be open to making
improvements in the future.
Comment: Several commenters applauded CMS' efforts to find ``an
administratively feasible approach to improving the accuracy of the DRG
weights.'' However, they expressed serious concerns about whether the
proposed approach achieves that goal. Many commenters asserted that CMS
proposes to move to a new cost-based methodology without offering any
evidence that the proposed method actually improves payment accuracy.
A few commenters submitted analyses that suggest that the impact of
the proposed HSRVcc methodology is substantially different than the
MedPAC recommendations, and may even decrease payment accuracy relative
to the charge-based weights. A few commenters specifically noted that
cardiac procedures are more adversely impacted by the HSRVcc
methodology. The proposed methodology reduces relative weights for the
three major implantable cardioverter defibrillator (ICD) DRGs (515,
535, and 536) by 25 percent or more. While these proposed reductions
imply that the weights based on the existing charge-based methodology
overstate the costs of ICD procedures and therefore overpay them, the
commenters presented analyses suggesting that these cases are actually
underpaid. One such analysis by MedPAC, in its report on physician-
owned specialty hospitals, found ICD procedures to have ``lower
marginal'' profitability or ``possibly a loss'' for hospitals, based on
calculation of payment-to-cost ratios and surveys of specialty
hospitals. They also indicated that CMS, in approving cardiac
resynchronization therapy defibrillators (CRT-D) for new technology
add-on payments, found the device to be inadequately paid and granted
the add-on payments to defray the costs of the therapy. Given that
payment rates under the charge-based weights appear to be inadequate in
many of the cardiovascular DRGs, the commenters believed the severe
reductions resulting from the proposed HSRVcc methodology appear to be
unjustified and provide ample reason to believe that the proposed
methodology does not accomplish the goal of improving payment accuracy.
These commenters emphasized that while measuring improved payment
accuracy is difficult, the large degree to which the weights fluctuate
given the methodological changes alone indicates the need for further
analysis and study. The commenters believed CMS should publish reliable
indicators that demonstrate how the goal of payment accuracy is
achieved. One commenter requested that CMS produce and publish
estimates of payment-to-cost ratios and the relative profitability by
DRG to determine the effectiveness of different weight-setting and
patient classification methodologies in improving overall payment
accuracy. The commenter emphasized that such estimates must be adjusted
to account for the cost of providing services that include high-
technology devices that are understated in the cost reports. Another
commenter recommended that CMS construct a process to test the
sensitivity of weights to various methodological assumptions and
publicly share the results, including: a comparison of the CMS weights
to MedPAC's HSRV cost approach; a comparison of CMS weights to an
approach using standardized costs (as opposed to HSRV); comparison of
CMS weights to weights calculated by estimating costs at the claim
level using the 10 cost center approach; evaluation of other
alternative methodologies for estimating costs; and an evaluation of
the stability of weights over time.
Response: We appreciate the commenters concerns regarding the
HSRVcc relative weight setting methodology we proposed and the large
change in the relative weights that result from the application of this
methodology. As we stated in the FY 2006 IPPS final rule, given the
potential for significant redistribution in payments, the MedPAC
recommendations should be studied extensively before any broad
fundamental changes are made to the current system. In the proposed
rule, we provided the results of such an extensive analysis and
concluded that changes can be made to the relative weight methodology
and the DRG system to improve payment accuracy. Although we agree that
adopting a methodology that results in large changes in payment should
not be adopted without careful study, we do not believe that the mere
presence of such significant impacts invalidates the methodology. On
the contrary, we believe large payment impacts may suggest there is a
significant degree of distortion present in the current payment system.
In our view, we believe that the changes to the IPPS should be
evaluated based on whether they represent an improvement to the current
system. MedPAC has studied the IPPS extensively and found that
improvement can be found in payment accuracy from adopting its
recommendations that are similar to those we proposed.\2\
---------------------------------------------------------------------------
\2\ Medicare Payment Advisory Commission: Report to Congress on
Physician-Owned Specialty Hospitals, March 2005, p. 37-38.
---------------------------------------------------------------------------
While we acknowledge the need for further study and evaluation of
the HSRVcc methodology, we continue to believe that the differential
markups among departmental CCRs have introduced distortion into the
charge-based relative weights. We note that MedPAC found that ``the
current payment system encourages community hospitals to allocate
capital to profitable services such as cardiology and stimulates the
formation of specialty hospitals that often focus on providing
profitable services and tend to care for low-severity patients.'' \3\
The information we obtained from the cost reports on the differing
level of charge markups occurring between routine and ancillary
hospital departments supports MedPAC's conclusions that the most
profitable DRGs that are leading to the development of cardiac
specialty hospitals are those that require a lot of ancillary services
with high markups and low CCRs. We note that the proposed rule showed
that these hospitals are almost exclusively affected by changes to the
relative weight methodology providing further evidence of bias and
distortion in the relative weights by setting them using hospital
charges. To the extent that charge markups vary significantly between
the various routine and ancillary hospital departments, we believe that
there is a need to adjust charges to cost prior to setting the relative
weights. Although it suggested refinements to CMS' proposal (all of
which we have adopted in this final rule), we note that MedPAC found
that the CMS proposals made great strides toward achieving the goal of
improvements in payment accuracy.\4\ Therefore, as discussed in section
II. C., we are using the national average CCRs to adjust the cost
center charges for each DRG to cost prior to setting the relative
weights. While we acknowledge that no payment methodology can be
perfect because DRG-specific costs cannot be determined, we believe the
cost-based methodology we are finalizing in this rule represents a
significant
[[Page 47895]]
improvement over the current charge-based methodology for all of the
reasons we specified above. Under the cost-based methodology in this
final rule, we will increase payment for relatively underpaid cases and
reduce payment for relatively overpaid cases. We believe this reform is
badly needed to reduce the bias in the weights and make more
appropriate payments for both medical and surgical DRGs.
---------------------------------------------------------------------------
\3\ Hackbarth, Glenn, MedPAC Comments on the IPS Rule, June 12,
2006, page 2.
\4\ Hackbarth, Glenn, MedPAC Comments on the IPPS Rule, June 12,
2006, page 2.
---------------------------------------------------------------------------
In order to mitigate the impact of the changes in the relative
weights, we are implementing the new cost-based weight methodology in a
3-year transition, where the weights in the first year will be set
based on 33 percent of the cost-based weight and 67 percent of the
charge based weight. We will continue to study the HSRVcc methodology,
the potential effects of charge compression and ways in which we can
better account for severity of illness within the DRG system in the
coming year.
With respect to the changes in the new patient classification
system, the proposed rule noted that we modeled the CS DRGs and
observed a 12-percent increase in the explanatory power (or R-quare
statistic) of the DRG system to explain hospital charges. That is, we
found more uniformity among hospital total charges within the CS DRGs
than we did with Medicare's current DRG system (71 FR 24027). Thus, we
believe that there is clear evidence that improvements can be made to
the current DRG system that will reduce heterogeneity among patients
within a given DRG. While this statistic indicates that the current CMS
DRG system can be refined to improve payment accuracy, we agree that it
does not necessarily mean we should adopt the system we proposed. For a
variety of reasons explained further below, we believe that a number of
factors must be considered in deciding how to revise the DRG system to
better recognize severity of illness.
Comment: One commenter asserted that CMS published incorrect and
deficient information about the HSRVcc methodology, its impact on
hospitals, and the underlying data utilized in developing the proposed
rule. Specifically, the commenter believed the HSRVcc methodology was
flawed and therefore stated that the published impacts were inaccurate.
The commenter believed that we failed to comply with the Federal Data
Quality Act, and OMB, HHS, and CMS Guidelines which address the quality
of the data used for policy development, in particular, meeting
standards of utility, objectivity, integrity, and transparency and
reproducibility. Because the commenter believed that we have violated
these data quality standards, the public was deprived of the
opportunity to submit meaningful comments, as required by the
Administrative Procedure Act (APA). The commenter urged CMS to take the
appropriate steps that would result in the withdrawal of the FY 2007
IPPS proposed rule and the publication of a new proposed rule.
Response: We disagree with the commenter's claims that the data
utilized in the development of the FY 2007 IPPS proposed rule were
materially flawed, did not comply with the Federal Data Quality Act,
and did not meet established OMB, Department and CMS guidelines for
data quality. The data sources used in estimating the payment impacts
from policy changes proposed in the FY 2007 IPPS proposed rule were the
HCRIS files that contain Medicare cost report data, the MedPAR files
that contain Medicare claims data, the OSCAR database, and the PSF
(which is maintained by the fiscal intermediaries and used in paying
Medicare claims). These are the best and most reliable data sources
available to CMS for modeling the impacts of policy changes. We note
that these same databases are used in modeling payment impacts under
the LTCH PPS, the OPPS, the IRF PPS, and the IPF PPS, as well as other
payment systems. We also note that the comment period to the FY 2007
IPPS proposed rule provided commenters with an opportunity to bring to
our attention specific examples of incorrect or inaccurate data. In
addition to our posting the impact files from the FY 2007 IPPS proposed
rule on the CMS Web site, as always, commenters had access to the same
CMS data files that we utilized through communication with our Office
of Information Services (OIS).
The fact that the data we used in the development of the FY 2007
IPPS proposed rule were available and transparent to the public was
attested by the detailed data analyses included with a significant
number of the public comments we received on the FY 2007 IPPS proposed
rule. Therefore, for the reasons stated above, we disagree with the
commenter's assertion that the data used by CMS in the FY 2007 IPPS
proposed rule does not meet the transparency and reproducibility
standards. As is the case with any change in policy, we do not base
policy decisions on mere assumptions, but rather we analyze the
relevant data and any comments submitted in response to a proposed
rule.
Comment: One commenter stated that it was unclear whether the
weights published for CS DRGs included using the transfer-adjusted
charges prior to calculating weights.
Response: We used the hospital's charge on the claim in the HSRVcc
methodology. We presume the commenter is asking whether we adjusted the
number of cases in setting the relative weights to reflect early
transfer to either a post-acute or other acute care setting. We did use
transfer-adjusted case counts when we applied the HSRVcc methodology
for the relative weights that were shown in Table 5 of the IPPS
proposed rule (71 FR 24272) and the ``Consolidated severity adjusted
DRG HSRVcc relative weights'' provided on the CMS Web site at: http://www.cms.hhs.gov/
AcuteInpatientPPS/ FFD/list.asp #TopOfPage. The case
mix index that we use to iterate the proposed FY 2007 HSRVcc weights
did not reflect a transfer-adjusted case count. That is, we used the
sum of all the case weights divided by the total number of cases
unadjusted for transfers to post-acute or other acute care settings.
Comment: Many commenters stated that once a cost-based system is
implemented, CMS should provide at least a three-year transition. They
stated that a three-year transition is consistent with MedPAC's
recommendation to implement the changes to the weights and DRG system
over a transitional period. Commenters recommended that payments be
made based on a blend of charge and cost-based weights culminating with
full cost-based weights at the completion of the transition period.
Response: We have in the past provided for transition periods when
adopting changes that have significant payment implications. Given the
significant payment impacts upon some hospitals because of these
changes to the DRG weighting methodology, we considered options to
transition to cost-based weights. We believe the potential payment
effects from the changes to the DRG relative weights can be mitigated
by adopting a 3-year transition of the relative weights. During the
first year of the transition, the relative weights will be based on a
blend of 33 percent of the cost-based weights and 67 percent of the
charge weights. In the second year of the transition, the relative
weights will be based on a blend of 33 percent of the charge weights
and 67 percent of the cost-based weights. In the third year of the
transition, the relative weights will be based on 100 percent of the
cost-based weights.
Comment: One commenter asserted that the proposed changes to
improve
[[Page 47896]]
payment accuracy and to provide payment equity between specialty and
general hospitals do not address many of the differences between
specialty and full-service hospitals. The commenter stated that
hospitals should be reimbursed for the additional services that are
required to operate a full-service hospital which are often unnecessary
in a specialty hospital setting. The commenter acknowledged that CMS
already provides some support to hospitals that serve a high percentage
of Medicaid patients through disproportionate share payments. However,
the commenter suggested that CMS also make add-on payments to the base
DRG payment for expenses such as: operation of a full-service, 24-hour
emergency department; operation of a trauma service, a burn unit, or
other high cost medically necessary services; sponsoring ground and
helicopter ambulance services; operation of 24-hour diagnostic
services; provision of round the clock nursing services; and provision
of other support services such as clinical pharmacists, nutritionists,
case managers, and medical social workers. The commenter believed these
add-on payments will encourage hospitals to maintain these services
rather than promote specialty hospitals that may be able to operate at
a lesser cost without some or all of these services.
Response: Medicare does pay for all of these services through
either the IPPS or OPPS payment. We disagree that add-on payments are
necessary for services that are commonly provided at many hospitals.
The costs of these services will be incorporated in the IPPS or OPPS
relative weights. Rather, we continue to believe that Medicare's IPPS
payment system needs to be changed to make more equitable payment
across all hospitals and decrease the incentive to profit from patient
and DRG selection.
Comment: A few commenters stated that although the DRG payment
changes proposed by CMS seek to address the proliferation of physician-
owned, limited service hospitals in response to recommendations by
MedPAC, they do not believe that these payment changes alone will
remove the inappropriate incentives created by physician self-referral
to limited-service hospitals. They stated that physicians will still
have the ability and incentive to refer financially attractive patients
to facilities they own, avoid serving low-income patients, and
encourage utilization of profitable services. The commenters urged CMS
to examine the investment structures of physician-owned, limited
service hospitals and to continue the moratorium on issuing new
provider numbers to physician-owned, limited service hospitals until
the agency's strategic plan has been developed and the Congress has had
the opportunity to consider the agency's final report on the topic.
Response: We are in the process of completing the Final Report to
Congress and the Strategic and Implementing Plan on Specialty
Hospitals, as required by section 5006 of the DRA. Section 5006 of the
DRA requires us to consider, among other things, issues of bona fide
investment and proportionality of investment with respect to physician
investment in specialty (that is, cardiac, orthopedic or surgical)
hospitals. Section 5006 of the DRA also provides that the suspension on
enrollment of new specialty hospitals that we administratively
instituted on June 9, 2005, shall expire upon the date we issue the
final report, or, if the report is issued after August 8, 2006, it
shall expire on October 8, 2006. We note that Congress has provided for
a date certain for the end of the suspension on enrollment of new
specialty hospitals. Furthermore, we have not identified a need at this
time to continue the suspension beyond that date.
Comment: Many commenters stated that CMS's proposed HSRVcc
methodology presented in the FY 2007 IPPS proposed rule failed to
address issues of ``charge compression.'' The commenters explained that
``charge compression'' describes the common billing practice of
hospitals applying higher percentage markups on lower cost items and
lower percentage markups on higher cost items. The commenters noted
that MedPAC explained that hospitals may reduce the mark-ups for
higher-cost items to avoid ``sticker shock.'' \5\ As discussed below,
many commenters believed that, to the extent ``charge compression''
exists, the proposed HSRVcc methodology would lead to systematic
differences between estimates of costs and Medicare's payments.
Therefore, the commenters believed that the proposal failed to
accomplish CMS's stated goal of setting the DRG weights based on
accurate cost determinations. If the proposed methodology is
implemented, several commenters believed hospitals that perform a large
volume of procedures requiring relatively costly supplies/procedures
would be severely and unfairly penalized through inappropriately
reduced Medicare DRG payments. The treatments they provide would be
less likely to be provided, and consequently, Medicare beneficiaries'
access to care may be diminished. Therefore, the commenters stated that
if CMS adopts a cost-based DRG weighting methodology, a more accurate
measure of determining hospitals' actual costs must be developed.
---------------------------------------------------------------------------
\5\ Medicare Payment Advisory Commission, ``Meeting Brief: Study
of Hospital Charge-Setting Practices, '' September 9-10, 2004.
---------------------------------------------------------------------------
Many commenters believed that ``charge compression'' is a concern
because the proposed HSRVcc methodology uses a single CCR for a variety
of items and services in a department. Specifically, under the proposed
HSRVcc methodology, we proposed to aggregate hospital-level
departmental charges into 10 cost centers for each DRG, and then apply
national average cost-center level CCRs to determine estimated costs.
The commenters asserted that because most hospitals do not apply the
same uniform percentage mark-up when setting the charges of each item
in the department, the proposed HSRVcc methodology underestimates the
cost of relatively more expensive items (particularly devices and
implants) and overestimates the cost of relatively less expensive
items. The commenters believed that the use of a single CCR for a
variety of different items results in a systematic distortion of the
estimated costs, and consequently the DRG relative weights that are
used in determining the IPPS payment rates. Specifically, many
commenters stated that the HSRVcc methodology has a disproportionate
adverse impact on DRGs that include implantable technologies and
devices, and in some cases would result in Medicare reimbursement that
is less than the actual cost of the device.
Some commenters discussed cost data research that has been
performed since the implementation of the OPPS to determine the causes
and effects of ``charge compression.'' The commenters asserted that
OPPS payment rates are also affected by charge compression.
Specifically, one commenter recently commissioned research to
investigate whether Medicare claims data provided statistical evidence
of ``charge compression.'' (This research was summarized in an
executive summary by Christopher Hogan of Direct Research, LLC.
entitled ``A Proposed Solution for Charge Compression.'') Many other
commenters cited this recent research in their own comments, and
recommended that the results of this research be used to develop an
adjustment under the proposed HSRVcc methodology to account for
``charge compression.'' This analysis utilized the detailed coding of
charges for supplies by revenue center on the Medicare claims data in
the Standard Analytical Files (SAF) to divide the single cost-
[[Page 47897]]
center CCR for ``supplies and equipment'' used under the proposed
HSRVcc methodology into separate cost-center CCRs for 5 supplies
subcategories (general supplies; implantables; sterile supplies;
pacemakers and defibrillators; and all other supplies) based on a
``strong statistical association between mix of charges for supplies
(by revenue center) in a hospital and the [overall] supplies CCR in a
hospital.'' Using these data from all hospitals, a regression analysis
yielded a single ``set of CCR adjustments reflecting national average
CCRs for [each of] the [five supplies] sub-categories.'' This national-
average set of adjustments is applied to each hospital (and combined
with each hospital's actual supplies CCR) to determine an adjusted
estimate of cost on each hospital's claim in the MedPAR file. The
results of this research showed that this variation in CCRs across the
supplies subcategories would result in weights for some DRGs being
significantly different than under the HSRVcc methodology. In
particular, the methodology advocated by Hogan would increase the
relative weights ``for DRGs with substantial charges in the implantable
devices and pacemaker/defibrillator revenue centers.''
The commenters pointed out that the results of this research are
consistent with previous analyses demonstrating ``charge compression''
in hospitals' billing patterns. The commenters also noted that this
research was conducted exclusively on Medicare claims data, without
supplementation with any external data. The commenters believed that
this research demonstrates that an adjustment for ``charge
compression'' is possible. They further asserted that the research
provides a solid analytical basis for a specific adjustment. The
commenters advocated that we use the coefficients from this regression
analysis to develop a ``data-driven'' adjustment to the CCRs for the
supplies and equipment to address the distortion caused by ``charge
compression.''
Another commenter supported the idea of a ``charge compression''
adjustment but suggested that CMS should ensure appropriate stakeholder
involvement before applying such a policy. Other commenters also
advocated for the use of data from the SAF to analyze the relationship
between costs and charges for non-implantable supplies and equipment to
determine whether an adjustment to the medical-surgical supplies cost
center on the MedPAR files to account for ``charge compression'' is
also warranted.
As a result of the concerns discussed above, many commenters stated
that any change toward a cost-based DRG weighting methodology under the
IPPS must address the distortion caused by ``charge compression'' and
must ensure that the methodology utilizes accurate cost determinations.
Consequently, some commenters requested a delay in the implementation
of the cost-based DRG weighting methodology until an adjustment for
``charge compression'' can be incorporated. In addition, some
commenters stated that such an adjustment should also be used to
address ``charge compression'' under the OPPS. Several commenters
recommended that, in addition to including an adjustment for ``charge
compression,'' the methodology for determining the cost-based DRG
relative weights be developed without employing the HSRV methodology.
However, a few other commenters endorsed the proposed HSRVcc
methodology, stating that the ``HSRVcc methodology more closely
represents the cost of providing services than the current charge-based
system.''
Several commenters referenced various research studies on this
issue undertaken over the past 5 to 6 years. These commenters asserted
that the research supports the existence of ``charge compression'' and
its systemic distortion in payment rates. The commenters also stated
that ``although evidence of the effect of charge compression is not
new,'' research that could support an adjustment to offset charge
compression was not available. However, according to the commenters,
``research just completed now presents a solution.''
Response: We appreciate the commenters' concerns regarding charge
compression and its impact on the relative weight calculations under
the proposed HSRVcc methodology. We are interested in further studying
the analytic technique suggested in the comments of using a regression
analysis to identify adjustments that could be made to the CCRs to
account for charge compression. We note that the Hogan study's
regression model was only applied to expensive medical supplies and
devices and was not applied uniformly to develop potential adjustments
that could be made to costs and charges across all revenue and cost
centers that could potentially be subject to charge compression. If
such a model were to be applied, we believe further analysis would have
to be undertaken to determine whether it should apply to all costs and
revenue centers. At this time, we intend to research whether a rigorous
model should allow an adjustment for ``charge compression'' to the
extent it exists. Accordingly, we have engaged a contractor to
undertake a study on charge compression and review the statistical
models provided to us by the commenters. To the extent that we find
``charge compression'' exists, we will further study potential models
that could adjust for it so we can develop more accurate systems of
cost-based weights to better reflect the relative costs of the
different types of services provided under the IPPS. As suggested in
the comments, we plan to fully involve appropriate stakeholders in
future analysis of this issue to the extent feasible. Before
implementing such an adjustment, we would fully describe our analysis
and a potential proposed adjustment as part of the IPPS proposed rule
for FY 2008.
Further, we intend to use the charge compression study that we will
conduct over the next year as an opportunity to better understand the
costs of medical devices. The United States faces a dilemna in health
care. Although the rate-of-increase in health care spending slowed last
year, costs are still growing at an unsustainable rate. One reason
health care costs are rising so quickly is that most consumers of
health care are frequently not aware of the actual cost of their care
due to lack of transparency. We believe that cost, quality, and patient
satisfaction information should be available across the spectrum of
care.
Transparency of device pricing is a key aspect of consumer
understanding of the cost of health care. We believe that the enhanced
understanding of device pricing that will be brought about as part of
our charge compression study will help accelerate the public release,
in a consumer friendly fashion, of pricing information of medical
devices. The public release of device pricing will help augment our
overall efforts to empower consumers with better information on the
health care they require.
In addition, we note that in order to mitigate the impact of
adopting a revised methodology for calculating DRG weights, we are
standardizing charges for MedPAR claims using the same methodology we
have used in past years, rather than using the HSRV methodology.
However, as discussed in detail in section II.E. of this preamble to
the final rule, we are adopting our proposal to adjust charges to
account for costs prior to establishing DRG weights. However, we
anticipate undertaking further analysis of the hospital-specific
methodology over the next year in conjunction with the research we are
doing on charge compression. If our analysis suggests that an
adjustment for charge compression should be applied and/or that the
hospital-specific methodology will result in relative
[[Page 47898]]
weights that more closely approximate the relative costs of care, we
will propose further changes for FY 2008. In the interim, we are
further mitigating the potential payment effects from the changes to
the DRG relative weights by adopting a 3-year transition of the
relative weights. During the first year of the transition, the relative
weights will be based on a blend of 33 percent of the cost-based
weights and 67 percent of the charge weights. In the second year of the
transition, the relative weights will be based on a blend of 33 percent
of the charge weights and 67 percent of the cost-based weights. In the
third year of the transition, the relative weights will be based on 100
percent of the cost-based weights.
3. Refinement of DRGs Based on Severity of Illness
For purposes of the following discussions, the term ``CMS DRGs''
means the DRG system we currently use under the IPPS; the term ``APR
DRGs'' means the severity DRG system designed by 3M Health Information
Systems that currently is used by the State of Maryland; and the term
``consolidated severity-adjusted DRGs (CS DRGs)'' means the DRG system
based on a consolidated version of the APR DRGs (as described in detail
below). We discussed the CS DRGs in the FY 2007 IPPS proposed rule and
solicited public comments on whether there are alternative DRG systems
that could result in better recognition of severity than the CS DRGs we
were proposing. As we made clear in the proposed rule, there are still
further changes that are important to make to the CS DRG system before
it is ready for adoption. In the remainder of this final rule, ``CS
DRGs'' refers to the DRG system we analyzed and proposed for adoption
in FY 2008. However, as we indicate below, we received a number of
public comments about the proposed CS DRGs, potential alternatives, and
a number of other issues related to our proposal. Below we summarize
those comments, respond to the comments, and present our plans for
adopting a severity-adjusted DRG system for FY 2008.
In the FY 2006 IPPS final rule (70 FR 47474), we stated that we
would consider making changes to the CMS DRGs to better reflect
severity of illness among patients. We indicated that we would conduct
a comprehensive review of the CC list as well as consider the
possibility of using the APR DRGs for FY 2007. We did not adopt APR
DRGs for FY 2006 because such an adoption would represent a significant
undertaking that could have a substantial effect on all hospitals.
There was insufficient time between the release of the MedPAC report in
March 2005 and the publication of the FY 2006 IPPS final rule for us to
analyze fully a change of this magnitude. Instead, we adopted a more
limited policy by implementing severity-adjusted cardiac DRGs.
After publication of the FY 2006 IPPS final rule, CMS contracted
with 3M Health Information Systems to further analyze the MedPAC
recommendations in support of our consideration of possible changes to
the IPPS for FY 2007. Under one task of this contract, 3M Health
Information Systems analyzed the feasibility of using a revised DRG
system under the IPPS that is modeled on the APR DRGs Version 23 to
better recognize severity of illness. The APR DRGs have been used
successfully as the basis of Belgium's hospital prospective global
budgeting system since 2002. The State of Maryland began using APR DRGs
as the basis of its all-payer hospital payment system in July 2005.
More than a third of the hospitals in the United States are already
using APR DRG software to analyze comparative hospital performance.
Many major health information system vendors have integrated this
system into their products. Several State agencies utilize the APR DRGs
for the public dissemination of comparative hospital performance
reports. APR DRGs have been widely applied in policy and health
services research. In addition to being used in research by MedPAC, the
APR DRGs also contain a separate measure of risk of mortality that is
used in the Quality Indicators of the Agency for Healthcare Research
and Quality, the Premier Hospital Quality Incentive Demonstration
discussed in section IV.B. of this preamble, and the Joint Commission
on Accreditation of Healthcare Organizations (JCAHO) hospital
accreditation survey process (Shared Visions-New Pathways).
Below we present a comparison of the CMS DRG system and the APR DRG
system.
a. Comparison of the CMS DRG System and the APR DRG System
The CMS DRG and APR DRG systems have a similar basic structure.
There are 25 MDCs in both systems. The DRG assignments for both systems
are based on the reporting of ICD-9-CM diagnosis and procedure codes.
Both DRG systems are composed of a base DRG that describes the reason
for hospital admission and a subdivision of the base DRG based on other
patient attributes that affect the care of the patient. For surgical
patients, the base DRG is defined based on the type of procedure
performed. For medical patients, the base DRG is defined based on the
principal diagnosis. In Version 23.0 of the CMS DRG system, there are
367 base DRGs and 526 total DRGs. In Version 23 of the APR DRG system,
there are 314 base DRGs and 1,258 total APR DRGs. Some of the base DRGs
in the two systems are virtually identical. For example, there is no
significant difference between the base DRG under both systems for
medical treatment of congestive heart failure. For other base DRGs,
there are substantial differences. For example, in the CMS DRG system,
there are two base DRGs for appendectomy (simple and complex); in the
APR DRG system, there is only one base DRG for appendectomy (the
relative complexity of the patient is addressed in the subsequent
subdivision of the base DRG into severity of illness subclasses).
The focus of the CMS DRGs is on complexity. Complexity is defined
as the relative volume and types of diagnostic, therapeutic, and bed
services required for the treatment of a particular illness. Thus, the
focus of payment in the CMS DRG system reflects the relative resource
use needed by the patient in one DRG group compared to another.
Resource use is generally correlated with severity of illness but
intensive resource use does not necessarily indicate a high level of
severity in every case. It is possible that some patients will be
resource-intensive and require high-cost services even though they are
less severely ill than other patients. The CMS DRG system subdivides
the base DRGs using age and the presence of a secondary diagnosis that
represents a CC. The age subdivisions primarily relate to pediatric
patients (those who are less than 18 years of age). Patients are
assigned to the CC subgroup if they have at least one secondary
diagnosis that is considered a CC. The diagnoses that are designated as
CCs are the same across all base DRGs. The subdivisions of the base CMS
DRGs are not uniform: Some base DRGs have no subdivision; some base
DRGs have a two-way subdivision based on the presence of a CC; and
other base DRGs have a three-way subdivision based on a pediatric
subdivision followed by a CC subdivision of the adult patients. In
addition, some base DRGs in MDC 5 (Diseases and Disorders of the
Circulatory System) have a subdivision based on the presence of a major
cardiovascular condition or complex diagnosis.
The APR DRG system subdivides the base DRGs by adding four severity
of
[[Page 47899]]
illness subclasses to each DRG. Under the APR DRG system, severity of
illness is defined as the extent of physiologic decompensation or organ
system loss of function. The underlying clinical principle of APR DRGs
is that the severity of illness of a patient is highly dependent on the
patient's underlying problem and that patients with high severity of
illness are usually characterized by multiple serious diseases or
illnesses. The assessment of the severity of illness of a patient is
specific to the base APR DRG to which a patient is assigned. In other
words, the determination of the severity of illness is disease-
specific. High severity of illness is primarily determined by the
interaction of multiple diseases. Patients with multiple comorbid
conditions involving multiple organ systems are assigned to the higher
severity of illness subclasses. The four severity of illness subclasses
under the APR DRG system are numbered sequentially from 1 to 4,
indicating minor (1), moderate (2), major (3), and extreme (4) severity
of illness.
The APR DRG system does not subdivide base DRGs based on the age of
the patient. Instead, patient age is used in the determination of the
severity of illness subclass. In the CMS DRG system, the CC list is
generally the same across all base DRGs. However, there are CC list
exclusions for secondary diagnoses that are related to the principal
diagnosis. In the APR DRG system, the significance of a secondary
diagnosis is dependent on the base DRG. For example, an infection is
considered more significant for an immune-suppressed patient than for a
patient with a broken arm. The logic of the CC subdivision in the CMS
DRG system is a simple binary split for the presence or absence of a
CC. In the APR DRG system, the determination of the severity subclass
is based on an 18-step process that takes into account secondary
diagnoses, principal diagnosis, age, and procedures. The 18 steps are
divided into three phases. There are six steps in Phase I, three steps
in Phase II, and nine steps in Phase III.
The diagram below illustrates the three-phase process for
determining patient severity of illness subclass.
BILLING CODE 4120-01-P
[[Page 47900]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.006
Under the CMS DRG system, a patient is assigned to the DRG with CC
if there is at least one secondary diagnosis present that is a CC.
There is no recognition of the impact of multiple CCs. Under the APR
DRG system, high severity of illness is primarily determined by the
interaction of multiple diseases. Under the CMS DRG
[[Page 47901]]
system, patients are assigned to an MDC based on their principal
diagnosis. While the principal diagnosis is generally used to assign
the patient to an MDC in the APR DRG system, there is a rerouting step
that assigns some patients to another MDC. For example, lower leg
amputations can be performed for circulatory, endocrine, or
musculoskeletal principal diagnoses. Instead of having three separate
amputation base DRGs in different MDCs as is done in the CMS DRG
system, the APR DRG system reroutes all of these amputation patients
into a single base APR DRG in the musculoskeletal MDC. The CMS DRG
system uses death as a variable in the DRG definitions but the APR DRG
system does not. Both DRG systems are based on the information
contained in the Medicare Uniform Bill. The APR DRG system requires the
same information used by the current CMS DRG system. No changes to the
claims form or the data reported would be necessary if CMS were to
adopt APR DRGs or a variant of them.
The CMS DRG structure makes some DRG modifications difficult to
accommodate. For example, high severity diseases that occur in low
volume are difficult to accommodate because the only choice is to form
a separate base DRG with relatively few patients. Such an approach
could lead to a proliferation of low-volume DRGs. Alternatively, these
cases may be included in DRGs with other patients that are dissimilar
clinically or in costs. Requests for new base DRGs formed on the use of
a specific technology may also be difficult to accommodate. Base DRGs
formed based on the use of a specific technology would result in the
payment weight for the DRG being dominated by the price set by the
manufacturer for the technology.
The structure of the APR DRGs provides a means of addressing high
severity cases that occur in low volume through assignment of the case
to a severity of illness subclass. However, the APR DRG structure does
not currently accommodate distinctions based on complexity.
Technologies that represent increased complexity, but not necessarily
greater severity of illness, are not explicitly recognized in the APR
DRG system. For example, in the CMS DRGs, there are separate DRGs for
coronary angioplasty with or without insertion of stents. The APR DRGs
do not make such a differentiation. The insertion of the stent makes
the patient's case more complex but does not mean the patient is more
severely ill. However, the inability to insert a stent may be
indicative of a patient's more advanced coronary artery disease.
Although such conflicts are relatively few in number, they do represent
an underlying difference between the two systems. If Medicare were to
adopt a severity DRG system based on the APR DRG logic but assign cases
based on complexity as well as severity as we do under the current
Medicare DRG system, such a distinction would represent a departure
from the exclusive focus on severity of illness that currently forms
the basis of assigning cases in the APR DRG system.
Section 1886(d)(4) of the Act specifies that the Secretary must
adjust the classifications and weighting factors at least annually to
reflect changes in treatment patterns, technology, and other factors
that may change the relative use of hospital resources. Therefore, we
believe a method of recognizing technologies that represent increased
complexity, but not necessarily greater severity of illness, should be
included in the system. We plan to develop criteria for determining
when it is appropriate to recognize increased complexity in the
structure of the DRG system and how these criteria interact with the
existing statutory provisions for new technology add-on payments. In
the FY 2007 IPPS proposed rule, we invited public comments on this
particular issue.
Another difference between the CMS DRG system and the APR DRG
system is the assignment of diagnosis codes in category 996
(Complications peculiar to certain specified procedures). The CMS DRG
system treats virtually all of these codes as CCs. With the exceptions
of complications of organ transplant and limb reattachments, these
complication codes do not contribute to the severity of illness
subclass in the APR DRG system. While these codes could be added to the
severity logic, the appropriateness of recognizing codes such as code
998.4 (Foreign body accidentally left during a procedure) as a factor
in payment calculation could create the appearance of incentives for
less than optimal quality. Although there is no direct recognition of
the codes under the 996 category, the precise complication, in general,
can be coded separately and could contribute to the severity of illness
subclass assignment.
Comment: Some commenters strongly supported including the
complication codes (996.00-999.9) when assigning a patient to a
severity-adjusted DRG because the codes represent pre-existing or
predictably higher risks upon admission for difficult patients who are
typically referred to regional centers. The commenters stated that
failure to do so will create new incentives for adverse admission
selection and underpay hospitals that treat difficult patients. The
commenters stated that the 996 codes include some complications that
should never be paid (for example, wrong site surgery and instruments
left in the patient). However, the commenters indicated that these
kinds of complications likely constitute less than one-half of one
percent of all complications and revising the DRG system so that all
996 codes are not paid will provide incentives to hospitals to avoid
admitting patients that are at high risk because of a pre-existing
condition or other circumstance. Another commenter stated that all
infections should be removed as complicating conditions under the DRG
system.
Response: The discussion in this section of the proposed rule noted
that 996 codes are used in assigning a patient to a CMS DRG but not to
an APR DRG. Although the discussion in this section of the proposed
rule did indicate that using these codes to assign a patient to a DRG
may raise questions about incentives for less than optimal quality, the
discussion was only intended to note the differences that currently
exist between the CMS and the APR DRGs. The commenters raised issues
that require further study. We will consider quality of care issues and
payment incentives as we consider how to implement section 5001(c) of
Pub. L. 109-171 with respect to hospital acquired conditions, including
infections. There is a more detailed discussion of this provision of
the law in a later section of this final rule.
Table B below summarizes the differences between the two DRG
systems:
Table B.--Comparison of the CMS DRG System and the APR DRG System
----------------------------------------------------------------------------------------------------------------
Element CMS DRG System APR DRG System
----------------------------------------------------------------------------------------------------------------
Number of base DRGs...................... 367......................... 314
Total number of DRGs..................... 526......................... 1,258
Number of CC (severity) subclasses....... 2........................... 4
[[Page 47902]]
Multiple CCs recognized.................. No.......................... Yes.
CC assignment specific to base DRG....... No.......................... Yes.
Logic of CC subdivision.................. Presence or absence......... 18-step process.
Logic of MDC assignment.................. Principal diagnosis......... Principal diagnosis with rerouting.
Death used in DRG definitions............ Yes......................... No.
Data requirements........................ Hospital claims............. Hospital claims.
----------------------------------------------------------------------------------------------------------------
To illustrate the differences between the two DRG systems, we
compare in Table C below four cases that have been assigned to CMS DRGs
and APR DRGs. In all four cases, the patient is a 67-year-old who is
admitted for diverticulitis of the colon and who has a multiple
segmental resection of the large intestine performed. ICD-9-CM
diagnosis code 562.11 (Diverticulitis of colon (without mention of
hemorrhage)) and ICD-9-CM procedure code 45.71 (Multiple segmental
resection of large intestine) would be reported to capture this case.
In both DRG systems, the patient would be assigned to the base DRG for
major small and large bowel procedures. These four cases would fall
into two different CMS DRGs and four different APR DRGs. We include
Medicare average charges in the table to illustrate the differences in
hospital resource use.
Case 1: The patient receives only a secondary diagnosis of an ulcer
of anus and rectum (ICD-9-CM diagnosis code 569.41). Under the CMS DRG
system, the patient is assigned to base DRG 149 (Major Small and Large
Bowel Procedures Without CC). Under the APR DRG system, the patient is
assigned to base DRG 221 (Major Small and Large Bowel Procedures) with
a severity of illness subclass of 1 (minor).
Case 2: The patient receives a secondary diagnosis of an ulcer of
anus and rectum and an additional secondary diagnosis of unspecified
intestinal obstruction (ICD-9-CM diagnosis code 560.9). Under the CMS
DRG system, the patient is assigned to DRG 148 (Major Small and Large
Bowel Procedures With CC). Under the APR DRG system, the patient is
assigned to base DRG 221 and the severity of illness subclass increases
to 2 (moderate).
Case 3: The patient receives multiple secondary diagnoses of an
ulcer of anus and rectum, unspecified intestinal obstruction, acute
myocarditis (ICD-9-CM diagnosis code 422.99), and atrioventricular
block, complete (ICD-9-CM diagnosis code 426.0). Under the CMS DRG
system, the patient is assigned to DRG 148. Under the APR DRG system,
the patient is assigned to base DRG 221 and the severity of illness
subclass increases to 3 (major).
Case 4: The patient receives multiple secondary diagnoses of an
ulcer of anus and rectum, unspecified intestinal obstruction, acute
myocarditis, atrioventricular block, complete, and the additional
diagnosis of acute renal failure, unspecified (ICD-9-CM diagnosis code
584.9). Under the CMS DRG system, the patient is assigned to DRG 148.
Under the APR DRG system, the patient is assigned to base DRG 221 and
the severity of illness subclass increases to 4 (extreme).
Table C.--Example of Sample Cases Assigned Under the CMS DRG System and Under the APR DRG System
----------------------------------------------------------------------------------------------------------------
CMS DRG System APR DRG System
Principal diagnosis code: 562.11 --------------------------------------------------------------------------
Procedure code: 45.71 Average Average
DRG assigned charge DRG assigned charge
----------------------------------------------------------------------------------------------------------------
Case 1--Secondary Diagnosis: 569.41.. 149 without CC......... $25,147 221 with severity of $25,988
illness subclass 1.
Case 2--Secondary Diagnoses: 569.41, 148 with CC............ 59,519 221 with severity of 38,209
560.9. illness subclass 2.
Case 3--Secondary Diagnoses: 569.41, 148 with CC............ 59,519 221 with severity of 66,597
560.9, 422.99, 426.0. illness subclass 3.
Case 4--Secondary Diagnoses: 569.41, 148 with CC............ 59,519 221 with severity of 130,750
560.9, 422.99, 426.0, 584.9. illness subclass 4.
----------------------------------------------------------------------------------------------------------------
The largest significant difference in average charges is seen in
case 4 where the average charge under the APR DRG assigned to the
patient ($130,750) is more than double the average charge under the CMS
DRG assigned to the patient ($59,519).
b. CS DRGs for Use in the IPPS
APR DRGs were developed to encompass all-payer patient populations.
As a result, we found that, for the Medicare population, some of the
APR DRGs have very low volume. MedPAC noted that the larger number of
DRGs under a severity-weighted system might mean that CMS would be
faced with establishing weights in many categories that have few cases
and, thus, potentially creating unstable estimates. While volume is an
important consideration in evaluating any potential consolidation of
APR DRGs for use under the IPPS, we believe that hospital resource use
and clinical interpretability also need to be taken into consideration.
For example, any consolidation of severity of illness subclasses within
a base DRG should be restricted to contiguous severity of illness
subclasses. Thus, it would not be reasonable clinically to combine
severity of illness subclasses 1 and 4 solely because both consist of
low-volume cases. We analyzed consolidating APR DRGs by either
combining the base DRGs or the severity of illness subclasses within a
base DRG. For consolidation across base APR DRGs, we considered patient
volume, similarity of hospital charges across all four severity of
illness subclasses and
[[Page 47903]]
clinical similarity of the base APR DRGs. For consolidations of
severity of illness subclasses within a base DRG, we considered patient
volume and the similarity of hospital charges between severity of
illness subclasses. In considering how to consolidate severity of
illness subclasses, we believed it was important to use uniform
criteria across all DRGs to avoid creating confusing and difficult to
interpret results. That is, we were concerned about inconsistencies in
the number of severity levels across different DRGs.
The objective to simultaneously take into consideration patient
volume and average charges often produced conflict. Table D below
contains the overall patient volume and average charge by APR DRG
severity of illness subclass. While severity of illness subclass 4
(extreme) has the lowest patient volume of 5.80 percent, we found that
the dramatically different average charges between severity of illness
subclass 3 (major) and subclass 4 (extreme) patients of approximately
$32,426 and $81,952, respectively, would make it difficult to
consolidate severity of illness subclass 3 and 4 patients. Conversely,
we found that, while the average charge difference between severity of
illness subclass 1 (minor) and 2 (moderate) patients was much smaller,
of approximately $17,649 and $20,021, respectively, the majority of
patient volume (68.08 percent) is in these two subclasses. Thus, low
patient volume and small average charge differences rarely coincided.
Table D.--Overall Average Charges and Patient Volume by APR DRG Severity of Illness Subclass
--------------------------------------------------------------------------------------------------------------------------------------------------------
APR DRG APR DRG APR DRG APR DRG
Severity of Severity of Severity of Severity of
All cases illness illness illness illness
Subclass 1 Subclass 2 Subclass 3 Subclass 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Cases.................................................... 11,142,651 21.47% 46.61% 26.12% 5.80%
Average Charges.................................................... $26,342 $17,649 $20,021 $32,426 $81,952
--------------------------------------------------------------------------------------------------------------------------------------------------------
There were also few opportunities to consolidate base DRGs. For
base DRGs in which there was a clinical basis for considering a
consolidation, there were usually significant differences in average
charges for one or more of the severity of illness subclasses. APR DRGs
already represented a considerable consolidation of base DRGs (314)
compared to CMS DRGs (367). Thus, we expected that further base DRG
consolidation would be difficult.
We reviewed the patient volume and average charges across APR DRGs
and found that medical cases assigned severity of illness subclass 4
within an MDC have similar average charges. We observed the same
pattern in average charges across severity of illness subclass 4
surgical patients within an MDC. The data suggest that, in cases with a
severity of illness of subclass 4, the severity of the cases had more
impact on hospital resource use than the reason for admission (that is,
the base APR DRG within an MDC). Thus, we believe that, within each
MDC, the severity of illness subclass 4 medical and surgical patients,
respectively, could be consolidated into a single group.
In some MDCs, it was not possible to consolidate into a single
medical and a single surgical severity of illness subclass 4 group. In
these MDCs, more than one group was necessary. For instance, Table E
below contains the patient volume and average charges for severity of
illness subclass 4 cases in MDC 11 (Diseases and Disorders of the
Kidney and Urinary Tract). Taking into consideration volume and average
charges, except for APR DRG 440 (Kidney Transplant), surgical cases
assigned severity of illness subclass 4 in MDC 11 could be consolidated
into a single group having 5,492 patients and an average charge of
$107,258. However, we decided not to include kidney transplant patients
in this severity of illness subclass 4 due to their very high average
charges (approximately $203,732 or more than $100,000 greater than
other patients in MDC 11 having a severity of illness subclass 4).
Average charges within the consolidated severity of illness subclass 4
surgical DRG in MDC 11 show some variation but are much higher than the
corresponding average charges for the severity of illness subgroup 3
patients of $48,863. Thus, our analysis suggests that the data support
maintaining three severity of illness levels for each base DRG in MDC
11; a separate severity of illness subclass 4 for all patients other
than those having kidney transplant; and a separate DRG for kidney
transplants.
Table E.--Summary Statistics for Surgical Cases With Severity of Illness
Subclass 4 in MDC 11
------------------------------------------------------------------------
Average Average
APR DRG Number of length of total
cases stay charges
------------------------------------------------------------------------
440 (Kidney Transplant).......... 378 18.0 $203,732
441 (Major Bladder Procedures)... 528 21.5 128,729
442 (Kidney & Urinary Tract 833 16.6 101,501
Procedure for Malignancy).......
443 (Kidney & Urinary Tract 966 18.4 103,905
Procedure for Non-Malignancy)...
444 (Renal Dialysis Access Device 935 18.3 104,249
Procedure Only--Severity of
Illness Subclass 4).............
445 (Other Bladder Procedures)... 186 15.2 80,197
446 (Urethral & Transurethral 492 13.4 73,110
Procedure--Severity of Illness
Subclass 4).....................
447 (Other Kidney, Urinary Tract 1,552 19.3 121,011
& Related Procedures)...........
------------------------------------------------------------------------
The consolidation of severity of illness subclass 4 APR DRG into
fewer groups was done for all MDCs except MDC 15 (Newborn and Other
Neonates With Conditions Originating in the Perinatal Period), MDC 19
(Mental Diseases and Disorders), and MDC 20 (Alcohol/Drug Use and
Alcohol/Drug Induced Organic Mental Disorders). In the 22 MDCs in which
the severity of illness subclass 4 consolidation was applied, the
number of separate severity
[[Page 47904]]
of illness subclass 4 groups was reduced from 262 to 69.
For MDC 14 (Pregnancy, Childbirth, and Puerperium), the base APR
DRGs were consolidated from 12 to 6. Severity of illness subclass 1
through 3 were retained, and severity of illness subclass 4 was
consolidated into a single APR DRG, except for cesarean section and
vaginal deliveries, which were maintained as separate APR DRGs. This
consolidation reduced the total number of obstetric APR DRGs from 48 to
22.
The Medicare patient volume in MDC 15 was very low, allowing for a
more aggressive consolidation. For MDC 15, we consolidated 28 base APR
DRGs into 7 base CS DRGs. For each of the 7 consolidated base MDC 15
DRGs, we combined severity of illness subclasses 1 and 2 into one DRG
and severity of illness subclass 3 and 4 into another DRG. This
consolidation reduced the total number of MDC 15 DRGs from 112 in the
APR DRG system to 14 CS DRGs.
In MDC 19, we consolidated 12 base DRGs into 4 base DRGs. We
retained the 4 severity of illness subclasses in MDC 19 for each of the
4 base DRGs. In MDC 20, the base APR DRG for patients who left against
medical advice has severity of illness subclass 1 and 2 consolidated
and severity of illness subclass 3 and 4 consolidated. The remaining 4
base DRGs were consolidated into 1 base DRG with 4 severity of illness
subclasses.
We did not consolidate any of the pre-MDC subclass 4 APR DRGs such
as Heart Transplant. As explained earlier, pre-MDC DRGs are DRGs to
which cases are directly assigned on the basis of ICD-9-CM procedure
codes. These DRGs are for liver and/or intestinal transplants, heart
and/or lung transplants, bone marrow transplants, pancreas transplants,
and tracheotomies. For the pre-MDC DRGs, except for Bone Marrow
Transplant, we consolidated severity of illness subclasses 1 and 2 into
one DRG. In addition, the three base APR DRGs for Human
Immunodeficiency Virus (HIV) with multiple or major HIV-related
conditions had severity of illness subclasses 1 and 2 consolidated.
In total, we reduced 1,258 APR DRGs to 861 CS DRGs. In Appendix C
of this proposed rule, we present the 861 unique combinations of CS
DRGs.
Table F below includes a description of the consolidations that we
did within each individual MDC and includes information about the total
number of DRGs that were eliminated from the APR DRGs to develop the CS
DRGs.
BILLING CODE 4120-01-P
[[Page 47905]]
[GRAPHIC] [TIFF OMITTED] TR18AU06.007
Appendix D of the FY 2007 IPPS proposed rule (71 FR 24433) showed
the crosswalk of each CS DRG to its respective APR DRG. We numbered the
DRGs sequentially and incorporated the severity of illness subclass
into the DRG
[[Page 47906]]
description. However, within the range of sequential numbers used for
an MDC, we retained some unused numbers to allow for future DRG
expansion. By using a three-digit number for the CS DRGs, we also avoid
the need for reprogramming of computer systems that would be necessary
to accommodate a change from the current three-digit DRG number to
separate fields for the base CS DRG number and the severity of illness
subclass.
Severity DRGs represent a significant change from our current DRG
system. In addition to changing the way claims are grouped, severity
DRGs introduce other issues requiring additional analysis, including
possible increases in reported case-mix and changes to the outlier
threshold. Our analysis of these issues is outlined further in the next
section.
Comment: A number of commenters suggested further refinements that
need to be made to the CS DRGs to account for complexity as well as
severity. Commenters recommended that CMS create a ``task force'' to
analyze situations in which the complexity of the patients is not
always appropriately recognized by the proposed CS DRGs. One commenter
stated that the severity system is flawed because it does not capture
resource utilization or the utility of technologies that would be more
appropriate for beneficiaries.
The commenters also provided examples of base DRG assignments under
the current CMS DRGs that are different than those under the CS DRG.
For instance, one commenter indicated that high dose interleukin-2 (HD
IL2) is used to treat otherwise terminal cancer patients with
metastatic renal cell cancer and melanoma. HD IL2 can evoke an immune
response that eradicates the tumor and provides a potential opportunity
for recovery. In the FY 2004 IPPS final rule, CMS created a new
procedure code for HD IL2 therapy and assigned these patients to DRG
492. The commenter reported improved access to HD IL2 therapy as a
result of these changes. However, the commenter was concerned that
these patients could potentially be assigned to a number of different
DRGs under the CS DRGs with a weighted average reduction in the
relative weight of 58 percent. The commenter suggested revising the CS
DRG to take into account the complexity associated with providing HD
IL2 therapy. Other commenters noted:
Some patients in need of ventricular assist devices (VAD)
are currently paid in the same group as heart transplant patients using
the CMS DRGs. Other heart assist devices are assigned to DRG 525 (Other
Heart Assist Implant). These patients will be paid in the same group as
implantable cardiac defibrillator patients under the CS DRGs. The
commenters noted that it is possible that payment for these kinds of
cases could decline by more than 70 percent under the proposed rule.
The commenter believed that the assignment under the CS DRGs will not
recognize higher resources associated with treating VAD patients
relative to those in need of implantable cardiac defibrillators.
Bare metal and drug-eluting coronary stents would be
assigned to the same CS DRG eliminating the distinction currently made
for these two different kinds of stents in the CMS DRGs. The commenters
noted that CMS created separate DRGs for drug eluting and bare metal
stents to recognize the higher costs of drug eluting stents.
Defibrillator device replacement cases are currently
assigned to DRG 551 (Permanent Cardiac Pacemaker Implant With Major
Cardiovascular Diagnoses or AICD Lead or Generator). The commenters
were concerned that these cases would be assigned to the DRGs for
Permanent Cardiac Pacemaker Implant With & W/O AMI, Heart Failure or
Shock and the cases would revert back to classification based on
presence or absence of heart failure, AMI, or shock, rather than an
MCV.
Patients receiving tPA thrombolytic therapy for stroke are
currently assigned to DRG 559 (Acute Ischemic Stroke With Use of a
Thrombolytic Agent). CMS revised the DRGs in FY 2006 to provide a
separate DRG for stroke patients being treated with a reperfusion
agent. According to the commenter, these patients will be paid in the
same group with all stroke cases under CS DRGs undoing the change that
CMS made in FY 2006 according to the commenter.
In FY 2006, CMS created separate DRGs for the revision of
hip or knee replacement (DRG 545, Revision of Hip or Knee Replacement)
to distinguish the higher resources associated with revisions from
original replacements. Under CS DRGs, these cases would be assigned to
the same group as the original replacement (bilateral or single) of the
specific joint. The commenters were concerned that CMS' proposal to
adopt cCS DRGs will undo a proposal that it adopted just 1 year ago.
Combined anterior/posterior spinal fusion cases are
currently assigned to DRG 496 (Combined Anterior/Posterior Spinal
Fusion). This procedure requires two separate incisions and turning the
patient over during surgery. The commenter expressed concern that under
the CS DRG system, these cases would be paid in the same group as all
spinal fusions and the new DRGs would not recognize higher costs
associated with treating these patients.
The APR DRG and CS DRG systems do not have DRGs for lung
transplants alone or combined kidney/pancreas transplants. The
commenter suggested that there should be separate DRGs for these
transplants in addition to liver/intestinal transplants. The commenter
indicated that lung transplants alone have lower costs and should not
be in the same DRG as combined transplants.
Response: In the vast majority of clinical situations, severity of
illness and treatment complexity are directly related and are therefore
addressed in the CS DRGs. As discussed in the proposed rule, there are
a number of clinical situations, primarily related to the use of
specific technologies, in which low severity patients receive care with
high treatment complexity and cost. We acknowledge that further
refinements are needed to the proposed CS DRG system before it will be
ready for adoption. In the FY 2007 IPPS proposed rule, we noted a
number of concerns we had with adopting the CS DRGs in FY 2007 (71 FR
24027). Among them was our concern that we might need additional time
to refine the CS DRGs to better account for complexity as well as
severity. The commenters have brought some important issues to our
attention that we believe should be carefully considered before we
adopt the CS DRGs. We will consider these issues if we were to make
further modifications to the CS DRGs and propose adopting them for FY
2008. However, as we indicate elsewhere in this final rule, we have
engaged a contractor to assist us with completing an evaluation of
alternative DRG systems that may better recognize severity than the
current CMS DRGs and meet other criteria that would make them suitable
to adopt for purposes of payment under the IPPS. We expect to complete
this evaluation of alternative DRG systems quickly this fall as part of
moving forward on adopting a revised DRG system that better recognizes
severity in the IPPS rulemaking for FY 2008. It is possible that some
of the alternatives that we evaluate for better recognizing severity in
the DRGs will be based on the current CMS DRGs. If we were to develop a
clinical severity concept that uses the current CMS DRGs as the
starting point, it is possible that the issues raised by the commenters
will no longer be a concern. If, however, we were to propose adopting
the CS DRGs for FY 2008, we would consider the issues raised by the
commenters as we make further refinements to this DRG
[[Page 47907]]
system so it accounts for complexity as well as severity as a proxy for
relative resource use.
Comment: One commenter suggested a way of accounting for
therapeutic complexity when assigning a patient under the CS DRGs. The
commenter indicated that the patient should be assigned to a severity
of illness subclass based on whether they received a separately
identifiable technology that provides a clinical benefit and results in
significantly higher case costs independent of severity level relative
to the base DRG. The commenter also recommended that complexity levels
be superimposed on the proposed severity of illness levels, such that
either severity or complexity, or a combination of the two, would
increase the classification of a case. The classifications would be
defined as severity of illness or complexity (1-4).
Response: We will further consider how to incorporate complexity
into the assignment of a patient to a severity of illness subclass
under either the CS DRGs if we propose to adopt them in FY 2008 or the
alternative DRG system that we will consider once we complete our
evaluation of potential DRG systems. It may be possible to assign a
case to a severity of illness subclass under either the CS DRGs, the
alternative system we plan to evaluate or even underrefined CMS DRGs by
using the procedures or services that are provided to the patient as a
measure of resource use (that is, complexity). We agree that the use of
a separately identifiable procedure or technology may be useful in
determining the assignment of a patient to a specific subclass of a
base DRG much like what occurs today under the CMS DRGs when assigning
patients with placement of a bare metal or drug-eluting stent to
separate DRGs.
Comment: Some commenters were concerned that CMS did not propose to
adopt the already widely used APR DRGs endorsed by MedPAC, but rather
proposed to adopt CMS'-developed CS DRGs. Some commenters stated that
the CMS analysis that resulted in the CS DRGs is skewed because
Medicare uses a truncated list of diagnosis and procedure codes. The
commenter noted that CMS does not use comparable data to what 3M uses
for the complete APR DRGs. Another commenter stated that the APR DRGs
are the most advanced DRG classification system available yielding the
most clinically homogenous groupings and the greatest predictive power.
This commenter believed that it provides a sound basis for developing
CS DRGs.
Response: MedPAC did not endorse using the APR DRGs.\6\ However,
MedPAC's analysis that led to their recommendation to refine the
current DRGs to more fully account for difference in severity of
illness among patients was based on the APR DRGs. Even though MedPAC's
analysis was based on the APR DRGs, it recognized that CMS would have
to consider a number of different factors when making decisions in the
design of a DRG system. For instance, MedPAC noted that the large
number of DRGs might mean that CMS would be faced with establishing
weights in many categories that have few cases and thus potentially
creating unstable estimates. To avoid creating refined DRGs with
unstable relative weights, MedPAC recommended that the Secretary should
be selective in adopting fine clinical distinctions similar to those
reflected in the APR DRGs. Refining the DRGs will require carefully
weighing the benefits of more accurate and economic distinctions
against the potential for instability in relative weights based on a
small number of cases.\7\ We do not believe that MedPAC expected that
we would adopt the APR DRGs without any changes.
---------------------------------------------------------------------------
\6\ Medicare Payment Advisory Commission. March, 2005. Report to
the Congress, Physician-Owned Specialty Hospitals, page 76.
\7\ Ibid, page 41.
---------------------------------------------------------------------------
Comment: Some commenters stated concerns with merging of dissimilar
patient groups in the CS DRG system. Combining clinically dissimilar
groups across the severity dimension has the potential to render the
groups far less clinically meaningful. It is anticipated that such
groups would have to be restructured frequently as treatment patterns
change for primarily very ill patients. Some commenters stated that it
seems that more categories may have been consolidated than necessary,
giving up clinical and statistical homogeneity unnecessarily. It was
noted that this is especially important if the CS DRGs are envisioned
as part of the basis for evolving efforts towards value-based
purchasing where such measures as post-admission complications and
readmissions need to be evaluated on a risk-adjusted basis. An
alternative approach was suggested to keep the patient groups separate
from a classification perspective, but merge from a payment analysis
perspective.
Response: As discussed above, the CS DRGs are based on the APR DRG
system. The APR DRG system is comprised of 314 base DRGs, which are
divided into four severity of illness subclasses. We believe that the
APR DRG greatly improve recognition of resource use and clinical
similarity of patients. However, in our analysis of the APR DRG system,
we observed that cases assigned severity of illness subclass 4 within
an MDC have similar average charges. Furthermore, our clinical
consultants frequently considered the severity of illness subclass 4
patients across DRGs within an MDC to have a closer clinical
resemblance than to lower severity patients in their respective DRGs
because, in severely ill patients, comorbidities have a greater impact
on severity than the reason for admisssion. Treatment patterns will
evolve for these multiple comorbidities leading to severity level 4
(sepsis, shock, acute renal failure, among others). However, to the
extent that these multiple comorbidities will change (for example,
better treatment of septic shock so that this occurs less frequently)
they should do so equally across all patients within an MDC. With
respect to the comment about maintaining more DRG groups for purposes
other than payment under the IPPS, we proposed to adopt the CS DRGs
only for Medicare inpatient hospital payment. We chose to consolidate
the APR DRGs to increase administrative simplicity, minimize the impact
on existing claim processing systems, and avoid having multiple DRGs
with low case volumes and similar weights. The commenter's suggestion
would essentially result in many more DRGs having exactly the same
weight. Therefore, we do not see a need to adopt the commenter's
suggestion. However, a hospital or any other entity can use an
alternative patient classification system for the other purposes
suggested in the comment.
Comment: Some commenters stated that the CS DRGs are problematic
because they were not designed to accommodate non-Medicare populations.
The commenters indicated that many hospitals use DRGs for quality and
other outcome measurements and that the proposed CS DRGs may not be
clinically appropriate for these purposes.
In addition, another commenter stated that private health insurance
company contracts use the CMS DRG relative weights as the payment basis
for inpatient services delivered to members under private health
insurance plans. The commenter stated that because these contracts are
typically negotiated based on a fairly static assumption of CMS DRGs
(including classification and weights), the proposed redistribution
will disrupt virtually every contract because of the varying services
[[Page 47908]]
consumed by members covered under private health insurance. The
commenter urged CMS to provide a greater lead time in implementing
changes to the DRG system and relative weight methodology to allow
health insurers more time to model the impact of the methodological
changes to their hospital contracts.
Response: We acknowledge that Medicare DRGs are sometimes used by
non-Medicare payers for their own purposes. However, CMS' primary focus
of updates to the Medicare DRG classification system is on changes
relating to payment for services furnished to Medicare beneficiaries,
not the obstetric, pediatric, or neonatal population. Cases involving
these patients are found far less frequently among Medicare
beneficiaries than in the general population. In fact, we applied
consolidations to the APR DRGs to develop the CS DRGs to recognize that
the APR DRGs were developed to accommodate all patient populations and
there would be many DRGs with few Medicare cases or insufficient
differences in the relative weights to warrant us maintaining a
separate DRG. We encourage other payers that use Medicare's DRG system
for payment to make appropriate modifications for patient populations
that are found infrequently among Medicare beneficiaries such as
neonates and children. Again, as we stated above, a hospital or any
other entity can use an alternative patient classification system for
purposes other than Medicare payment.
In response to the commenter's concern with regard to the impact on
private health insurance plans, we are improving our relative weight
methodology to make Medicare payments more accurate. We utilize
Medicare specific data to calculate the relative weights designed to
pay Medicare costs. We have a fiduciary responsibility to administer
the trust fund in order to provide quality care for our beneficiaries
and that, not private payer contracts, is our foremost concern.
However, as we noted earlier in this section, we are postponing the
implementation of the HSRV methodology while we study its impact on
charge compression. Instead, we are using a more similar approach to
calculating the IPPS relative weights that is used in the OPPS. That
is, rather than using a hospital-specific relative weighting
methodology, we are standardizing charges to remove relevant payment
factor adjustments and then adjusting those charges to costs using
national cost center CCRs.
In addition, we are adopting a 3-year transition of the relative
weights. We believe this transition may also mitigate any potential
impacts to private payer contracts from the changes to the DRG relative
weights. During the first year of the transition, the relative weights
will be based on a blend of 33 percent of the cost-based weights and 67
percent of the charge weights. In the second year of the transition,
the relative weights will be based on a blend of 33 percent of the
charge weights and 67 percent of the cost-based weights. In the third
year of the transition, the relative weights will be based on 100
percent of the cost-based weights.
Comment: One commenter suggested that CMS seek further refinements
to the DRGs for mental services. The commenter suggested that these
DRGs have been underpaid for many years.
Response: We will consider whether the psychiatric DRGs need
further refinements as we proceed to refine the DRG system to better
recognize severity for FY 2008. We note that the application of cost-
based weights will increase Medicare's payments for the psychiatric
DRGs in FY 2007.
Comment: Some commenters inquired how other prospective payment
systems such as the IPF PPS and LTCH PPS that rely upon the IPPS DRG
classifications would be affected by the changes to adopt CS DRGs.
Response: We did not propose any changes to the DRG classifications
systems used under the IPF PPS or the LTCH PPS in the IPPS proposed
rule. However, we acknowledge that these PPSs use the IPPS DRG
classifications to make payment determinations. Furthermore, we note
that the refinements we are adopting to the current CMS DRG system to
better recognize severity (which are discussed in detail in section
II.C.7. of this final rule) will be applicable under the IPF PPS and
LTCH PPS, just as past annual updates to the IPPS DRG classifications).
We will need to consider whether corresponding changes need to be made
to these other payment systems once final decisions are made about how
DRG classification will occur under the IPPS in the future. Payment
rate and policy changes to the IPF PPS and LTCH PPS went into effect
for RY 2007 on July 1, 2006. These PPSs are using the Version 23 IPPS
GROUPER for the first 3 months of RY 2007 (July 2006 through September
2006). Consistent with the IPPS, the IPF PPS will use Version 24 of the
IPPS GROUPER, effective October 1, 2006. No further changes will be
made to the IPF PPS until next July. Under the LTCH PPS, changes to the
LTC-DRGs were proposed for FY 2007, based on the proposed Version 24
IPPS GROUPER (71 FR 24049 through 24068), and changes to the LTC-DRGs
that will be effective October 1, 2006, based on the finalized Version
24 IPPS GROUPER (presented in this final rule) are discussed in section
II.F. of the preamble of this final rule. Any changes to the DRG
classification systems for these prospective payment systems would be
undertaken through notice and comment rulemaking in their respective
proposed rules.
Comment: One commenter stated that it was not clear how the
judgment was made for the MDC 11 severity subclass 4 example shown that
these average charge values were sufficiently similar to consolidate.
The commenter suggested that CMS provide further information about the
criteria and considerations it used to judge categories as low volume
and potentially unstable and to judge the mean charges (or costs) as
sufficiently similar to warrant consolidation. One commenter expressed
concern about the consolidations related to obstetrics and psychiatric
care services.
Response: As discussed above, the CS DRGs are based on APR DRGs
that are divided into severity subclasses 2 through 4 subclasses which
greatly increase the resource and clinical similarity of the patients.
Furthermore, as discussed above, our clinical consultants frequently
considered the level 4 severity patients across DRGs within an MDC to
have a closer clinical resemblance than to lower severity patients in
their respective DRGs. In consolidating the severity level 4 patients
in an MDC, volume was a primary consideration along with the extent of
clinical difference. For example, in MDC 11 severity level 4, kidney
transplants were kept in a separate group and not consolidated with the
other MDC 11 surgical DRGs because of the clinical distinctiveness of
patients having a major organ transplant.
Comment: One commenter expressed concern that patients may need to
suffer adverse consequences in order for the case to be assigned to a
higher severity level. The commenter believed that the severity
grouping should reflect complexity and patient benefit as well and
should allow for an increased severity/complexity level even without
adverse patient consequences.
Response: The current DRG system assigns a CC status to most
patients with a complication or adverse event that occurs after
admission. Although in the CS DRGs post admission complications can
result in an increase in a patient's
[[Page 47909]]
severity level, patients are primarily assigned to the higher severity
levels (levels 3 and 4) based on the presence of multiple serious
comorbidities in multiple organ systems rather than a single adverse
event. Thus, unlike the current DRGs in which a single post admission
complication can place the patient in a higher paying DRG, the CS DRGs
in general require multiple significant problems to be present in order
for a higher severity level to be assigned. In general, these patients
will be more costly to treat. The system does not reward ``adverse''
consequences as suggested by the commenter but instead recognizes
severity of illness will also be associated, at least in part, with
resource use.
Patients are increasingly admitted to the hospital at high severity
of illness. Adverse consequences can and do occur within the hospital.
However, some of those consequences are unavoidable (particularly for
patients who are admitted at a high severity of illness). Section
5001(c) of Pub. L. 109-171 requires that, beginning in FY 2009, we
select diagnosis codes associated with at least two conditions that
result in assignment of a higher weighted DRG and that reasonably could
be prevented through the application of evidence-based guidelines.
Beginning with discharges in FY 2009, section 5001(c) requires that we
not assign cases to higher weighted DRGs based on the presence of these
preventable conditions. Section 5001(c) also mandates that, for
discharges on or after October 1, 2007, we require a hospital to
include the secondary diagnosis of a patient at admission as part of
the information required to be reported by a hospital for payment
purposes. We believe that the concerns of the commenter will be
addressed when we implement section 5001(c) of Pub. L. 109-171.
Comment: A number of comments supported CMS' goal of improving
payment accuracy. However, the commenters stated that the need for and
best approach to changing the patient classification system has not
been objectively demonstrated. One commenter provided a sophisticated
statistical analysis that it asserted confirms MedPAC's conclusion that
changes are needed to improve payment accuracy. However, this commenter
suggested the greatest improvement in cost-margin consistency resulted
from switching the basis for the DRG weights from charges to cost and
neither the HSRVcc methodology nor the CS DRGs improved payment
accuracy. Other commenters indicated that more careful analysis is
needed, along with greater access to the details of the CS DRG
methodology. The commenters identified the following concerns:
Validation. The commenters indicated that it is unclear
whether there is a need for a new patient classification system. The
commenters stated that the implication of moving from a resource-based
system to a severity-based payment system must be more fully explored
and understood. They indicated that CMS provided no analysis that shows
that the proposed changes result in an improved hospital payment system
compared to the existing DRG system or APR DRGs.
Budget neutrality adjustment. The commenter indicated that
the proposed rule did not address an adjustment for improved
documentation and coding or even a methodology for determining one. The
commenter suggested that CMS not apply an adjustment for more
comprehensive documentation and coding that increases perceived but not
real case mix until there is evidence that one is needed. The commenter
requested that CMS monitor actual changes in coding and documentation
practices associated with implementation of inpatient payment reforms
to determine if any base payment adjustments are needed rather than
adjust payments in anticipation of such changes.
Availability of the GROUPER. Many commenters stated that
the proprietary nature and lack of transparency of the proposed CS DRG
GROUPER are concerns. The current DRG GROUPER logic has been in the
public domain since the inception of IPPS. Without the new GROUPER
logic, the commenters believed that it is virtually impossible for
anyone to thoroughly analyze the system and comment. The commenters
urged that CMS make any new classification system widely available to
the public on the same terms as the current DRG system. Some commenters
stated that CMS should provide the GROUPER for the CS DRGs and open a
new public comment period. Several commenters were concerned about the
cost of the GROUPER if the CS DRGs were implemented.
Too few diagnoses and procedures considered. The
commenters are concerned that the current CMS GROUPER does not use all
diagnosis and procedures that affect a patient's severity of illness
and/or the resources utilized. The commenters believed that the number
of secondary diagnoses may be an important factor in determining
differences in patient characteristics.
Response: With respect to the comment about the need for a new
patient classification system, the proposed rule noted that we modeled
the CS DRGs and observed a 12-percent increase in the explanatory power
(or R-square statistic) of the DRG system to explain hospital charges.
That is, we found more uniformity among hospital total charges within
the CS DRGs than we did with Medicare's current DRG system (71 FR
24027). Thus, we believe that there is clear evidence that improvements
can be made to the current DRG system that will reduce heterogeneity
among patients within a given DRG. While this statistic indicates that
the current CMS DRG system can be refined to improve payment accuracy,
we agree that it does not necessarily mean we should adopt the system
we proposed. As suggested by the commenters, there are a number of
other evaluation criteria that we need to consider before deciding
whether to adopt the CS DRGs or a potential alternative. We describe
these criteria in more detail below. With respect to the comments about
a budget neutrality adjustment to account for potential improvements in
documentation and coding, we discuss the comments and our responses on
this issue more fully in the next section of this final rule. The
comment about the availability of the GROUPER is related to a number of
detailed comments we received about the potential for Medicare to adopt
a proprietary DRG system. We have provided a more detailed description
of these comments and our responses below. With respect to the comment
about fully utilizing all of the diagnosis and procedure codes
submitted on the claim, we note that CMS does not process codes
submitted electronically on the 837i electronic format beyond the first
9 diagnosis codes and the first 6 procedure codes. While HIPAA requires
CMS to accept up to 25 ICD-9-CM diagnosis and procedure codes on the
HIPAA 837i electronic format, it does not require that CMS process that
many diagnosis and procedure codes. As suggested by the commenters,
there may be value in retaining additional data on patient conditions
that would result from expanding Medicare's data system so it can
accommodate additional diagnosis and procedure codes. We will consider
this issue while we contemplate refinements to our DRG system to better
recognize patient severity. However, extensive lead time is required to
allow for modifications to our internal and contractors' electronic
systems in order to process and store this additional information. We
are unable to move forward with this recommendation without carefully
evaluating implementation issues. One
[[Page 47910]]
issue that we expect to consider in deciding whether to adopt such a
major systems change is how frequently information beyond the ninth
diagnosis code and sixth procedure code affects DRG assignment. Given
the cost of an infrastructure change to accommodate this request, we
want to be certain that there are sufficient benefits to justify the
costs. Again, we will continue to carefully evaluate this request to
expand the process capacity of our systems.
Comment: Some commenters stated that the CS DRG grouping
methodology based on average charges is inconsistent with the proposed
changes to adopt cost relative weights. The commenters recommended
using the HSRVcc methodology to determine cost-based weights for
consolidating the APR DRGs into CS DRGs.
Response: As explained above, we are not adopting the HSRVcc
methodology for FY 2007 because of our concerns about the interaction
of charge compression with the hospital-specific portion of the cost
weight methodology. Instead, we are setting relative weights based on
the estimated cost of the DRGs where cost is determined by applying the
national average CCRs to the standardized charges for each DRG in each
of the 13 cost centers. In general, when we consider whether to further
distinguish types of cases within a DRG in order to create a new DRG or
to reassign these cases to a different DRG, we are comparing cases that
are clinically similar. Therefore, it is possible or even likely that
these cases will be using the same mix of routine and ancillary
services and the results of the analysis will be similar whether the
cases are compared based on average costs or charges. That is, the
cases will be using services that have comparable charge markups over
costs and the analysis will produce the same conclusion whether the
comparison between cases is based on costs or charges. The major
differences between cost and charge weights will occur when comparing
across clinically dissimilar services that use a different mix of
routine and ancillary services with variable markups. For this reason,
we believe that we can continue to do our initial evaluation of
potential DRG changes using average charges. Given the complexity
associated with developing cost-based weights, we believe our
preliminary analysis for evaluating whether to make a DRG change should
use charges as a proxy for costs. However, we will consider the
commenters' suggestion and, to the extent feasible, consider whether it
is possible to evaluate potential DRG changes using costs as well as
charges.
Comment: Numerous comments expressed concerns about the use of a
proprietary DRG classification system. The commenters indicated that
the current DRG GROUPER logic has been in the public domain since the
inception of the IPPS. Many commenters noted that the source code,
logic and documentation for the current DRG system can be purchased
through the National Technical Information Service. The commenters
stressed the importance of maintaining transparency within the DRG
system (that is, any new DRG system should be available to the public
on the same terms as the current one). The commenters stated that any
methodology used for the Medicare GROUPER must not be based on a
proprietary system. One commenter questioned how future DRG refinements
would be made if the underlying system is owned by 3M.
A number of commenters were concerned that it was not possible to
thoroughly analyze the proposed CS DRGs and provide comments without
the GROUPER logic. Other commenters stated that limited information on
the proposed CS DRGs hampered their ability to conduct modeling of the
new system. Some commenters raised serious concerns allowing CMS to
assign the CS DRG without hospitals having the ability to group the
case themselves. According to the commenters, without the CS DRG
information, revenue and patient receivables cannot be recorded
accurately. The commenters stated that hospitals must have the ability
to accurately estimate payments in evaluating strategic initiatives,
business plans, budgets, marketing, staffing, and other critical
decisions. Commenters noted that CMS provided a link to a web tool on
the 3M Web site that allowed hospitals to conduct their own analyses of
the impact of moving to CS DRGs. However, these commenters stated that
the reality was that if a hospital does not have its own APR DRG
GROUPER software, it can only obtain CS DRG information one case at a
time by entering specific diagnostic and procedure codes.
Several commenters stated that if CS DRGs are adopted and the
GROUPER remains proprietary, they would be limited in their ability to
educate and assist hospitals in use of the new system. One commenter
indicated that the current 3M product is proprietary and not available
in the public domain for hospitals or their software vendors who
develop and support their patient account billing and case management
software. The commenter also stated that it does not have any access to
the underlying codes, conditions and edits utilized by 3M with its
product and as a result could not accurately comment on the interaction
between severity and complexity associated with individual claims in
contrast to resource consumption. The commenter stated that, although
hospitals are not required to have a GROUPER, hospitals that hold
compliance as a top priority rely on a grouper/encoder to ensure that
claims meet all edits prior to submission.
Several commenters stated that a single company's monopoly over the
DRG system would be costly to hospitals. The commenters indicated that
it would be more difficult to obtain the system to integrate it into
hospitals' existing systems. The commenters reported that Maryland
hospitals report a GROUPER price of $20,000 per hospital with the
ultimate price varying based on criteria such as whether it is used on
a mainframe or personal computer. Another commenter expressed concerns
that only 3M would be providing access to the GROUPER. The commenter
stated that with over 4,000 hospitals requiring a new severity-adjusted
DRG GROUPER, it is not feasible or reasonable to expect that one vendor
could service all the hospitals nationally in the few months between
the posting of the final IPPS rule and an October 1, 2006
implementation. The commenter stated that having 3M maintain control of
the GROUPER software limits access by other software vendors to begin
reprogramming of the many computer systems that would need to be loaded
with the CS DRGs that is currently incompatible with the CMS DRGs. The
commenter stated that there will need to be sufficient time between
making the GROUPER available and implementation so that hospitals can
test their systems, and study the impact on their facilities.
Another commenter stated that it offered software that hospitals
and health plans utilize in managing the billing, coding, and payment
for inpatient hospital services under the DRGs. The development of
software related to Medicare's DRG system by private companies is
possible only because the current DRG methodology is available in the
public domain. The commenter also noted that the public can obtain full
access to the details underlying the CMS DRG system by purchasing
information and software from the National Technical Information
Service for a nominal charge in a timely manner well in advance of the
implementation of changes. The commenter noted the information was
available to all of the public simultaneously and no company
[[Page 47911]]
currently has a competitive advantage in producing DRG products. The
commenter added that CMS currently engages in an open and comprehensive
discussion about the structure of the DRG methodology through a variety
of mechanisms including notices published in the Federal Register. CMS
releases sufficient detail about its methodology in electronic formats
to enable providers, health plans, and vendors to develop and validate
their own computer programs. The commenter expressed concern that
unfettered access to the underpinnings of the DRG system would not
continue to be available under the CMS proposal to adopt CS DRGs. The
commenter suggested the following criteria that a new DRG system should
meet in order to be adopted by Medicare:
Software distribution comparable to what is currently made
available, which includes:
GROUPER source code which produces all pertinent return
information;
All underlying tables that drive the GROUPER with
documentation;
A complete set of test cases to validate the functioning
of the software;
Complete system and user documentation;
Contact people who can and will respond to questions in a
timely fashion;
The right to redistribute the methodology to business
partners and consultants;
The right to translate source code to other technology
environments and to integrate it into other systems;
Pre-releases of software and documentation well in advance
of planned implementations; and
An open inclusive process for considering future
enhancements.
The commenter indicated that the agency must also ensure that
whatever refinement methodology is adopted is open to public discussion
and scrutiny, now and on an ongoing basis. The commenter stated that
transparency is critical to advancing affordability in our health care
system.
Response: With respect to making information available for the
public to analyze the proposed DRGs, we were cognizant of this issue
and attempted to provide as much information as possible that would
allow the public an opportunity to comment meaningfully on the proposed
CS DRGs. We provided the following data files on the CMS Web site at no
cost to the public to assist with understanding our proposed rule:
Provider Specific File.
Impact file for IPPS FY 2007 Proposed Rule.
CCRs and Weighting Factors.
DRG Relative Weights.
CS DRG HSRVcc relative weights.
CAH List for FY 2007 Proposed Rule.
In addition to this information, we made available for purchase
both the FY 2004 and FY 2005 MedPAR data that were used in simulating
the policies in the IPPS proposed rule. We also discussed the proposed
rule in at least two national teleconferences that were open to the
public. One of these calls was a Special Hospital Open Door call that
was scheduled for 1 and 1\/2\ hours and was completely devoted to
explaining the IPPS proposed rule and answering questions from the
public. There were over 1,100 calls into this national teleconference.
Finally, we were able to provide access to a Web tool on 3M's Web site
that would allow an end user to build case examples using the proposed
CS DRGs. While the commenters are correct that these case examples
could only be analyzed one at a time, the tool did provide a detailed
explanation of how the severity of illness was assigned and the
demographic and diagnostic information that went into that
determination. Further, other information about the CS DRGs and APR
DRGs were available at that Web site, including access to the APR DRG
definitions manual.
We acknowledge the many comments suggesting that the logic of
Medicare's DRG system should continue to remain in the public domain as
it has since the inception of PPS. We also acknowledge the commenters'
concern about the impact of moving to a proprietary system and the
potential for limiting public access to the underlying GROUPER logic
relative to the current CMS DRGs. We note that the issues associated
with using a proprietary DRG system were well illustrated in a public
comment that we received from the Maryland Health Services Cost Review
Commission (HSCRC). Maryland adopted the APR DRGs in June 2004. The
commenter noted that ``despite the advance notice, a number of
hospitals had not acquired the APR DRG GROUPER until near the time for
full implementation to begin. In addition to acquiring the GROUPER,
hospitals had to deal with issues of integrating the GROUPER with other
hospital systems, which was at times difficult with proprietary
systems.'' The commenter further noted that Maryland has 47 acute care
hospitals and ``moving the nation's entire hospital industry to a new
system in a short period is likely to be much more difficult.'' The
commenter indicated that ``CMS has the opportunity to avoid some of the
transition issues the HSCRC faced by placing the CS DRG logic in the
public domain or by requiring open licensing of the GROUPER at
reasonable rates.'' The commenter noted that consultants and vendors to
hospitals have struggled to obtain access to the GROUPER as they
advised their clients.
The public comments and Maryland's experience with APR DRGs have
led to many commenters recommending that Medicare should adopt a new
DRG system that is in the public domain. As we evaluate alternative
severity classification systems, we will use public access to the
system as an important element in evaluating whether each system can be
adopted by Medicare. We will continue to strive to promote transparency
in our decision making as well as in future payment and classification
systems, as we have done in the past.
Comment: A number of commenters suggested that a more
straightforward approach to achieving the same or similar objective
would be for CMS to refine the current DRG classification system by
retaining the current base DRGs (eliminating the current paired DRGs
with and without CC) and adding 3-4 levels of severity, rather than
using APR DRGs. This option would preserve the many policy decisions
that CMS has made over the last 20 years that are already incorporated
into the DRG system and yet adjust hospital payments to reflect the
cost of care based on patient needs and conditions. Other commenters
suggested designating certain DRGs as device-dependent to ensure that
device costs are appropriately reflected in the claims file data. Some
commenters suggested that CMS retain the current DRG system but revise
the CC list as an alternative approach to better recognizing severity
of illness in the DRG system.
Several commenters stated that CMS did not conduct an objective
study of the CS DRGs although alternatives for the APR DRG system are
readily available. These commenters asked whether CMS considered
adopting an alternative DRG system that could also better recognize
severity.
Two commenters proposed alternative severity of illness systems to
the APR DRG system. One commenter suggested that we use the Refined DRG
(RDRG) severity of illness system which is supported by Health Systems
Consultants, Inc, that contains 1,274 groups with 350 base DRGs. The
commenter explained that each of the medical base DRGs is divided into
three severity classes and each of the surgical base DRGs is divided
into four severity
[[Page 47912]]
classes. In addition, there are neonate groups based on birth weight,
seven DRGs that do not have severity classes and an early death group
in each MDC created to remove low outliers according to the commenter.
The commenter noted that the research for the RDRG system was
undertaken between 1986 and 1989 under a Health Care Financing
Administration (now CMS) cooperative agreement. The commenter indicated
that the RDRG system has been updated annually using the current CMS
complications and comorbidities list since 1989. Solucient, LLC has
also used the previous HCFA DRG severity work to develop a risk
adjusted DRG system which they refer to as Refined Diagnosis Related
Group (R-DRG). Solucient also reports that they have updated their
system annually with ICD-9-CM code changes. Another commenter noted
that HSS/Ingenix has developed an all-payer severity-adjusted DRG
system (APS-DRGs) which contains 1,130 case-mix cells with 376
consolidated DRGs plus 2 error categories. The commenter indicated
that, outside of MDC 15, all consolidated DRGs are divided uniformly
into three severity levels. The commenter also indicated that the
number of severity levels within MDC 15 depends upon the consolidated
DRG in the APS-DRG system.
One commenter stated that based on their analysis none of the off-
the-shelf Version 23 DRG systems is the best alternative. Rather, it
was recommended that a hybrid system be created which would combine the
best features of each system. The commenter stated that the proposed CS
DRG system or the current CMS DRG system would be the preferred systems
to modify. One commenter stated that the use of objective, physiologic
data on admission to enhance claims data significantly improves the
accuracy of any severity stratification. The commenter suggested that
CMS conduct one or more demonstration projects studying claims data
enhanced with objective, time-stamped electronically captured
laboratory results as an alternative approach for severity adjustment
for payment and quality assessment purposes.
Response: The approach suggested in the comments to incorporating
severity measures into the current CMS DRG system may be a viable
option that we will evaluate in the coming year. With respect to the
comment that we undertake demonstration projects to study alternative
ways of better recognizing severity in the DRG system, we are concerned
that such an endeavor could not be completed in time for FY 2008
implementation. We believe it is very important to make improvements to
the DRG system to better recognize severity rapidly and there are a
number of different ways that improvements in payment accuracy can be
achieved without undertaking a lengthy demonstration project. As
suggested by the commenters, much research has already been completed
on alternative DRG systems. We believe it is likely that at least one
of these systems (or potentially a system that we develop ourselves
based on our own prior research) will be suitable to achieve our goal
of improvements in payment accuracy by FY2008. We are currently in the
process of engaging a research contractor to evaluate the 3M Severity
of Illness DRG products along with the other DRG severity systems that
have come to our attention during the comment process.
As indicated above, we will use public access to the system as an
important element in evaluating whether each system can be adopted by
Medicare. With respect to the CS DRGs and potentially the other systems
described in the public comments, there may be licensing issues. We
proposed to use the CS DRGs beginning in FY 2008. While they were
developed under a contract with the Federal government, the CS DRGs are
essentially a variant of the APR DRGs that are copyrighted by 3M. The
APS-DRGs are a proprietary product owned by HSS/Ingenix, a division of
United Health Care. However, HSS/Ingenix has indicated that, should we
decide to adopt their product, it would make its DRG system available
to the public under the same terms as the current CMS DRGs (that is,
the source code, logic and documentation can be purchased through the
National Technical Information Service). The RDRG system is supported
by Health Systems Consultants.
There are other issues of note with respect to the DRG systems
mentioned in the comments and Medicare's efforts to adopt a DRG system
that better recognizes severity. In the late 1980's, CMS (then HCFA)
funded a Yale University contract for the development of refined
severity DRGs. The severity DRGs developed under this contract formed
the basis for most of the severity DRG systems available today,
including the Ingenix APS-DRGs, the 3M APR DRGs, the Health Systems
Consultants RDRGs and the Australian government's AR-DRGs. In the mid-
1990's, CMS (then HCFA) also adapted the Yale system and developed a
potential severity DRG system, which was described in the Health Care
Financing Review.\8\ Although the APR DRGs have departed from the Yale
approach to a greater extent than have the other systems, both the 3M
product and the APS-DRGs were derived from the 1989 Yale severity
system that is in the public domain. Given that the Yale system is in
the public domain and CMS considered adopting a severity DRG system
based on it in the mid 1990's, we will also consider updating our prior
work part of our initiative to identify and implement a severity DRG
system for use by Medicare in FY 2008. Consistent with the sentiment
expressed in the public comments, this option would have the advantage
of using the current DRGs as a starting point and retaining the benefit
of the many DRG decisions we have made in recent years. The DRG system
we considered in the mid-1990's used a base DRG with 3 levels of
severity depending upon whether the patient had no CC, a CC, or a major
CC. During this past winter, CMS began a comprehensive review of over
13,000 diagnosis codes to determine whether they should be classified
as CCs when present as a secondary diagnosis. Under this option, we
could continue this review of the CC list, classifying them into one of
the three categories described above in conjunction with updating the
severity DRG system that we considered in mid-1990's.
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\8\ Edwards, Nancy et al., ``Refinement of Medicare Diagnosis
Related Groups to Incorporate a Measure of Severity,''Health Care
Financing Review, Winter 1994, pages 45-64.
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c. Changes to CMI From a New DRG System
After the 1983 implementation of the IPPS DRG classification
system, CMS observed unanticipated growth in inpatient hospital case-
mix (the average relative weight of all inpatient hospital cases) that
is used as proxy measurement for severity of illness.
There are three factors that determine changes in a hospital's CMI:
(1) Admitting and treating a more resource intensive patient-mix
(due, for example, to technical changes that allow treatment of
previously untreatable conditions and/or an aging population);
(2) Providing services (such as higher cost surgical treatments,
medical devices, and imaging services) on an inpatient basis that
previously were more commonly furnished in an outpatient setting; and
(3) Changes in documentation (more complete medical records) and
coding practice (more accurate and complete coding of the information
contained in the medical record).
[[Page 47913]]
Changes in CMI as a result of improved documentation and coding do
not represent real increases in underlying resource demands. For the
implementation of the IPPS in 1983, improved documentation and coding
were found to be the primary cause in the underprojection of CMI
increases, accounting for as much as 2 percent in the annual rate of
CMI growth observed post-PPS.\9\
---------------------------------------------------------------------------
\9\ Carter, Grace M. and Ginsburg, Paul: The Medicare Case Mix
Index Increase, Medical Practice Changes, Aging and DRG Creep, Rand,
1985.
---------------------------------------------------------------------------
We believe that adoption of CS DRGs would create a risk of
increased aggregate levels of payment as a result of increased
documentation and coding. MedPAC notes that ``refinements in DRG
definitions have sometimes led to substantial unwarranted increases in
payments to hospitals, reflecting more complete reporting of patients'
diagnoses and procedures.'' MedPAC further notes that ``refinements to
the DRG definitions and weights would substantially strengthen
providers' incentives to accurately report patients' comorbidities and
complications.'' To address this issue, MedPAC recommended that the
Secretary ``project the likely effect of reporting improvements on
total payments and make an offsetting adjustment to the national
average base payment amounts.'' \10\
---------------------------------------------------------------------------
\10\ Medicare Payment Advisory Commission: Report to Congress on
Physician-Owned Specialty Hospitals, March 2005, p. 42.
---------------------------------------------------------------------------
The Secretary has broad discretion under section 1886(d)(3)(A)(vi)
of the Act to adjust the standardized amount so as to eliminate the
effect of changes in coding or classification of discharges that do not
reflect real changes in case-mix. While we modeled the changes to the
DRG system and relative weights for the proposed rule to ensure budget
neutrality, we are concerned that the large increase in the number of
DRGs will provide opportunities for hospitals to do more accurate
documentation and coding of information contained in the medical
record. Coding that has no effect on payment under the current DRG
system may result in a case being assigned to a higher paid DRG under a
system that better recognizes severity. Thus, more accurate and
complete documentation and coding may occur under a DRG system that
better recognizes severity because it will result in higher payments
than the current CMS DRGs. In the FY2007 IPPS proposed rule, we
solicited comments on this issue.
Comment: One commenter suggested that CMS should delay
implementation of the proposed changes to the DRG system until it
conducts nationwide coding and documentation education, particularly to
physicians. The commenter also suggested that CMS should find a method
to provide physicians who practice in hospitals with web-based
documentation training and incentives document correctly.
Response: The proposed CS DRG system is based on the reporting of
current ICD-9-CM diagnosis and procedure codes. The proposed changes do
not require any changes for hospitals or physicians in how they code or
document information in the medical record. For this reason, we do not
believe there is a need for any changes to education and training that
occurs with respect to documentation and coding.
Comment: Several commenters expressed concern that the proposed
rule did not provide any type of analysis to justify or support the
need for an adjustment to the IPPS rates for anticipated changes in
case mix from a new DRG system. These commenters noted that CMS did not
provide a specific adjustment amount in the proposed rule. The
commenters stated their view that it is the responsibility of CMS to
provide adequate notice and the opportunity for meaningful public
comments in response to such a specific proposal before any adjustment
can be applied. One commenter recognized that CMS is authorized to make
adjustments for changes in coding that are likely to occur. However,
absent strong evidence, they urged CMS to avoid making negative
adjustments to the standardized amount for anticipated increases in
case mix. Another commenter provided two suggestions to CMS. The first
suggestion was for CMS to share its thought process on how the
standardized amount would be adjusted and allow the public an
opportunity to provide comments on this basic set of criteria. The
second suggestion was that CMS should make a commitment to adjust
future base payment levels if it is determined that the initial
adjustment projections are inaccurate. Another commenter stated that
any adjustment to the standardized amount in an attempt to account for
increased documentation and coding is unnecessary and unwarranted. The
commenter asserted that it is virtually impossible to objectively
distinguish real changes in case mix from those that occur due to
improved coding and documentation. This commenter stated claims are
coded using the official coding guidelines that are the same regardless
of the DRG system being used. Another commenter requested that CMS not
overestimate the growth in CMI as a result of improved coding. This
commenter asserted there are many needs for accurate data collection in
a hospital setting and coders do not stop reviewing a medical record
after locating the first CC that assigns the patient to a higher
weighted DRG. The commenter maintained that several hospitals ask
coders to assign codes to many of the non-invasive procedures that do
not affect DRG assignment. This same commenter also stated they believe
the increase in CMI will not be as significant as CMS anticipates.
One commenter representing the State of Maryland shared the state's
experience with case mix index changes after adoption of the APR DRG
system. The commenter stated correct coding resulting in maximum
reimbursement under the CMS DRGs could understate a hospital's case mix
under the APR DRGs. Facilities that have tried to improve their coding
productivity by seeking to maximize reimbursement under Medicare may
not obtain an accurate representation of its patient's severity of
illness under APR DRGs. According to the commenter, hospitals have a
financial incentive to improve their clinical documentation and to code
more completely when APR DRGs (or CS DRGs which are based on APR DRGs)
are used for reimbursement.
The commenter also indicated that case mix growth exceeded four
percent for the State's hospitals on average, as they began to prepare
for the full transition to APR DRGs. Case mix growth in this current
fiscal year is about the same. As such, the State has established a
policy for FY 2006, limiting the amount of case mix growth experienced
for each hospital until the coding patterns become stable. In addition,
an appeals process for hospitals with services that generate rising
case mix growth due to complexity has also been established.
Response: We appreciate the commenters' concerns and feedback
regarding potential adjustments to the national standardized amount to
account for improvements in documentation and coding that may cause the
case-mix index to increase absent real case-mix growth. The commenters
are correct that we did not propose a specific adjustment for improved
documentation and coding. As stated in the proposed rule, we were
soliciting comments on the possibility of changes in the case mix index
as a result of the increase in the number of DRGs within the proposed
CS DRGs. We will continue to analyze this issue as we evaluate
alternative DRG systems that may better recognize severity of illness
for implementation in FY 2008. We
[[Page 47914]]
acknowledge the commenters' request to provide an opportunity for
public comment before CMS adopts a specific adjustment to the
standardized amounts for improved documentation and coding. As stated
earlier, we intend to propose further changes to better recognize
severity in the DRG system for FY 2008. If we decide to make an
adjustment to the standardized amount to account for improvements in
documentation and coding, we will provide the specific level adjustment
and the data and analysis underlying it in a proposed rule that will
allow for an opportunity for public comment.
We disagree with the commenters that suggested there is no need for
an adjustment to the IPPS standardized amounts to account for
improvements in documentation that increase case mix and, therefore,
payments. As presented above and in the proposed rule, Medicare's
experience since the original inception of the IPPS and long-standing
research provide substantiation that improvements in documentation and
coding that increase case-mix and payment will occur when the
opportunity arises through the expansion of the DRG system. Further,
the comment representing the State of Maryland made clear that when CS
DRGs ``are used for reimbursement, hospitals have the financial
incentive to improve their clinical documentation and to code
administrative records more completely.'' \11\ MedPAC also noted that
``adopting our recommended refinements to the DRG definitions and
weights would substantially strengthen providers' incentives to
accurately report patients' comorbidities and complications.'' \12\
---------------------------------------------------------------------------
\11\ Redmon, Patrick, D., Comment Letter to CMS on the FY 2007
IPPS Proposed Rule, June 12, 2006.
\12\ MedPAC, p. 42.
---------------------------------------------------------------------------
Comment: One commenter stated that, in its experience, a change to
the severity of illness grouping logic will result in an increase to
the rate of change in case-mix. Because any effect will not be revenue
neutral, the commenter questioned if and how CMS intends to address the
change in case-mix, for example, regulating the change or setting a cap
for hospitals. The commenter indicated that case-mix could rapidly
decline as well as rapidly increase at the hospital-specific level and
asked if CMS had a mechanism to address that issue, as well. The
commenter also recommended that hospitals with improved case mix due to
improved coding accuracy and internal documentation should be entitled
to the full CMI benefit.
Response: We appreciate the commenter's concern and agree that the
severity of illness grouping logic will affect case-mix. Also, we have
known since the development of a PPS for capital payments that changes
in case-mix affect capital payments to certain hospitals as much, or
more than, operating payments. However, we do not know, at this point,
the extent and direction of the impact to case-mix that the severity of
illness grouping logic would have, or how rapidly the changes to case-
mix would occur. When a decision is made regarding implementing the
severity logic, we will be carefully scrutinizing the data and a myriad
of variables to ascertain its effect and whether or not adjustments or
interventions are necessary.
4. Effect of CS DRGs on the Outlier Threshold
In its March 2005 Report to Congress on Physician-Owned Specialty
Hospitals, MedPAC recommended that Congress amend the law to give the
Secretary authority to adjust the DRG relative weights to account for
the differences in the prevalence of high-cost outlier cases. MedPAC
recommended DRG-specific outlier thresholds that would be financed by
each DRG rather than through an across-the-board adjustment to the
standardized amounts. Furthermore, in comments that MedPAC submitted
during the comment period for the FY 2006 IPPS proposed rule, MedPAC
stated its belief that the current policy makes DRGs with a high
prevalence of outliers profitable for two reasons: 1) These DRGs
receive more in outlier payments than the 5.1 percent that is removed
from the national standardized amount; and 2) the relative weight
calculation results in these DRGs being overvalued because of the high
standardized charges of outlier cases. MedPAC also noted that, under
its recommendations, outlier thresholds in each DRG would reduce the
distortion in the relative weights that comes from including the
outlier cases in the calculation of the weight and would correct the
differences in profitability that stem from using a uniform outlier
offset for all cases. MedPAC added that its recommendation would help
make relative profitability more uniform across all DRGs.
In the FY 2006 IPPS final rule (70 FR 47481), we responded to
MedPAC's recommendation on outliers by noting that a change in policy
to replace the 5.1 percent offset to the standardized amount would
require a change in law. However, because the Secretary has broad
discretion to consider all factors that change the relative use of
hospital resources in the calculation of the DRG relative weights, we
stated we would consider changes that would reduce or eliminate the
effect of high-cost outliers on the DRG relative weights. At this time,
we have not completed a detailed analysis of MedPAC's outlier
recommendation because we do not have the authority to adopt such a
change under current law. Instead, we have focused our resources on
analyzing MedPAC's recommendations with respect to adopting severity
DRGs and calculating cost-based HSRV weights that can be adopted
without a change in law. While we intend to study MedPAC's
recommendation in more detail at a future date, we note that changes to
the DRG system that better recognize severity would have important
implications for the outlier threshold. In the proposed rule, we
analyzed how the outlier threshold would be affected by adopting the CS
DRGs.
Using FY 2004 Medicare charge data, 3M Health Information Systems
simulated the effect of adopting CS DRGs in conjunction with HSRVcc
weights (described) on the FY 2006 outlier threshold using the same
estimation parameters used by CMS in the FY 2006 final rule (that is,
the charge inflation factor of 14.94 percent) (70 FR 47494). Under
these assumptions, 3M Health Information Systems estimated that the
outlier threshold would be reduced from $23,600 under the current
system to $18,758 under the CS DRGs with HSRVcc weights. By increasing
the number of DRGs to better recognize severity, the DRG system itself
would provide better recognition for cases that are currently paid as
outliers. That is, many cases that are high-cost outlier cases under
the current DRG system would be paid using a severity of illness
subclass 3 or 4 under the CS DRGs and could potentially be paid as
nonoutlier cases.
Comment: Some commenters noted that there was only a limited
discussion of the CS DRGs' effect on the outlier threshold and no
information about application of the postacute care transfer payment
policy. Some commenters inquired how policy areas such as outliers and
new technology will be affected by the proposed DRG changes.
Response: We will consider further the application of the postacute
care transfer payment policy as we make changes to the DRG system. With
respect to outliers, we discussed this issue in the proposed rule. We
noted that better recognition of severity in the
[[Page 47915]]
DRG system will result in some cases that are currently paid as
outliers becoming nonoutliers. Under current law, we are required to
establish an estimated outlier threshold so that between 5 and 6
percent of estimated IPPS payments are made as outlier payments. Our
longstanding policy has been to set the outlier threshold so that
estimated outlier payments equal 5.1 percent of estimated IPPS
payments. If we were to continue this longstanding policy, we would
expect DRG refinements that better recognize severity to lead to a
reduction in the outlier threshold. In the proposed rule, using the
same data and assumptions used for the FY 2006 final rule, we estimated
that adoption of the CS DRGs would reduce the outlier threshold from
$23,600 to $18,758.
Comment: One commenter recommended that CMS continue to provide the
additional payment for blood clotting factor administered to
hemophiliac inpatients in the future even if severity-adjusted DRGs are
implemented.
Response: Section 1886(a)(4) of the Act excludes the costs of
administering blood clotting factors to inpatients with hemophilia from
the definition of ``operating costs of inpatient hospital services.''
Therefore, under the statute, payment for blood clotting factor
provided to hemophiliac inpatients is not included in Medicare's IPPS
payment and is paid separately. For this reason, we will continue to
apply Medicare's policy of paying separately for blood clotting factor
provided to hemophiliac inpatients.
5. Impact of Refinement of DRG System on Payments
In the FY 2007 IPPS proposed rule (71 FR 24020), using the FY 2004
MedPAR claims data, we simulated the payment impacts of moving to the
CS DRG GROUPER and the alternative HSRVcc method for developing HSRV
weights. These payment simulations did not make any adjustments for
changes in coding or case-mix. For purposes of this analysis, estimated
payments were held budget neutral to estimated FY 2006 payments because
we have a statutory requirement to make any changes to the weights or
GROUPER budget neutral. Based on the results of this impact analysis,
in the FY 2007 IPPS proposed rule, we proposed to adopt both the HSRVcc
weighting methodology for FY 2007 and the CS DRGs for FY 2008. Later in
the proposed rule (71 FR 24028) and in the Appendix A--Regulatory
Impact Analysis (71 FR 24404), we modeled the effect of only adopting
HSRVcc relative weights using the FY 2005 MedPAR claims data applying
the traditional statutory budget neutrality requirements.
For reasons described in more detail above, we are adopting cost-
based weights in this final rule. However, we are not adopting our
proposal to standardize charges on MedPAR claims using HSRVs until we
further research issues related to charge compression. Further, as
described in more detail above, we are modifying our proposed plan to
adopt the CS DRG system for FY 2008. Rather, we will evaluate the CS
DRGs along with the other DRG severity systems that have come to our
attention during the comment process and consider updating the work we
did to develop a severity DRG system in the mid-1990's before adopting
a system that better recognizes severity for FY 2008.
In the proposed rule, we presented the impact of the proposed
changes on specific high volume DRGs. For comparison purposes, in the
following table we are showing the percent changes in weight for these
DRGs presented in the proposed rule and the percent changes in weights
for these DRGs under the policies we are finalizing in this rule:
------------------------------------------------------------------------
Final rule
Proposed Final rule (w/o (with
DRG Title rule transition) transition)
(percent) (percent) (percent)
------------------------------------------------------------------------
14. INTRACRANIAL 3.8 1.8 0.6
HEMORRHAGE OR
CEREBRAL INFARCTION.
75. MAJOR CHEST 1.4 0.0 0.0
PROCEDURES.
76. OTHER RESP SYSTEM -3.4 -1.7 -0.6
O.R. PROCEDURES W
CC.
79. RESPIRATORY 7.6 2.0 0.7
INFECTIONS &
INFLAMMATIONS AGE
>17 W CC.
87. PULMONARY EDEMA & 10.9 0.0 0.0
RESPIRATORY FAILURE.
88. CHRONIC OBSTRUCTIVE 8.3 1.8 0.6
PULMONARY DISEASE.
89. SIMPLE PNEUMONIA & 9.7 2.1 0.7
PLEURISY AGE >17 W
CC.
104 CARDIAC VALVE & OTH -11.0 -3.1 -1.0
MAJOR
CARDIOTHORACIC PROC
W CARD CATH.
105 CARDIAC VALVE & OTH -7.2 -2.3 -0.8
MAJOR
CARDIOTHORACIC PROC
W/O CARD CATH.
110 MAJOR CARDIOVASCULAR -5.4 -3.3 -1.1
PROCEDURES W CC.
113 AMPUTATION FOR CIRC 5.0 3.4 1.1
SYSTEM DISORDERS
EXCEPT UPPER LIMB &
TOE.
121 CIRCULATORY 4.7 0.7 0.2
DISORDERS W AMI &
MAJOR COMP,
DISCHARGED ALIVE.
124 CIRCULATORY -19.7 -9.3 -3.1
DISORDERS EXCEPT
AMI, W CARD CATH &
COMPLEX DIAG.
125 CIRCULATORY -28.9 -14.6 -4.9
DISORDERS EXCEPT
AMI, W CARD CATH W/
O COMPLEX DIAG.
127 HEART FAILURE & 2.8 3.7 1.2
SHOCK.
138 CARDIAC ARRHYTHMIA & 2.7 2.5 0.8
CONDUCTION
DISORDERS W CC.
143 CHEST PAIN.......... -10.5 -6.2 -2.1
144 OTHER CIRCULATORY 4.2 2.2 0.7
SYSTEM DIAGNOSES W
CC.
174 G.I. HEMORRHAGE W CC 11.2 2.9 1.0
182 ESOPHAGITIS, 5.6 -1.1 -0.4
GASTROENT & MISC
DIGEST DISORDERS
AGE >17 W CC.
188 OTHER DIGESTIVE 5.7 1.0 0.3
SYSTEM DIAGNOSES
AGE >17 W CC.
210 HIP & FEMUR 3.8 2.2 0.7
PROCEDURES EXCEPT
MAJOR JOINT AGE >17
W CC.
277 CELLULITIS AGE >17 W 15.2 9.1 3.0
CC.
296 NUTRITIONAL & MISC 10.6 5.3 1.8
METABOLIC DISORDERS
AGE >17 W CC.
316 RENAL FAILURE....... 8.3 3.7 1.2
320 KIDNEY & URINARY 10.9 5.3 1.8
TRACT INFECTIONS
AGE >17 W CC.
493 LAPAROSCOPIC -4.0 -4.6 -1.5
CHOLECYSTECTOMY W/O
C.D.E. W CC.
497 SPINAL FUSION EXCEPT -13.4 0.5 0.2
CERVICAL W CC.
515 CARDIAC -20.6 0.3 0.1
DEFIBRILLATOR
IMPLANT W/O CARDIAC
CATH.
541 ECMO OR TRACH W MV 3.6 -2.9 -1.0
96+HRS OR PDX EXC
FACE, MOUTH & NECK
W MAJ O.R..
542 TRACH W MV 96+HRS OR 8.4 -0.8 -0.3
PDX EXC FACE, MOUTH
& NECK W/O MAJ O.R..
544 MAJOR JOINT -3.7 2.6 0.9
REPLACEMENT OR
REATTACHMENT OF
LOWER EXTREMITY.
545 REVISION OF HIP OR -5.8 1.8 0.6
KNEE REPLACEMENT.
[[Page 47916]]
547 CORONARY BYPASS W -8.9 -5.5 -1.8
CARDIAC CATH W
MAJOR CV DX.
548 CORONARY BYPASS W -11.9 -6.2 -2.1
CARDIAC CATH W/O
MAJOR CV DX.
550 CORONARY BYPASS W/O -5.8 -3.8 -1.3
CARDIAC CATH W/O
MAJOR CV DX.
551 PERMANENT CARDIAC -13.0 1.3 0.4
PACEMAKER IMPL W
MAJ CV DX OR AICD
LEAD OR GNRTR.
552 OTHER PERMANENT -15.0 1.0 0.3
CARDIAC PACEMAKER
IMPLANT W/O MAJOR
CV DX.
553 OTHER VASCULAR -5.8 -0.5 -0.2
PROCEDURES W CC W
MAJOR CV DX.
554 OTHER VASCULAR -6.5 -1.4 -0.5
PROCEDURES W CC W/O
MAJOR CV DX.
556 PERCUTANEOUS -34.9 -16.2 -5.4
CARDIOVASC PROC W
NON-DRUG-ELUTING
STENT W/O MAJ CV DX.
557 PERCUTANEOUS -25.5 -10.4 -3.5
CARDIOVASCULAR PROC
W DRUG-ELUTING
STENT W MAJOR CV DX.
558 PERCUTANEOUS -34.5 -13.8 -4.6
CARDIOVASCULAR PROC
W DRUG-ELUTING
STENT W/O MAJ CV DX.
------------------------------------------------------------------------
We received a number of comments, which we discuss below,
expressing concern over the magnitude of the changes we proposed to the
relative weight methodology and the effects on the DRG weights. As
shown in this table above, the impact of the transitional cost based
weights computed without using the HSRVcc method of standardization is
significantly less than the impacts projected in the proposed rule. As
a further demonstration of the manner in which our final policy
mitigates the impacts of the proposed rule, we are presenting the
following two tables showing the number of DRGs experiencing percent
gains and losses in their relative weights in the proposed and final
rules. We also are showing the number of providers experiencing percent
gains and losses in case mix due to the proposed and final changes. As
shown in the tables, the more extreme percent changes are greatly
reduced with our final policies.
Comparison of the Number of DRGs Experiencing Percent Gains/Losses in
Relative Weights in the Proposed Rule Relative to the Final Rule
Transition
------------------------------------------------------------------------
Final rule (with
Percent change in DRG weight Proposed rule transition)
------------------------------------------------------------------------
More than -10%.................. 32 0
Between -5 and -10%............. 42 1
Between -1 and -5%.............. 49 78
Between -1 and +1%.............. 42 308
Between 1% and 5%............... 111 130
Between 5% and 10%.............. 97 12
More than +10%.................. 153 7
------------------------------------------------------------------------
Comparison of the Number of Hospitals Experiencing Percent Gains/Losses
in Case-Mix Index in the Proposed Rule Relative to the Final Rule
Transition
------------------------------------------------------------------------
Final rule (with
Percent change in case-mix index Proposed rule transition)
------------------------------------------------------------------------
More than -10%.................. 40 0
Between -5 and -10%............. 103 0
Between -1 and -5%.............. 597 30
Between -1 and +1%.............. 416 2,067
Between 1% and 5%............... 1493 1,450
Between 5% and 10%.............. 794 28
More than +10%.................. 79 20
------------------------------------------------------------------------
For additional comparison purposes between the proposed and final
rule relative weights and DRG changes, the following table shows the
estimated payment impacts on case mix change by hospital group that we
projected for the proposed rule and also shows the estimated payment
impacts that we are finalizing in this rule.
----------------------------------------------------------------------------------------------------------------
Severity DRG
Proposed rule Severity changes & cost
Column 1 changes in weights (with
DRGs transition)
----------------------------------------------------------------------------------------------------------------
All hospitals................................................... 0.0 0.0 0.0
By Geographic Location:
Urban hospitals............................................... -0.3 0.0 0.0
[[Page 47917]]
Large urban areas (populations over 1 million)................ 0.1 0.0 0.1
Other urban areas (populations of 1 million or fewer)......... -0.9 0.0 -0.2
Rural hospitals............................................... 2.7 -0.1 0.2
Bed Size (Urban):
0-99 beds..................................................... 0.5 0.3 0.1
100-199 beds.................................................. 1.8 0.0 0.3
200-299 beds.................................................. 0.0 -0.1 -0.1
300-499 beds.................................................. -1.1 0.0 0.1
500 or more beds.............................................. -1.5 0.0 -0.2
Bed Size (Rural):
0-49 beds..................................................... 5.5 -0.1 0.3
50-99 beds.................................................... 4.3 -0.2 0.3
100-149 beds.................................................. 2.8 -0.2 0.2
150-199 beds.................................................. 1.0 0.1 0.1
200 or more beds.............................................. -0.2 -0.2 -0.2
Urban by Region:
New England................................................... 0.3 0.3 0.1
Middle Atlantic............................................... 0.1 0.0 0.2
South Atlantic................................................ -0.7 -0.1 -0.2
East North Central............................................ -0.4 0.0 0.0
East South Central............................................ -0.8 -0.2 -0.3
West North Central............................................ -1.4 0.1 -0.2
West South Central............................................ -0.7 0.0 -0.1
Mountain...................................................... -1.4 0.2 -0.1
Pacific....................................................... 0.6 -0.1 0.2
Puerto Rico................................................... 3.3 -0.4 0.1
Rural by Region:
New England................................................... 1.8 0.1 0.5
Middle Atlantic............................................... 2.8 0.0 0.4
South Atlantic................................................ 3.4 -0.3 0.2
East North Central............................................ 1.9 -0.1 0.1
East South Central............................................ 2.9 0.0 0.0
West North Central............................................ 1.7 -0.1 0.1
West South Central............................................ 3.5 -0.2 0.1
Mountain...................................................... 2.4 -0.1 0.2
Pacific....................................................... 3.5 -0.4 0.3
By Payment Classification:
Urban hospitals............................................... -0.3 0.0 0.0
Large urban areas (populations over 1 million)................ 0.1 0.0 0.1
Other urban areas (populations of 1 million or fewer)......... -0.9 0.0 -0.2
Rural areas................................................... 2.6 -0.1 0.2
Teaching Status:
Non-teaching.................................................. 1.1 0.0 0.2
Fewer than 100 Residents...................................... -0.8 -0.1 -0.1
100 or more Residents......................................... -0.8 0.0 -0.2
Urban DSH:
Non-DSH....................................................... -1.1 0.1 0.0
100 or more beds.............................................. -0.2 -0.1 0.0
Less than 100 beds............................................ 3.5 0.1 0.4
Rural DSH:
SCH........................................................... 4.2 --0.2 0.2
RRC........................................................... 1.3 -0.1 0.0
Other Rural:..................................................
100 or more beds.............................................. 4.2 0.1 0.3
Less than 100 beds............................................ 5.5 -0.1 0.2
Urban teaching and DSH:
Both teaching and DSH......................................... -0.6 0.0 -0.1
Teaching and no DSH........................................... -1.7 0.1 -0.1
No teaching and DSH........................................... 1.1 0.0 0.2
No teaching and no DSH........................................ -1.0 0.1 0.0
Rural Hospital Types:
RRC........................................................... 4.8 0.1 0.3
SCH........................................................... 0.9 0.0 0.0
MDH........................................................... 3.9 -0.3 0.2
SCH and RRC................................................... 5.1 -0.1 0.4
MDH and RRC................................................... 1.0 -0.3 0.0
Type of Ownership:
Voluntary..................................................... -0.3 0.0 0.0
Proprietary................................................... 0.2 0.0 0.1
Government.................................................... 1.3 0.0 0.0
[[Page 47918]]
Medicare Utilization as a Percent of Inpatient Days:
0-25.......................................................... 2.7 0.2 0.3
25-50......................................................... -0.5 0.0 0.0
50-65......................................................... 0.3 -0.1 0.0
Over 65....................................................... 0.3 0.0 -0.1
Hospitals Reclassified by the Medicare Geographic Classification
Review Board:
FY 2005 Reclassifications:....................................
Urban Hospitals Reclassified by the Medicare Geographic -0.5 0.1 0.0
Classification Review Board: First Half FY 2007
Reclassifications............................................
Urban Nonreclassified, First Half FY 2007..................... -0.3 0.0 0.0
All Urban Hospitals Reclassified Second Half FY 2007.......... -0.3 0.0 0.0
Urban Nonreclassified Hospitals Second Half FY 2007........... -0.3 0.0 0.0
All Rural Hospitals Reclassified Second Half FY 2007.......... 1.6 -0.1 0.1
Rural Nonreclassified Hospitals Second Half FY 2007........... 4.5 -0.1 0.3
All Section 401 Reclassified Hospitals........................ 2.9 -0.1 0.2
Other Reclassified Hospitals (Section 1886(d)(8)(B)).......... 4.6 -0.2 0.4
Section 508 Hospitals......................................... -0.5 -0.1 0.0
Cardic Specialty Hospitals...................................... -11.2 0.0 -2.3
----------------------------------------------------------------------------------------------------------------
We are discussing specific comments and responses relevant to our
impact analysis below. The changes that we are adopting in this final
rule are illustrated in our regulatory impact analysis.
Comment: Some commenters expressed concern that the proposed rule
discusses the impact of moving to CS DRGs using FY 2004 inpatient
claims rather than FY 2005 claims to estimate impact. Some commenters
stated that using 2 separate years of claims data to show the impact of
major changes made it impossible to assess the overall impact of the
changes with any reasonable level of confidence.
Response: Because of the long lead time to develop the methodology
and our proposed rule, we used the FY 2004 MedPAR data to calculate
HSRVcc weights and model the CS DRGs for purposes of the analysis shown
on pages 24007-24011, 24020-24026 of the FY 2007 IPPS proposed rule (71
FR24007-24011, 24020-24026). At the time we were developing provisions
of the proposed rule, FY 2005 MedPAR data were unavailable to us. Given
the public interest in prompt publication of the rule, we decided not
to replicate all of the analysis that we provided in section II.C. of
the proposed rule based on the FY 2004 data once the new FY 2005 data
became available to us. We believed delaying publication of the
proposed rule to revise our analysis so all of the payment impacts were
shown based on FY 2005 data was not in the public interest. Once we
developed the methodology and the analysis for the proposed rule, we
calculated the relative weights using the HSRVcc methodology that we
were proposing to adopt for FY 2007 using the FY 2005 MedPAR. We
modeled the HSRVcc relative weights using the FY 2005 MedPAR because we
would be using these data to calculate actual relative weights that
would be used to determine FY 2007 hospital payments. We believed it
was important to model our FY 2007 proposal as closely to how payments
would be determined to provide the most meaningful opportunity for
public comment. For purposes of providing the payment impacts shown on
pages 24028-24030 and the Appendix A--Regulatory Impact Analysis (71
FR24404) and the methodological description shown on pages 24044-24049
of the proposed rule, we used FY 2005 MedPAR data. We disagree with the
commenters that providing separate analyses using 2 years of data makes
it more difficult to understand and assess the payment impacts. Rather,
we believe that providing these analyses makes it easier to understand
how relative weights will change solely as a result of updating the
data.
Comment: MedPAC was pleased that CMS proposed three of MedPAC's
four recommended changes to the IPPS system. However, the MedPAC
expressed concern the proposal not to implement the severity changes
until FY 2008. They stated that it is important to correct for
differences in patients' severity concurrently with the corrections for
charging distortions. MedPAC believed that all of the proposed policy
changes to the IPPS should happen concurrently. MedPAC stated that
failure to adopt all of the changes would leave some payment
distortions in place, thereby continuing to favor some kinds of
patients over others. According to MedPAC, adopting all of the policies
would create the most accurate payments and prevent hospitals from
facing unjustified shifts in their payments that may occur under
partial adoption of the payment reforms. MedPAC stated that concerns
about giving hospitals time to adapt to the changes may be better
managed by implementing all changes in FY 2007 and then giving
hospitals a transition period. Another commenter asked that CMS
implement both of these proposed changes in FY 2007 for the following
reasons:
MedPAC's analysis revealed significant inaccuracy in the
current payment system and recommended implementation of both the new
severity-refined DRGs and a revised method for the weights at the same
time.
It is inequitable to remove the subsidy provided by the
overpayments for cardiac and orthopedic surgery prior to correcting the
underpayments for the most severely ill patients.
It is not reasonable to ask that some hospitals experience
financial losses from implementing the new weights this year if
implementing severity would offset some or all of these losses. To
stagger implementation will cause providers to experience unnecessary
payment fluctuation between FY 2007 and FY 2008.
The commenter further added that a delay is not beneficial to
taxpayers as hospitals will have more time to up-code and increase
their Medicare payments. Many commenters agreed with MedPAC that the
cost weights and severity-adjusted DRGs should be implemented
simultaneously. However, these commenters suggested implementation no
sooner than FY 2008 to limit sharp fluctuations in payments
[[Continued on page 47919]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 47919-47968]] Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems and Fiscal Year 2007 Rates; Fiscal Year 2007
Occupational Mix Adjustment to Wage Index; Health Care Infrastructure
Improvement Program; Selection Criteria of Loan Program for Qualif[[Page 47919]]
[[Continued from page 47918]]
[[Page 47919]]
to hospitals from year to year. Many commenters opposed a two-step
implementation, whereby CMS would implement cost-based weights in one
year and a new DRG system to better account for patient severity in a
subsequent year. They noted that each of these two major reforms
significantly redistributes payments, often in off-setting directions.
They stated that large swings in payments between the two reforms would
create unnecessary volatility and have a profound impact on hospitals'
ability to plan effectively, especially for necessary major medical
equipment purchases and other capital expenditures. Therefore, they
recommended that CMS implement both cost-based weights and severity-
adjusted DRGs concurrently. While some commenters urged CMS to
implement both payment reforms concurrently in FY 2007, other
commenters advised delaying until at least FY 2008 to allow enough time
to improve the proposed methodologies and underlying cost data to
ensure accuracy of payments. Some commenters stated that the cost-based
weights methodology should be implemented after the severity adjusted
DRG methodology.
Response: Although we are not adopting the CS DRGs this year, we
agree that it is important to smooth the transition for our current DRG
system to a more accurate payment system. As indicated above, we have
decided to adopt traditional cost-based weights for FY 2007 without the
HSRV part of the methodology and we are making refinements that will
create 20 new CMS DRGs, modify 32 others across 13 different clinical
areas involving 1,666,476 cases that would improve the CMS DRG system's
recognition of severity of illness for FY 2007. We believe it is
appropriate to take steps toward transitioning the IPPS to a severity
based DRG system for FY 2007 by applying some of the severity logic
from our proposal to the CMS DRGs where appropriate. By revising the
CMS DRGs, we are offering hospitals an interim step toward severity
DRGs. Hospitals would be able to take advantage of the improved
recognition of severity within the context of the more familiar CMS
DRGs. This interim step affords us the opportunity to adopt some of the
more basic components of a severity DRG system, such as specific splits
in DRGs that lead to groups with greater resource utilization.
Comment: Some commenters were concerned that CMS has not taken into
account all of MedPAC's recommendations for reforming the IPPS.
Response: We believe the commenters were expressing concern that we
did not analyze MedPAC's recommendation to adjust the relative weights
to account for differences in the prevalence of outlier cases. As
explained above, we placed most of our attention and resources on the
recommendations related to refinement of the current DRGs to more fully
account for differences in severity of illness among patients as we do
not have the statutory authority to make the specific changes to our
outlier policy that MedPAC recommended. While we have not made MedPAC's
recommendation regarding outliers a central focus of our analysis, we
do intend to examine this issue in more detail over the next year.
Comment: One commenter stated that the annual impact of the changes
to the proposed CS DRG system will reduce payments for its institution
by an additional $2.7 million per year. The commenter suggested that
community, not for profit hospitals be exempt from these proposed
changes as this is not the group of hospitals that were the intended
target of these changes. One commenter stated that the efforts to
address issues identified in the MedPAC report should begin and end
with the specialty hospital subset and should not occur in conjunction
with payment systems at large for all other hospital facilities.
A few commenters urged CMS to further analyze and evaluate the
impact of the proposed HSRVcc methodology on access to Centers of
Excellence. They noted that the proposed changes are particularly
significant for large volume hospitals and may have a negative impact
on the Centers of Excellence. Any negative impact to these Centers
could impede beneficiary access to high quality services. Several
commenters stated that although CMS' intent may have been to eliminate
reimbursement incentives for specialty hospitals to select the most
profitable cases, the proposed methodology appears to negatively affect
all hospitals serving the most prevalent diagnoses (cardiology,
orthopedic joint replacement, and neurosurgery) within the Medicare
population. The commenters stated that efforts to address issues
identified in the MedPAC report should be limited to specialty
hospitals. The payment systems at large that affect all other hospital
facilities should not be changed. These commenters suggested that CMS
address the reimbursement incentives of specialty hospitals by
implementing a separate payment system for specialty hospitals, rather
than implement a proposed policy that could negatively impact all
hospitals. Several commenters suggested implementing the proposal only
for specialty hospitals while deferring the proposed payment reforms
for full-service hospitals to afford more time to study the
implications of the HSRVcc as a method of general applicability.
Another commenter stated that care for Medicare beneficiaries in rural
areas will be adversely affected by the proposed adoption of HSRVcc
weights because of the dramatic impact on specialized services provided
by rural referral centers that are not available at other smaller
hospitals in rural communities. The commenter suggested that the future
viability of these specialized services may be at risk. Therefore, the
commenter recommended that CMS recognize the unique impact of the
proposed changes on rural referral centers by excluding these hospitals
from the change.
Response: Payments under a prospective payment system are
predicated on averages. Therefore, we do not believe it would be
appropriate to exclude certain hospital groups from implementation of
the changes we are adopting to use cost-based weights or better
recognize severity in the DRG system. While these changes are expected
to reduce incentives for hospitals to ``cherry pick'' or treat only the
most profitable patients, the objective of these proposed revisions is
to improve the accuracy of payments, leading to better incentives for
hospital quality and efficiency and ensure that payment rates relate
more closely to patient resource needs. Even though few hospitals will
have a large increase or decrease in overall Medicare payments, there
may be a significant increase or decrease in payment for individual
cases within a hospital. Under certain circumstances, the current DRG
system benefits hospitals that focus on treating less severely ill
patients. Adjusting payment for the severity of the patient will remove
the incentives to systematically choose one patient over another.
Currently, the DRGs overpay for some types of cases and underpay for
others because the relative weight system is based on charges and the
DRG system does not sufficiently distinguish more or less resource
intensive patients based on severity of illness. The changes we are
making to account for costs in the DRG relative weights and improve
recognition of severity within the DRG system will significantly
increase payment accuracy at both the patient and hospital level.
For these reasons, we believe these changes should apply to all
hospitals paid using the IPPS, regardless of
[[Page 47920]]
whether a hospital is a specialty hospital or a rural referral center.
We have made significant changes to our proposal and the impacts shown
in this final rule may be very different for an individual hospital
than those we showed in the proposed rule. The impact on any specific
hospital will depend on the types of cases it treats.
Comment: Several commenters stated that in order to analyze and
comment, a crosswalk between the current DRGs and the severity DRGs
should be made available.
Response: As indicated earlier, we provided a number of resources
during the comment period to assist commenters in analyzing our
proposal. We provided a number of data files listed earlier on the CMS
Web site at no cost to the public. In addition to this information, we
made available for purchase both the FY 2004 and FY 2005 MedPAR data
that were used in simulating the policies in the FY 2007 IPPS proposed
rule. We also provided access to a Web tool on 3M's Web site that would
allow an end user to build case examples using the proposed CS DRGs.
Comment: One commenter stated that the best estimates on a hospital
specific basis, of the incremental effects on payment of CMS' changes
to the DRG system should be published in the FY 2007 IPPS final rule.
The commenter also suggested that CMS release impact files by hospitals
far in advance of any implementation.
Response: Information to determine hospital-specific impacts is
available on the CMS Web site at: http://www.cms. hhs.gov/
AcuteInpatient PPS/FFD/list.asp#TopOf Page. Click on: ``Acute
Inpatient--Files for Download http://www.cms. hhs.gov/Acute
InpatientPPS/FFD/list.asp.'' For the proposed rule impact file, click
on ``Impact file for IPPS FY 2007 Proposed Rule http://www.cms.hhs
.gov/AcuteInpatient PPS/FFD/ itemdetail.asp?filter
Type=none&filterByDID=-99& sortByDID=2&sortOrder=ascending&
itemID=CMS061736.'' Similar information for the final rule will also be
available on the CMS Web site shortly after the publication of this
final rule. We note that some level of familiarity with data concepts
and Medicare payment variables will be necessary for hospitals to use
these files and simulate a payment analysis for their own facility.
Using the latest data available at the time this final rule was
prepared, we estimated impacts by category of hospital, and the tables
displaying these impacts are published in the impact section of this
final rule. Space limitations preclude us from being able to provide
hospital-level impacts. In addition, to the extent that adjustments for
providers such as the IME adjustment, DSH adjustment, and/or operating
and capital CCRs may be updated for FY 2007 subsequent to the
publication of this final rule, the actual impacts on individual
providers may differ slightly from those we estimated. We believe that
by providing the payment variables and other information electronically
on the CMS Web site, hospitals have the flexibility to simulate and
develop their own impact analyses that may be better suited to their
needs than any analysis CMS would do at the hospital level.
Comment: Some commenters stated that CMS needs to extend the
comment period to allow hospitals additional time to evaluate the
effects of these proposed changes.
Response: One of the reasons that we proposed adopting the CS DRGs
for FY 2008 was to give hospitals more than the 60-day public comment
period and the additional 60-day delay between the publication of the
final rule and implementation on October 1, 2006, to fully understand
and plan for the change to the CS DRG system. As indicated earlier, we
are not adopting CS DRGs for FY 2007. Therefore, we do not see a need
to extend the 60-day public comment period. Although we are not
extending the 60-day public comment period, we will involve hospitals
and other stakeholders in our plans for moving to a severity DRG system
for FY 2008. We are interested in public input on the types of criteria
that we should consider and how to evaluate improved payment accuracy
as we consider changes to the DRG system to better recognize severity
of illness.
Comment: Some commenters encouraged CMS to review the cost/benefit
of implementing the cost-based weight methodology and a severity-
adjusted DRG system in conjunction with changes to the CMS UB04 claim
form and the adoption of ICD-10-CM. The commenters suggested that
implementing these changes simultaneously could help alleviate the
additional cost of multiple system upgrades both for the hospital and
the fiscal intermediaries. Some commenters stated that CMS should
conduct a single independent study to determine the impact that
implementation of this methodology will have on coding and billing
productivity or hospital cash flow. Some commenters stated that
implementing the significant DRG changes proposed by CMS is only a
temporary solution until a more refined DRG system can be adopted with
more specific clinical classification systems such as ICD-10-CM and
ICD-10-PCS that will be capable of fully recognizing a patient's
severity of illness and the services provided to treat that condition.
Response: We believe that it is important to improve the payment
accuracy in the hospital IPPS by implementing these changes when
appropriate. The IPPS payment reforms that we have proposed do not
require information system changes for hospitals similar to those that
will be required for adoption of ICD-10 or a new HIPAA compliant
transaction system. The relative weights are merely one component in a
payment formula for calculating Medicare's IPPS payment rate. Although
there will be increases and decreases in the relative weights that are
used in the payment formula for different DRGs, this payment change
does not require hospitals to make any computer system changes.
Similarly, the changes to adopt a severity DRG system will also not
necessarily require hospitals to make any upgrades to their computer
systems. The proposed DRG system or any alternative that we consider
would use the same ICD-9-CM diagnosis and procedures codes as the
current CMS DRGs. Although it seems likely that hospitals will want to
acquire the DRG system that Medicare will use, we do not expect that
substituting one DRG GROUPER for another should be burdensome and
require upgrades to hospital information systems. With regard to the
comment that a more refined DRG system can only be adopted with more
specific classification systems such as ICD-10-CM and ICD-10-PCS, the
Secretary is evaluating whether we should adopt ICD-10.
Comment: One commenter supported the decision to use the CS DRGs,
noting that use of a 3-digit DRG number would avoid the undue health
programming costs that move limited financial resources away from
initiatives focused on improving quality care and access to health
care. However, the commenter also indicated that the number of digits
in the DRG number should not be a factor in choosing the best severity
classification system.
Response: We appreciate the commenter's support for our proposal as
well as the comment that the DRG classification system used by Medicare
should not be dependent upon the number of digits in the DRG number. We
will consider any information system infrastructure issues as we
evaluate alternative DRG systems.
Comment: Several commenters stated that the reasons CMS gave in the
proposed rule for not implementing CS DRGs for FY 2007 are valid. The
commenters stated that they are all the
[[Page 47921]]
more valid because hospitals now would have less time to prepare if CMS
were to implement its proposed severity adjusted DRGs this October 1.
Response: We agree. The proposed change to adopt CS DRGs represents
a major change to how hospitals are paid for Medicare inpatient
services. We will not be implementing the CS DRGs for FY 2007. However,
we do plan to evaluate potential alternative DRG systems that better
recognize severity than the current CMS DRGs for FY 2008.
Comment: One commenter suggested that the CS DRG system's reliance
on 3M's proprietary APR DRG grouping logic and software may not be in
compliance with Pub. L. 104-113, the National Technology Transfer and
Advancement Act of 1995. The commenter recommended that we participate
in the formation of expert committees with a proven consensus standards
body to develop a standardized DRG classification and severity-
adjustment system for the IPPS.
Response: We appreciate the commenter's support for the use of a
consensus standards body to develop a severity-adjusted DRG system. The
National Technology Transfer and Advancement Act of 1995 directs
Federal agencies to use voluntary consensus standards in lieu of
government-unique standards, except where inconsistent with law or
otherwise impractical. As we move toward implementing a severity-
adjusted DRG system, we will carefully consider whether it would be
appropriate to involve a voluntary consensus standards body in the
process.
Comment: Some commenters stated a transition (blended) period with
stop loss protections should be provided over a period of one to three
years. Other commenters suggested a longer transition period given the
magnitude of payment distribution across DRGs and hospitals. The
commenters believe that the transition approach would be consistent
with many other major changes that have been implemented gradually over
the years, including the capital prospective payment system. The
commenters suggested that a minimum of 1 year should be allowed for the
development of software systems to handle these changes.
Response: We agree that these changes should be implemented over a
transitional period. As we indicated earlier, we are revising the
current DRG system to better recognize severity (which is discussed in
detail in section II.C.7. of the preamble of this final rule) and are
also adopting cost-based weights for FY 2007. We are providing for a
transition period of 3 years with the relative weights becoming an
increasing blend of costs weights as the transition proceeds. We also
believe that the 20 new DRGs we are adopting for 2007 will improve the
transition from our current system to a more sophisticated severity DRG
system in FY 2008.
Comment: One commenter noted that MedPAC recommended excluding
statistical and high cost outliers from the computation of the DRG
weights in order that the weights reflect the average cost of the
inlier case only. MedPAC further recommended shifting the financing of
the outlier pool from all cases to cases in the DRGs with the highest
prevalence of outliers. The commenter noted that outlier cases occur
most frequently in high-weighted DRGs. Therefore, MedPAC's proposal of
accounting for the high prevalence of outliers in the DRGs would
compound the weight compression caused by the HSRV methodology. The
commenter believed that each proposal by MedPAC (to exclude statistical
and high cost outliers from the computation of the DRGs) would
exacerbate payment inaccuracies, and the two proposals combined would
be deleterious. The commenter stated that it would further analyze
MedPAC's proposal to test their theory empirically.
Another commenter was also concerned about MedPAC's recommendation
to adjust the DRGs to account for the prevalence of high-cost cases.
The commenter explained that reducing the relative weights to finance
the outlier pool will adversely affect payment for hospitals
specializing in the most complex patients. Hospitals may be discouraged
from developing the capacity to treat high cost outliers and responding
to the needs of their community according to the commenter. Meanwhile,
the commenter suggested that hospitals that have the capacity to treat
the highest cost and most complex cases may abandon such an
infrastructure because it will be too costly to maintain.
One commenter supported MedPAC's proposal and believed that
implementing MedPAC's proposal would support the goal of achieving
payment accuracy. The commenter explained that the current system
provides double reward for DRGs with a high prevalence of outliers. The
commenter recommended that CMS seek legislative authority to implement
MedPAC's proposal of DRG specific outlier thresholds.
Another commenter was supportive of MedPAC's recommendation and
noted that MedPAC stated in a letter to CMS that ``failure to adopt any
of (MedPAC's) recommendations would leave some payment distortions in
place, thereby continuing to favor some patients over others.''
Therefore, the commenter recommended that CMS implement all of MedPAC's
recommendations simultaneously when Congress has granted CMS authority
to adopt MedPAC's outlier recommendation.
One commenter was concerned that CMS provided only ``minimal''
analysis of the effect of the DRG refinements on the outlier threshold.
Noting that the 5.1 percent set aside for outlier payments could be
significantly reduced with the adoption of severity DRG refinements,
the commenter believed that implementation of severity DRGs is
premature until the Secretary determines whether statutory changes are
needed to determine the percentage of total IPPS payments that should
be made as outliers.
One commenter recommended that, even though CMS does not have the
authority to change the outlier policy, it should review creating DRG-
specific or day outliers under a severity DRG system. Another commenter
recommended that CMS reduce payments for outliers and eventually
eliminate them upon implementing severity DRGs.
Response: We thank the commenters for taking the time to comment on
MedPAC's recommendation. As noted above, we do not have the statutory
authority to implement MedPAC's recommendation, and, therefore, we
placed most of our attention and resources on the recommendations
related to refinement of the current DRGs to more fully capture
differences in severity of illness among patients. However, we intend
to examine MedPAC's recommendation regarding outliers in more detail in
the future and will consider the comments we received on the FY 2007
IPPS proposed rule.
6. Conclusions
As we describe in more detail below, we believe that adopting cost-
based weights and making improvements to the DRG system to better
recognize severity has the potential to result in significant
improvements to Medicare's IPPS payments. This final rule implements a
cost weight methodology effective for FY 2007. Further, we are creating
20 new CMS DRGs and modifying 32 others across 13 different clinical
areas involving 1,666,476 cases that would improve the CMS DRG system's
recognition of severity of illness for FY 2007. Further, as suggested
by MedPAC and others, we are adopting these changes over a
[[Page 47922]]
transition period while we plan further improvements to the IPPS for FY
2008.
In developing our proposed and final policies, we considered a
range of alternatives outlined below, and we solicited comments on both
the proposal and the alternatives. We asked commenters to consider both
the CS DRGs and alternative severity adjustment methods for accounting
for severity more comprehensively in the DRG payment system. For
example, under one alternative in the proposed rule, we would implement
the CS DRGs in FY 2007 along with the HSRVcc weighting methodology. In
this event, as discussed above, to maintain budget neutrality, we would
also implement in FY 2007 an adjustment to the standardized amounts to
eliminate the effect of changes in coding or classification of
discharges that do not reflect real changes in case-mix. Although we
did receive comments in support of this idea, many commenters requested
that we not adopt the CS DRGs and the HSRVcc weights for FY 2007. Many
of these commenters suggested delaying implementation of both proposals
until at least FY 2008. Under another alternative, we would have
adopted and implemented CS DRGs in FY 2008. Although we did receive
comments in support of this idea, we also received many comments
raising important concerns about licensing and proprietary issues
potentially associated with use of the CS DRGs. The commenters asked us
not to adopt the CS DRGs unless we could make them available on the
same terms as the current CMS DRGs. Yet other commenters objected to
our proposed implementation of the CS DRGs unless we evaluated
alternatives and better justified why there is a need to adopt a
revised DRG system. Under yet another alternative, we would consider
partially implementing the CS DRGs in FY 2007 and complete
implementation in FY 2008. However, we noted that there were practical
difficulties associated with partial implementation of CS DRGs because
cases in a single DRG under the current CMS DRG system may group to
multiple DRGs and MDCs under the CS DRG system. Conversely, cases that
group to multiple MDCs and DRGs under the current system may group to a
single MDC and DRG under the current CS DRG system. We did not receive
any comments supporting the idea of partial adoption of the CS DRGs.
In the FY 2007 IPPS proposed rule, we discussed in some detail an
alternative to partially adopting CS DRGs that would apply a clinical
severity concept to an expanded set of DRGs in FY 2007. For example, we
have received correspondence that raised the concern that hospitals may
have incentives under the current DRG system to avoid severely ill,
resource-intensive back and spine surgical cases (as discussed in
section II.D.3.b. of the proposed rule; the correspondence specifically
requested that we apply a clinical severity concept to DRG 546). In the
proposed rule, we noted that other surgical DRGs may not accurately
recognize case severity. Because of the frequency of DRG use and the
potential for risk selection, we pointed out that certain DRGs may be
particularly important in creating a financial incentive for hospitals
to select a less severely ill patient whose case would be assigned to
the same DRG as a more severely ill patient.
Therefore, while we proposed to adopt the CS DRGs in FY 2008, we
were considering whether to make more limited changes to the current
DRG system to better recognize severity of illness in FY 2007. In the
FY 2006 IPPS final rule (70 FR 47474 through 47478), we took steps to
better recognize severity of illness among cardiovascular patients. For
all DRGs except cardiac DRGs, we currently distinguish between more and
less complex cases based on the presence or absence of a CC. However,
the diagnoses that we designate as CCs are the same across all base
DRGs. Because the CC list is not dependent on the patient's underlying
condition, CCs may not accurately recognize severity in a given case.
The changes we made in FY 2006 to the cardiac DRGs significantly
improved recognition of severity between patients by distinguishing
between more and less severe cases based on the presence or absence of
a MCV. In the proposed rule, we indicated that we were considering
whether a similar approach applied to other DRGs would improve payment.
Much like the approach we took last year to identify MCV conditions
that represented higher severity in cardiovascular patients, in the
proposed rule, we indicated that we planned to examine which conditions
identified more severely ill cases in selected MDCs and DRGs. We
solicited comments as to whether it would be appropriate to adopt these
types of limited changes in FY 2007 as an intermediate step to adopting
CS DRGs in FY 2008. There were a number of comments that suggested we
should make improvements to our current DRG system rather than adopting
the CS DRGs. A number of comments expressed support for using the
current DRG system as the starting point for revising the DRG system to
better recognize severity to avoid losing the many positive changes
that have been made over the years to the CMS DRGs. We also encouraged
commenters to send us suggestions regarding potential changes that
could be made to the current DRG system to better recognize severity of
illness. As indicated below, some commenters did provide us with
specific suggestions for how we could revise the current DRGs.
In the FY 2007 IPPS proposed rule, we also discussed an additional
alternative under which we would implement the CS DRGs in FY 2007 and
the HSRVcc methodology in FY 2008. We did receive one comment
supporting this idea. However, as we have discussed elsewhere, we
believe that we should not adopt CS DRGs in FY 2007, but rather
evaluate severity DRG systems for adoption in FY 2008.
With respect to the relative weight calculations, we believe that
adopting HSRVcc weights has the potential to significantly improve
payment equity between DRGs. As MedPAC notes, a ``survey of hospitals'
charging practices suggests that hospitals use diverse strategies for
setting service charges and raising them over time.'' MedPAC found that
data from the Medicare cost reports indicate that hospital markups for
ancillary services (for example, operating room, radiology, and
laboratory) are generally higher than for routine services (for
example, intensive care unit and room and board).\13\ Thus, MedPAC has
concluded that the relative weights for DRGs that use more ancillary
services may be too high compared to other DRGs where the routine costs
account for a higher proportion of hospital costs. Although we agree
with MedPAC's conclusion, the public comments raised important issues
about the effect of charge compression on the relative weights using
the HSRVcc methodology. These commenters argued that the HSRV
calculation exacerbates the effect of charge compression or the
practice of hospitals applying higher percentage markups on lower cost
items and lower percentage markups on higher cost items. As we
indicated above, we have engaged a contractor to assist us with
studying whether charge compression is an actual phenomenon and how it
affects the HSRV methodology. As part of this analysis, we will study
an adjustment for charge compression suggested in the public comments
and will consider adopting HSRV weights in the future. Nevertheless, in
the interim, we believe it is important to adopt a methodology for
calculation of DRG
[[Page 47923]]
relative weights that takes costs into account. We have revised the
CCRs that we used to develop cost-based weights based on the public
comments. Although they do not show the same differentials indicated in
the proposed rule, they continue to support MedPAC's conclusion that a
system based on charges pays too much for some types of cases and pays
too little for others. As indicated above, we summarized hospital-level
cost and charge information to 2 routine and 11 ancillary departmental
cost centers and found that national average routine cost center CCRs
ranged from 50 percent (intensive care unit days) to 56 percent
(routine days), while ancillary cost center CCRs ranged from 16 percent
(anesthesiology) to 46 percent (labor and delivery room).
---------------------------------------------------------------------------
\13\ Ibid, p. 26.
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MedPAC also found that relative profitability ratios were higher
among cardiovascular surgical DRGs than the medical DRGs.\14\ We
believe the relative profitability of the surgical cardiovascular DRGs
has been an important factor in the development of specialty heart
hospitals. Our payment impact analysis indicates that this issue will
be addressed by adopting cost-based weights. Moving from the current
system of charge-based weights to cost-based weights increases payment
in the medical DRGs relative to the surgical DRGs. We expected this
result, given that routine costs will generally account for a higher
proportion of total costs in the medical DRGs than in the surgical
DRGs. In the proposed rule, we estimated that all of our combined
changes would, on average, increase the medical DRG weights by
approximately 7.3 percent while reducing the surgical DRG weights by
approximately 6.9 percent. Implementing the cost-based weights without
utilizing the HSRV standardization method under the 3-year transition
period where the weights for FY 2007 will be based on 33 percent of the
cost-based weight and 67 percent of the charge weight will lessen the
effects of redistribution between medical and surgical DRGs. In this
final rule, we estimate that the increase in the average medical DRG
weight will be 0.9 percent and that the decrease in the average
surgical DRG weight will be 1.2 percent. The pattern of increasing
medical weights and decreasing surgical weights still holds true.
However, by adopting the cost based weights in a transition period, we
are mitigating the larger swings in payments that our proposed policies
adopted in full would have caused.
---------------------------------------------------------------------------
\14\ Ibid, p. 29.
---------------------------------------------------------------------------
Although adopting HSRVcc weights would result in the most
significant improvement in hospital payment-to-cost ratios among the
changes to the IPPS recommended by MedPAC,\15\ we have concerns about
implementing this methodology until we can further study whether the
relative weights might be affected by charge compression. For this
reason, we are adopting cost-based weights without HSRV for FY 2007.
However, we will consider applying the HSRV methodology in subsequent
years if our analysis of charge compression suggests the issue is not a
concern or, if appropriate, we can apply an adjustment that would
account for its effects.
---------------------------------------------------------------------------
\15\ Ibid, p. 37.
---------------------------------------------------------------------------
Based on our analysis, we concur with MedPAC that the CS DRGs would
account more completely for differences in severity of illness and
associated costs among hospitals. MedPAC observed some modest
improvements in hospitals' payment-to-cost ratios from adopting APR
DRGs.\16\ We modeled the CS DRGs discussed above and observed a 12-
percent increase in the explanatory power (or R-square statistic) of
the DRG system to explain total hospital charges. That is, we found
more uniformity among hospital total charges within the CS DRG system
than we did with Medicare's current DRG system. While we believe the CS
DRG system that we described above has the potential to improve the
IPPS, we have the following concerns about adopting it for FY 2007:
---------------------------------------------------------------------------
\16\ Ibid, p.37.
---------------------------------------------------------------------------
Further adjustments are needed to the proposed DRG system.
In the proposed rule, we indicated that further adjustments need to be
made to the proposed CS DRGs to account for situations where less
severely ill patients may be more resource-intensive because they need
expensive medical technology. The CS DRGs assign a patient to a DRG
based on severity of illness but do not recognize increased complexity
due to the types of services/technology provided. In addition, the CS
DRGs do not incorporate many of the changes to the base DRG assignments
that have been made over the years to the CMS DRGs. There was
significant interest in the public comments in either revising the CS
DRGs to reflect these changes or use the CMS DRGs at the starting point
to better recognize severity. The public comments provided a number of
examples where we need to consider whether further changes are needed
to the CS DRGs before they are ready for implementation.
Use of a proprietary DRG system. The commenters raised
valid points about adopting a proprietary DRG system, including
concerns about the availability, price and transparency of logic of the
APR DRGs that are currently in use in Maryland. The CS DRGs are a
variant of the APR DRG system. As we evaluate alternative severity
classification systems, we will use public access to the system as an
important element in evaluating whether each system can be adopted for
Medicare. We will continue to strive to promote transparency in our
decisionmaking as well as in future payment and classification systems
as we have done in the past.
No alternatives have been evaluated. We have not evaluated
alternative DRG systems that could also better recognize severity. We
have received comments suggesting that alternative DRG systems can
better recognize severity than the CS DRGs. It appears that all of the
DRG systems that were raised in the public comments as potential
alternatives to the CS DRGs are proprietary systems. However, it is
possible that we could use one of these systems if it were made
available in the public domain on the same terms as the current CMS
DRGs. Further, as discussed above, CMS (then HCFA) did work on
developing a severity DRG system in the mid-1990's. It is possible that
we could update this work and adopt a system that better recognizes
severity based on the current CMS DRGs for FY 2008 that does not raise
the licensing issues that are involved with using prioprietary systems.
Therefore, for the reasons indicated above, we are not adopting the
CS DRGs for FY 2007. However, we are creating 20 new CMS DRGs and
modifying 32 others across 13 different clinical areas involving
1,666,476 cases that would improve the CMS DRG system's recognition of
severity of illness for FY 2007. Furthermore, as discussed earlier, we
have engaged a contractor to assist us with evaluating alternative DRG
systems that were raised as potential alternatives to the 3M Severity
of Illness DRG products in the public comments. Finally, we will
consider the review that we have undertaken of the 13,000 codes on the
CC list as part of making further refinements to the current CMS DRGs
to better recognize severity of illness based on the work that CMS
(then HCFA) did in the mid-1990's to adopt severity DRGs. Again, we
expect to complete this work in time for proposing changes to the DRG
system to better recognize severity of illness by FY 2008.
[[Page 47924]]
7. Severity Refinements to CMS DRGs
In response to the FY 2007 IPPS proposed rule, we received a number
of public comments that supported the refinement of the current CMS
DRGs so that they better capture severity. Several commenters supported
the expanded use of a clinical severity concept similar to the approach
used in FY 2006 to refine the cardiac DRGs. One commenter urged CMS to
expand the set of DRGs to which this clinical severity concept would
apply, including the DRGs that capture the implanting of
defibrillators. Another commenter expressed support for additional
modifications to the current DRGs to better capture severity and
complexity of patients. Another commenter recommended that CMS start
with the current DRG system and provide overlays for severity,
complexity and patient benefit. One commenter suggested that CMS
develop severity levels within all of the existing DRGs (or pairs of
DRGs, in the cases where CC or MCV splits now exist), or identify
specific DRGs that may be most appropriate for severity adjustments.
Several commenters recommended specific adjustments to better capture
severity for septicemia, headache, and mechanical ventilation patients.
(The DRG recommendations are discussed below under the specific DRG
topic.)
We recognize the importance of having a classification system that
recognizes cases that utilize greater resources and have higher levels
of severity of illness. While we discussed moving to a new DRG system
such as the CS DRGs for FY 2007, we stated that we were also interested
in improving the current DRGs so that they better capture patients with
greater severity of illness as early as FY 2007. We solicited comments
in the proposed rule on whether it would be appropriate in FY 2007 to
apply a clinical severity concept to an expanded set of DRGs, similar
to the approach we used in FY 2006 to refine cardiac DRGs based on the
presence or absence of an MCV.
We believe it is appropriate to move in a direction toward a DRG
system that better recognizes severity. Our strategy involves following
recommendations received as part of public comments and implementing
some of the severity logic in the proposed CS DRGs in the CMS DRGs
where appropriate. By doing so, we would be taking an interim step
toward better recognizing severity in the DRG system. Hospitals would
be able to take advantage of a portion of improved severity logic in
the proposed CS DRGs within the context of the more familiar CMS DRGs.
This interim step would also afford hospitals a more detailed
understanding of some of the basic types of DRG logic used in the
proposed CS DRG system. Obviously, we were not able to adopt some of
the more sophisticated logic involved in the 18 steps included in the
proposed CS DRG system. However, we were able to adopt some of the more
basic components such as specific splits in DRGs that lead to groups
with greater resource utilization.
We began our process of adopting some of the severity logic within
the proposed CS DRGs by first comparing the current CMS DRGs to the
base DRGs in the proposed CS DRGs to identify areas where improvements
could be made to better account for severity of illness and resource
utilization. We used two general approaches to evaluate potential DRG
changes. First, we analyzed where the assignment of a case to a DRG
differed under the CMS DRGs and the proposed base CS DRGs. Second, we
analyzed whether there was a list of ``major conditions'' that could be
used to revise any DRGs to better recognize severity, similar to the
changes to the cardiovascular DRGs involving MCVs we established in
last year's final rule. We used the diagnoses listed as ``major'' or
``extreme'' under the proposed CS DRGs for this review. The changes
described below will result in better recognition of severity in the
current DRG system and, like the changes we made last year to reform
the cardiovascular DRGs based on MCVs, represent an excellent next step
in refining the Medicare inpatient hospital payment system so our
payments are better targeted to specific patients based on their costs
of care.
We began our review by focusing on the cardiac and orthopedic DRGs
because of our concerns that cardiac, orthopedic, and surgical
hospitals have taken advantage of opportunities in the DRG system to
specialize in the least complex and most profitable inpatient cases.
However, with respect to orthopedic and surgical specialty hospitals,
we considered that they have very small inpatient volume and the issues
that are leading to their creation are generally unrelated to profit
opportunities in the IPPS. Although we did review the orthopedic DRGs,
we generally did not find opportunities within the current DRG system
to make further refinements for severity of illness. We were also
unable to find a strong basis to subdivide further most of the
cardiovascular DRGs. In last year's IPPS rule, we already made
significant changes to the DRG system to better account for severity of
illness in the DRGs frequently performed by cardiac hospitals. As
mentioned earlier, this DRG change involved splitting some cardiac DRGs
based on the presence or absence of an MCV. We then conducted a
comparison of the base DRGs in the CMS DRG system and proposed CS DRGs.
We analyzed data to identify specific CMS DRGs with wide ranges in
charges that had been subdivided or in other ways modified under the
proposed CS DRGs. As stated earlier, this process did not allow CMS to
use the more sophisticated logic involved in the proposed CS DRGs to
differentiate groups with greater severity. However, we were able to
identify a group of DRGs that could be created to better align our
payments based on severity of illness. We used our own analysis along
with specific recommendations received during the comment period to
develop further severity refinements to the current DRGs.
We identified 20 new CMS DRGs involving 13 different clinical areas
that would improve the CMS DRG system's recognition of severity of
illness. Twelve of the new DRGs are medical and 8 are surgical. The 20
new DRGs are constructed through a combination of approaches used in
the proposed CS DRGs to refine the base DRGs such as:
Subdividing existing DRGs through the use of diagnosis
codes.
Subdividing DRGs based on specific surgical procedures.
Selecting cases with specific diagnosis and/or procedure
codes and assigning them to a new DRG which better accounts for their
resource use and severity.
We also modified 32 DRGs to better capture differences in severity.
The new and revised DRGs were selected from 40 current DRGs which
contain 1,666,476 cases and represent a number of body systems. In
creating these 20 new DRGs, we are deleting 8 existing DRGs and
modifying 32 existing DRGs. The specific DRG changes are described
below:
a. MDC 1 (Diseases and Disorders of the Nervous System)
(1) Nervous System Infection Except Viral Meningitis
Under our current DRG system, all nervous system infections except
viral meningitis are assigned to CMS DRG 20 (Nervous System Infection
Except Viral Meningitis). By combining all nervous system infections
except viral meningitis into one DRG, we are grouping together patients
with wide ranges of severity. Under our proposed CS DRGs, there are
separate DRGs that distinguish bacterial infection and tuberculosis
from other infections of the
[[Page 47925]]
nervous system. The CS DRGs divided these cases in order to better
recognize severity. The codes which describe bacterial infection and
tuberculosis are listed below.
We then divided the cases within CMS DRG 20 based on the presence
or absence of bacterial infections and tuberculosis of the nervous
system. Our medical advisors support dividing these cases in this
manner to better recognize severity of illness. The data indicated that
these are two distinctly different groups with significant differences
in severity. The bacterial and tuberculosis infection group had average
charges of $47,034 compared to the $36,507 average charges for cases
with other types of infection of the nervous system. Clearly these
charge data support the fact that the bacterial and tuberculous
infection group has a significantly greater degree of severity. The
chart below illustrates these data:
----------------------------------------------------------------------------------------------------------------
Number of Average length Average
DRG cases of stay charges
----------------------------------------------------------------------------------------------------------------
CMS DRG 20...................................................... 6,130 9.88 $42,191.76
DRG 20 with Bacterial & TB Infections of Nervous System......... 3,310 10.1 47,034.42
DRG 20 w/o Bacterial & TB Infections of Nervous System.......... 2,820 9.54 36,507.64
----------------------------------------------------------------------------------------------------------------
The data support the creation of two separate DRGs for these two
groups of patients. Therefore, we are deleting DRG 20 and creating the
following two new DRGs:
DRG 560 (Bacterial & Tuberculosis Infections of Nervous
System).
DRG 561 (Non-Bacterial Infections of Nervous System Except
Viral Meningitis).
The ICD-9-CM diagnosis codes assigned to each new DRG are as
follows.
The new DRG 560 will have principal diagnosis codes listed in the
following table.
------------------------------------------------------------------------
Diagnosis code DRG 560 diagnosis code titles
------------------------------------------------------------------------
003.21................ Salmonella meningitis.
013.00................ Tuberculous meningitis, unspecified examination.
013.01................ Tuberculous meningitis, bacteriological or
histological examination not done.
013.02................ Tuberculous meningitis, bacteriological or
histological examination results unknown (at
present).
013.03................ Tuberculous meningitis, tubercle bacilli found
(in sputum) by microscopy.
013.04................ Tuberculous meningitis, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
013.05................ Tuberculous meningitis, tubercle bacilli not
found by bacteriological examination, but
tuberculosis confirmed histologically.
013.06................ Tuberculous meningitis, tubercle bacilli not
found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
013.10................ Tuberculoma of meninges, unspecified
examination.
013.11................ Tuberculoma of meninges, bacteriological or
histological examination not done.
013.12................ Tuberculoma of meninges, bacteriological or
histological examination results unknown (at
present).
013.13................ Tuberculoma of meninges, tubercle bacilli found
(in sputum) by microscopy.
013.14................ Tuberculoma of meninges, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
013.15................ Tuberculoma of meninges, tubercle bacilli not
found by bacteriological examination, but
tuberculosis confirmed histologically.
013.16................ Tuberculoma of meninges, tubercle bacilli not
found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
013.20................ Tuberculoma of brain, unspecified examination.
013.21................ Tuberculoma of brain, bacteriological or
histological examination not done.
013.22................ Tuberculoma of brain, bacteriological or
histological examination results unknown (at
present).
013.23................ Tuberculoma of brain, tubercle bacilli found (in
sputum) by microscopy.
013.24................ Tuberculoma of brain, tubercle bacilli not found
(in sputum) by microscopy, but found by
bacterial culture.
013.25................ Tuberculoma of brain, tubercle bacilli not found
by bacteriological examination, but
tuberculosis confirmed histologically.
013.26................ Tuberculoma of brain, tubercle bacilli not found
by bacteriological or histological examination,
but tuberculosis confirmed by other methods
(inoculation of animals).
013.30................ Tuberculous abscess of brain, unspecified
examination.
013.31................ Tuberculous abscess of brain, bacteriological or
histological examination not done.
013.32................ Tuberculous abscess of brain, bacteriological or
histological examination results unknown (at
present).
013.33................ Tuberculous abscess of brain, tubercle bacilli
found (in sputum) by microscopy.
013.34................ Tuberculous abscess of brain, tubercle bacilli
not found (in sputum) by microscopy, but found
by bacterial culture.
013.35................ Tuberculous abscess of brain, tubercle bacilli
not found by bacteriological examination, but
tuberculosis confirmed histologically.
013.36................ Tuberculous abscess of brain, tubercle bacilli
not found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
013.40................ Tuberculoma of spinal cord, unspecified
examination.
013.41................ Tuberculoma of spinal cord, bacteriological or
histological examination not done.
013.42................ Tuberculoma of spinal cord, bacteriological or
histological examination results unknown (at
present).
013.43................ Tuberculoma of spinal cord, tubercle bacilli
found (in sputum) by microscopy.
013.44................ Tuberculoma of spinal cord, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
013.45................ Tuberculoma of spinal cord, tubercle bacilli not
found by bacteriological examination, but
tuberculosis confirmed histologically.
013.46................ Tuberculoma of spinal cord, tubercle bacilli not
found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
013.50................ Tuberculous abscess of spinal cord, unspecified
examination.
013.51................ Tuberculous abscess of spinal cord,
bacteriological or histological examination not
done.
013.52................ Tuberculous abscess of spinal cord,
bacteriological or histological examination
results unknown (at present).
013.53................ Tuberculous abscess of spinal cord, tubercle
bacilli found (in sputum) by microscopy.
013.54................ Tuberculous abscess of spinal cord, tubercle
bacilli not found (in sputum) by microscopy,
but found by bacterial culture.
[[Page 47926]]
013.55................ Tuberculous abscess of spinal cord, tubercle
bacilli not found by bacteriological
examination, but tuberculosis confirmed
histologically.
013.56................ Tuberculous abscess of spinal cord, tubercle
bacilli not found by bacteriological or
histological examination, but tuberculosis
confirmed by other methods (inoculation of
animals).
013.60................ Tuberculous encephalitis or myelitis,
unspecified examination.
013.61................ Tuberculous encephalitis or myelitis,
bacteriological or histological examination not
done.
013.62................ Tuberculous encephalitis or myelitis,
bacteriological or histological examination
results unknown (at present).
013.63................ Tuberculous encephalitis or myelitis, tubercle
bacilli found (in sputum) by microscopy.
013.64................ Tuberculous encephalitis or myelitis, tubercle
bacilli not found (in sputum) by microscopy,
but found by bacterial culture.
013.65................ Tuberculous encephalitis or myelitis, tubercle
bacilli not found by bacteriological
examination, but tuberculosis confirmed
histologically.
013.66................ Tuberculous encephalitis or myelitis, tubercle
bacilli not found by bacteriological or
histological examination, but tuberculosis
confirmed by other methods (inoculation of
animals).
013.80................ Other specified tuberculosis of central nervous
system, unspecified examination.
013.81................ Other specified tuberculosis of central nervous
system, bacteriological or histological
examination not done.
013.82................ Other specified tuberculosis of central nervous
system, bacteriological or histological
examination results unknown (at present).
013.83................ Other specified tuberculosis of central nervous
system, tubercle bacilli found (in sputum) by
microscopy.
013.84................ Other specified tuberculosis of central nervous
system, tubercle bacilli not found (in sputum)
by microscopy, but found by bacterial culture.
013.85................ Other specified tuberculosis of central nervous
system, tubercle bacilli not found by
bacteriological examination, but tuberculosis
confirmed histologically.
013.86................ Other specified tuberculosis of central nervous
system, tubercle bacilli not found by
bacteriological or histological examination,
but tuberculosis confirmed by other methods
(inoculation of animals).
013.90................ Unspecified tuberculosis of central nervous
system, unspecified examination.
013.91................ Unspecified tuberculosis of central nervous
system, bacteriological or histological
examination not done.
013.92................ Unspecified tuberculosis of central nervous
system, bacteriological or histological
examination results unknown (at present).
013.93................ Unspecified tuberculosis of central nervous
system, tubercle bacilli found (in sputum) by
microscopy.
013.94................ Unspecified tuberculosis of central nervous
system, tubercle bacilli not found (in sputum)
by microscopy, but found by bacterial culture.
013.95................ Unspecified tuberculosis of central nervous
system, tubercle bacilli not found by
bacteriological examination, but tuberculosis
confirmed histologically.
013.96................ Unspecified tuberculosis of central nervous
system, tubercle bacilli not found by
bacteriological or histological examination,
but tuberculosis confirmed by other methods
(inoculation of animals).
036.0................. Meningococcal meningitis.
036.1................. Meningococcal encephalitis.
098.82................ Gonococcal meningitis.
320.0................. Hemophilus meningitis.
320.1................. Pneumococcal meningitis.
320.2................. Streptococcal meningitis.
320.3................. Staphylococcal meningitis.
320.7................. Meningitis in other bacterial diseases
classified elsewhere.
320.81................ Anaerobic meningitis.
320.82................ Meningitis due to gram-negative bacteria, not
elsewhere classified.
320.89................ Meningitis due to other specified bacteria.
320.9................. Meningitis due to unspecified bacterium.
324.0................. Intracranial abscess.
324.1................. Intraspinal abscess.
324.9................. Intracranial and intraspinal abscess of
unspecified site.
357.0................. Acute infective polyneuritis.
------------------------------------------------------------------------
The new DRG 561 will have principal diagnosis codes listed in the
following table.
------------------------------------------------------------------------
Diagnosis code DRG 561 diagnosis code titles
------------------------------------------------------------------------
006.5................. Amebic brain abscess.
045.00................ Acute paralytic poliomyelitis specified as
bulbar, unspecified type of poliovirus.
045.01................ Acute paralytic poliomyelitis specified as
bulbar, poliovirus type i.
045.02................ Acute paralytic poliomyelitis specified as
bulbar, poliovirus type ii.
045.03................ Acute paralytic poliomyelitis specified as
bulbar, poliovirus type iii.
045.10................ Acute poliomyelitis with other paralysis,
unspecified type of poliovirus.
045.11................ Acute poliomyelitis with other paralysis,
poliovirus type i.
045.12................ Acute poliomyelitis with other paralysis,
poliovirus type ii.
045.13................ Acute poliomyelitis with other paralysis,
poliovirus type iii.
045.90................ Unspecified acute poliomyelitis, unspecified
type poliovirus.
045.91................ Unspecified acute poliomyelitis, poliovirus type
i.
045.92................ Unspecified acute poliomyelitis, poliovirus type
ii.
045.93................ Unspecified acute poliomyelitis, poliovirus type
iii.
049.8................. Other specified non-arthropod-borne viral
diseases of central nervous system.
[[Page 47927]]
049.9................. Unspecified non-arthropod-borne viral diseases
of central nervous system.
052.0................. Postvaricella encephalitis.
052.2................. Postvaricella myelitis.
053.14................ Herpes zoster myelitis.
054.3................. Herpetic meningoencephalitis.
054.74................ Herpes simplex myelitis.
055.0................. Postmeasles encephalitis.
056.01................ Encephalomyelitis due to rubella.
056.09................ Rubella with other neurological complications.
062.0................. Japanese encephalitis.
062.1................. Western equine encephalitis.
062.2................. Eastern equine encephalitis.
062.3................. St. Louis encephalitis.
062.4................. Australian encephalitis.
062.5................. California virus encephalitis.
062.8................. Other specified mosquito-borne viral
encephalitis.
062.9................. Mosquito-borne viral encephalitis, unspecified.
063.0................. Russian spring-summer (taiga) encephalitis.
063.1................. Louping ill.
063.2................. Central European encephalitis.
063.8................. Other specified tick-borne viral encephalitis.
063.9................. Tick-borne viral encephalitis, unspecified.
064................... Viral encephalitis transmitted by other and
unspecified arthropods.
066.2................. Venezuelan equine fever.
071................... Rabies.
072.2................. Mumps encephalitis.
090.40................ Juvenile neurosyphilis, unspecified.
090.41................ Congenital syphilitic encephalitis.
090.42................ Congenital syphilitic meningitis.
090.49................ Other juvenile neurosyphilis.
091.81................ Acute syphilitic meningitis (secondary).
094.2................. Syphilitic meningitis.
094.3................. Asymptomatic neurosyphilis.
094.81................ Syphilitic encephalitis.
100.81................ Leptospiral meningitis (aseptic).
100.89................ Other specified leptospiral infections.
112.83................ Candidal meningitis.
114.2................. Coccidioidal meningitis.
115.01................ Histoplasma capsulatum meningitis.
115.11................ Histoplasma duboisii meningitis.
115.91................ Histoplasmosis meningitis, unspecified.
130.0................. Meningoencephalitis due to toxoplasmosis.
321.0................. Cryptococcal meningitis.
321.1................. Meningitis in other fungal diseases.
321.2................. Meningitis due to viruses not elsewhere
classified.
321.3................. Meningitis due to trypanosomiasis.
321.4................. Meningitis in sarcoidosis.
321.8................. Meningitis due to other nonbacterial organisms
classified elsewhere.
322.0................. Nonpyogenic meningitis.
322.1................. Eosinophilic meningitis.
322.2................. Chronic meningitis.
322.9................. Meningitis, unspecified.
323.01................ Encephalitis and encephalomyelitis in viral
diseases classified elsewhere.
323.02................ Myelitis in viral diseases classified elsewhere.
323.1................. Encephalitis, myelitis, and encephalomyelitis in
rickettsial diseases classified elsewhere.
323.2................. Encephalitis, myelitis, and encephalomyelitis in
protozoal diseases classified elsewhere.
323.41................ Other encephalitis and encephalomyelitis due to
infection classified elsewhere.
323.42................ Other myelitis due to infection classified
elsewhere.
323.51................ Encephalitis and encephalomyelitis following
immunization procedures.
323.52................ Myelitis following immunization procedures.
323.61................ Infectious acute disseminated encephalomyelitis
(ADEM).
323.62................ Other postinfectious encephalitis and
encephalomyelitis.
323.63................ Postinfectious myelitis.
323.81................ Other causes of encephalitis and
encephalomyelitis.
323.82................ Other causes of myelitis.
323.9................. Unspecified causes of encephalitis, myelitis,
and encephalomyelitis.
341.20................ Acute (transverse) myelitis NOS.
341.21................ Acute (transverse) myelitis in conditions
classified elsewhere.
341.22................ Idiopathic transverse myelitis.
------------------------------------------------------------------------
[[Page 47928]]
(2) Seizure and Headache
Comment: One commenter stated that the current DRGs do not
adequately capture the severity of patients with more severe types of
headaches. The commenter further noted that seizures and headaches
represent distinctly different levels of severity, yet they are grouped
together in the CMS DRGs:
CMS DRG 24 (Seizure & Headache Age >17 with CC).
CMS DRG 25 (Seizure & Headache Age >17 without CC).
CMS DRG 26 (Seizure & Headache Age 0-17).
The commenter stated that more severely ill patients, such as those
with intense migraine headaches, should be differentiated from other
patients in the DRG. The commenter suggested splitting these DRGs into
two or more new DRGs to better capture severity. Alternatively, the
commenter suggested that CMS examine how the APR DRG system handles
these types of cases.
Response: Under both the APR DRGs and our proposed CS DRGs, seizure
and headache cases are assigned to separate DRGs while these cases are
grouped together in the CMS DRGs. Both severity DRG systems recognize
different levels of severity for these two groups of patients. Our
medical advisors found that seizure and headache patients are
clinically different, with seizure patients having a higher level of
severity. We also analyzed data for patients with seizures versus those
who are admitted with headaches and found that seizure cases have
higher average charges than headaches. We did not have enough cases to
analyze potential DRG changes for DRG 26. As the chart below shows,
seizure patients age greater than 17 have average charges of $17,125
with CC and $10,540 without CC. Headache patients greater than 17 years
of age have average charges of $11,618. The data did not support
creating a split for headache patients greater than 17 years with and
without CC. The difference in average charges for these groups was only
$2,596 ($12,591 with CC as compared to $9,995 for those without a CC).
DRGs 24, 25, and 26
----------------------------------------------------------------------------------------------------------------
Number of Average length Average
DRG cases of stay charges
----------------------------------------------------------------------------------------------------------------
24.............................................................. 60,186 4.67 $16,403.55
25.............................................................. 25,816 3.13 10,419.00
26.............................................................. 21 4.05 17,396.43
----------------------------------------------------------------------------------------------------------------
Seizures Age >17 With and Without CC
----------------------------------------------------------------------------------------------------------------
Number of Average length Average
DRG cases of stay charges
----------------------------------------------------------------------------------------------------------------
With CC......................................................... 50,605 4.8 $17,125.19
Without CC...................................................... 20,065 3.1 10,540.27
----------------------------------------------------------------------------------------------------------------
Headaches > 17
------------------------------------------------------------------------
Average length Average
DRG of stay charges
------------------------------------------------------------------------
15,332.................................. 3.4 $11,618.15
------------------------------------------------------------------------
Headaches >17 With and Without CC
----------------------------------------------------------------------------------------------------------------
Number of Average length Average
DRG cases of stay charges
----------------------------------------------------------------------------------------------------------------
With CC......................................................... 9,581 3.7 $12,591,92
Without CC...................................................... 5,751 2.9 9,995.85
----------------------------------------------------------------------------------------------------------------
The data also support creating separate DRGs for seizure and
headache patients greater than 17 years of age. The data further
support an additional split for seizure patients based on the presence
of a complication or comorbidity (CC). Seizure cases with a CC have
$6,585 greater average charges compared to cases without a CC. The data
are less compelling for creating a split based on the presence of a CC
for headache cases, since the difference in average charges is only
$2,596.
The clinical data and our medical advisors support the creation of
separate DRGs for these two groups of patients. Therefore, we are
deleting the following DRGs:
DRG 24 (Seizure & Headache Age >17 with CC).
DRG 25 (Seizure & Headache Age >17 without CC).
We are creating the following three new DRGs:
DRG 562 (Seizure Age >17 with CC).
DRG 563 (Seizure Age >17 without CC).
DRG 564 (Headaches Age >17).
The ICD-9-CM codes and DRG logic for cases assigned to these new
DRGs will be as follows.
New DRG 562 will have the following principal diagnosis codes and
age greater than 17 years with a CC.
[[Page 47929]]
------------------------------------------------------------------------
Diagnosis code Diagnosis code title
------------------------------------------------------------------------
345.00................ Generalized nonconvulsive epilepsy, without
mention of intractable epilepsy.
345.01................ Generalized nonconvulsive epilepsy, with
intractable epilepsy.
345.10................ Generalized convulsive epilepsy, without mention
of intractable epilepsy.
345.11................ Generalized convulsive epilepsy, with
intractable epilepsy.
345.2................. Petit mal status, epileptic.
345.3................. Grand mal status, epileptic.
345.40................ Localization-related (focal) (partial) epilepsy
and epileptic syndromes with complex partial
seizures, without mention of intractable
epilepsy.
345.41................ Localization-related (focal) (partial) epilepsy
and epileptic syndromes with complex partial
seizures, with intractable epilepsy.
345.50................ Localization-related (focal) (partial) epilepsy
and epileptic syndromes with simple partial
seizures, without mention of intractable
epilepsy.
345.51................ Localization-related (focal) (partial) epilepsy
and epileptic syndromes with simple partial
seizures, with intractable epilepsy.
345.60................ Infantile spasms, without mention of intractable
epilepsy.
345.61................ Infantile spasms, with intractable epilepsy.
345.70................ Epilepsia partialis continua, without mention of
intractable epilepsy.
345.71................ Epilepsia partialis continua, with intractable
epilepsy.
345.80................ Other forms of epilepsy and recurrent seizures,
without mention of intractable epilepsy.
345.81................ Other forms of epilepsy and recurrent seizures,
with intractable epilepsy.
345.90................ Epilepsy, unspecified, without mention of
intractable epilepsy.
345.91................ Epilepsy, unspecified, with intractable
epilepsy.
780.31................ Febrile convulsions (simple), unspecified.
780.32................ Complex febrile convulsions.
780.39................ Other convulsions.
------------------------------------------------------------------------
New DRG 563 will have the principal diagnosis codes listed above
for DRG 562, age greater than 17 years, but no complication/
comorbidity.
New DRG 564 will have the principal diagnosis codes listed as
follows and an age greater than 17 years.
------------------------------------------------------------------------
Diagnosis code Diagnosis code title
------------------------------------------------------------------------
307.81................ Tension headache.
310.2................. Postconcussion syndrome.
346.00................ Classical migraine without mention of
intractable migraine.
346.01................ Classical migraine with intractable migraine, so
stated.
346.10................ Common migraine without mention of intractable
migraine.
346.11................ Common migraine with intractable migraine, so
stated.
346.20................ Variants of migraine without mention of
intractable migraine.
346.21................ Variants of migraine with intractable migraine,
so stated.
346.80................ Other forms of migraine without mention of
intractable migraine.
346.81................ Other forms of migraine with intractable
migraine, so stated.
346.90................ Migraine, unspecified without mention of
intractable migraine.
346.91................ Migraine, unspecified with intractable migraine,
so stated.
348.2................. Benign intracranial hypertension.
349.0................. Reaction to spinal or lumbar puncture.
437.4................. Cerebral arteritis.
784.0................. Headache.
------------------------------------------------------------------------
b. MDC 4 (Diseases and Disorders of the Respiratory System):
Respiratory System Diagnosis With Ventilator Support
Medical patients who are treated with mechanical ventilation for
respiratory failure are currently assigned to DRG 475 (Respiratory
System Diagnosis with Ventilator Support). This DRG includes patients
who are on a mechanical ventilator for only a few hours as well as
patients who are on mechanical ventilation for several days. The
proposed CS DRGs divide these patients into two groups, those on
ventilator support for 96 or more hours and those on ventilator support
for less than 96 hours. The CS DRGs recognize the difference in
severity between these two groups of patients. Our medical advisors
agree that medical patients who are treated with mechanical ventilation
for respiratory failure for 96 or more hours in most cases are more
severely ill than patients who are treated with mechanical ventilation
for fewer than 96 hours. A review of these cases illustrates a
significant difference in average charges for patients on ventilator
support for 96 or more hours which supports the greater severity of
these patients. The chart below shows that patients on ventilator
support for 96 or more hours have average charges of $83,058 compared
to $38,300 for patients on ventilator support for less than 96 hours, a
difference of $44,758 in charges. The following chart summarizes these
data.
[[Page 47930]]
DRG 475 Respiratory System Diagnosis With Ventilator Support
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 475......................... 114,199 10.64 $55,873.15
DRG 475 with Ventilator Support 44,836 15.30 83,058.24
96+ Hours......................
DRG 475 with Ventilator Support 69,363 7.64 38,300.81
< 96 Hours......................
------------------------------------------------------------------------
The proposed CS DRGs do a much better job of identifying patients
on ventilator support who have higher levels of severity and utilize
significantly more resources. Therefore, we will adopt the approach
used under the CS DRG system and split these patients based on whether
or not the patients are on mechanical ventilation for 96 hours. We are
deleting DRG 475 and creating the following two new DRGs:
DRG 565 (Respiratory System Diagnosis with Ventilator
Support 96+ Hours).
DRG 566 (Respiratory System Diagnosis with Ventilator
Support < 96 Hours).
The DRG logic for these two new DRGs is as follows.
New DRG 565 will have a respiratory system diagnosis and procedure
code 96.72 (Continuous mechanical ventilation for 96 consecutive hours
or more).
New DRG 566 will have a respiratory system diagnosis and the
following procedure codes:
96.70 (Continuous mechanical ventilation of unspecified duration).
96.71 (Continuous mechanical ventilation for less than 96
consecutive hours).
c. MDC 6 (Diseases and Disorders of the Digestive System)
(1) Major Esophageal Disorders and Major Gastrointestinal and
Peritoneal Infections
The proposed CS DRGs assign major esophageal disorders to a single
DRG because these disorders have been shown to have a higher level of
severity than do other types of esophageal disorders. Under the current
CMS DRGs these disorders are dispersed throughout 8 separate DRGs. The
conditions included in the list of major esophageal disorders are
described in the table below. The proposed CS DRGs also assign specific
gastrointestinal and peritoneal infections that represent a high level
of severity into a single DRG. These conditions are assigned to the
same group of eight CMS DRGs mentioned above within CMS' current DRGS.
The conditions considered gastrointestinal and peritoneal infections
are described in the table below.
Our data show that the two groups of cases assigned to major
esophageal disorders and to the gastrointestinal and peritoneal
infections represent significantly greater severity levels and have
higher average charges than do other cases in the eight CMS DRGs. The
eight current CMS DRGs to which these two groups of higher severity
cases as assigned are as follows:
CMS DRG 174 (G.I. Hemorrhage with CC).
CMS DRG 175 (G.I. Hemorrhage without CC).
CMS DRG 182 (Esophagitis, Gastroenteritis & Miscellaneous
Digestive Disorders Age >17 with CC).
CMS DRG 183 (Esophagitis, Gastroenteritis & Miscellaneous
Digestive Disorders Age >17 without CC).
CMS DRG 184 (Esophagitis, Gastroenteritis & Miscellaneous
Digestive Disorders Age 0-17).
CMS DRG 188 (Digestive System Diagnoses Age >17 with CC).
CMS DRG 189 (Digestive System Diagnoses Age >17 without
CC).
CMS DRG 190 (Digestive System Diagnoses Age 0-17).
DRGs 174, 175, 182, 183, 184, 188, 189, and 190
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 174....................... 249,359 4.69 $16,987.26
DRG 174 w/o Major Esophageal 241,508 4.69 16,934.86
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 175....................... 28,485 2.86 9,573.73
DRG 175 w/o Major Esophageal 27,816 2.87 9,934.86
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 182....................... 282,619 4.48 14,269.01
DRG 182 w/o Major Esophageal 243,563 4.07 13,124.03
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 183....................... 77,582 2.89 9,933.62
DRG 183 w/o Major Esophageal 74,899 2.84 9,845.81
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 184....................... 66 4.38 12,116.67
DRG 184 w/o Major Esophageal 60 3.88 10,053.38
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 188....................... 88,970 5.45 18,278.19
DRG 189 w/o Major Esophageal 87,210 5.43 18,194.27
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 189....................... 12,454 3.06 9,963.90
DRG 190 w/o Major Esophageal 12,123 3.02 9,855.31
Disorders or Gastrointestinal
and Peritoneal Infections....
DRG 190....................... 58 5.02 14,156.52
DRG 190 w/o Major Esophageal 45 5.13 14,829.47
Disorders or Gastrointestinal
and Peritoneal Infections....
------------------------------------------------------------------------
[[Page 47931]]
Major Esophageal Disorders
------------------------------------------------------------------------
Average
Number of cases length of Average
stay charges
------------------------------------------------------------------------
10,633..................................... 4.7 $18,410.30
------------------------------------------------------------------------
Major Gastrointestinal and Peritoneal Infections
------------------------------------------------------------------------
Average
Number of cases length of Average
stay charges
------------------------------------------------------------------------
41,736..................................... 6.9 $20,861.06
------------------------------------------------------------------------
As can be seen from the tables above, cases assigned to these eight
DRGs without a major esophageal disorder or a major gastrointestinal
disorder and peritoneal infection have average charges ranging from
$9,845 to $18,194. The average charges for major esophageal disorders
are $18,410, while average charges for major gastrointestinal disorders
and peritoneal infections are $20,861. Removing these higher severity
cases from the eight DRGs does not have a significant impact on the DRG
weights for the remaining cases. Most of the higher severity cases are
being removed from DRG 182. There were 282,619 cases in this DRG. By
removing the two new groups of cases, the DRG has 243,563 cases
remaining. The average charge for DRG 182 with the remaining cases
decreases from $14,269 to $13,124. Therefore, the impact on the
remaining cases is not that significant. However, reassigning cases
with major esophageal and gastrointestinal disorders and peritoneal
infections to two new DRGs has the effect of creating two groups which
have higher levels of severity and use significantly greater resources.
Our medical advisors agree that these two groups represent higher
levels of severity and that it is appropriate to move these two groups
of cases out of their existing assignments and into the following two
new DRGs:
DRG 571 (Major Esophageal Disorders)
DRG 572 (Major Gastrointestinal Disorders and Peritoneal
Infections)
We are creating new DRG 571 with the following ICD-9-CM diagnosis
codes (removing them from DRGs 174, 175, 182, 183, 184, 188, 189, and
190):
------------------------------------------------------------------------
Diagnosis code Major esophageal disorders diagnosis code titles
------------------------------------------------------------------------
017.80................ Tuberculosis of esophagus, unspecified
examination.
017.81................ Tuberculosis of esophagus, bacteriological or
histological examination not done.
017.82................ Tuberculosis of esophagus, bacteriological or
histological examination results unknown (at
present).
017.83................ Tuberculosis of esophagus, tubercle bacilli
found (in sputum) by microscopy.
017.84................ Tuberculosis of esophagus, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
017.85................ Tuberculosis of esophagus, tubercle bacilli not
found by bacteriological examination, but
tuberculosis confirmed histologically.
017.86................ Tuberculosis of esophagus, tubercle bacilli not
found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
112.84................ Candidal esophagitis.
456.0................. Esophageal varices with bleeding.
456.1................. Esophageal varices without mention of bleeding.
456.20................ Esophageal varices in diseases classified
elsewhere, with bleeding.
530.4................. Perforation of esophagus.
530.7................. Gastroesophageal laceration-hemorrhage syndrome.
530.82................ Esophageal hemorrhage.
530.84................ Tracheoesophageal fistula.
750.3................. Congenital tracheoesophageal fistula, esophageal
atresia and stenosis.
750.4................. Other specified congenital anomalies of
esophagus.
862.22................ Injury to esophagus without mention of open
wound into cavity.
947.2................. Burn of esophagus.
------------------------------------------------------------------------
We are creating new DRG 572 with the following ICD-9-CM diagnosis
codes (removing them from DRGs 182, 183, 184, 188, 189, and 190):
------------------------------------------------------------------------
Diagnosis code Major esophageal disorders diagnosis code titles
------------------------------------------------------------------------
001.0................ Cholera due to vibrio cholerae.
001.1................. Cholera due to vibrio cholerae el tor.
001.9................. Cholera, unspecified.
003.0................. Salmonella gastroenteritis.
004.0................. Shigella dysenteriae.
004.1................. Shigella flexneri.
004.2................. Shigella boydii.
004.3................. Shigella sonnei.
004.8................. Other specified shigella infections.
004.9................. Shigellosis, unspecified.
005.0................. Staphylococcal food poisoning.
005.2................. Food poisoning due to clostridium perfringens
(c. welchii).
005.3................. Food poisoning due to other clostridia.
005.4................. Food poisoning due to vibrio parahaemolyticus.
005.81................ Food poisoning due to vibrio vulnificus.
005.89................ Other bacterial food poisoning.
006.0................. Acute amebic dysentery without mention of
abscess.
006.1................. Chronic intestinal amebiasis without mention of
abscess.
006.2................. Amebic nondysenteric colitis.
007.0................. Balantidiasis.
007.1................. Giardiasis.
[[Page 47932]]
007.2................. Coccidiosis.
007.3................. Intestinal trichomoniasis.
007.4................. Cryptosporidiosis.
007.5................. Cyclosporiasis.
007.8................. Other specified protozoal intestinal diseases.
007.9................. Unspecified protozoal intestinal disease.
008.00................ Intestinal infection due to e. coli,
unspecified.
008.01................ Intestinal infection due to enteropathogenic e.
coli.
008.02................ Intestinal infection due to enterotoxigenic e.
coli.
008.03................ Intestinal infection due to enteroinvasive e.
coli.
008.04................ Intestinal infection due to enterohemorrhagic e.
coli.
008.09................ Intestinal infection due to other intestinal e.
coli infections.
008.1................. Intestinal infection due to arizona group of
paracolon bacilli.
008.2................. Intestinal infection due to aerobacter
aerogenes.
008.3................. Intestinal infection due to proteus (mirabilis)
(morganii).
008.41................ Intestinal infection due to staphylococcus.
008.42................ Intestinal infection due to pseudomonas.
008.43................ Intestinal infection due to campylobacter.
008.44................ Intestinal infection due to yersinia
enterocolitica.
008.45................ Intestinal infection due to clostridium
difficile.
008.46................ Intestinal infection due to other anaerobes.
008.47................ Intestinal infection due to other gram-negative
bacteria.
008.49................ Intestinal infection due to other organisms.
008.5................. Bacterial enteritis, unspecified.
4.00.................. Tuberculous peritonitis, unspecified
examination.
014.01................ Tuberculous peritonitis, bacteriological or
histological examination not done.
014.02................ Tuberculous peritonitis, bacteriological or
histological examination results unknown (at
present).
014.03................ Tuberculous peritonitis, tubercle bacilli found
(in sputum) by microscopy.
014.04................ Tuberculous peritonitis, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
014.05................ Tuberculous peritonitis, tubercle bacilli not
found by bacteriological examination, but
tuberculosis confirmed histologically.
014.06................ Tuberculous peritonitis, tubercle bacilli not
found by bacteriological or histological
examination, but tuberculosis confirmed by
other methods (inoculation of animals).
014.80................ Other tuberculosis of intestines and mesenteric
glands, unspecified examination.
014.81................ Other tuberculosis of intestines and mesenteric
glands, bacteriological or histological
examination not done.
014.82................ Other tuberculosis of intestines and mesenteric
glands, bacteriological or histological
examination results unknown (at present).
014.83................ Other tuberculosis of intestines and mesenteric
glands, tubercle bacilli found (in sputum) by
microscopy.
014.84................ Other tuberculosis of intestines and mesenteric
glands, tubercle bacilli not found (in sputum)
by microscopy, but found by bacterial culture.
014.85................ Other tuberculosis of intestines and mesenteric
glands, tubercle bacilli not found by
bacteriological examination, but tuberculosis
confirmed histologically.
014.86................ Other tuberculosis of intestines and mesenteric
glands, tubercle bacilli not found by
bacteriological or histological examination,
but tuberculosis confirmed by other methods
(inoculation of animals).
021.1................. Enteric tularemia.
022.2................. Gastrointestinal anthrax.
032.83................ Diphtheritic peritonitis.
039.2................. Abdominal actinomycotic infection.
095.2................. Syphilitic peritonitis.
098.86................ Gonococcal peritonitis.
123.1................. Cysticercosis.
123.5................. Sparganosis (larval diphyllobothriasis).
123.6................. Hymenolepiasis.
123.8................. Other specified cestode infection.
123.9................. Cestode infection, unspecified.
126.0................. Ancylostomiasis due to ancylostoma duodenale.
126.1................. Necatoriasis due to necator americanus.
126.2................. Ancylostomiasis due to ancylostoma braziliense.
126.3................. Ancylostomiasis due to ancylostoma ceylanicum.
126.8................. Other specified ancylostoma.
126.9................. Ancylostomiasis and necatoriasis, unspecified.
540.0................. Acute appendicitis with generalized peritonitis.
540.1................. Acute appendicitis with peritoneal abscess.
567.0................. Peritonitis in infectious diseases classified
elsewhere.
567.1................. Pneumococcal peritonitis.
567.21................ Peritonitis (acute) generalized.
567.22................ Peritoneal abscess.
567.23................ Spontaneous bacterial peritonitis.
567.29................ Other suppurative peritonitis.
567.31................ Psoas muscle abscess.
567.38................ Other retroperitoneal abscess.
7.39.................. Other retroperitoneal infections.
567.89................ Other specified peritonitis.
567.9................. Unspecified peritonitis.
569.5................. Abscess of intestine.
------------------------------------------------------------------------
[[Page 47933]]
(2) Principal or Secondary Diagnosis of Major Gastrointestinal
Diagnosis
We examined the diagnosis codes assigned to MDC 6 for severity
using the proposed CS DRGs and created a list of diagnosis codes that
are identified as major or extreme in the APR DRGs or the consolidated
severity DRGs. We refer to this set of higher severity diagnosis codes
as Major Gastrointestinal Diagnoses. The list of higher severity
diagnosis codes considered to be a Major Gastrointestinal Diagnosis is
provided in the table below showing new DRG 569.
We then examined DRGs 148 and 149 (Major Small & Large Bowel
Procedures with and without CC, respectively) and DRGs 154 through 156
(Stomach, Esophageal & Duodenal Procedures Age >17 with and without CC
and Age 0-17, respectively) when these Major Gastrointestinal Diagnoses
were present as either a principal or secondary diagnosis. In general,
these Major Gastrointestinal Diagnoses represent or are associated with
the reason for performing the surgical procedure in DRGs 148 and 149
and DRGs 154 through 156 and are the most serious diagnoses that
necessitate surgery. As the following tables illustrate, the presence
of these Major Gastrointestinal Diagnoses identifies patients with a
higher level of severity. The presence of these Major Gastrointestinal
Diagnoses leads to significantly higher average charges for these two
groups of surgical patients, particularly for cases currently assigned
to DRGs 148 and 154 which are the surgical procedures that include the
presence of a CC. The surgical patients with Major Gastrointestinal
Diagnoses would not only be considered to have a greater level of
severity and be more expensive, they would also be assigned to the
surgical DRG that includes a CC. The tables below show that patients in
DRG 148 with a Major Gastrointestinal Diagnosis have average charges of
$70,001.16 compared to average charges of $43,809.03 when a Major
Gastrointestinal Diagnosis is not present. The difference in charges
for cases in DRG 149 was not as great. The difference in average
charges was $29,103.84 for DRG 149 when a Major Gastrointestinal
Diagnosis was present and $23,077.84 when it was not. The number of
cases with a Major Gastrointestinal Diagnosis was significantly larger
for DRG 148 (58,153 cases compared to only 1,822 in DRG 149). Similar
findings occur for DRGs 154, 155, and 156. Cases with a Major
Gastrointestinal Diagnosis occur with significantly greater numbers in
DRG 154 (9,924 compared to only 357 in DRG 155 and none in DRG 156).
The average charges for cases with a Major Gastrointestinal Diagnosis
were $84,270.92 for DRG 154, and only $29,193.81 for DRG 155.
DRGs 148, 149, 154, 155, and 156
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 148....................... 126,156 11.92 $55,882.59
DRG 148 with PDX/SDX of Major 58,153 14.24 70,001.16
GI Diagnoses.................
DRG 148 w/o PDX/SDX Major GI 68,003 9.94 43,809.03
Diagnoses....................
DRG 149....................... 18,471 5.66 23,672.25
DRG 149 with PDX/SDX of Major 1,822 7.66 29,103.84
GI Diagnoses.................
DRG 149 w/o PDX/SDX Major GI 16,649 5.44 23,077.84
Diagnoses....................
DRG 154....................... 25,617 12.95 66,257.17
DRG 154 with PDX/SDX of Major 9,924 15.59 84,270.92
GI Diagnoses.................
DRG 154 w/o PDX/SDX Major GI 15,693 11.28 54,865.56
Diagnoses....................
DRG 155....................... 5,679 3.96 21,543.88
DRG 155 with PDX/SDX of Major 357 7.10 29,193.81
GI Diagnoses.................
DRG 155 w/o PDX/SDX Major GI 5,322 3.75 21,030.50
Diagnoses....................
DRG 156....................... 4 9.25 48,015.50
DRG 156 with PDX/SDX of Major 0 0 0
GI Diagnoses.................
DRG 156 w/o PDX/SDX Major GI 4 9.25 48,015.50
Diagnoses....................
------------------------------------------------------------------------
Our medical advisors agree that these gastrointestinal surgical
patients with a Major Gastrointestinal Diagnosis are more severely ill
and represent patients with a higher level of severity. They support
subdividing cases in DRG 148 and 154 based on the presence of a Major
Gastrointestinal Diagnosis to better capture patients with higher level
of severity. A summary of these changes is provided below.
We are deleting DRG 148 and creating the following two new DRGs:
DRG 569 (Major Small & Large Bowel Procedures with CC with
Major Gastrointestinal Diagnosis)
DRG 570 (Major Small & Large Bowel Procedures with CC
without Major Gastrointestinal Diagnosis)
The DRG logic for new DRGs 569 and 570 is as follows.
New DRG 569 will have a principal diagnosis from MDC 6 and one of
the following codes as either the principal or secondary diagnosis.
This DRG will also have an operating room procedure from current DRG
148 and a Complication/Comorbidity (as defined in CMS DRG GROUPER
Version 24.0).
------------------------------------------------------------------------
Principal or secondary diagnosis--major
Diagnosis code gastrointestinal diagnosis diagnosis code title
------------------------------------------------------------------------
008.41................ Intestinal infection due to staphylococcus.
008.42................ Intestinal infection due to pseudomonas.
008.43................ Intestinal infection due to campylobacter.
008.45................ Intestinal infection due to clostridium
difficile.
008.46................ Intestinal infection due to other anaerobes.
008.49................ Intestinal infection due to other organisms.
014.04................ Tuberculous peritonitis, tubercle bacilli not
found (in sputum) by microscopy, but found by
bacterial culture.
098.86................ Gonococcal peritonitis.
[[Page 47934]]
456.0................. Esophageal varices with bleeding.
456.20................ Esophageal varices in diseases classified
elsewhere, with bleeding.
530.21................ Ulcer of esophagus with bleeding.
530.4................. Perforation of esophagus.
530.7................. Gastroesophageal laceration-hemorrhage syndrome.
530.84................ Tracheoesophageal fistula.
531.00................ Acute gastric ulcer with hemorrhage, without
mention of obstruction.
531.21................ Acute gastric ulcer with hemorrhage and
perforation, with obstruction.
531.40................ Chronic or unspecified gastric ulcer with
hemorrhage, without mention of obstruction.
531.41................ Chronic or unspecified gastric ulcer with
hemorrhage, with obstruction.
531.50................ Chronic or unspecified gastric ulcer with
perforation, without mention of obstruction.
531.60................ Chronic or unspecified gastric ulcer with
hemorrhage and perforation, without mention of
obstruction.
531.91................ Gastric ulcer, unspecified as acute or chronic,
without mention of hemorrhage or perforation,
with obstruction.
532.00................ Acute duodenal ulcer with hemorrhage, without
mention of obstruction.
532.10................ Acute duodenal ulcer with perforation, without
mention of obstruction.
532.11................ Acute duodenal ulcer with perforation, with
obstruction.
532.20................ Acute duodenal ulcer with hemorrhage and
perforation, without mention of obstruction.
532.31................ Acute duodenal ulcer without mention of
hemorrhage or perforation, with obstruction.
532.40................ Chronic or unspecified duodenal ulcer with
hemorrhage, without mention of obstruction.
532.41................ Chronic or unspecified duodenal ulcer with
hemorrhage, with obstruction.
532.50................ Chronic or unspecified duodenal ulcer with
perforation, without mention of obstruction.
532.60................ Chronic or unspecified duodenal ulcer with
hemorrhage and perforation, without mention of
obstruction.
533.00................ Acute peptic ulcer of unspecified site with
hemorrhage, without mention of obstruction.
533.10................ Acute peptic ulcer of unspecified site with
perforation, without mention of obstruction.
533.21................ Acute peptic ulcer of unspecified site with
hemorrhage and perforation, with obstruction.
533.40................ Chronic or unspecified peptic ulcer of
unspecified site with hemorrhage, without
mention of obstruction.
533.41................ Chronic or unspecified peptic ulcer of
unspecified site with hemorrhage, with
obstruction.
533.50................ Chronic or unspecified peptic ulcer of
unspecified site with perforation, without
mention of obstruction.
533.51................ Chronic or unspecified peptic ulcer of
unspecified site with perforation, with
obstruction.
533.60................ Chronic or unspecified peptic ulcer of
unspecified site with hemorrhage and
perforation, without mention of obstruction.
533.91................ Peptic ulcer of unspecified site, unspecified as
acute or chronic, without mention of hemorrhage
or perforation, with obstruction.
534.00................ Acute gastrojejunal ulcer with hemorrhage,
without mention of obstruction.
534.40................ Chronic or unspecified gastrojejunal ulcer with
hemorrhage, without mention of obstruction.
534.41................ Chronic or unspecified gastrojejunal ulcer, with
hemorrhage, with obstruction.
534.50................ Chronic or unspecified gastrojejunal ulcer with
perforation, without mention of obstruction.
534.51................ Chronic or unspecified gastrojejunal ulcer with
perforation, with obstruction.
534.91................ Gastrojejunal ulcer, unspecified as acute or
chronic, without mention of hemorrhage or
perforation, with obstruction.
535.01................ Acute gastritis with hemorrhage.
535.11................ Atrophic gastritis with hemorrhage.
535.21................ Gastric mucosal hypertrophy with hemorrhage.
535.31................ Alcoholic gastritis with hemorrhage.
535.41................ Other specified gastritis with hemorrhage.
535.51................ Unspecified gastritis and gastroduodenitis with
hemorrhage.
535.61................ Duodenitis with hemorrhage.
537.3................. Other obstruction of duodenum.
537.83................ Angiodysplasia of stomach and duodenum with
hemorrhage.
540.0................. Acute appendicitis with generalized peritonitis.
540.1................. Acute appendicitis with peritoneal abscess.
550.00................ Unilateral or unspecified inguinal hernia, with
gangrene.
550.01................ Recurrent unilateral or unspecified inguinal
hernia, with gangrene.
550.02................ Bilateral inguinal hernia, with gangrene.
551.00................ Unilateral or unspecified femoral hernia with
gangrene.
551.1................. Umbilical hernia with gangrene.
551.20................ Unspecified ventral hernia with gangrene.
551.21................ Incisional ventral hernia, with gangrene.
551.29................ Other ventral hernia with gangrene.
551.3................. Diaphragmatic hernia with gangrene.
551.8................. Hernia of other specified sites, with gangrene.
551.9................. Hernia of unspecified site, with gangrene.
557.0................. Acute vascular insufficiency of intestine.
557.1................. Chronic vascular insufficiency of intestine.
557.9................. Unspecified vascular insufficiency of intestine.
560.0................. Intussusception.
560.2................. Volvulus.
560.31................ Gallstone ileus.
560.81................ Intestinal or peritoneal adhesions with
obstruction (postoperative) (postinfection).
560.89................ Other specified intestinal obstruction.
560.9................. Unspecified intestinal obstruction.
562.02................ Diverticulosis of small intestine with
hemorrhage.
562.03................ Diverticulitis of small intestine with
hemorrhage.
562.12................ Diverticulosis of colon with hemorrhage.
562.13................ Diverticulitis of colon with hemorrhage.
564.7................. Megacolon, other than hirschsprung's.
[[Page 47935]]
567.0................. Peritonitis in infectious diseases classified
elsewhere.
567.1................. Pneumococcal peritonitis.
567.21................ Peritonitis (acute) generalized.
567.22................ Peritoneal abscess.
567.23................ Spontaneous bacterial peritonitis.
567.29................ Other suppurative peritonitis.
567.31................ Psoas muscle abscess.
567.38................ Other retroperitoneal abscess.
567.39................ Other retroperitoneal infections.
567.81................ Choleperitonitis.
567.9................. Unspecified peritonitis.
568.81................ Hemoperitoneum (nontraumatic).
569.5................. Abscess of intestine.
569.83................ Perforation of intestine.
569.85................ Angiodysplasia of intestine with hemorrhage.
578.0................. Hematemesis.
750.3................. Congenital tracheoesophageal fistula, esophageal
atresia and stenosis.
863.30................ Injury to small intestine, unspecified site,
with open wound into cavity.
863.31................ Injury to duodenum with open wound into cavity.
863.39................ Other injury to small intestine with open wound
into cavity.
863.50................ Injury to colon, unspecified site, with open
wound into cavity.
863.51................ Injury to ascending (right) colon with open
wound into cavity.
863.52................ Injury to transverse colon with open wound into
cavity.
863.53................ Injury to descending (left) colon with open
wound into cavity.
863.54................ Injury to sigmoid colon with open wound into
cavity.
863.55................ Injury to rectum with open wound into cavity.
863.59................ Other injury to colon and rectum with open wound
into cavity.
863.90................ Injury to gastrointestinal tract, unspecified
site, with open wound into cavity.
863.95................ Injury to appendix with open wound into cavity.
863.99................ Injury to other and unspecified gastrointestinal
sites with open wound into cavity.
868.13................ Injury to peritoneum with open wound into
cavity.
947.3................. Burn of gastrointestinal tract.
------------------------------------------------------------------------
New DRG 570 will have an operating room procedure code from current
CMS DRG 148 and a principal diagnosis from MDC 6, except for a
principal or secondary diagnosis listed above in the Major
Gastrointestinal Diagnosis list and will have a Complication/
Comorbidity.
We also are deleting DRG 154 and creating two new DRGs as follows:
DRG 567 (Stomach, Esophageal & Duodenal Procedures Age >17
with Complication/Comorbidity with Major Gastrointestinal Diagnosis)
DRG 568 (Stomach, Esophageal & Duodenal Procedures Age >17
with Complication/Comorbidity without Major Gastrointestinal Diagnosis)
New DRG 567 will have a principal diagnosis from MDC 6 with either
a principal or secondary diagnosis of a Major Gastrointestinal
Diagnosis (see list of Major Gastrointestinal Diagnoses listed above).
New DRG 567 will also have an operating room procedure from current CMS
DRG 154 and a CC. New DRG 568 will have a principal diagnosis from MDC
6, except it will not have a principal or secondary diagnosis from the
list of Major Gastrointestinal Diagnoses. It will also have an
operating room procedure from current CMS DRG 154 and a CC.
d. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract):
Major Bladder Procedures
Under our proposed CS DRGs, cases with a major bladder procedure
were found to have a higher level of severity than were cases with
other types of bladder procedures. Therfore, cases with a major bladder
procedure are assigned to a single DRG in the CS DRGs. The procedures
classified as a major bladder procedure are as follows:
Major Bladder Procedures
------------------------------------------------------------------------
Procedure code Description
------------------------------------------------------------------------
57.6.................. Partial cystectomy.
57.71................. Radical cystectomy.
57.79................. Other total cystectomy.
57.83................. Repair of fistula involving bladder and
intestine.
57.84................. Repair of other fistula of bladder.
57.85................. Cystourethroplasty and plastic repair of bladder
neck.
57.86................. Repair of bladder exstrophy.
57.87................. Reconstruction of urinary bladder.
57.88................. Other anastomosis of bladder.
57.89................. Other repair of bladder.
------------------------------------------------------------------------
[[Page 47936]]
The CMS DRGs assign these cases to one of the five following DRGs:
DRG 303 (Kidney, Ureter & Major Bladder Procedures for
Neoplasm).
DRG 304 (Kidney, Ureter & Major Bladder Procedures for
Non-Neoplasm with CC)
DRG 305 (Kidney, Ureter & Major Bladder Procedures for
Non-Neoplasm without CC)
DRG 308 (Minor Bladder Procedures with CC)
DRG 309 (Minor Bladder Procedures without CC)
Our medical advisors support creating a new DRG for major bladder
procedures because they represent cases with higher levels of severity,
are clinically different, and use greater resources. We examined data
on cases containing a major bladder procedure and determined they
represent cases with a higher level of severity and utilize
significantly more resources than other cases within the DRGs where
they are currently assigned. Cases with a major bladder procedure had
average charges of $53,434 compared to $14,976 to $38,119 for other
cases within the five DRGs where the patient did not have a major
bladder procedure. The tables below illustrate these data.
------------------------------------------------------------------------
Average
DRGs Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 303....................... 23,328 7.28 $37,510.79
DRG 303 Without Major Bladder 18,909 6.33 32,867.55
Procedures...................
DRG 304....................... 13,257 8.35 38,800.38
DRG 304 Without Major Bladder 12,835 8.19 38,119.74
Procedures...................
DRG 305....................... 2,827 3.10 19,528.35
DRG 305 Without Major Bladder 2,776 3.02 19,295.59
Procedures...................
DRG 308....................... 6,358 6.15 27,982.54
DRG 308 Without Major Bladder 5,180 5.30 24,017.30
Procedures...................
DRG 309....................... 3,104 1.98 15,446.61
DRG 309 Without Major Bladder 2,820 1.72 14,976.79
Procedures...................
------------------------------------------------------------------------
Major Bladder Procedures
------------------------------------------------------------------------
Average length Average
Number of cases of stay charges
------------------------------------------------------------------------
6,354................................... 10.8 $53,434.93
------------------------------------------------------------------------
Therefore, we are moving these procedures out of their current DRGs
(DRG 303, 304, 305, 308, and 309) and into new DRG 573 (Major Bladder
Procedures). A summary of these changes is as follows:
We are renaming the following three DRGs:
DRG 303--`` Kidney and Ureter Procedures for Neoplasm''
DRG 304--`` Kidney and Ureter Procedures for Non-Neoplasm
With CC''
DRG 305--`` Kidney and Ureter Procedures for Non-Neoplasm
Without CC''
We are removing the following procedure codes from DRG 303-305,
308, and 309 and assigning them to new DRG 573. New DRG 573 will
contain the following procedure codes.
Major Bladder Procedures
------------------------------------------------------------------------
Procedure code Description
------------------------------------------------------------------------
57.6.................. Partial cystectomy.
57.71................. Radical cystectomy.
57.79................. Other total cystectomy.
57.83................. Repair of fistula involving bladder and
intestine.
57.84................. Repair of other fistula of bladder.
57.85................. Cystourethroplasty and plastic repair of bladder
neck.
57.86................. Repair of bladder exstrophy.
57.87................. Reconstruction of urinary bladder.
57.88................. Other anastomosis of bladder.
57.89................. Other repair of bladder.
------------------------------------------------------------------------
e. MDC 16 (Diseases and Disorders of the Blood and Blood Forming Organs
and Immunological Disorders): Major Hematological and Immunological
Diagnoses
Under our proposed CS DRGs, major hematological and immunological
diagnoses were found to identify cases with a higher level of severity.
They are assigned to a single DRG under the CS DRGs. The diagnoses
considered to be major hematological and immunological diagnoses
include the following conditions:
------------------------------------------------------------------------
Major hematological and immunological code
Diagnosis code titles
------------------------------------------------------------------------
279.11................ Digeorge's syndrome.
279.12................ Wiskott-aldrich syndrome.
279.13................ Nezelof's syndrome.
279.19................ Other deficiency of cell-mediated immunity.
279.2................. Combined immunity deficiency.
283.0................. Autoimmune hemolytic anemias.
[[Page 47937]]
283.10................ Non-autoimmune hemolytic anemia, unspecified.
283.19................ Other non-autoimmune hemolytic anemias.
283.2................. Hemoglobinuria due to hemolysis from external
causes.
283.9................. Acquired hemolytic anemia, unspecified.
284.8................. Other specified aplastic anemias.
284.9................. Aplastic anemia, unspecified.
288.1................. Functional disorders of polymorphonuclear
neutrophils.
288.2................. Genetic anomalies of leukocytes.
996.85................ Complications of transplanted bone marrow.
------------------------------------------------------------------------
These conditions are currently assigned to the following four CMS
DRGs:
DRG 395 (Red Blood Cell Disorders Age >17)
DRG 396 (Red Blood Cell Disorders Age 0-17)
DRG 398 (Reticuloendothelial & Immunity Disorders with CC)
DRG 399 (Reticuloendothelial & Immunity Disorders without
CC)
Our medical advisors agree that major hematological and
immunological disorders are found in patients with significantly
greater levels of severity and are different from other conditions in
the four DRGs where they are assigned. Our data analysis shows that
major hematological and immunological diseases identify patients with
significantly greater levels of severity. They are more resource
intensive than other conditions assigned to these four DRGs. Cases with
major hematological and immunological conditions had average charges of
$21,276 compared to $11,066 to $18,791 for the other conditions where
these cases are currently assigned. Most of the nonhematological and
immunological cases (96,557) are assigned to DRG 395 and have an
average charge of $12,977.
DRGs 395, 396, 398, and 399
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 395.......................... 109,874 4.28 $14,078.78
DRG 395 Without Major 96,557 4.10 12,977.20
Hematological Diagnosis
excluding Sickle Cell Crisis &
Coagulation Disorders...........
DRG 396.......................... 19 2.95 10,406.05
DRG 396 Without Major 17 3.06 11,066.94
Hematological Diagnosis
excluding Sickle Cell Crisis &
Coagulation Disorders...........
DRG 398.......................... 17,608 5.71 19,902.21
DRG 398 Without Major 6,381 3.28 18,791.32
Hematological Diagnosis
excluding Sickle Cell Crisis &
Coagulation Disorders...........
DRG 399.......................... 1,552 3.38 11,277.35
DRG 399 Without Major 1,011 3.28 11,207.22
Hematological Diagnosis
excluding Sickle Cell Crisis &
Coagulation Disorders...........
------------------------------------------------------------------------
Major Hematological Diagnosis excluding Sickle Cell Crisis & Coagulation
Disorders
------------------------------------------------------------------------
Average length Average
Number of cases of stay charges
------------------------------------------------------------------------
25,087.................................. 5.6 $21,276.25
------------------------------------------------------------------------
We are creating a new CMS DRG 574 (Major Hematologic/Immunologic
Diagnoses Except Sickle Cell Crisis and Coagulation Disorders). We are
removing the codes mentioned in the table above from DRGs 395, 396,
398, and 399 and assigning them to new DRG 574. We also are assigning
the new diagnosis codes indicated by an asterisk (*) to new DRG 574.
These new codes also capture major hematological and immunological
conditions and were created to provide more detail than the current
codes in this section of ICD-9-CM. The DRG assignments for these new
codes are also shown in Table 6A of the Addendum to this final rule.
------------------------------------------------------------------------
Major hematological and immunological code
Diagnosis code titles
------------------------------------------------------------------------
279.11................ Digeorge's syndrome.
279.12................ Wiskott-aldrich syndrome.
279.13................ Nezelof's syndrome.
279.19................ Other deficiency of cell-mediated immunity.
279.2................. Combined immunity deficiency.
283.0................. Autoimmune hemolytic anemias.
283.10................ Non-autoimmune hemolytic anemia, unspecified.
283.19................ Other non-autoimmune hemolytic anemias.
283.2................. Hemoglobinuria due to hemolysis from external
causes.
283.9................. Acquired hemolytic anemia, unspecified.
284.01 *.............. Constitutional red blood cell aplasia.
284.09 *.............. Other constitutional aplastic anemia.
284.8................. Other specified aplastic anemias.
284.9................. Aplastic anemia, unspecified.
288.00 *.............. Neutropenia, unspecified.
[[Page 47938]]
288.01 *.............. Congenital neutropenia.
288.02 *.............. Cyclic neutropenia.
288.03 *.............. Drug induced neutropenia.
288.04 *.............. Neutropenia due to infection.
288.09 *.............. Other neutropenia.
288.1................. Functional disorders of polymorphonuclear
neutrophils.
288.2................. Genetic anomalies of leukocytes.
996.85................ Complications of transplanted bone marrow.
------------------------------------------------------------------------
f. MDC 18 (Infections and Parasitic Diseases (Systemic or Unspecified
Sites)): O.R. Procedure for Patients With Infectious and Parasitic
Diseases
Under the APR DRG system, cases in DRG 415 (O.R. Procedure for
Infectious and Parasitic Diseases) are subdivided based on the presence
or absence of one of the following principal diagnosis codes, which we
are referring to as Postoperative or Post-Traumatic Infection:
958.3, Posttraumatic wound infection, not elsewhere
classified
998.51, Infected postoperative seroma
998.59, Other postoperative infection
999.3, Infection complicating medical care, not elsewhere
classified
The APR DRG system found cases with one of the above infection
codes to represent a higher level of severity. Our medical advisors
examined cases in the current CMS DRG system in DRG 415 and found that
the presence of one of these infection codes as a principal diagnosis
led to significantly higher levels of severity. Charge data also
support this conclusion. The following table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Average
DRG Redefinition of DRG 415 Number of length of Average
cases stay charges
----------------------------------------------------------------------------------------------------------------
415.................... O.R. Procedure for Infectious & Parasitic 52,458 14.03 $63,211.99
Diseases.
A...................... O.R. Procedure with Principal Diagnosis 33,077 15.90 74,964.28
Except Postoperative or Post-Traumatic
Infection.
B...................... O.R. Procedure with Principal Diagnosis of 19,381 10.8 43,154.68
Postoperative or Post-Traumatic Infection.
----------------------------------------------------------------------------------------------------------------
As can be seen from the above table, cases in DRG 415 with a
principal diagnosis except for postoperative or post-traumatic
infection have average charges of $74,964.28. Cases with a principal
diagnosis of postoperative or post[pi]traumatic infection have average
charges of $43,154.68, or $31,809.60 less. Therefore, cases without one
of the four infection codes, 958.3, 998.51, 998.59, and 999.3, have
significantly higher severity levels than do cases that contain one of
the four infection codes.
Accordingly, we are deleting DRG 415 and divide the cases into two
new DRGs as follows:
DRG 578, Infectious and Parasitic Diseases with O.R.
Procedure
DRG 579, Postoperative or Post-traumatic Infection with
O.R. Procedure
Cases will be assigned to new DRG 578 if they were previously in
DRG 415, but do not contain one of the following principal diagnosis
codes:
958.3, Posttraumatic wound infection, not elsewhere
classified
998.51, Infected postoperative seroma
998.59, Other postoperative infection
999.3, Infection complicating medical care, not elsewhere
classified
Cases will be assigned to DRG 579 if they were previously assigned
to DRG 415 and contain one of the four principal diagnosis codes listed
above.
g. Severe Sepsis
Comment: As an alternative to the proposed CS DRGs, commenters
recommended a new DRG to identify patients with severe sepsis
associated with respiratory failure requiring mechanical ventilation.
One commenter suggested using an approach to better recognize severity
of illness that is similar to the change CMS implemented in the FYa2006
final rule for major cardiovascular conditions (MCVs). This approach
involved examining the MCVs which could be present as either a
principal or secondary diagnosis leading to greater severity of illness
and resource consumption. Another option suggested by two commenters
involved modifying DRGa416 (Septicemia Age >17) so that it would be
split based on mechanical ventilation greater than 96 hours (code
96.72). The commenter stated that patients on mechanical ventilation
for greater than 96 hours have a greater severity of illness than do
those who are not on mechanical ventilation for 96 or more hours.
Another commenter recommended considering mechanical ventilation as a
pre-MDC DRG on the basis of the mechanical ventilation greater than 96
hours procedure code (96.72) to better recognize patients with a
greater severity level. This commenter also provided an option to add
systemic infections (038.x) as an acceptable principal diagnosis for
DRG 475 when reported in conjunction with mechanical ventilation or
tracheostomy. One commenter maintained that the clinical reason to
address a new DRG for severe sepsis is related to proper recognition
and treatment for this group of patients with a greater degree of
severity. This commenter stated clinicians are getting better at
understanding the importance of early recognition and treatment. As
sepsis presents with organ dysfunction, treatments must be prompt or
mortality rapidly increases according to the commenter.
Response: We analyzed data for patients in DRG 416 and 417 who are
on mechanical ventilation for 96 or more hours. The following table
shows our findings.
[[Page 47939]]
------------------------------------------------------------------------
Average
DRGs Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 416....................... 272,603 7.45 $28,344.81
DRG 416 With Mechanical 10.369 15.55 94,994.49
Ventilation 96 Hours (96.72).
DRG 416 Without Mechanical 262,234 7.13 25,709.42
Ventilation 96 + Hours.......
DRG 417....................... 31 6.35 27,131.58
DRG 417 With Mechanical 0 0 0
Ventilation 96 + Hours.......
DRG 417 Without Mechanical 31 6.35 27,131.58
Ventilation 96 + Hours.......
------------------------------------------------------------------------
The data clearly show that DRG 416 septicemia patients who are on
mechanical ventilation for 96 or more hours have a significantly
greater severity of illness level and use greater resources than do
other patients in DRG 416. Those patients on mechanical ventilation for
96 or more hours had average charges of $94,994 compared to $25,709 for
other patients in DRG 416. We found no cases in DRG 417 with patients
who reported mechanical ventilation for 96 or more hours. Therefore, we
agree with the commenters that patients in DRG 416 who are on long term
mechanical ventilation of 96 or more hours have greater severity of
illness and use significantly greater resources. These patients should
be assigned to a separate DRG to better reflect their higher severity
level. Because we have no data on patients in DRG 417, we are not
modifying that DRG at this time. Because the data on DRG 416 are
compelling, we are deleting DRG 416 and splitting these cases into two
new DRGs based on whether or not the patient is on mechanical
ventilation for 96 or more hours. These two new DRGs are as follows:
DRG 575 (Septicemia with Mechanical Ventilation 96 + Hours
Age >17)
DRG 576 (Septicemia without Mechanical Ventilation 96 +
Hours Age >17)
Cases will be assigned to DRG 575 when they have a principal
diagnosis from current DRG 416 and code 96.72 (Continuous mechanical
ventilation for 96 consecutive hours or more). Cases will be assigned
to DRG 576 when they have a principal diagnosis from current DRG 416
and do not have code 96.72.
We note that this DRG split is similar to the change we are making
in MDC 4, for DRG 475 which was discussed earlier. The creation of
these two new DRGs is distinct from the request to create a separate
DRG for severe sepsis, which is discussed in section II.D.7. of this
final rule.
D. Changes to Specific DRG Classifications
1. Pre-MDCs
a. Heart Transplant or Implant of Heart Assist System: Addition of
Procedure to DRG 103
Based on public comments, we are assigning an additional procedure
code to DRG 103 (Heart Transplant or Implant of Heart Assist System)
under the pre-MDCs. In the FY 2006 IPPS final rule (70 FR 47297), we
addressed suggestions concerning the placement of codes for external
heart assist systems in DRG 103. Although we found that charges
associated with code 37.65 (Implant of external heart assist system)
were more than $100,000 lower than the average charges for all cases in
DRG 103, we found that there was a subgroup of patients who were
comparable in resource use and length of stay to other cases included
in DRG 103. Those patients received both the external heart assist
device (code 37.65) and later had the device removed (code 37.64,
Removal of heart assist system) after a lengthy period of rest and
recovery of their native hearts. We note that commenters provided
external data indicating that survival rates are improving for patients
receiving more advanced versions of these devices. In addition,
commenters provided information indicating that longer periods of
support with the external heart assist device are improving patients'
survival chances and opportunity to be discharged with their native
heart. These data show a 50-percent survival rate with an average total
length of stay of 43 days for all AMI heart recovery patients. On
average, a surviving patient will receive 31 days of average support
time followed by an additional 38 days in the hospital after the device
is removed. Based on information considered from a later year than our
MedPAR data, it is clear that patients weaned from the external heart
assist system have longer lengths of stay and are very different from
the average patients having this procedure that were in our FY 2004
data.
Given the newness of this procedure and the latest generation of
this device, the Medicare charge data included a limited number of
patients having the device implanted and removed. However, the Medicare
charge data did support that patients receiving both an implant and
removal of an external heart assist system in a single hospital stay
had an average length of stay exceeding 50 days and average charges of
$378,000 that are more comparable to patients in DRG 103 than DRG 525
(Other Heart Assist System Implant). Accordingly, in FY 2006, we
revised DRG 103 so that both implantation and removal of an external
heart assist device in the same hospitalization would group to DRG 103.
However, we did not consider those cases where an external heart
assist system is switched during a hospitalization, and replaced with
another external heart assist system, that is subsequently removed. The
ICD-9-CM coding structure specifies that the replacement of the system
be coded to 37.63 (Repair of heart assist system), and not to 37.65.
These cases are assigned to DRG 525 not DRG 103 even though the cases
are comparable in resources expended, length of stay, etc., to other
patients where the device is implanted and explanted during the same
hospital stay.
Based on public comments, we believe that DRG 103 should be revised
to take this situation into account. Therefore, we are reconfiguring
DRG 103 in the following manner: Those patients who have both the
replacement of an external heart assist system (code 37.63) and the
explantation of that system (code 37.64) prior to the hospital
discharge will be assigned to DRG 103.
By making this change, Medicare will be making higher payments for
patients who receive both a replacement and an explant of an external
heart assist system during a single hospital stay. Our intent in making
this change is to recognize the higher costs of patients who have a
longer length of stay and are discharged alive with their native heart.
Cases in which a heart transplant also occurs during the same
hospitalization
[[Page 47940]]
episode will continue to be assigned to DRG 103.
b. Pancreas Transplants
On July 1, 1999, we issued coverage policy that specified that
pancreas transplants were only covered when performed simultaneously
with or after a Medicare covered kidney transplant. A noncoverage
policy for pancreas transplant remained in effect for patients who had
not experienced end stage renal failure secondary to diabetes. On July
29, 2005, we opened a national coverage determination (NCD) to
determine whether pancreas transplant alone, that is, without a kidney
transplant, is a reasonable and necessary service for Medicare
beneficiaries. On April 26, 2006, we published the NCD for pancreas
transplants on our Web site at: http://www.cms. hhs.gov/mcd/
viewncd.asp?ncd-- id=260.3&-- version=3& basket=ncd%3A260%2E3% 3A3%3
APancreas+Transplants. The NCD specifies the limited circumstances
where the evidence is adequate to conclude that pancreas transplant
alone is reasonable and necessary for Medicare beneficiaries.
Medicare coverage of pancreas transplants alone is limited to
transplants in those facilities that are Medicare-approved for kidney
transplantation. A listing of approved transplant centers can be found
at: http://www.cms.hhs. gov/ESRDGeneralInformation /02--Data.
asp#TopOfPage. The CMS NCD includes several criteria for the coverage
of pancreas transplants alone, including having a diagnosis of Type I
diabetes. (We refer readers to section 260.3 of the Medicare National
Coverage Manual for the entire language of the NCD.)
Because we had issued a proposed NCD and a final NCD was not
expected to be completed until late April 2006 (after completion of the
proposed rule), we used the FY 2007 IPPS proposed rule to indicate the
coding changes that we would make to DRG 513 (Pancreas Transplant) in
FY 2007 if Medicare's final decision memorandum would have continued
the program's national noncoverage of pancreas transplants (71 FR
24030). In addition, we also indicated the conforming changes that we
would make to the MCE ``NonCovered Procedure'' edit if Medicare
coverage was established for pancreas transplants alone. That
discussion was included in section II.D.6. of the preamble of the
proposed rule (71 FR 24039), which described proposed changes to the
MCE.
Because the April 2006 Medicare final decision memorandum stated
that the performance of pancreas transplants alone is reasonable and
necessary for Medicare beneficiaries in limited circumstances, the
logic for the determination of patient case assignment to DRG 513 in
the FY 2006 GROUPER program needs to be modified to remove the
requirement that patients also have kidney disease. Therefore, because
the NCD was finalized, we are modifying DRG 513 to consist of the
following logic: List A (the diabetes codes) of the required principal
or secondary diagnosis codes remains the same, as does the required
operating room procedures (codes 52.80 (Pancreatic transplant NOS), and
52.82, (Homotransplant of pancreas)). List B is removed from the logic;
the following codes will no longer be required as a principal or
secondary diagnosis:
403.01, Hypertensive kidney disease, malignant, with
chronic kidney disease
403.11, Hypertensive kidney disease, benign, with chronic
kidney disease
403.91, Hypertensive kidney disease, unspecified, with
chronic kidney disease
404.02, Hypertensive heart and kidney disease, malignant,
with chronic kidney disease
404.03, Hypertensive heart and kidney disease, malignant,
with heart failure and chronic kidney disease
404.12, Hypertensive heart and kidney disease, benign,
with chronic kidney disease
404.13, Hypertensive heart and kidney disease, benign,
with heart failure and chronic kidney disease
404.92, Hypertensive heart and kidney disease,
unspecified, with chronic kidney disease
404.93, Hypertensive heart and kidney disease,
unspecified, with heart failure and chronic kidney disease
585.1, Chronic kidney disease, Stage I
585.2, Chronic kidney disease, Stage II (mild)
585.3, Chronic kidney disease, Stage III (moderate)
585.4, Chronic kidney disease, Stage IV (severe)
585.5, Chronic kidney disease, Stage V
585.6, End stage renal disease
585.9, Chronic kidney disease, unspecified
V42.0, Organ or tissue replaced by transplant, kidney
V43.89, Organ or tissue replaced by other means, other
organ or tissue, other
We note that DRG 513 remains in the pre-MDC hierarchy.
Comment: Five commenters supported the proposed coding changes to
DRG 513 and the MCE.
Response: We appreciate the support of the commenters. Accordingly,
as the NCD for pancreas transplants alone was approved, in this final
rule, we are adopting the changes as described above to DRG 513 and the
MCE logic.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Implantation of Intracranial Neurostimulator System for Deep Brain
Stimulation (DBS)
Deep-brain stimulation (DBS) is designed to deliver electrical
stimulation to the subthalamic nucleus or internal globus pallidus to
ameliorate symptoms caused by abnormal neurotransmitter levels that
lead to abnormal cell-to-cell electrical impulses in Parkinson's
disease and essential tremor. DBS implants for essential tremor are
unilateral, with neurostimulation leads on one side of the brain. DBS
implants for Parkinson's disease are bilateral, requiring implantation
of neurostimulation leads in both the left and right sides of the
brain.
The implantation of a full DBS system requires two types of
procedures. First, surgeons implant leads containing electrodes into
the targeted sections of the brain where neurostimulation therapy is to
be delivered. Second, a neurostimulator pulse generator is implanted in
the pectoral region and extensions from the neurostimulator pulse
generator are then tunneled under the skin along the neck and connected
with the proximal ends of the leads implanted in the brain. Hospitals
stage the two procedures required for a full-system DBS implant.
In FY 2005, to better account for these two types of procedures, we
revised procedure code 02.93 (Implantation or replacement of
intracranial neurostimulator lead(s)) for the lead placement and
created three new procedures codes for the pulse generator: 86.94
(Insertion or replacement of single array neurostimulator pulse
generator); 86.95 (Insertion or replacement of dual array
neurostimulator pulse generator); and 86.96 (Insertion or replacement
of other neurostimulator pulse generator). We published the new
procedure codes and revised procedure code titles in Tables 6B and 6F
of the FY 2005 IPPS final rule (69 FR 49627 and 49641).
In FY 2006, we made further refinements to the pulse generator
codes to identify rechargeable pulse generators. We published the new
procedure codes and revised procedure code titles in Tables 6B and 6F
of the FY 2006 IPPS final rule (70 FR 47637
[[Page 47941]]
and 47639). The current list of pulse generators codes are:
86.94 (Insertion or replacement of single array
neurostimulator pulse generator, not specified as rechargeable);
86.95 (Insertion or replacement of dual array
neurostimulator pulse generator, not specified as rechargeable);
86.96 (Insertion or replacement of other neurostimulator
pulse generator);
86.97 (Insertion or replacement of single array
neurostimulator rechargeable generator); and
86.98 (Insertion or replacement of dual array
neurostimulator rechargeable generator).
Kinetra[supreg] is an implantable dual array neurostimulator pulse
generator that is approved for a new technology add-on payment through
FYA2006. For more information about the new technology add-on payment,
please refer to section II.G.3.a. of this preamble.
Medtronic, the manufacturer of Kinetra[supreg], argues that the new
technology add-on payment provision is designed to recognize the higher
costs of new medical innovations for the initial period the technology
is available on the market, and until the associated costs and charges
related to the technology are available in the MedPAR database and can
be used to recalibrate the DRG weights. Medtronic also argues that,
once a technology is no longer eligible for new technology add-on
payments, the new technology add-on payment provision is designed to
support the reclassification of the technology to other clinically
coherent DRGs with comparable resource costs.
With the conclusion of the new technology add-on payment, Medtronic
is concerned that Kinetra[supreg] will be inadequately paid in DRG 1
(Craniotomy Age >17 With CC) or DRG 2 (Craniotomy Age >17 Without CC)
under MDC 1. Medtronic recommended that CMS reassign the full-system
Kinetra[supreg] implants to DRG 543 (Craniotomy with Implant of Chemo
Agent or Acute Complex CNS Principal Diagnosis) under MDC 1. To
accommodate this recommendation, procedure codes 02.93 and 86.95 would
have to be reassigned to DRG 543 and the title for DRG 543 would have
to be revised to ``Craniotomy with Implantation of Major Device or
Acute Complex CNS Principal Diagnosis.'' Medtronic argued that DRG 543
would be a ``clinically-consistent DRG that more appropriately reflects
the resource utilization associated with full-system [deep brain
stimulation] procedures.'' Medtronic also emphasized that its proposal
would only apply to full-system Kinetra[supreg] implants when both the
leads and generators are implanted during a single inpatient stay and
procedure codes 02.93 and 86.95 both appear on the claim. Medtronic
believes the current DRG assignment is appropriate for partial system
implants.
Medtronic provided an analysis of FY 2004 MedPAR data. Procedure
code 86.95 was not created until FY 2005 so Medtronic used procedure
codes 02.93 and 86.09 (Other incision of skin and subcutaneous tissue)
to identify the full system. It identified 193 cases assigned to DRG 1
with average charges of approximately $69,155, and 532 cases assigned
to DRG 2 with average charges of approximately $56,113.
In the FY 2007 IPPS proposed rule we indicated that we have
reviewed the latest data for the full-system DBS implants assigned to
DRG 1 or DRG 2 in the FY 2005 MedPAR file. We identified cases with
procedure codes 02.93 and 86.95 for full-system dual array cases. We
also identified cases with reported codes 02.93 and 86.96 for those
full-system cases where the type of pulse generator was not specified.
The following table displays our results:
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay charges
------------------------------------------------------------------------
DRG 1--All Cases.............. 23,037 9.61 $55,494
DRG 1--Cases with 02.93 and 51 5.18 73,020
86.95 (Kinetra[supreg])......
DRG 1--Cases with 02.93 and 101 4.86 53,356
86.96 (Unspecified)..........
DRG 2--All Cases.............. 9,707 4.41 32,791
DRG 2--Cases with 02.93 and 146 2.40 59,414
86.95 (Kinetra[supreg])......
DRG 2--Cases with 02.93 and 249 2.12 47,047
86.96 (Unspecified)..........
DRG 543--All cases............ 5,192 11.71 71,138
------------------------------------------------------------------------
These data showed that approximately one-quarter of the full-system
dual array neurostimulator pulse generator cases are assigned to DRG 1
and approximately three-quarters of these cases are assigned to DRG 2.
In both DRGs, the average length of stay was shorter for the full-
system array neurostimulator pulse generator cases than for all other
cases. However, the average charges for the full-system dual array
neurostimulator pulse generator cases are approximately $18,000 and
$27,000 higher than the average charges for DRGs 1 and 2, respectively.
The average charges for these cases in DRG 1 are comparable to those
for DRG 543. However, the more commonly occurring cases in DRG 2 have
average charges that are less than those in DRG 543 by nearly $12,000.
We reviewed all of the procedures that will result in a case being
assigned to DRGs 1 and 2. Unlike the full-system DBS implants, we
believe for most of the cases assigned to these DRGs, there will be no
device cost to the hospital. For this reason, we believe the higher
average charges and lower length of stay for cases involving full-
system dual array neurostimulator pulse generators are likely accounted
for by the cost of the device. While it is possible that the cost of
the device itself will make the full-system DBS implants more expensive
than other cases in the DRG, the hospital's charge markup may also
explain the higher charges but lower average length of stay. As
indicated in section II.G.3.a. of this final rule, the national average
CCR for medical equipment and supplies is approximately 34 percent.
Thus, the actual cost to the hospital of the case including the full-
system dual array neurostimulator pulse generator may be much lower
than the charges would suggest.
With respect to whether the cost of the technology itself, absent a
charge markup, makes the case more expensive, in the FY 2007 IPPS
proposed rule, we stated that we intended to address this issue as we
make further refinements to the DRG system to address severity of
illness as discussed in section II.C. of this preamble.
Comment: Several commenters opposed CMS' proposed decision to
retain the current assignment of implantable dual array neurostimulator
pulse generator cases in DRGs 1 and 2. Several commenters stated that
CMS should recognize the higher resources associated with this
technology and reassign implantable dual array neurostimulator pulse
generator cases to DRG 543. Two commenters disagreed
[[Page 47942]]
with CMS' statements that markups associated with Kinetra[supreg] may
overstate the total charges of the implant procedure. Medtronic
submitted information on charge compression in which the company
contends that it conclusively finds the hospital charge markups for
implantable devices are in fact significantly lower than for other,
lower cost supplies and equipment. Medtronic and one other commenter
argued that the total charges found in the FY 2005 MedPAR data
associated with implantable dual array neurostimulator pulse generator
procedures may be understated relative to other procedures in DRG 1,
DRG 2 and DRG 543 and that reassignment of this technology to DRG 543
is fully warranted. The commenters stated that the implementation of
the CS DRGs should be deferred to at least FY 2008 and not be a factor
in CMS' decision to make DRG reassignments this year.
Response: With regard to the issue of charge compression, we are
studying this issue in our effort to improve payment accuracy in the
IPPS. The average charges for the 51 cases in DRG 1 where the patient
received a dual array neurostimulator are $17,426 or 31 percent higher
than the rest of the cases in DRG 1. The average charges are comparable
to those for DRG 543 ($73,020 for dual array neurostimulator cases and
$71,138 for DRG 543).
The average charges for the 146 cases in DRG 2 are $26,623 or 81
percent higher than the rest of the cases in DRG 2 and only $12,000
less than the average charges for DRG 543. Based on these data, we
believe that the dual array neurostimulator cases will be more
accurately paid in DRG 543 than DRGs 1 and 2. We will be implementing
this change to the DRG assignment for the full-system dual array
neurostimulator cases for FY 2007. Implantable dual array
neurostimulator pulse generator procedure cases reported with ICD-9-CM
procedure codes 02.93 and 86.95 will be reassigned to DRG 543. We are
changing the DRG title for DRG 543 to ``Craniotomy With Major Device
Implant or Acute Complex CNS Principal Diagnosis.''
b. Carotid Artery Stents
Background: Stroke is the third leading cause of death in the
United States and the leading cause of serious, long-term disability.
Approximately 70 percent of all strokes occur in people age 65 and
older. The carotid artery, located in the neck, is the principal artery
supplying the head and neck with blood. Accumulation of plaque in the
carotid artery can lead to stroke either by decreasing the blood flow
to the brain or by the plaque breaking free and lodging in the brain or
other arteries leading to the head. The percutaneous transluminal
angioplasty (PTA) procedure involves inflating a balloon-like device in
the narrowed section of the carotid artery to reopen the vessel. A
carotid stent is then deployed in the artery to prevent the vessel from
closing or restenosing. A distal filter device (embolic protection
device) may also be present, which is intended to prevent pieces of
plaque from entering the bloodstream.
Effective July 1, 2001, Medicare covered PTA of the carotid artery
concurrent with carotid stent placement when furnished in accordance
with the FDA-approved protocols governing Category B Investigational
Device Exemption (IDE) clinical trials. PTA of the carotid artery, when
provided solely for the purpose of carotid artery dilation concurrent
with carotid stent placement, was considered to be a reasonable and
necessary service only when provided in the context of such clinical
trials and, therefore, was considered a covered service for the
purposes of those trials. Performance of PTA in the carotid artery when
used to treat obstructive lesions outside of approved protocols
governing Category B IDE clinical trials remained noncovered until the
release of the October 12, 2004 NCD for PTA of the carotid artery in
post-approval studies. This decision extended coverage of PTA in the
carotid artery concurrent with placement of an FDA-approved carotid
stent for an FDA-approved indication when furnished in accordance with
the FDA-approved protocols governing post-approval studies. On March
17, 2005, CMS released an NCD that extended coverage to patients at
high risk for carotid endarterectomy (CEA) who also have symptomatic
carotid artery stenosis >=70 percent. Procedures must be performed in
CMS-approved facilities and with FDA-approved carotid artery stent(s)
with distal embolic protection. (Section 20.7 of the NCD manual which
discusses this decision may be viewed at the Web site: http://www.cms.hhs.gov/manuals/downloads/ncd103c1_Part1.pdf
.
Placement of a carotid artery stent in patients who have had a
disabling stroke (modified Rankin scale >=3) is excluded from coverage.
We established codes for carotid artery stent procedures for use
with discharges occurring on or after October 1, 2004, for inpatients
who were enrolled in an FDA-approved clinical trial and who were using
on-label FDA-approved stents and embolic protection devices. These
codes are as follows:
00.61 (Percutaneous angioplasty or atherectomy of
precerebral (extracranial vessel(s)); and
00.63 (Percutaneous insertion of carotid artery stent(s)).
We assigned procedure code 00.61 to four MDCs and seven DRGs. The
most likely clinical scenario is that in which cases are assigned to
MDC 1 (Diseases and Disorders of the Nervous System) in DRGs 533
(Extracranial Procedures with CC) and 534 (Extracranial Procedures
without CC). Other DRG assignments can be found in Table 6B of the
Addendum to the FY 2005 IPPS final rule (69 FR 49624). Code 00.63 is
not considered a procedure code itself and should be used in
combination with code 00.61.
Based on the results of evaluation of PTA and carotid stents for
our FY 2006 final rule (70 FR 47300, August 12, 2005), we did not find
sufficient evidence to warrant a DRG change at that time.
We again reviewed the PTA and insertion of a carotid stent(s) for
the FY 2007 proposed rule, as manufacturer representatives suggested
that we assign all carotid stenting cases to DRG 533 only, bypassing
DRG 534. As we indicated in the FY 2007 IPPS proposed rule (71 FR
24032), we reviewed the FY 2005 MedPAR data on all cases in DRGs 533
and 534 and on those cases containing code 00.61 in combination with
00.63. The following table displays those results:
------------------------------------------------------------------------
Average
DRG Number of length of Average
cases stay (Days) charges
------------------------------------------------------------------------
DRG 533--All cases............ 44,031 3.65 $26,376
DRG 533 with codes 00.61 and 2,400 2.94 33,344
00.63 reported...............
DRG 533 with code 00.61 and 99 5.95 46,591
without 00.63................
DRG 534--All cases............ 40,381 1.72 17,196
DRG 534 with codes 00.61 and 2,056 1.52 25,000
00.63 reported...............
[[Page 47943]]
DRG 534 with code 00.61 and 55 2.31 27,895
without 00.63................
------------------------------------------------------------------------
We found that 5.5 and 5.1 percent of the cases in DRGs 533 and 534,
respectively, involved placement of a carotid artery stent. In DRG 533,
the average length of stay was 19.4 percent shorter for the carotid
stenting cases than for all other cases. In DRG 534, the average length
of stay was 11.6 percent shorter for the carotid stenting cases than
for all other cases. However, the average charges for the carotid stent
cases were higher by $6,968 in DRG 533 and $7,804 in DRG 534. We
reviewed all of the procedures that would result in a case being
assigned to DRGs 533 and 534. Unlike the carotid artery stent
placements, we believe that, for most of the other cases assigned to
these DRGs, there will be no device cost to the hospital. For this
reason, we believe the higher average charges and lower length of stay
for the cases involving carotid artery stents could be accounted for by
the cost of the device. We discussed the possibility that the cost of
the device itself makes the stent cases more expensive than other cases
in the DRG, and that the hospital's charge markup may also explain the
higher charges but lower average length of stay. We also suggested that
we intended to address this issue as we make further refinements to the
CS DRG system previously described. The use of a carotid stent or
stents may increase complexity and resource use even though the patient
is not necessarily more severely ill. We indicated that we believed
that the CS DRG system we proposed would need to be further refined to
assign cases based on complexity as well as severity to account for
technologies such as carotid stents that increase costs. For this
reason, we did not propose a change to the current DRG assignment for
these cases.
Comment: More than a dozen commenters addressed this topic. State
hospital associations, in particular, were unanimous in their
recommendation that all carotid stenting cases should immediately be
assigned only to DRG 533, bypassing DRG 534 entirely. The commenters
suggested this solution to increase payments to hospitals in order that
the higher costs associated with carotid stents are recognized within
the existing DRG system.
Response: We are opposed to this suggestion. The DRGs comprise a
native structure of the types of patients within each DRG category.
Further, this structure is based on an organizing principle. For
example, cases in DRGs 533 and 534 are organized on the principle of
surgical approach (extracranial procedures) as well as the presence or
absence of CCs. To ignore the structure of the DRG solely for the
purpose of increasing payment would set an unwelcome precedent for
defining all of the other DRGs in the system.
Comment: Several commenters mentioned that, while CMS suggested
that the higher average charges and lower lengths of stay for cases
involving carotid artery stents are likely accounted for by the cost of
the device, CMS provided no evidence to support this assertion.
Response: The average length of stay for patients in DRGs 533 and
534 with the placement of carotid stent(s) are 19.4 and 11.6 percent
shorter than the other patients assigned to DRGs 533 and 534,
respectively. Therefore, a long length of stay is not the reason for
the higher average charges. We based our assertion on the contribution
of the cost of the device to the total cost of the patients in these
DRGs compared to other cases in the DRG with longer lengths of stay. We
note that the next comment suggests that our analysis is correct that
the higher charges for the carotid artery stent cases relative to other
cases in the DRG are, in part, associated with higher supply costs.
Comment: One commenter suggested that CMS create a new pair of DRGs
with and without MCVs until the adequacy of payment under the severity
adjustment methodology is fully assessed. This commenter noted that,
while length of stay and operating room costs are lower for carotid
stenting, supply and radiology charges associated with the stent and
the angiography are higher, resulting in higher overall costs for
carotid stenting.
Response: While we recognize the creativity of this approach, we
note that the MCVs are applicable to cases in MDC 5 (Diseases and
Disorders of the Circulatory System), while DRGs 533 and 534 are in MDC
1 (Diseases and Disorders of the Nervous System). Such an approach for
MDC 1 might have merit, but we would want to evaluate the entire MDC
thoroughly before creating such a list of complicating diagnoses. We
will further consider this concept as we evaluate severity DRG systems
for adoption in FY 2008.
Comment: One commenter, while urging CMS to reconsider our decision
not to assign all carotid cases to DRG 533, noted that the current
National Coverage Determination on CAS [Carotid Artery Stenting] very
clearly states that only those patients who are at high risk for [open]
surgery due to the presence of a detailed list of complications or
comorbidities are eligible for carotid artery stenting. Therefore, by
CMS' own characterization, all patients undergoing carotid artery
stenting have complications and comorbidities and should be assigned to
DRG 533.
Response: This assumption is theoretically correct. However, the
detailed list of comorbidities or anatomical risk factors that are
required to support the surgeon's decision to perform carotid stenting
instead of a carotid endarterectomy is not the same as the CMS list of
CCs. For example, amaurosis fugax, code 362.34 (Transient arterial
occlusion) is recognized as a risk factor which would justify carotid
stenting, but is not recognized by the CMS GROUPER as a diagnosis
defined as a CC.
Comment: Several commenters suggested that CMS create two new DRGs
for the carotid stent cases.
Response: We note that the number of procedures has increased from
the data reported in the FY 2006 IPPS final rule (70 FR 47300), thus
indicating acceptance of this procedure by the medical community as a
main-stream surgical alternative. In FY 2006, as the specific codes for
carotid stenting had only been in use since October 1, 2004, we used
the existing codes 39.50 (Angioplasty or atherectomy of other
noncoronary vessel(s)) and 39.90 (Insertion of non-drug-eluting
peripheral vessel stent(s)), in combination with principal diagnosis
code 433.10 (Occlusion and stenosis of carotid artery, without mention
of cerebral infarction) as a proxy for the number of cases involved in
clinical trials. In DRG 533, we had 1,586 cases with the proxy codes
reported, and in DRG 534, there were 1,397 cases. In FY 2005, the
patients represented 3.5 percent and 3.3 percent of all cases in DRGs
533 and 534, respectively. That figure has now climbed to 2,400 cases
[[Page 47944]]
and 2,056 cases, and 5.5 percent and 5.1 percent, respectively.
In addition, the difference in the average charges are 26 percent
higher for carotid artery stent cases in DRG 533 than for the average
charges in all cases in that DRG, and 45 percent higher using the same
parameters for DRG 534. We believe these data are compelling enough to
warrant creation of a new DRG.
Accordingly, we are creating DRG 583 (Carotid Artery Stent
Procedure). This DRG will be located in MDC 1, and will be
hierarchically ordered above DRGs 533 and 534. DRG 583 will contain two
procedure codes. Code 00.61 will determine the DRG, and will be
combined with code 00.63. Both codes must be reported in order for
cases to be assigned to this DRG.
We are not splitting this DRG based on the presence or absence of a
CC as suggested by the commenters. One criterion for splitting a DRG
based on the presence or the absence of a CC is that it must have an
impact of at least $40 million. In this situation, the overall average
of the charges for all cases in DRGs 533 and 534 is $30,193. We then
subtracted the actual average charges for only the carotid stent cases
in both DRGs 533 and 534, and multiplied that figure by the actual
number of cases. For DRG 533 and DRG 534, we estimate an impact of
approximately $10 million each. Added together, the total impact would
be $20 million, falling short of our threshold of a $40 million impact
to create a CC/non-CC split. Therefore, we are not creating a CC/non-CC
split in the DRG for carotid artery stenting at this time.
We reiterate that coverage of the carotid artery stent procedure is
limited to patients at risk of developing a stroke due to narrowing or
stenosis of the carotid artery. Diagnosis code 433.10 (Occlusion and
stenosis of carotid artery without mention of cerebral infarction)
should be used to identify the site of the procedure in the carotid
artery. If it is necessary to identify bilateral occlusion or stenosis,
diagnosis code 433.30 (Occlusion and stenosis of multiple and bilateral
arteries without mention of cerebral infarction) may also be used.
These codes should be used together, as code 433.30 contains arterial
sites that are not currently covered for Medicare patients. Reporting
of code 433.30 alone will cause the case to fail the editing system at
the fiscal intermediary, and the case could be denied.
Inclusion of the fifth digit of ``1'' (with cerebral infarction)
with either 433.1x or 433.3x will cause the claim to be rejected.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Insertion of Epicardial Leads for Defibrillator Devices
As we indicated in the FY 2007 IPPS proposed rule (71 FR 24033), we
received a comment indicating that a change in coding advice for the
insertion of epicardial leads for CRT-D defibrillator devices affects
DRG assignment. The commenter noted that the Third Quarter 2005 issue
of the American Hospital Association's publication Coding Clinic for
ICD-9-CM instructs coders to assign code 37.74 (Insertion or
replacement of epicardial lead [electrode] into atrium) for pacemaker
or defibrillator leads inserted through use of a thoracotomy into the
epicardium. While the use of code 37.74 is standard coding practice for
pacemakers, the advice is new for defibrillators. This coding advice
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting held on September 29 and 30, 2005. Participants at the
Committee meeting proposed modifications for the code category 37.7
(insertion, revision, replacement, and removal of pacemaker leads;
insertion of temporary pacemaker system; and revision of cardiac device
pocket). These modifications involved expanding the category so that
the codes for leads would no longer be restricted to pacemakers. This
change would guide coders to use code 37.74 for the insertion of
epicardial leads for both defibrillators and pacemakers for the ICD-9-
CM and will become effective on October 1, 2006.
The commenter indicated that this coding advice would restrict some
defibrillator cases from being assigned to the defibrillator DRGs.
Specifically, the commenter expressed concerns about the DRG logic for
the following DRGs:
DRG 515 (Cardiac Defibrillator Implant without Cardiac
Catheter)
DRG 535 (Cardiac Defibrillator Implant with Cardiac
Catheter with AMI/Heart Failure/Shock)
DRG 536 (Cardiac Defibrillator Implant with Cardiac
Catheter without AMI/Heart Failure/Shock)
Cases are assigned to one of these three DRGs when a total
defibrillator system, including both the device and one or more leads,
is implanted. The implant could be represented by the ICD-9-CM codes
for the total system, that is, code 00.51 (Implantation of cardiac
resynchronization defibrillator, total system [CRT-D]) or code 37.94
(Implantation or replacement of automatic cardioverter/defibrillator,
total system [AICD]). Cases can also be assigned to DRGs 515, 535, and
536 when a combination of a device and a lead code is reported. The
following combinations of defibrillator device and lead codes are
present in the current DRG logic:
00.52 (Implantation or replacement of transvenous lead
[electrode] into left ventricular coronary venous system) and 00.54
(Implantation or replacement of cardiac resynchronization
defibrillator, pulse generator device only [CRT-D])
37.95 (Implantation of automatic cardioverter/
defibrillator lead(s) only) and 00.54 (Implantation or replacement of
cardiac resynchronization defibrillator, pulse generator device only
[CRT-D])
37.95 (Implantation of automatic cardioverter/
defibrillator lead(s) only) and 37.96 (Implantation of automatic
cardioverter/defibrillator pulse generator only)
37.97 (Replacement of automatic cardioverter/defibrillator
lead(s) only) and 00.54 (Implantation or replacement of cardiac
resynchronization defibrillator, pulse generator device only [CRT-D])
37.97 (Replacement of automatic cardioverter/defibrillator
lead(s) only) and 37.98 (Replacement of automatic cardioverter/
defibrillator pulse generator only)
A DRG logic issue has arisen concerning the instruction to use code
37.74 for epicardial leads inserted with CRT-D defibrillators. The new
combination of a defibrillator device with an epicardial lead (code
37.74) is not included in DRGs 515, 535, and 536. The commenter
recommended that the following combinations be added to DRGs 515, 535,
and 536 so that all types of defibrillator device and lead combinations
would be included: code 37.74 and code 00.54; code 37.74 and code
37.96; and code 37.74 and code 37.98.
We agree that these three combinations should be added to the list
of combination codes included in DRGs 515, 535, and 536. This change
would result in all combinations of defibrillator devices and leads
being assigned to one of the defibrillator DRGs. Therefore, in the FY
2007 IPPS proposed rule, we proposed to add these three combinations to
the list of procedure combinations under DRGs 515, 535, and 536.
Comment: A number of commenters supported adding the new
combinations of defibrillator devices with the epicardial leads to DRGs
515, 535, and 536. One commenter stated that this change would bring
the DRGs into
[[Page 47945]]
alignment with the change in coding advice to assign code 37.74 in
conjunction with implantation of CRT-D defibrillators.
Response: We appreciate the support of commenters and agree that
this change would bring the DRGs into alignment with the change in
coding advice.
In this final rule, we are adding the following combinations of
device and lead codes to DRGs 515, 535, and 536: code 37.74 and code
00.54; code 37.74 and code 37.96; and code 37.74 and code 37.98.
b. Application of Major Cardiovascular Diagnoses (MCVs) List to
Defibrillator DRGs
In the FY 2006 IPPS final rule (70 FR 47289 and 47474 through
47479), we addressed a comment we had received in response to the FY
2006 proposed rule which noted that section 507(c) of Pub. L. 108-173
required MedPAC to conduct a study to determine how the DRG system
should be updated to better reflect the cost of delivering care in a
hospital setting. The commenter noted that MedPAC reported that the
``cardiac surgery DRGs have high relative profitability ratios.'' While
the commenter acknowledged that it may take time to conduct and
complete a thorough evaluation of the MedPAC payment recommendations
for all DRGs, the commenter strongly encouraged CMS to revise the
cardiac DRGs through patient severity refinement as part of the IPPS
final rule effective for FY 2006.
In response to this comment, we performed an extensive review of
the cardiovascular DRGs in MDC 5, particularly those DRGs that were
commonly billed by specialty hospitals. We observed that there was some
overlap between the lists of cardiovascular complications and complex
diagnoses and that these lists were already used to segregate patients
into DRGs that used greater resources. Because the hospital industry
already was familiar with the major complication and complex diagnosis
lists used within the cardiovascular DRGs, we began our analysis with
these two overlapping lists.
The two lists were originally developed for the current DRG system
because they contained conditions that could have an impact on the
resources needed to treat a patient with cardiovascular complications.
Many of the conditions were cardiovascular diagnoses and, therefore,
would be classified to MDC 5. However, we determined that some of the
diagnoses were not cardiovascular, but would still have an impact on a
patient with cardiovascular complications. The conditions that were not
cardiovascular diagnoses were not assigned to MDC 5 if they were the
principal diagnosis.
We reviewed the conditions on the two overlapping lists and
identified conditions that we believed would lead to a more complicated
patient stay requiring greater resource use. We referred to these
conditions as ``major cardiovascular conditions (MCVs).'' The MCVs
could be present as either a principal diagnosis or a secondary
diagnosis and lead to greater resource consumption. The complete list
of MCVs was published in the FY 2006 IPPS final rule (70 FR 47477 and
47478).
In the FY 2006 IPPS final rule, we also adopted new DRGs 547
through 558, effective October 1, 2005 (70 FR 47475 and 47476).
However, we emphasized that the refinements to the DRGs were being
taken as an interim step to better recognize severity in the DRG system
for FY 2006 until we could complete a more comprehensive analysis of
the APR DRG system and the CC list as part of a complete analysis of
the MedPAC recommendations that we planned to perform for FY 2007 (and
which was addressed in section II.C. of the preamble of the FY 2007
proposed rule).
Since publication of the FY 2006 IPPS final rule, we have received
a question from a commenter as to why we did not apply the MCV list to
the following defibrillator DRGs: 515, 535, and 536. The commenter
noted that the pacemaker DRGs were revised using the MCV list, but the
defibrillator DRGs were not.
As noted above, for FY 2006, we created new DRGs 546 through 558 to
identify cases with more costly and severely ill patients as an interim
step to evaluating severity DRGs. We analyzed for the first time last
year data on cases within MDC 5 and presented data that showed
significant difference for patients in certain DRGs based on the
presence or absence of an MCV. This split did not work for the
defibrillator DRGs, as we could not identify groups with significantly
different resource use. For instance, splitting DRG 515 based on the
presence of an MCV would lead to two groups with differences in charges
of only $3,430 ($89,341 for those with an MCV and $85,911 for those
without an MCV). In the data we displayed in the FY 2006 IPPS final
rule, the differences for DRGs selected for an MCV split ranged from
$10,319 to $21,035. Splitting DRG 515 based on an MCV would produce a
difference in charges of only 10.1 percent as compared to differences
of 28.7 to 47.7 percent for DRGs 547 through 558. Therefore, the data
did not support including DRG 515 among those split based on the
presence or absence of an MCV. Similar results were found when DRG 536
was split by an MCV. There was only an 8.1 percent difference in
charges between the two groups. We also identified other problems with
splitting DRG 535 based on the presence or absence of an MCV. Some of
the codes a claim must include for the case to be grouped to DRG 535
under our current system are also codes on the MCV list. Therefore,
applying the MCV list to DRG 535 would result in all cases being
assigned to the DRG with an MCV and none to the DRG without an MCV. For
these reasons, we did not subdivide DRGs 515, 535, and 536 based on the
presence or absence of an MCV.
In the FY 2007 IPPS proposed rule, we indicated that we had decided
not to propose additional refinements of the DRGs based on MCVs for FY
2007 because of our efforts to propose a broader refinement of the DRG
system, as discussed in detail in section II.C. of the proposed rule.
However, as discussed further in section II.C. of the preamble of the
proposed rule, we solicited comments on whether it would be appropriate
in FY 2007 to apply a clinical severity concept to an expanded set of
DRGs, similar to the approach we used in FY 2006 to refine cardiac DRGs
based on the presence or absence of an MCV.
Comment: Commenters agreed with the recommendation that we not
subdivide DRGs 515, 535, and 536 based on MCV. However, one commenter
expressed concerns about how the current DRGs were achieving their goal
of identifying patients with greater severity of illness. Other
commenters opposed the proposal to delay refining defibrillator DRGs
based on MCVs. These commenters believed it was appropriate for CMS to
apply a clinical severity concept similar to the approach used in FY
2006 to refine cardiac DRGs to an expanded set of DRGS (for example,
defibrillator DRGs) based on the presence or absence of an MCV.
Response: We agree with the commenters who suggested that our goal
should be to reform the Medicare DRG system to develop a better means
of capturing severity of illness and complexity. As discussed in
section II.C. of the preamble of the proposed rule, we solicited
comments on whether it would be appropriate in FY 2007 to apply a
clinical severity concept to an expanded set of DRGs, similar to the
approach we used in FY 2006 to refine cardiac DRGs based on the
presence or absence of an MCV. As discussed in section II.C.7., we are
implementing revisions to the
[[Page 47946]]
current DRGs to better recognize severity of illness. However, the
analysis we have performed to this point does not support splitting
defibrillator DRGs based on the presence or absence of an MCV. As
stated earlier, simply applying the MCVs to the defibrillator DRGs in
DRGs 515, 535, and 536 would not lead to significant improvements for
DRG 515. Applying the MCV list to DRG 535 would result in all cases
being assigned to the DRG with an MCV and none to the DRG without an
MCV. For these reasons, we did not subdivide DRGs 515, 535, and 536
based on the presence or absence of an MCV.
While we did not find additional severity improvements for
defibrillator cases, we will continue to study this area and look for
further improvements.
4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Hip and Knee Replacements
In the FY 2006 final rule (70 FR 47303), we deleted DRG 209 (Major
Joint and Limb Reattachment Procedures of Lower Extremity) and created
new DRGs 544 (Major Joint Replacement or Reattachment of Lower
Extremity) and 545 (Revision of Hip or Knee Replacement) to help
resolve payment issues for hospitals that perform revisions of joint
replacements because we found revisions of joint replacements to be
significantly more resource intensive than original hip and knee
replacements. DRG 544 includes the following code assignments:
81.51, Total hip replacement
81.52, Partial hip replacement
81.54, Total knee replacement
81.56, Total ankle replacement
84.26, Foot reattachment
84.27, Lower leg or ankle reattachment
84.28, Thigh reattachment
DRG 545 includes the following procedure code assignments:
00.70, Revision of hip replacement, both acetabular and
femoral components
00.71, Revision of hip replacement, acetabular component
00.72, Revision of hip replacement, femoral component
00.73, Revision of hip replacement, acetabular liner and/
or femoral head only
00.80, Revision of knee replacement, total (all
components)
00.81, Revision of knee replacement, tibial component
00.82, Revision of knee replacement, femoral component
00.83, Revision of knee replacement, patellar component
00.84, Revision of knee replacement, tibial insert (liner)
81.53, Revision of hip replacement, not otherwise
specified
81.55, Revision of knee replacement, not otherwise
specified
In the FY 2006 IPPS final rule (70 FR 47305), we indicated that the
American Association of Orthopaedic Surgeons had requested that, once
we receive claims data using the two DRG procedure code assignments, we
closely examine data from the use of the codes under the two DRGs to
determine if future additional DRG modifications are needed.
After publication of the FY 2006 IPPS final rule, a number of
hospitals and coding personnel advised us that the DRG logic for DRG
471 (Bilateral or Multiple Major Joint Procedures of Lower Extremity),
which utilizes the new and revised hip and knee procedure codes under
DRGs 544 and 545, also includes codes that describe procedures that are
not bilateral or that do not involve multiple major joints. DRG 471 was
developed to include cases where major joint procedures such as
revisions or replacements were performed either bilaterally or on two
joints of one lower extremity. We changed the logic for DRG 471 last
year for the first time when we added the new and revised codes. The
commenters indicated that, by adding the more detailed codes that do
not include total revisions or replacements to the list of major joint
procedures to DRG 471, we are assigning cases to DRG 471 that do not
have bilateral or multiple joint procedures. For example, when a
hospital reports a code for revision of the tibial component (code
00.81) and patellar component of the right knee (code 00.83), the
current DRG logic assigns the case to DRG 471. The commenters indicated
that this code assignment is incorrect because only one joint has
undergone surgery, but two components were used. One commenter
indicated that ICD-9-CM does not identify left/right laterality.
Therefore, it is difficult to use the current coding structure to
determine if procedures are performed on the same leg or on both legs.
The commenters raised a concern about whether CMS intended to pay
hospitals using DRG 471 for procedures performed on one joint. The
commenters indicated that the DRG assignments for these codes would
also make future data analysis misleading. The commenters recommended
removing codes from DRG 471 that do not specifically identify bilateral
or multiple joint procedures.
We agree that the new and revised joint procedure codes should not
be assigned to DRG 471 unless they include bilateral and multiple
joints. Therefore, in the FY 2007 IPPS proposed rule (71 FR 24035), we
proposed to remove the following codes from DRG 471:
00.71, Revision of hip replacement, acetabular component
00.72, Revision of hip replacement, femoral component
00.73, Revision of hip replacement, acetabular liner and/
or femoral head only
00.81, Revision of knee replacement, tibial component
00.82, Revision of knee replacement, femoral component
00.83, Revision of knee replacement, patellar component
00.84, Revision of total knee replacement, tibial insert
(liner)
81.53, Revision of hip replacement, not otherwise
specified
81.55, Revision of knee replacement, not otherwise
specified
The proposed revised DRG 471 would then contain only the following
codes:
00.70, Revision of hip replacement, both acetabular and
femoral components
00.80, Revision of knee replacement, total (all
components)
81.51, Total hip replacement
81.52, Partial hip replacement
81.54, Total knee replacement
81.56, Total ankle replacement
We proposed to assign the codes removed from DRG 471 (codes 00.71,
00.72, 00.73, 00.81, 00.82, 00.83, 00.84, 81.53, and 81.55) to DRG 545
when used either alone or in combination. This list of codes removed
from DRG 471 and added to DRG 545 includes partial revisions of the
knee and hip as well as unspecified joint procedures such as code 81.55
where it is not clear if the revision is total or partial.
Comment: Several comments supported our proposals to remove codes
00.71, 00.72, 00.73, 00.81, 00.82, 00.83, 00.84, 81.53, and 81.55 from
the combinations assigned to DRG 471 and assign cases with these codes
to DRG 545. The commenters agreed that these codes should be removed
from DRG 471 because they do not represent bilateral and multiple joint
revisions or replacements.
Response: We appreciate the commenters support to remove codes
00.71, 00.72, 00.73, 00.81, 00.82, 00.83, 00.84, 81.53, and 81.55 from
the combinations assigned to DRG 471. These cases will be assigned to
DRG 545.
We are finalizing the changes to DRG 471 and DRG 545 that we
proposed.
[[Page 47947]]
Further, as we indicated in the proposed rule, we plan to perform
extensive data analysis on the new and revised joint procedure codes as
we receive billing data to determine if future refinements of these
DRGs are needed. In addition, as indicated in section II.C. of the
preamble of the proposed rule, we are planning in the future to adopt a
revised DRG system for the IPPS that addresses severity of illness. We
encouraged commenters to evaluate how the new and revised joint
procedures should be addressed in such a revised system. We received
comments indicating that the CS DRGs that we proposed do not
distinguish between patients receiving an original joint replacement
from a revision. As we indicate elsewhere in this final rule, we will
evaluate these issues as we develop our plans for adopting a revised
DRG system that addresses severity of illness.
b. Spinal Fusion
In the FY 2006 IPPS final rule (70 FR 47307), we created new DRG
546 (Spinal Fusions Except Cervical with Curvature of the Spine or
Malignancy). DRG 546 is composed of all noncervical spinal fusions
previously assigned to DRGs 497 (Spinal Fusion Except Cervical with CC)
and 498 (Spinal Fusion Except Cervical without CC) that have a
principal or secondary diagnosis of curvature of the spine or a
principal diagnosis of a malignancy. The principal diagnosis codes that
lead to DRG 546 assignment are the following:
170.2, Malignant neoplasm of vertebral column, excluding
sacrum and coccyx
198.5, Secondary malignant neoplasm of bone and bone
marrow
213.2, Benign neoplasm of bone and articular cartilage;
vertebral column, excluding sacrum and coccyx
238.0, Neoplasm of uncertain behavior of other and
unspecified sites and tissues; Bone and articular cartilage
239.2, Neoplasms of unspecified nature; bone, soft tissue,
and skin
732.0, Juvenile osteochondrosis of spine
733.13, Pathologic fracture of vertebrae
737.0, Adolescent postural kyphosis
737.10, Kyphosis (acquired) (postural)
737.11, Kyphosis due to radiation
737.12, Kyphosis, postlaminectomy
737.19, Kyphosis (acquired), other
737.20, Lordosis (acquired) (postural)
737.21, Lordosis, postlaminectomy
737.22, Other postsurgical lordosis
737.29, Lordosis (acquired), other
737.30, Scoliosis [and kyphoscoliosis], idiopathic
737.31, Resolving infantile idiopathic scoliosis
737.32, Progressive infantile idiopathic scoliosis
737.33, Scoliosis due to radiation
737.34, Thoracogenic scoliosis
737.39, Other kyphoscoliosis and scoliosis
737.8, Other curvatures of spine
737.9, Unspecified curvature of spine
754.2, Congenital scoliosis
756.51, Osteogenesis imperfecta
The secondary diagnoses that will lead to DRG 546 assignment are:
737.40, Curvature of spine, unspecified
737.41, Curvature of spine associated with other
conditions, kyphosis
737.42, Curvature of spine associated with other
conditions, lordosis
737.43, Curvature of spine associated with other
conditions, scoliosis
After publication of the FY 2006 IPPS final rule, we received a
comment stating that creating new DRG 546 was insufficient to address
clinical severity and resource differences among spinal fusion cases
that involve fusing multiple levels of the spine. Specifically, the
commenter suggested that the spinal fusion DRGs be further modified to
incorporate Bone Morphogenic Protein (BMP), code 84.52 (Insertion of
recombinant bone morphogenetic protein). The commenter also suggested
that CMS apply a clinical severity concept to all back and spine
surgical cases similar to the approach that we used for the MCVs to
refine the cardiac DRGs in the final rule for FY 2006. The commenter
recommended recognizing additional conditions that reflect higher
resource needs, regardless of whether they are principal or secondary
diagnoses. The commenter also suggested that the spine DRGs be further
subdivided based on the use of specific spinal devices such as
artificial discs. These changes would entail the creation of 10 new
spine DRGs in addition to other changes requested.
Response: We agree that it is important to recognize severity when
classifying patients into specific DRGs. In response to recommendations
made by MedPAC last year that are discussed in section II.C. of this
final rule, we are conducting a comprehensive analysis of the entire
DRG system to determine whether to undertake significant reform to
better recognize severity of illness. At this time, we believe it is
premature to develop a severity adjustment for spine surgeries while we
are considering a more systematic approach to capturing severity of
illness across all DRGs. We also believe it would be premature to make
revisions to DRG 546 because this DRG was created on October 1, 2005,
and we do not yet have data to analyze its impact. Given the number of
innovations occurring in spinal surgery over the last several years
(for example, artificial spinal disc prostheses, kyphoplasty, and
vertebroplasty), we agree that additional analysis of the spine DRGs
would be warranted if we were to continue with the current DRG system
and not adopt CS DRGs. However, as discussed above, in the FY 2007 IPPS
proposed rule, we proposed to develop a severity-adjusted DRG system.
For this reason, we are not further researching this issue for FY 2007.
However, in the proposed rule, we encouraged commenters to examine the
proposed CS DRG system described in section II.C. of the preamble of
the proposed rule to determine whether there is a better recognition of
severity of illness and resource use in that system.
Comment: One commenter stated that it was premature to consider
splitting the spinal fusion DRGs into potentially up to 10 new DRGs at
this time. The commenter stated there is a need for additional data
analysis prior to recommending new DRGs.
Response: We agree with the commenter that it is premature to
consider splitting the spinal fusion DRGs into as many as 10 new DRGs.
We will continue to study this area. In the meantime, we will not
modify the spinal fusion DRGs for October 1, 2006.
c. CHARITETM Spinal Disc Replacement Device
CHARITETM is a prosthetic intervertebral disc. On
October 26, 2004, the FDA approved the CHARITETM Artificial
Disc for single level spinal arthroplasty in skeletally mature patients
with degenerative disc disease between L4 and S1. On October 1, 2004,
we created new procedure codes for the insertion of spinal disc
prostheses (codes 84.60 through 84.69). We provided the DRG assignments
for these new codes in Table 6B of the FY 2005 IPPS proposed rule (69
FR 28673). We received comments on the FY 2005 proposed rule
recommending that we change the assignments for these codes from DRG
499 (Back and Neck Procedures Except Spinal Fusion With CC) and DRG 500
(Back and Neck Procedures Except Spinal Fusion Without CC) to the DRGs
for spinal fusion, DRG 497 (Spinal Fusion Except Cervical With CC) and
DRG 498 (Spinal Fusion Except Cervical Without CC) for procedures on
the lumbar spine and to
[[Page 47948]]
DRGs 519 and 520 for procedures on the cervical spine. In the FY 2005
IPPS final rule (69 FR 48938, August 11, 2004), we indicated that DRGs
497 and 498 are limited to spinal fusion procedures. Because the
surgery involving the CHARITETM Artificial Disc is not a
spinal fusion, we decided not to include this procedure in these DRGs.
However, we stated that we would continue to analyze this issue and
solicited further public comments on the DRG assignment for spinal disc
prostheses.
In the FY 2006 final rule (70 FR 47353, August 12, 2005), we noted
that, if a product meets all of the criteria for Medicare to pay for
the product as a new technology under section 1886(d)(5)(K) of the Act,
there is a clear preference expressed in the statute for us to assign
the technology to a DRG based on similar clinical or anatomical
characteristics or costs. However, for FY 2006, we did not find that
the CHARITETM Artificial Disc met the substantial clinical
improvement criterion and, thus, did not qualify as a new technology.
Consequently, we did not address the DRG classification request made
under the authority of this provision of the Act.
However, we did evaluate whether to reassign the
CHARITETM Artificial Disc to different DRGs using the
Secretary's authority under section 1886(d)(4) of the Act (70 FR 47308,
August 12, 2005). We indicated that we did not have Medicare charge
information to evaluate DRG changes for cases involving an implant of a
prosthetic intervertebral disc like the CHARITETM and did
not make a change in its DRG assignments. We stated that we would
consider whether changes to the DRG assignments for the
CHARITETM Artificial Disc were warranted for FY 2007, once
we had information from Medicare's data system that would assist us in
evaluating the costs of these patients.
As we discussed in the FY 2007 IPPS proposed rule (71 FR 24036), we
received correspondence regarding the DRG assignments for the
CHARITETM Artificial Disc, code 84.65 (Insertion of total
spinal disc prosthesis, lumbosacral). The commenter had previously
submitted an application for the CHARITETM Artificial Disc
for new technology add-on payments for FY 2006 and had requested a
reassignment of cases involving CHARITETM implantation to
DRGs 497 and 498. The commenter asked that we examine claims data for
FY 2005 and reassign procedure code 84.65 from DRGs 499 and 500 into
DRGs 497 and 498. The commenter again stated the view that cases with
the CHARITETM Artificial Disc reflect comparable resource
use and similar clinical indications as do those in DRGs 497 and 498.
If CMS were to reject reassignment of the CHARITETM
Artificial Disc to DRGs 497 and 498, the commenter suggested creating
two separate DRGs for lumbar disc replacements.
On February 15, 2006, we posted a proposed national coverage
determination (NCD) on the CMS Web site seeking public comment on our
proposed finding that the evidence is not adequate to conclude that
lumbar artificial disc replacement with the CHARITETM
Artificial Disc is reasonable and necessary. The proposed NCD stated
that lumbar artificial disc replacement with the CHARITETM
Artificial Disc is generally not indicated in patients over 60 years
old. Further, it stated that there is insufficient evidence among
either the aged or disabled Medicare population to make a reasonable
and necessary determination for coverage. With an NCD pending to make
spinal arthroplasty with the CHARITETM Artificial Disc
noncovered, we indicated in the FY 2007 IPPS proposed rule that we did
not believe it was appropriate at that time to reassign procedure code
84.65 from DRGs 499 and 500 to DRGs 497 and 498.
After considering the public comments and additional evidence
received, we made a final NCD on May 16, 2006, that Medicare would not
cover the CHARITETM Artificial Disc for the Medicare
population over 60 years of age. For Medicare beneficiaries 60 years of
age and under, local Medicare contractors have the discretion to
determine coverage for lumbar artificial disc replacement procedures
involving the CHARITETM Artificial Disc. The final NCD can
be found at: http://www.cms.hhs.gov /mcd/viewncd.asp:ncd --;id-
150.10&ncd --version1& basket=ncd%3A150%2E10% 3A1%3ALumbar+
Artificial+Disc+ Replacement%280ADR%29.
Comment: Some commenters agreed with our proposed decision not to
reassign CHARITETM Artificial Disc at this time to the
spinal fusion DRGs. Other commenters disagreed with our proposal not to
move code 84.65 (CHARITETM) from DRGs 499 and 500 to DRGs
497 and 498. One commenter noted that the national noncoverage
determination for the CHARITETM Artificial Disc only applies
to patients over 60 years of age. The commenter further noted that
local Medicare carriers have the discretion to make coverage decisions
for Medicare beneficiaries who are under 60 years of age. The commenter
stated that patients who receive the CHARITETM Artificial
Disc are candidates for a fusion procedure involving an anterior
surgical approach. The commenter goes on to state that the
CHARITETM Artificial Disc is an alternative therapy to
spinal fusion for patients with similar diagnoses. The commenter
supplied data from FY 2005 MedPAR file in support of its request for a
DRG change. These data included 54 cases that were assigned to DRGs 499
and 500. The 23 cases in DRG 499 had mean charges of $61,750, while the
31 cases assigned to DRG 500 had mean charges of $53,802. These data
compare to mean charges of $26,974 for all cases in DRG 499 and $17,731
for all cases in DRG 500. The commenter reported mean charges of
$71,581 for DRG 497 and $55,489 for DRG 498. The commenter stated that
the 54 CHARITETM cases are more similar in average charges
to all cases in DRGs 497 and 498 than to DRGs 499 and 500.
Response: We agree with the commenter that it is not appropriate to
consider a DRG revision at this time for the CHARITETM
Artificial Disc, given the recent decision to limit coverage for
surgical procedures involving this device. Although we have reviewed
the Medicare charge data, we are concerned that there are a very small
number of cases for patients under 60 years of age who have received
the CHARITETM Artificial Disc. We believe it appropriate to
base the decision on a DRG change on charge data only on the population
for which the procedure is covered. We have an extremely small number
of cases for patients under 60 on which to base such a decision. For
this reason, we do not believe it is appropriate to modify the DRGs at
this time for CHARITETM cases.
5. MDC 18 (Infectious and Parasitic Diseases (Systemic or Unspecified
Sites)): Severe Sepsis
In FYs 2005 and 2006, we considered requests for the creation of a
separate DRG for the diagnosis of severe sepsis. Severe sepsis is
described by ICD-9-CM code 995.92 (Systemic inflammatory response
syndrome due to infection with organ dysfunction). Patients admitted
with sepsis as a principal diagnosis 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 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. In both FY 2005 and FY 2006 (69 FR 48975 and 70 FR
47309), we did not believe the current clinical definition of
[[Page 47949]]
severe sepsis was specific enough to identify a meaningful cohort of
patients in terms of clinical coherence and resource utilization to
warrant a separate DRG. Sepsis is found across hundreds of medical and
surgical DRGs, and the term ``organ dysfunction'' implicates numerous
currently existing diagnosis codes. While we recognize that Medicare
beneficiaries with severe sepsis are quite ill and require extensive
hospital resources, in the past we have not found that they can be
identified adequately to justify removing them from all of the other
DRGs in which they appear. For this reason, we did not create a new DRG
for severe sepsis for FY 2005 or FY 2006. We indicated that we would
continue to work with National Center for Health Statistics (NCHS) to
improve the codes so that our data on these patients improve. We also
indicated that we would continue to examine data on these patients as
we consider future modifications.
For the FY 2007 IPPS proposed rule, we again received a request to
consider creating a separate DRG for patients diagnosed with severe
sepsis (71 FR 24037). The information and data available to us from
hospital bills with respect to identifying patients with severe sepsis
have not changed since last year. However, the NCHS discussed
modifications to the current ICD-9-CM diagnosis codes for systemic
inflammatory response syndrome (SIRS), codes 995.91 through 995.94
(which include severe sepsis) at the September 29-30, 2005 ICD-9-CM
Coordination and Maintenance Committee meeting. During the meeting, it
became clear that there is still confusion surrounding the use of these
codes. As a result of the meeting and the comments received, the
Committee made modifications to the set of SIRS codes. These
modifications are reflected in Table 6E, Revised Diagnosis Code Titles,
of the Addendum to this final rule.
We believe that implementation of the modified SIRS diagnosis codes
and the updated coding guidelines over the next year could begin the
process of improving data for this group of patients. The desired
outcome is to be able to better evaluate Medicare beneficiaries with
severe sepsis with regard to their clinical coherence, resource
utilization, and charges. Therefore, in the FY 2007 IPPS proposed rule,
we did not propose to create a new DRG for severe sepsis for FY 2007.
Comment: Numerous commenters asked for changes to the current
sepsis classification. The commenters agreed that coding of systemic
inflammatory response syndrome (SIRS), sepsis, septicemia, severe
sepsis, and septic shock has been confusing to the provider community
in the last few years. Specifically, one commenter stated coding
guidelines have been revised based on clinical definitions, which in
turn has affected the DRG classification for sepsis. Another commenter
referenced the ICD-9-CM Code Book tabular section and the American
Hospital Association's (AHA) fourth quarter (4Q) 2003 Coding Clinic,
``for patients with severe sepsis, the code for the systemic infection
(038.x) or trauma should be sequenced first, followed by either code
995.92 (Systemic Inflammatory Response Syndrome due to infectious
process with organ dysfunction) or code 995.94 (Systemic inflammatory
response syndrome due to noninfectious process with organ dysfunction).
Codes for the specific organ dysfunction should also be assigned.'' The
commenter stated that as a result of this coding guideline, respiratory
failure cannot be sequenced as the principal diagnosis because it is
considered an organ dysfunction of the patient's sepsis. However,
reverting sequencing instructions would be confusing and again disrupt
the data according to some of the commenters. As a result, many
commenters stated that a new DRG for severe sepsis is not appropriate
due to the inconsistent data.
Response: We agree that there has been a great deal of confusion in
the coding and sequencing of cases with severe sepsis and SIRS. The
commenters are correct that the coding directives lead cases with
severe sepsis that are on mechanical ventilation for respiratory
failure to be assigned to DRG 416 (Septicemia Age >17) and DRG 417
(Septicemia Age 0 >17) instead of DRG 475 (Respiratory System Diagnosis
with Ventilator Support). As stated in the proposed rule, we have
continued to work with NCHS to improve the codes so that our data on
these patients improve. We believe that implementation of the modified
SIRS diagnosis codes and the updated coding guidelines over the next
year will further improve the coding of this subset of patients.
Comment: One commenter presented its analysis of the MedPAR data
and again requested the creation of two new DRGS for severe sepsis, one
medical and one surgical. The other option suggested by the commenter
was to split DRGs 415 and 416 into DRGs with and without severe sepsis
cases. The commenter expressed concern that, while there has been some
confusion over the use of the SIRS family of codes (995.90-995.94) over
the past three years, the confusion has been mainly associated with the
other codes and not the severe sepsis code (995.92). The commenter
provided information concerning the definition of severe sepsis and its
adoption following a 1992 consensus panel of the American College of
Chest Physicians and the Society of Critical Care Medicine. According
to the commenter, the panel defined severe sepsis as a systemic
inflammatory response to infection that leads to acute organ
dysfunction. The commenter noted this definition has been used
successfully to identify thousands of patients with severe sepsis and
in more than 30 large-scale clinical trials. The commenter also stated
severe sepsis cases are clinically coherent with a common underlying
problem (SIRS) leading to complications (acute organ dysfunction) and
are managed similarly, receiving advanced life support in intensive
care units. The commenter also provided examples to demonstrate how
clinical coherence leads to resource use coherence.
Response: We appreciate the commenter's analysis of the data. As
stated above, there has been significant confusion over the use of the
sepsis codes. While the definition may be well understood among the
individuals involved with the clinical trials, there has been
uncertainty in the application of the codes as evidenced by repeated
discussions at the ICD-9-CM Coordination and Maintenance Committee
meetings and comments received in response to the proposed rule. We
note that the National Center for Health Statistics has revised the
sepsis and systemic inflammatory response syndrome codes in response to
suggestions made at the Committee meetings. These revisions are shown
in Table 6E of the Addendum to this final rule and will go into effect
on October 1, 2006 (codes 995.91 through 995.94). We did not propose a
new DRG for severe sepsis for FY 2007 in the proposed rule due to the
data inconsistencies and difficulty expressed with properly assigning
the sepsis codes, among other reasons cited previously.
In the FY 2007 IPPS proposed rule, we also solicited comments on
the proposal we were considering to adopt a CS DRG system. We noted it
is possible that the proposed system would better recognize the
extensive resources that hospitals use to treat patients with severe
sepsis. We encouraged commenters to examine the proposed system and
provide comments. The comments and responses on this proposal are
discussed in section II.C of this final rule.
[[Page 47950]]
Therefore, in this FY 2007 final rule we are not creating new DRGs
for medical or surgical severe sepsis cases as requested by the
commenter.
6. Medicare Code Editor (MCE) Changes
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. Patient diagnoses, procedure(s),
discharge status, and demographic information go into the Medicare
claims processing systems and are subjected to a series of automated
screens. The MCE screens are designed to identify cases that require
further review before classification into a DRG.
For FY 2007, we proposed to make several changes to the MCE edits
(71 FR 24038 and 24039). We received one comment on this topic. As a
result of new and modified codes approved after the annual spring ICD-
9-CM Coordination and Maintenance meeting, we make changes to the MCE.
In the past, in both the IPPS proposed and final rules, we only
provided the list of changes to the MCE in the IPPS that were brought
to our attention after the prior year's final rule. We historically
have not listed the changes we have made to the MCE as a result of the
new and modified codes approved after the annual spring ICD-9-CM
Coordination and Maintenance meeting. These changes are approved too
late in the rulemaking schedule for inclusion in the proposed rule.
Furthermore, although our MCE policies have been described in our
proposed and final rules, we have not provided the detail of each new
or modified diagnosis and procedure code edit in the final rule.
However, in response to a public comment and in the interest of making
the IPPS more transparent, we are including in this final rule a
comprehensive list of all the changes to the MCE edits for the next
fiscal year as a result of coding changes.
a. Edit: Newborn Diagnoses
We proposed to add code 780.92 (Excessive crying of infant (baby))
to the ``Newborn Diagnoses'' edit in the MCE. This edit is structured
for patients with an age of ``0''. In the Tabular portion of the ICD-9-
CM diagnosis codes, the ``excludes'' note at code 780.92 states that
this code ``excludes excessive crying of child, adolescent or adult''
and sends the coder to code 780.95 (Other excessive crying. (The new
title of this code, shown on Table 6E of the Addendum to this final
rule is ``Excessive crying of child, adolescent, or adult''.) To make a
conforming change, we also proposed that code 780.92 be removed from
the ``Pediatric Diagnoses--Age 0 Through 17'' edit.
We did not receive any public comments on the proposed edit and,
therefore, are adopting it as final.
In addition, there were diagnosis codes discussed at the March 2006
ICD-9-CM Coordination and Maintenance meeting that were approved too
late in the rulemaking schedule for inclusion in the proposed rule.
Therefore, the following ICD-9-CM diagnosis codes are added to the
``Newborn Diagnosis'' MCE edit for FY 2007:
768.7, Hypoxic-ischemic encephalopathy (HIE)
770.87, Respiratory arrest of newborn
770.88, Hypoxemia of newborn
775.81, Other acidosis of newborn
775.89, Other neonatal endocrine and metabolic
disturbances
779.85, Cardiac arrest of newborn
Because diagnosis code 775.8 (Other transitory neonatal endocrine
and metabolic disturbances) was expanded to the fifth-digit level, this
code is being deleted from the Newborn Diagnosis edit.
b. Edit: Diagnoses for Pediatric--Age 0-17 Years Old
We are adding the following new diagnosis codes to the edit for
diagnosis for pediatrics--age 0-17 years old:
V85.51, Body Mass Index, pediatric, less th